commandants in addressing these challenges and we look for it your testimony about these issues. if you are confirmed, you will be responsible for ensuring the combat readiness of marines and marine corps units. a legendary wartime marine, general victor krulak once stated, being ready is not what matters. what matters is winning after you get there. your job will be to ensure that happens and no one in this room understands how to do that better than you do. you also will be a member of the joint chiefs and a military adviser to the president, the national security council, and the secretary of defense. clearly these two hats the service chiefs wear are related, and their views and advice about issues that could affect the marine corps should be sought out and given great weight by national leaders. general, later today the senate will vote on whether the defense authorization act for fiscal year 2011 should be taken up for debate.

despite unanimous recommendations of the four service chiefs, the legislation includes a provision that would repeal the so-called don't ask, don't tell law. i want to emphasize -- the service chiefs, and we will be talking about this on the floor, all of them said that they wanted to complete study about the effect on morale and battle readiness of their respective services before moving forward with the implementation of repeal of don't ask, don't tell. the study that the defense department is conducting does not do that. the study assumes that repeal will take place. for all intents and purposes, there is no study has to the impact on battle effectiveness and morale of repeal this legislation. so i continue to urge my

colleagues to reject this effort to short circuit the process endorsed by the depend -- the department of defense leaders, not by the service chiefs, a process that was supposed to inform us with one that merely ratifies a politically-driven decision. we all fall or to hearing your thoughts about whether the comprehensive review should be allowed to run its course in this fashion, and what you feel about the affected could have on the united states marine corps. we also look forward to hearing your professional military advice about what policy is best for your branch of our armed services, the effectiveness and readiness of which you will be entrusted with maintaining at the highest levels if confirmed in this position. today our military continues to be engaged in combat operations, and career officers, in ceo's, and their families, are being asked to do so much. it would be a mistake to ignore the views of our troops and the

military advice of the service chiefs, and for the senate to act prematurely to repeal the tariff don't ask, don't tell law for the sake of fulfilling a political promise. i look for to the testimony of general amos today, and i again thank him and his family for their service. thank you, mr. chairman. >> thank you very much, senator mccain. all: senator hagen. >> thank you very much, mr. chairman. ranking member mccain, members of the committee, it is with great honor and pleasure i intra kyushu and accomplished new general, and general john amos. at that daughter-in-law of all four major engine -- i introduce to you an accomplice in general, general james amos. born in the great state of idaho, he has great north

carolina ties. between 2004 and 2006, he commanded the second marine expeditionary force, leading all marine ground aviation and logistical forces at two of our great bases in eastern north carolina. camp lucerne in jacksonville, and sherry. . locations that are home to a marine active duty, dependent cover retiree, an employee population of over 200,000. also, rumor has it that this accomplished fighter pilot too much i should note is the first aviator nominated to be commandant of the marine corps in its rich history, maintains a residence in the western portion of the tar heel state, where he likes to stay where possible. it is there in north carolina

where we alert him to resign after he retires. he is not alone in this journey. beside him for nearly a quarter decades as she is today has been his wife, bonnie. i happen to speak to bonnie is today and she shared with me that almost 40 years ago they met in september, engage in october, and were married in december. i think we have two very smart people here. they met at the bank where she worked and as of lung -- young lieutenant, he was in flight school. they have been in 19 different locations. some better than others all have been filled with enough memory still laugh -- last three lifetimes. all been active in this -- while

been active in volunteer organizations, bonnie has worked as a commercial real estate development companies for 22 years. throughout it all, their family has always been their number one priority. jim and connie amos have two children, ages 36 and 33, who were leading successful, professional lives despite having attended 25 different schools and 24 cumulative years of primary and secondary education. their daughter was born in hawaii and now lives in charlotte, north carolina. with her husband and two of bonnie and james's four clinton's. his wife is here and they have their other two grandchildren and also the grandson, charlie, also with us today. they lived in west virginia. this military family loves the

marine corps and counted a blessing to have live throughout the united states. as you know, general amos is held the title of assistant commandant for the marine corps for the past two years. today we consider his nomination to be commandant, to lead a force of 250,000 active duty and 39,000 reserve marines serving on the frontiers of freedom, fighting in afghanistan, providing humanitarian relief to flood-ravaged pakistan, and practices -- rescuing vessels from pirates off the coast of somalia. join in 19 -- one in a 1946, his father received his wings flying seaplanes. eupepsia most distinguished officer before you here today. i will have you noted growing up with a father who was a navy pilot saw general amos living in

memory -- many warm localities, california, florida, and the british west indies. his guidance counselor once wrote his parents that he feared that the general was "destined for a light as a beach bum if he did not turn things around." obviously he did turn things around. he graduated in high school in 1964 and headed to kodiak, alaska to work and halibut processing factory, the better taking a job as a laborer in a construction camp. after 15 months of that, he went back to the midwest, attended the university of idaho, and injured during navy rotc program. he graduated in 1970 with a degree in finance and embarked on a military career with aspirations to be a pilot. he was designated a naval

aviator and learn to find the phantom to before the transition to the hornet. the rest, as they say, is history. over the course of his 38-year career, he is commanded marine aviation units from the squadron to win level. he commanded all marine aviation in iraq as the commanding general of the aircraft wing during operation iraqi freedom one and two. he is served as nato's deputy commander of the navy striking forces in italy and as the chief of staff of u.s. joint task force during the 1999 air campaign over yugoslavia. his in the commanding general of the marine corps combat development command and as a deputy commandants for combat integration. he has also been the assistant

deputy commandant for plans, policies, and operations, and the assistant deputy commandants for aviation. general amos fully in the stands that the price of the war is paid by the young men and women that make the ultimate sacrifice to our great nation. while serving as the third marine aircraft wing commander in iraq, he had the names of each of the marines and sailors whose lives we've lost posted along a wall of his combat operations center. and honoring the manner of america's history, general amos ensures that their lives have not been lost in vain. the names of the fallen served as a daily reminder of what was at stake, and today they reinforce the general personal commitment to our force. as the assistant commandant of the marine corps, he has been at the forefront of ensuring that personal readiness for marines and their families, he has championed and tackled head on

the critical readiness challenges facing our forces over the past nine years at work, and mr. chairman, the marine corps will face many challenges in the coming years, for most of which include supporting our marines in ongoing operations in afghanistan and elsewhere. these times will require the steady hand of the leader tested and proven in combat operations and an experienced manager with a clear vision for the future. you have such a general officer before the committee today. it is a pleasure votes to welcome and introduce general jim amos. i hope that the full senate will move swiftly to confirm this important task of continuing to ensure -- will move swiftly to confirm him so that he can move forward to the important task of continuing to ensure our marine corps remains america's

expeditionary force in readiness. thank you very much, mr. chairman. you think you so much for that wonderful introduction. a warm introduction. other powerful introduction as well. general amos, before we call on you for your opening statement, let me ask you a set a standard questions which we asked all our nominees. had you adhered to applicable laws and regulations governing conflicts of interest? >> yes, sir, i do. >> do you agree when asked to give your personal views even if those views differ from the administration in power for margin yes, sir, i will. >> excuse me. usmc any duties or actions which would appear to resume the outcome of the confirmation process corps sergeant in no, i have not. >> would you ensure your staff

complies with deadlines established for requested communications including question for the record in hearings? >> yes, sir. you and would you cooperate in providing witnesses in response to congressional request? >> yes, sir. >> will they be protected from reprisals from their testimony from greeting card >> yes, sir. >> de you agree to provide documents including copies of electronic forms of communication in a timely manner when requested by a duly constituted committee or to consult with the committee regarding the basis for any delay or denial in providing such documents? >> yes, sir, i will. >> now we call on you for your opening statement. feel free to introduce members of your family who were with you and anyone else you might wish to introduce. >> bank you very much. chairman 11, ranking member mccain, distinguished members of the committee, thank you for the

opportunity to appear before you in support of my nomination to be the 35th commandants of the united states marine corps. senator hagen, thank you for introducing me and for your kind and generous words. you honored both me and my family and i look forward to the next opportunity for you to spend time in our law cabinet and western north carolina. we thank you for sharing a small part of the tar heel state with the famous family. while senator hagen is introduce my friend and wife, bonnie, i want to recognize her selfless contributions to me personally and to the thousands of rain families whose lives she has touched. has acknowledged earlier during our 40 years of marriage to each other, she is raged and are killed -- raised our children in my absence.

she has repaired our dishwashers, are washing machine, watched over homework for children. she is the epitome of the marines bows. she is the epitome of a mom, and sage role model. she is the rock of our family. also with me is our daughter jamie, and our daughter-in-law, mali, and our grandchildren. behind them or role of our high school classmates >> am humbled to be honored. i am keenly aware of the challenges our nation faces today and in the future. i have been fortunate to serve as the assistant commandant for

the past two years, a position that afforded me a broad view of the successive of your greens and every place. from evidence -- of your marines in every place. from afghanistan to the current flood release on going in pakistan, to the recapture of the pirated ship magellans start 12 days ago, and finally to the 5000 marines and seven amphibious ships and responded faithfully and with compassion to the earthquake victims in haiti earlier this year. the courage, determination, and selfless was demonstrated by your marines has been remarkable. thanks to the generals leadership, our marines have never been better trained or better lead. today, your marine course focus is on winning the war in afghanistan. that will remain the principal focus unless directed otherwise. concurrent with those efforts,

however, we will look to the future to determine what our corps needs to look like in uncertain times ahead. we will shape to be our nation's shock force, ready to respond to a looming crisis. while we cannot predict the future, we can prepare for it. if confirmed, i will do everything in my power to ensure that our nation continues to have a marine corps to answer the call -- always faithful, always ready. thank you for the legendary support this committee has provided the marines over many decades. we exist today because of the will of congress and the american people. pledge tonenfirmed, i always have my honest assessment of what is required to maintain the health of your report and the security of our great nation. thank you for the opportunity to come before this committee and i

look forward to your questions. >> thank you very much, general, and we will have a seven minute first round and perhaps a second round. general, two fundamental elements of the afghanistan strategy that the president announced in december, 2009, our first, a surge of 30,000 additional u.s. troops by the end of this summer to regain the initiative and secondly, the setting of the july, 2011, date for the beginning of the reduction in our combat presence in afghanistan. with the pace of those reductions to be determined by the circumstances at that time. do you agree with the president's policy? >> mr. chairman, i absolutely

agree that this needs to be a conditions based effort. everything i read since the president made his announcement at west point last fall indicates that a withdrawal will begin and does not stipulate specifically what that means in terms of force structure. everything i have read since then would indicate that the withdrawal will be conditions on-base. i have great confidence in the leadership on the ground, and general petraeus. they know how to fight a counterinsurgency. and i have every belief that they will give the president and the secretary of defense the best military advice. >> general, do you agree that the setting of that date, july, 2011, is important for the success of our mission in afghanistan because it signals urgency to the afghan leaders, that they must more and more take responsibility for their countries security? >> mr. chairman, i do agree with

that. i think it is helpful. i am pleased that it is also undergirding and backed up by the conditions on the ground. everybody understands that. so, yes, sir, i do agree with that. >> japan has recently reaffirmed support for an agreement that realigns u.s. forces on okinawa and moves 8000 marines and their dependents to guam. the agreement obligates japan to build a replacement facility for the marines' air station and requires the detailed management of more than $10 billion worth of projects to complete construction of all operational requirements -- housing, training ranges, as well as the upgrade to the civilian infrastructure and utilities on guam.

the agreement outlines which troops will move to guam, with the units being headquarters units. are, there are reports that the marine corps would prefer to change the force mix to include more operational troops and fewer headquarters units. is my understanding that the marines believe that their preferred force mix would be more efficient and more effective. now, are you satisfied with the force mix of marines that are planned to be moved, and is there a mix that you believe would be preferable to the mix currently planned? >> mr. chairman, the recent agreement was made many, many years ago. i was not present when it was agreed to. but after we stopped at about two years ago, we did took a look at this. we determined and the marine

corps that there probably was a better lay down. and what it did, in the effort to try to optimize the presence across the pacific, this laydown. a marine air ground task force at each one of the locations. so instead of having headquarters on guam, we looked at the opportunity to put a marine underground task force at one, and an open know, and one in hawaii. we have an adjustment to the laid down and we are just -- we are working with the state department right now. >> there is also concern over the marines ability to adequately train once the move has been made. a parcel of land -- paygat. do you know the pronunciation? >> it is paygat. >> paygatt has cultural

significance. this has raised opposition on guam to relocating or rains on the island. to you think there are other acceptable trading options if pagatt is not available. >> just a recent discussion on this, i know that is still in the negotiation phase. i do not think there has been any final decision with regards to pagatt. the message the record of like to leave our brothers and sisters on bomb is set their moral history is important to us. -- on guam is that their moral history is important to us. we have every expectation that we are of able to fire are machine guns and heavy weapons out there, that it will be satisfactory in the end to our

brothers and sisters on guam, and we will be good stewards of that. the issue is our presence in the pacific. the second is available training areas, as you talked about. the importance of the marine corps to be able to train. and finally, the quality of life for those 9000 marines and family members that will move eventually to guam. i think we can work around the pagatt issue. >> thank you. relative to the don't ask don't tell issue, the department of defense, the secretary of defense and the chairman of the joint chiefs of staff both support the repeal of don't ask don't tell. they also have undertaken a study relative to how to implement that change. and that study is underway.

