at 2:00 p.m., we have a book launch. "the fine failed state, the north korean threat to international security" -- this will be a terrific even at 2:00 p.m. grab a bite to eat and come back. with that, please join me in thanking dr. hecker. [applause] >> of according to a government report, u.s. banking an profits grew. we will hear from the federal deposit insurance corp. sheila bair next on c-span. today, the european union urged the irish government to approve a budget plan for 2011 in order

to get some financial assistance from the eu and the international monetary fund. we will hear from ireland's parliament and prime minister later this hour. then president obama visits the chrysler plant in kokomo, indiana. >> here are some programs that c-span is airing thursday starting at 10:00 a.m. eastern. jeff bridges talks about his work to reduce youth hunger. jane goodall and her work with animals. john pauls discusse stevens. thanksgiving day on c-span. >> now an update on the banking industry's performance in the third quarter of the year. we will hear from officials at the fdic. sheila there is the chairman.

the fdic is responsible for insuring up to the tune of $50,000 at most commercial banks. this is 20 minutes. >> hello and welcome. lower provisions and losses are driving bank earnings. industry earnings in the third quarter totaled $13.5 billion. this is a substantial improvement from a year ago, but less than banks reported in either the first two quarters earlier this year. last quarter, almost all -- the

proportion of institutions reported positive income rose to the highest level in more than two years. lower provisions for loan offers were the key factor in driving earnings higher. insured institutions set aside almost $35 billion in provisions in the third quarter. that is $28 billion less than they set aside a year or earlier. the decline in loss provisions corresponds with an improvement in asset quality. as you can see, both net charge- offs and current loan balances decline for the second quarter in a row. the improving outlook has encouraged some institutions to reduce quarterly loan-loss provisions. it resulted in reductions in their total loan-loss reserves. almost 60% of institutions increased their reserves, but the dollar volume of reserve reduction exceeded reserve bills. most large banks had substantial reductions and the magnitude of the reductions overshadowed the

reserving that occurred mainly at smaller banks. as a result, as you can see, the industry's coverage ratio fell slightly, even though current non-loan balances also declined. it is not unusual when troubled loans are declining. we are seeing an improving trend in credit quality. as this chart shows, a troubled loans should remain near historic high levels of the coverage ratio is still low. many institutions came into the recent crisis with inadequate reserve levels and they need to exercise restraint in drawing them down now. at this point in the credit cycle, it is too early for institutions to be reducing reserves without strong evidence of sustainable and improving loan performance. institutions should always air on the side of caution. -- always err on the side of caution. at some point, the industry must

begin to grow its revenues and long growth will be an essential ingredient. this shows that the declining trend in loan balances appears to almost have run its course. total loans and leases held by fdic insured institutions declined by 0.1% in the third quarter. if not for the change in the accounting world that brought securitized loans back onto the bank balance sheets earlier this week, this would have been a small decline in two years. many large banks have had sizable reductions in their loan portfolios of the last couple of years. but in the third quarter, such reductions were notably absent. i hope we are close to seeing genuine increases again. however, surveys show that the demand for loans is increasing. it is in backup -- it is important to keep in mind that some institutions continued to

experience distress. almost 19% of institutions were unprofitable in the third quarter. almost 36% had lower quarter earnings than a year ago. the number of problem institutions continues to rise. 149 institutions have failed this year. they have already exceeded the 2000's -- the 2009 total of 140. but we expected the total assets to be lower than last year's. as we have indicated before, we anticipate fewer failures next year. as the banking industry continues to recover, we also see a positive trend in the deposit insurance fund. the deposiinsurance fund balance at the end of september was -$8 billion, compared to - $15.2 billion in the prior quarter. if this -- this balance remains in negative territory.

after declining for seven straight quarters, the debt balance has now improved for three quarters in a row. at the end of the third quarter, our total cash position was just $144 billion, approximately e same as june. while we expect demand on cash to continue, our projections indicate that our current resources are more than enough for anticipated fellers and meeting obligations for banks that have already failed. the industry has come a long way in cleaning a balance sheets, increasing capital, and adjusting to the markets and the economy. but the adjustments are not over. this is no time for complacency. the recently disclosed documentation problems and

foreclosures have race problems of the contingent liabilities they might face. if they are not resolved promptly, the process will slow down and resolving problem mortgages could delay the u.s. housing market. we welcome the federal reserve's stance on dividend buybacks by large bank holding companies. banks should be conservative with regard to the evidence, bonuses, and other payments that could impact capital. as we continue to emerge from this devastating financial crisis, building capital must remain a priority so they can maintain a ready access to funding and continue to help intermediaries. i will take your questions. >> does this mean that it will get easier to get a loan? >> i hope so. i think so. we want prudent and safe and sound loans. yes, i think there has been a lot of bells should repair.

the fact that we have not had more significant -- a lot of balance sheet repair. but the fact that we have not had more significant declines is a significant sign. >> can you explain what you mean by questions about contingent liabilities that they might face? what consequences do you see as possible? >> we have already seen significant public commentary about investor and happiness. obviously, the securitized service loans have warranties that could be impacted by that situation. we do not have all the facts yet, but it is something to be aware of. >> can you explain further? it seems that the fate of large and small banks are still diverging. the larger banks are doing much

better. is that what the -- >> i think the smaller banks are getting healthier sooner. it is not as fast as the larger institutions. commercial real estate continues to weigh on the balance sheets of many of them. the community banks are improving as well. their loan balances have remained more constant. yes, they are little behind the bigger banks, but they are improving, too. >> can you give us another head- update on -- >> >> i think it is important to,

that is part of the fdic, but completely autonomous. we represent about $2 billion in potential recoveries. obviously, you are right, we probably will like and more that. there will be many more. if deposit insurance is a very valuable thing to have and it does require herbal hide -- does require high standards, it is important to be able to attract the boards. we tried to be very balanced. even -- and targetted when we bring cases. the criteria is gross negligence. there needs to be clearer violation propagation. when do we do that, we know we are wise to proceed. it could cost taxpayers money

which backs the fund. they cordate with the fbi and i would refer you to them related to the aig investigation. thank you very much. >> 0.1%, the trajectory seems to be going up. how confident are you that that will be positive next quarter? >> these cycles tend to run in

fairly predictable ways. we had the declining commercial loan balances for several consecutive quarters. wednesday the recovery came, it was pre consistent. you have seen, through the regulatory survey, that lending standards have changed. i think loan demand has lagged behind. large companies have gone straight to the market in recent years. they're starting to come back a little bit more to the banks. small businesses have lagged behind somewhat. they are seeing a lot of demand for their products. it has been a slow turnaround, but, once it does take place, then it will be sustained. >> will it be 0.1% again next quarter? >> we do not have a prediction for what it will be next

quarter. but history shows that the cycles of contraction are very sustained. they run their course. and the cycles of expansion are sustained. and they run their course as well. we expect expansion in the next couple of quarters. >> i would add that many institutions have a tremendous amount of liquidity at this point. as demand picks up, institutions are ready to extend landing. i think that is certainly -- once we see the economy pick up, we should see activity on the alongside. >> we did see unused loan commitments expand. that is kind of an indicator of credit availability at least.

