we take a strike that balance you're just talking about. i would ask you to take a look at that. on page 5 of your testimony, you talk about sustainability and how important it is. if we do not get a plan in place, it will sap our nation's economic vitality. as the head of the fed, in practical terms if we do not get a plan, what does it mean to families across this country? what does it mean to the small businesses? . to get common sense and make the tough decisions you have alluded to earlier in your answers. what it means i . >> one of the main channels would be if confidence was lost

in our long-term fiscal stability we would see our interest rates go up quite a bit as we have already seen an increase in other countries and that would affect of course consumers ability to buy houses and automobiles etc.. it would slow our economy. by reducing the value of government bonds that would put pressure on the balance sheet of financial institutions so it would cause a lot of stress in the economy and in the worst case would cause financial instability like we are seeing it to some extent increase. so if you want a strong economy you need to have capital investment. you need to have consumers ability to write houses and automobiles and so on. and the high interest rates that would make it even more difficult to balance the budget --. >> interest rates i believe within two years, we are on the path to pay a billion dollars a day just on interest on the debt that is how out-of-control it is

getting. >> our interest rates now are very low so the concern is they would go higher and be much more disruptive to make the cuts and make the changes you have to make in the budget to meet the fiscal goals at that point with interest rates much higher. >> mr. etheridge. >> thank you mr. chairman. thank you for being here in thank you for your service. i was here and i remember in 2008 when congress didn't step up to the plate when we requested it to do so, when credit markets froze around the world, the stock market fell over 500 points in a matter of minutes. and over the weekend they had-- heads prevailed, listen to good advice and at least started back on the road. not only were we punish but a lot of folks in this country had money in 401(k)'s and a host of other places so their life savings, some lost them totally.

so thank you for your hard work in your efforts. the economic collapse almost created by years of not paying attention to squandering the surplus, and we just averted disaster and i appreciate all those who did the work your testimony notes and economists on both sides of the political spectrum's have pretty much agreed i think that thanks to the recovery act and you testified to this, we are starting to see signs of economic growth. you indicated earlier some of that growth may have been directly related in some states, they say this much is 2% loss in gdp in those years. last week i attended a school in sanford, south carolina and i think those are smart investments not only to put people to work to lay the groundwork for long-term economic growth.

however as you have indicated and testified the recovery is not on the sound is footing as we would like it to be. north carolina still faces tough times. teachers, medicaid funds that are not funded and there are those who take a pretty tough point in saying we ought not to do it. we shouldn't do it, because if we do it there are those who vote against it o will go home and campaign against people who do what they consider responsible thng, to keep this economy moving forward, just for political purposes. my question for you, that we need to keep our eye on the ball. my fear is that not only will children get hurt if we don't do the right thing but economic recovery in the long run, we will pay a healthy price. in your view, what would be the effect on the recovery if we pull back too soon and did not provide the kind of aid to states may need?

at a very critical moment, and i think we are at that tender.now and i would be interested in your thoughts on that. >> let me first say in terms of any fiscal package again i don't want to adjudicate specific parts of it and congress needs to decide which components they want to support and whicones they think will be most effective but in terms of the timeframe, right now i don't think it is the time-- this very moment is not the time to radically reduce our spending or raise our taxes. decodes the economy is still in the recovery mode it needs that support. however, the risk of course of ongoing deficit is the loss of, potential loss of confidence in the markets in the way to reassure the market is by creating a plausible plan for medium-term stability in the fiscal situation. we obviously can't-- forever. >> we put in paygo as the

chairman touched on earlier, to get to that point. you have outlined some of the-- and this may not be something you can deal with but i think it is important to say at this meeting, because i've talked to a lot of community small bankers, a lot of small-business people, a lot of developers who are really frustrated. they are frustrated because they see a need to do something but because of certain regulations they are being told whatever the value of that real estate they had is now 300, and many are cashing it in. i really fear, if we aren't very cautious in what we do, we are going to wind up with a few large builders in this country, more big banks, and fewer people to get involved in local lions clubs, boy scouts and girl scouts, the things that make america what america is and as you said, and i hope you remind them that it is these people we

have to make sure we get credit to our small-business people in america. that is not flowing yet i don't think in the way it needs to. >> i absolutely agree. i think there are some signs of progress but it is still a very tough situation. the fed is a regulator. we are working with our colleagues to do all they can to make sure banks are making good loans. >> thank you sir. >> thank you mr. chairman. we welcome you again and i recognize you for five minutes. >> a few quick questions. i am sorry. did i get it? there you go. my apologies. dr. bernanke, a few quick questions here. first off you began your testimony by saying-- we are all happy about that. my question to you is given the

modest economic growth do you believe there is a need, is it wise to do additional fiscal stimulus to help the economy along or do you believe the economy right now does not need further fiscal stimulus on the fiscal side? >> i will turn it back to you this way. if you decide to do more fiscal fiscal stimulus seminole there are moderate size bills being contemplated, it would be very helpful to combine that with again, reiterating this point but i think it is very important, with a plan for a fiscal exit strategy. the federal federal reserve has a strategy for exiting our monetary policy. the united staes government and fiscal authorities have to have a strategy for exiting fiscal policy so you have a more effective set of policies if you combine any expansion and further fiscal support with other measures that reassure markets that in fact our deficits will be in control in

the medium-term. >> do you right now see any fiscal exit strategy out of the united states congress? >> we have this deficit commission that mr. ry is on, but and i hope they will come up with some good recommendations but right now, there is not anything on the table at this point. >> i have been frustrated at this point there've been a number of free trade agreements languishing in congress. do you believe that where the congress to pass free trade or expansion of free-trade it would wod help the economy? >> yes, i d. i think we need to be part of the globalized economy. i think trade is an important source of demand for our goods and also a source of materials as well, so i think generally speaking we have got to push

forward on the doha round in the free trade agreements we are looking at. >> finally dr. bernanke, the last set of questions. you testified the federal budget appears to be on an unsustainable path. how will we know when it is on a sustainable path? what triggers what earmarks, benchmarks would you guide the congress on to know that we are on a sustainable path? is there a in an amount of a budget deficit, a percentage of gdp? >> one simplrule of thumb is that the primary deficit which is the deficit excluding interest payments should be about imbalance. if that is true, or put it another way, if the deficit equals interest paynt, so in practice that might be 2% of gdp deficit. if that is true then arithmetic way it turns out the ratio of the debt outstanding, the gdp remains constant so i think keeping our debt relative to our

income, constant or declining, would be a good indicator of sustainable policy. >> for this coming fiscal year what number would that be for the budget? >> i don't think there is any way that next year will be brought down to two or 3%. i would be emphasizing this is really a medium-term objective and you still have some time but we need to get a plan in place as soon as we can. >> what dollar amount? >> right now that would be about 300 billion. >> tnk you mr. chairman. chairman. >> thank you very much. >> there we go. dr. bernanke, given your serious concerns about long-term structural deficits, critics might say that you are inconsistent in saying that you supported t.a.r.p. and the stimulus bill had positive

effects. what would be your answer to those critics? >> my answer is that deficits are sometimes necessary. they are necessary in wartime. they are necessary in deep recessions and this was the case where monetary policy was pushed very, ry far. and i believe that they t.a.r.p., i realize it is very unpopular but i do blieve it was very important stabilizing our financial system and indeed the money has come back for the most part. so, for those emergency purposes i think that deficits were necessary. >> t.a.r.p. in the stimulus were necessary in your opinion? >> i believe they were very helpful, yes. in particular prevented the breakdown of the global financial system. but that being said, we can't have an emergency every year. we have to maintain a more stable situation over the longer-term. >> i understand but i think just to clarify, you just said without t.a.r.p. we could've had a breakdown in the world

financial system. >> without a doubt, we would have. >> so in effect, you think t.a.r.p., the passage of t.a.r.p. was consistent with principle fiscal responsibility? >> i do because in the absence of t.a.r.p. we would have had a much deeper recession and the loss of tax revenue and the other costs would have far outweighed the actual cost of the t.a.r.p.. >> what you are saying then is without t.a.r.p. we could've had larger deficits than it greater national debt than we have today? >> we most certainly would have. >> there is a probability we could've had a second great depression? >> i think so, yes. >> also before we make decisions about the future we may need to make sure we understand what happened in the past. could someone bring up mr. garrett's chart, please? now, this chart doesn't talk about 2003, 2002 and 2001. do i understand when president was came into office the great

deficit areas during his administration were projected to be a total of $45 trillion in surplus. is that correct? when president bush walked into office? >> the ten-year projection. >> been then remake of to 2009 it looks like maybe a $1.4 trillion deficit in 2009, the first year the obama administration. am i not correct in undetanding 1.3 trillion of that was projected before president obama was sworn into office so about 93% of that first read column for 2009 was projected before president obama signed a single bill into law. is that about correct? >> as of when? >> as of while president bush was still in office, where their projections for 2009 two b.a. $1.3 trillion deficit? >> i don't remember the exact number but clearly most of that deficit was the result of the recession and the financial crisis.

>> i think cbo projected a $1.3 trillion deficit before president obama was sworn into office. let me ask you, dr. orszag,, the head of omb has said the 2001 2001/2002 tax cuts unpaid for and passed by republicans on a virtually partisan basis will have added $6 trillion to the national debt over the next decade. do you have any figures that would substantially differ from dr. orszag's? have those three bills added to the national debt? >> i don't have any figures but i know that they calculate on a baseline basis. those numbers would be pretty big i think. >> if we go forward with making permanent all of the bush 2001/2003 tax cuts, reduce the national debt or increase the national debt? >> if you did absolutely nothing else, it would make-- he would increase it says it might make

the economy grow faster but not fast enough to make up for revenue lost. >> in and of themselves extending those tax cuts makes them permit would increase the national debt? >> us away but it also a trade-off and you have to ask yourself whether there are other options that may be more effective at reducing deficits at less cost. >> i understand the timing is important but in your opinion do tax cuts pay for themselves? some people say you can balance the budget just by cutting taxes more. in your opinion the tax cuts pay for themselves? >> in general the the income tax cuts-- the actual revenue losses less than the static estimate because there are some positive response to the economy but in general i don't think most economists would agree that they completely pay for themlves, no. >> thank you. >> the $1.2 trillion estimate for 2009, the number supplied by cbo for 2009/2010.

mr. autry of ohio. >> thank you for being here today and sharing your thoughts on the economy and the financial markets and certainly i appreciate you sharing your thoughts about a system that is more resilient at having a plan in place for stabilization, and i appreciate being cautious about the u.s. economic outlook, although you also noted that there has been some recovery and it looks as though there might be modest recovery over the next couple of years but i think there is also a growing risk out there that the recovery could be damaged or even undercut by the ripple effects of the debt crisis in europe right now, what is happening in europe. and also when you combine that with the concerns i am hearing out there from our small businesses, the concerns about nancing and credit to continue

their operations and wanting to expand their operations and businesses. the concerns about the persistently high rates of unemployment we have right now and under employment and the lack of private jobs that are being created right now that i believe are the long-term sustainable jobs that will turn this economy around and you combine that with a massive government spending and debt, all in major threat to sustainable growth. i want to get your views on the spending and debt control. the uncertainty that is bringing to our economy right now and the direction that you think we are moving and whether or not i think there is a fundamental difference in the types of jobs being created with all this, government jobs versus the private sector jobs. >> first of all you did a good job of identifying some of the risks to the recovery, financial market risk, small business credit and unemployment. those are some of the things i've highlighted in in speeches and discussions.

as i have indicated, i think once again that need to think about our fiscal path, our fiscal plan as the trajectory not a year by year deficits. it is not realistic i thnk or even advisable to y to balance the dget this year because that would be too wrenching a change in the economy is still in a weakened condition. and i don't think that would be possible or a sizable. however, in order to maintain the confidence of markets and to keep interest rates low, which is useful for the whole economy in the recovery, it is also very important to try to provide the assurance thugh some mechanism that congress i seriously contemplating measures that will bring us back to sustainability over the medium-term and i realized it is a difficult thing to do an difficult to be credible. but, congress is very creative on these types of matters and i

hope you will be lookingt ways to find the path back to sustainability over the next few years. >> if we can't can bring up a figure, chart number one i believe, the chart on tidal wave debt. this chart right here. i want to get your opinion as far as the debt crisis we are seeing across europe right now. how it is going to occur in the u.s. if we don't change the way we are going right now. there are projections right now that payments were ejected to reach 20% of the tax revenue were higher by 20/20 as part of the payment and continue to grow and when you look at this chart i want to get your thoughts on that. >> this chart illustrates graphically what i've been saying which is when the the red line is sloping up sharply, that is just a graphical way of saying it is not sustainable. you want a situation where that

is sort of flat or going down instead of broadening.