but the decision to make the change is one that they decided was the right decision before they undertook that steady. udy. it is how to implemented which is the subject of the study they had undertaken. the house and senate armed services committee have both passed a provision which would repeal don't ask don't tell if and only if the president and the chairman of the joint chiefs of staff and the secretary of defense certified to congress that they have received and considered the report of the department of defense working group and only if they certify that the implementation of a repeal of the statute would be consistent with the standards of military readiness, military effectiveness, unit cohesion, and recruiting and retention. now, i understand that you have indicated that you have opposed

the change in the policy. my question is this -- if at such a certification by civilian and military leadership were made following receipt of the report, could you have confirmed, implement a repeal of the don't ask don't tell policy in the marine corps? >> mr. chairman, the marine corps is probably one of the most faithful services you have in our country, and if the law is changed by congress and signed by the president of the united states, the marine corps will get in step. >> thank you. senator mccain? >> thank you, mr. chairman pierre thank you, general, and this is very interesting time for you to be here on your confirmation hearing. i know some of these questions are very difficult for you. in your written statements,

response to questions from the committee, i quote: my personal view of the assisted a policy have supported the unique requirements of the marine corps band of us, i do not recommend its repeal. the potential disruption, the condition that may be caused by a significant change during a period of significant combat operations. is that an accurate quote? >> yes, sir. that sounds accurate. >> the interesting thing is that the study that is being conducted by the department of defense -- >> senator, i went through all 103 questions. >> this study does not assess the impact on morale and effectiveness of repeal of a law. and what it does is ask

questions as to how the military would adjust to repeal of the law. so, therefore, we are now basing a decision that by the present -- facing a decision by the president of the united states, secretary of defense based on a study that does not get to the fundamental question, which is what is the effect of the repeal on moral and battle effectiveness? this study, this questionnaire assumes repeal of the law, an incredible act of disingenuous behavior on their part. and the four service chiefs, you included and general conway, all request and state their positions unequivocally that a study should be conducted that would determine the effect of morrell and battle effectiveness on the men and women who are serving. and that is also the view of the

senior enlisted personnel. so i guess my question is -- what the survey, would you be able to determine what the effect on morale and battle effectiveness would be, or would this survey bet -- tell you how best the repeal would be implemented? >> senator mccain, i have been a big fan of the secretary of defense's effort to introduce the survey since its beginning. as i said earlier, i have gone through the entire survey, looked at every question, and i determined i would answer myself if i were taking it electronically, which i did not. there are two other parts in addition to the survey. and the survey is under way, by the way. it is out there among our family

members right out. it has gone out to the active force and all the services and the reserve force. in the family members are in the process of responding to the survey. but there are two other aspects of that effort. the first one is kind of a tall many military installations around this country, led by senior leadership. asking questions, talking to them, getting input. the second part is an online survey were all service members can respond. it is like a blog site. they get on and you can respond and that is not e anonymous. when all this information comes in december, will there be enough information to provide the chairmen and the secretary of defense best military advice? my sense of with the survey, having read it, was in addition

to those other matters, sir, i believe it will. wherever the, and that -- whatever the commandant is will be able to give his best military advice of that. >> and the response both online and in the town hall meetings i have been told has been overwhelmingly negative. is that true? >> iowa occurred at the marine bases and the marine -- i have heard at the marine bases in marine and put it has been profoundly negative. but i do not know that for a fact. i have not seen that. >> thank you. as you well know, later today, the senate will act without having -- knowing whether the survey is a valid or not, completed -- the service chiefs will not be required to sign off on any decision which is made. those that are given direct responsibility for the morrell ale and battle effectiveness

of their respective services. unfortunately, this is all being done in light of the november 2 elections. i have never seen anything quite like it in my years that i have served here, because, obviously, there will be a different composition of this committee and the united states senate after november the second. i am a little concerned about the response to the chairman's commentsdivided byquestions about afghanistan. i visited with my friend, senator lieberman, senator graham, many times afghanistan. i get the opposite impression from people ranging from a police chief outside kandahar to president karzai. all of whom say that the fact that we have set a date for

withdrawal, that we will be withdrawing has cost zero ripple effect -- has caused a ripple effect that is damaging to our ability to succeed. does not give him a sense of urgency. what gives him is a sense of survival. and it does not give the taliban the sense they are about to be extended. it gives them the impression that all they have to do is hang on -- they are not about to be exterminated. a high ranking taliban has said, you have the watches. we have the time. if it were condition based alone, there were be no one more supportive than this member. but condition based and saying that we would be withdrawn no matter what has sent a signal throughout the region from india to iran to pakistan to

afghanistan, hang on, adjust to the new realities that the united states is leading. the president made the announcement -- the u.s. is leaving. the president made the announcement with no military recommendation to do so whatsoever. it is the president's authority to make that decision, or any decision along those lines, but to somehow believe that this is going to somehow hasten its success when that the fact is it in hanses dramatically -- enhances dramatically the chances of failure. the present commandant said that provides theh drithdrawal enemy with sustenance. i wonder if you disagree with general conway's assessment. >> i read the entire press conference that jim conway had about 10 days ago from start to

finish. i have worked with him for a long time. he certainly made that comment. but as you look -- if you look at the entirety of the press conference, shortly thereafter, he is making comments along the lines that if the taliban in helmand think of the marines will begin a withdrawal in december, to guzzle 11, and they walk out to do their business -- in december, 2011 -- taken in context of the entire article, i believe that is what general conway was talking about. in talking about the province, i would say there is great success going on there. i do not think there is an expectation that there will be all wholesale withdrawal of helmand next summer.

>> the media reports that the progress in that province has not been as rapid as we expected, nor is it in mar jah. and we are going to have to plan for more difficult times ahead. casualties are up, so i obviously have different information than you do about the degree of success that we have achieved so far. thank you, mr. chairman. >> thank you very much, senator mccain. senator reed. >> thank you very much. thank you for your devoted service to the marine corps and to the nation. you have a challenging assignment, but we are all very confident you will perform at magnificent leap in that assignment. with respect to the don't ask don't tell issue, do you feel confident that you will be able to give your uninhibited advice to both secretary of defense and the president before they make

any final decision going forward, if you are confirmed? >> senator, i absolutely do. we have to spend some time it taking a look at what those results look like and interpreting exactly what they mean, what is it telling the service chiefs. it will tell each something different, because i believe each service has its own culture. i am told that whoever is the commandant in december will receive that information specific to the united states or in court and based on that information, and whoever -- i come with 40 years of experience -- whoever is in that job will be able to provide the secretary of defense, the chairman, the best military advice. >> do you feel that in this process you and your colleagues have been educated on the issue and on the potential impact both of the pluses and minuses? >> senator, i think there are

parts of this that we have not pulled back debt. by that, i am talking some policy issues, some standards of conduct issues. the issue of unit cohesion. we are not quite sure what the impact will be on an all volunteer force, especially our young force like the marine corps, predominantly young. 60% are 21 years or younger. and so we are not quite sure what the impact will be. so, that is the important part of the survey. it will inform us, give us a sense of that impact. but it is too soon to tell. >> now, in the process of, and i think you are right about informing yourselves, in turn, you will be in a position to inform the secretary of the defense and the white house about the perspective of the corps. i would assume that whatever

decision is made, that would entail educating the marines, army, the department of defense about the new standards of conduct that might be imposed. i think that is obvious. >> senator, you are absolutely correct. the whole idea that at the beginning of the certification, we are able to come back to congress and to be able to say that we have thought through the policies. we thought through the legal ramifications. we thought through the monetary ramifications, the impact on buildings, barracks, base housing. we thought through all of those things, and we understand what we would call all hold dot mill pf. the whole horizon of things that would be impacted. that would be required before certification. there is a lot of work to be done once the results come in to work through that before the certification can take place.

and after that, there certainly will be. there will be training. there will be a host of different aspects that we have not even thought of yet that we will have to spend time with paired >> let me just switch gears quickly to afghanistan. my sense i had of your response is that you see the policy of the united states is to sustain a position long term, indefinite position in afghanistan, but the size is the issue. the president clearly indicated next july that his intention is to begin to downsize forces there, but again, i do not want to put words in your mouth, but i do not hear you saying that maintaining a long-term military position in afghanistan requires having that size troop force of their indefinitely. is that an accurate deduction?

>> senator, i honestly do not know -- we his starkly in combat, we typically guessed wrong. we do our best to be clairvoyant, but we typically are not completely accurate. that is the nature of warfare. in december in iraq, i do not think any of us believed we would be it in iraq as long as we have. in fallujah, we thought it would be a year and we could come home. none of us knew. i am confident in the u.s. military force on the ground, both army, navy, air force and marine corps. i really am. i just spoke to the burning corps commander on the ground for 45 minutes. he is a personal friend.

i deployed with him in combat and i trust his judgment. he is very encouraged by what he is seeing on the ground in afghanistan. in his part of afghanistan, in helmand. militarily, i have to believe that that is taking place throughout the other provinces, where other servers brothers and sisters are. so i am confident that we are headed in the right direction with this thing. i cannot tell you how long the forces will be needed to be on the ground. i know there are pockets of the helmand province that are optimistic we improving every day. there is marked improvement in places like nawa, that just a year ago were absolutely taliban territory, and now the district governor is setting up schools and bazaars are open. i walked down those markets with out any helmet or flak jacket.

i am optimistic about our military forces of all our services that they will be able to do their mission. i just cannot tell you how long we will need to be on the ground and what size force. >> a final topic. the traditional role of the marine corps is to conduct amphibious operations, to go across the beach into areas denied us. over the last 10 years now, the marine corps has been on the ground, not in the amphibious operations but in traditional, land-based operations, ground operations. how much of your basic skill set has been diminished because of your focus on other tasks that ? >> senator reed, first of all,

the skill sets for combat are still there. in fact, they are probably better honed it today than they have been in the last four years of our history. those young men and women, those young staff nco's are fearless. they know what they are doing and they are very effective. the combat effectiveness is there. we have today three marine expeditionary units which compiled, made up of nine amphibious ships at sea. two of them off the coast of pakistan doing the relief operation and taking down the magellan star. the other one sailed 30 days early just to get over to help, another great effort by our nation to help with humanitarian assistance in pakistan. and we have a unit in the southern pacific doing operations there. so we have amphibious expertise in the marine corps.

had we spend a lot of extra time doing it, other than what i just described? the answer is no. will we need to get there? yes, sir, we will. thanks to congress it isvinng growth, allowing us to actually do something. we can actually do the kind of training you are talking about. >> thank you very much. >> senator sessions? >> thank you, general amos. thank you for your service and your family, for their service. i am so proud of the marines. i have had the opportunity, and senator mccain had to visit with marines in serious combat areas and seeing their performance, courage, and

dedication. they are the kind of people we have got to support, a farmffir, and help and train in every way possible. i know that you believe that and i believe you have the opportunity to play a critical role in the continued development of the marine corps. one of the visits are remember to iraq was with senator levin, and we've got a terrible, i thought, very worrisome briefing at one of the worst points in the iraq war. the marines gave us that briefing in anbar province. later, the situation turned, and as we were briefed on the second visit, the marines officers briefed us on how they bonded with the local leaders and

supported them and they turned against al qaeda and ran them out in short order, supported by the united states military and particularly the marine corps. i know one war model is not precisely that of another one, but it seems to me that we do have to have a modest view of what we can accomplish in afghanistan. we need to understand that the remote areas of afghanistan have never been directly ruled by kabul. and we are going to have to work with local leaders much and the way that occurred in al anbar. you understand that discussion. i am sure it has been going on with the marine corps. would you briefly give your comments about how you see the

central government in afghanistan relating to distant provinces and how we can best bring safety and security to some of those of distant provinces? >> senator sessions, you are absolutely correct. when you look back on the history of iraq. when you look back, it was probably ramadi, one of the most dangerous places. when those tribal sheikhs realize we were not the enemy, to their families by the hundreds and the awakening began. it is different than in iraq. they are not the tribal sheikhs we had in iraq. we do have tribal chiefs, but there is a hierarchy of

leadership we are finding in afghanistan. it is a little more difficult to work with. we are working with it on the ground right now. probably 70%, maybe 75% of those great lessons learned, certainly the fundamental lessons on counterinsurgency applied in afghanistan the same way they applied in iraq. but the way we deal with the culture, the way we interact with the leadership of the tribes is a bit different. there are what we call district governors on the ground in places like nawa, all these different names you read in the paper, there are district governors appointed by the central government. some are more affected than others. -- more effective than others. there was the expectation that if we came into town, where a

year and ahlhalf ago, the taliban came in five years ago and ran the villagers off. the marines were there. i spent christmas there. there is a good example of the central government providing a strong district governor. he cleaned the place up and rebuild the marketplace and the school. so each one of these little districts, with their governors, some are more effective than others. i think the key is that we can provide the security, but the central government needs to ensure that the government's part of helping that country is in place. >> well, i appreciate that. on the extent to which you believe that the central

government is able to impose its will and order in distant provinces as a realistic goal is something that i think we have to wrestle with. and we do not need to be too optimistic about that. we need to be willing to accept what happened in al anbar as those local leaders brought in their children, their families and they took it over with out too much direction from baghdad. let me ask this, with regard to senator mccain's questions on don't ask don't tell, i would like to say i share his views in general there and was disturbed to read it recently in the the washington times that an army deputy chief in charge of personnel, spoke before several hundred troops in

the european headquarters in germany and said "unfortunately, we have a minority of service members who are racist and bigoted and you will never be able to get rid of them." he said, "but these people opposing this new policy will need to get with the program, and if they cannot, they need to get out." no matter how much training and education of those in opposition, you always have those that oppose this on moral and religious grounds just like you have racists today. general amos, you will be setting the policy for the marine corps, and do you think that -- how do you feel about what appeared to be a message that if you have traditional values, that you do not have a

place in the m and if the policy changes, all should comply with it, do you believe that any marine or any marine officer is not able the n to express a personal opposition to that policy without being attacked? >> i will note that apparently the general said those words were taken out of context and not totally accurate, but it raises the question that is an important question. >> senator sessions, i cannot comment on that. i knew that general from dealings, but i cannot comment because i was not there. >> i want to know if you think it is appropriate leadership, a position of the military if this policy is adopted, to not allow

people to have different views and for them to get out of the military. >> senator, if we step away from the don't ask don't tell, there are lots of things that go on it today in the american military that the average marine out there might not agree with. but the one thing we have and the marine corps is a discipline and leadership. those are the two things that i think will carry the day for as should the look at changed. but there has never been a gag order. and i do not anticipate one being put on marines. i would probably say that one of the rites of passage for being a young enlisted marine is to be able to grouse. and we do that, and they do that, and i did it as a lieutenant. i do not see that that would be an issue. >> do you condone that kind of comment, if it was an accurate quote? >> i'm sorry, senator?