>> the chairman talked about the need -- her words exactly is the these are not the time for complacency. thus far as the provisioning -- as far as the provisioning value, are you recommending banks -- what are you doing about it if you were worried about complacency? >> law loan-loss reserve provisioning is the major area of focus of our on-site teams, all the regulators. this has been communicated directly to the institutions. where institutions stand right now is very important to understand.

if they are seeing improvement, this improvement can be sustained and, understanding that the good news in the economic environment in which these institutions are operating in, they should not be too aggressive in pulling back. >> is probably a unique environment. we still have a high volume of problems out there that have already been reserved against. the economy is getting better, but it is a slow expansion and it has not reduced unemployment that much to date. in that environment, banks are trying to find the right level. i think all we are doing is asking them to take into account that uncertainty and make sure that they're prepared for dealing with the problem loans that still exist on the balance sheet. >> most banks are still increasing their reserves at this stage. the overall industry average is

reductions at the bank stage and they are leading the recovery. >> what about the litigation of the foreclosure mass and foreclosed banks and additional guidance there? are there any instructions to make sure that they are provisions for those potentially? >> the industry is in the process of doing some on-site the valuations of institutions with the largest mortgage banking operations. once that information is gathered and it covers all the averages you just mentioned, there definitely will be some guidance to follow.

>> the was there at a factor besides the decline that you attribute to capital growth? >> no. i think we indicated it had a substantial increase, one of the largest we have seen of late. i do not have a particular list of what specific institutions are growing their capital. but we did see capital ratios grow across the board. i think we did see substantial improvements in capital positions. it is not confined to just a few institutions. >> is that because institutions are not applying capital? >> they are adding to their capital. in the aggregate at least, it was through other than retained earnings. we did see growth in the capital balances.

>> there is this balance of -- this process of balance sheet repair. is there anything that is starting to fall? dividend earnings and things like that, it is a combination of bankers the build capital, recognizing problems, not recognizing losses and move in the balance sheet into a stronger position. going forward, that is a sign of strength for the lending capacity for the industry. going for, the industry is in a better position -- going forward, the industry is in a better position. we seek the u.s. auto fleet and trucking fleet getting older and need replacement. we see a middle market started to build inventory. that is leading to some loan demand now. the industry has really improved its balance sheet position to meet that demand.

>> any other questions? all right, everybody, thank you very much. >> the financial stability oversight council wrapped up its second meeting and set a deadline by the middle of next year to identify which derivatives clearing houses will

be subject to federal supervision under the dodd- frank act. it was provided to -- it was signed into law by president obama earlier this year. this is 25 minutes. >> this agreement will help promote stability across the global financial system and places u.s. firms, which are comparatively were capitalized in a better position. -- comparatively well capitalized in a better position. at home, we have begun to build

this council into a lasting institution for cooperation. we published an integrated road map for implementation, reflecting both our shared responsibilities and our individual statutory mandates and requirements. we have adopted best practices on transparency so that implementation efforts will provide opportunity for the public to understand our decisions and help participate in shaping those decisions. in that context, we received thousands and thousands of comments on these two initial request for comments. i want to thank those of you who have taken the time to offer your perspectives. one of the great things about our process in the u.s. is that you will be able to see these regulations in draft before they are finalized. that helps to make sure that the people around this table and in this room are better informed about how to make sure we are achieving the objectives of along and regulations, making

the more practical. the members of this council have made a lot of progress in moving quickly to begin the process of rule-writing and bringing more clarity and certainty to our financial markets. just looking forward, in the next few months, the council will make a set of decisions. there will be very consequential to the reform bill. in january, the council will propose a rule governing designation of non-bank financial institutions. this critical step will help the council to place under heightened oversight all financial institutions, not just banks, that could represent a threat to our financial system. the second priority, in the middle of next year, the responsible agencies will have outlining rules for oversight of derivatives markets, strengthening and bringing transparency to a part of the

financial system the played a very important role in this particular crisis. third, we will work to bring better clarity to the authorities that the law provides for an orderly liquidation of a major financial firm that faces the risk of failure. this authority was absent prior to the crisis. it is designed to help taxpayers from a bearing the cost and limit the risk of collateral damage when firms make mistakes. it is to help produce the moral hazard risk that we all live with in this financial system. fourth, we're working to bring transparency to mortgage disclosure forms and credit card agreements to help protect consumers better and help them make more informed financial decisions. those are a list of core primary items in the coming months. in today's meeting, this open session, we will do three specific things. first, we will listen to a

briefing, an update on work under way to adjust a range of problems in the mortgage documentation for closure process. we will turn to a discussion of designation criteria for financial market utilities and vote on advanced notice of rules making. finally, we have tv a procedural votes that will come to. let me just end by thinking again e work of the members of the council and their staff who have taken on an enormously challenging burden and are doing an excellent job getting this process and putting the reform in place. i compliment them for that. we turn to the mortgage foreclosure process. i want to turn the floor to the assistant secretary of the treasury and as michael to give us an update on the work of the

task force in that area. >> thank you, mr. chairman. on behalf of the foreclosure task force, how would like to give an interim update on status and reviews and the mortgaging system. this would be a normal part of a process to keep the council abreast of material developments in the financial sector. the foreclosure working group has five key objectives, determine the scope of problems, holding the banks accountable for fixing the problems, making sure individuals who have been harmed or given redress and that harsh penalties where appropriate for their actions, getting a mortgage servicing industry to do a better j for households and -- household in and actingdifficulty, enactin in a way to hold firms accountable. there are five tier areas under review. first, foreclosure process,

second, lost mitigation, third, put backs, fourth, securitization trust, and, lastly, disclosures. reviews are ongoing and expects to report back to the council at the january meeting with initial findings. in the interim, let me make a couple of key points. first, we're working to bring clarity and certainty as quickly as we can, but reviews will take time. second, the bulk of the examination work to date focused on the foreclosure process has found widespread and, in our judgment, inexcusable breakdowns in basic controls of the foreclosure process. these problems must be fixed. let me provide a brief overview of the extent of the reviews. earlier this fall, we formed a foreclosure task force at your request. 11 federal agencies, including the relevant as dog entities and the ftc, the department of housing and the department of urban housing and development,

certain law firms and other matters, the working group is also courting closer with the state, the attorney general's, and state bank regulators. the exams are designed to test the inadequacy of bank assessments and make sure that foreclosures are completed in applicable legal requirements and that affidavits and claims are accurate and to determine whether troubled borrowers were a properly -- the scope of work for foreclosure governance is significant. organizational structure and staffing and vendor management, quality control, loan documentation, including

custodial management and foreclosure process is. examiners are conducting interviews of personnel and reviewing samples of individual foreclosure files from every 50 states. examiners are expected to complete on-site field work by the end of the year. once this field work is completed, regulators will aggregate results across institutions to ensure consistency, prepare supervisory letters, and return supervisory actions that may be needed. the regulators will draft a horizontal foreclosure report that identifies the range of industry foreclosure practices and common foreclosure governance and weaknesses that need remediation. they are targeting to complete this work by late january. in addition to reviewing the foreclosure process, there are ongoing as compliance procedures.

separate and apart from the foreclosure and provocation violations, servicers may face risk for originating loans during the height of the boom. origination cutbacks at relatively large scale have been occurring for some time and will likely continue for several years. there have also been concerns raised regarding whether documentation problems exist with respect to loans and securitization trust. regulators have begun to review compliance by servicers, custodians, and trustees with procedures required by servicing agreements, trusting custodial agreement, and related contracts. in late october, with respect to sec wrote a the f t letter about the related risks and costs.

major financial institutions are being reviewed for problems across a wide range of issues, lost mitigation, origination put backs, securitization trust, and disclosure requirements. these reviews are ongoing. the task force will report back to this council at the january meeting. >> thank you, michael. any questions or comments for michael? thank you. we will turn now to the discussion of the advance notice of proposed rulemaking, seeking public input on criteria used to designate market utilities. why is this important? the payments, clearing, and settlement systems of our financial system and the rules that the financial market utilities play in that system are critical to a well

functioning financial system, imposing higher or consistent standards on the financial market utilities being the key piece of building a more resilient, more robust financial system. one of the critical responsibilities of this council is to take the first step towards that by designating systemically important financial market utilities. we will listen to a brief introduction from the treasury's office of financial restitutions. he will be joined to answer questions by three others. lance, give us an introduction to the rule. then we will have a discussion if necessary. >> thank you, mr. chairman. this is the first up in the canceled rulemaking process for designating systemically important financial market utilities.