>> it would be helpful to those of us in position. >> the cost itself is pretty small actually. the cost of the recession is very large and i -- we can try to estimate that. jo we need to get the book ends and how big this really is. number three, how can you use

your power? to get these to the table to avoid the ghost towns and ghost neighborhoods we have in this country. there's a real blockage. you can't get a negotiation at the local level. there's nothing requiring the servicers to come to the table. we need to take a look at this. you deal with these companies anyway. you need to get to the table. with a number of under water loans, this isn't going to get any better. i was talking to dennis card

osea from california. we really need somebody to hold these skeversers accountable. began, a megabanks actually have a larger share of assets in the market than they did in the beginning and the big investment banks that are very important to the way you oerate particularly in new york and they had about a third of the assets in the country prior to the crisis and they now have nearly two-thirds. meanwhile institutions and places like i represent are paying huge fdic fees, up from $20,000.5 years ago, up to 70,000 last year and this year $700,000. the reason lending is constructed at the local level is because these large institutions are ally holding so much of the power and we don't have a really balanced financial system so they are not

making small-business loans, so my question is what role can you play with the fed in restoring prudent lending and broad competition across o financial system? question one relates to getting the services to the table, working with the megabanks and number 2, what can you do to help restore lending across this country for a competitive financial marketplace? >> on the first, we have been working hard to support the treasuries efforts to do hamp renegotiations between borrowers and lenders and we have made clear to the banks they should participate and cooperate in those programs. >> with all due respect it is the services who aren't showing up and it is a voluntary program that is not working. >> we can strongly encourage them to participate but it is up to congress to make it mandatory. we don't have the power to make it mandaty that we are certainly, we think it is good practice and good for the banks to get these things resolved and to have these loans in limbo is

not good for the banks either. they need to get them resolved and stabilize as quickly as possible so i think there is a common interest here and we are interested in that point. feds are interested in stabilization which is a related issue when you have a lot of foreclosures in an area you have a breakdown in public order or tax revenues and property values, so that is another issue where we have been very much involved. but again i think the government's primary pool for this is through the treasure and we try to support them analytically and through our supervisory function. on competition actually right now i agree with you 100% the small banks are critical. we worked with small banks overtime and we are very concerned when the senate was contemplating taking us out of the small bank supervision business because we find those connections and that input we get from the internet action we have are very important for our regulatory and monetary policy so we are supporting them

whenever we can. actually what is happening now in many cases is that the large banks are pulling back because of shortage of capital or because of conservatism and it is the small community banks in many cases that are healthy and are coming forward in making loans so they are providing an important service right now and we certainly encourage that. >> mr. chairman i know my time is that the beasties on the smaller institutions is killing lending at the local level. maybe you could take a look at that with sheila bair at the fdic. thank you. >> thank you mr. chairman. since is economic situation started back in 2008 we have seen in our country a significant rise in defaults on home mortgages. at the same time the absence of the homebuyer tax credit will i believe lead to a decrease in demand. it would seem these happenings will cause the housing crisis to drop even more significantly in the future. what is the appropriate response of the fed in such a scenario?

what can the fed due to do address the situation, if anything? >> the main thing we are doing of course is that we have purchased a large amount of mortgage-backed securities guaranteed by the government-sponsored enterprises and right now the 30 year mortgage rate is about 4.8% so that will clearly make it accessible. affordably right now in terms of price and interest rates, you are right that the larger amount of foreclosed properties is a major drag particularly in some areas of the country and i agree with ms. kaptur on this issue that we need to work with the treasury to and with banks-- to do what we can to get these resolved as quickly as possible whether it is through renegotiation of the mortgage, whether through a short sale or however it is done, get people situated and allow those houses to be turned over in the maetplace so we are working to

try to manage that situation. that is clearly a big overhang in the housing market. >> that is my question and i appreciate your answer mr. chairman. thank you. >> the chair now recognizes ms. loomis. i break your pardon for moving ahead. you have five minutes. >> thank you mr. chairman. dr. bernanke, i want to explore our entitlement programs with you for a little bit. we know from visiting with treasury secretary geithner, that medicare is essentially bankrupt. we know that social security, when we get to the suwannee 30's will be taking in enough money only to pay out three force of the benefits it pays out now. so, to help this committee dispelled the persistent and dangerous myth that our

entitlement programs are sustainable as currently structured, can you describe the fiscal and economic consequences of doing nothing on entitlement and simply allowing social security and medicare to run their course, and could you please put figure 1 backup? that was the one on the tidal wave of debt,because i'm concerned about the effect of doing nothing with our entitlement programs on this very tidal wave. >> you are correct that the tidal mud programs are are not self funded. they are unfunded liabilities to a significant extent at this point. they are t biggest single component of spending going forward. now, there are various ways to address this. you can cut other things but at some point you need to address the overall budgetary situation. if you don't you will get a picture like this one where interest rates are rising, interest payments are rising because the debt outstanding as

rowing exponentially. and at that point, things will, part. a famous economist once said anything that can't go on forever will eventually stop in this. it might have been a very implicit way ed far as cuts, a financial crisis, high interest rates that stop grow, continued borrowing from abroad, so clearly we need to get control of this over the medium term and we are certainly going to have to look at entitlements because that is a very big part of the obligations of the federal government going forward. >> the only plan that i have seen that addresses entitlement and spending comprehensively is ranking member ryan's plan that can be read on american roadmap.org. are you aware of any other plan to comprehensively address both entitlements and non-entitlement

spending? >> i think brookings and a few others have provided programs, but they are pretty rare. i agree with that. >> you mentioned that we need to be careful in the short term about upsetting the apple cart, but we need to address these in the medium and long-term. why to you is a good definition of medium to long-term? >> well, it depends to some extent on the rate of recery of the economy. the more quickly it recovers the sooner the medium term will come in some sense but right now, the various estimates the cbo and omb and under different scenarios show structural deficits from 2013 to 20/20 between four and 7% of gdp which is not sustainable, so i would say medium-term is three to five years out in the future and of

course, the situation gets much more difficult beyoncé 20/20 when the entitlement spending becomes even greater. >> i am aware that mr. ryan's plan has been scored by cbo and that it does not actually balance the budget until the second half of this century. that is how gentle a landing it is. and that is based on our current economic situation, so it would balance the budget earlier if there were a more robust economic recovery. does that number scare you as being too abrupt and effort to recover our economy and balance the budget? >> i am not familiar with that trajecry there but i think we need to show within a few years we are going to go clearly to a path where the debt-to-gdp ratio

remains more or less stable. in other words the line in that picture is flat or going down rather than rising and as long as that can be persuasively shown to the public into the market, than that would be a very important step. >> are you basically saying it is all about trajectory and confidence in this trajectory and that is what we are trying to achieve. >> yes. >> thank you mr. chairman. thank you mr. bernanke. >> thank you mr. chairman. chairman bernanke thank you for being here today and the hard work you are doing. when you testified in front of this committee a year ago, almost to the day, the economy was still in decline, grossed a mystic product decreased by over 6% and they were shedding about 500,000 jobs a month. i know we talked about this several times. today our economy is growing at a rate of 3% adding almost

300,000 jobs in april. that is a significant turnaround. however, in places le my home state in rhode island, which ntinues to have one of the highest unemployment rates in the country, 12.5% rate right now, finding jobs continues to be a top concern for me and my constituents and thother is, the other issue is the federal deficit and i know these have been-- here this morning. my question is built on small business job creation and i do want to address the deficit. small business is a key economic driver particularly in rhode island which we have 97 or 90% of our businesses in rhode island are small businesses. can you give us again and update on the current state of lending to small businesses in particular and can you also give us an update status report on the term asset-backed lending

facility as it relates to small business lending, and in your estimation to small businesses now have access to the credit they need to begin expanding and adding jobs. what do you believe the most effecte way the federal government can spur small-business growth and job creation? how do we jumpstart job creation and small businesses, which is the backbone of our economy at least in particular rhode island? the other thing is i would like you to get to, as i mentioned before, the deficit and are mounting federal debt is a larger concern for all of us especially given the recent volatility in the european market. do you believe our economy is stable enough to enact immediate deficit reduction measures and is if not what are the risks of a double-dip recession? finally what is the most effective way two of-- don't put

our economic recovery at risk? >> so, the credit situation for small businesses remains very tough, very tight. i think there are some indications of modest improvement. for example our survey of loan officers suggest that they have no longer, they are no longer tightening the terms on which they offer loans to small businesses, and the rate at which a small loans is declining or at least leveling off to some extent that things are getting a little better. another indicator is that part of the reason it is a little better maybe that right now businesses are not coming to the banks in many cases for loans because they don't have the demand for their products. if you ask small businesses in the surveys, most of them point to the lack of demand is the most important problem and credit is down on the list somewhere and i think our concern is as the economy grows

and businesses want to grow that they will run into constraints, so i think to answer question although there seems to be some signs of improvement and i heard some of this last week in michigan when i was talking to suppliers to the auto industry, some signs of improvement still obviously are tied tight for small business. our talf program i think was very helpful in getting this securitization market for small business loans going again. that program is now over because we are trying to exit from those extraordinary measures, but the secondary market has seemed to revive and seems to have revived and in addition the treasury is purchasing sba loans by the fda is only one, only one part of the source of credit for small business and that is why i emphasize today the fed has been working very aggressively with banks to make sure that small

businesses that are creditworthy are not turned away. i am sure it is not in all cases but we understand the importance of this recovery in this economy. on the deficit, again, as i mentioned to mr. ryan i think it is really a question of trajectory, a very sharp consolidation and fiscal policy this year would not be a good idea of. i think given the fragility of the recovery at this point, but maintaining a strong recovery in keeping interest rates low would be assisted by a commitment by congress to bring the deficit to a sustainable level and the debt to a relatively flat level to gdp over medium-term. >> ms. delauro. >> thank you mr. chairman. dr. bernanke, welcome and thank

you. as expressed here and in other forums, the concern about the adverse effects of the growing deficit and debt in the coming years, and its long-term effect on our economy. i worry that there is a great deal of confusion about what the concerns implied about policy choices. now and over the next few years. for instance, the concerns about the economic deficit and debt led some house members to demand that the fiscal relief for the state in the form of a temporary extension of the increase in the federal matching rate for medicaid be dropped from the jobs bill the house passed before the recent break. you commented in your testimony about the shortfall in the state budget. additional layoffs and you

mentioned something earlier on this, additional layoffs and there are substantial layoffs coming particularly in education and that will follow with health care workers, probably police and firend states are required to balance these budgets. what that means in terms of those layoffs, if we do not extend additional fmat funding for states, will that be a drag on the economy and slow recovery? and i know you shy away, as you talk about specific programs, but we are in an economic crisis at the moment here. we have to connect dots between federal government and state government with what is happening. what is your sense of this policy with regard to assistance to states at this juncture? at this juncture, not forever, at this juncture?

.. the environment here today, which is of concern that we do not seem to be looking at, and the following question as dr. orszag said in the paper the other day there was a trade-off between deficit reduction and job creation. given what you said on assuming you have the same view that we

are dealing with a to attract program but congress has become increasingly concerned that there is a trade-off and that policy such as extending the unemployment benefit as extending -- doing something about the fmat program -- moving in the direction the only track is deficit reduction so that my point to you is do you agree that there is no trade-off that both are the right goal, do you think that we can create jobs and show that in the long term we are serious abo deficit reduction? >> yes, but you have to do both. that's my point. skype we are in an environment in this institution, dr. bernanke, that is one track, deficit reduction, it's not job creation or if the measure needs to deal with short-term economic

recovery and i don't know if you are fearful and i would ask you the question that the current climate in the congress and both the house and the senate is the one track. and my question to you is that the appropriate direction to take? what kind of repercussions would result if that effort and saying to the states or saying to this effort on job creation we can't do that now, and what does that do overall to the recovery? >> i think in the short term fiscal policy needs to take into account the fact the recovery is still pretty fragile and me need more assistance. the rest as if you do only that short term type of activity it may cause markets to worry that you're not serious and interest rates could go up and do what

the problems we are in ull agreement here. >> we are in full agreement, but i making the point that we are in a climate and environment in the congress that is one track and in my view is that is not where the future economic recovery lies. it is the same and we are on the scene truck. deficit reduction is clearly something we have to focus on. >> next question. mr. mcconaughy and this will be the next series of questions. >> thank you, mr. chairman, and dr. bernanke, i'm sorry i'm the last question. the stimulus passed by this congress last year, was it necessary and did it work? >> i think it was helpful. i think it added -- it did

create jobs and growth. but it could have done better i don't know, but it was helpful. it did create some jobs. but again, it has added -- again i am fine with the fact it added to the deficit but we need to take into account the long term implications as we do fiscal policy, and forward. >> but let's go back to when we pass the stimulus. was it useful or necessary to the economic recovery or could we have gotten by withut it? >> i don't want to buy into the entire package and all the aspects of it, the composition, the size, all these things but i do believe the fiscal policy was helpful and -- >> useful. was the stimulus useful or not a year ago a little over a year ago? >> you will be one of the few economists i know of who thinks otherwise if the answer isn't yes. >> again, i don't know what would have happened in the

absence. i think it did help jobs and growth and clearly we needed help because the economy was in weak condition a year ago. >> thank you. you mentioned the deficit commission, dr. bernanke. i've heard members of this committee on other sides of the aisle say that they are all for addressing the deficit, so long as it never involves any of the revenue sources. can we, in fact, change the trajectory we are on in terms of deficit growth if we only address the revenue -- the spending side and don't address the revenue side? >> i think i would urge everybody to approach this with an open mind and be willing to look at alternatives. in the and people have their own views and decisions to make, but i would think that we don't want to be carving of all possibilities before we get -- >> i guess i'm asking you a different question. i agree everyone should keep an open mind but i telling you they don't have an open mind. they publicly expressed the do

not favor the reduction as long as anything having to do with revenue is off the table. can we get to serious deficit reduction, change that trajectory you talked about if we eliminate half of the ledger sheet? >> theoretically you could to cut enough but it would be difficult to that of an ischemic is there enough spding to be cut? >> of course. >> national defence, homeland security? >> that's your judgment, the congress judgment, that's not my judgment. >> it must be nice to be an economist. your predecessor opined after the inoculation of president bush that he did not think that the proposed tax cuts at the time would necessarily have a deleterious effect on the situation of the deficit and that it could have a stimulative effect on the economy. was he right or wrong in that opinion rtrospectively? >> i think it probably did

strengthen the economy but probably also raised the deficit. >> you think it strengthened the economy? >> in the sense that remember in 2001 we were in a recession supportive of the recovery i believe. however it did add to the deficit. >> but it didn't seem to have a sustained impact on the economy if you look at what happened in 2007, six short years later, did it? >> that is certainly true, but the financial risis was a separate set of factors that hit the economy. >> you are referring to the economic decline after 9/11 in 2001? >> etkin after the drop in the bubble, the dot com bubble march of 2000 when the recession began. >> my final question because my time is up a so is yours, taxes. there was a study released a few years ago that showed that the a cumulative aggregate tax burden on state, local and federal the

average household in america is now at its lowest point since 1950 when harry truman was the white house -- is that your understanding as well? >> that may be true but it's in part due to the fact we are in a deep recession to people's incomes are down so the taxes they pay are less than usual. i'm not sure that is true about each individual tax in terms of rates and so on. >> were taxes cut as part of the stimulus bill last year? >> yes. >> thank you. i yield back, mr. chairman. thank you, dr. bernanke. >> c2 speed mr. chairman bill thank you. we are finding the time to testify. the members who didn't have the opportunity to submit questions may submit questions for the record if there is no objection, there is none, so ordered. >> thank you for coming. we appreciate your testimony. >> thank you, mr. chairman.

[inaudible conversations] [inaudible conversations]

>> that white boum we see, that's the absorb ant pad they

put in to the marsh to troy to protect it. i've been working in this area quite a bit. it's looking like i'm seeing less and less oil on the shores each day. jo you see some boom is all white. they probably just change it had out. they change it everyday and push a fresh one in.

