community spending over 180 companies. it has been an invaluable education tills, allowing people to connect for myriad purposes for charitable purposes and in the political realm for grassroots organization and for local community building. when we reached 500 million users, b.s. people to share their experiences with the services. some of the stores are intimate and personal. one person, a mother in phoenix, credits her status message with her being diagnosed with breast cancer in order to treat the disease. she became an on-line prevention advocates. other stores have broader significance. the 2008 presidential lesson has been called the facebook election. .

to join the site, to use our tools, or engage in life. it is the people who use facebook that drive all our product decisions. recent changes provide examples. in my written testimony, i

highlight for reasons. the privacy tool, contextual tool, one-click tool, and dad permissions. i'm happy to discuss any and all i want to highlight the important economic growth supported by the people who use facebook and the companies that innovate by building on the platform. the growing fatality of the incident makes facebook the experience possible for our users without them ever sharing identifiable information with advertisers. facebook is a u.s.-based company. 70% of yours are outside the night in states, more than 80% of the employees are located here -- 70% of a vusers are outside the united states, but more than 80% of the employees are located here. there is an entire economy

around the platform. 1 million applications are available on the platform. some are filled with businesses that employ hundreds of people and make hundreds of millions of dollars in revenue. the new york times wrote an article about a leading games the lawful -- developer called zynga. it now has 400 job openings. the company has been valued at over $4.5 billion. another phase of developer was acquired by electronic arts for $400 million in 2009. these are to the largest success stories in the facebook platform economy. i want to emphasize the real power base lies with the individual to use this service to connect and share with their friends. we are proud of the service we provide. using innovative debilities, facebook will facilitate a more personalized and engaging

experience. i am grateful for the opportunity to be here. i look forward to your questions. >> thank you, mr. taylor. next on my list is mr. -- professor whitten. >> thank you. i devoted my career as an academic and as google's lead privacy engineer to one primary goal, making it intuitive, simple, and useful for internet users. this is the central challenge of privacy engineering. be services on the internet constantly evolve. viable news services change the way that we interact with each other and use information. these services, built in part from the information that providers learned from their

users, offer the value. many are offered for free. they have been good for our economy. in 2009 alone, google of online advertising generated a total of $54 billion of economic activity for american businesses, website publishers, and nonprofits. that includes 9000 billion dollars the week gave to advertisers lester. -- that we gave to appetizer's last year. our biggest asset is our users a trust. it enables us to better match searchers with the information that they seek to fight off those that would scam our users are undermine the usefulness of our search results, and to create new search results. we focus on building transparency, a user control,

and security in to our project. we constantly reiterate to make sure that we are honoring our users' privacy expectations and security needs. because our user'tress is so critical, it is important -- user's trust, it is important we do not fill their information. i urge you to look at google.com/dashboard. it was developed to provide users with a one-stop come easy to use control panel for the personal information associated with their google account from gmail to sear ch and 20 other google products. with the board, users can see, and it come and delete the data stored with their individual accounts. she can change her privacy settings, see what she is sharing, and click into the settings for each individual

product. i was adamant woman crated the dashboard that we not make it seem to do when we created the dashbvo -- i was adamant will we created the dashboard that in not just a privacy tool. we took a similar approach with their advertising network. our preference manager allows users to opt out of ad targeting and to learn about our privacy practices. equally important, it allows users to the the categories that they will see, select new interest categories, and remove ones that do not match their interest. by offering this service, we hope to get more people to understand and confirm the privacy setting specific interestingly, for every one user who opt out, we see four edit their provinces and 10 of

you the page into nothing. -- edit their preferences and 10 view their paid and do nothing. we are proud of the track record. despite our best efforts, we have made mistakes. in may, googled disclosed that we have mistakenly included code and the software on our street cars that gave information sent over a wi-fi network from open, and in crowded networks. to be clear, google never used the mistakenly collected data in any product or service. there is no disclosure of any personal information to any party. as soon as he learned about the incident, we disclose what had happened and acknowledged armistead. newell is working hard to address this incident. -- google is working hard to

address this incident. we are taking this matter seriously. we are announcing the changes we will make. at the same time, we continue to develop industry leading privacy and security tools. we recently launched in curveted search, allowing users worldwide to protect their search query from snooping or interception. we are the only major web mail provider to encrypt all e-mail traffic by default. this is a proactive approach that my team brings to our jobs. i look forward to answering your questions. thank you. >> thank you. now mr. jim harbper from the cato institute. >> thank you for inviting me to testify. i appreciate you educating the public. my 21 page, single spaced

written testimony is only a brief glance at the many issues that are involved in privacy regulation. suspect the one page executive summary is what will benefit you and your staff in the early examination of the issue. it says that privacy is a complicated human history. when people talk about privacy, and -- they may mean security from identity fraud. they may mean a distaste for being marketed to in the crash commercialism. privacy refers to control of personal information. that is having the ability to selectively reveal things about yourself and you kingcraft the image you portray to all the different communities the you interact with. as he had seen in discussion today, the online environment is new and different. many people do not know how to

control information about themselves. it will not be easy. i may play skunk of the garden party when i say that i have doubt of the capacity of fair information practices and regulatory solutions to solve these problems and deliver privacy. fair information practices have a long history, nearly 40 years ago there are many good practices -- 40 years. there are many the practices. there are many different data practices that matter in different degrees at different times. blanket use of practice is probably inappropriate and unhelpful. i focused heavily on notice. the failure of noticed over the past decade to deliver privacy. the short notice project is wonderful and fine, but i do not hold out much hope that it will lead to an upwelling of privacy

awareness that i think we would like to have. i believe in changing business particles. for to protocols. regulations may prevent new protocols and new ways of interacting on line from coming into existence. this would be a pity. it would deny all of us the next generation of innovations. the companies represented by michael panelists i think should always be met by competition. companies can use the regulatory process to lock out competition from a foreclosed new business models in privacy problematic. and what the change had to really briefly and talk about an issue i know is on the minds of many people. that is targeted advertising.

targeted advertising is sensitive. it represents a loss of control over personal information. it also objectifies consumers as such rattigan treating them as human beings who laugh, cry -- rather than treating them as human beings to laugh, cry, and fall in love. i understand the concern. it is not motivate me. i want to talk about my experience as the operator of a small website. i ran a website called washingtonwatch.com. it had about 1.6 million visitors last year. i am aware of the passions unemployment compensation generate. i run the site in my spare time. i filled with my own funds. i joke that is the reason why i do not have a vote in my driveway. it might be the reason why i do not have a driveway. i run google ads help defer the cost.

amazon has a critical going -- a pretty cool thing going on right now. i have tons of features that i want to add it to washingtonwatch.com. i decide to add new features when i feel like i have the money to do it for the i pay my web developers about twice what i make per hour to work on a site. my sob story does not matter. i stand in the shoes of many small website operators to choose whether they are going to add more content and features a some whether they can afford it. targeted advertising and the wafers sites to support themselves better -- is a way for sites to support themselves. targeted at a more viable and can textual ads and non- contextual, blanket advertising. curtailing targeted advertising in the name privacy involves

trade-offs with other importing consumer issues. thanks again so much to testify. i am happy to answer your questions. >> miss dorothy attwood. >> thank you for providing at&t the opportunity to participate. for the 2 billion of us to use the internet, the possibilities are endless. there is a venue for almost every type of interaction. we only have looked at the possibilities. digital signals sent from the rubble in haiti and able to relief workers to locate survivors. -- in a bold relief workers to locate survivors -- enabled re lief workers to locate survivors. these and bandages are not

guaranteed. the internet random information shared willingly among the users. the continued growth of the internet is dependent upon earning in maintaining the trust of internet users, that their information is being shared in a way they intend. when i appeared before this committee two years ago, i articulated the four pillars of all of at&t's' approach to privacy. we continue to believe that these can be the foundation for a privacy regime applicable to all entities. we are even more convinced we have a consistent set a standard use throughout the internet. last summer from at&t -- last summer, at&t had a 45 the previous period and has in the

privacy policy. in consolidating 17 policies into long, we recognize the when it came to privacy, our customer's expectations are the same regardless of the nature, let alone the credit for classification of the services they purchase. they want their privacy to be respected. they regard the information they share as theirs to govern. at&t has emphasized privacy by design as a means of increasing transparency. these are built on at the asset. earlier this year, we added an advertising choices link on to our website that explains our use of what customers search for on yp.com to target as to users elsewhere, it tells them how to opt out, and how to locate the

interest profile manager we developed. we launched an advertising social networking recommend a site. users can not join this information site without first establishing their privacy preferences . would provide additional notice about information sharing on the site three separate hoehling. other industry groups have made important progress in standardizing the user's experience so they can better understand the use of their online affirmation for targeted advertising. we have unified the presentation of the nai tel tool and adopted an icon that will be used. at&t is building on this momentum by working with better advertising. we believe the industry should press even further and develop a trust framework that enables the

permission. with this framework, and cities throughout the ecosystem could cooperate in a way to honor the provinces of the customer. such an approach can be likened to bacon's where consumers are not involved in the details on how they handle the actual money transfers but they have every confidence that their money goes where they intend. as detailed in my testimony, a groundbreaking work is already under way. it is easy to misinterpret teen the ease at which information is shared -- misinterpret the ease at which information is shared. it is about the creation and maintenance of an on-line identity. consumers want control over the sharing of that identity protoco.

it is beyond question that consumer affirmation is the bedrock of online advertising that feels a great deal of internet innovation. at the same time, we need to address the fundamental issue of how to preserve customer confidence and trust. government and industry must take the step of moving beyond the system of notice to a truly consumer center framework for information framework that will grow. thank you. >> thank you very much. finally, prof. of joseph turow, we welcome you back. -- professor turow, we welcome

you back. >> thank you for providing me the opportunity to contribute. >> you are still a little hard to hear. that is because you are off the end of the table. >> i like to highlight for appointed by written testimony. the first is we have a whole new world here. chairman rockefeller, i think your opening statement is of a vice what is going on. it used to be the media firms segment of large populations through media outlet. today a detailed level of knowledge about people in the haters are being used in ways that were unheard of a few years ago. it is common to buy the right to deliver an added to a person with specific characteristics at the precise moment that the person both a web page. through cookie matt activities, an advertiser can buy the right to reach someone on an exchange to the advertiser knows from previous contacts and is not

tracking around the web. -- now checking around the web. claims of anonymity change the meaning of of and will anonymity." -- meaning of the word "anonymity." we live so much of our lives in the digital arena. if they tu know i if theyrow, -- if they know i am joseph's turow, there preventing me with views of the world. we have companies that are contributing. they can to beat? said they holds that can create quite a detailed picture. we do not know it. we do not give our permission. it may even harm our reputation.