such firms may concentrate risk as well. title 8 of the dodd-frank act provided the council with authority under such firms. the council shall designate those utilities that the council determined are or are likely to become systemically important. the financial market utilities defined under the statute as any person who manages or operates a multilateral system for the purpose of transferring, clearing among financial institutions or between financial institutions.

the failure destruction to function a financial market utility to increase the significant liquidity problems spreading among financial institutions or markets and thereby threaten the financial system of the united states. through this motion, the council seeks to gather information as it develops the specific criteria and the analytical framework by which you will designate these utilities that are systemically important. it provides the public with 30 days to provide comment. the npr will be provided with a notice of proposed rulemaking. this is npr does not address the analytical framework for clearing nativities carried up by financial institutions which will be considered separately. >> thank you. questions or comments?

chairman bernanke. >> your last question talked about -- there was a lot of clearing and settlement in the last quarter. sorry. your last question in the npr talks about international considerations. obviously, a lot of clearing and settlement is across the border. could you talk about what you have in mind there and how the international aspects of an institution could affect its designation? >> as you mentioned, mr. chairman, the most financial markets are global and cross- border in nature. increasingly, the post-trade process these are also spending borders and becoming more integrated. in determining the systemic importance to the u.s. financial system of the financial market utilities, the council may need to consider several international aspects of those

utilities, such as, weather, the utility is subject to liquidity risk from u.s. dollar and non- u.s. dollar transactions, the degree to which it has reliance on foreign financial institutions for such things as settlement services for contingent liquidity provisions, for example. >> thank you, jeff. german shapiro? -- chairman shapiro? >> let me express my support for the a advance notice. my staff worked very diligently across many agencies to get it done. i think it is very important, as we go forward, to address an system that we work

together. i would encourage investors, industry, and other market but dispense to comment and give us the best of their knowledge and expertise on this. excuse me. it includes exchanges from a definition of the dfmu. i wonder how that affects agencies who are affiliated with the exchange as some more. >> chairman shapiro, the clearing agency affiliated with an exchange could be designated as such. the act does exclude certain entities from the definition of financial market utilities, including exchanges, depositories, alternative trading systems that may be registered with the sec or the

cftc. they are excluded to the extent of their activities that are required to be registered with one of those two agencies. beyond that exclusion, just because there is an affiliation with a clearing agents say, that would not affect the possibility it could be designated by the council as systemically important. >> thank you, robert. german consumer -- chairman nzler.e lawyege >> they have a new role.

in a new act, swaps will be clear. this is so important. we currently regulate 14 clearing houses. some of them, we co-regulate with international regulators. that might grow to 20. but i think this is an important role. we are writing rules right now. we're consulting heavily with international regulators. but our mandate is to try to write these rules by next july. we're trying our best to follow international standards. my question for the team -- if something is designated as systemic, although we have a clearing house is, what is the consequence? >> if the financial market utility is designated by the council as systemically

important, it would become subject to credential and supervisor provisions of title 8. these include first conducting operations in compliance with applicable risk management standards, which could be higher in some respects than those applicable to other fmu's. the regulatory review procedures may vary from those that would be applicable to others. third, being subject to applicable examination and enforcement provisions -- the supervisory agency would be required to conduct an exam of an fmu at least once a year. >> what is the example of something that might be higher standard? >> in the case of derivative

organizing, a rule has been proposed that required that, if you were designated as system important, you have sufficient financial resources to meet the default of the two largest risk exposures. the standard that applies to ofer dco's is the decline the single largest. >> we are trying to finish by next july. it is our hope and recommendation for this council that we would hopefully be able to move through this designation by that time or at least somewhat similar to that time. that would bring the greatest clarity. >> ok. other questions or comments? >> also would like to thank the staff for all the work that has gone into this. i am wondering whether staff has some sense as to whether the

fmu's would necessarily be those that process key financial markets or whether they might be bell value fmu's that might systemically important. >> that is a good question. >> the designation is not necessarily limited to just large-value organizations. it could apply to small-value payment, selling organizations as well. >> any other comments and questions? thank you all for the work in this area. we now move to the two administrative procedural issues. the first is an aspect of the committee structure.

we've sent recommendations that were developed by the staff to set up a set of committees. before we go to the committee structure, i need to ask you to adopt the resolution adopting publication of these. i need a motion to adopt the resolution. and a second. all a favor? any opposed? excellent. now to the committee structure. we stipulated before and our colleagues have discussed a said of standing committees that will allow the council to operate. i want to make sure that that structure is acceptable. i will not describe it here. we will put it in the public domain if it is adopted. does anyone have any questions or comments about the committee structure?

if not, ask for a motion to adopt and approve this proposed committee structure. a second? all in favor? any concerns or questions? excellent. the final administrative matter is the minutes. does anybody have any questions or comments, suggestions? hearing none, can i have a motion to adopt and approve the minutes of the first meeting? a second? all in favor? excellent. are there any other issues or questions before we adjourn? ok, thank you all for all your work. i appreciate it. a motion to adjourn? thank you very much.

aqua why ho >> today, thireland as for financial assistance. we will hear from the parliament and the prime minister next. and then present obama visits to the chrysler plant in kokomo, indiana. later, there will be an update on north korea. >> congress is out this week for the thanksgiving day. the house and the senate will work on the remaining fedele spending for this budget year. the senate continues work on food and drug administration oversight of food recalls. live senate coverages on c-span

2. the house is here on c-span. the new congress begins next year. members will be sworn in january 5. among them, there will be 16 new senators, including republican likely of utah. he repeated -- he defeated robert bennett. he then won 62% of the vote in the general election. in delaware, chris comes defeated christine o'donnell for a seat that was once held by vice-president joe biden. >> the irish prime minister faced leaders of the opposition party in the average parliament for questions about the financial assistance package from the european union and the imf. the key u.s. and imf have extended a $5 billion in euros of emergency loans to the republic of ireland. the prime minister is also referred to in the irish word

for prime minister. >> in the past week, we have seen the authority and the trust of this government evaporate. having been told only last week that there was not a need for any outside intervention or

outside help about a financial bailout, would have now seen and the people have watched in horror from their point of view as the imf, the ecb, and the european commission in dublin. within three days, you, yourself, announced a formal application for a bailout. yesterday, we saw the spectacle of your absent friends withdraw their support from government on the basis that they had been betrayed and that there was not proper communication within the cabinet. it seems, following the press conference yesterday, there is an ongoing attempt to cling to power at all costs. at this time of crisis, what our

country needs is confidence and stability. it has neither at the moment. people who have money in banks are concerned as to whether they should leave it there on the basis that your budget might not get through. it is very important to reiterate to those people that their money is safe. i want to assure you that this party will act constructively in the interest of ireland and in the interest of stability and confidence that is needed both here and internationally. that is why we have been working since before the dawn this very evening to send out a signal internationally about the importance of the 5.5% tax rate, such a fundamental cornerstone of any direct investment in our country.