>> when the oil touches the grass, it is going to kill it. we have the wave action that erodes the marshes. we should be sitting on land right now. with how bad it erodes with the storms and stuff. it's really gooding to chew it up and move our coastline further in. >> it's showing wrer on land. can you clearly see we are probably 50 feet away from the shore line. this used to be land here. that's just from hurricanes and global erosion.

>> i'd be shrimping. i'd be troling. i just want it back. that's all. stuff happens. i'm upset about it. they node to just clean it up. that's all. you have some people that are angry but what are going to do? get out here and help clean it. >> obviously there's a lot of oil out there because you see it in the grass but you didn't

really see it in the water. >> there's been a lot of sheen here. it's really thin. it's difficult to see particularly with the hot weather we have had. it burns off. it evaporates. oil naturally biodegrades. where it accumulates in the marsh. that's where we have to treat it. jo we saw a lot of birds out there. none of them look like there is oil on them. why is that? >> what's the next step? >> this is it. it is a long process. we go out there and continue replacing the boom.

the gentleman from alabama. mr. bachus: thank you, mr. speaker. this motion to instruct directs the confereeso insist that this legislation end the possibility of taxpayer-funded bailouts once and for a by stipulating that bankruptcy is the only available option for liquid ating a failed financial firm. the motion also reqres that the conferees and the public by xtension have at least 72 hours to review the contentof the conference report before its inal approval. we've heard time and time again that the democrats, quote,

resolutionuthority to wind down systemically significant financial institution ends the too big to fail doctrine and protects taxpayers. that's an outrageous and false claim. read the bills. both the house and the senate let the fdido the following -- lend to a failing firm, purchase the assets of a failing firm, guarantee its obligations to creditors, take a security interest in its assets, and even sell or transfer assets that the fdic has acquired from it. and while the house establishes $150 billion bailout fund to pay for the resolution of a failed fd with an exa $50 billion line of credit with the treasury if the original $150 billion is exhausted and cannot fully fund the bailout, the senate approach is no better. the senate would allow the fdic

to potentially provide trillions of dollars from the treasury in order to pay off a failed firm's creditors. and couerparties in the aftermath of its failure with the hopes that the funds can be recouped at some later date but only a hope. the senate bill institutionalizebackdoor bailouts that have so infuriated the american people. by conferring on the fdic the exact same tools that were used to rescue the creditors of bear stearns, a.i.g., fannie mae and freddie mac with a taxpayer price tag today of over $1 trillion. this would continue the misguided too big to fail bailouts that allowed u.s. regulators to pay goldman sachs and other large european banks 100 cents on the dollar at the

expense of smaller institutions and companies which were considered too insignificant or all to save or to pay. the democrats like to call their plan a death panel for large financial firms. but if you read the bill, in reality it's nothing less than a taxpayer-funded life support to pay off the creditors of the failed institutions but not necessarily all of the creditors. they could pay some of the creditors and let others hang out to dry. we saw that with a.i.g. and other bailouts. and don forget the so-called too big to fail institutions have only grown larger and more dominant through the regulator directed taxpayer-funded bailout process, a process this leslation institutionalizes. a better, more equitable approach to dealing with failed nonbank financial institutions,

the only wayto make sure taxpayers are protected from paying for lost -- past mistakes is bankruptcy, first proposed by republicans. unlike the fdic, which is funnel unlimited of taxpayer cash to iling firm's creditor as part of a so-called resolution, a bankruptcy court has need -- neither the authority nor the funds to make creditors whole. bankruptcy is an open, transparent process administered according to clear rules, subtle preferences, preferences that in this bill can be disregarded. by contrast, the resolution authority proposed by the democrats would be carried out entirely behind closed doors with no guarantee of adequate stakeholder participation and protection and without a bankruptcy judge to ensure a fair and equitable outcome.

the democrats have been careful to include in their bill a provision that explicitly statethat taxpayers will bear no lses from the government's exercise of resolution authority, but that promise, like the promise we heard in fannie and freddie, is an empty one, not worth the paper it is printed on. you remember on this floor we heard the secretary of tresury say $300 billion that will never be used. it was used and almost another $1 trillion more was guaranteed. the only way to ensure that the pockets of taxpars will not again be picked by wall street and government bureaucrats with the help of congress is a coalition which sometimes i refer to as the reckless and the clueless is to insist that failing firms be resolved through bankruptcy. in conclusion, let me remind my colleagues that for 99.9% of

core companies and all individuals who find themselves unable to meet their obligations are their creditors -- or their creditors, bankruptcy, not a government bailout, ithe only alternative. it ought to be the alternative for failing too big to save corporations as well. this motion to instruct would eliminate the too big to fail, too small to save double standard in the democrat bill that has so infuriated the american people and made -- makes bankruptcy the only option for the systemically sigficant firm many of which created the crisis that our economy and the american people face today. i urge my colleagues to support it and reserve the balance of my time. the speaker pro tempore: the gentleman from alabama reserves. the gentleman om massachusetts. mr. frank: i yield myself such time as i may consume. the speaker pro tempore: the gentleman is recognized. mr. frank: we have just seen an

elephant stick wielded on the floor of the house. e elephant stick refers to the man who is walking around the floor here in washington carrying a big stick and people say, why do you have that g stick? people he says, i have to keep away the elephants. people say, there are no elephants here. he says, right, my stick works. my friend from alabama is determined to prevent from happening what is not going to happen and what is not authorized in the bill. it is true, we have bailouts. what we also have is theatest in a sees of bailouts and a series of unning repudiations of the bush administration from its former supporters. i believe president bush's administration will do the best they can work weak tools at the time to deal with the problem. what we have are ways to avoid

that from happening. there was referee to too big to fail. they will fail. the question is will their failure lead to consequences that you should have some ability to deal. with we do model some of this after the fdic. the fdicrun by an able appointee, a republican, appoint to the job by president bush, had a major role in helping us decide how to do this. it is to say, first of all, the institutions that get too far into debt will die. my republican colleags were actually right in the wrong place. earlier this year. which is better than their usual average when they talked about death tanls -- death nels. we are legislating death panels this yearut they're for financial institutions, not elderly women. we don't havehem in the health care bill, we have them in the financial bill. there is no too big to fail

institution. some things that were done were not done as well as they should have been. that's why we go to a final conference. to the extent there are discussions that some of these might survive, we'll clean them out. the senate bill has some provisions i don't like. 202 of the senate bill, i hope to change. on the other hand, the notion that in this very complex system we have with the debts that are out there, going into bankruptcy is simplistic. by the way if think republican colleagues really believe that bankruptcy is the only way to deal with these institutions, they would have an amendment or would have had an amendment to do away with the disillusion authority of the fdi -- the dissolution authority of the fdic. we don't have simple bankruptcy for banks, we have a particular method given their importance in society and how you wind them down. as for the conference report

being opened, i welcome republican colleagues as converts to the cause of openness and interbranch negotiations. when the republicans controlled this institution for 12 years and had the senate for most of that time, conferences were s rare that i've had to explain to members who came during the years of repubn rule how a conference works. now they have become great dvocates of an openness they never implemented themselves. we will have a conferee, which i announced was my intention, last year, last fall. it will be open, things will be presented, they will be debated they will be subject to amendment they will be voted on. i was asked if they were going to be televise ared. i am not the editorial director of c-span. i hope it will be covered. i hope tv will be there. i hope it will be dely covered. i think it probably will be, given the interest. when they talk about a 72-hour

requirement, i expect we will beat that. the timetable i amhoping for will have this bill done in a couple of weeks and it should be reported out if we can work this out by a thursday and not come to the house until tuesday which is more than 72 hours. one never knows whether there will be some emergency, what might happen this will be a fully debated bill system of there are aspects of the inspection report i agree with. there are aspects with which i disagree. of course, we have to go to the senate, that's why instruction motions are not binding. i do disagree with two points. first of all, the entirely inaccurate allegation that this perpetuates bailouts, they have us confused with the situation in 2008. i don't blame the bush administration for the bailouts, but some of them could have bn conducted better but they didn't have the tools this ves them the tools that first the bush

administration and now the obama administration has asked for, not to keep institutions alive but to put them to death in a way that does not cause great problems in the rest of the economy. there will be no taxpayer money expended here. that's already done. i do not doubt that years from now they'll take credit for what we had already decid to do. the instruction motion, in other words is a mixed bag. some parts of it, i hope we will act on. the fund of $150 billion recommended to us, again, by the chairwoman of the fdic. many of us thought that made sense. the senate and th administration were opposed to it. it will not survive the conference, everyone knows that, so that is going to disappear anyway. saying you have only bankruptcy and nothing el that helps yo buffer the consequences of the failure of these institutions and failures they will be. they will be failednd

dissolved, i think is reckless. i plan to vote against the conference -- against the motion to instruction and given that it is such a mixed bag of things an given that it's not binding, i willredict that the outcome is likely to be very similar, no matter how it votes, there are some things we'll do, some things we have to negotiate with the senate we haven't got the power to order so i think this will be useful discussion but i will go back to test the central points. there will be no taxpayer funds and no institutions that do not -- are not allowed to fail. there will be an effort, and it has to be negotiated, to work with the senate so that we do not simply say that the consequences are of no interest. i repeat again, those who genuinely believe that only bankruptcy should be ud have made a major concession by not applying those rules to the

banking system. if only bankruptcy should be used, then where is the motion, where was the amendment during the process to convert the fdic dissolution process on which this is modeled to a bankruptcy model. i reserve the balance of hi time. the speaker pro tempore: the gentleman from massachusetts resves the balancof his time. the gentleman from alabama. mr. bachus: i yield fou minutes to the gentleman from texas, mr. paul. or mr. hensarling. sorry. the speaker pro tempore: the gentleman is recognized for four minutes. mr. hensarling: thank you, mr. speaker. . speaker, the question before us, with apologi to william shake spafere to bail out or not to bail out, that is the question. the motion to instruct by the ranking member says, no more bailouts. quite simply, it caot be said any other way. unfortunately, whether you're dealing with the house bill or

the senate bill, there's still -- there are still firms that are in their view too big to fail. the phrase used is systemically significant, stemically risky, but they are identifying firms for a specific regulatory scheme and in the hou version, as the distinguished chairman of the financial services committee pointed out, has a prefunded bailout fund. in the senate version they drop their prefunded but there's an infinite line of credit that the fdic can draw upon with respect to the treasury. again if you have firms, mr. speaker, that are too big to fail, then you are saying they can't fail, so if they can't fail, then at some point, you're going to bail them out. now, i've heard the distinguished chairman of the financial services committee, the gentleman from massachusetts, on many occasions say, no taxpayer

funds will be used. i heard him say it seconds earlier. and i know he believes it and i know he means it but unfortunately, the track record for him and many of his colleagues on that side of the aisle, and predictably such is not very good. the distinguished chairman was the same one who told us he dn't believe that taxpayers would be called upon to bail out fannie and freddie. well, approximately $150 billion later, we know that fannie and freddie did have to be bailed out that rolling the dice was not a good strategy. we know that we were told these are the same folks who also told us that the national flood insurance program would never go broke, the crop insurance prram, medicare ll never go broke. we've heard it before, mr. speaker. to somehow believe that ultimately taxpayers will not be called upon to have to bail

out these firms is asking us, frankly to igne history and to suspend disbelief. again, it is time to end the bailouts in the motion to instruct -- and the motion to instruct would do that. too bito fl. becomes a self-fulfilling prophecy. in many respect the bill ought to be renamed the perpetual bailout act of 2010. it as the wrong scheme. bankruptcy ishe proper scheme. i know the chairman has told us, well, we have death panels for these financial firms. well, what happened on chrysler and their so-called death panels? we know that washington decided to play favorites. certain creditors were benefited at the expense of oths. unsecured creditors, particularly the.a., united

automobile workers, somehow they jet to the front of the line. secured creditors go to the back of the line. it's being used, it creates avenues for political favoritism in washington, d.c., it will again lead to washington picking winners and losers. we know how this ends. we know that a.i.g. was used to make counterparties whole. c.i.t. was designate today big to fail they got billions of dlars, they failed anyway, but it was resolved quickly. it is time to end the bailout the nation cannot afford to be on the road to bankruptcy. it is time to end the bailouts, mr. speaker. it is time to approve this motion to instruct. i yield back the balance of my time. the speaker pro tempore: the gentleman's time has expire. the gentleman from alabama reserves the balance of his time. the gtleman from massachusetts. mr. frank: i yield myself such time as i may consume. i would like to yield to any of my republican colleagues who can tell me why they never

moved to require bankruptcy as a way of dealing with failing banks. if bankruptcy is the only way to do it, why have the republicans never proposed that we substitute for the current fdic propos, bankruptcy? i'm used to being unanswered when i ask hard questions. thing proves a point. the gentleman from texas. mr. hensarling: i would say to the distinguhed chairman that depositors are different from investors. when we have taxpayer money specifically at risk, it calls for a different regime. mr. frank: the gentleman is wrong about that. yes deposirs are different than investor, depositors are insured. but we have deposit insurance. if you on the other side generally believe this, they would provide deposs sit insurance and bankruptcy. the gentleman has iorrectly answered the question. deposit insurance takes care of depositors but there are other

ways to reducthe cost to the government. bankruptcy and deposit insurance has not been the method. i'll yield again. mr. hensarling: is the distinguished gentleman suggesting we ed deposit insurance for firms like citigroup and goldman sachs? mr. frank: that's even by the standards of this debe wholly illogical. what i'm suggesting is the glaring inconsistency between saying bankruptcy is the only way you put an institution out of business and the failure to apply that to the banking institution. by the way, i don't -- i don't mean to be rude but the gentleman mentioned city corp., but there's a bank there that has deposit insurance. there's another error -- there's another error i tried twice, this is that the bill designates institutions too big to fail or systemically important. that's misleading as stated.