>> do you condone that kind of leadership from this attended general? >> sir, again, i am going to try to shy away from him and his comments. from my perspective, it is fundamental leadership and discipline. i do not see this as a racist issue. i do not see these as an issue -- it is not anxious issue for the marine corps because we do not have the answers yet, and we will get those. but i do not see those in the same light as it was reported. >> well, i think good people can disagree on this, and i think the military can survive and change as they have changed before. as the executive director for the center of military preparedness said, there will be no toleration of the sand if for whatever reason you disagree, whether it is religious

conviction, your career will in essence be over. that would not be the policy, of you you would support, would it? when you take action to protect someone who generally disagrees with the change but is willing to live and work in the military in accordance with that change? >> we will. there is no question about it. we are the most disciplined service of all the ones you have. we follow orders. so the answer is, absolutely, yes we will. the less than we want to do -- if this policy is changed, the last thing you will see a marine corps do is try to step in and push it aside. that will simply not be the case. there will be issues. we will work through them. >> i am not saying put it aside. i am saying respect somebody in the marine corps who did not approve of the change, has a genuine moral or principled opposition to the change.

is that career going to be over? >> that career -- and less there is something that happens i am unaware of, that career will not be over. we have plenty of issues where marine to disagree vocally, and you read about in our publication. >> thank you. i was troubled by this comment by a top ranking army officer. thank you very much, mr. chairman. >> senator webb? >> first, a minor correction for the record, if i may, when senator mccain mentioned that general amos would be the first commandant not from the infantry ranks, and he and i discussed, general chapman was an artillery officer and was a great, and up. certainly, will be the first marine aviator to hold commandant rank. out of my respect for general

chapman, who was my comment and. general, i would like to thank you for the precise way you have addressed this issue on don't ask don't tell, practically with respect to this survey that was mandated after the hearings in february, when secretary gates and admiral mullen began this process. i had an exchange with them at the time, where it was my understanding, and i said it to them after their opening testimony, that the survey was vitally important. to make sure that those who are serving were a part of this process, not the political

process, but that their input was of vital in terms of moving forward. and the second is, as you mentioned, was that this type of a survey would enable the military leaders to provide their best advice. and i think you have made that point clearly today. it is the reason i have had hesitations about moving forward at this time. and i just wanted to thank you for the precision with which you have answered these questions. we are going to have the opportunity, obviously, in future to discuss the major policy concerns, some of which you have been asked about today -- the nature of the war against international terrorism, how we are deploying our forces operationally in places like afghanistan, the drain on our people operationally with this type of structure. secondly, the very key issue coming up now about the roles and missions of the marine corps, as i think most marines

fully understand -- marines do amphibious operations well. they have historically, but the amphibious role for the marine corps came out of the fact they have always been on the cutting edge of tactical change. they developed the amphibious doctrine in the 1930's after looking at what happened in world war rahman one in became the predominant innovators -- in world war i. you can look at preaching to the choir here, but i think our colleagues need to understand the if you look at the casualties, these words very-- very few had to do with amphibious warfare. we are going to have to address seriously the reconfiguration of the marine corps forces in asia. as you know, i spent some time as a military planner in guam in the 1970 togetherng

facilities analysis out there then. i was encouraged to hear your comment about moving more operationally into the thguam area. i think we need to look more at tiniam, particularly for firing ranges and small maneuver areas out there. i was out there this past february looking at the training in okinawa. but today, what i would like to get your thoughts on is something more provincial, but it is disturbing to me. into that is this legislative initiative that is moving forward to change the name of the department of the navy to the department of the navy and marine corps. when you talk about troops are grousing and having a beer, this is something that came up over

my many years of association with the marine corps. in my view, there is some demagoguery going on over here on this issue. i am not really sure what utility, changing his name would bring about, just to be frank here. it never bothered to me when i went to the naval academy that i did not go to the marine corps academy. it did not bother me when i was awarded the navy cross and it wasn't a marine corps cross. it did not bother me when i was secretary of the navy with responsibility for the navy and marine corps that i did not have that title. i think that 235 years of excellence answers the question. i am trying to figure out, on the one hand, what is the upside of doing this and what is the impact in terms of 235 years of tradition if we do it? >> senator, as you know, all the

former commandants have that -- that have been asked this have elected to stay out of this, and they have elected to make comments such that this is a political effort and that is not a disparaging political effort. this is a political effort and it is probably not appropriate for the commandant of the marine corps to weigh in on. and that is the current position of general conway. and, sir, i would like to maintain that position. i am not sure i will be allowed to today, but i would like to be able to maintain that. and i am comfortable with that. i thought to this a lot. you and i discussed it last week in the office. at this point, i would like to keep it that way. now, is that going to be satisfactory, or do i need to dig into this a little bit more here and reveal myself? >> well, i think, let me just as

k people in the marine corps to be careful about this. there is an old saying it takes 200 years to develop a tradition and two days to destroy one. if there is a series of side that you do not want to discuss right now, i am happy to listen to it. but i think we ought to examine the impact this would have beyond what people are thinking about in terms of may be getting more equal place at a budget process. >> sir, and we talked but to the other day, a little bit the process. just as the commandant of the marine corps was not a member of the joint chiefs of staff in the middle part of the last century, and that evolves. he was not invited to the key west meetings when they were established.

it clearly had a significant contribution in the pacific. how did that happen? it was in the early 1950's, the commandant of the marine corps was made a member of the joint chiefs of staff. this whole process has been evolutionary since the beginning of the department of the navy. i think if you talk to the marines out there -- no, i cannot -- i have not gone out for a survey, but my instincts and talking to marines are that where we are in 2010, today, because of where we have evolved, we are a pretty formidable force for our nation. and i think of this early, and this is objectively. this is a not the park that has analysis behind it. subjectively, the average fleet marine would look at the secretary and say, yes, i would like to be called the secretary

of the navy and the secretary of the marine corps. is that worth breaking news years of traditions'? i am not sure is. but that is not really the basis behind it. we paid a pretty healthy price. and we feel pretty irrelevant right now. that is a heartfelt answer. >> the marine corps has always paid a heavy price in every war from world war i, particularly forward. 103,000 were killed or wounded in vietnam. at the same time, if i had set down over a beer in 1969, people would say, yes, why can't we be the secretary of the navy and marine corps? but just think about the other implications here.

and i would say, i am not sure people have really studied the other areas that this might affect. thank you, mr. chairman. >> thank you very much, senator webb. senator brown. >> i am honored to meet you. i have seen you on tv as well. i have seen you on television and the newspapers. thank you for in your service and for the sacrifice your family has made to support your career. i was wondering if you could help define what you feel the marine corps's mission post iraq and post afghanistan will be? the u.s. in general thoughts on that? >> senator brown, thank you for the opportunity to take the committee to a little glimpse of what we in the marine corps see

in the future of the marine corps. the title of america's expeditionary force and readiness catches up. it needs a little bit of explanation, but that is the overarching sense of what we need to provide our nation. the nation pays a price in readiness for its green corn. in other words, to have a force that is ready -- the nation pays a price in readiness for its marine corps. when the president says, sending a force. we have a crisis that is brewing that we want to circumvent, that we want to terminate, we want to intervene on early on. that requires a force that is ready. so the marine corps needs to be that force already. as we come out of afghanistan, what i pledge this committee, if i become the 35th commandant, is we will maintain that force of readiness. i think our nation expected. and that is why the model of sending the marines resonance so

well across this country. that is the first cases, the writing is. the second piece is i think we need to be forward deployed -- that is the first case, the readiness. the second piece is i think we need to be forward deployed. engagement with the nations and more prevention activities. the ability to train armies. the ability to be present and help nations train their forces. i think that is of vital role of the marine corps. i think we need to be the nation's crisis response force. not everybody can be bet. we need to be light enough to get their rapidly. and heavy enough to carry the day for whatever the crisis is. and it is our intention to refocus ourselves back on that ability to be our nation's crisis response force. so when the president says, sent in the marines. we are theeither there or we can get there rapidly. that will be our focus in the

next two decades after we come out of afghanistan. >> company you feel you have the tools and resources you will need, especially based upon some of the cuts being proposed? will you have those tools and resources to do the job and to keep your men and women save? >> senator, we have what we call a force structure review group going on right now. that means we have an effort by some of our best minds in the marine corps to determine what the shape of the marine corps will look like pose afghanistan. what should it be? how many size units? what should be the composition of those units? based on the results of that, which we should see in the early part of january, that will help us determine do we have the asset? we may have the organic assets right now. i do know the equipment we have in afghanistan is going to have to be what we call reset. it is. have to go into the deeper level minutes and get

refurbished or we will have to replace it. so there is the reset bill out there to kind of help the marine corps get well post afghanistan. so is it too soon for me to tell do we have the resources right now. i know that we will be reshuffling the deck. i know what ever the force structure -- whenever that force structure review groups comes out, then we will begin at to reorganize the marine corps and that will determine then what those resurfaced -- those assets, what will be required to help reorganize the marine corps. it is too soon to tell right now. >> and how is the truth or all with all of the deployment and the family morale -- the troop morale, with all the deployments, and the family are morale? >> first, troop morale. while these are some of the

toughest times, these are also the best times. the morale among marines is sky high. when you visit them down in helmand province, they are living in tough conditions. some of them are living in what we call tin cans, the small trailers. but the bulk of those 20,000 marines are deployed in small villages, living in pop tents, have not had a bath and 30 days, eating mre's and living a hard life, but they are a happy life. it is almost counterintuitive that you can take young men and women and put them in an environment like that or promised them in training that will go in an environment like that and they would be happy about it. so the morale among the marines is happy. our recruiting is up. in fact, if you signed up in september to the united states marine, an infantryman, you could not go to paris island or san diego and a probably around

february or march. we are backed up with the number of applicants. so that part is exceptional. my sense is that marines are getting to do what they signed up to do. we promised -- you come in, it will be tough, you will join us. we are not the least bit interested in joining you. you join this elite organization, this war fighting organization and we will probably put you into harm's way. my sense is we are fulfilling our part of the promise, and i think young men and women are attracted to this. the second part is the morale of the families. that is the part i worry the most about, because it is tough. it was exciting for the first couple of years. for our families, we have some of the best programs in the entire military. but my sense right now is our families are getting tired. we have families that are on their fifth and sixth deployment. so when you start talking families, even though we are caring for them well and reaching out to them and doing

everything in our power to put our arms around them, our families are getting tired. >> thank you, mr. chairman. thank you, sir. good luck. >> senator, thank you. the defense authorization bill will hopefully be coming to the floor at 11:00 heard it will be a cloture vote on that bill at 2:15. i must go to the floor and senator good when has kindly offered to take the gavel. we appreciate that. hassenator goodwin kindly offered to take the gavel. i want to pay special thanks to your grandson at charlie. yes sat there all morning looking interesting in what grandfather had to say. i have five kids and i know what the task is to hear your grandpa and answer some technical questions. but he deserves some kind of a

medal for his wonderful behavior here today. but thank you for your passion for the marines. it comes through loud and clear this morning and it is a very inspirational to them and to us. senator goodwin, i turn the gavel over to you. >> senator hagen. >> i am thrilled that you had been nominated. i cannot think of anyone more qualified than you. i wanted to say thanks again to your wife, bonnie, up 40 years, and jamie and mali and charlie. healing your family have committed so much, and night -- you and your family have

committed so much and i am proud of you. i am proud of our marines, especially their brilliant execution in iraq and afghanistan. north carolina as honor does the second marine expeditionary force and the special operations command. our marines have led the way in afghanistan. specifically the helmand and kandahar provinces. i look forward to working with you one of water contamination issues, if an issue that i am committed to. they affect and the marines and our families need closure. what i'm going to ask you a first is the increase of demand for amphibious forces capable of conducting security cooperation, regional deterrence, and crisis

response such as the july 2006 non-combat an evacuation operation in lebanon. this need for increased amphibious capability is emerging in the wake of geopolitical strategic uncertainties, if increase challenges to it assets. the requirement for amphibious ships agreed upon between the department of navy concerned eighth ships, but risk was accepted in reducing the fleet to 33 ships. my understanding is that we're currently down that 31 amphibious ships, with that number possibly falling even lower. as commandant of the marine corps, are you concerned that further degrading amphibious capabilities may be imprudent, and what capabilities might be lost?

>> thank you for the opportunity to talk about something that has been my life for the last quarter years. -- the last four years. the amphibious ship is in my estimation the most utilitarianism vessel that is offload in the united states navy. you can do combat all of that ship, you can do humanity and in -- humanitarian assistance. when the terrible earthquake happen in haiti, 7 and navy ships went to the rescue. when the port was completely clock in the air field was a mess with airplanes and you could not get supplies in and out, those seven amphibious ships pulled off the coast, and out of them, both the helicopters and our seaborne

craft, they came marines and sailors and engineers and equipment and water and medical supplies. they were there for over 45 days providing command and control, providing capabilities, bringing haitians out to our ships. there is a great example. what the people do not resist richard remember is when katrina hit. -- what most people do not remember is when katrina head. we loaded equipment, we loaded bulldozers, front-end loaders, seven-ton trucks, water, food, communications equipment's. we just put marines on their ships along with sailors, and what's katrina pass through, one

of those ships pulled into new orleans and provided the central command and control in the early stages of the aftermath of katrina. those amphibious ships pulled them off the coast of louisiana and mississippi and send out their marines with those tractors and vehicles and they came across the beaches that were otherwise on accessible. you know what is happening right now and pakistan with the three amphibious ships there. not only flying at -- combat afghanistan, but also relief operations in northern pakistan all the way up. and then they take one of their ships to take down the magellan star. they rescued the crew from the somali pirates. we just want the 26 marine

expeditionary unit, one of years from north carolina, they left a month early to say all and get off the coast to pakistan. they should be there by the end of this month. there's a further testimony to the fact that the utilitarian value of these ships. not only in these marine expeditionary unit are they the label, but they can pull off and operate all of africa with what we call the security and cooperation mission. they can bring medical, it is a one-stop shopping operation. i think the value of the ship is absolutely paramount. the secretary of navy believes in them. you're absolutely correct. we have agreed to deep fiscal constraint of 33 ships. everything we do now is informed by the budget and and and you appreciate that. we're sitting at 31 ships. we're going to go down over the next couple of years.

but as we look at the fiscal defense planning effort, by the end of that, by that time we hit 2016, which should be back at 33 ships. some will be brand spanking new. it is what we have agreed to over the next force structure review. >> i wanted to ask about at the wounded warriors. one of my priorities is to ensure that wounded warrior programs across the services effectively assist our wounded warriors to reintegrate into their operational units, transition to another military occupational specialty, or transition to our productive civilian life. i know that the marine corps is wounded warriors programs have played a vital role.

what your thoughts on the long- term needs and requirements for the wounded warrior regimen? >> my personal opinion on both wounded warrior regiment and the whole approach has been taking care of our wounded and ill and injured, we put our arms around all of them. i think it's become legendary. i think it was prescient. it was something that came in its time. i was speaking to groups on saturday night that the marine museum that had raised money to care for the families of our wounded warriors. and i like in the evolution of how we started this war in 2003 to where we are today as building an airplane while it is in flight. we were not sure what all the requirements work, but over time we have gotten to battalions.