>> we have limited time for the leader's questions. >> that is why i except your invitation to go against the delegation that is here from the delegation commission. i do have one specific request to you. it is this there are two days that you have within your grasp that can restore certainty and that can restore a sense of confidence. the first of these is the budget. you have made the point of the importance of the budget being passed. tomorrow, the four-year fiscal plan will be presented. before that is in effect, the budget for 2011. what i want you to do now, in the interest of being constructive here, in the interest of certainty and stability and confidence, will you tell them now that you will

bring for the budget next week? as you are aware from your experience, a slimmed down version can be put through with the key ingredients of that budget. i will facilitate the house sitting from monday to friday until all of that has been completed through the legislative process by christmas. this will bring some measure of certainty to a government that is out of control. >> first of all, there is no question the characterization that clinging to office is my motivation. that is not my motivation. my sole motivation is to ensure that the four-year plan is published and that a budget is passed by the house.

commissioner rand has made it clear that he does not want to see the situation without address by the new year. i suggest that we proceed with the budget on the day that we have set out. we want to do that and do it properly and do it appropriately. i agree with the commissioner when he came to talk with the minister of finance. we very much agree that the best statement of confidence for this country is to pass that budget. i think it is very important that it happen. i do not wish to go over again some of the issues that were raised in his remarks. unfortunately, is becoming -- i

want to make it clear. i refuse the specific reports last week that were put to me. firstly, that we had in fact applied. secondly, there was interest perhaps for people to do that immediately. but i was very anxious to ensure that i represent the taxpayers, that i represent the people of this country. in relation to the technical discussions taking place, we wanted to make sure that whatever concerns were being expressed that we were made aware of them and that we could deal with those issues. the political position made on tuesday night, that matter has moved around quickly, as you know. i just want to make that point.

there is -- there is no intention of any government at any time but to represent the people of our country the best we possibly can. i was simply responding truthfully to those specific reports that were untrue at the time. as you know, on sunday, we may formal application, having had the opportunity to set some parameters for these discussions, including the importance of the 12.5% coverage as the cornerstone of our industry. the second point i was making is that it was unusual in the situation for a country would not have considered a class

facility at some point. but it is clear that the perception and opinion and the view of the g-7 and others that we would consider this matter. we were prepared to do so. we do have international obligations, but we must also protect our own interest the best possible way we can. that is simply what i want to say in relation to that. there is no intention, no motivation, whatever by me or anyone in this government to deceive anybody. we're simply trying to make sure that we have room to maneuver what is constrained or limited, that we not be bounced into a situation, to look at the situation and the company we walk with, listen to concerns, and we made sure that the

parameters of the decisions we were about to make were consistent with what is public best for the country. in relation to the other matter that the deputy raises, i set out clearly in a statement yesterday evening what the government's intention is. we believe that it is true that the statement of confidence is necessary. we will publish our four-year plan as we said we would and submitted to the european commission. -- and submit it to the european commission. i do not want to anticipate what those are. we will deal with those issues as probably and as is possible to do in order to bring certainty to the situation. i believe that, in the new year, it will be making that point.

it will be an opportunity for us to go to the country and have the country make the decision as to who should have the mandate and continue the challenging work that faces this country for years ahead. if we delay that situation -- i know that there are some of genuinely feel that we should have an election at this time -- we need to pass this budget as we said we would. we need to proceed with the timeline. it is a 6 billion us correction that has to be brought forward. -- it is a $6 billion correction that has to be brought forward. we need to continue to do that in as a focused and calm a way as possible. >> you have used two words that are important. first, you referred to the immediate priority. second, you referred to

certainty. these are not normal times. this is not business as usual. frankly, i have no interest in attempting to play political games with something that is as serious for the people of our country as the situation is. the fact that you are absent earth while friends are not here, i am not sure that there sacked or are about to be sacked. that is for you to decide. i do not accept that, if you want to bring certainty to this matter with respect to the budget, that you cannot do so next week. it was very easy for the government to bring in a bill overnight to take $1 billion off of pensioners who are in nursing homes -- overnight. what is at stake here is certainty, stability, the confidence of our people.

maybe he does not appreciate the level of absolut is desperation and anger that is out there. one thing you can do is bring forward your budget next week. you can also bring forward, as i say, the essentials of your finance bill and i facilitate you by having the house said monday through friday for the next -- for the two subsequent weeks that you wish so that the legislative process can be completed by government. in the interest of certainty, the interest of stability, the interest of restoring confidence at home and abroad. what i do not want to see is what i heard from the minister of transport today. [boos and hisses] what the minister of transport was talking about was having an

election of april or may. reaction of uncertainty that that creates? i am telling you from my own experience here, it is perfectly in order for the government to bring in a budget next week, to bring in a slimmed down version of the key essentials of your finance bill and have them put through the legislative process that you regularly referred to, and have that out of the way by christmas. that restores some sense of stability. that restores some sense of confidence. that restores some sense of relief internationally that at long last, ireland is beginning to move the way that it should. i offer you that in a spirit of being constructive. if you are serious about what you say, the immediate priority and the restoration of certainty, i support that. so i would offer you the

opportunity to bring forward your budget, bring forward a key, essential bill in finance, and to deal with that before the house leaves for christmas. you can then name your date for the general election toward the back end of january. >> i do not anticipate whatever the timeline you are suggesting would be involved in completing the enactments that are necessary to complete the budgetary and other matters that have to be complied with when the budget is enacted. so let me make that clear. the second point want to make is that as you know, as you know, november is very important in terms of taxes. it is critically important that those are right in the next financial year in order to make

sure that our budgetary assessment is correct and our figures are up today. we are talking about, therefore, having the budget within a week of those figures being brought through. that is why we always have our budget then. the point i am making is that the commission and the people with whom we are dealing accepted that the issuing of the four-year plan this week and a voting on the budget of the seventh of december, with the abrasion that will make sure the quantitative -- with the informational will make sure the quantitative nature of the budget is correct, that we do it that way. the government has to do this correctly. it has to get to the november figures as part of it.

so we're talking about, within the next two weeks, having a budget to put before this house, and having a four-year plan published tomorrow. >> i want to pursue this a bit further because the situation that we are now in is one of very considerable instability and lack of certainty, and that's been largely brought about by the government itself. you contributed to it yourself by denying that the recession is taking place within the eu or the imf. we were told thursday on radio what you should have told us earlier in the week. we ended up with the imf being brought then, with an application being made to the stabilization fund on monday,

which was something that you had been denying denying all weekend. you say what needs to be done is that the budget needs to be passed. let's be clear about this. there is a process that happens, as you know. the budget is brought in. there are a series of resolutions, many of which deal with excise matters. very often, they're not very controversial at all in terms of the house passing them, but it is then followed by two pieces of legislation which are required to give effect to the budgetary measures.

last year, the first was passed prior to christmas. the other is a finance bill. last year, that did not creep its way through the house until the 26th of march. two questions for you. first of all, what is the time when you're talking about? can you set out for us here the steps? if you are saying, responding to the suggestion that has been put to which is that you are moving forward the date for the budget, which is a proposition of with which i would agree, but you are rejecting it now and sticking with the seventh of december. what is your time line after the seventh of december? when did you envisage a the finance bill in particular being presented, i voted on, and being enacted? and secondly, can i ask you

this, since we are in circumstances that one of the parties in government have already taxed themselves of of government. wait -- we have heard from deputies to have supported your government who suggest that their loyalty is at least in doubt. do you consider that the government has the majority that is sufficient to put through the financial resolutions of the budget on budget night itself? >> i have given the reason to the deputy ngo about -- to the

deputy and you about the reasons for waiting for the november tax returns. that timeline is known to be the one in which we are dealing, so we proceed on that basis. i make the point that it is in order to do that as opposed to postponing the election. we all know that people approval will take a lot longer than a seventh of december, which is the appointed date for the budget. the action setup and undertaken with the european union -- actions that have been undertaken with the european union is based on end in the context of the publication of a four-year plan this week in the

ratifying of a budget on the seventh of december. that is an integral part of the process that we are in gauged in. the third point is that while i do not anticipate a legislative change, a finance bill has to be passed. there is a need for the appropriations bill to assure that payments can be made, and the other legislative enactments that arise out of the budget announcement will also have to be passed. what i am saying, deputy, is that on the basis of the filling all of those requirements and giving certainty to the decisions that are taken, the