in fact, the bill in the house does not designate any institution as being systemically important. the only way an institution would be designated as systemically important is if it was found to be troubled. so there would be no situation in which an institution would havehat label and go out and be able to do things with it. under the bill we have, only a finding that the instition is in difficulty triggers a systemic importance designation and it's accoanied with restrictions on the institution. it's exactly the opposite of this being a badge to get more loans. it is publicly identified as a public institution. the last point i'd make is this. there's flood insurance, medicare a number of things, none of them have the language we have in this bill this bill has very specific language banning those things because we have learned from experience. we've learned from the experience of 2008, with all those bailouts and remember,

every single bailout activity was initiated by the bush administration. i s that not for they are political purposes but to inindicate the difficulties here. it was the people in the bush administration who said to us, give us different tools. we've got to be to be able to deal with putting these institutions out of business t not ignore the consequence. with that, mr. speaker, i reiterate is bill prevents bailouts, desigtes no institution as stemically important and says regulators may step in when they find an institution to be troubled and if they think that troubled institution can use damage, they don't just designate it, they put severe restrictions on it. it's exactly the opposite of the suggestion that it's too big to fail. they have to increase capital, decrease activity and people will be told if that

president obama. we began with the brazilian ambassador. >> good afternoon mr. president. the president will vote against the draft resolution. in doing so, we are honoring of the purposes that inspired us in the efforts that resulted in the nuclear is asian. we will do so because we do not see sanctions as an effective instrument in this case. sanctions will most probably lead to the suffering of the people of iran and play in the

hands of those on all sides that do not want dialogue to prevail. past experience is in the u.n., notably in iraq showed a spiraling sanctions, threats and isolation can result in her tragic consequences. we will vote against also because the adoption of sanctions at this juncture runs contrary to the successful effort of brazil and turkey to engage iran and a negotiating solution for its nuclear program as brazil repeatedly stated the and we rescission adopted on the 17th is a unique opportunity that should not be missed. it was approved by the highest levels of the leadership and endorsed by its parliament. denuclearization promoted the solution that would ensure the full exercise of iran's rights

to the peaceful nuclear energy while providing full verifiable assurances that iran's nuclear program has extensively peaceful purposes. we are firmly convinced that the only possible way to achieve this collective goal is to secure kuran's corporation through its effect is an action oriented dialogue and negotiations. thterm a clear showed that persuasion can do more than punitive action. its purpose and result where to build the confidence needed to address the whole set of aspects of iran's nuclear program. as we explained yesterday, the joint declaration removed with political obstacles to the materialization othe proposals by the iaea in october, 2009. many governments and highly respected institutions and individuals have come to acknowledge its value asan

important step to the broad discussion on the iranian nuclear program. the brazilian government deeply regrets tha the joint declaration has neither received the political recognition that it deserves more given the time that it needs to bear fruit. brazil considers on natural to rush for the parties concerned can sit and talk about the implementation of the declaration. the vmi group required to the letter of 24 of may which confirmed the commitment to the content of the declaration whe received just hours ago. no time has been given for iran to react to the opinion of the vienna a group including to the proposal of technical meeting to address details. the adoption of sanctions in such circumstances sends the wrong signal to what could be the beginning of a constructive engagement in vienna.

it was also a matter of great concern the way in which the permanent members together with a country that is not a member of the secuity council negotiate among themselves for months of losed doors. mr. president, brazil it touches the utmost importance to disarmament and non-proliferation and our record in this domain is impeccable. we have also affirmed and reaffirmed now the imperative for all nuclear activity to be conducted under the applicable safeguards of the international energy, the agency, and iran's activities are no exception. we continue to believe the nuclear is some policy and should be pursued. we hope all parties involved will see the long-term wisdom of doing so. in our view of the adoption of the new sanctions by the security council will delay rather than accelerate for progress iaddressing the

question. we shouldn't miss the opportunity of starting a process that can lead to a peaceful negotiated solution to this question. the concerns regarding iran's nuclear program raised today will not be resolved until dialogue begins. by adopting sanctions this council is actually opting for one of the two tracks they were supposed to run in parallel in our opinion the wrong one. thank you mr. president. >> thank you, mr. president. turkey is fully committed to its responsibilities in the field of nonproliferation and as such is a party to all major international non-proliferation instruments and regimes. we don't want any country in our region to possess nuclear weapons. such a development would make it even more difficult the attainment of the goal of the establishment of its own of

weapons of mass destruction in the middle east which turkey attached great importance. rkey would like to see the restoration of confidence within the international community on the exclusive peacul nature of iran's nuclear program. to this end, we see no viable outcome to the diplomacy peaceful solution. it is with this understanding that we have signed together with brazil the declaration we changed and implement the swap formula elaborate by the agency in october of last year with providing nuclear fields to the research reactor. mr. president, take ron's brigety new reality with respect to the program the declaration resigned to become designed as a confidence-building measure will if implemented contribute to the resolution of the issues

relating to iran's nuclear program in the constructive atmosphere. the declaration innocence provides its first track in the broader road map that would lead to a comprehensive settlement of the problem. in other words, the declaration provides an important window of opportunity for diplomacy. sufficient time and space shall bear the full implementation. we are deeply concerned the option of sanctions will affect themomentum created by the declration and the overall diplomacy process. on the other hand, it is rather on helpful that the responses of the vmi group were received the fact the response of the negative nature and was sent on the day of the adoptionof the resolutions determining the aspect of the position. our position demonstrates the commitme to the efforts.

having said that, though against the resolution should not be constituted as an indifference to the problems from iran's nuclear program. there are serious questions within the international community regarding the purpose and the nature of iran's nuclear program and these ned to be clarified taking this opportunity, we call upon iran to show absolute transparency about the nuclear program and demonstrate full cooperation with the international atomic energy agency in order to restore confidence. mr. president, turkey at such great importance to the resolution of this problem through peaceful means and negotiations. the sanctions resolution has been adopted today. despite our active and unrelenting efforts in destruction. however, the adoption of the resolution should not be seen as

an end to the diplomacy efforts. there is the firm opinion that after the adoption of this resolution efforts towards finding a peaceful solution to this problem has to be continued even more resolutely. on the other hand, we take note of the concerns of the international community's regarding the reach by iran and the 20%. the steps by the authorities discovered the conerns of th international communities which have led to certain questions regarding the peaceful nature of the nuclear program. now it is the implementation of iran, the declaration must feel onthe table iran should come to negotiations with five plus one to take up the nuclear program including suspension of enrichment. we will contribute to this process with these the republic

of turkey is against the resolution today. thank you, mr. president. >> thank you,mr. president. today, the security council has responded ecisively to the grave threat to international peace and security posed by iran's failure to live up to its obligations under the nuclear non-proliferation treaty. this treaty is the principal international legal instrument for holding member states accountable. discouraging the spread of nuclear weapons and bringing the benefit of nuclear energy to all corners of the world. as president obama has said, the rules must be binding. violations must be punished. words must mean something. the issue is straightforward. we are at this point because the the front of iran has chosen to

violate its commitments to the iaea and the resolution of the council. despite consistent longstanding demand by the international, an antiiran has not suspended its uranium enrichment and other proliferation related activities. the security council has passed the resolution today aimed at reinforcing the need for iran to take th steps and comply with its obligation. these sanctions arnot directed at the irony in ran and people nor did they stop the legitimate exerse of its right under the npt in conformity with its obligation. rather, the sanctions aimed squarely at the nuclear ambition of a gernment is chosen a path that will lead to increased isolation. the sanctions are its top as they are smart and precise.

this resolution prohibits iran from investing in sensitive nuclear activity abroad. it in pos is binding restrictions on iran's in parts of conventional arms. it bans all activities related to ballistic missiles that could deliver auclear weapon. it imposes a comprehensive framework of cargo inspections to detectand stop iran from muggling and acquisition of illicit materials or nuclear items. accretes important tools to block iran's use of the international financial system. particular iranian banks to fund and facilitate nuclear proliferation. it highlights the potential link between iran's energy sector and its nuclear ambitions. it targets the will of te islamic revolutionar guard corps in the iran's

proliferation efforts. it establishes the u.n. panel of experts to help monitor and enforce the implementation of sanctions and it imposes targeted new sanctions include think asset freezes and travel bans on authity entities and an individual link to the iranian nuclear proliferation. mr. president, since 2002, the international atomic energy agency has sought to investigate serious concerns that iran speech of nuclear program might have military dimensions. in 2003, the ia board o governors expressed, quote, great concern that iran still had not enabled the iaea to assure the member states that iran had declared all of its nuclear material activities. for our part, the united tates launched a sustained serious effort to starting early last year to engage with iran on a range of issues of mutual

concern including these nuclear issues. the united states made detailed and specific openings to the iranians. including personal and direct outreach by president obama. the united states strongly supports the peaceful use of the atom for energy and innovation. like every nation, iran has rights but it also has responsibilities. and the two are inextricably linked. iran sean opportunity after opportunity to verify the peaceful nature of its nclear program. in recent months iran has given us more reas, not less, to suspect its goal is to develop the ability to assemble a nuclear weapon. last september, the world learned that iran had secretly built another uranium enrichment

facility at qom in clear violation of security council resolutions and in iran's iaea obligation. last ovember, iran announced that it would build ten more such facilities. in february, iran said it would begin to enrich uranium and to nearly 20% moving closer to the weapons-grade materials. in may the iaea a firm yet again that iran is continuing its than to the uranium enrichment and warned that iran has amassed more than 2,400 kilograms of low enriched uranium. the resolution we passed today offers iran a path to the immediate suspension of the sanctions. the best way is also the easiest one. iran must review its international obligation, suspend its enrichment he read

it to date related processing heavy water related activities and cooperate with the iaea. the united states reaffirms our commitment to engage in robust principled and creative diplomacy. we will remain ready to continue diplomacy with iran and its leaders to make clear how much they've to gain from acting respsibly and how much more they stand to lose from continued recklessness. today's resolution does not replace those efforts but it esn't support them. turkey and brazil have worked hard to make progress on he research reactor proposal. efforts that reflect the leaders good intentions to address the irania people's humaitarian needs while building more international confidence about the nature of iran's nuclr program.

my governmt will continue o discuss iranians revised proposal and concerns about it as appropriate. but the tehran reactor then and now does notespond to the fundamental well-founded and unanswered concerns about iran's nuclear program. this resolution does. until the world's concerns with iran's nuclear defiance are fully resolved, we must work together to insure that the sanctions in the resolution are fully and firmly implemented. we must ensure that the development of the most devastating weapons ever devised by uman science is prescribed by the most responsible controlled ever produced. la month 189 countries can together to strengthen the

nuear non-proliferation treaty as a cornerstone of global security. today's resoluton is an important part of that. the nnpt must remain at the center of the global effort to stop nuclear proliferation even as we pursue the ultimate goal of a world without nuclear weaps. mr. president, today i'm proud to say that this council has risen to its responsibility. now, iran should choose a wise course. thank you, mr. president. >> [speaking in native tongue] >> translator: i thank the representative of the united states and to the united kingm. >> thank you, mr. president. i but like to begin by reading the text of a statement which has been agreed by the foreign ministers of china, france, germany, russia, the united kingdom and the united states. with the support of the high

representatives of the european union. the statement reads as follows. we, the foreign ministers of china, france, germany, russia, the united kingdom and the united states would like to take this opportunity to reaffirm our determination and commitment to seek the early negotiated solution to the iranian nucle the adoption of the united nations security council resolution 1929 while reflecting the international community concern about the iranian nuclear program and reconfirm and the need for ira to comply with the u.n. security council and iaea board of governor requirement keeps the door open for continued engagement with iran. the aim of our efforts is to achieve a comprehensive and long-term settlement which would restore international confidence in the peaceful nure of iran's

nuclear program. while respecting iran's legitimate rights to the peaceful use of atomic energy. we are resolute in continuing our work for this purpose. we also welcomand commend all diplomatic efforts in this regard. especially those recently made by brazil and turkey on the specic issue of the tehran research reactor. we reaffirm our june, 20 proposals which remain valid as confirmed by resolution 1929. we believe these proposals provide a ound basis for future negotiations. we are prepared to continue dialogue and interaction with iran in the context of implementing the understandings reached during the geneva meeting of one october, 2009. we have asked aaron as ashton the representative of foreign

affairs and curity policy to pursue this with the secretary of iran supreme national security council at the earliest opportunity. we expect iran to demonstrate the pragmatic attitude and respond positively to our openness towards dialogue and negotiations. mr. president, that concludes this statement on behalfof the foreign ministers. >> i should now like to make some remarks of my national capacity. today e u.n. security council adopted resolution 1929 as a result of the international community ongoing serious concerns about the proliferation risks of the iranian nuclear program. once again, the u.n. security council has sent a strong message of international resolve to. it is a clear signal that iran's continued failure would comply with its u.n. security counl

and iaea boardrequirements to cease its enrichment related activities could not be tolerated. mr. president, the u.n. security council last addressed the issue in september, 2008 and a clear statement we wish to resolve our serious concerns throug dialogue and negotiations. since that time we have made several efforts to achieve this. when the foreign ministers met in new rk on the 23rd of september, 2009, they reiterated their wish to negotiate a comprehensive long-term agreement to resolve the irony and nuclear issue. but they also made clear that this could only be achieved if both sides were willing to approach these matters in a spirit of mutual respect and were committed to looking for solutions going forward. last october's meeting in geneva we reached agreement on the three important issues.

first, iran agreed to hold the meeting on its nuclear program within one month. iran also said that it would cooperate fully and immediately with the iaea on the enrichment facility near qom. also agreed in principal to a deal to supply its research reactor to. welcome these commitments and made clear we hope to that would be the start of a period of intense negotiations. we regret this did not prove to be the case. iran state repeatedly that it will not discuss its nuclear program claiming that our concerns are baseless. they are not. th are fully documented reports from the iaea director-general going back several years and the subject of security council resolutions since july,2006. the purpose of the fasuba and qom remain on the established.