it is one of the greatest success stories coming out of this war. my sense is that it will be around for a long time. i'm having a hard time envisioning when we will not need this. i think the wounds of this war will be with us for a while, even if we stop and get all skill at of afghanistan. the wounds of this war will be there for a while. they will need to care. we also have the typical things like cancer, accidents, tragedies that happened, and that is the ill and injured that find their way into the wounded were battalion in their care. the second reason is that the world that we live in is going to require marines to live and some of the most nasty places for the bidding of our nation. we will have wondered marines

for the decades to come. they will need a place to go and refit and rearm. imagine that care for them. i just talked about that. i think is absolutely first rate. we have an effort underway to change -- help them re-enter grade in the marine corps, change their military occupational specialty, and most of the young men -- you have met them in the hospital, the very first thing that they say is that they want to get back to their unit. that is the first order of business. during her recovery, the second pieces, now that it looks like i am a covered, i want to get back to being an infantryman. in some cases they may not be able to. in most cases, we were deliberately to try to help them move into other military occupation specialties. it takes a while for them to get

to the point where they're willing to do that. and lastly, the matriculation back into civilian society. i know that you know this. we worked hard, we are plugged into industry, we're plug to into people that want to hire wounded warriors. i was sitting there on saturday night with a major defense industry corporation. a retired marine there was employed and they just hired 32 of our wounded marines. that type of effort is going on across our country. that is great news. >> i want to thank you for your service. i looked bored your confirmation. >> senator chambliss. >> general amos, thanks to you and your family for your commitment to freedom and democracy. your nomination to be the next commandant speaks to that commitment as well as your

leadership to our nation. we're very appreciative and i want to publicly thank the current common dog, general conway, who has been a great asset not to the marine corps only but to our nation. his 40 years of service, and that two of you, thanks for what you do every day. i intended to ask you about the resources, but as you know, we had -- we're very proud to have the marine corps located in our state, and the facility. that relationship is unparalleled. i think you address that resources you. i am not one to get to that. i want to ask you about this deadline. i'm confused about your answer to that. i frankly think it is a huge mistake to have that deadline out there. just like senator mccain, i

think it alerts our enemy that they can sit back and wait on us. i understand you are saying that just because you support the july 1 with drawl, that in august and september, it the bad guy raises as head of marine is going to be there to take off. but that is what confuses me. why do we want to tell them that we're going to even begin withdrawing in july, if in fact we're going to be there in august or september or even in 2012 it if need be? >> senator, i cannot speak for the president. he is my commander in chief and he has made the announcement in his three confirmed dead. my sense is that the leadership of the department of the defense, the leadership of our combat and command, the

leadership on the ground in afghanistan has given me -- has confirmed to meet that they are confident that the right decision will be made. the top of warfighting decisions that commanders -- only commanders on the ground have access to the full situation. i am confident in the abilities of david petreaus and others. i believe in our secretary defense. i know he is our best interest at heart. nowhere have i seen a deadline tacked on to the backside of the july 2011 announcement. no date that the last service man or woman will be out of afghanistan. i am led to believe and i will be encouraged that this is not a precipitous cliffs. july 2011 is not a cliff that we fall off of. it will be a type of gradual decline. i cannot speak to what that

decline will look like or how rapid the decline will take place, i just go back to the fact that the commanders on the ground to know best are going to have a great amount of say about where our forces come out, at what rates, or were they need to be realigned. that is where i fall in on this. >> are you confident that beginning july 2000 first cut to douse a loving, that what role race will be dictated by conditions on the ground? >> i believe first of all the president said a withdrawal will begin. when the president speaks, there will be a withdrawal that will take place. what that will look like, i do not know. but to enter your question specifically, i am confident that the leadership will make the best decisions. we paid a price for this. they're young men -- the lives of young men and women that we've lost in that country

predicament is on the ground have knowledge of that and it will not what those lives go in vain. i am confident that the leadership will have a direct input on this, senator. >> switch gears for just a minute. your background is in aviation. how comfortable are you with the 2012 base for the f-35 be. what the possibilities that that ioc date is not achieved? this program since its birth. i've been the deputy commandant of aviation as we made the decisions to buy the joint strike fighter, skip a generation of airplanes, and take a procurement holiday while we waited for the joint strike fighter. it is an exciting time for us.

there are five record joint strike fighters in line over maryland right now going to test and evaluation. all the testing that has to take place for an airplane or a new weapon system, they are there now. indications they are behind on the test schedule, if not a lot, but the airplanes themselves are flying very well. our ioc in december 2012 will give us 10 airplanes, and will give us the air crew that are combat ready and ready to deploy. when you think about what that would mean to our nation, to have this. first degeneration fighter attack airplanes in our inventory, ready to deploy, should something happen, it is pretty significant. the marine corps is holding firm on maintaining that 2012 december ioc.

if the ioc slides to the right, then it will slide to the right and we will still have an ioc somewhere, not too many months after that, that we end up with a 10-plane squadron of his generation aircraft ready to deploy anywhere in the world. i think it is important to our international partners. we're partnered with italy and spain and great britain on the stovl variant which the marine corps will be flying. our ioc gives them great -- it encourages them and shows them a record of progress. i think it is pretty important that we maintain that if at all possible. >> you aviators in the marine corps have been very patient. we have experienced as policy makers the same frustrations you have experienced with this program, but hopefully we are on track and we will see that 2012

i ok date a reality, because we know the value of this weapon system to your inventory and how much it will mean to you as we go down the road. thanks very much for your service and look board to your confirmation. >> thank you, senator. >> senator burris. >> congratulations to you, general amos. earliest this year during a trip to san diego, had the opportunity to visit the marine corps station at miramar. i went to the recruit the above. that and forced my intense respect for the men and women who serve as marines. based upon the exceptional career, i am confident the president has made this right choice. how like to thank you

personally for your continued service and dedication to our great nation. it is men like you that make this nation great. i am pleased to extend my appreciation to your wife and your family for what she does to support the marine spouses. mr. chairman, i have a couple of questions of want to submit for the record. i am very concerned on the position on don't ask, don't tell. please let me understand that your position that you individually do not support the statute change, is that correct? >> senator barrettes, i do not because i will represent those young men and women to wear this uniform. i do not know it yet what the

impact on unit cohesion will be. i do not know yet what the impact on recruiting and retention will be in our combat readiness. there is nothing more intimate in live and combat. i have a bunch of questions and that is why i said what i said. >> you are born in 1947? >> i was born in 1946. >> you are 1 years old when the president truman issued an executive order integrating our armed services. at that time, we had segregated forces, regimented troops, and my knowledge of people who served in spite of racism, i remember my uncle's and my

uncles-in-loss, going off to war in world war ii, and talking about their limited experience in racism that existed in the military. but they were willing to fight and die for this country. opposition to you is that there are individuals who happen to be of another cassation called gay or lesbian that are just as dedicated to this country and conserve it valiantly and well we have thousands of them that continue to serve. because of my position on this issue, i have had people coming people come up to me and said they want to go into the military but it would be a hassle because of their

sexual orientation. i know that you are inexperienced lawyer and a dedicated military man. i respect your views. -- you are an experienced warrior and a dedicated military man. but we must not limit the opportunity for a dedicated american, regardless of his or her sexual orientation, to serve this country if they wanted. general, they make the marines better, which might be hard to do. what is your comment? >> sir, it had become the 35th commandant, i will have responsibility --

>> we're going to make you that commandant. >> i would be responsible for every small part of american society. people who want to be a marine, and second of all, those or physically and mentally qualified. >> there is no way in the world i could've gone to the strain that i saw those young kids did, they make them train even though they are tired, and the trainer said, in combat you cannot get tired. you never know when that an ounce of energy will be needed to save yourself and your partners. i saw them crawl on the ground, role on the ground. i cannot do that when i was 2430. i was a bad little guy in my days and i could not handle it. >> those of those same wonderful men and women, the sons and daughters that the parents of

our country belong to us -- loan to us. and we work hard to train them into the fearless young men and women that will give their lives for one another in a tough situation in a place like afghanistan. >> pulse of for one day and i made a mistake with the marine recruit. one gentleman was in civilian clothes. i said, your and ex-marine? i made the biggest mistake of my life. you do not call marine and ex- marine. he said, once a marine, always a marine. >> sir, you're absolutely correct. you are always simmering. campaign to get that word out of the lexicon.

you are marine forever. >> i heard general webb question you. i know you cannot comment on that, but given the fact that you are first in battle, that you're ready for the call as you stated, you are ready to go. at the ines are th point that should be the department of the navy and marine. gentleman, keep in mind that we need to have the best in the broadest and opportunity always

to serve not. i know that you will follow the policy in the law that this change. there is no question about that. maybe we will have a chance to talk about this privately. for a person who's understood what racism and sexism as an. i fought this in my state for those persons or different persuasions and sexual orientation. they need the same opportunities, the same commitment to serve as anyone else. >> sir, thank you for your high regard for the marine corps. you have made my day. that will give me through the rest of the day. >> it brings tears to my eyes, because when you set that -- i was at certification -- ellis of walter reed, i said, you've been discharging what you wanted he said he wanted to go back into in his unit. i just cried like a baby. i cannot believe that that is

the commitment the u.s. train those young men and women to have. god bless you and thank you for protecting us, general. >> thank you, senator. >> general, take you for being here. thank you t bonnie and your family for the sacrifices that they may. those who stand beside s often pay a heavier price than those to get the opportunities serve and we're grateful to your family and grateful to you for all of the years that you serve this country. i want to pick up on the topic the macaulay's in georgia discussed with you, the f-35 in the delivery of it. we're proud to have the marines in florida, not as much of a presence in other states, but we do some of the refurbishing work figure referred to, and also coming to the f-35 and the training for one squadron of military aviators. i'm concerned about the f-35.

we're happy to be doing the training in florida, but this program, this plane is taken on all along time to develop an it has been over budget and continues to be delayed. if we do not meet the delivery dates, what impact what that have on your community? will that put you in any type of strategic predicament if these plans do not come on time and do not come at a rate that you need to be able to use them? >> faq for having a real sense for understanding what the issues are here. it's exciting and we're looking forward to delivering the first airplanes and down there. they're building a great team. if the ioc moves to the right, and if it does, i do not know that it will or not, their

discussions going on right now. i am not privy to them but i have heard that. if it moves to the right, it will finally settle on sunday to the right of that, however many months, like the said earlier, not too many. but in the meantime, the marine corps set out just about 67 years ago to take a look at our strike fighter is that we currently have. how did we manage that? how did we manage a total flight hours on their airplanes to sustain their service life? that is what we're talking about. if we have a slide to the right on the joint strike fighter, the western league do not have a slide to the right of our current requirements to reduce airplane squadrons, carriers, all that. but we did their -- several years ago is to mitigate this and to deal sustain this. we began to manage the service life of each one of our airplanes.

we've done it with our f-18. we move airplanes around within squadrons based on the numbers of catapults, the number of traps that they have had, the number of landings a day of that on carriers. there is a limitation on that. the amount of g-forces pulled on there's airplanes is registered. those are in indication of service life of your plan as well. not to mention the total hours. will we have done is actually move the deck chair, so to speak, on the ship to move look like our airplanes or load g- loaded airplanes to where they can pull more, look catapult and trapped air plans to air carrier squadrons. the short answer is that we can manage that and we're managing it right now. we stood down a couple of squadrons of f-18's not too long

ago, and have taken their assets and spread them around to sustain ourselves. we can do this. this is doable. >> how long can you do in. >> sir, i will have to come back to you will but the precise as to. we know how long we can do it for. there are other mitigation efforts under way which examines how we can put money into our current fleet of f-18's and extend their life? that analysis is underway. judy if you could supplement that for the record, i have a great concern about this project. we need to get the f-35 out since we have been working on this is 1935. we went to the moon faster than we've built this airplane. thank you for that and look forward to getting there from you. on one shift gears to afghanistan. i do not want to recall the ground that was talked about before.

let me ask you some straightforward, simple question. do you think we're winning the war in afghanistan? >> senator, that is probably the question that is the hardest to ask. there is not a yes or no. i can i give you that. i can give you a glimpse into portions of what is happening in afghanistan, the marine corps down in regional command center southwest, and helmand province. it sits right on the border, right next to kandahar, as you know. arguably one of the toughest areas of all of afghanistan in the marines are there. if what's the progress personally on my visits. having just talk to the commander on the ground, i could keep you indication after indication where things are actually moving well. let me give you a couple.

i talked about the group liberated and now the town is rebuilt, the schools reopened, when the district governor walked me into the school house, in the four corners of the room, about one-tenth the size of this hearing room, or four large rugs. the students were in four groups. the proudest he was was when he took me over and put me in front of a bunch of little girls. this district governor and the town which had been ruled and dominated by the taliban was the first female school class and all of helmand province. since then, they have opened up -- in the town of marja, the of opened up to schools to include girls right now. does to the indications that

there is positive evidence. things are happening. when i talk to the commander, he said, several months ago when the taliban attack this, they attacked and groups of 15 to 20. they were pretty ferocious. we of worn them down now where they do what he calls shoot and scoot operation. freed by, they muscled their a cave -- they stick the muzzle on ak-47 around the building, fire, and renault. there is no major sustained combat operation. the typical thing you see in these villages are the shoot and scoot. we will succeed militarily in the nation of afghanistan. >> is the july 11 -- the july 2011 withdrawal date we talked about, is it harming your mission or the market is in

making your mission more difficult? >> i ask that question, and they do not even talk about it. there is no discussion in the helmand province about this ignatius -- as this and -- it as an issue. the leadership, the provincial governor of a helmand province, they are dedicated. there's not announce the flinching on this. >> alas question i have for you, and probably deserved a longer answer, but it occurs to me that as an expeditionary force, the marine had been lied on their feet, in and out, try to be first in to secure the beachhead, when the battle, and then be able to move on to the next battle. that seems to be the intention with the counterinsurgency strategy that requires you to go in and work -- seems to be counter to the intention of a counterinsurgency strategy to go

in and build local fighting forces. as the commandant, that is something you must think about, the tension between your traditional role in this new way of war fighting. i wonder how you will reconcile those competing demands? >> senator, i think the -- when we leave afghanistan, the last thing i would want to see the marine corps do is lose the skills says that we of learned over the last nine years. many of the skill sets, but cultural sensitivity, the importance of language, the ability to work with other nations in some remote areas, they're all things that we'll learn, and we've relearn them. we have done them for over two or 35 years for our history. we are on the land right now. that has happened to us periodically throughout the marine corps. that happened was in korea, if it happened to us in vietnam, it happened to us and france.

but we come out and become our nation's crisis response force that has the response capability the rest for too. -- that i referred to. i would want to maintain that because as we work with other nations and countries around the world, we're going to do our level best to begin to lighten the marine corps up, and we're going to do our level best to work with our navy brothers to be those for deployed forces ready to do the nation's bidding at a moment's notice. i think we can take the best of what we have learned and hang onto that, and then we will get around to the rest of the business. >> thank you mr. chairman. >> thank you, general, for being here today. allied to begin by reiterating my appreciation to the committee and chairman 11 to have an

opportunity to serve the general may be where i was appointed to my position because of that death of senator byrd in virginia, regarded as a giant in american history. he served our government for nearly a quarter of its history. a daunting task, one that pales in comparison to the challenges which you see. i'm pleased to have the opportunity to visit would briefly here today. it allows me -- back in july, when the announcement was made, amidst the dozens of calls of congratulations and well wishes, at the chance to have a conversation with a friend and former colleague by the name of robert ferguson, a marine

currently serving as the cabinet secretary for the west virginia department of administration, a man who is extremely active in veterans' issues throughout the state of west virginia. during our brief conversation, he sent me a simple figured, 32. the marines they had died in that calendar year. it is more troubling given the high numbers of the best ever used. talk to me about the men -- the mental and behavioral challenges facing the men and women in your command as they return from defending our country in places like iraq and afghanistan, and also the distress -- d-stress program. >> thank you for allowing me to address this.