deputy then asked me, but that timeline is -- what did that timeline is. i can say that it will all be done with do urgency and proper procedures, as quickly as we can do that. i am not in the business of using this particular situation for any personal regard for myself or any personal consideration. the third point i want to make is that regarding the whole question of the passage of the budget, i believe it has been said both in terms of external conflict in the country and internal conflict in the country, the greatest statement of confidence we could make is to adopt the budget with the corrections the weir's the keynote -- corrections that we are speaking of. of course, a recognize the

differences between us on many issues. i do not question the motivation of people who look to the national issue. this is a madeleine -- this is a matter of national interest for assault. i say that openly. we have to discharge our duty. we will do that. i hope that there are sufficient people in the house to see that we are acting in national interest. >> first of all, can i say that it is important that we have clarity and that we have stability, both in relation to budgetary matters and in relation to the political life of the country, but to be

honest, i think you have brought anything but clarity to this matter. let me start with this. i do not think that is in this country's interest that the budgetary process is prolonged to the end of march. i do not think it is in our interest that we have a three- four month period of instability, of doubt, a lack of clarity whether or not the budget is going through. the budgetary process is not completed, as you well know, until the finance bill is enacted, and last year that was the end of march. now i ask you very clearly, what was your intention regarding the other pieces of legislation. i am asking you particularly in

relation to the finance bill, what is your intention with regard to that? it is unacceptable and not in anybody's interest that that process is not completed, and is strung out for a three-four month time period. that is not in the country's interest. i invite you again to tell us clearly when we are going to see, when you see the end of the process come up when you envisage the pipeline being completed? you analogous situation, and you have said this before year too -- you are now in a situation, and you have said this before hear it too, that you are in the responsibility of bringing forth a budget.

given the response of the green party and the statements made by some independence, do you consider that you have a majority on your side of the house to put through the budget and legislation you submit? >> i say again that the reason why i cannot, the reason why the budget is being brought forth on the seventh of december is because of the valid reasons i have given. i am not trying to be difficult. there are valid reasons for that. the second point to make is in relation to the time stamp for the completion of all of the action needed based on budgetary announcements i cannot anticipate or relate to you at this point.

i would expect that certainly by the month of february we should have everything completed. that would be my hope. you are asking me to give you an indication. april, may, i do not anticipate that. i am simply trying to be frank. i am not here playing games. i am giving you my opinion. that is my opinion. i am giving it to you. that is what i think as a realistic timescale for legislative announcements to be made. if, as i say, we continue to work through these issues as property, -- we will continue to work through these issues in the proper way. i believe there will be support for this budget. i believe there will be support for this budget.

i believe that this house knows and understands, and i have indicated the timetable for the leaders in the spirit in which it was received, the question of additional official confirmation of the situation and the seriousness of the present situation we find ourselves in. i would ask everyone to reflect on that. >> that complete leaders questions for today.

could i call in new to announce the order of business for today? >> statements on the finance ministers' meeting.

the proceedings shall be brought to a conclusion at 7:00 p.m. tonight and the following arrangement shall apply. the leaders of the labor party shall be called upon until not exceed 16 minutes each. the statements of other members called upon shall not exceed 10 minutes. members may share time. there will be questioned starting at 6:35 p.m. for a time not exceeding 20 minutes. following statements to not exceed five minutes. >> one proposal has been brought to the house today. statements on the finance ministers' meeting.

>> this is probably the most momentous decision in the history of the state in this procedure. this is the effect of the decision by the government to request assistance from the european central bank, the european commission, and the international monetary fund. the proposal that this would merit a mere 19 minutes of debate is unbecoming to the irish constitution and to the people of ireland. the prime minister himself needs to come into this house and explain in detail to the people of ireland what his cabinet signed off to by way of a virtual meeting and video conferencing of finance ministers. as it stands in this particular discussion, the labor party will have a 15 minute slot.

but only the minister of finance will speak for the government. i think it is extraordinarily inappropriate and assaulting -- insulting to the people at home not to have this decision explained in our part to the people of our country. we are being told from every newspaper in the world what the irish people need to do it. everybody in this house is conscious of our international responsibility, but under the irish constitution we have a responsibility primarily to the citizens of our own country. >> what you are doing is disorderly and inappropriate. >> i wish to record opposing the order of business as presented by the prime minister. i would say that i think it is

absolutely it inappropriate that he should even move an order of business here today when what he should have done, last evening at the very latest, if not a long time before as we have called for, is to go to the parliament and allow the people the opportunity to give a mandate to the government in order to ensure that there is confidence restored and measures introduced. >> that is out of order. there is no provision in the order for explanations such as this. [crosstalk and shouting] the fact of the matter is that we should not be having a in this order of business here today. this leader has not got the support of even his own party. >> this is not a motion on the order of business.

>> it is the only example in history -- >> this is out of order. [shouting] >> we need to move on. [bell ringing] >> it is absolutely unacceptable. [bell ringing] >> unacceptable.

[bell ringing] >> this issue relates to statements of the euro-group meeting. there will be other opportunities to hear on that the matter. >> [speaking gaelic]

some opposition leaders had wanted him to resign before the budget but. he has a coalition government. ireland was passed to come up with a four-year plan to reduce the government budget as a condition of the assistance package. the government will release its budget to parliament tomorrow. president obama and joe biden travel to india at that, the site of a chrysler manufacturing plant that was part of the auto industry restructuring. the president calls on congress to extend tax cuts for middle- income earners and talks about the administration's economic stimulus measures. this is about half an hour. [applause]

southeast >> hello, folks, how are you? good to see you all. good to be back in an automobile plant, making things. hey, thank you all very much. we're delighted to be here and i expect as delighted as you are to be able to be here. look, when the president and i got elected we knew we had a heavy load to carry. the country was in some real tough shape. and we stepped up, and with the help of some of -- all the congressmen, the senators here, we passed the recovery act just

after taking office, in the midst of the worst economic crisis since the great depression. and we had three clear goals, led by the president. one is help communities and people who were hit the hardest, hit the hardest by this awful recession. save and create jobs today, but also lay a foundation for long- term prosperity in the future. because more than -- a year after implementing this act, i can say proudly that not only have we helped millions of people, but -- not only have we created millions of jobs, not only have we spurred growth in new industries, but we have completely transformed, with the great leadership of the local and state leadership here, communities like this one here in kokomo. ank, i'm the son of automobile man, and i want to tell you he managed automobile facilities for my entire life. and kokomo, anybody in the

automobile business has already known, was one of the great auto towns in america -- not only making chrysler automobiles but delphi, supplying parts and so many other suppliers, and all the related jobs that go with that. to bring kokomo back, to bring the automobile industry back, we knew we had to change things. we couldn't just keep doing the things the way we did. we knew the auto industry had to get leaner, had to get tougher, had to be more competitive. and we insisted that they did. and now you see the result -- an old industry adapting to a whole new era, competing again, leading again, and most importantly, hiring again. hiring again. mr. president, i know you know this, but the last year of the last outfit we succeeded, they lost 461,000 automobile-related jobs. and so far we've created almost 75,000 new jobs, and a lot more to come.

and, folks, look, the government didn't do this. the government didn't do this alone. the government did was it was supposed to do. with the leadership of a president and leadership from the president, we had investment from the private sector brought onboard because the government was able to get back in the game and said we're part of it. the auto industry has roared back in america. now, i was telling the boss over here that the thing i like most about everything -- again, being the son of an automobile man -- is that my dad would be happy. for the first time in 24 years -- americans like your product better than they like foreign products that are made here. that's a big deal. that's a big deal. look around here. look around here. for every one guy working here in the assembly line, there's five more doing exactly what you're doing. everybody thinks it's only the assembly plants. well, there's five people working at plants like this for every single job in the automobile assembly line.