the february, 2010 iaea report made clear once again that iran had not answered a number of key questions. on the trr produced a detailed proposal from the iaea that all parties present agree. iran then withdrew its initial acceptance of the proposal and in february starte to enrich lo enriched uranium to 20%. despite having neither the need to do so or the means to fabricate the fuel for use in the reactor. iran also announced the construction of further enrichment facilities. mr. president, we acknowledge the good faith efforts of turkey and brazil to persuade iran to engage with the iaea on the tape on research reactor. however, we cannot accept the attempts to use these efforts to justify its continued defiance of success of the u.n. security

council resolutions that mandate suspension of iran's in richmond operations. we have said many times we do not qution iran's right to peaceful nuclear energy but with those rights, responsibilities. mr. president, today's resolution has been made necessary by iran's actions. once again the resolution restas our willingness to engage in dialogue to address the substance of our concerns. the meases adopted in this and previous resolutions can be suspended when iran's suspend its nuclear activities. we remain ready to resume the talks o iran's program that we started in geneva on the first october, 2009. we believe such talks can lead to a solution as long as they are purposeful, discuss both sides' concerns anmake swift progress. in extended our hand we show our determination to resolve these

matters through dialogue and diplomacy and in adopting this resolution we show equal determination to continue to respond robustl to hear on's refusal to comply with its international obligations. thank you. >> [speaking in native tongue] >> translator: mr. president conference comes to the adoption of 1929 the council has done so by a large majority with a balanced including countries of africa, asia, europe, america, states possessing a nuclear industry and those without one, states with trade relations of iran and those which have none. this unity is the result of an office to become obvious reason which are familiar iran has developed a nuclear program for 18 years. once the program was discovered, iran has impeded the iaea efforts to uncover its final

objective. iran continues the enrichment and despite 563 council resolutions and despite the lack of a credible nuclear power program on its soil. the facts are clear. there's o doubt, no doubt as possible. it's enough to recall them. iran has developed a program of missiles capab carrying nuclear warheads. iran has worked on advancement studies which constitute the missing link between enrichment and the ballistic missile program. especially on building the delivery vehicle in which the nuclear warhead can be placed. however, it has thus far refused any operation on the issue with the agency. more recently iran built a facility in qom. one adapted to military use, yet small for civilian purposes. this is a th detective function 24 hours a day for 45 years to

provide sufficient fuel for civilian. finally last february iran started to enrich uranium that 20%, which brings its dangerously close to the threshold no surprise then in the fact that the iaea the just concluded in the director general's rert on the 21st of may that it was impossible fr the agency to come from all nuclear material in iran are devoted exclusively to peaceful rposes. mr. present, it was not as the result of a lack of effort to bring iran to open up for alogue at this time. the three europeantates, federal republic of germany, united kingdom and france, have since 2003 attempted to engage in dialogue with ir. this approach has led to the

first european corporation proposal dated august, 2005, than the offer in 2006 in the offer of june, 2008, significant incentives had been offered to iran in the nuclear security fields. a high-level delegation sited tehran in june 2008 with a letter signed by the minister including the american secretary of state at the time. meetings took place with iranians, military correspondents, direct and indirect contact, multilateral and bilateral. no effort was scared. the offers did not lead to any conclusion as a result of the refusal to engage in negotiations and for six months now iran has refusedto meet the european union representative. leedy ashton despite the

commitment ndertaken last october. it is in this country my country welcomes with a sense of credit to the turkish and brazillian initiative on the tirana research reactor as a confidence-building measure. my authorities indicated the highest level we welcome the commitment of the eminent leaders and cherish the hope. we note however that iran has already spurred no effort to avoid the substance of the agreement by continuing its enrichment to 20% and reaffirming its continuing to do so which reduces the main purpose of the agreement and then by playing for time to ensure but a fraction of the stock of iranian, stop by of uranium would have to be exported to enable it to rapidly rebuild the quantity for the latter device. it was noted iran skewed reading of the agreement. choosing to view it as a

justification for a limited enrichment a final rejection of sanctions in the finally an alibi. allied to avoid discussing the program. finally and most importantl a satisfying agreement on the tape on research reactor could be a confidence-building measure, yet it wouldn't terkel have the problem. for half the problem is the nature of the nuclear program, the discovery of the facility in qom and richmond 20% and instruction of the ied efforts. this problem remains unchanged. it is iran's refusal to withdraw that forces us here today to show fairness. for these reasons, the resolution which is to adopt it constitutes an appropriate response. the resolution is rebuffed get specific and targeted. it isn't aimed at the irony in people. its measures will increase the cost to iran of its

proliferation policy. they will slow down the progress of the program and a ford diplomacy and more time. in fact this was the very least we could do following the diovy of th klemstine facility in qom and the beginning of the average maturity% for it is our duty, the duty to protect the npt. this vessel of which iran believes that it can travel without having purchased a ticket if after such a development we were not to react firmly as the message we would send it to the potential followers of iran is go ahead. it is our duty to prevent a regional arms race whichounts on the purpose of the iranian purpose could give rise to. it is of duty to prevent a conflict with the disastrous consequences in an unstable region. having said this, the dialogue remains.

this includes discussions on the tape from research reactor. foley mindful of brazil and turkey's efforts from france, the united staes, russia have written to the iaea director-general to share with him th issues regarding the tripartite agreement which are problematic. we would propose an expert meeting with iran as soon as possible to find agreement on these issues. we are ready to consider other measures as spilled and the resolution we just adopted. mr. president, this is a decision we cannot take a loan. it is of to the iranian leaders now to finally as we urged them to do so for close to seven years now to profit to them. it is up to them to conider the interest of their people rather than to pursue a dangerous dream of power at the cost of regional stability. it is up to them to choose integration into the fold of

international society reaping its evidence than the growing olation. if they are ready for this we will be there ready to help them. thank you. >> thank you, mr. president distinguished colleagues. i've never seen the chamber so crowded as i see it today so i have to welcome all ambassadors and distinguished colleaes to be here to watch the debate. this reminds me of a football game between the united states and iran in 1998. but the whole world w watching it. mr. president, before entering this chamber about the history the wonderful structure

especially whent follows us to this very moment. a wise man used to say it is not history that repeats itself. it repeats the same mistakes reviewing our past memories together at home this council still acts today proves we are still dealing with the unjust international system that is based on how gemini after most policies. in order to replace for the conscience of all peace-loving people around the world. i regret to say a few words about unfair pressure that all the vehicle o nation has endured you to the aggression and intervention of some of the

same countries whose representatives are sitting around the table today pushing for the imposition against the arana iranian nation. what we talk about our own experiences. 's about of course accidental or spontaneous. comparison in this case is amazingly instructive. the membe of the security council have considered it today have quite identical against the country in 1951 the words are quite similar, energy, independence and a big power intervention. the united kingdom in the 1950's

was arguing the same as today. national iran, the oil industry is putting in danger peace and security of the region and of the world. just replace the phrase of the nationalization from accusations against iran at the time with the war with the nuclear activities of today. and you will have quite working statements for diplomats who are repeating the history. it is however worth remembering that regarding the oil nationalization in the hague the united kingdom salles the story to president eisenhower and the

united states to reinstate and supported dictatorship in iran. needlessto say, the coup d'etat was organized and implemented under the false pretext of international peace and security. and respect for democracy. which afterwards it was frequently used to justify othr similar subversive actions against other developing nations and all of these to preserve or expand the interest of the international consortium no one should be allowed to endanger. yes history will not forget

about the similarity in sharp contrast to impose an type arana iranian sinks into this time and that whilehe 1950's against it but if the naturalization. the united states acts and both times has been at work to deprive the nation of its absolute rights to achieve self-sufficiency of energ production whether it be hydrocarbon or nuclear energy. the energy with the islamic republic of today's lower than powerful and supported by its people have political experiences, experience and scientific rich cultural

heritage and enjoy the support of the nation's. mr. president, the actions of the few against the nation are not new. the united stateand its allies in his aggression against iran in the chemical weapons and other military support. the steadily support and would increase in supplies of chemicals and biological agents even after the first united nations report weapons gainst saddam in northern iraq and against iranian trips. the first reaction why the scores were denied. the second reaction was to

declare any response to the attacks as premare. the third response was to escalate the delivery of arms and chemical and biological agents. again, no action was taken by the security council against the brutal use of chemical dependence because of the veto threats by the same providers of him and weapons. they were the same powers who have in post the resolution under the security council today. s soon as the united states found the victory of iran in the world it directly enters into confrontion with iran by among other things shutting down and iranian passenger airplane. the inaction by the security council was an outrageous.

i will not dwell on the view of this body and the biggest lie of the recent history articulate it by still the same power here when they came to justify he invasion of iraq. the u.s. and the u.k. again made their own coalition and invaded iraq under the false pretext o searching for damaged wmd. mr. president, the islamic republic of iran is means to exercise the inalienable right to nuclear technology for peaceful purposes and to build on its own scientific advances in the developing peaceful aspects. at the same time, iran is the victim of the use of weapons of mass destruction in recent history has rejected and opposed

the development and use up all of these weapons on religious the leader of the republic of iran has on several occasions including in his message to take on international conference on the nuclear disarmament and nonproliferation held in april 2010 in tehran declare that nuclear weapons re forbidden and brought the message for forbidden and i brought th message to my letter has documents 2010 slash 203. fi cofounder this message we consider the use of such weapons as religiously forbidden and

believe it is everybody's duty to make informed to secure humanity against the reat disast. furthermore, the president and the statement of the president of the islamic republic of iran in the conference also underlined iran's fundamental rejection of the nuclear weapons as the need to strengthen and revitalize the appropriation st.. this is yet another indication of the great commitment to the issue of the npt and our concern of the danger of nuclear weapons and the urgent need for total integration from the face of the earth. iran and the kept close cooperation with the iaea and this cooperation at the same juncre went even beyond its illegal obligation i have already elaborated on many other

locations to meet numerous examples of such corporations that iran has had with the agency and here i suffice myself to say since the ury, to the lane three, the agency has conducted over 4,500 person inspections and iran represents an unprecedented verification activities andhe state party since the creation of the agency. however, despite this unprecedented robust pro active cooperation with the iaea the countries continue unfair provocative behavior and hostile attitudes against my country by getting the security council on necessarily involved in this issue and pushing such motivated resolution.

yohave many false allegations against iran. one of them was tapproach leedy ashton [inaudible] which i'm not going to elaborate any more on that one. a striking gusev -- example will make an accusation against the nuclear issue has manifested itself in the deal on the supply of the research reactor which in fact was put on the table after the request for the agency's assistance in purchasing fuel for the reactor particularly for this reactor this produces medical purpos for more than 800,000. why we have proof to people to enrich uranium to a higher level for production of the fuel

needed for the reactor we prefer as a gesture of goodwill to exchange the low enriched fuel of 3.5% with the 20% enriched fuel needed for the reactor. however, a few countries either as calculated a politically motivated action resolution that the iaea board of governors in november, 2009, after the discussion that we had in october. the same thing is happening here. ..

despite this, we have seen positively to the to distinguish members of the console, turkey and brazil who sincerely and at the highest level try to pursue an aim that was actually what was worst of them to achieve. goodwill and seriousness by agreeing with this initiative that led to tehran declaration on the exchange of fuel. here, i would like to express my -- for the sincere-- that

opened a new windowf opportunity for more cooperation. but, instead, and founately and the great demise of the international community that had supported this declaration, the same fuel power, immediately introduced a resolution. those who were unfairly accusing the republic of iran of lack of cooperation are today showing no respt to what they had initially-- the two members of the council to do. this yet again displays the bitter fact that what matters is their narrow political interests. it shows that they will break their promises whenever they so sh and they have no respect

for other members of the console the security council that has turned into a tool in the toolbox of a few countries who do not hesitate to abuse it when and where the interest requires. mr. president and distinguished audience, one day there should be an and to the unrestrained and rampant applying of-- that is unfortunately being practiced by this council. some powerful members of the council and should answer many legitimate questions with regard to their behavior on this council. they should respond why they have not-- in reacting to the

resort of force against iran, even the threat of using nuclear weapons at the highest level by the united states as reflected in the u.s. nuclear deal where it-- [inaudible] they should respond to this question that's why they have never allowed the console to take any action with regard to the threats used on a daily basis by the regime against iran in violation of the united nations charter. indeed they should also explain to the international community why they are pushing the council to take action against a nation that is only trying to exercise its legal and inalienable rights while at the same time, the same few countries resort to annie possible force from taking

action against israeli regime's violation of the most basic principles of international law and international humanitarian laas documented and have repeatedly prevented this body from moving to stop the massive aggression of he zionist regime against the palestinian and lebanese people. there should be an answer on the part of those who prevented this body to offer a strong resolution and condemnation for the council to limit its action to a mere provincial state on its great brutal and criminal act. there should also be an answer why this council has not given the slightest chance of

addressing the israeli regime's nuclear arsenal despite its compulsive propensity to engage in aggression and carnage. mr. president, i wish to conclude might distressing-- n amount of pressure and mischief will be able to break our relations determination to pursue an event it's legal and inalienable rights. iran is one of the most powerful and stable countries in the region and has never bowden will never bow to the hostile actions and pressures and we will continue to defend its rights. i have to express again my sincere thanks to the

delegations of turkey and brazil foworking against this resolution and also the distinguished member of the lebanese elegation ambassador for not supporting this resolution. history will memorize this action today on this council. thank you very much for your patience. >> mr. president, the russian federation voed in favor of a draft resolution guided by its consistent position of principle regarding the iranian nuclear regime. we have consistently advocated a resolution of all questions covered by the international community regarding iran's nuclear program through dialogue and constructive corporation with hran. we hope that the adopted resolution will be seen by a ran as a further signal that they

need to respond positively to the numerous appeals of the six international facilitators, the whole of the international community to fulfill their obligations in terms of non-proliferation to launch substantial negotiations with the six facilitators to ensure transparent cooperation with iaea to clarify all issues lated to the iranian nuclear program. russiahas a framework of multilateral formats as well as independently made and will continue to make snificant efforts to convince iran to quaff braked constructively with the six facilitators and in good faith will fill all positions of security council resolutions and iaea decisions. in building a nuclear power plant inusheir the russian federation and it's very actions e fundamental rights of iran as to develop its peaceful nuclear program, energy program.

unfortaty the intensive efforts of the russian federation have not enjoyed an appropriate response by iran. thus far iran has not taken the necessary decisions which would open the roads to fully mastering nuclear energy and strengthening the npt regime. under these conditions, and in the context of th approach developed by the six facilitators and approved by the security council, what has become inevitable is that our measures constrain the development of those fields of iranian activities which are counter to the task of strengthening the non-proliferation regime. security sanctions are a force measure. e we have used in a balanced and proportional way. during the negotiation on the draft resolutions they russian

delegation that were targeted and haveeen a security council decision aimed exclusively on the task of bolstering the non-proliferation regime and not containing any provisions which would harm the well-being of the iranian people. we are firmly convinced of their lack of any alternative to a diplomatic settlement of the iranian nuclear issue. this populace was reflected in the text of this resolution. we expect that tehran will finally signaled its readiness to engage in negotiations with its facilitators within the framework of this dialogu in addition to the necessary discussion of iranian nuclear program. we would also discuss the six facilitators proposed package of constructive incentives aimed at iranian partners in cooperation with the iaea to remove any dark areas around this program. this package remains on the

table as we affirmed the resolution adopted and also the statements of the six facilitators, foreign ministers at today's meeting. we are convinced that the contents of the package fully demonstrates the benefits to iran of corporation with the international community in various fields. which is a situation of disregard for security council resolutions and iaea decisions regarding the iranian nuclear program. we cherish the hope that iran will see these clear benefits and initiate cooperation with the six facitators including an implementing all understandings and agreements which were reached in geneva on the first of october, 2009. shedding light on the nature of iran's nuclear program through full-fledged cooperation by tae rand with the eia ai could lift the security council sanctions against his country and fford the opportunity to fully enjoy all rights possessed by

nonnuclear parties including uranium enrichment for nuclear power, plants fuel production. we hope that the fuel mechanism for the tehran research reactor will be implemented and practiced, which russia was a source of. we welcome. relative work related to this initiative continues within the framework of the jen group in conclusion i shouldlike to again underscore we expect that iran willactivate pragmatic and reasonable ways and respond positively to the six facilitators to effectively resolve the issue in the interest of the whole international community. mr. president, i thank you.