reputations are being created here. people care a lot about data collection that know what is going on. research shows that in large proportions, american adults do not understand how the new data base marketing process that takes place behind their screens work. over and over, privacy policies do not help. i hate to be negative, but i am very concerned that the box we are talking about could bring the kind of problems that we heard about regarding privacy. it is clear to me that newer tools sometimes called-ford are counterproductive. -- called dashboards are counterproductive. the reason they are counterproductive so far is that they provide visitors with the incorrect impression that they fully revealed the information

advertisers use to address them on the side. -- sites. i would like to ask the googlers prison since -- google resistive if they are limited. it also shows that americans know their activities are being followed on line and are uncomfortable and concerned about it. a recent survey showed emphatically that americans do not want a situation where content is tailored for them based on the use of their data without their knowing it. the situation they do not want is getting worse. i would suggest that the emerging digital world raised consumer protection issues. when companies try people without their knowledge, sell their data without the knowledge and then decide whether they are targets or waste, we have a

social problem. if it is allowed to fester, customers realize how it affects them and the offers they get, we are in a situation. the supermarket will get even more disconcerted -- get them even more disconcerting. it uses information with abandon . the data is being sliced and diced decreed reputations that they do not know about them. people own their data, have a right to know where their data is used, and to not have to worry when they travel through the media world that their actions will cause them on wanted social discrimination regarding what they later see

and hear. i suggest that the congress recognizes that certain aspects of this new world raise serious issues and act with that in mind. one path and maybe -- one pact may be to limit the amount of data. some organizations resist such organizations. in the face of the widespread concerns, a level of regulatory playing field will have the opposite effect. it will increase public trust and set the stage for new forms of commercial competition. thani thnak the committee for inviting me. -- i think the committee for

inviting me -- i thank the committee for inviting me. >> thank you. i appreciate your having this hearing. it is a very important topic. i am sorry i was not able to be here for the first panel. the vote slid backward. here we are. i appreciate all the members of this panel coming forward. professor turow, i appreciate your comment now provocati. right now there is a lot confusion and a lot of anxiety among the public at large about what power they have over the collection of information and over their lives in the end and how it always managed. -- it all is managed.

it is not just the commercial component. the information being collected sometimes might be incorrect. it might be out of context. it may be correct and in context the last longer in the marketplace than people may want it to without the ability to explain it or to make up for some youthful transgression our whatever it is that the information represents. it could be meant for a specific audience and is understood if it is specifically and from the distributed. that can lead to harm and loss of job opportunity. let's say you had cancer -- have a cancer patient fact the case through a support network of cancer patients and somehow that enters in through an e-mail or reaches some other source and it winds up becoming a source of

herbal cures being sent to her or other information. that may not be the way that cancer patient was to leave their life. it may not be the way they want to be identified for and may be that the insurance rates go up because the information gets out. who knows. the bottom line is this. we sat on this committee. i remember these conversations 10 years ago when we tried to pass a broad based distribution of privacy rights. we could that do it. we have learned a lot since then about what happens. i would like to ask a few specific questions regarding some of that. let me ask you, professor turow, what do you think about this and no harm no foul school of enforcement? does that do all we need to do?

does that provide an adequate standard by which we should live? >> i suggested in my talk, harm is a very difficult concept. sometimes, we can find harm. sometimes we can quantify harm. i think the law would like to define harm and that we can quantify monetarily. we are dealing with issues of a reputation here. i would even argue we are dealing with issues of respect and social cohesion. we have to go a bit further and look at harm in the historical way the we thought about it. >> and see if i can pin that down. mr. taylor, you have crossed the five and a million users at facebook worldwide. did 500 million users at facebook worldwide. how many people work on privacy issues and design? >> everyone at facebook for some privacy issues and design.

like security, privacy is a central part of our planning and design process. during every aspect of the product design and prototype process, privacy is a aspect of discussion. what is it accurate or inaccurate that at facebook that when a privacy concern mounts for there is a modification of service somehow that you change your practice that can increase the amount of informations that users share with others? users then expressed concern about that, modify the practice somewhat, but the press is sort of repeat itself. -- but the process sort of repeat itself. -- repeats itself. >> we never retroactively change people's settings.

there have been point where we have transition from one set of -- i will give you one practical example. when facebook started expanding from college networks to the whole world, there is no notion of -- everyone signed up as a member of the university. we needed to expand the notion to beyond universe city. we bay networks for entire countries. everyone from turkey to join state turkey regional network. at some point, it became a meaningless distinction. sharing with the entire country of turkey is roughly equivalent to everyone in the world. when we got rid of regional networks and we are modifying it, every user went through a blizzard or they got to choose the new settings. that type of setting had gone away. >> if you change your settings,

what happens to the old information? how long is that correct? >> what do you mean by "old information?" >> is a lost forever if you change it? is it stored in your mechanisms? can still operate and use it? >> any information that you publish to face the, you can remove. anytime you change your privacy setting, he can easily change it later. it applies to all the information that you have published. >> do you still have the information? even though it has changed in terms of the internet? do you have that stored? >> the privacy settings? >> whatever was there before. >> if the user posts a 02 facebook, we retain the photo a unless they choose to delete it. >> if they deleted, it is

deleted from your storage? >> yes, that is correct. >> and all other information bikeways -- likewise? >> we tried to take a practical approach to privacy. today if you went to your facebook privacy page and you said your privacy setting to "friends only" it did not only apply to all future things you shared with of things you previously shared as well. we tried to make it easy to not only enable people to change your settings but to change decisions they made in the past as well. >> i know i've gone over my time. do you have the ability to c ull from that information? is there some formula by which you can commercially scan the information that is fair and make some kind of determination? >> our focus at facebook is the information users have they decided to share in their profile. one thing that is fairly unique

is that it is a service for sharing. people put information on their profile because they want to share it with their friends. >> i understand that. do they want to share with you in a way you can cull it and use it for systems analysis of all or broadbased breaking people up in two categories of putting them out a marketing? do you do that? >> their two parts to that question in my head. i want to make sure it is clear. facebook never sells data to third parties and their cells that said to advertisers kah. other aspect regarding advertising, ads targeted on face but to the information you to put on your profile. if you remove it from your profile, as a longer be targeted to that. [unintelligible]

>> thank you. >> senator caswelmacaskill. >> i anniston advertising makes the internet work and it makes it free. i am a little spooked out at the way this is developing. imagine how an ordinary american would react if someone took a camera and followed them around the store. the doing everything they were buying, watching them make selections between this make a pandemic of the room make --

make selections between this or that. i was sitting up here for fun. i could go and search for something i did not really want to now. i went on the web and i looked up a foreign suv. i am not in the market for a foreign suv. if i would buy it, it could be an american suv. it then i went on another web site within 10 minutes of i did it and guess what it asked? there were a bunch of ads for four and suvs. that is creepy. -- for foreign suvs. that is pp. someone is following what i in

doing. if this is taken to the logical conclusion, we could kill the golden goose here. i would ask, especially those at google, i know you guys are using algorithms to read e- mails. it is my understanding you are doing it internally only. could you address the issue that i am talking about, you are reading e-mails internally and using information to predict marketing behavior? >> certainly. this is a really good question. i very much sympathize with the feeling of being followed. i think it is a very important one for us to address. specifically in the case of e- mails, let me clarify that google's system are not attempting to do any prediction

of marketing behavior based on the content of e-mails. gmail has always done was take the same systems that scan an e- mail an order to identify whether it is spam and have the same system trigger off key word. when i asked to purchase something to a gmail ad, i was e-mails with my mother a couple of summers ago. sue is complaining about the heat. i offer to buy here in airconditioner and my e-mail. as those sitting there looking at the e-mail i had just sent in gmail, because it had the keyword "air-conditioner" there was an ad for air-conditioner next to it and i clicked on it and bought one.

that was shown purely because that keyword was in the mail message i was reading that of them. that is a transient thing. that is not used to build any kind of profile with me. it was purely something that happened in a moment right there. >> let me ask this. isn't it true that there are coupons they print out on the internet and you take them into a store and use them and imbedded in the bar code is a whole bunch of affirmation about you? -- information about you? do you think the consumer has a right to know about that? they may be aiding to additional things they do not want? do not you see that as a privacy issue that you need to address? i do not think most americans get that is what is going on. i think they think the bar codes so the vendor what they

are getting. >> this is not a practice that google engages in. to your larger question, absolutely. i think the challenge for all of us and that i take personally is to try to make these things not mysterious for people. a lot of the stress comes from the fact that people experience these things as happening behind the scenes in a way they do not have any control over. while we have really focused on and try to do is to find innovative ways to push that understanding of what is happening to the foreground. this is really what we are trying to do. we were pushing for the ads to make it an engaging interface to get to the manager, some people would want to see what interest

categories where associated with their cookies, to participate state-controlled over it. >> i know i am over time. we are used to people poking around our lives year. -- here. it to be a great boon for office and research. my staff from a printout and brought me a print shop of a company you can go to the internet and to pay them $5 it will tell you a whole bunch of stuff about you. it'll tell you where you like to shop. it will tell you where you live for their how many bathrooms -- where you live, how many bathrooms you have, whether or not you are wealthy, how old your mother is. the folks that have been making a lot of money in offices and research, the internet will be a big help. there will be allowed to find

out a lot more stuff for five bucks than they typically have spent thousands. the are kind of use to an invasion of privacy. we sign up for an invasion of privacy. we embrace it willingly. i do think that you all need to really address the phenomenon i talk about. as the american public catches on, and they are born to be very happy. thank you. >> thank you. -- they are not going to be very happy. thank you. >> thank you. members were doing something to improve our stalker laws. i hope all of your companies will support these changes. i think it'll pass the house

today. the senate always takes a little more time. i think would be helpful to have the support of your compan ies, something that goes beyond your responsibility. my first question is of you, mr. taylor from facebook. i appreciate the work you are doing. i have raised concern about having a more acceptable safety information on the facebook pages. as i know from my 15-year-old daughter, a lot of them kids are using it. -- a lot of kids are using it. i know you had your privacy button. if there is a way to have a more easily extendible safety information so kids know what to do, if they suddenly get a request of a friend from someone who they do not know, could you

respond to that? >> we recently launched a safety center that is accessible. i think we as a company share your concern about safety throughout the company. it is something we think about it every product that we launch. , to highlight it to the things i think are really important. this is a really subtle issue. one thing we focused on is conceptually giving the people who use facebook the ability to report suspicious activity or offensive contacts. the route the site, there are living for people to report content that they thinking from someone who is bullying or perhaps predatory in some way or any content that they feel it is inappropriate. it is a very important issue. it is not highlighted in some of the discussions i have heard. at the time someone is experiencing something suspicious, giving them the

ability to report that and our teams to receive information and disable accounts as it is relevant is very important. we work with every single state attorney general to run their list of creditors against our accounts, disabling a very large amount of accounts and reporting back to authorities. that only goes so far. we hold ourselves to a much higher standard than that. having those in line report linked is a very important part of maintaining a safe environment. >> i appreciate that. i hope we can continue to work on this issue to see if we can highlight the safety list so the kids know what they can do. these are just kids. the more we can make it relevant with a button that says if you are worried or scared about something as opposed as privacy, i think that would trigger them

more to look at it. we can continue working on that tehema in may, for did on that. -- working on that. in may, we learn that they will come out photos for the math teacher. i exchanged letters with your ceo, eric schmidt. could you talk about the outcomes of what i consider a serious privacy violation? >> we are still conducting are very thorough follow-up investigation. i am not a member of the team focusing on that it directly. i will be somewhat limited in what i can reply to. we have committed to communicating publicly what changes we will make to ensure that this kind of mistake is not happen again.