of all the things that i spend my time on in the last 25 months, the issue of suicides in our corps, the issue of psychological health, boats, probably occupied a clear majority of my time. it lost 32 marines as of this date. that is 32 more marines than we should have lost. the loss 52 last year, a services -- suicides been counted on the calendar year. just looking at this trend going up, it is not a matter of waking up, we were doing things but we have to do them differently. we went to marine noncommissioned officers and said that we need their help. most suicides were young men

aged 19-22, white, young enlisted, there were predominately the ones we were losing or e-4 and e-5. noncommissioned officers said, let us take this on. we had them help us build the most high impact and most relevant training program for noncommissioned officers on suicide prevention than any in the service to date. i am proud to report you -- i am courage to report to you today that the number of suicides in this year, and noncommissioned officers has dropped -- have dropped markedly. this time last year, we at 37 suicides in the marine corps. we have 32 to date. where are we headed? it is important and we're not

done. we have another effort on the way right now to take that same type of high-value or high impact training and put it down to our young e-12 e-3's. the same thing for a first lieutenant's unsettling tennis. we're. a bill a separate training program. that is the focus of suicide prevention. we're not done. we're not satisfied. 32 more than we want to have this year and we are determined to bring that number down. you want to make a difference. the d-stress program came out of these noncommissioned officers. i said, it can you give me a suggestion on something that you think might help? looking at the suicides, a lot seemed to have a common denominator of a problem with their relationship with a young woman, could be a white, could be a girlfriend, could be a fiancee, they said, if you need

to have relationship hot line. maybe it was, we will let it that and go, don't understand that. but we call it that for about six months. we came to the conclusion that what we needed was a hot line that would plug into middle health providers across this nation, that a family member, can a white, a husband, a marine, one of our corps manned or dr. sailors could call, completely anonymously, and get assistance. the beta test is being done at camp pendleton, at miramar, and others. it is in cooperation with our health care provider out there. we have 24 hour hotlines, and we have advertised this now, in the

early indications are that is getting traction. when i committed to this committee, i will be a would give you a full report. the whole idea is to provide another avenue to reduce this issue of stigma, where a man or woman can pick up the phone and call and talk to somebody, and then get referred to a mental health providers somewhere in the western part of the analysis. it is the referral and follow-up care which is critical imports. there are a host of things that we're doing and would be happy to go with those things with you. >> i appreciate that and your answer. it has been honor for me to preside over your confirmation hearing today. chairman levin has indicated that the commitment on meet as soon as possible at the nomination. i want to wish you well and think you and your family for being here today, and they understand you brought some west

virginians with you. they are well behaved. [laughter] the record will remain open for five days of senators wish to submit additional questions to you. this hearing is now adjourned. >> naked, sir. -- thank you, sir. [captioning performed by national captioning institute]

>> it is really a pleasure to welcome you all here today for one of our more elaborately round tables. i'm especially delighted to introduce the house committee on foreign affairs, howard berman. imitation may be the sincerest form of clarity, but washington sincerest form of admiration is noting the ones most cherished qualities in others. our speaker today has the admiration of a remarkably broad spectrum of powerful individuals. an academic from his district told me you was a huge fan, praising him as extremely thoughtful and very cerebral. he -- he's been described as one

of the most creative members of the house and one of the clear cited operators in american politics. people who generally describe him as a good friend, it covers all the political spectrum, and he has made contributions from foreign-policy to global health, immigration to intellectual property. chairman berman, who represents parts of the sanford and the ballet, has been a public servant for almost 40 years. after graduating ucla law school and working for five years as a labor lawyer, he was elected to the california state assembly in 1973. if in 1974, he became the youngest majority leader in the history of that body, demonstrating the quiet that penetrating political acumen that has characterized his career. it's been a member of congress since 1982, serving on the foreign affairs committee which he chaired since 2008, and the

judiciary committee. his time in the house has been a time a significant achievement. he offered amendments that reinvigorate the false claims act, which now protects and incentivizes whistle-blowers. this effort has saved united states government billions of dollars. it's been a consistent innovator on a lottery that allows 20,000 people a year to immigrate to the united states, not based on their family ties or their professional skills, but only the burning desire for a better light. it's been a consistent voice on foreign affairs, not only strengthen the u.s.-israel relationship, but important issues on india, pakistan, and other issues. today he speaks about a run.

frigid he speaks about iran. -- he speaks about iran. if there is hard work, chairman berman has won the admiration of many in government. he is the conscience and the dad of the california identification -- delegation. howard berman is the consummate. he has passed institutional knowledge that is rare these days. that is what is my special pleasure to introduce you to representative howard berman. [applause] >> quite an introduction. thank you. has a look around, i saw some of my friends in the defense contractor community. i was wishing you had not

mention my role on the false claims act legislation. [laughter] it is great to be here, john. thank you very much. it is an honor to speak to the middle east program roundtable. i have wanted to do it for a number of reasons. sometimes less frequently than at other times, but since we first came to congress, the long relationship with c s i s is to have these great conferences. i think they became violations of ethics rules or something, but they were wonderful. [laughter] when i did, it was by definition ethical. [laughter] due to china -- we went to china

back in the late 1990's, and i have a great regard for the leader of the program. a special appeal was that this particular round table is sponsored by the uae. i have come to have a chance of a the last three years, since i became chairman, to work with the ambassador from the uae here today. whenever i think that there are -- there is something inherently -- there will always be a conflict in the middle east and nothing can ever happen, i meet somebody like that and think there is another way. i am honored to be part of his lecture series. i want to vengeance some staff people with me. i have an excellent staff. -- i want to mention some staff people with me.

she is back there tending bar. [laughter] and robert over there, he works with me on middle east issues. if-minute talk about a run. -- you have to ask me to talk about iran. and i've become obsessed with that subject. this round table seeks to build a greater understanding of the complexities of the gulf region. as we all know, the gulf is not lacking in such complexities. for example, u.s. combat operations in iraq have officially ended, but iraq is struggling to form a government and build this table nation- state l and with a diverse population and a long and contentious history. saudi arabia which possesses much of the world's known petroleum reserves and is accused of turning a blind eye

to terrorist financing by wealthy saudis, is led by an 86- year-old monarch's, and its future is clouded by a lack of clarity about secession in the next generation of the royal family. qatar as resources that it has turned into incredible wealth. it maintains strong ties to hamas. bahrain struggles with a mixed population and an impressive iranian behavior. yet despite all of these challenges, there is one called country -- iran -- that represents by far the greatest challenge and threat to the cult, israel, the united states, in the international community. prevent iran from requiring a nuclear weapon capability is an absolute necessity for our national interest. as chairman of the house foreign

affairs committee, i have made that my number one priority. iran has enough enriched uranium to create two new weapons, and is only when you're away from protecting the necessary technology to build and test and eight of functional bomb. with such capability, iran would be virtually impervious to u.s. and western diplomatic pressure, and accordingly could pursue its human rights abuses at home and terrorism abroad with near impunity. her run its terrorist partners as well as hezbollah and hamas would be emboldened. arab states would make new accommodation in order to assure their survival. they could succumb to iranian pressure to reject or rescind

the u.s. basing rights, and iran would have greatly increased leverage inside opec to cut back oil production which could lead to massive increases and the price of oil. he could provoke its larger neighbors to pursue their own nuclear weapons program which would especially -- effectively destroyed that program. it may even use its armed as an offensive weapon. that last possibility cannot be totally dismissed, especially in the case of regime -- covers seem so ecologically driven and has so little regard for human life that sends thousands of its own children to their deaths as human mine sweepers during the iraq-iraq war. israelis justifiably feared for their future if iran becomes a nuclear weapon capability. we need a solution to this

problem and it is important to be a peaceful one. i strongly supported president obama is diplomatic outreach to iran last year. unfortunately, iran did not reciprocate. its recalcitrance like the enrichment facility under way at aom deepened international suspicion of its intentions. we had no choice but to pursue are no sanctions. the other options, strikes against iran's nuclear installations or even worse accepting our ran as a nuclear weapon states, are far more risky but potentially dire consequences to u.s. cover regional, and international security and stability. the comprehensive act which passed both houses of congress overwhelmingly and were signed into law by president obama in

july 1 is an important contribution to the international effort to ratchet up pressure on the iranian regime. through a variety of measures, it forces banks to choose between the u.s. market and the iranian market. it specifically takes aim at foreign businesses and financial institutions that provide financial services to iranian entities, including the islamic revolutionary guard corps veteran ball and terrorism or weapons of mass destruction. additionally, the legislation targets foreign companies that sell her ran refined petroleum or assist iran in developing our maintaining its own refinery capability. .

albert belle has been met with significant international with jay our bill has been met significant international acceptance. and it now stands united with us in the sanctions effort it is a

far cry from the situation woman the first act was passed in 1996. if they have now imposed their own sanctions. virtually every energy company has agreed to see sales of petroleum to enron -- to cease sales of petroleum to iran pay th. press reports indicate that sanctions have cut in half by iranian trade with the dubai. south korean sanctions have suspended the operations of the branch in seoul.

south korea is iran's fourth trading partner. based on our discussion, the operations in the country have effectively been shut down for good fo. these sanctions along with the prohibition and a new investment will deep in the international financial and energy sectors. japan is a major trading partner.

i recognize the significant step they are taking. they have fought tooth and nail against these actions. i applaud their determination and courage. i hope other nations involved soon choose to make the same sacrifices for the better good of the international community. everyone's interests are served by preventing iran from achieving a nuclear weapons capability. if they are properly enforced, they will now be essentially unable to purchase a vital part. we have seen numerous reports that they are starting to feel the squeeze. he went into some detail about this in the speech yesterday.

it is still early. no definitive conclusions can be drawn. the obama administration appears serious. secretary clinton has appointed it. secretary clinton has appointed a serious policy maker. he continues his highly affect them where. -- in his effective work. he warns them about them.

earlier this month, they designated the german bank eihm said the few banks shown. the action will isolate eih and the u.s. financial system. they may step up sales of refined petroleum. several chinese companies appear to be engaged in sanctioned activity. need to convince them that it is a threat to the stability of energy markets.

it is fair to say they may direct efforts to persuade china of that fact. congress will remain deeply engaged. i have established a group that will closely follow sanctions and meet regularly. we are fully committed to making sanctions. my goal is not just to squeeze iran's a economy. my goal is to try and create a dynamic to change their mind we want the iranian leadership to conclude that they are not worth the cost. a belief their peaceful means of achieving that goal. if it turns out that they are committed to their nuclear arms

program at any cost, we will have to consider the implications of that further down the line. with that, i think i will stop talking. i do not know if there is room in y>> please come identify yourself. at only one question. -- ask only one question. statement ending what do you think of my statements are not really questions. first question, right over here. >> you talked about how sanctions have been affecteive

and peaceful. how much time do they had to succeed? how important is it that the u.s. imposes sanctions on the offending firms? >> first of all, one quick shout out to the "financial times." they are a great source of information to me on my different companies are doing. [laughter] that is access to classified information. secondly, i think it is -- i think we are talking months and not years. i think no one expected that a day after the un acted and we acted iran would be shouting

"uncle." i am not surprised there has not been any indication. give them what our goal is here, i think it is a matter of months. we have to see it working before people lose faith. a key part in making this an effective is what you alluded to. a shame since the eight sanctions regime -- a sanctions breezregime to discover relationships begand that does t

lead to sanctions will soon lose. it is essential that investigation begain. it to be taken into consideration. where they do not, sanctions could be imposed but t credibil. pence of people expecting that to happen. >> effecwhat is your sense of decision process on the nuclear file? is it in issue of making gestures? are you seeking to influence the president? yardy seeking to influence a

group of decision makers? you took the actions to have the desired effect. what is the iranian audience? >> my assumption is that at the end of the day different views and pressures are important. it is only the supreme leader that has to give the go ahead. things and not just happen. the tests percuss is about specific things on the ground. it is about the enrichment. it is about allowing them to go to places they are now denied

access to prepare -- access to. that is how we know if it is being suspended in terminated. >> it is against the tiny mentioned. and what would you say to our friends and i'l-allies they cano that they would be supportive?

>> will they get into that? in this venue? by the knowledge that i do not know what the strategy will produce the results. i do not think it makes a lot of sense for me to go often speculate on what those alternatives are. any of the other alternatives have serious consequences. only some of which we can imagine. we have to drill down on that. so to speak. >> he mentioned this fiscal -- the despicable human rights effort. what might they speak out about?

>> they never once touched on any of the provisions. they are allowing export of certain equipment and technologies to the distance to enhance their ability to communicate. it enhances their ability to suppress speech and communication, particularly in

the digital world. i think we have an obligation to talk about those issues. the only thing that cost about -- the clock for a change in a run is on a fast -- is moving fast enough to resolve the issue. i start from a different premise. whatever i might wish does not matter. i do not see the clock moving that fast. my primary focus is on doing what we can to diminish the

possibility of weapon capability. there is some criticism about that. i do think it is legitimate to go. careful process of what can we say that can help them be useful. they want to feel we are on their side. >> allied key to take you to

love and numb. i want to ask about the aid. >> do you plan to lifted? >> the id demonstration has done an interagency read the. they have completed the three the. i want to know about what their review concluded, what our goals are. i did not put on.

i am puzzled about what we are seeking to gain. walleye have not yet -- i have some appointments, calendar. i've not yet talked with lebanese officials. >> i am very grateful to you for spending time with us and honoring us. thank you all for coming. [applause] [captions copyright national cable satellite corp. 2010]

>> good morning. i am president and ceo of the capitol markets. on behalf of the entire team here and the chairman i thank you for joining us today. i am very pleased to introduce the chairman of the cftc, gary gensler. you have the volume front of you but for c-span and others i want to point out that he has -- he was a goldman sachs for a number of years, was at the treasury department and the

clinton administration on capitol hill working for senator sarbanes. but really i think in the last year has proven how useful all of that combination has been to the job he is currently doing pity and i don't think there is a single person in this town who has worked quite as har, has put and the effort both getting the substance on the monumental task but also making sure that he hears from a variety of perspectives and gatherers as much data as possible. during his tenure at the chairman of cftc throughout the legislative process and not on the regulatory process, the cftc has been a real benchmarks in terms of transparency in government, every single meeting the chairman does and the team does around this iue, everything the 31 teams up a cftc do as the employment that is publicly available on the website and as you will see they

are not being lazy about it either. there are quite a few meetings and they a being very thorough with round tables and other sessions to make sure they gather as much data as possible so today is not the exception of the world is just more of the world which is the chairman getting out to talk to all the people who will have to live with the rules with the cftc, the sec and federal reserve guard draft and to make sure that as we implement the dog frk regulatory legislation we do it in a way that brings what we desperately need to the transparency to the markets but does so in a way that strengthens the overall economy and is consistent with economic growth. we are -- the chairman has been extraordinarily accessible to the chamber. not sure we agree 100% of he time but if we did i would really start worrying. so, i -- but do know that he is less than 100% of the time and i am sure the final outcome

of the regulatory implementation will be strengthened not just at the cftc but throughout government and throughout the world by his energy, his dedication, his intelligence and his approach to getting the work done. we learned jst this morning since he arrived that he was up last night at midnight reviewing our website, and he led on that he was working sunday evening. i have a suspicion that is not the only sunday that he has worked. gary, we really appreciate your making the time today, and mr. chairman, thank you for the approaching or taking to the process. there could not be a better time or a better person to have leading the cftc, the chairman of the cftc, gary gensler. [applause] >> david, thank you for that very kind introduction. it's sort of unexpected because maybe we've now passed the law and we are rule-riding and i greatly appreciate it.