it's a big, big process. people working in places like here and delphi suppliers, making parts was a major part of this recovery. and then when you guys have jobs, guess what happens. the coffee shop stays open. the barbershop stays open. the restaurant stays open. people open new businesses downtown. people sell jackets and shoes and hats. people, in fact, have jobs. this has an effect all the way through the economy. and that's what's happening here in kokomo, as your mayor can tell you. the lunch counter needs a few more waitresses and servers to feed them. the remodeled plant can reinvigorate an entire community and give people who don't work here hope. the people who don't work here. we were just in town. people were saying, thank u. they don't work here. they're saying thank you for this facility. but we can't just build a new economy by revitalizing and modernizing an old industry. we can't stop at creating new jobs in old industries.

we need to create whole new industries, as well. and that's what the president did. a great example is over in tipton, aboundsolar -- whole new industry. there's no reason why you can't build the best automobiles in the world and also be a leader in what the new industries -- the new green industries in the world are going to be. the president did what every great president has done in the past. he's looked to the future. we used the recovery act to provide seed money that sparked private investment -- private investment in new industries like solar and wind, advanced batteries, high-efficiency lighting, high-speed rail. folks, some of our friends forget, that's what all great presidents did. lincoln did it when he built the transcontinental railroad by putting down seed money to the railroads to go build it. that's -- we're doing the same thing here again. every great president has a vision. and now we're doing it here. we're doing it here with the renewable energy investments that are being made outside the city, with the new industries of the future.

and in a sense, there's a whole new automobile industry building a different kind of automobile. mr. president, my dad used to have a saying when he was -- ran automobile dealerships of almost four decades. he said, joey, all they got to do is give me product. give me product. give me product, i can sell it. i can -- you're giving them the best product in the world again. we also believe we can't have a strong economy without strong communities. and that's why the president in the recovery act made sure we helped hard-hit towns like kokomo. we now -- we were just at the fire station. there's 13 firefighters still on the job because of the recovery act and because of the safer act. teachers, law enforcement officers on the job. when i tell you an international recession hits and a worldwide recession, guess what. a town like kokomo and other towns of 50,000 all across america, they can't do it on their own. you got to help them stand up a little bit.

and that's why we helped with infrastructure and roads, to bring improvements, to bring back main street, to bring it back to life. kokomo is in the forefront of it all. and nowhere is it written that kokomo can't be the hub of innovation in emerging industries of the 21st century -- like it was in the 20th century. nowhere is that written. look, nobody knows better than this man that our work certainly isn't done yet. we're just starting. but it's important we recognize success stories like kokomo as signs that we are definitely moving in the right direction. this town and its people are a model for others looking to do the same thing over and over again in this country. you guys here have been the embodiment of the limitless potential when we put government and the private sector and the community all together, working toward the same end -- a community built -- this community -- this community is built on grit and

determination, a willingness for you all to fight hard, to pick yourself back up off the mat and to march toward what you all believe now -- i believe, i hope you do -- is a better day, a brighter future, a new start. we know it's a long road back. but we know we're on the road. and the one most important thing we've got to communicate to the nation and to everyone listening is we can't stop now. we can't turn around. we're heading in the right direction. kokomo is coming back. america is coming back. and it couldn't have happened without the vision of the man sitting behind me. ladies and gentlemen, the president of the united states, barack obama. >> thank you. thank you, everybody. thank you. everybody have a seat. thank you so much. thank you, joe. thank you, kokomo.

i have to just say, by the way, joe is not only one of the best vice presidents in history. he's also one of the best introducers in history. i try to take him wherever i can. i want to thank your plant manager, jeremy keating, for the great tour and the great work that he's doing here. he is proud of the work that's being done at this plant. i want to thank your local uaw president, richie boruff, who's here -- thank them for showing me around. a couple other hotshots -- u.s. senator evan bayh is here. congressman joe donnelly is in the house. congressman andre carson is here. congressman baron hill is here.

by the way, congressman baron hill is in the indiana basketball hall of fame. now, that's pretty cool. being a congressman is cool; being in the basketball hall of fame in indiana -- that's something. mayor of kokomo, greg goodnight, is here, doing outstanding work. the ceo of chrysler group, sergio marchionne, is here. president of uaw, bob king, is in the house. we've got some of the best workers in the united states of america right here at this plant. and i had a chance to meet some of you as we were going around seeing these amazing

transmissions that you're building. and i was very happy to hear that after a couple of tough years, this plant is now running at full capacity. and that's why i'm here today. that's why i'm here today. now, we all know that one plant by itself doesn't mean that there aren't people in kokomo who are still hurting. i had lunch with the mayor and some firefighters, and there's still a long way to go. the mayor has got all kinds of great plans, and there are businesses that are looking to start expanding. but the fact is there are millions of people around the country who are still looking for work in the wake of the worst recession in our lifetimes. i don't have to tell you that.

many of you still have friends or neighbors, a husband or a wife who is still struggling. and i know that before this plant started rehiring, a lot of you were in the same position, so you remember that it is a tough, tough thing when you're out of work, especially when you've taken a lifetime of pride in working and supporting a family and making great products. but even as we continue to face serious challenges, what's happening here at this plant - the changes we're seeing throughout kokomo - are signs of hope and confidence in the future -- in our future, together. you're showing us the way forward. you're living up to that spirit of optimism and determination - that grit - that's always been at the heart of who we are as a people, at the heart of america. i remember coming to kokomo a

little over two years ago. joe will remember this. some of you might have been here. what was happening here reflected what was happening all over the country, all over this region. for a decade or more, families had felt a growing sense of economic insecurity. a lot of manufacturing had left the area. and then a recession started taking hold, and folks were seeing job losses and facing new hardships. that was before anybody knew how devastating the recession was going to be. so by the time i took office, just a few months later, the financial crisis had hit, the auto industry teetered on the brink, and we were losing millions of jobs. and that left joe and i with some tough choices. one was to help the auto industry restructure.

and that wasn't an easy call. i understood that there were some reservations of those who said that the industry should pay a price for some poor decisions by the part of management. but we also knew that millions of jobs hung in the balance. we also knew that the very survival of places like kokomo were on the line. and we knew that the collapse of the american auto industry would lead to an even deeper disaster for our economy. and you know what, we also believed that america, which popularized the automobile, whose middle class was made on the basis of manufacturing -- that we couldn't just give up. we couldn't throw in the towel. that was not an option. there were those who were prepared to give up on kokomo and our auto industry. there were those who said it was going to be too difficult, or

that it was bad politics, or it was throwing good money after bad. you remember the voices arguing for us to do nothing. they were pretty loud, suggesting we should just step back and watch an entire sector of our economy fall apart. but we knew that the auto industry was not built, and this country was not built, by doing the sy thing. it wasn't built by doing nothing. it was built by doing what was necessary even when it's difficult. so we made the decision to stand behind the auto industry -- if automakers, if ceo's like sergio were willing to do what was necessary to make themselves competitive in the 21st century, and if they have the cooperation of workers who were taking pride in the products that they made. we made the decision to stand with you because we had confidence in the american worker, more than anything. and today we know that was the right decision. we know that was the right decision.

today each of the big three automakers has increased their market share -- each of them. for the first time in over a decade, americans are buying a larger share of chryslers, fords and g.m. cars, and a smaller share of their foreign counterparts -- for the first time in decades. we're coming back. we're on the move. all three american companies are profitable, and they are growing. some of you read last week, g.m.'s stock offering exceeded expectations as investors expressed their confidence in a future that seemed so dim just 18 months ago. and as a result, the treasury was able to sell half of its g.m. stock.