we take this very seriously. >> i appreciate that. >> you are just figuring out how to change things so it does not happen again? >> the investigation is still out there -- open. >> appeared appear file sharing is not often discussed when kids use these program. -- peer-to-peer out turn is often not discussed with kids using the program. all the company's data goes out into the internet. they became victims of identity theft this in a want to comment on what we should be doing? we have a bill to try to address it. who no takers? mr. harper, thank you. >> i've not been on a peer-to-

peer networking many years. it calls for better consumer awareness and education. that is the hard way but the only way to go out and. a good parenting is always at the center of protecting children online. you are not want to come up with a magical technology solution. >> as a parent who did not even know what lol meant when out as a question in a campaign event, i do not know every parent can know everything about what is going on. that is why i suggest you look at our bill. we are trying to give adults on the computer more information about what their kids have put on there so that they can maybe stop it. that is what we are trying to do i have to step out for something and then i will be back. >> that was dramatic. >> thank you. i have a couple of comments and

questions. the first is to mr. taylor. how would you notify when he made these changes? you describe the new security component. how'd you notify your customers? >> there are a variety of mechanisms and depending on the magnitude of the change led me start -- change. >> let's start with the latest one. >> i've not directly working on this. excuse any inaccuracies. we launched its trip from a part of our help center. that is the center support part of our website. we also launched ads to advertise the presence of the new center to our users. >> where would you label this on day importance to your customers? would this be the maximum amount of notification? >> it is sought the maximum

amount. -- it is not the maximum amount. some changes to our service will have a prominent notice at the top of your facebook page, the interns 0.2 facebook, and -- the entrance to facebook, the most important. >> thank you very much. i want to take the air conditioning example one step further if i tampa once -- if i can. once the company high has that information, they have a profile on you. i consider some of this leg the catalog business on steroids. you order one catalog and before you know it is 80% of your meal.

now you -- mail. now you have ordered it. what happens to the data they have now collected? >> first of all, the air conditioning company told google it would pay to have this particular ad. then i am reading my e-mail. my e-mail has the word "air conditioner" and it sends me ad. then i click on the ad. i am taking to an advertiser's website. at that time they are after, i no longer dealing with google. i am not talking directly to the advertiser. at the air conditioner in my shopping cart. i give them my delivery address and payment information. the ongoing relationship i may have with the company is established to that transaction.

>> but in essence, it started with just air-conditioning in your e-mail. >> that is what triggered the added to the company. they had no information to pursue an ongoing relationship with me until i went to their site and interactive. >> he made a commitment at that point. when you purchased the unit, the assumption is that your plan to get a lot of stuff from them. >> i did remember for that particular company. and number getting a lot of air- conditione relatesr e-mails. >> the assumption is that one to go on thei -- that once you go n there, that you are in their system. >> there is used in of in or opt out to get promotional e-mails. >> for the company's letter here, -- t hat arthat are here,

what one thing would you recommend to increase the level of security and privacy to the users of your facilities? i use the facility brother. one is at&t, facebook, and google. what is the one thing that should be improved? you tell me you are doing it all right. >> let me comment on that. >> of the radar will go up. the one not be a good answer. -- that will not be a good answer. >> we believe we are adopting the framework that the ftc talked about. we are innovating in the way we are talking to our customers. the one thing we are missing is that we are not honoring each other's customers permissions. every day there are literally millions of customers who use at&t's service is on apple's

ihpone go to face it and check their friend sat this info to google where they should go for dinner. that happened millions of times a day. the customer has to read all of the privacy policies. i am proud of the policy. we worked hard to make it very secure and straightforward. there is nothing that happens to the customer and it goes to at&t and says they want to have their information protected. i cannot honor that across the board. i do believe that is the next phase will me think about demystifying it for the consumer and making it less creepy. we have to work with the industry and pushed the boundaries as saying, when someone says to me i was my information protected in a

certain way, they want to protect it. i honor that. google honors me. we give a single unified fade to the customer in terms of their permission. cr>> a want to bring of the idea of individual consumers exercising control over cookies. could these are the primary way in which the track from site to site. arafat and internet explorer are the most popular browsers. -- a firefox and internet explorer are the most popular browsers. i am a stickler. i delete every cookie, a computer. people can create a blanket rules of of that kind of thing and take a big chunk out of the information. that is one thing consumers can

do. >> i know my time is up. >> i think you are right about that. it has to be said that increasingly companies are trying to get around cookie problem. companies are beginning to use first party could ease, because they know third for the cookies are a disaster. toolbars can be used without any cookies at all. there are some cookies that do not extinguish. there are a lot of ways, registration. if the industry knows that cookies are sometimes how fallible and in danger. -- are sometimes fallible and in danger. " i feel like you feel you are being ignored. -- >> i feel like you feel you are being ignored and that that still on something for you. >> what is it? >> this is his.

i wanted to make a point. you indicate -- let's say i am a 55-year-old forster from central montana, and you indicated that all i have to do is go to the particular click and they will get their capacity to protect themselves. it turned out that your machine here, the particular click is labeled "settings" -- i am getting out of the tree and running in getting this. if i go like this in thoery, i guess what you get -- if i go like this, in theory i get when you gave me. i give my choice. on the other hand, i had to go to that setting.

what is the word "setting?" houses goes to mean something? -- ow is that -- how is that supposed to mean something? to you it is very clear. there is total clarity with all of the and certainty about occasional mistakes. review with all of you uncertainty about occasional mistakes. -- with all of you about and certainly and occasional mistakes. maybe i could eliminate if i spend time on it and get down to the settings anything get 21 taffeta do you see my point? >> i actually agree with your

goals of clarity. i can tell you t hat we strive for that in terms of the usability of our devices and finding things like this easily on a device. it is a challenge. we try to excel at it, actually. one of my point about this particular feature was that i believe that it is important that privacy issues not just be relegated to a privacy policy, that they actually be designed so that they are part of the user interface that the user would encounter normally during the use of their device. . .

>> is your location being tracked? we think that is just as important if not more important. user interface is one of the areas where we are actively innovating. there is more innovation to be done there. >> i do, to au pair >> i agree. >> i am going to say something not entirely unpleasant to you but it surprised me.

you are in charge of security and openness for google, and you started out with a three minute lecture on how much money kugel mak google makes. we all know that. why did you start out on that? i want to say that for the record. he started talking about how successful google is. you have nothing to say? i am going on to mr. taylor. mr. taylor, your privacy policy has the falling -- 'even after you remove information from your profile or delete your account, copies of that information may remain viewable elsewhere." and then it goes on to say " certain types of communications use and other users cannot be

removed, such as messages," which are kind of basic. now, it begs the question if a facebook user wants to permanently delete, you gave him a firm answer -- is gone. this says otherwise. >> i'm sorry. rae yoare you done? is it a proper time? you bring up some of the most subtle issues we deal with and working on a social product. the issue about your data may still be viewable elsewhere -- is important point -- an important point to give people reading that policy are realistic expectation on how information may flow throughout the internet. you may publish your telephone number to your facebook profile and your friend may take that number and copy it into their phone. that interaction came from

facebook, and even though you deleted your profile, that information may continue to exist because your friend copied it into their phone. likewise, your friend might take a photograph you published to facebook and printed out and put it on a collage or on their personal home page because they copied it off of facebook. when you are sharing information with other human beings on the internet, it is not just a technical thing -- it is a social thing. people may choose to do things with that information outside of the things we can control. if i recall the part of the policy you talk about, that is the realistic expectation that we are trying to make sure people using our service understand. regarding, there are some pieces of information that cannot be deleted like messages. we have thought a lot about this. a lot of people use our messaging products like these mammoe-mail.

once you send a letter to someone, and it ends up in their hands, you have the social ability to ask for it back, but it is in their hands. when you send someone a message, we consider that piece of information owned by two people, just because it is provided by the existing conventions that existed with e-mail and even postal mail. so those are very specific instances. the information you shared on your profile is information you can delete permanently. in those instances, we were trying to take a thoughtful approach. >> is it not true that some were, and -- somewhere, and this applies to intelligence agencies, that there is some point that there is a residual

place of keeping information that cannot be deleted under any circumstances? >> sir, i cannot speak to what our intelligence agencies do. >> i am asking that to you. >> do you mind clarify your question? are you asking -- from our servers, when you delete your account, we delete the information associated with your account. >> so there is no backup anything anywhere which retains that? >> the technical systems are complex and there may be back up of some information somewhere due to the complexity of this system. >> what if you are subject to a lawsuit? and you have to go back and pull out that particular email, whatever was? you have to be able to do that, don't you? or you say, we cannot defend ourselves. >> if someone has depleted their

facebook account, what mechanisms we have to look up that deleted account? some of this may get into specific details of our infrastructure i am not familiar with. the spirit of facebook is your information is deleted. these technical systems, due to the technical requirements of making a system that is reliable and available at all times of the day, may mean there are backups in some parts of our system. so i think that is a reality. i am not sure and that specific instance what information would be available. -- in that specific instance. >> i move from my purse and high up in the tree cutting off bridges to a 13-year-old -- from my purse and high up in the tree cutting off branches to a 13- year-old, who is a lonely, and

the ability for a predator. we had hearings on this subject, too. i do round tables in my state of west virginia about that subject -- the vulnerability of students, of young people. they are your future, your present. i do not know how much of your profits come from them, but a lot. and when somebody asked you the question, who is responsible for privacy protection? everybody who works at facebook, everybody who works there is. i found that suspicious and disingenuous. i think companies have to be divided up. and people do not spend all their time on every question that comes before them -- what are the privacy consequences of this? i do not believe what you said. >> that is a fair point. what i intended to say is that

the engineers and product managers that develop the products take into account privacy ed every aspect of product design. we have -- at every aspect of product design. >> i accept that. don't you think there is the possibility of beginning to divide the world into enand users into two categories -- those who know what to expect and how to handle themselves, what consequences are of what they do. i put that group at 50%. and then others who are simply thrilled to be on facebook or on google, whatever, but they are not sure what they are doing, they are not sure the consequences of what they do. they do not know what it means it to have them fall on them or

rum. they are innocent -- they do not know what it means to have people follow them. you are being successful and people are signing up like crazy. so why complain? but there are consequences. there are inherent consequences. the bullying thing is not inconsequential. sexual predators is huge. and it is a part of what you do. if you can defend yourself against this, if you go to the right icons and make the right moves, i suppose you could stay out of trouble. always working is the record. people are tracking you -- always lurking is the record. tople are using new tyou

advertise. the word air-conditioning did come up for a certain reason. it was convenient because you were trying to help your mother. in other cases, it may be confusing. my philosophical question -- i ask the au professor this question. are we dividing ourselves into two classes of people -- people who understand it and can handle themselves on these instruments before us and those who cannot? and those who cannot are paying a price which we do not yet fully understand but which we are beginning to understand and that does get into the abuse and sexual lives and predator that and bullying or misinformation or simply being marketed. it is the same question with senator kerrey. i get telephone calls at our home that are meant to be unlisted numbers.