the last time i was here the house of represtatives passed the law and i think it was at that moment the senate banking committee, i see ball on here but used to work for senator chambliss. but i don't think this senate agriculture committee had yet done their wor but now six months later the commodities futures trading commission, securities exchange commission are working to implement the dodd-frank wall street reform and consumer protection act, and particularly with regard to the regulation of the swaps market place. before i discuss that reform i just want to thank everybody at the cftc. the staff, my fellow commissioners on getting this strong the bill through, but also on the task ahead. we have much work to do going forward. there are three critical reforms that were indicted in this statute. first the bill says swap

dealers, the people holding themselves out making markets and swaps, but the swap dealers themselves have to ha comprehensive regulation to the american public and bring greater transparency. second, the bulk of the swaps market if i can call that the standardized parts of the market in the transparent trading facility, something we call exchanges or the new term swap execution facilities. and third, the bill lowers risk to the american public by bringing the standard of derivatives into the clearing houses. clearing houses work and innovation actually not just the last ctury but the prior one in the 1890's and the stand between parties to their evidence, derivatives have been around since the civil war for the corn and wheat futures. with the clearinghouse innovation of the century to lower risk so there was one central counterparty in case any of the other parties defaulted and to the transaction in terms

of the implementing the statute, the act itself, dodd-frank act is very detailed. i think it was about 340 pages alone talking about the swaps market place. so it really does address the key policy issues. one might even say it addresses the secondary policy issues and, did that but then regulators like the sec and the cftc are asked to write rules are out the details with regard to that market. and it requires us to do that generally within 360 days so you can mark probably july 15th, 2011 on your calendar, and for those who are keeping track that is 297 days to go, and it's just how we have to consider this. we have organized ourselves around 30 will writing teams. it doesn't mean 30 roles. there will be more. some of the teams have multiple

roles, and we actually met that group met the day before the president signed the bill and we organized how we're going to move forward on it. and two principals by the us, too straightforward principles. first is the statute. it's very details. we are going to comply with the statute and it certainly our intent and every provision that we can. it there's always a little ambiguity the key things are there inhe statute so when in doubt, turn to the statute. what was congressional intent as we understand, lowering risk to the american public. we just lift the huge financial crisis, the worst in 80 years and to increase transparency to your members, the customers of your company and so forth. second, we are going to consult heavily. we are consulting heavily with other regulators and the public. we are of course working very closely with the securities exchange commission and federal reserve but also the other

provincial regulators. it seems that every week i personally have a meeting with one of the heads of our other agencies, mary schapiro and ben bernanke and sheila bair and secretary governor and so forth. at the team level it is much more intense. the day after the president signed the bill, 20 of the team leads were at the fcc must in 24 hours and they were ll sharing what we needed to do. we did that at the federal reserve within a week and it's been ongoing throughout. we are sharing the documents, term sheets and the like that the government is working as best we can. we are still human, ut as one. in addition to working with our counterparts here, we are also working internationally with international regulators and we are actively consulting across the oceans. next week i will actually be traveling over to brussels to discuss, you know, our

derivatives reform efforts and consult with the european commission up with theirs. the just released the document last week that was equally historic to what we are doing here, and very strong and i would say consistent in large measure. a different political systems, different cultures, we are bound to have some differences, but very similar. and each of the rule writing teams are also individually consulting, taking what they released from europe last week and seeing where it can online. one of the first rules we are going to do we were making some changes suday night to draft to try to align it a little bit more with the europeans and we are also soliciting broad public comment. we did is starting e day the president signed the bill. we put out 30 teams, the topics on the website and asked the public to send information and tell us what you're tinking in

to these mailboxes. is wasn't required by any statute, we just want to get pre-decision comments from the public. but we also organized summer out tables and have the securities exchange commission. i think we will have a couple more. they have been really helpful. they have been examining issues of the trading markets and the governments of the maine utilities and the data that is requiredn the market. we've talked to academics and users of these complex products and the public as well as the market participants from wall street and so forth. we have additionally many individuals ask for meanings. meetings like this, and we are posting those on the website. we don't always have them telecast so that is really up to you. but, we have had i thi in the 61 days since the bill was signed over 100 meetings. that's more than two per

business day. scott snyder fr my staff is here and he can take your names and numbers down. i'm only kidding the this is a meeting wille posted on the website. we normally do take every name down but when it gets this larger think we are all right. i think i had 11 meetings myself last week, but you can see who is there, the subject matter is discussed, the paper if they submit something. i think if it is all right we are going to put the document i read last night on the web site but you havealready g it publicly. and just as we bring that transparency to the swap market we believe and transparency to the le writing process and i think that that's helpful. our goal was to publish proposed rules this fall. there is a two-step process, proposals and a final rule based on the comments we received. we found it takes four to six months to turnaround from a proposal period, take those

comments and get a final rule and that is when you are only doing three or four at a time, and year we have 30 sets of rules, so it might be sounding a bit ambitious but it is wth the congress asked us to do to finish buy july 15th next year and we are human, something certainly will slip but i an't predict which ones will select yet. so, we are going to publish rules this fall, the knicks securities exchange commission and we are aligning as best we can our schedules. we have asked can we take the tough important issues and do it first, and i have to say we don't quite have that luxury. we are going to start with the first meeting october 1st. the agenda items will be including what's called an interim final rule and some data collection. why are we starting with that? the statute said we only had 90 days to do it, so you know, we have to be prudent and get that done. we are going to do something with regard to the government's.

we only have a whole 180 days to finalize that, so we need to start and be conscious of the clock the conagra said. and third, we are going to start with some of the rules with regard to clearinghouses. we're looking at the clearinghouse will probably in a number of ways. it won't just be one of rule. so we are doing some of the early one negative on financial resources and take that up in front of the commission. we have five commissioners all engaged. there is an intricae process and i thank them but we try to take these and public etings and then i don't think we have a meeting the following week but we are going to put a guilherme weekly meeting line and we will just move through the process and see if we can get this done. again, we arguments which might slip, but we are sharing our internal budget of time with the public and you know how we are trying to do it.

we also published one final rule on the currency market for the public and we have done a request for comment on definition so that we can get people's thoughts. i felt i would touch upon four topics from the memo last night i read, the speech roughly hit some but then take questions. these seem to be things that might be on the members' minds. the end user exception. this is something for somebody viewing out there, the statute takes up the issue is which transactions need to be cleared? clearinghouses that have existed for a long time lower risk to the public and where the statute came out is transactions that were standard enough to come to thnew clearinghouse must be in the cleang house lering the risk, but there was an exception for some parties and these exceptions were if you are not a

financial company. these statistics show about0% of the derivatives transactions are between the two financial companies, but in the bank and insurance company, the hedge fund and a swap dealer and so forth. nine or 10% is in the nonfinancial companies. the large manufacturers, the large retailers and so forth. so congress decided then on the financials would not be required to come in to these clearinghouses. it was a sort of containable small enough number nine or 10%. as long as that party was hedging or mitigating commercial risk. so i think it's pretty clear. we are to write rules to sort of say more words about it, but congress decide if you are not financial and you are hedging a commercial risk or mitigating a commercial risks, you get a choice you can still use the clearing house the you get a choice. but the clearing houses of

course will lower risk on the other 90% of the standard transactions. the next topic i was going to talk about is omething in the statute called a major swap participant. this isn't a term ncessarily familiar to the public or all of you. but many end users, many corporations have asked well, could i do this? and the reason they are asking this is because of major swap participants is regulated in the statute just like this what dealer. the swap dealer are these large banks that have toave a cushion of capital and a lot of business conduct standards and some corporations say could i get caught up in that. and much work needs to be done. a lot of csideration, a lot of work that five commissioners of the ftc and so forth. i think the statute is pretty specific. the statute, there are three tests in the statute to determine whether an entity is a major swap participant come and

they all relate back to one thing. whether an entity is substantial enough to be relevant to the entire economy, relevant enough and thus what business to the financial system as a whole. in essence, if they failed do have another aig case on our hands or do we have to go back earlier and we have a long-term capital management situation as was a hedge fund in the late 90's that had a swap derivatives book of $1.2 trillion on on a regulated hedge funds. to give you a conceptual thing. so, if an entity is a swap dealer it's already regulated so further this is about not being a dealer and swaps but still very substantial. now we estimate that the cftc there may be as many as 200 entities that askedto register swap dealers. we still have to do some things on that and it may be smaller,

it may be larger, but if you are registered as a swap dealer that is because you are making markets in these things. but the major swap participant category is really if you are not a swap dealer and you are still big enough to have an effect on the overall economy. so, most end users, most end users, most corporate, most members of the chamber are not likely to fall within a major participant category but again i can't speak for how the rule will come out but i think the congress has been pretty clear as to what the definition is. the third area of the real time reporting. there's a great benefit dodd-frank brings to the american public. i think it is a great benefit it brings to your members and the customers of the members, there's tansparency in this market, the market was really quite a dark markets and still is to most people. the bill does this in two ways. first, it requires the standard

part of the market to trade on exchanges or swap execution facilities. we know that we have that in the rest of the derivatives market because all futures have to be on transparent market and would have this in the securities market or trying to buy 100 shares of the company of any one of your company's you know where the trade and if you are a corporate treasurer and want to do a share repurchase you know where the stock trades. now you have the benefit in the swap market for the standard part of the market. the seco one that it does is real-time reporting after the trade occurs. just to say a few words on each of the swap execution facility it's clear in the statute i'm just quoting, it is a trading system or platform where local participants have the ability to execute the trade, swaps by accepting bids and offers made by multiple participants. multiple what some people call many participants to the many participants in that you can

accept the bids or offers, so you benefit from that and your customers will benefit and i think it will improve the pricing of the marketplace. the more pretreat transparency before the transaction occurs the more likely it will also be additional competition coming into this marketplace and tighter pricing on your transactions as members enter into. one of the things the statute says is, quote, the facilities are, quote, to promote the free trade transparency in the market so that it's clearly a goal the congress wants. the wood as appropriately authorizes sec and the cftc to facilitate rose for a block trade. what is a block trade? is a large transaction and it certnly would probably all agree a $5 billion transaction is a block. the writ be a debate. some on wall street would want to block the trade to be up like

$500,000. i am exaggerating a bit, but we need to write rules to the largestrades to promote liquidity would not have to be there. the other thing it did is the converse says that after the trades happen it's very specific those transactions have to be reported on a real-time basis. it's called post trade transparency and this is for all the transactions, the standard ones and the ones that are not standard. this is a change made in t legislative process, but so it is all of the transactions have to have this real time reorting and it actually says in the statute, quote come as soon as technologically practicable. so i've asked is that six nanosecond or a minute? as soon as technologically practical the congress put in so we are going to comply with the statute and life rules on that and what does this do? is facilitates everybody in the room's use of the

marketplace is, and i think that everybody will benefit but i want to say as we write te rules of the real time reporting the statute says, quote, we are supposed to ensure the information does not identify the partcipants. so yu get real-time reporting, but we are not supposed to identify the participants of the transaction. so it requires both promoting price discovery, but protecting the confidentiality of the participants. so we have to sort through that in their riding and it's kind of interesting. the last thing and then questions is in pawlen. what is the time frame? how is this going to go about? many market participants really want to lower the regulatory uncertainty and know where we are. but at the same time we want to have enough time to consider. we are learning every day. we have a great agency and we have been regulating derivatives, actually all the way back a little bit to the 1920's, but this bill upon the

expertise and there is a lot of new things we are learning as we go into this new marketplace. so we have until july 15th of next year to write the rules, but the statute also envisions a transition period after the world writing. converse said we have to give at least 60 days. so you can mark on your calendar 60 days from july 15th which is about september 15th of next ar but why did congress do that? and i think it was the right thing to do, it is because there is going to need to be time for the market to adjust. some cases the big swap dealers will send in their paper work and register and they will obviously be swap dealers but in some cases the new trading facility is this thing called swap execuon facilities will be registering as well. and if it is possible but there is as many as 200 swap dealers

we have to process the paperwork, and if there is a couple or a few dozen swa the execution facilities initially, we have to process that and it's not just checking the box. we have to thoughtfully review eight. so, one of the things i would imagine will happen, and we look forward to, there will be a lot of public comment about the transition period because congress said at least 60 days. so just how we look at that and it will be interested in public comment on how we phase things and so forth. so the cftc faces challenges in the mnths ahead but i am just so proud of the agency, the working relationship among the five commissioners and the working relationship we have with the sec and federal research. it is a challenge and a tight time still to confiscate and no doubt we will slip a bit somewhere.

but i think we can get this done and i look forward to really hearing the questions today and all of your comments, probably your thousands of comments in the next 297 days. david? [applause] >> we have time for questions. you will see there is to microphones up there and i would invite anybody that has a question to come to one of the microphones and while people i know i will ask the first question. let me say i think i'm going to do a press avail afterwards wherever scott snyder is but so i will probably take questions from the members and to the press afterwards. let me start from the beginning of the chamber's primary interest on this debate. one is to bring the needed a transparency to the market and second, to make sure that for the main street businesses that are edging the day-to-day business risk that the working

capital they need particularly in this economy isn't tied up on necessarily particularly when they are not contributing in any way to the systemic risk or during landing of the things that helped create the financial crisis. there are some changes made in the bill of the very end at 4 o'clock in he morning intended to clarify but at least from the perspective of those companies that made things a lot cloudier in terms of what the impact will be on them. i think if we ae really large and you have a substantial position you probably guess where you belong and the question is particularly these uncertain economic times hw much certainty should the end users at don't have a substantial position that are just managing their day-to-day business risks how much certainty can they have that they can deploy the working capital for other purposes or should they be holding just in

case the fed and regulators tell them they need to do itto manage the business risks? >> well, i think that the congress and to anticipates the change of the derivatives and the swap market. i don't think that is in doubt. there will be more transparency of the goal is certainly lower risk. what david has asked about is when the banking regulators for the bans set up the citol large requirements, how that willripple out to this membership here and help when we do it for them on banks, we have a smaller universe that' the bank regulators, the big univer. so i can't really speak yet and anticipate how this will come out. certainly the public will engage and give advice to the federal reserve and bank regulators and the ftc and us and there will be other questions like that yet

answer as to where we will come out because that is where the rule writing process is about but it's clear in the statute the regulators are to set capital and margin to help lower thrisk of the bank's. it's not so much whether one member fails, one of your members here even if certainly would be bad for your communities and your employees. but this is about the risk of a swap dealer and if the swap dealer fails what is the risk of that, and so that's why the tradition in the marketplace is that some people require the margin to be posted at the big banks, and that is a matter of commercial arrangement, but of course rule writing is yet to come on that issue. >> may be your personal opinion

on where you think this will end up as a general matter. >> the position of the margin should be done to manage systemic risk or as a policy instrument to ensure more transactions go to clearinghouses and exchanges? >> well, i think that -- i look to the statute says and if i remember the word, and i'm sorry, their specific words that is to help lower risk of the dealers and then threw that the economy but the words are in the statute and if i misquoted, i think that if i can look at the capitol, the capitol the bank needs or and non-bank needs for derivative that goes to a clearing house strikes me should