so here's the lesson: don't bet against america. don't bet against the american auto industry. don't bet against american ingenuity. don't bet against the american worker. don't bet against us. don't bet against us. don't bet against us. this plant is a shining example of why you shouldn't. two years ago, production here was plummeting. a lot of folks had lost their jobs. today, this plant is coming back. the company has invested more than $300 million in this factory to retool. but it gets better.

sergio just told me today chrysler is announcing an additional investment of more than $800 million in its kokomo facilities -- $800 million. that's good. that's good news. that's real money, $800 million. see, the mayor has got a big grin on his face. you're pretty happy about that. over the next few years, folks here expect to manufacture more transmissions than ever before. and as a result, hundreds of workers are back on the job.

jeremy said we're going to be hiring more. this includes -- i'm going to name a couple of people just to embarrass them a little bit. where is sharon ybarra? is sharon here? right here. sharon lost her job of 20 years at a paper mill. she was only able to find work that paid her far less than her old job - until she was hired by chrysler. and now she is doing a great job right here at chrysler. we're proud of you. jim faurote is here. where's jim? jim's right next to her. jim worked for chrysler for a

decade -- right? then he lost his job when the plant he worked at in new castle shut down. over the next few years, he could only find intermittent work on and off. it wasn't until after the restructuring that he was able to have a job he could count on. he's been back at work now for more than a year doing an outstanding job, making great products here at chrysler. at a plant down the road, workers are manufacturing parts for hybrid vehicles. that's already led to dozens of jobs, and will lead to nearly 200 jobs over the next few years. a few miles outside of kokomo, in tipton, a clean energy company called abound is going to be able to hire 900 workers - taking over a plant that had to shut down a few years ago. so a factory that was empty and dark will come back to life. and when people have a

paycheck, as joe said, they can go to the store, they're able to spend. that helps the economy grow. and so on main street in kokomo we're seeing a revival, with new businesses opening downtown. so, for anybody who says our country's best days are behind us, anybody who would doubt our prospects for the future, anybody who doesn't believe in the midwest, anybody who doesn't believe in manufacturing -- have them come to kokomo. have them come to kokomo. come here. meet these workers. visit these plants. come back to this city that's fighting block by block, business by business, job by job. this is a reminder of what we do as americans. what we can do as americans when we come together, when we're not divided; we're not

spending all our time bickering, but instead focusing on getting the job done. we don't give up. we don't turn back. we fight for our future. no, we're not out of the woods yet. it took a lot of years to get us into this mess. it will take longer than anybody would like to get us out. but i want everybody to be absolutely clear, we are moving in the right direction. we learned that the economy -- we learned today that the economy is growing at a faster pace than we previously thought. that's welcome news. but we're going to keep on making it grow faster. we're going to keep on creating more jobs. we need to do everything we can to make that happen. that's why in the coming days it is so important, the coming months it's so important, that democrats and republicans work

together to speed up our recovery. we've got to put aside our differences. the election is over. we've got to find places where we can agree. we've got to remember the most important contest we face, it's not between democrats and republicans. it's between america and our economic competitors. other nations are already making investments -- other nations are making investments in education, energy and infrastructure, technology, because they know that's how they're going to be able to attract the new jobs of the future. and throughout our history, democrats and republicans have agreed on making these investments. if we don't want to cede our economic leadership to nations like china, we've got to do the same today. we've got to make sure our workers have the skills and the training to compete with any workers in the world. we should give our businesses more incentive to invest in

research and innovation that leads to new jobs and new products and new industries like the ones we're seeing here in kokomo. we should make it easier, not harder, for middle-class families to get ahead. i'll give you an example -- on taxes. next year, taxes are set to go up for middle-class families unless congress acts. if we don't act by the end of the year, a typical middle- class family will wake up on january 1st to a tax increase of $3,000 per year. so, in the next few weeks, i'm asking congress to take up this issue. the last thing we can afford to do right now is raise taxes on middle-class families. if we allow these taxes to go up, the result would be that a lot of people most likely would spend less, and that means that the economy would grow less.

so we ought to resolve this issue in the next couple of weeks so you've got the assurance that your taxes won't go up when that clock strikes midnight. now, this is actually an area where democrats and republicans agree. the only place where we disagree is whether we can afford to also borrow $700 billion to pay for an extra tax cut for the wealthiest americans, for millionaires and billionaires. i don't think we can afford it right now - not when we are going to have to make some tough decisions to rein in our deficits. that's going to require sacrifice from all americans, including those who can most afford it. so i'm eager to sit down with leaders from both parties next week and to hammer this out. but we need to hammer it out. you know, long before transmissions were coming off the line at this plant - and by the way, you look at these transmissions today and somebody 20 years ago or 10 years ago might not recognize

them -- they're amazing. before henry ford built the model t or walter chrysler took up the reins at a start-up called buick, a man by the name of elwood haynes decided to do a little experiment right in kokomo. he set up a one-horsepower boat engine on his kitchen; he bolted it to the ground. his idea was that he might be able to rig the motor to a carriage. so he starts it up -- and the engine worked great. in fact, it worked so well that it came loose from the bolts and destroyed the kitchen floor. and after a brief and what i imagine was a difficult conversation with his wife -- elwood decided to continue his tests in his machine shop. and he toiled for months.

but when he was finished, he had completed one of the earliest working automobiles ever built in america. and he named it the pioneer. so kokomo has a storied place in our history. this is a city where people came to invent things and to build things, to make things here in america; to work hard in the hopes of producing something of value and something that people could be proud of. that's the legacy of all of you. you are all heirs to that tradition right here at this plant. that's the legacy that has made this country the envy of the world. and i am absolutely convinced this legacy is one you will continue to uphold for years and decades to come. congratulations, chrysler. congratulations, kokomo. proud of you. ♪

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>> coming up on c-span, a discussion of north korea's nuclear plan.

then an update from the financial stability overnight council. on tomorrow's "washington journal", we will get an update on the conflict between north and south korea. a former senior director at the national security council and joins us. after that, leslie gebl discusses his recent article on u.s. foreign policy priorities and a new global economy. later, a conversation on the increasing number of diseases that are becoming resistant to antibiotics. ouranthony facuuci is guest. "washington journal", each morning at 7:00 a.m. eastern. siegfried hecker returned recently from north career where he was given a tour of a secret facility -- returned from north korea where he was given a tour of a secret facility.

this is 90 minutes. >> we went into the may 5 auditorium and i thought it was completely empty until kim jong il walked in and everybody roared. it was silent. is nobody breathing here? i am the president of the korea economic institute. it is a great pleasure to host you for this event. as you can see from the turnout, this is a very significant event. i would tell you how we would run things. i will give you a little bit of preparation in terms of the trip that nicole fentiman and i went on one week prior. there are a few interesting points that will segue into professor hecker's

presentation. we will then have a little bit of a shuffle when bob joined him for the "q&a". on the second of november, nicole and i went to north korea. we had asked to go see the facility is not really to look at the new construction that was under way but to try to figure out what was going on in the intervening time since the last inspectors were there in april, 2009. when we got there, we were briefed by the general bureau of atomic energy safeguards division director. and he gave us a little bit a preview of what was going on there, which really was not much, but we began a discussion about the fuel fabrication center. in that discussion, i came to learn that the enrichment facilities that we were looking for, uranium enrichment facilities, were in fact there.