you just hang up. that is an annoyance. it should not occur in american life. but i have no way of stopping it. hence, the question -- can i stop facebook from having records on me? you say, yes. i am not so sure. >> the larger question is, or becoming two different societies and is not that wrong on something that is this dominant in our culture? >> i think we are becoming multiple level societies for a number of reasons. one is exactly what you say. the people who know and the people who do not know. as i get into the data we have dealt with and people have done research on, i used to believe that a lot of these problems could be solved by education. i no longer believe that everything can be solved by people learning. it is too complex. i find professionals in the field, when i call them to check on things i am thinking about,

will not know the answers. reading privacy policies is becoming a scavenger hunt, because not only do you try to make sense of verbiage which is basically understood by the people who created it and not many others, you are also into links that tell you that other parts of this are related to other companies and they use words like affiliate's that most would not understand. at that level, we have even very intelligent people could not -- that could not make sense of that. on another level, i am concerned we are moving into a world -- and this gets us into television, not just the internet -- because the television is going through the internet. digital tv. we are going to have a situation where people receive the views of the world based upon what others know about them and what they do not know others know about them. it is quite possible, and i have spoken to people who are beginning to think about this

regarding marketing, are changing the news profile based upon the parameters that people know about you. as a consequence, that will fit people into certain kinds of reputation and silos. we are not there yet, but we are defining people's reputations in ways they do not understand. there are multiple levels relating to status, education, relating to so many things that i am beginning to despair that we can ever really understand it. i am beginning to think at -- that some parts of this have to be regulated. not anything, -- not everything, by any means. >> i am so over my time it is embarrassing. senator kerrey, thank you -- senator kerry. >> can you share with us what the recent which was about that saw the distribution of more

than 100,000 ipad owners' emails. >> we had an incident recently that was largely called a brute force attack. it was a security breach by some hackers who were trying to collect information about ipad users. it was an incident where the hackers developed, looked at, develops software in which they word used to capture email addresses -- that were used to capture email addresses that were able to be captured on a website that they had because there was a certain -- well, for the ease of the customer, the website they went to retain information

about the email address using the icc i.d. code, which is the serial number of ipad. by writing the code, they were able to randomly seek to capture the information of that email address and constructed a list of those addresses. we found out about the security reach when a media ouletlet said the attackers had gone to them and proposed there was a vulnerability in the security of the email address. within 24 hours, we fixed that vulnerability. then we tried to assess whether there was additional vulnerability. we concluded that the only information that was potentially vulnerable was the icc-id code, the serial n umbeumber onr sim card.

in an abundance of caution, we notify all the purchasers of the ipad 3g device that was a potential exposure of their email address. to date, we have not seen that information be released in any other way other than to these media outlets. but we are cooperating with the criminal investigation that is looking into seeing how that security breach occurred. >> how oftyeen do you guys get attacked like that? >> it is a daily event. >> for all due -- for all of you? >> we spend millions of dollars on securing the network. it is a constant. it is almost as board in trying to expose a vulnerabilities. -- almost a sport in trying to expose a vulnerability.

>> how should people who have their information entrusted to you, what kind of confidence can they have? >> i think that developing the confidence and maintaining the confidence of the security of the network is essential. in this instance, we were disappointed. we spend millions of dollars establishing very secure networks and since, we have failed our customers. as soon as we understood the nature of the problem, we fixed it and notified them. we also made available new sim cards, if our customers feel they need them. from a security perspective, we do not think they are necessary but we made that available. absolutely -- they demand and expect more. >> you are an engineer. licyo, i am a poic person. >> are you able to tell me where

there is the greatest vulnerability in the system for abuse, where in the networks? >> i think you have multiple areas that are capable of security violations. so you have databases where you store information. you have a physical links were individuals try. you have devices where there is actually efforts to correct devices. i would described in the entire product line, you have multiple areas where you could see security breaches. in fact, we have a lab that is set up just to try to ferret out where those bridges can occur. >> can you tell us what deep packet inspection is? >> essentially, it is the ability to read beyond -- every

bit has a certain information. some of it is considered shallow, kind of like addresses. other portions of it are called deep packet which is payload information. department inspection -- deep packet inspection is the capability to evaluate the shallow and a deep information contained in that bit. it is used in our network for trying to find malware, spyware for purposes of network security. >> is it used for commercial purposes? >> thank you for saying so. i heard previous testimony. no. we do not use it for marketing purposes, which was the subject of interest a couple years ago. in portland, we have gone so far

as to it -- and partly, we have gone so far is to explain we will not use it -- important. in the event that there seems to be a desire for the use of that information, we ask our customers first. so, no. we do deep packet inspection -- like any technical advancement -- there have been discussions about recent issues that have been faced by companies on this panel and each one of those involved the use of technology in a proper way. in this context, the packet inspection, -- deep packet inspection, i do not think there is anybody who has suggested it was used inappropriately. where the issue is the use of that in the way that seemed to offend customers and user expectations. because of that, at&t was not doing that or planning to do that, but we made clear we would

not do that without customer permission. >> mr. taylor, in response to the chairman's question about the deleting of information and the storage of information, you repeatedly said that if it is deleted, it is gone. what if somebody simply deactivates their facebook page? it's there forever, is not it? >> i may get some of these details wrong. this is based on my understanding. when you deactivate your facebook account, for some period of time, you can reclaim it. it is a very frequent that someone might choose to disable their account and then want to restored. so we added that as a feature to our users, where we noticed that many people had biters

remorse about a decision to delete the account-- had buyer'' remorse about the decision to delete the account. >> so you do not know whether or not it stays for several years? >> i do not think it does. i am not familiar with the details. i am uncomfortable giving a specific answer. it is worthwhile to provide one specific bid of context. people published a lot of information to their profile. i recently had a baby, for example, and a lot of the initial photographs are in there. the act of the leading that is significant. just like -- the act of deleting that is significant. that is the motivation for that piece of functionality. i wanted to provide that context. >> fair enough. well, as everybody knows, our

counterparts in the house have introduced legislation. we have a cross the jurisdiction on this committee. the consumer protection subcommittee. we will work with the chairman, and with a goal of trying to build a record, we have reports coming out from the commerce department and the ftc. the question is -- can we come up with a standard, a set of expectations that are more effective? we struggled with this 10 years ago and i guess we failed because the offline-on-line debate -- we got caught up in that and tried to reach may be too far at that point in time. incidently, i am not suggesting you're companies have not made - - your companies have not made significant initiatives to respect people's privacy. all in all, the opt-in, opt-out

debate has been resolved pretty effectively. i give you credit for that. it is tricky. that is a long page of complicated conditions, and most people zap to the "i agree" and off they go. so, i am not sure there is knowledge in a copy emptor component of this -- the caveat emptor component of this. we need to figure if we can get a base line that is simpler and more direct. we look forward to it. thanks for the time. >> go ahead. >> thank you, mr. chairman. the day is getting late and i had a few additional questions about the subject that senator kerrey raised -- senator kerry raised about opt-in, opt-out.

they can visit -- oodouble agent.com. how do your users learn about opt-out? how do they learn about it? >> the opt-out link is in our privacy policy documents, which is a link from every page on our website -- linked from every page on our website. we work hard to make sure our privacy policy is in as plain gtheiierand not lenthie than it needs to be. but that is currently the

mechanism. i should point out that in the case of i-ads, that is something that we are just starting to do. in fact, we just started earlier this month to enable i-ads, which are ads that come up in the applications on your iphone. that mechanism may evolves over time as we innovate new ways to incorporate the control over user information into the user interface itself rather than just relying on the privacy policy. >> in your testimony, you indicated that your customers have been caught in a model for location-based privacy disclosures -- an opt-in model for location based privacy disclosures.

and an opt-out for apple. is that right? >> um, i think what you said is correct. >> you can clarify later if you want in writing or for the record. i am trying to figure out how uniform privacy disclosure policies would affect apple if we were to mandate that. >> well, so, with respect to location, as i mentioned previously, there is a master on-off switch for location-based davis of the user has the option of opting out from any location data collection at all, as the chairman rockefeller pointed out, perhaps that could be a more easily defined interface,

but that is the goal of that feature. >> with google, along these same lines about reading privacy policies when people are not looking at everything. you may have data on that. i do not know how many actually read them. can you learn about how users learn about-board and how you inform them and what work you have done -- and about dash- board. >> we developed a pithy saying, and this is to say that show is better than tell. my perspective on this is that privacy policies are necessary, but they are only the beginning of the efforts we should be making to try to explain consistently the same things, the same important things that users need to understand about privacy in many different ways. this is why we have a google --

if you click the privacy link, you go not just to a policy but to the center, which contains the policy but also contains a frequently asked questions. it contains -- when we launched chrome, we commissioned a comic book to explain some of the things about the way it worked and the controls we built into it. it contains youtube and videos of me and others explaining aspects of how we use data, what controls are there, how-board works -- how daskboard works. we tried to present information many different ways -- how dashboard works. another component of it, and one dear to my heart, is working to build the clarity right into the

experience of the product. with the dashboard, it was a very important to make that be ideally something that people would go to just because they want to know -- where is all my stuff? it would be like going to your desktop almost. because it presented -- in a useful and practical way -- a view of what the information stored in the account was. people would be consciously aware of that, even if they were not thinking privacy, privacy. we did not want people to first be concerned and then click through and see things. we wanted to put it in front of them. i think there is a lot of work to be done. there is a lot of mystery to clear up. hopefully, that will keep my team is busy. >> i know as chairman -- and talking about google and how you have grown, i was thinking

about that. one of the messages is that you have been successful. we appreciate that. we appreciate the job you have brought, all of you, to our country, but with that comes responsibility for privacy. but this responsibility for privacy of things we would not imagine people are trying to do to steal things and creditors in getting information, and that is what you are hearing from all of us today. it is what we hear from our constituents. i know you have heard them as well. it is our duty to say that we need to do something better. some of laws will be is affecting some of the things you do. i want to thank you for your testimony and we will work with you as we draft laws and try to do the best thing for the people of this country. thank you. thank you, mr. chairman. >> i have a closing thought.