be less than the capitol it needs for still a bilateral ansaction because the clearinghouse itself is lowering risk so just as a pure economic view of the banks should have a question that's a great if they are not putting it into a clearing house. at's capital and i know not margin. >> dan don with the electrical power station and i appreciate your comments and i want to follow-up on that point. and it's probably not a surprise that from our perspective there shou be that recognition that those that are the end users and mitigating the commercial risk and over-the-counter markets should not have to have some of those requirements that we think even if it is just imposed on the financial counterparties will increase the transaction cost and be able to participate in it in those markets and therefore eliminate the benefits

of the clearing exception. but that being said, i wonder going back to something previously that use it on the data reporting and whether there is going to be a recognition of a similar difference in treatment between the financial entities and the commercial end users with the real time reporting and as soon as technologically practicable recognizing that some of the systems set up in a these individuals and sometimes smaller organizations that will participate in the over-the-counter market may not be those as some of the other financial entities. >> i will give you a partial answer and then leave you with a question. the partial answer is the real time reporting responsibility is not placed in for a first order on end users and the first order is placed on the swap dealer, the dealer that you are with or possibly on the exchange, the trading venue itself. and i think congress did that

because that is the swap dealer or the exchange is really the party that is the registered entity, the regulated entity. so, and it doesn't make a distinction because it's popular history for the exchange of all trades just as in the securities marketplace. the only question i get back to, you are asking whether there is no swap dealer in essence one commercial fermenters into a transaction with another commercial frm and neither one of them has enough activity to be called a swap dealer. >> for the veing public this is probably less than 1% of the market and we don't even know if it is less than one-tenth of 1% of the market where there is no dealer andt's not on an exchange, and we are orting through and if you have thoughts and advice you can send where there are two parties entering

into the swap and neither one of them are the dealer because they are just not -- they don't do much transactions. there still is a real time reporting requirement but we have to understand that neither one of them is a really regulated entity. so send us your thoughts. >> it is a very small part of the market. >> it can't be a real chamber meeting. there's no other question? the cameras are rolling. >> thanks a lot for coming here today and being with us, taing time out of your busy schedule. we appreciate that. if i heard yo correct use it in your statement you are going to do two things, you are going to try to comply with the statute and, sold heavily with other regulators and the public. i thought i heard you say you were going to comply with the

statute and say what is congressional intent as we understand it's. is that going to be any different than congressional intent as the commerce understands it? and the reason why i ask that is because when the bill, the passage of the bill there were quite a few colloquys going around several letters to the major chairman from the chairman of the committee, the chairman of the major committees of jurisdiction that clarify congressional intent on quite a few things with regard to the end user expansions and particularly with regard to the merging requirements on the end users and they were pretty straightforward in terms of clarifying a lot of the legislative intent. and i just wanted to know are you going to take into those considerations and factor in those colloquies and those letters of the various commiee chairmen clarify and the legislative intent? >> the wonderful thing is you are aware because i can tell

from the question and i'm not. [laughter] and they are probably both wonderful things. though i applaud and got in and chose not to go to law school i ended up doing another path. so i'm going to leave it to the general counsels and the lawyers to talk about all of the most of what you are saying, but what we are doing in all of these rules is looking to the statute and certainly our staffnd commissioners are reading as much as we can on the congressional letters. there's a lot of them, there is an awful lot of floor speeches. we do our best. we are also human, it is an enormous body of literature that was put into the congressional record, and i've done my best but i sure there are some things i haven't read. and all of it ultimately will

come to influence individual commissioners and individual people in different ways, but what i am saying is our intent, not the congressional but our intent is to comply with the statute. not try to over read or under read. its 340 pages, it is a lot of detail, a lot of debate for the american public look to congress to resolve. >> how would you characterize the level of international accounting you need on the maetplace? >> thank you. it's an excellent. and, you know, my dialogue with the europeans starting with the commissioner and even before his predecessor and all of the

career staff at the european commission in london with the fisa and the treasury and the european central bank to the meetings last week i had, i mean, i see the regulators are thrilled and i'm going back to brussels next week and the cooperation is not just for the cftc. the treasury department and federal reserve take a lead on a lot of this to the ftc and a lot of us, the occ do a lot of it and i think what the europeans put out last week is quite aligned. we have different political systems, different cultures, we are naturally gointo have some differences. but it between the european market and the u.s. market we are going to have a mandatory requirement. we are going to have the data repositories. there is a similar almost identical i know it is a little different approach to the important matter to th chamber in user exceptions and so it is

fairly well on. the japanese is before us, they passed the statute this may. we've met with them. we've met with i'm sure will over 20 individual countries just at the cftc. so i think it's excellent. but again, we are different cultures and ifferent political systems. we will come out with some differences. does that answer? >> thank you,mr. chairman. first i want to thank you and your staff. you have just been so open and willing to dialogue throughout this process so far. schenectady want to introduce yourself or does everybody knows you? >> im michael withgibson. one question, the coalition for the defensive end users submitted a comment last night

and we took the position on major swap participant definition which is basically that as you pointed out 90% of the market has already taken care of when you regulate the swap dealers with certain bank like regulations and not just you obviously, but for the ms p it seems the bill already has a lot of safeguards in place for the largest in the users and title i has provisions that deal with non-bank financial institutions that reach a certain level of systemic significance. title ii has a whole solution for these remedies and i wonder, wondering the coalition is wondering with respect to the end users that simply use swap two hedge so let's set aside if there are not in the end users out there that employ the swap speculator is to not hedge but to set them aside, for those in

users that use the swap just to hedge why is there even need to be and ms p definition, and i don't want to ask it in a way that you can -- >> i think i'm going to answer but with some long-term capital management to the viewing public. long-term management was a hedge fund in the late 1990's that said it to their investors everything they did was they were hedging. they really did. and there were some nobel laureates that really hd these philosophies as to how they were hedging. the head of derivatives at $1.2 trillion amount. i don't know whether it was the happenstance of history and honor. i had to actually visit that group over the weekend right before they were failing when i was in the treasury department. and i don't know whether they were hedging or not but they said that is what they were hedging. i remember the long weekend and that was a systemic issue to the american public.

so i just -- you know, i'm giving one commissioner of you but i think just what the concourse is saying is even if you are not a swap dealer you might be so substantial that it's important to be regulated like the swap dealers and i don't know how many memrs you have in this coalition. do you have a sen of how many? >> there have been several hundred companies. >> several hundred companies. i -- to any of them have a trillion dollars what book? and again, i don't know where the sec and we will come out. we have ten commissioners, so it is a process we ave to come together on the congress i think has been clear into three categories it has to have something substantial to the economy or the financial or get -- markets were the words in the test so we come together with the fec, we will put out a

proposal. no doubt if there were x number of companies on the x negative one company will say not me. even if we said there were two companies the second one would say it's not me. but i think the congress has been pretty clear we will come together with the sec and most members of the collision number that you have this is a nonissue, but there will be somebody that with the congress is saying if they are so substantial they could have an affect that we need to tighten regulation. i think that's what that is about. does that help you? again, if you are representing that i don't know where we will end up, but i sure there will be a lot of energy by the company on the cusp. but that is where a lot of the rule writing is about is the cusp. >> can i have one quick follow-up question?

that's might you draw the distinction between hedging like the long term capital management situation hedging investment risk, risk of other investments versus risks associated with the business? >> i don't know but if i remember the gentleman i met with that fateful sunday september of 1998 they felt they were hedging their business and their business was investment, but i understand and that is why this is a good process we are learning every day this meeting is helpful and you also send comments. i think what you're suggesting, michael, is if you are a non-financial company hedging. is that what you're trying to get that? >> no, not necessarily. thank you. >> tom has a question. >> mr. chairman, treasurer of

the corporation and the president of the national association of corporate treasurers and we along with u.s. chamber, the business roundtable -- [inaudible] >> yes, sir. >> members of our coalition for the dividend end users and the concern that we have had all along has been to seek clear exemption from not only clearing but marketing for the end users and the reasons david gave in the beginning i would echo, but just from the corporate treasury standpoint, i can tell you that the concern is in order to meet the variable in some cases multiple times a day margin calls to be required the treasury have to hold a slight cash for the committed credit to meet the margin goals, and we have estimated for instance my company is a member of the business roundtable and that

group, the members of the business financial roundtable have to hold aside $269illion on average to meet the mrgin calls, and the consequences of th is that its $259 million not available for investment and expanding our plant and equipment in doing research and development and a growin the business and in the fact we have the estimate to the s&p 500 would result that effect would result in the loss of 100,000 to 120,000 jobs. and we'v been getting this argument the cost-benefit argument throughout the legislative process and it has been unanswered by anybody in government who is a proponent of the legislation and now that we are in this regulatory process, i would just be very interested to hear how you ar conducting the cost-benefit anasis as you consider the alternatives to the different regulations that you have called upon to implement.

>> generally what we are doing, we have a small but very good team of economists. we have economists throughout our agency would also a dedicated group and chief economist group out 15 or 16 chief economists. and so we are complying with another law that we have to do on certain rules. this is just one of them. again, i don't know where the federal reserve and the bank regulators and the ftc will come out on this. we just had a smaller slice for the nonbanks if you or an energy swap dealer or a commodity swap dealer, the interest-rate swaps and derivatives, the currency swaps and derivatives archly are and banks, not always but the bulk so the would be the bank regulators would take this up. but in the earlier debate and in

the situation is really about lowering risk to the american public and these large integrated financial entities would risk they have. so that's -- i dorecall the statute has language and purpose and so forth, so that will help guide all of us in this regard. so the answer to your question i probably can't answer the core because i can't speak to the process. it's an ongoing process and still a lot to be done. >> i think what i understood you to say is that you intended to do a cost-benefit analysis to weigh the alternative rules you might implement and -- >> what we do -- there is a part, i can't remember there's the paperwork reduction act and the procedures act and various acts on how any of our agencies -- we, again, intend to comply

with all of those laws ando i don't want to leave you with a false. but in each of those they have proficient on how to do a certain aspect of the cost-benefit analysis. so i'm not -- i don't want to take on more projects unless they are right there and we have to infil law. >> mr. chairman, let me in closing again repeat how much we preciate your willingness to come here not just today but engage in the business community. i think the one thing the audience should take away is that there is a terrific relationship with the outcome of this wave of the rules that's going to be required to implement dodd-frank come and our current economic conditions. so let me aybe invite you just and making a closing comment and thank youfor your openness with your thoughtfulness. some viewers might be left with

the impression that the derivatives by themselves are risky and a bad thing. i remember talking to one policy member who didn't follow close sinking didn't we ban those? can you explain why it's important that we have a vibrant functioning market in the derivative? what does it mean to the economy to get this right? we are doing over how best to do it but can you describe the need? >> derivatives which came about in the civil war when the farmers wanted to hedge risk, wanted to plant something in the ground and wanted to really narrow the price they might get at the harvest time and spend money on the ed and clearing the field and paying farm workers so this market developed first in chicago because the great lakes were there and it's a transport site. that marketplace helped thousands of farmers hedge their

risk initially. it ddn't get regulated about 60 yes. there were somebuses and problems and so forth. fast forward to the 1970's. at same sort of mechanism of hedging a risk jus like the farmer hedging the risk and secondly, very important, discovering the price, a local farmer was like getting the right price from the party buying of the grain elevator operator like to get a national price. so it is those two fundamental things just thinking of the farmer which it is completely but is happening today for every corporation. discovering the price that's really a national or international price and its in the competitive markets and hedging the risk. the 1970's it started to be on all oil and gas and on interest rates by the 1980's there was a new product called over-the-counter derivatives. it was not done on the central markets.

today, about 33 trillion, it's a big number, 33 trillion of the derivatives are regulated, they are called future. that is the notion on that. nearly 300 trillion are not regulated since eight or nine times the size and that is what started the 1980's is unregulated off exchange. but that exchange market and the regulated market both will now be regulated. one is called futures and one is called swap. they will be regulated and what they do was a fundamentally allow corporations, members of the chamber, small cities, government, hospitals to hedge a risk. they might be borrowing money and they want to make sure that they have a fixed payment for the next ten years. but the only way they can borrow the money is to pay floating-rate. so the swap is a way that you arrange to exchange about. you could be hedging the currency because you are exporting or importing. hedging and oil price or jet

fuel price. so it is fundamental to the american economy we now have nearly $300 trillion of these in this economy. that's about $20 of derivatives for every dollar of goods and servic sold in america. what's important and what the congress i did is say we want to lower the risk because sometimes these markets don't lower risk. sometimes they in fact come to terrible outcomes like aig where the system failed, the regulatory system failed, too, by the way, but the system failed, so we have to lower the rest because it's not all good. so the products themselves held discover prie, hedge risk, but we should bring a regulation to be eight or nine tenths of the market that hasn't been regulated the last 20 or 30 years like we've had in the regulated part of the market, and to make it more transparen so everybody gets better pricing. i'm giving my best shot at

explanation. >> i know that at one point during the day we tried to tie it to the predictability of the price for this weeke's footba games i'm not going to ask you to predict who will win the super bowl but -- >> i can't do that. there may be a swap somewhere with that might be a gaming contract and i think it is banned under the statute and we will comply with the statute. but i want to thank all of you. we are going to have differences. i mean, it was a dirty gracious opening and, and michael and others here, and mike will represent parties that, you know, but what the rules not to be complied with quite the statute. you always want us to comply with a statute but maybe not with your clients. [laughter] our role is to comply with the

statute and protect the american public lowering risk, promoting transparency. but i understand there will be some differences at times. but we need to hear those differences and eliminate the differences and we will turn from it and might narrow the difference at the end of the day you have a role process. please make comments on that process as we go along. >> let me commend you. tempting i think with the amount of work you got to do between now and what is it, 297 days from now to kind of sit in your office and meet with staff and white rules but i think from the date you realized getting the rules right require getting out and talking to people and the process you put in place will ma sure at the end of the day we get ths as close to right as humanly possible and we are glad it's in your hands and we appreciate you coming today. thank you. [applause]

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[captioning performed by national captioning institute] the largest independent interest rate and currency risk advisor. since 1991. before that, he was at jpmorgan. chatham probably has the broadest experience in the market place dealing with a range of companies that use these products. i know that chatham has been -- it will be hard to exaggerate the help that chatham provided during the entire legislative process cons to provite to the chamber and understanding what is really a complex area. if we are getting anything right. we appreciate your entire team and you're leading this panel today. >> thank you very much.