>> mr. president, the security council has a new resolution on the iranian issue. this is the sixth resolution on the issue adopted by the council since july, 2006. like previous five resolutions, the new resolution not only reflectshe concerns of the international community over the iranian nuclear issue but also expresses the exploration of all parties to bring about a peaceful settlement of the issues for diplomatic negotiations. china calls on all members of the international community to implement the resolution comprehensively and in good faith. china always maintained that the action taken by the security council on the iranian nuclear issue must appear to the following three principles.

first, it should can should be the maintance of international nuclear non-proliferation regime and as a state party to the treaty of non-proliferation of a nuclear weapon iran should fulfill its obligations under the mpp. in the meantime, it's right to peaceful use of nuclear energy should the fully respected and safeguarded. second, the security council should be conducive to peace and stability in the middle east, especially the gulf region. third, it ou help promote the momentum of a world economic recovery. it should not affect the normal life of the iranian people and normal intertional trade and transactions. the acti taken by the security council should appropriate with

the practice of iran in the nuclear field and it should reinforce the diplomatic efforts to resolve the iranian nuclear issue. china has been constructively engaged in the consultations on the draft resolution and worked vigorously to ensure the resolution fully reflects the above principles. we are of the view that-- can never resolve the iranian nuclear issue. to bring about a comprehensive and appropriate issue, it is imperative to attend to a dialogue and negotiations. adoption of the new resolution by the security council does not mean diplomatic efforts are closed. the new resolution is aimed to bring iran back to the negotiating table and to activate a new round of diplomatic efforts. in this connection, mentioned in the new resolutn are

reversible. that is to say if iran suspects uranium enrichment as a kid goodies and complies with the relevant security security council resolutions the council will suspend or even lift its sanctions against iran. over the years, china has been committed-- chinahas always viewed the security council unity is essential to resolving the uranian nuclear issue. we have always maintained the unity of the security council and are not in favor of hasty actions. we believed in order to maintain the unity of the security council we have to make more effort. over the years, china has been committed to a peacefully resolving the iranian nuclear

issue through diplomatic negotiations and has made efforts in this regard. china welcomes and highly values these agreements between brazil, turkey and iran and the research reactor. we hope the parties concerned will make full use of the positive momentum created by the agreents and spared no efforts to resolve the iraan nuclear issue peacefully through dialogue and negotiations. mr. president, as the security council adopted the new resolution on the iranian nuclear issue with the foreign minister issued a joint statement reiterating their commitment to resolving the issues through diplomatic negotiations and expressing their readiness to redouble diplomatic efforts towards expansion of the negotiations.

china hopes the countries concerned will on the basis of equality and beach or respect strength and contacts and dialogue to foster mutual trust, dispel misgivings, address each other's concerns and seek a solution acceptable to all parties to restart negotiations. china will work along with all countries concerned and continue to make its own contribution to the peaceful settlement of the pp?bap!?úaóú?ú?úúa?@@@

okay. why don't we go ahead and get started?

hearing will come to order. the committee will come to der. today we are holding the fourth committee hearing here in the energy and natural resources committee on the devastating oil spill in the gulf of mexico. as large volumes of oil continue to wreak havoc in the gulf, o thoughts are first with the people on the forefront of the disaster, the families of those who have lost their lives in the explosio who are working day and night to protect the places and the wildlife they care about and often their liveliod, as well. i know all americans are thinking of the residents of the gulf region and are grateful to them and to the other responders for their work under this -- these most difficult circumstances. it's clear that prior to the explosion of the deepwater horizon rig neither the companies invold nor the

government adequately appreciated or prepared for the risks involved in a deepwater drilling operation of this type. results of that failure to properly assess risks and prepare for risks have been disastrous. lives have been lost. f residents has been f life of interrupted and in some cases destroye the environmental damage has been immense. since bp has so far failed to stop the oil gushing into the gulf, the extent of t further damage that will be suffered is not known. our purpose today is to review near term actions that have been this long-standing failure to ct properly assess risk and to ensure the safety of this and operations in the outer energy continental shelf. according to the department of interior, the gulf of mexico has

nearly,000 active leases on the federal outer continental elf. 64% of which are in deepwater. as a result, there are nbout 3,000 or 3,600 oil and gas-related structures in the gulf. in 2009, 80% of all u.s. offshore oil producti, 45% of natural gas production occurred in water depths in excess of 1,000 feet. industry had drilled nearly 4,000 wells to tho depths. operators have drilled about 700 wells that like deepwater horiz horizon's well are in water depths of 5,000 feet or greater on the outer continental shelf. in 2009, production from the gulf accounted for 31% of total domestic oil production and 11% of totalomestic natural gas

production. offshore operations provided direct employmen estimated at 150,000 jobs. we're all aware of our country's demand for oil. as a result of this accident, we are aware, perhaps, in away that we were not before of e true potential costs of that demand. the challenge for regulators and for congress in enacting statutory responsibilities and authorities to those regulators is to put approiate requirements in place ensuring that this horrible price is not paid again. at the same time, we are reminded that we must continue with renewed vigor to reduce our dependence on oil for both national security, economic and environmental reasons. it's particularly challenging to do so while we are still in the midst of a crisis. investigations are ongoing into the cause of we do not have certainty about

what happened. the best minds in the country must be focused on stopping this oil leak and cleaning up the affected areas, and yet, we must make sure that as an urgent matter that ongoing operations are safe. today we hear from the interior take about the actions. his team has produced a rept on a 30-daytimeline to identify near-term safety measures that need to be taken. the regulators have acted quickly to impose some of these new safety requirements immediately on oning operations. in addition, the administration's taken measures to halt certain operations to ensure their safety while allowing others to continue. we appreciate the secretary's efforts and his work to ensure that there is an adequate response to the environmental and safety crises presented by this accident. we also appreciate his presence here today. look forward to working together

with the administration on our shared and urgent goal of ensuring the safety of these operations. let me turn now to senator mull kauai ski. >> good mo good morning to you, secretary. n a couple weeks now sinceou have been before the committee. i think last time you were here -- >> excuse me. >> -- the oil from the -- >> part of the bailouts and we are tired of being dumped on in the gulf. i'm a commercial- >> let me -- >> -- we're tired of being dumped on. >> ma'am, ma'am. >> let me ask the -- to please exit the room. allow us to proceed with our hearing. >> thank you, mr. chairman. mr. chairman, again,s i was saying, it's been several weeks now since you have been before the committee. at that time, the oil had not yet reached the shores and the

marshes of southern louisiana. a couple weeks ago, we had the opportunity, along with the chairman, to go over that spill. i think we a recognize that the gravity of the situation, the nightmare that's become for the residents of the gulf reon. today, we are examining the he interior department has recommended and implemented so far in response to the deepwater spill. we're examining not only the 44-page report on immediate recommendations for improved safety and environmental protections, but also, we need toiscuss the moratorium that the interior department is implemented for all deepwater exploration and the additional requiremts and suspensions for some shallow water exploration, aswell. there can be no doubt, most certainly, that the public outrage and the political pressure mounted for the government to do more about this still-worsening situation and i think we are all sympathetic to those demands. yesterday, i had an opportunity

to meet with an alaskan, testifying this morning in another committee here on the hill. speaking on the long-term impacts of oil spills on fisheries as we experienced after the exxon valdez. unfortunately, his storys miliar, very familiar to me and my constituents but it was about constant struggle of finding a balance of exploration and producon of oil which our state depen onor the majority of its economy against the critical and very compelling interests of maintaining the ecosystems which support the remaining building blocks of our fisheries and tourism economies. the gulf is certainly faced with the srk picture of the associated tradeoffs right now. so i applaud the interior department for the efforts as you have stated in the report to addresthe fact thatamerica's energy security is likely to carry exploration increasingly into very deep water environments and how to

re-evaluate whether the best practices for safe drilling adjusted for the unique might challenges of drilling so very far under the sea and these are not just technical challenges but human challenges, as well. which we recognize can be diff regulate without successfully creating a culture, both at the regulatory and the industri level that prioritizes safety and, in turn, protects from anything like deepwater horizon ever happening again. i'm sure that we will look back at the lessons that have been learned not only from what happened on april 20th but from the various operational responses to the spill and most certainly we will learn lessons from our policy onses, as well. i think we just no ed to look to the news yesterday that one of the largest independent offshore operators announced that it's packing up and moving three of the rigs to foreign waters and so i think the question that needs to ask is this consequence unintended?

is it something we're willing to accept? mr. chairman, there's certainly a lot to talk about here. i want there to be no effort or expanse spared to bring the well under control and see to it that the victims of this spill are compensad fairly and expeditiously and i'm certainly working to make that happen. and as we look at the policy moving forward, i reiterate that we refully consider the impacts of this spill on long-term energy policy. we have got t get right. energy secretary chu announced yesterday that the department is providing online access to diagnostic results and other data about the malfunc blowt preventer and he said and i quote, transparency is not only in the public interest it is part of the scientific process. we want to make sure that independent scientists, engineeenginee engineers and other experts have every opportuty to review this information and make their own conclusions. mr. chairman, i would echo secretary chu's statements.

let reform policy in a transparent, reasoned manner where the public and all interested parties can review it. we certainly have a lot of work to do with that. i appreciate the opportunity and look forward to the comments from the secretary. >> well, thank you. and as senator murkowski id, we welcome you bac to the committe mr. cretary. andf course, your deputy david hays and your counselor steve black, we welcome them, as well. please go ahead with your statement. >> thank you very much, chairman bangman and ranking member murkowski and all the u.s. senators and i think all of your former colleagues o the committee soit's always good to come to this committee, even when we're dealing with difficult challenges that are facing our nation. i have prepared a statement for the record that we will submit for the record but i think in the in of having a dialogue with you, what i want to do this morning is to focus

in on a couple of key issues. the first is the status of offshore drillin and the safety program which the president has dicted which we are in the process of implementing. and the secd is the reform at we have under way at the department of interior with respect to the minerals management service and movin forward with efforts to develop a new organization there. it may be useful at the outset before i speak to those two central points here to also just give you a quick overview of what is happening even this morning. we are in a position where we are directive of bp relative to making sure that they're doing everything humanly and technologically possible to stop the leak, to fight the oil on the seas and to fight the damages as they occur on shore. this morning, secretary chu and i had our morning call with the bp executives.

we were informed that the enterprise vessel which is what they call the vessel that is doing the short-term containment is capturing about 15,000 barrels of oil a day. at our insistence, they have moved forward with additional capacity to be able to capture additional amounts of oil. and, to make sure that the redoredu redundancies are built in over time so that at the end of the day as much of theollution as is leaking can be captured will be captured. our goal is to get to zero pollution emanating from this well and doing it in the interim while they get to the final effort which will be to kill the well through the relief wel which are penetrating the sub sea and which now are, you know, several -- close to 8,000 feet below the surface of the sea s . they're continuing in parallel,

notsequence. nothing is being spared to bring this problem under control. in the headquarters at houston where i have now spent probably ten days in the last -- in the last three or four weeks, the scientists from the united states of america, from sandy labs, from livermore and from san alamos and t geological survey, the department of defense experts are assembled there making sure that the best minds are beingrought t focus in on the problem. and that's at the direction of the president. let me comment just then on two of the issues and know that the committee will have many questions on these matters. and first, deputy secretary david hays has been invold on this effort and now i think we entered day 51 or 52 nonstop like the rest of us, we're relentless. we haven't taken a day off from the beginning and we'll continue

to this same level until we get this problem under control and figure out the future with respect to oil and gas in the outer continental shelf. steve black who is the secretary to the counselor has been involved in all the energy issues at the department of interior and was one of the key that was submitted to the president at his direction. and so he may have answers to some of the questio with respect to the safety report. let me speak to the status of offshe drilling bause i think that's something which many of you on this committee are very interested inanting to find out where we are. first, the president following the dewater horizon directed the department of interior to develop safety recommendations within 30 days. the goal is simple. if we are going to move forward with with any kind of oil and gas production in the outer continental shelf, it must be done in a safe manner and safety in the past are not assumptions that will be made in

the future. to the extent that offshore drilling will continue, it has to be done in a manner that we can ensure that it can be done in a safe way and so the multiple recommendations that came out to the president in the report are now in the process of being implemented at the department of the interior. those recommendations include additional enforcement and safety measures. they include requirements which essentially amount to a of well prevention mechanisms and certification of blow-out prevention in the outer continental shelf and with respect to cementing and casing, with respect to rig safety and a whole host of other safety initiatives. they are being implemented through notices to the lessees which we implemented yesterday

to the lessees so there is a panoply of safety measure which are significantly enhanced from what had existed in the past that are being already secondly, with respect to the status of offshore drilling, i wanted to comment on the moratorium and what we're doing with respect to water development. with respect to the moratorium that the president and i have put into place, it was our view that we needed to get to the bottom, that we needed to find out exactly what it is that happened out at the deepwater horizon so that as we mov forward with any kind of deepwar horizon exploration, that we can assure the amerin public and we can assure everyone who was watching that, in fact, it can move forward in a safe way. the president's commission which will take a look at all the issues will have a recommendation based on the president's directive within six

months. that those recommendations will then be incorporated into how we move forward with outer continental shelf drilling but between now and then, it was our view, it was the president's directive that we press the pae button. it's important for all of you on this committee to know that word. it's the pause button. it's not the stop button but it's the pause button and it's a pause button so that we can make sure that if we move forward with ocs, drilling and the outer continental shelf at it can be done in a way that's protective environment as well. with respect to the shallow waters which i defined essentially at 500-foot level, we have allowed those oil and gas shallow water production efforts and drilling efforts to move forward if, in fact, the operators can certify to us that they can meet the safety requirements. for most good operators they'll be able to give us the -- the