i remember 10 to 15 years ago, when it was y2k. when was that? cato comes down with 10. do i have a 12? what was fascinating about that and what is on my mind is what an unbelievably naive display that was. an enormous number of very large a day before a vote to land at the washington airport -- jets coming in a day before a vote to land at the washington airport. senators right and left were summoned to meetings to tell us what the stakes were and how we

should vote. the next day, and that's still very much in my mind, and it describes the separation in some respects between your world and our world. it is not just a matter of silicon valley, east coast, those horrible people in government, but there is the unfortunate fact that we do have oversight over to. you. and this is hard for you to live with, because you are off on a tear doing great things for this country. and the senator and i left with incredibly frustrated parents, principals, , school board members, police officers coming in and complaining to us on a regular basis about the fallout about what it is you do.

and i do not say that with hostility. i say that with a sense of, that we each have to reach out to each other. but you should know that this is a committee -- it is called the commerce committee. i have been on it for 26 years. we have changed. and we have changed much more into a consumer protection- type of committee. we find ourselves up to our ups, rs in scams and pop- and what the health insurance industry did during the health care debate, the way they were taken to court. we had a lot to do with that and how they are still trying to take the medical loss ratio in which we finally had to pass when the public option it could not pass, and they are trying to twist that before health and human services can put out a

final ruling on it. aggressively, people trying to shape the world they want the world -- shape the world the way they wanted to be. that is behavior i can forgive provided there is a counter on the undersiother side. the other side happens to be us. you have heard bright people with some passionate thoughts and deep reflections on the success of your industries and the use of your industry is by but there is the other side. and that is where we use words like -- that is why i p ointed that out -- i made myself into a tree climber. that is what most people are like in this country. in the east, midwest, southwest, northwest, and california. and, um, so i just hold that out

as a thought for you, that we are doing this together, and we are -- the people who sit behind us on these things are incredibly sophisticated wizards at what you do. if we are going to make america better, protect children, because parents to do as much as they tend to be responsible but understand when it cannot be because they do not have the time, they are dead tired, they are on their third job of the day, what ever it is, that still, all of the system has to work. you started out the day a bit talking about, we are all about privacy protection online. and it ended up more with, well, we still have a lot to do, a long way to go.

and there were things that came up, which i did not find satisfaction in but found interest in it. to simply say, in closing, that we need each other. but it is important to understand that you need us, too, because we represent the american people in the way that you do not. they do more business with you, but they depend upon us. so we have our work to do, all of us. you are terrific to be here and to stay this long. most would not have done it. but you did get your machine back. thank you, all. >> nice to meet you. [captioning performed by national captioning institute] [captions copyright national cable satellite corp. 2010]

>> in a few moments, president obama talks about withdrawing troops from iraq and his plans to help disabled veterans. in 40 minutes, the treasury secretary's speech in new york about implementing the new financial regulations law. then thad allen's update on bp's efforts to permanently seal the oil well in the gulf. on "washington journal" tomorrow morning, richard weitz looks at the process of withdrawing troops from iraq. we'll talk about jobs with jesse jackson. and our special series on the

next health care law continues with sandy praeger on immediate changes to insurance plans. "washington journal" is like every day at 7:00 a.m., eastern. >> every weekend in august, "book tv" returns to panels we have been to around the country. see talk show host tammy bruce next weekend. later in the month, the harlemt book festival, and freedom fextst. for the full listing, go to booktv.org. >> president obama says the u.s. military withdrawal from iraq is on schedule with combat troops out by the end of the month and all troops leaving by the end of next year. he spoke to the disabled veterans in a land of for 40

minutes. -- in atlanta for 40 minutes. >> good morning, ladies and gentlemen, honored guests. -- and especially my disabled veterans, your families, and your survivors. it is a privilege and a great honor to have been asked to introduce this morning's most distinguished speaker at our 89 national convention of the disabled american veterans and of salary. -- and auxiliary. abraham lincoln called upon us to render honor to the soldier and a sailor ever were bravely bears this country's cause,

otter to the citizen who cares for his brother in the field and serves as best he can at that same cause. the current president of the united states is a living example of putting those words into action. his leadership and steadfast commitment to the men and women who have served and sacrificed for our country's cause is a matter of public record. president obama is a strong supporter of the united states military and of our nation's veterans and their families. he believes in providing the resources and the support that the v.a. needs to honor america's moral obligation to our veterans, while serving in the united states senate, as well as a during his presidential campaign, he stressed his strong support for

advanced a preparations for veterans' health care, and i was honored to be there at the white house when he signed that landmark bill into law. i am pleased to note that the president also signed important legislation that provides a much-needed supportive services and assistance to family caregivers of severely disabled veterans. and also, i might add, his two budget submissions treat veterans very well and continue a tradition of quality, compassionate health care, and something which is a vitally important to me and certainly to you as a disabled veterans. most importantly, he has proven himself willing to listen to our point of view on vital veteran issues, but more than that, he actually has taken our views to

heart. he used them to inform his developing policy positions on those very issues. it is my honor to introduce our special guest. ["hail to the chief" playing] >> ladies and gentlemen, the president of the united states. [applause]

>> thank you. thank you so much. thank you. thank you. everyone, please have a seat. thank you very much. thank you so much. thank you. it is -- irthday. b >> it is a great honor. it is true. i will be 49 this week. i have a lot more gray hair than i did last year. it is an extraordinary honor to be here. thank you, commander, for your kind introduction and for your

lifetime of service. in noreen's and vietnam -- in the marines in vietnam, but as a we aress at thdvocate, grateful to you. thank you for everything you have done. i want to thank your great leadership team for welcoming me today. chairman ray dempsey. absolutely. incoming commander wally tyson. national adjutant arch wilson. judy heslip of the d.a.v. auxiliary. and your outstanding executive director in washington. i am pleased to be joined by a

decorated vietnam veteran, and a lifetimeirr, member of d.a.v., my secretary of veterans affairs -- secretary some shaenseki. disabled american veterans, i valued your advice and counsel when i was a senator, when i co- sponsored the post 9/11 g.i. bill. you were one of the first veteran organizations that i called upon when i began my presidential campaign. [applause] and as president it has been my pleasure to welcome you to the white house, to make sure

america is serving our veterans as well as you have served us. and most recently, to sign advanced a preparations into law for the better -- so that veterans health care will never again be held hostage to the political games in washington and the budget battle. [applause] now, there is another visit i will not forget. i was in the oval office, expecting a visit. and in come bobby, carrying a baseball bat. [laughter] now, it is not every day that somebody gets past the secret service carrying a baseball bat. you may have heard about this. it turns out it was a genuine at louisville slugger. a thank you for going to bat for

our veterans on advance preparations. so, i am grateful for that symbol of our partnership, and i am proud of the progress we have achieved together. but as one of your outstanding members from illinois reminded me, there was a promise made during the campaign and a promise kept. and i intend on keeping on keeping my promises to the veterans of america. in the life of our nation, not every generation has been summoned to defend our country at this hour of need. but every generation, to answer that call, has done so with honor and with courage. among you are members of that generation that saved the world from fascism. i was honored to stand with our

world war ii veterans at normandy last year, an anniversary of d-day. [applause] this year, as we mark this 65th anniversary of our victory in that war, we once again salute our veterans of the second world war. others among youth faced a cold korean peninsula. as we mark the 60th anniversary of that conflict this year, i will be proud to travel to the republic of korea in november to pay tribute to our veterans of the korean war. [applause] many of you served in the jungles of vietnam.

you also served with honor, exemplary dedication and courage, but more often shunned when you came home. that was a national disgrace. and it must never happen again. [applause] and that is why we are making sure our veterans from today's wars are shown the respect and the dignity they deserve. and whether you served in the gulf to free kuwait or fought in the streets of mogadishu or stop the ethnic slaughter in the balkans, you, too, are part of an unbroken line of services stretching across two centuries. for you, coming home was the

beginning of another battle -- the battle to recover. you fought to stand again, waukegan, and work again. you fought for each other -- to walk again and work again. you became leaders in our communities and in our companies, including a former vietnam veteran and senator reminded us that america's disabled veterans are strong at the broken places. [applause] today, your legacy of service is carried on by a new generation of americans. some step forward in a time of peace, not foreseeing years of combat. other stepped forward in this

time of war, knowing they could be sent into harm's way. for the past nine years, in afghanistan and iraq, they have boarded the burdens of war -- borne the burdens of war. they and their families have faced the greatest test in the history of our all-volunteer force, serving tour after tour, year after year. through their extraordinary service, they have written their own chapter in the american story. by any measure, they have earned their place among the greatest of generations. now, one of those chapters is nearing an end. as a candidate for president, i pledged to bring the war in iraq to irresponsible ea responsible. [applause]

shortly after taking office, i announced our new strategy for iraq and for a transition to full iraqi responsibility, and i made it clear that by august 31, 2010, america's combat mission in iraq would end. and that is exactly what we are doing. as promised and on schedule. [applause] already, we have closed or turned over to iraq hundreds of bases. we are moving out millions of pieces of equipment in one of the largest logistics operations that we have seen in decades. by the end of this month, we will have brought more than