thank you, david. we have a great panel here today of people that are operating right at the place where the impact from the statutes will be the greatest, certainly in the end user category so what we wanted today is to have an opportunity for the people that are experiencing these changes, exactly how it is impacting them. so let me introduce the folks of the panel here. we have verrett mims. we have christine mccarthy. executive president, corporate real estate, sourcing alliance and treasury at the walt disney company and we have tammy evans, the director of global funding, investments and foreign exchange at i.b.m. and we have mitch bleske, the

assistant vice president and chief investment officer and treasury manager for trustmark corporation. i would like each of you to just give a very short description of the risks that you face and kind of on a macro basis how you handle it and really what is your involvement in this debate has been. >> so boeing basically has risks on several fronts. believe it or not we are one of the largest exporters. playing e would have to fi ure out a reason. but ultimately we do have foreign sourcing and manufacturing, so that's where some of our orange income has hatching from. on top of that real son of the company is a company who basically has these interest rates because as you know financing for plainness voting rates, but upon issuance itself

will have to manage that. also, we have the pension plan. and because of the pension plan we have to use interest-rate riveted to manage the duration of the planet wheels of the currency of programs whose managers how to use exchange and the counter derivatives as well. so for us to get into the debate is because we probably have a total of almost 20 billion no-show in a derivative and to make sure depending on what the margin requirement impact that we want to limit the amount of working capital and a sense that we're in the midst of trying to develop not one but two planes as you know. and so for us, it was very paramount for the company that we try to limit, like i said i'm in the amount of working capital that would lead the umpires. because it will create volatility in terms of how you manage your cash, which is what treasurers all over the country are named for being is where the source of liquidity comes from, making sure there's enough of it. so for us we didn't want that

type of volatile cash forecasting or even the impact the impact of just manage accounting itself. because as you know for a fat 133 which is now 815, we need to have a customized contracts that we can limit just the pml volatility for our shareholders. so for us there's as many impacts and that's why we've been heavily involved in the debate. >> christine. >> okay, the walt disney company is the leading company in entertainment come to the five recognized brand, disney, abc, espn, pixar and marvel. you produce and distribute movies and television shows. we operate network and cable television channels. we manage some of the most beloved and popular theme parks in north america, asia and europe and were the worlds largest merchandise licensor. and we also operate a wide range of websites. our focus is on the creation of high-quality branded content

using technology to improve the content and to make it more accessible to consumers. and exposing our businesses and brands across new media platforms and promising international markets. the users of the counter to riveted to manage the company's exposures, fluctuates in magistrate, foreign currency exchange rates and commodity prices. the underlying purpose of these derivatives is to mitigate the impact of changes in volatility in international markets on the earnings and operations of our businesses. in the normal course of business, through a centralized corporate treasury group, we utilize interest-rate swap, interest-rate caps, cross currency swap agreements, affects forward options and colors. we use these instruments to hedge only known him for tax exposer's and we do not engage in any speculative trading

activity. disney is exposed to interest-rate rates primarily through bartering activities. the objective here, using these derivatives on is to mitigate the impacts of interest-rate changes on our cash flows on the market value of our borrowings. primarily we use paychecks to pay floating-rate thoughts for interest rates management activity. disney also through our global business type dvds. the objective here is to use these derivatives to hedge exposures and to manage the earnings and cash flow fluctuation associated with currency rates, thereby enabling management to focus on the poor business, not on changes in foreign exchange markets. disney made its currency risk for the multiyear has risen, target and a high hedge ratio in the current year, declining thereafter. all of disney's otc derivatives are entered into under bilateral intracranial between disney and

financial counterparties. and we include collateral posting requirements for each party, which are based on each party's respective credit risk. our derivative site dignities are fully disclosed in our quarterly financial statements. as an active participant in the otc derivatives market or risk mitigation purposes, we have spent and will continue to be closely monitoring the investor labor to the completion of this rulemaking process prior to the implementation of the legislation. will also continue to evaluate both the direct and indirect impacts of this new legislation that will have on our ability to hedge disney's financial risk in a cost effective manner. thank you. >> tammy. >> thank you. this'll be an echo virtue party heard. ibm likewise is primarily involved in the foreign exchange derivatives and interest rate

market. ibm operates in over 170 countries and therefore we have a substantial exposure to foreign currencies. and so that is the biggest part of our portfolio. in fact, it's an excess of $30 billion foreign affects transaction that we do on the derivatives market. we also have interest-rate derivatives in place as well. similar to what verett said, that is variable interest rate and most of the deadly issue in the bond market is stretched so will put interest-rate swaps in place for that. most of our -- most of our derivative site dvds is complied with hedge accounting. so we use the definition that chairman gensler mentioned earlier but that risk and we believe that should help us be exempt. one of the things we are

concerned about is the definitional period of time and the lives in relation to come out of that aired in particular the substantial position and that in fact brings it back into the equation. so we, as christine mentioned, will continue to monitor the 500 rules that are coming out of this massive piece of legislation and ensuring that the rulemaking brings through the expected impact, but making sure we also monitor any unintended consequences that we learn from it as well. >> thanks, mike. clearly, a little bit if the outlier in this group, given that i'm a bank and not a corporation. but when i think about the risk that our bank takes, which is a $10 billion bank holding company out of jackson, mississippi, we are very much alike the corporation in terms of the risk we need to manage.

clearly, i risk a slightly different and we do offer what we call our customers as well. but the underlying purpose that is managing risk for the two main reasons we as derivatives first to be from managing the balance sheet standpoint. each bank takes and deposits a month of those deposits to its customers. unfortunately can't take it what type of structure depositor structure of law and our customers play. it's what we have is this mismatch between the timing of those liabilities in those assets take into account, for instance, today's rate environment were very low interest rate environment customers on the deposits paid want to say racial or. and on the corporate side corporate dollars want to go out and extend their bartering and were putting on long-term assets on the balance sheet. and so, what route right now is the risk to raising rates. and so we'd like to be able to do, we want to build to do and do with a least onerous

processes began as put on a pay fixed receive slot. unfortunately, again our goal of this pg pointed out, it is never for the purposes of their hedging transaction. and that really leaves me to the next step is we don't always have the right assets or liabilities to use as a hedging tool. and from the customer standpoint, we also offer customer derivatives. and you cheer, why would you do for street during foreign rate lending. we might be in a position i risk to higher rates. one way to that risk is put out a asset as opposed to a fixed-rate asset. so customer comes to us. we say we don't want to do a long-term fixed-rate love with you. you want to put on our balance sheet épee debris and most and will go out into the market and provide them a swap engadget right with the street, with a major swap for discipline. for those of the main reasons why we do the derivatives. in terms of this reform, we're

feeling rather comfortable about the way things are landing, but there are some concerns about some additional capital, additional costs, which unfortunately do tend to work its way through systems and that's working with much smaller companies than we have in our panel come with general or middle market customers around the south. >> well, recently certainly this debate in this discussion has enlivened the corporate treasure community for more than i think any other issue in recent history. now i know that some and there's -- in the debate has really argued that derivative reform is the way it's originally been lined up is really going to be beneficial for end-users. this is a positive thing. and that the opposition that sometimes you hear from the end-user committee for community

is really driven out of influence from the wall street banks. i guess i'm curious how and why are you getting involved in how do you see it really impact the new? what are kind of the biggest issues? maybe i'll start with you, christine. >> for us -- for us it's all about cost. in outcome i think the banks have to fight their own battles. we manage risk inside the walt disney co. to mitigate fluctuations that are outside of our normal business activity. so changes in current the market changes in interest rates, interest rates could significantly impact our bottom line earnings with hedging. would've been a risk making movies, making tv shows, running cable channels come in disturbing the product worldwide. so jacked in a lot of financial volatility into earnings is something that we don't think investors or employees and other constituencies that to the walt

disney company for. >> i think for us -- to jump in, all three of very large pension plans. and so because we want to make sure those pensioners, we want to manage the risk of interest rate and assembly of the viability we know we have to fund. and so of course other people at large pension plans have not frozen their pension plans. away 544 billion pleasant entire benefit an entire contribution plan. were very interested to make sure that money is actually funding the pension and not being used are set aside because the pension plan itself is now a financial entity is now part of the legislation would be subject to marshman clearance. and so for us, very interested to see how the rulemaking will affect that. >> may talk about cost. have you quantified or looked internally assayed what she was

assume this is going to cost you? >> for ibm, i guess there's two aspects to that. obviously there will be some sort of cause that will be passed down to f. as an end-user participated in the derivatives market. we don't believe that there will be significant and have a significant impact. unfortunately and probably others on this panel will have such a large number of banks that we work with that we believe will still be able to be somewhat competitive, which should mitigate some of those costs, although they will be there. the bigger question that was going to be if we are pulled into the margin. a novice or that the cost to our business. and that is a significant impact to the -- you know, right now our portfolio of the derivatives portfolios between 40 and 45 billion or so we last reported in second quarter.

and depending on where the market shifts, i mean, you're talking you could potentially have upwards $5 billion of capital that held up in margin requirements. that equates to, you know, years worth of acquisition. and so, that would either eliminate the ability for us to go and acquire companies or do some organic growth. the product that we want and obviously as tom had mentioned earlier and impact on jobs. >> i would echo that as well. the walt disney company enjoys a wide, stable counterparty. so i don't think will be constrained in having a competitive marketplace they are. it is the potential margin requirements, which not only have the financial and liquidity burden, but also in the straightest burden. so that something would also have to factor into the equation.

>> let's talk about transparency a little bit. that's certainly been a topic and it's a very worthwhile goal for this process. and price discovery -- talk a little bit about how you go about price discovery at this point and whether transparency or how strong the transparency is. >> we have a number of platforms that we utilize that we believe creates a lot of transparency when we as current macs are blue burger or any other platforms out there. and again in the large number of bank relationships we have, we believe we do a very good job at giving the most competitive price in the market. where we have a little bit -- is that there's a certain type of transaction, very large transaction or the unique transaction, that may require us

to actually get on the phone and do some phone calls. and so, a little bit tougher to price in that particular market. but frankly that's where we have a concern that the new legislation. and you had mentioned my liquidity. to the extent we are trying to get a large trade through, there is a concern out there that the real-time reporting that has been discussed in the transparency that were all for could create a problem for us because a particular bank may not want to take on that trade and have the real-time reporting out there and subject himself to not being able to hedge that particular position that they are now in without increased pricing there. >> explain that just a little bit more. >> sure. so, if we wanted to do, you know, say we issued 2 billion of bonds and so we wanted to take that fixed-rate bond and swap it

to floating. if we went out there and wanted to do that with the bank, they may be -- they may not want to take a $2 billion trade, put it out there for real-time reporting for everyone to see and everyone know their position. and again it affects the pricing they get as they hedged this floating-rate position that they've taken on. now, there is discussion as chairman gensler mentioned in his earlier speech, is that at what point does it fall into large block trading rules. and so is 500 million in number where larger than that it becomes a delay in reporting today that bank time. if that doesn't occur though, will that bank even do the trade, what's the cost are going to tack onto us as a result of that trade. or do we have to break it up into multiple trade, smaller trade, which increases the operational burden on that as

well. >> so in other words, transparency is good, but sometimes too much transparency can be problematic. so it's navigating now. another question and just for anyone, some have suggested certainly with the credit him all the credit crisis that we've had that clearing is really good for companies and it would integrate them against counterparty risk and they should prefer clearing over trading directly with the banks. why wouldn't anyone want to clear? >> pulsar with this. it impacts me the least and they can invent a little bit. you know, as a bank, we generally enter into a support nx and which are in that position would be covered to the extent that exceeds threshold research and collaterals. the implication that we would have would just be the

requirement of some initial margin, which requires us to put money up front as opposed to as the transaction involves throughout time and maybe a negative position to us and requires us to utilize the quilty and support our business money. the other issue of course is margin general is going to be more restrictive than the type of collateral. we may not be able to use some of our investment security assets that we have on the books that are earning a much better yield and alternatively we have to use cash his orbit more expensive. so those are concerned on the margin not supposed to going from not going to something, which i think is going to be more of a challenge for the community banks that we serve, which i just don't see them from two standpoints. first, working capital issues they can get into. secondly probably more importantly is operationally. a small metal arcade customer is

$10 million in revenue does not sun in the back of a second support the business of passing cash or collateral back and forth with the bank or third party. to me it's almost ridiculous to request that. and what in turn will will become onerous for them to be able to do that. and that's where going to have to only offer that fixed-rate lending. while a first step offering fixed-rate lending, the cost is going to go up because we have to get paid to take that risk on the ballot sheet. panache as a matter of fact unfortunately. >> one other thing that i would mention that also is a factor for us for clearing is clearing also leads one to believe you're going to have were standardized contracts. and with ibm, particularly we've got a lot of contracts that are standardized. we do some single average rate forwards and double average rate forwards and reduce concurrency transactions that are really out

there in the market very act of leave. so given that, right now the way that we are able to structure this contract, we have nearly perfect hygiene between the two read the date our exposure. so with we have to go to more than standardized contracts, what that could mean us more volatility in our income statement with those in effect admits increasing or lots of hedge accounting, which would be worse. >> i echo that as well. >> i do as well. and it's just not small metal markets company billing a bit of people sitting around doing collateral, you know, she cannot operationally as well. so i think for us, to come were definitely taken a look at her counterparty we don't consider the clearing is getting as much the benefit. since those people actively a shopper deals are looking in the market to see what's going on.

>> christina, let me ask you this. there were policy features and legislation. some were received very positively from corporate treasuries and others were sources of concern. but parts of the debate to you think was the most agreement? >> well through it mistral. a couple periods ago. increased government that leads to more transparency, that gives legislators more visible at ability. it's certainly a positive other arrests are building up an assist on. it's better to know about them sooner rather than later so i don't think there's any debate around that portion. i think you really get down to some of the ambiguity around definitions and this whole issue over and users and margin requirements potentially. so i think when you go at the 20,000 vote levels, you know, i think this is a good thing. it's when you get down into the nitty-gritty and into the

granularity. and you know, i speak for a lot of end-users that we used these to hedge commercial risks. and we don't hedge all of our risks. there's certain currencies that are to a liquid, too expensive and they're not that significant, so will choose to manage our own risk. but when i look at the overall portfolio of risk that we take him either from interest rates are foreign-exchange primarily our commodity risk is pretty nominal. but when i look at the interest rate on the foreign exchange risk, and for not able to do that, that significant. once again it all boils down to the definitions in the nitty-gritty of this legislation. >> anyone else have anything to add? okay. to what extent, there's a lot of uncertainty at this point, you know, through the whole debate and now the legislative phase to

the rule-making phase. how is this impact did your ability to play in -- plan and a vast? >> i can speak for ibm. one of the things that our senior leadership has done this a few years back they rolled out what we call the 2010 were not. and i was rolled out obviously internally, but externally as well. and they laid out what we'd expect from that perspective here in 2010. so here we are in 2010 and we knew that we needed to forecast out a period of time having already met our goal for 2010. and what we have said we would achieve. so that whooshes rolled out a few months back and i guess it's our 2012, 13 is rolled out the time. so we actually went out five years, 2013. and so we've rolled out we

expect our eps number to be at least $20 in 2015. now with that comes a lot of forecasting and a lot of planning over for a long period of time, five years. so there have been certain assumptions that have been made with regards to currency. again, operate in a 170 countries you have to factor that in. one of the assumptions is that we continue with our robust derivatives hedging programs that we have in place. so to the extent we are impacted by any of this, it starts to impact a message that we have given to the street and basically again the roadmap of our company and what we're expecting in the next five years from a financial is. so a lot of work is being given in monitoring both the impacts on the rule-making as well as the changes in how that's impact to the way party laid out