requirements that we have imposed on them including certification that the blow-out prevention mechanisms and cementing and casing procedures are all working and so we wanted to allow shallow water drilling to move forward if it could be done in a way that can ensure safety and the notice of the lessees went out yesterday will hopelly achieve that. let me then speak to the second point i wanted to cover this morning, that is with respect to the minerals management service and the changes that we aretaking within that agency. it's important to reflect back also at the work that has gone on with mms over the last 16, 17 months at the department of interior and there has been massive work that's gone on. from d one we imposed ethics requirements on mms that had not existed before and made ethics requirements a part of the

performance plans of supervisors within mms. those who were involved in wrongdoing were referred to prosecution or other personnel action with respect to people who had been involved in wrongdoing. our purpose in taking those reforms was to change the culture at mms and i believe that we have made significant progress in moving on that agenda. seco also move forward with the whole new agenda with respect to renewable energy recognizing oil and gas is important. we also have recognized that there is tremendous opportunity with respect to wind power in the offshore. yesterday i signed a memoranda of understanding with ten governors along the atlantic coast because we believe that very significant amount of the electricity needethe eastern seaboard can, in fact be generated from wind power off the atlantic and the states along the atlantic coast are very interested in supportive of

those initiatives so we have moved forward with major renewable agenda, energy agenda within mms and finally on reform efforts, the plans which we ann were a culmination of very significant amount of work taking into account and consideration two different plans that had been put forward by the prior administration, the 2007/2012 plan and 2010/2015 plan and the plan that came out was different from what had been proposed. we ended up postponing leases that had been planned in the earlier ones because we felt we needed additional science and we needed additional information with respecto spill response capability. we looked at places like bristol bay in alaska and said it was too special and had the kind of ecosystem values there that

needed to be protected for the long term but we were also looking at making sure that those areas where you had the right infrastructure, where you had the support of, say governments where we had the geophysical information that we allowed oil and gas production to move forward and certainly that was what we put forward with respect to the gulf of mexico. now, there are other places on the atlantic and i know senator menendez and others were interested with respect to the atlantic. in the north atlantic we took that off the table from any drilling exploration. but we said we would do there is develop additional information to make thoughtful decisions relative to the ocs so the plan we came up with was in fact what i consider to be one of the most significant changes that we came up with mms. now, moving ahead, how do we take this very critical function of the department of the interior of the united states of

america and organize it in way so that we can make sure that the functions of government are beingerformed and being performed well? ordered the dismantling of mms as we knew it into what will be three components going forward. you all know on this committee that mmsxists by virtue of secretarial order. the secretarial order that i have signed envisions a creation of a new direction forward in terms of how we organize and let me quickly walk through that and i will conclude my testimony. we are separating the revenue collections of mms totally away from that part of the department. mms has historically been located within the assistant second of land and minerals. there are approximately 900 people who work in that part of the department. their job is to go out and collect the money on behalf of

the american citizen which they have done in good waysor a long timencluding on average of $13 billion a year. $13 billion a year that comes into the federal treasury from oil and gas and most of it coming from the offshore. they do that day in and day out. thosunctions revenue collections will be moved totally away from land and minerals and put over into the assistant secretary of policy management and budget who is an assistant secretary appointed by the president confirmed by the senate and so that wl be a complete separation of the revenue collections from the permitting and enforcement site. then what we'll do with the rest of the agency is we'll divide it into two bureaus. one will be the bureau of ocean energy management which will have the responsibility for moving forward with the lease sales, moving forward with the environmental analysis and moving forward with making sure that the resource in the outer

continental shelf both with respect to conventional energy and renewable energy is being managed in the appropriate way. we will also create a bureau of safety and environmental compliance which will be separate and apart from the agency that has the responsibility for giving out the leases and that will allow essentially the police function of government to operate independently of the part o the government that will be providing the leases and the planning with respect to the ocs. now, how did we come up with this plan? we had been working on a new reorganization for mms for several months. this plan in large part reflects what has happened as well in places like the uk and norway where after horrific incidents that they also had in their outer continental shelf, they reorganized their departments relative to how they oveee the outer continental shelf. as we move forward with the

reorganization, chairman bingaman andenator murkowski and the distinguished members of this committee, i want to work closely with you to make sure that the organization that we put into place will ensure the goals which were articulated by you, senator bingaman and that is that we have safety and an environment as a critical concern of how we move forward with devopment in the ocs.and wd be happy to take your questions. >> well, thank you very much. let me just start and ask about the moratorium that you put in place. you'veo it as a pressing the pause button. how does that affect producing wells in the gulf? is there -- are there requements you're putting on the wells that are currently producing wells, not those that are being developed but those

that he been in production and closed in and operating? >> we are -- senator bingaman, with respect to the moratorium and its application, we havehe moratorium in place including with respecto the 33 deepwater drilling operations that were under way. we have ordered those drilling rigs to do is to continue drilling to the point where they can get to a safe place then secure the well. at tt point in ti drilling will stop until we complete the safety reviews and the presidential commission reports and we can make a determination about how we are going to move forward. with respect to your question on production, production continues in the gulf of mexico. there has been very little interruption because of the epwater horizon on production from theulf of mexico and w continue to do inspections and

have asked for additional inspectors through the request to the congress so that we can continue to inspect those facilities including those production facilities. >> let me ask on the -- you mentioned the 15,000 barrels per day or that were captured i believe you saidy bp in this effort they're making yesterday. obviously the key question is not how many barrels are captures but how many barrels are coming into the gulf that are not captured, and how much oil is there that is continuing to add to the environmental damage and economic damage that that part of our country is suffering. can you give us any more insight into how large that number is?

>> senator bingaman, i hope that in the next several days we will number that is based on science and includes pressure readings and the visuals of the plume that it's coming out. we have at my direction and under the command of admiral thad allen had marsha mcnutt, the directo of the united states geologic survey come up with our own independent numbers. we did not want to rely on bp to come up with their s, and before the riser was cut off, e scientific group had come up with an estimate that was between 12,000 and 19,000 barrels per day. now that the riser has been cut off, there is an additional effort to take a look at what is coming out of the leaking well and we hope to be able t have the scientists that are looking at that issue have some numbe

that we will share with the american public and obviously th the membersf this committee in relatively soon. >> is there anyht that perhaps the procedure that bp went through to cut off the riser added to the quantity of oil coming out? >> you know, chairman bingaman, i think -- i mean, i will say this, something that you might want to confirm with secreta chu and the scientists from the labs that have been involved in this, but their view is it has been cmunicated to me tha the range of increase may have been sowhere between 4% and 5% over what it was before. >> okay. all right. let me ask what -- what do you expect this other report, the one the president continues to refer to which is this six-month report, what do you expect that

to yield in the way of -- is it going to make another series of recommendations similar to the recommendations that came out of your 30-day report, or is it going to be trying to do something different? >> i will have deputy secretary david hayes respondo that because he's in charge of the vestigations and helping with setting up ofhe commission, but there are multiple investig going on, many reports that are coming in and we are getting to the root causes, and everything that is happening here and will happen over the next several months will be fed into the presidential commission at the at the end of the day there will be one report but i will have the deputy secretary provide some additional information on that question. and, senator, could i ask you again which report is -- >> well, the president has said that the moratorium will be in place until he gets his six-month report, and that's the one that i'm just interested in

kning, what are we going to learn from that report or is going to be anothereries of recommendations in addition to an investigation, or what can it going to be? >> yes, yes, thank you. he report from the new commission that has been establisd with senator graham and bill riley. that commission, we will be working with closely per the secretary's comments to fold in everything that's going on so that they have in front of them thel record. there is,course, a minerals management service united states coast guard joint report that is going on right now, joint investigation. that will be fed into the presidential commission. there's an independent evaluation by the national academy of engi that will be fed into the commission and the commission itself will be undertaking its own investigation, so we will be looking to the commission dialogue to make sure they be

have every of information potentially important for their deliberations on what their long-term recommendations are. >> senator murkowski? >> mr. chairman, secretary salazar, you mentioned the decision as it related to the cha chacii and beaufort. i don't know if you reviewed the white paper presented by the u.s. arctic research commission. they essentially are advocating for additional research in subarctic conditions. it's something that this commission has been focused on for some time, spent a fair amnt of study on and it is a time draft but i want to make sure you've had an opportunity to review that so we'll make sure you get a copy if you and your staff haven't.

i wanted to ask you about the study or the review that was conducted, this 30-day review prior to the new deepwater ban, there was an immediate inspectioned by you to review all the deepwater ocs facilities. can you give any more detail in terms of the results of those inspections and did you unearth anything thalarly revealing in terms of possibly a culture of unsafe activities? i know it was a very quick review and you're now going into the longer term review but was there anything that was noticeable in that initial review? >>no, we ordered the immediate inspection of all 33 operations that were under as i recall, the information that came back to us is that they

were all in compliance with the requirements of the regulations and with the exception of two or three and the incidents of noncompliance were relatively miner. i will say this, senator murkowski, that one of the things that has been lea here is that there is much more that can be done with respect to what we are doing concerning the safety requirements imposed on companies, for example, the testing of blow-out prevention ne thing learned by the deepwater horizon incident, the beginning of drilling the reef valves which is the ultimate solution to this particular spill. they havdone the testing of these blow-out preventers in the subsea in ways they haven't done before so the new requirements

impos t the notice the lessees we sent out yesterday has significant additional requirements and so there will be a whole panoply of those requirements that have to be met. >> let me ask you specifically about that. it was my understanding that the blowout preventer with the deepwater horizon had actually undergone a couple tests only days before it failed and those tests actually were successful. so how are weoing to -- i mean i understand the purpose and don't disagree with additional testing but do we really believe that recertification of the b.o.p. would have done anything to enhance the reliability of that testing? are we doing the right st, i guess is the question. >> well, there's a whole host of things that nge out with respect to blow-out

preventers including the kind of redundancies built in, additional casing shear rams that we will be requiring and additional redundancies in their actati a actuation and i'll ask steve black to comment briefly on the report because he was the principal author of the report on the safety recommendations. >> and when y do that, mr. black, in addition to understanding that, i'm curious to know, there's going to be a lot of new technical requirements that will be required going forward and understand that. but what about instituting some minimum training standards, for instance, if you're going to have standards on certification, will you also require certification of people on the rig that are working in these areas that are related to

safety and control so you got the technological side but you also have the human side and i think we recognize there's been human error here, as well. how does that integrate as well if you can address that? >> thank you, senator murkowski and mr. chairman, thank you for the courtesies of sitting here today with the secretary. to your first question, senator murkowski, with respect to the blowout prevter and the testing it's important to remember this safety report doesn't presuppose any investigation or the outcome of any investigation that's currently ongoing. it instead attempts to identify safety measures that can be taken immediately and improve the safety margin with respect to offshore drilling, the blowout preventer on the deepwater horizon was, in fact, tested but i think what we've learned is those tests, as you suggest, didn't reveal perhaps modifications to the blowout preventer equipment or incompassable between the rov

t stabs and ro interface panel on the blow-out stack so we want to make sure that the -- that all brps, all subc.o.p.s are respected and any repair or modification that has been made to a b.o.p. stack is properly reported and understood so in the event of an emergency an intervention can occur. with respect to training the report does in fact recommend that mms in conjunction with otherlders develop new guidance and new regulations with respect to training, inspections and a variety of other safety measures so those in fact will occur. the department will lead that effort through work groups that we set up at the department. but we do very much intend to work with industry, work with other stakeholders to develop that kind of requireme >> senator, senator udall, is he

here? i don't see him at this point. let me go to senator shaheen. >> thank you, mr. chairman. mr. secretary, i appreciate the efforts that you have taken and that you have talked about this morning to reform the culture of corruption that has exied within mms and recognize that this is a culture that has been created over a number of years that you inherited when you took over this job. reorganization o be concerned efforts will really address some of the corruption that exists there and the individuals who may have been part of that and whether it's reshuffling of the deck or whether it will really allow you to dea with that culture and get rid of the folks

who have not been operating in a manner that they should be as they're looking at what needs to be done to regulate this industry so can you talk a little bit about how confident you are about the reorganization that you have underway? >> senator shaheen, let me -- it's a very good question. let me say our reorganization is not cosmetic. our reorganization is essentially blowing up mms and put into different parts of the department and separating functions to avoid bot perceived and real conflicts of interest it is overhaul of this function of the government in every complete sense of the way. it doesn't mean that things that we did bill taken away. for example, still requiring ethics training and having ethics counselors and having ethics part of the performance standards, that all will be done, as well. what we have done under the

secretarial order and will be implementing is a complete reconstruction of the mms function and deputy secretary david hayes would like to comment on that, as well. >> senator, you raise a point that is central to our thinking in terms of the reorganization effort. in our view is that what is most necessary is a clarity of mission and under the current structure where you have the folks forward leaning under the state leasing and being encouraged to do more and more leasing, more and more permitting, almost by virtue of the statutory st have the employees accepting that mission executing it. there has not been as clear a mission on the enforcement and safety side candid di and we th structurally by separating these functions, creating a clearer mission,

therll be execution. it has becvident tous, frankly, in the last 50 days that the employees can execute a mission. we have asked them to turn on a dime to put in placeome ements and they are doing it. so we have some views that we can do this if we get clarity of mission byating these nk you.ns. i want to switch the topic a little bit. i know that everyone is focused right now on ending the current spill and dealing with cleap. but one of things that struck me when we had the principals from bp, halliburton and transocean here before this committee was their response when i asked them what they were doing to addressesearch on deepwater spills and cleanup and

the answer from three was zero. they are committing no resources to doi anything about how deal with these kinds of situations in the future. and as i'm sure you all know, righe're spending about 50 million a year ashe federal government to fund r&d for exploration and production of oil and gas and alter deep waters but we're not spendin nearly that amount to address cleanup and containment and what happens when we get into the kind o that we're in right now. we're fortunate at the university of new hampshire to have the coastal response research center which is one of the premiere centers in the country that's looking at these issues and in talking to their director, dr. nancy kinner, one of the points she made to me is that right now what we really lack is any funding either in

the industry or from the federal government to address this kind of research, so can you talk about whether you think we should be spending at least as much on cleanup and containment as we're spending right now on how to drill in deepater and if you he thoughts about how we should be looking at this issue in the future and where the resources should come from? >> senator shaheen, this will be and is one of the questions that will be addressed by the presidential commission and that we are addressing as well. the fact is that bp did have an oil spill response plan. the fact is tt that plan ntemplated the ability respond hundred thousand barrels per day. the fact also that tha plan has not been effective in

protecting the sensitive ecology the gulf of mexico and the people of the gulf of mexico and so there will be a review of all of these issues determine what is it that is needed. there is research under way with respect to oil spi issues of the time,n fact, in senator menendez's state of hj knowledge there is an oil spill laboratory which looks at oil spills and how to contain oil spills and so this is an area obviously which will be one of those lessons to be learned. >> but would you agree that, in fact, the resources to really look at this issue have not existed? >> the answer to that is yes, i mean, the resources in terms of looking at spill response and dealing with some of the deep water issues i don't think have been there. >> thank you. >>enator sessions?