90,000 of our troops home from iraq since i took office -- more than 90,000 have come home. today, even as terrorists tried to derail the progress, because of the sacrifices of our troops and a very rocky partners, of violence in iraq continues to be near the lowest it has been in years. next month, we will change our military mission from combat to supporting and training iraqi security forces. in fact, in many parts of the country, and rockies have taken the lead for a security-- iraqis have taken the lead for security. we will maintain a transitional force and to remove all of our troops from iraq by the end of

next year. during this period, our forces will have a focused mission, supporting and training iraqi forces, partnering with them at in counter-terrorism missions, and protecting our civilian and military efforts. these are dangerous tasks. there are still those with bombs and bullets to will try to stop our progress. the hard truth is we have not seen the end of american sacrifice in iraq, but make no mistake, our commitment in iraq is changing from a military effort led by our troops to a civilian effort led by our diplomats. as we mark the end of america's combat mission in iraq, a grateful america must pay tribute to all this served there. [applause] remember, our nation has had a

vigorous debate about the war. there are patriots who supported going to war and patriots who opposed to it. but there has never been any daylight between as when it comes to supporting the more than 1 million americans in uniform who have served in iraq. far more than any conflict since vietnam, these men and women from across our country have done more than meet the challenges of this young century. through their extraordinary courage and confidence and commitment, these troops and veterans have proven themselves as a new generation of american leaders. and while our country has sometimes been divided, they have fought together as one. while other institutions have shirked responsibilities, they have welcomed responsibility. while it was easy to be daunted by overwhelming challenges, the generation that served in iraq

has overcome every test before them. they took to the skies and spread across deserts' in the initial charge to baghdad. today we are joined by part of the 101st airborne division. nicholas binardi is here. [applause] when invasion gave way to insurgency, our troops persevere block by block, city by city, from baghdad to fallujah. as a driver, this soldier in toward constant attacks but never wavered in his mission, and we thank sergeant dan -- thank you, dan. when terrorists and militias plunged iraq into a sectarian

war, our troops adapted it, restoring order and defeating al qaeda in iraq on the battlefield. among those who served in those days was a scout with the first cavalry division, a specialist matt sidle. matt, for each of these men and women, there are countless others and we honor them all. our young enlisted troops and noncommissioned officers are the backbone of our military -- >> hoo-ah! >> the national guardsmen and reservists who served on deployments. more women tested by combat than any war in american history. [applause]

including a marine, sergeant patricia ruiz. patricia. -- i teased patricia. i said she looks like she is still in high school. but she is a marine. and we salute the families back home. they too have sacrificed in this war. that is why my wife, michelle, and the vice president's wife, dr. michelle biden -- dr. jill biden, have made it their mission to make sure america takes care of our remarkable military families, including our

veterans. now this summer tens of thousands of our troops in iraq are coming home. last week by president biden was at fort drum to help welcome back members of the legendary 10th mountain division. families are being reunited at bases across the country, from fort bragg in north carolina to fort riley in kansas to fort lewis in washington. every american can show their gratitude to our patriots who served in iraq. as we do, we are humbled by the profound sacrifice is that have been rendered. each of the veterans i have mentioned carried with them the wounds of this war. and as a nation, we will honor forever all who gave their lives -- that true measure of devotion -- in service in iraq, soldiers, sailors, airmen, marines, coast guardsmen --

active, guard, reserve. even as we end the war in iraq, even as we welcome home so many of our troops, others are still deployed in afghanistan. so i want to remind everyone, it was afghanistan where al qaeda plotted and trained to murder 3000 innocent people on 9/11. is afghanistan and the tribal regions of pakistan where terrorists have launched other attacks against us and our allies. and if afghanistan were to be engulfed by an even wider insurgency, al qaeda and its terrorist affiliates would have even more space to plan their next attack. and as president of united states, i refuse to let that happen. [applause]

the effort in afghanistan has been long and been difficult. and that is why after years in which the situation had deteriorated, i announced a new strategy last december, a military effort to break the taliban's momentum and train afghan forces so that they can take the lead for their security, and a civilian effort to promote good governance and development that improves the lives of the afghan people, and deeper cooperation with pakistan to root out terrorists on both sides of the border. we will continue to face huge challenges in afghanistan. but it is important that the american people know that we're making progress and we're focused on goals that are clear and achievable. on the military front, nearly

all the additional forces that i ordered to afghanistan are now in place. along with our afghan and international partners, we are going on the offensive against the taliban -- targeting their leaders, challenging them in regions where they had free reign, and training afghan national security forces. [applause] our thoughts and prayers are with all our troops risking their lives for our safety in afghanistan. and on the civilian front, we are insisting on greater accountability. and the afghan government has taken concrete steps to foster development and combat corruption, and put forward a reintegration plan that allows afghans to lay down their arms. in pakistan, we have seen the government begin to take the fight to violent extremists within its borders and major blows have been struck against

al qaeda and its leadership -- because in this region and beyond, we will tolerate no safe haven for al qaeda and their extremist allies. we will disrupt, we will dismantle, and we will ultimately defeat al qaeda. [applause] and we will give our troops the resources and the equipment to get the job done and keep our country safe. [applause] at the same time, every american who has ever worn the uniform must also know this -- your country is going to take care of you when you come home. [applause] our nation's commitment to our veterans, to you and your families, is a sacred trust.

and to me and my administration, upholding that trust is a moral obligation. it is not just politics. that is why i have charged secretary shinseki with building a 21st century va. [applause] and that includes one of the largest percentage increases to the va budget in the past 30 years. [applause] we are going to cut this deficit that we have got, and i have proposed upper -- a freeze on discretionary domestic spending. but what i have not frozen is the spending we need to keep our military strong, our country safe, and our veterans secure. so we're going to keep on making historic commitments to our veterans. [applause]

for about 200,000 vietnam vets who may have been exposed to agent orange and who now suffer from three chronic diseases, we are making easier for you to get the health care and benefits you need. [applause] for our gulf war veterans, we have declared that nine infectious diseases are now presumed to be related to your service in desert storm. [applause] for our disabled veterans, we have eliminated co pays for those of you who are catastrophically disabled. [applause] we have kept our promise on concurrent receipt that proposing -- by proposing legislation that would allow severely disabled retirees to receive your military retired pay and your va disability

benefits. it is the right thing to do. we have dramatically increased funding for veterans health care across the board, and that includes improving care for rural veterans and women veterans. [applause] 4 those 500,000 veterans who have lost their eligibility, our priority 8 veterans, we are restoring your access to va health care. and since the rumors continue to fly, even though they are wrong, let me say it as clearly as i can -- the historic health care reform legislation that i signed into law does not -- i repeat, does not -- change your bet -- change your veterans benefits. [applause] the va health care benefits that

you know and trust are safe, and that includes prosthetics for our disabled veterans. [applause] thanks to advanced appropriations, the delays for funding for veterans medicare -- medical care are over. and just as those delays were unacceptable, so too are long delays in the claims process. so secretary shinseki is working over time to create a single lifetime electronic record that our troops and veterans can keep for life. and today i can announce that for the first time ever, veterans will be able to go to the va website, click a simple blue button, and download or print your personal health records so you have them when you need them and can share them

with your doctors outside of the va. that is happening this fall. [applause] we're hiring thousands of new claims processors to break the backlog once and for all. and to make sure the backlog does not come back, we're reforming the claims process itself with new information technologies and a paperless system. >> hallelujah! [laughter] >> we got an amen over here. as a result of the innovation competition that i announced last summer, our dedicated va employees suggested more than 10,000 new ways to cut through the red tape and the bureaucracy. and we are already putting dozens of these innovative ideas

into action. additionally, we are enabling more veterans to check the status of their claims online and from their cell phone. [applause] as a net step, we are opening this competition to entrepreneurs and academics so the best minds in america can help us develop the technologies to serve our vets, including those of you with multiple traumatic injuries. we will keep at this until we meet our commitment to cut those backlogs, slash those wait times, and deliver your benefits sooner. this is a priority and we are going to get it done. [applause] in endingng progress homelessness among our veterans. today on any given night there are about 20,000 fewer veterans on the streets than there were when we took office.

but we're not going to be satisfied until every veteran who has fought for america has a home in america. we will not stop. [applause] finally, we are keeping faith with our newest veterans returning from afghanistan and iraq. we are offering more of the support and counseling they need to transition back to civilian life. that includes funding the post- 9/11 gi bill, which is already helping more than 300,000 veterans and family members pursue their dream of a college education. and for veterans trying to find work in a very tough economy, we are helping with job training and placement. and i have directed the federal government to make it a priority to hire more veterans, including disabled veterans.

and every business in america needs to know our vets have the training, they have got the skills, they have the dedication -- they are ready to work. and our country is stronger when we tap the incredible talents of our veterans. for those coming home injured, we are continuing to direct unprecedented support to our wounded warriors in uniform -- more treatment centers, more case managers, delivering the absolute best care available. for those who can, we want to help them get back to where they want to be -- with their units. and that includes service members with a disability, who still have so much to offer our military. we are directing unprecedented resources to treating the signature wounds of today's wars -- traumatic brain injury and post traumatic stress disorder. and i recently signed into law

the caregivers and veterans omnibus health care services act. that is a long name but let me tell you what it does. it not only improves treatment for traumatic brain injury and ptsd, it gives new support to many of the caregivers who put their own lives on hold to care for their loved one. [applause] and as so many of you know, ptsd is a pain like no other. the nightmares that keep coming back, the rage that strikes suddenly, the hopelessness that has led to many of our troops and veterans to take their own lives. so today i want to say in very personal terms to anyone who is struggling -- do not suffer in silence. it is not a sign of weakness to

reach out for support, it is a sign of strength. your country needs you. we are here for you. we are here to help you stand tall. do not give up. reach out. we're making major investments in awareness, outreach, and suicide prevention -- hiring more mental rut -- mental health professionals, improving care and treatment. for those of you suffering from ptsd, we are making it easier to qualify for va benefits. if a va doctor confirms a diagnosis of post-traumatic stress disorder, that is enough -- no matter what war you served in. [applause] these are the commitments my administration has made. these are the promises we have

worked to keep. this is the sacred trust we have pledged to uphold -- to you and all who serve. i want to make a special mention of a truly inspiring american, staff sergeant cory remsburg. he was at bethesda during one of my periodic visits to see our wounded warriors. and as i walked into his room, i saw a picture on the wall -- and it was the picture of the two of us together. i had met cory before, back at the d-day anniversary in normandy. a good looking young man, a proud army ranger, he had joined in a reenactment of that historic paratroop jump. then soon after, cory served on

his 10th deployment since 9/11 -- that is right, his 10th deployment. and that is when an ied nearly took his life. the traumatic brain injury was severe. cory was in a coma for months. it seemed possible that he would never wake up. but then something happened. his doctors still cannot explain it. his parents called it a miracle. cory opened one of his eyes. then a few weeks later, he moved a leg. then he moved the norm. -- he moved an arm. and there at bethesda, we were meeting again. and cory still could not speak. but he looked me in the eye.

he lifted his arm and he shook my hand firmly. and when asked how he was feeling, he held up his hand, pulled his fingers together, and gave a thumbs up. [applause] today cory is at a va hospital in florida. and with the support of his family and va staff, he is working hard every day to retrain his strength -- regain his strength. he has got to learn to speak all over again. he is grateful for the visits he has received from friends and supporters including the disabled american veterans. [applause] cory is only 27 years old.

he knows he has got a long and very hard road ahead. but he pushes on, and he is determined to get back to his fellow rangers. and when someone at the hospital said, cory, you're going to walk out of here someday, he said, no, i am going to run out of here. [applause] so to staff sergeant cory remsburg, to the disabled american veterans -- i want to say to all of you, you are the very essence of america, the values that sustain us as a people, and the virtues our nation needs most right now. and the resilience that in the face of great loss so many of you experienced, i know you like cory know what it means to pick yourself up and keep pushing on.

and that sense of purpose that tells us to carry on, not just when it is easy but when it is hard, even when the odds seem overwhelming -- that is what we are about. the confidence that our destiny is never written for us, it is written by s. the faith, that fundamental american faith, that there are always brighter days ahead, and that we will not simply endure, but we will emerge from our tests and trials and tribulations stronger than before -- that is your story. that is america story. and i am proud to stand with you as we write the next proud chapter in the light of the country that we love. god bless you, and god bless the united states of america.

>> senator mitch mcconnell responded to these remarks. mr. president, on another matter, the president today announced his plan to transition the mission of our military in iraq from combat -- excuse me. the president announced his plan today to transition the mission of our military in iraq from combat to an advisory and assistance mission. for context, it is worth remembering that prior to the full deployment of this force, some democrats were already declaring the surge the president is referring to today a complete failure. but thanks to the vision and the determination of general petraeus, general mcchrystal and ambassador crocker, the

counterinsurgency strategy was allowed to take root and to succeed. the population was protected, al qaeda was weakened and crucially our relationship with the flee can i government -- with the maliki government grew stronger. none of this was easy. between the surge and the anbar awakening, we had to prevail on many votes on time lines for withdrawal and fights over whether or not we would ever fund ongoing combat operations, all of which allowed for the strategic framework agreement and the security agreement between the u.s. and iraqi governments -- by the way, executed in the previous administration -- that outlined the drawdown of forces and the transmission of mission the president announced today. of course the iraqis must work through the formation of the next government and continue to impart insurgents. there are valuable lessons in all of this, as general petraeus works to build the afghan

security forces and defeat the taliban. the surge in iraq helped create the conditions that resulted in the security agreement between our two countries, which took a lot of hard work, and back in 2007 some, including the current president and vice president, thought it could not be achieved. the credit of course goes to general petraeus, general petraeus odierno, our fighting forces, ambassador crocker, and our iraqi partners. it is their sacrifice that we should remember >> in a few moments, treasury secretary timothy geithner. then an update on the effort to permanently sealed the gulf oil wells bill. later, a hearing about online privacy.

a couple of live events to tell you about tomorrow morning. here on c-span, the budget committee looks at the state of the u.s. economy when its members here from a panel of economists at 10 eastern. at the same time, the senate environment subcommittee on children's health looks at optimism and environmental health research. witnesses include representatives of the health and human services department. >> we're not ruling in the options and but not in the options out. >> this month marks the 20th anniversary of the beginning of the first gulf war. look at at the key players at that became desert storm online at the c-span video library. all three, every program since 1987, watch what you want when you want. >> treasury secretary timothy geithner says that the administration will move as

quickly as possible to implement the new financial regulations bill. one of his priorities will be to simplify the forms used to obtain mortgages and credit cards. he spoke at the stern school of business for 45 minutes. have withelighted to us today treasury secretary timothy geithner. [applause] in the audience we have the president of nyu, the faculty -- [applause] pack a day, students, alumni, and members of the new york business community rhetoric --

representing partnership for new york city. we also have 40 different news outlets. secretary geithner, you need no introduction, especially here in new york where you were president with the federal reserve bank. let me just say that like all americans, we at the stern school are extremely grateful to you and to the entire team that treasury for the leadership you provide building a road to shared prosperity both at home and abroad. thank you. before we began, let me just remind you that after this, as secretary geithner will take questions. and with that, it is indeed my great pleasure to welcome to the podium the secretary of the treasury, timothy geithner. [applause]

>> thank you, dean henry, he said that new york is strong. i concur in that. thank you for coming, and all of you in the room this been your life in higher education, i admire so much what you do. it is still important to our country. i am going to talk about financial reform which is tough and difficult. but more power to you. last month the president of united states signed into law reforms that will reshape the american financial system and restore it to its core purpose of generating lasting economic growth. today i want to outline the next that's for reform and the challenges we face in making those reforms a success.

before i do that, i want to recall how we got here. financial reform was an obligation, never a choice. we had an obligation to fix the basic flaws in our financial system that helped trigger the worst global economic crisis since the great depression. we had an obligation to make sure that this recession would be remembered not just for the deep damage it caused but also for the sweeping change it compelled. we had an obligation to rebuild our financial system so that it could once again be an engine for economic growth and innovation. this battle financial reform was very hard fought but it was a battle of necessity. for much of the past century, the american financial system was the envy of the world. our system provided investors with the strongest protections

anywhere in the globe. those protections and our dynamic, competitive market for financial innovation deal of the global ascendance of american business. -- fuelled the global ascendance of american business. our system provided the financing that created the great american manufacturing companies, unleashed a revolution in technology, and led to life saving advances in science. our system provided hundreds of thousands of engineers and on a trip and yours, scientists and small businesses with the unparalleled opportunity to transform their ideas into industries. with the american economy excelled relative to other major developed economies, it did so because our financial system was better at directing investment towards the companies and industries where the returns would be the highest. the american financial system

achieved all this because we had in place strong rules governing finance. these regulatory checks and balances helped create a remarkably long period of relative economic stability. recessions happened, but they were shorter and less damaging. we appeared to ed had achieved a system that was reasonably stable life but also very good at innovation. but over time those great strengths of our financial system were undermined. the careful mix of protections we created an established eventually eroded. new industries of consumer finance and mortgage lending grew up outside the banking sector, evading rules put in place to protect consumers. thuja -- huge amounts of risk moved outside the banking system were it was easier to increase leverage. that combined with a long period of low real interest rates around the world led to a race

to the bottom in underwriting standards and credit terms. and it led the american financial system, once the model of efficiency, to misallocate hundreds of billions of dollars towards an unsustainable real estate boom. when things fell apart, the damage spread far beyond wall street. house prices fell off a cliff. businesses and trade halted around the world. trillions of dollars in savings vanished. millions of jobs were lost. thousands of companies across main street america collapsed. how did this happen? the failures were many. on wall street and across the american financial system, financial firms of all types took on risks they did not fully understand. in washington, financial regulators did not sufficiently use the authority they had to protect consumers and limit excess risk. policy makers did not act early enough to overhaul a broken system. congress legislated loopholes

that allowed large parts of the financial industry to operate without oversight, transparency, or restraint. it is important to remember this -- in communities across the country, many americans took on more debt than they could afford and took on financial risks they did not fully appreciate. we all share responsibility for this crisis, and we share responsibility for reform. the reforms that are now full of the land will help us rebuild a pro-growth, pro-investment financial system, a system that will allow americans to save for retirement and to borrow to finance an education or a home knowing that proper safeguards are in place, a system that will help businesses finance growth with less risk that they will be starved for credit the next time we face an economic downturn. to get there, we have different responsibilities. for the american people, the

core challenge is to save a larger share of income, to borrow more responsible, and to be. -- and to be sure we better or understand the risks involved in investing and borrowing. that process is underway. americans are rediscovering the importance of living within their means. they are saving more and paying down debt. and they're growing more careful about how they borrow and how they invest. these changes are necessary and healthy. they will make a stronger as a country. for the financial industry, it your core challenge is to restore the trust and confidence of the american people and your customers and investors around the world. you will have to make your own decisions about how best to do that, but given that i'm here in new york, i thought i would offer a few suggestions as an interested observer. do not wait for washington to draft every rule before you start changing how you do business. get ahead of the process. by new ways to improve

disclosures for your consumers. and hidden fees. hidden fees. don't push people into loans they cannot afford. demonstrate your business customers that after running for cover during the peak of the crisis, you are willing to take a chance on them again. change how you pay your executives. make sure you have board members who understand your business and the risks you are taking. focus on improving your financial position so that your financial ratings, it cost of capital, the amount that you have to pay to borrow, all reflect your own financial strength and earnings prospects, not the false expectation that the government will be there in the future to rescue you. you can do that before even the first new rule of financial reform is written. a substantial part of the responsibility for reform balls on washington. those of us in government,

policy-makers, regulators, and supervisors, must make sure that these reforms meet the promise of the law, that they provide both the necessary protection against financial excess and preserve the benefits of financial innovation. that is our core challenge and i want to lay out some of the principles that will have to guide our work going forward. we have an obligation of speed. we will move as quickly as possible to bring clarity to the new rules of finance. the rule writing process traditionally has moved at a frustrating, glacial pace. we have to change that. second, we will provide full transparency and disclosure. the regulatory agencies will consult broadly as they write new rules. draft rules will be published. the public will have a chance to comment, and those comments will be available for all to see. third, we're not going to simply layer new rules on top of old

outdated ones. everyone that is part of this financial system knows that we have accumulated layers of rules that can be overwhelming, and these failures of regulation were rules that did not work and meet their basic purpose, and were some ways as appalling as the fellow year produced where regulation was absent. so we will eliminate rules that did not work. and wherever possible, we will streamline and simplify. the fourth principle. we will not risk killing the freedom for innovation that is necessary for economic growth. our system allowed too much freedom for predation, abuse, and excess risk, but as we put in place rules to correct for those mistakes, we have to strive to achieve a careful balance and safeguard the freedom, competition, and innovation that are essential for economic growth. fifth, we will make sure we have

a more level playing field, not just between banks and non-banks here in the united states, but also between our financial institutions and those in europe, china, and emerging markets who are all competing to finance global growth and development. we will set high global standards and blocking and prevent a race to the bottom from taking place outside the united states. we're going to work to bring more order and coordination to the regulatory process so that the agencies responsible -- and there are several of them -- responsible for building these reforms are working together and not against each other. this requires us to look carefully at the overall interaction of regulations designed by different regulators and assess the overall burden they present relative to the benefits they offer. so those are some of the principles they will guide our implementation of financial reform in you should hold us accountable for honoring them. that this process of

implementation is very broad in scope and very complicated. it will take some time. it involves appointing new champions of consumer financial protection and new leaders of banking supervision. it involves writing new rules in some of the most complicated areas of modern finance. it involves consolidating authority now spread across multiple agencies and setting up new institutions for coordination, crisis management, consumer protection, and for identifying systemic risks. it involves negotiations with countries around the world. each of the agencies involved in implementing financial reform are in the process of outlining how they propose to prioritize the rules they now have to write and setting initial dates for when the public will be able to comment on those rules. and in september, when the new financial stability oversight council first meets, we will

establish an integrated road map for the first pages of reform and put that in the public domain. without getting ahead of the process, i want to provide you a brief introduction to the steps we expect to take in four of the most important areas of reform over the next several months. on consumer protection, we want to move quickly to give consumers simpler disclosures for credit cards, although loans, and mortgages, so that they can make better choices, borrow more responsibly, and compare costs and services. one of the ways we intend to do that is by combining the two separate and inconsistent federal mortgage disclosure forms that consumers currently get. next month we will convene mortgage companies, consumer advocates, housing counselors, and other experts to gather ideas, take the best ones, test them on consumers, and then soon will be able to unveil a new,