>> thank you, mr. chairman and thank you, mr. secretary, for your directness. you've talked to directly. you haven't used notes. you have obviously got your head straight on challenges you face and we appreciate that and i want to work with you to deal with this crisis. we're now in the 51st day, the people i talk to in my state e concerned on -- they are concerned that we're not doing enough to stop the flow, and they're concerned about the effectiveness of our barriers and so forth. i will say that thursday and friday of last week i was in mobile. i met with the coastrd and bp officials. we met friday with local mayors, representatives up the tate leadership of governor riley who has personally been committing

much of his time to this effort and the mood was not good. people felt like there had been a lot of promises made, a lot of uncertainties there that they still haven't gotten true facts about but i believe our people are determined. they want to bounceack from this, and i'm confident that we will but we don't need to make any more mistakes. we need to be as effective as we can. so wh regard to particularly a problem that i believe resulted from a violation of an agreement with the governor of alabama concerning the boom material that was removed from our state, i do believe that you have responded to that and there has been some progress in restoring at least some of that, and i thin that's important. it's just a matter of good faith if you are working with the governor and make commitments you have to make sure that tries

to happen. i believe it is a coast guard decision but is a matter that was important. as we build the state, local and federal teamwork we need to deal with this crisis to follow up on the chairman's question about the flow, first of all, i'd like get a lite better picture about the flow, how much is coming out. you've indicated that it was originally projected to 12 to 19,000 barrels ada. is that correct? that's the last report you have and you have another report coming out soon? >> yes and i'll speak more to it when you finish your question. >> well, that would be my question. where -- what is the status of the flow today? do you expect to see any changes in your reportn the futurend i'd like to follow up on how much is being captured and how much there has been a reduction in the flow, if any?

>> let me make a comment and then i'll have david hayes who has beenworking, frany, for most of the night on this issue it.h the flowate comment on it was important for us to have our own independent assessment with respect to the flow rate because there are legal consequences, as you well know from every barrel that is spilt so we have not relied on bp for the flow rate analysis that has been done. under the command of admiral thad allen, there has been a flow rate group that has been established which is headed by marsha mcnutt, the director of the u.s. geological survey a group of scientists came up with those initial ranges of 12,000 to 19,000. there's decisional information that has developed now post-riser cut which those scientists are working on very hard t try to come up with a

clear answer so that the american public knows what the flow rate is and so that we can make sure that we are as prepared as possible too the response. >> can i interrupt you? you know, the information is so different, for example, you indicated that after the cut of the rider we may have had a 4% or 5% increase in flow rate. but originally i there was a projection from some official source of a 20% increase and i see some people have projected far more than that. ho confident are you that we sustained just a 4% to 5% increase? >> let me say that it is important for us to have the right number and that is what is being worked on right now. in fact, you know, secretary chu and marsha mcnutt and i have a meeting on this coming up today to make sure that we get to -- .

and we will get to that right number because the american people need to know it. it has been difficult toet to the right number because of the subsea conditions that have been operated -- and i'm going to have david comment on that but i just want to respond, senator sessions, my friend, that the issues relating to alabama and the issues o boom, the president and thad allen who is a national incident commander on this, he calls it as he sees it. i think he has resolved those issues with the governor including putting it in writing what was to happen so let me just say on the part of thad allen with whom i work with multiple times every day, no effort is being spared to make sure that the people of the gulf coast are being protected and if you find that there are things that are not going on, senator sessions in your state, please give me a call, and we'll get to thad allen immediately. i'd like just because he has

been working on it all night and may have more recent information on the flow rate maybe to kind of give you a sense of what's going on because i think it's of interest to the chairman as well as to all the members of the committee so if that would be okay with you, mr. chairman. >> whithat, mr. hayes, if you -- time is -- my question is over. i would just hope that you would talk about how much is being captured and w what you project is a reduction, if any, in the ow. >> certainly, senator. let me sort of paint the picture here of the government's effort to identify the flo rate. as the secretary testified, a flow rate technical group was formed and dr. marsha mcnutt, the director of the usgs is in charge of that. there are seven independent scientists that are on that group, a couple of weeks ago, they -- they -- before the riser was cut, looked at

variety of data streams to do an estimate of how much might be leaking out of at that time there were some leaks in the kink of the riser and then a the end of the riser and also at that time there was a tool that was bringing some of the material up from the end of the riser, you'll recall and collecting some of that material. what they did is they had several different workstreams. they had -- they had video that they ordered. the government required bp t provide the video so they could look at the video age attempt to calculate how much might be coming outment they also did a mass balance based on aerial work and subsea work to try to estimate how much had -- was on the surface, how much had evaporated and sort of back calculate how muchight be coming out. and those were the primary

approaches. what they came up with was a range, kind of aange of two of the work groups came out with a range of 12,000 to19,000 barrels a day. theideo work group came up with 12,000 to 25,000 barrels a day with a lot of uncertainty because of the difficulty of -- there was not good information about what the oil and gas ratio was so when you're looking at the video it was difficult to figure out essentially how much would be oilersus the gas which behaves differently. they -- they also were asked to estimate -- this is to your question, senator, how much, if we cut off the riser, would there be an increase in the amount of flow. and the government scientists in houston including dr. mcnutt with the bp folks did a variety

of calculations and came up with a range of 6% to 20% as a potential increase by virtue of losing some of the resistance basically in the rider and the government scientists came out and said it could be as much as 20%. that's not something bp wanted to say, in fact, they did not say that the government said it could be as much as 20%. the decision was made to do the riser cut anyway because of the potential to capture more of that oil through the top hat which i what is happening now is a re-evaluation of all of this, both terms of the original esti new information now that the riser is cut and we have gotten from -- we've ordered bp to give us high resolution video that the same group that looked at and estimated the flow based on the video of the much harder, frankly, to discern even

leaks in the kink and at the end of the riser, they're now looking at a single point with high resolution video. we now have much better information on the oil to gas ratio because of the material that's been coming up to the riseso we think that that group that's now looking at the video and applying a gas to oil ratio will come up with a much better estimate of how much is coming out of the riser. as the secretary alluded to, we're also getting additional data. we have moretion about relative pressure points and there's a lot of speculation, frankly, that it -- the increase may have been sstantially less than 20% from the cutting off of the riser. but we're going to find out very soon from this group that is looking at this issue very hard. in fact, all seven of these scientists just got the -- what they required of bp was very specific segments of the video

from the post riser cut. they actually had to take it -- they got the whole hard drive from bd. rerequir it. they got some specialists to take the segments they needed to look at. they're now reviewing it. we expect to have additional information very soon on that point. they'ralso relooking at the earlier estimates, so you will see a new government estimate very soon on the flow rate. in terms of the amount collected, we want that new flow rate and we'll have it very soon and then can back calculate essentially how much we believe therefore has been out from day one. i don't ht number, senator, right now. but we expect to have a much better number very, v soon and thank you for your patience. >> 4% to 5% incr is that some sort of estimate to date that you think is accurate?

that the -- >> in terms of the -- there is -- i think there's -- in terms the group of government scientists looking at this, they are seeing some data that suggests that the increase that occurred you -- when the riser was cut off was less than we were afraid it might be. so we hope to confirm that soon. >> soon, soon, this is almost two months. >> you've had more -- >> i know. >> senator menendez, go ahead. >> i think we need a good number soon. >> yes. >> thank you, mr. chairman. mr. second, let mert off by applauding the administration's decision at least at this point to cancel -- virginia lease sale 220. i opposed this from the very beginning. it putthe new jersey shore directly at risk. and, you know, thatisk i think

is more palpable tod as we've tried to make the case for some time that oil cannot be contained in neat little boxes ocean. it is certainly not being contained in the gulf of mexico and now that we are entering hurricane season, you know, even the natural loop current and he projections of trajectory of that oil is is subject to mother nature. and if you have hurricane season and the hurricane hits the gu, the consequences of where that oil goes for those of us on the east coast is increasingly of concern, so i think it was smart at this point. i appreciate the administration support moving towards unlimited liabil it relates to the responsibility of oilcompanies. it seems to me that if you take and create unlimited consequences that you should have unlimited liability. i think it's an opportunityor oil companies to also have discipline knowing that if that is their liability obligations that they will discipline

themselves not to take shortcuts or to cut corners as some suggested happened in this particular incident. i think that is important, as well. but i heard when you said we were only having a pause button and for those of us along the atlantic, we want see much more than a pause button. we want to see an effort that clearly makes it clear that we're not looking to put multibillion dollar -- new jersey alone is a $50 billion tourism industry so i hope we nd that -- let me just ask two questions that i think are critically important. you know, all the regulations in the world are good but if they're not enforced it doesn't mean much. i know you know that as a former attorney general. the reality is is that when i look at bp's response plan, it didn't take a rocket scientist to know they couldn't have been very serious because when they had sea otters, walruses and

seals as part of the response that they would have to animals in the gulf, last time i look we don't have those animals in the gulf. and obviously they didn't really have a plan to deal with the worst case scenario and it's something that we have to look going forward as to what, in fact, we permit. i mean, i don't understand who reviewed that plan and saw those elements in their plan and said you can't be serious. maybe in the arctic but not in the gulf of mexico. it doesn't take a rocket scientist to figure that out so you really have to question who is reviewing these things. secondly, mms "houston at of nearly400 offshore found safety investigations, mms collected only 16 fines of 400 investigations. so i know that you're reforming mms.

the qution is are we going to have the right regulatory oversight, vigorous oversight so that we don't relive this including on response plans and, lastly, are we in challenge -- there have been some reports that there is another drilling rig near the deepwater horizon called the ocean saratoga that appears toe with a ten-mile-long slick visible from satellite images. it was only discovered because of the images of the deepwater horizon. do you have any information on whether that is, in fact, a spill so kurring and if so what is being done t it? >> let me, senator menendez, i appreciate your comments and i know your passion and views on this for a long time and let me assure you they're taken into consideration. with respect to the other spill that you speak about, my understanding is that it is a remnant left over from hurricane

ivan and that it is leaking i guess at approximately a third of a barely a day but i can get -- we will get some additional information for you on that. with respect to you -- >> can you get for the whole committee but i'dike to know how long that's been going on, as well. what is the intent to close it down. >> we will get that information to you. with respect to the investigation -- the enforcement of gulation it is precisely the reason why we are moving forward with the creation of a bureau of safety and environmental enforcement. it needs to have the kind of police power to make sure and the personnel and the culture to make sure that regations are, in fact, enforced and s that's part of the reorganization and overhaul ofms that we are undertaking. the goal i one which i very

much share with you, senator menendez, and that is that must have vigorous and complete enforcement mechanisms in place with respect to any oil and gas activities in the outer continental shf. >> i'll close. my time i finished but let me just say you can't be coach and referee and mms has as it was constituted before been both an advocate for the industry and is pp be the referee of making sure that safety and soundness and a whole host of other things were observed. that simply dn't happen. we had a police officer that was asleept the switch. and if you look at the response plan and see that it doesn't make any sense then alarmells should have, you kn, risen that in fact these people are really not prepared for the worst case scenario and i hope we learn from that as we move rward. thank you, mr. airman >> senator corker? >> thank you,r. chairman and thanks for having this hearing

and mr. second, i'm -- i welcome you back and i'm struck by the dignity and directness with thank you for tha and your y. two colleagues who are with you and it actually has raised a question as i've watched you. i watched on the other hand the white house which seems t exhibit some characteristics of adolescee or something like that. i'm wondering what is the relationship that we have at present with bp? i know you talked about, you know, the fact is that you don't have the equipment. they have the ent. what is that true relatiohi and do the machinations that comeut of the white house, do they contribute in a positive way towards that relationship? where are we with bp as far as carrying it out? what is the actual direct relationship that you have with them in causing this crisis

which is a natural tragedy and for what it's worth i've said no critical comments regarding that because it's just a national trwe all need to figure out the best way to deal with it and we can after the fact do some quarterbacking, but what is that relationship and how are you carrying out these daily operations? >> thank you, s corker. the relationship is one in which we the united states government are directive of the thanks that are going on with bp. there is a structure which is part of the national framework and the national ctingency plans which are required by law which have been effectuated, and so we have a commander, a unified commander in thad allen who is overall responsible for everything that is going on, but i think perhaps to answer your question, you know, even over the last several days, w we have done is crafted orders, have gone to bp that

them to move forward with leak containment mechanisms, expanded beyond the amounts that they had contemplated initially, so they are -- you know, they are responsive to the orders and directives that we have given them related in part to senator sessions' questions o floor rates and requiring them toe additional pressure readings so we can have better estimates with respect to flow rates so the relationsh under the law and under the president's direction has been to be one of being directive to bp and we've been carrying that out every day whether it's in houston, whether it's inny of the gulf states orhether it's -- >> so on a daily basis, you get up, and you direct bp as to what to do? >> on a daily basis, 51 days

into this spill, let me just say, we are on top of it with everything that we have, and that is the president of the united states. it is the white house personnel who have been involved in this effort with us. it is my colleagues on the cabinet including secretary napolitano who is over -- >> let me -- again, i really respect you. you know that. we've had a good friendship. do y'all like tell them on a daily basis what activities to engage in? >> we -- mean that's what i'm taking from this. i'm just -- >> i mean i'll -- i receive and it was at my order and thad allen's order, a review of bp, what their work streams are all running in parallel because we didn't want them to run

sequentially. those are receiveddaily. that's at our direction. i have a personal conversation with andy ingal who is the head of bp running the operations out of houston to get an update every morning. secretary chu joins me on some of those meetings. when we find deficiencies such as looking at the fact now that we believe they teed to have additional redundancies in place as you look at hurricane season befo you get to the uimate sealing of the well through relief wells we order them to provide -- to provide those additional containment capacities and redundancies, so it's a dynamic relationship but it is a directive relationship between the united states and bp. which is what is contemplated by e law, senator corker. the law is very clear. bp is the respole