easy to understand federal disclosure form. we will also invite public comment on new national underwriting standards for mortgages to shape the reforms of the mortgage markets. the consumer protection also requires better enforcement, particularly of consumer finance companies, not regulated as banks. and so building on our very successful effort to stop mortgage scams led by a joint task force, we're going to coordinate a national enforcement effort targeted at other forms of consumer abuse, including those financial companies that target members of the military and their families. while our soldiers protect our nation abroad, their families should not be exposed to financial abuse at home. second, we're going to move forward on reforming the gses and our broader housing finance system. we will bring together at the

treasury department leading academic experts, consumer and community organizations, industry participants, and other stakeholders for a conference of experts focused on the future of housing finance. we will explore various models of reform and seek input from across the political and ideological spectrum. chairman frank plans a series of hearings on housing finance reform this fall. i suspect german dog will, too. and we are required under law to submit a plan by january of next year. we're going to move quickly to begin shaping reforms of the derivative markets. to start the process, we will work with the fed, the sec, and the cftc to outline specific quantitative targets for moving the standardized parts of the over counter derivatives business onto central clearing houses. and we have to accelerate international effort to define common global standards for

transparency, oversight, and the prevention of manipulation and abuse of these critically important markets. the final area of reform i want to talk about is perhaps the most important -- the task of establishing new rules to restrain risk taking and leverage in the largest global financial institutions around the world. all financial crisis is are, at their core, caused by excess leverage, a term we use to describe the amount of risk firms take relative to the financial reserves they hold against those risks. capital requirements determine the amount of loss firms can absorb, the magnitude of the risks they can take without risking tell you. they help the market provide discipline by forcing shareholders who enjoy profits in good times to be exposed to losses in bad times. there the financial equivalent of having speed limits on our highways, antilock brakes and airbags in our cars, and

building codes in companies -- communities prone to earthquakes. part of what made this crisis so severe was that capital requirements failed to keep up with risks and failed to force firms to prepare for the possibility of a severe recession with a substantial reduction in housing prices. this mistake was made worse by the fact we allowed a large parallel financial system, composed of investment base, consumer finance companies, and firms like aig, to grow up alongside the regulated banking system. firms were allowed to operate with very thin cushions of capital and reserves and to finance activities with short- term, unstable sources of financing. outside the united states, the rules were in some ways even weaker. that was true in the united kingdom where in order to attract business away from other countries, they built a financial system built on an

unstable foundation called " light touch regulation." and that was true in many of the other major developed economies where the rules allowed firms to operate with much lower levels of capital relative to risk. that global capital framework did not work and we're moving quickly across the world to fix it. let me describe the key elements of the international agreement we are working to build. we're going to make sure that financial institutions hold a lot more capital than they did before the crisis. we want the new requirements to be set so that we could face a crisis of this severity in the future without having the government have to step in and provide urd urgency life support -- an emergency life support. the major banks will be required to hold enough capital so that they could withstand losses similar to what we saw in the depths of this recession and still have the ability to operate without turning to the taxpayer for help.

second, we're going to make sure that firms meet these requirements with common equity so that they can better absorb losses. in contrast to the rules prevailing today which allow a wide range of other forms of capital, the requirements will be turned -- set in terms of real common equity, tightly defined to mean capital that will truly absorb first losses when firms get into trouble. third, firms will be required to hold significantly more capital against the types of risky trading that caused so much unexpected financial damage during this crisis. fourth, bigger firms and the more complex, interconnected firms will have to hold relatively more capital than smaller banks. the largest and most interconnected firms cause more damage when they fail, and so they need to be forced to hold more capital relative to risk. that is a simple principle of fairness and will also help to

provide incentives for firms to limit their size and leverage. fifth, these new capital requirements will be supplemented with new global standards for liquidity management, so that firms can withstand a severe shock in liquidity without deepening the crisis by, for example, selling assets in a panic or cutting credit lines indiscriminately or needlessly turning to central banks for liquidity of support, all of which can undermine financial confidence in periods of stress. under this framework we are now working to build, they will be subject to two tiers of capital requirements. all firms will have to hold a substantial minimum level of capital. and they will be required to hold an added buffer of capital set above the minimum. if a firm suffers losses that force it to eat into that buffer, it can do so but it will

have to raise capital, reduce dividends, or suspend share repurchases. this will help the bank -- the system be more stable over time by forcing base to move more quickly to strengthen their balance sheets as the risk of potential losses increases. the muscle -- the most consequential part of this framework will be the new quantitative capital ratios. they need to be substantially higher than they were. but if we set them too high too fast, we could hurt economic recovery or simply end up pushing risk outside the banking system, something that could come back to haunt us. we plan to give banks are reasonable transition period. banks will have until the beginning of 2013 to meet the new minimum, and will have several years beyond that to build up their new capital buffers. that means banks will have the ability to meet these new

requirements through future earnings and that will help protect the recovery under way. the u.s. financial system, it is important to note that because we moved so quickly with the bank stress tests in early 2009 to force banks to raise more common equity, our financial system today is in a very strong position internationally to adapt to the new global rules. as i said the beginning, enacting the reform was a hard fought battle. the opponents of reform will continue to claim as they have over the past year that these reforms will bring the end of the ameritech enterprise, the end of the york as the center of financial wisdom. let me provide some perspective. eight decades ago, a previous generation of americans battled to a great depression. they rose to meet the great challenge of their day by establishing bold new bank

protections and new securities laws. at that time just as now the opponents of reform predicted grave danger. in 1933, "time magazine" wrote in reference to the bill that created the fdic, "through the great banking houses of manhattan last week -- this is a bid -- ran wild eyed alarm. state bankers stared at one another in anger and astonishment. a bill had just passed which would rivet upon their institutions what they considered a monstrous system, not only robbing them of their pride of profession but producing all u.s. banking to its lowest level." a year later in 1934, the president of the chamber of commerce, speaking of the securities exchange act said, "is the opinion not only of stock brokers, but of thoughtful

business men that its sweeping and drastic provisions would seriously undermine legitimate business of all members of stock exchanges and investment banks, with resultant disastrous consequences to the stock market, would greatly prejudice the interest of all investors, would tend to destroy the liquidity of banks and would impose corporations of the country -- on corporations of the country serious handicaps in the practical operation of their business." notwithstanding those fears and distortions, the reforms that followed the great -- the great depression laid the foundation for decades of prosperity and led to one of the most impressive records of innovation and growth that any major economy had ever seen. financial reform cannot just be about fighting the last war. future risks will look different from those that cost this problem, so we need a system that is more adaptable and resilient and builds a stronger foundation for lasting economic

growth. the reforms we have just passed will fundamentally reshape the u.s. financial system. that will require financial firms to change the way they do business, to change the way they treat their customers, to change the way they manage risk, and to change the way they reward their executives. these reforms will be tough, but they will be toughest on those who took the greatest risks, who operated closest to the edge of prudence, who chased the market down and competed in a race to the bottom in standards and practices, and on those who made most of their profits in the most unsustainable of ways. and these reforms will benefit american business and the american people by providing more stable source of financing for the investments that will drive future gains in income and future growth. i know some of you here today are students at this great university. you'll be coming out of university at a time of great national challenge, and because of that, you will bring to the

world not just a greater appreciation of risk and responsibility, but also a recognition that what we each bring to the world depends not so much on how we hurt -- how much that we earn, but on the nature of the work that we do in that is a good thing for the country. america is coming back. the economy is healing. we are repairing the damage caused by the crisis, and we're taking the hard steps now off by implementing reforms that will be essential to our capacity to grow and prosper in the future. these financial reforms will make our financial system stronger and they will make our economy stronger. thank you very much. [applause] >> thank you very much,

secretary geithner. let's move straight into questions. if you have a question, we have microphones. raise your hands and i will let knowledge you -- acknowledge you. you have a question. >> thank you very much for that wonderful speech, secretary geithner. >> i hope that this is a good question. >> with the liquidity requirements for banks that you're proposing, how do we keep more financial innovation from moving into the shadow banking system? >> excellent question. the two things that we know that we have to do but it is a difficult challenge to me.

we have to make sure that the major firms at the center of the process of helping businesses raise capital live by the same set of rules. it in the future -- if in the feature, i knew great bank emerges, even if we do not call the bank, it needs to be regulated for leverage in capital on the same terms as the institutions that because we call banks. was at the center of the crisis. if you find what the right level is, we're trying to achieve a standard where you can absorb the losses and still have capital to operate. it would be more economically appropriate the institutions. you want the capital requirement to offset the effects of any residual moral hazard, you want

the capital requirement to capture the risk that these firms run economically. i think working get that balance right. the major u.s. firms are in a much stronger position because of these rules because we moved so quickly to force them to raise private capital, not just to replace the private -- that government capital, but to put them in a stronger position for future growth and innovation. you need to make sure that they can adapt over time, said the system will have to of all. it institutions like aig and merge in the future, we need to make sure that that subject to the same system that the rest of the system operates with. >> the question is about the economy as a whole.

in the last crisis, we had difficult monetary policy and a lot of ammunition. now the monetary policy, the interest rates are close to 0%, a balance sheet well over $2 trillion. what other weapons are there that the government has to deal with a crisis? >> the government still has substantial crisis -- capacity to respond to a future crisis. in the economy, it is important note, it is starting to repair. the private sector -- if you look at business investment and what they're spending on now, if you see a gradual strengthening of recovery. it is about year olds, businesses are hiring now, and you see the necessary transitions start to take place

as we transition away from the emergency actions to an economy that can be an economy led by private demand. there are important things that the government can do to reinforce that project. they're considering of package of tax incentives to help small business. that is a very sensible thing to do and broad support from the business and banking community. it is important for congress to give more assistance to get -- states more assistance of that thinking keep teachers in the classroom. things like that that are good policy to help reinforce the strength of this recovery, and we need to recognize that we will not have growth unless people are confident that our political system will be able to find the political will to bring our long-term fiscal deficit down. that will be a difficult process for us but that is something that we can manage as a country. right now, when you see a recovery, typically they are

tough and difficult. they are for moderate in pace than other financial recoveries because the people still have to reduce debt and dig their way out of the crisis. you are facing more headwinds coming out of a financial crisis than a typical recession. it is not surprising that this is a moderate recovery, but we're going to the necessary changes to put in place a better system that works better. you see people saving more and businesses investing more and we have to do more to support the process. >> next question. the fifth row here. >> thank you. i was just wondering your reaction to the apostle committee -- basel committee

moving away from your position that you have articulated today. for example, sheila bear and other bank regulators -- she loved -- sheila beir and other brand regulators. >> they have two stages. the first is what you read about last week, the set of changes to definitions, and changes to how to calculate the risks, changes to the rules in liquidity. does a very important building blocks of reform. they do not speak to get the second question in my remarks, where the new rules should set the required ratios. we're now in the process of trying to reach agreement on how trying to reach agreement on how