the reaction that i got when i got back to pyongyang and we began to talk with the ministry of foreign affairs, they were surprised that we were told that. in the ensuing discussion, the points that we made was that you are headed down a path that will put you in the same light as the iranians. you said you are building a light water reactor for peaceful nuclear energy. there is a uranium enrichment facility that you say is for low enrichment uranium at for creating nuclear fuel for this light water reactor, but given our history and the background that you have displayed, no one will believe you. and if you take a look at what has happened with the iranians, you are on the path for additional sanctions, international condemnation. but it is exactly what you say, there is no reason in the world

you should not allow people then it to take a look at this. invite inspectors back in to take a look at this or at the very least you should show dr. hecker of these facilities they sat back and essentially were very thoughtful and said, we will consider what he said. i had no idea what they're going to do, but when we came out of pyongyang, we went to beijing. i contacted dr. hecker and he and i had a conversation about what we had observed, what we believed that would better prepare him to focus on the enrichment facilities and light water reactor. with debt as a background, i would like to introduce -- with that as background, i would like to introduce siegfried hecker. >> thank you, ladies and gentlemen. as i look out, the crowd is a

little bit older than the usual stanford student crowd. professor bill perry teach a class on the role of technology in national security, and we touched on places like north korea, iran, and others. so if you don't mind, i will take a little bit of the style of my class and try to put this trip in the proper perspective. in other words, not just to give you a travelogue. i need to make sure i turn this on. as jack mentioned, i am out at stanford, and to put it in perspective, let me first say this visit did not come out of the blow. -0- out of the blue.

this is my seventh visit. i was taken there by professor john lewis initially who has been traveling there since 1986. the first time was in 2004. that is when they showed me the plutonium. that is when they've first actually said, look, we have the plutonium. the message was, because they had a message in each of the trips, the message was we have the bomb and your government ought to pay some attention. in 2005, the message that time was to john lewis just before the september 19 agreement, we are ready for an agreement but we want and l.w.r, a light water reactor. the agreement was signed a month later. in 2006, the director of the nuclear complex spoke and this

was three weeks after the nuclear test. the test worked and they were filled with pride. that managed to get the bush administration to actually engage the north koreans in a bilateral discussion, and in 2007, there was a first step agreement signed and i was in there in august, 2007, and the message was, could you tell the skeptics in the west we have actually turned the reactor off? and they turned it off in july, 2007. in 2008, they had begun at the disabled list process, and by the way, that is me and what we call the anti-sea clothing to make sure you protect yourself against potential contamination, and what i was doing is to be able to attest to the fact that the disabled and it was actually serious. a disabled and meant taking it

and putting it somewhere and being able to put it back, which they did in 2009, because in my visit in 2009, they essentially announced, we are going to leave the six-party talks. we'll do a missile launch. the rest is history. that is where we were. this is the current visit. jack had given me the heads up, because he went to facility that is shown on the left. instead of erecting another cooling tower which is what people suspected, they actually told us, we will convert power center to an l.w.r. no one believed us when we announced this in 2009, which they did, including you, dr. hecker. and it's true. this is the only reading i will do. let me read for you the essence of what the chief technical

officer told us in the guest house when we came and visited this november 12. 1990's in the 1980's and we agreed to give up our reactors, 2,000 megawatts of electric by 2003. build aarly 1990's, we 200 megawatt reactor. now they have become rarer and concrete structures and iron scrap. i can attest to that. we have not been able to continue to the national demand for electricity, so we decided to make and is stark. for us to survive, we decided to build our own l.w.r. in 2009, the foreign ministry said that we will proceed on our own light water reactor. we processed it, and delivered it to the military for weaponization.

that was in 2009, when they walked away from the agreement. our nuclear program has not proceeded as expected. we have not produced electricity and thus have impacted the economic condition of our country. we will use our economic resources to solve electricity problems. we are willing to proceed with the six-party talks in the 19th agreement, but we cannot wait for a positive agreement. we are trying our best to solve our own problems. we will convert our center to an l.w.r. it is a high priority to develop a uranium enrichment. we will have some difficulties with this, but we are proceeding with the fuel cycle. we have designated a site and also for the uranium enrichment is the first stage so it is a first priority. the construction is completed. the facility is operational. you'll be the first to see this facility. we showed a construction site to

the economic institution delegation headed by jack prichard. so that is what they told us. and i wanted to read to you that because that is very different from much of the hype. by the way, that is included in the report that i wrote it that is available on the website. they are serious about building an l.w.r. let me go back and review the status of their plutonium program, because that is what concerned me the most at the beginning and it is still what concerns me the most today. the 5 megawatt reactor is a photo we took in 2008. it shut -- it's shut down. there is no new plutonium being produced. there is no cooling tower. reprocessing facilities are in standby. we saw no action.

there is no plutonium in the pipeline for the facility. the fuel fabrication facility, they are starting to converted to lwr fuel. the 50 megawatts conductor is indeed iron scrap and a concrete mass. so that getes me back to the baton in inventory i made in the past and that is 24 to 42 kilograms, and that is enough for four-eight bombs. the main thing i want you to take away from this is that they really wanted to increase their weapons program and their nuclear arsenal and. they would restart and rebuild some of these facilities. that is the quickest way. they have tested twice. they know how to build a plutonium bomb. here they took us to the korea economic light water reactor si.

and to circle the is the concrete containment shell growing -- going up. the motivation for lwr is they've been after it for a long time. they started the reactor building with gas graphite reactors. the best way to put that is those reactors are great for bombs. they are not so great for electricity. they built it for both but they never finished the two big ones. the same construction at the u.k. and france began with but they switched to light water reactor, also, as has most of the rest of the world. in the 1980's, they realized they had problems making electricity, so they tried to get two light water reactors from the soviet. in 1994, they tried the u.s. and the fed.

1000 megawatt reactors. that remains on filled with the dissolution of the agreement. and then my own experience, and august, 2005, at dinner an official said, no lwr, no deal , no joint statement. so the u.s. managed to get enough of an lwr and said at an appropriate time, it would be considered. in 2007, we said, look, we wanted an lwr. you can operate i t. will not in rich and we will not reprocess if you are concerned about perforation. -- we will live in rich and we will not reprocess of you are concerned about proliferation. we have never build a light

water reactor before. they will build a 25-30 megawatt electric reactor. that makes very good sense. it is the way they did it with the gas graphite. before the was talking about they could not build the reactor, i was talking about 1,000 megawatts. they will build a small one. the vice minister made it very clear that that reactor is important not just for economic reasons but for symbolic reasons. they want to get something out of their nuclear program. so here are the details on the light water reactor. i am a technical guy. you will hear the term 100 megawatts, but that returns -- refers to a thermal output. it is nothing more than a waterboard. you use a nuclear reaction to make steam, and you have the

steam that drives a generator which give you electricity. and the conversion from the heat to the electricity brings on the power. they told me it was 25 to 30. they said one gets 30% efficiency. the concrete containment shell was going up. 40 meters high is what they told me. they needed a pressure vessel. that is one of the toughest parts of building a reactor. again, there is no way today they could build a pressure vessel. but they said they could do it for 25 megawatts. the electrical generators, they said they are for local communities. you have to change the fuel from a uranium metal to uranium oxide. you will probably have some difficulties, but we will do it.

and the fuel has to be enriched, and the typical in richmond is 3.5% -- enrichment is the 3.5%. and the target of completion is 2012, which is the target of completion for every major project because it is the centenary of kim jong il's father's birthday. it's credible, though. ok, so water the concerns with them building a light water reactor? my biggest concern is safety. we in this country lost the capacity to do things like the reinforcing of countroncrete fo nuclear power reactors. we have not built one for such a long time that we have to relearn that. they can build a small one, but it is important that that containment structure can hold

the potential accident. and the role of regulatory agencies is crucial and ensuring the safety of a nuclear power reactor. they said they had one. it did not make me feel very comfortable. it is a new design. they have a new team working on this. the institute for nuclear power operators and the world association of nuclear operators -- after three mile island accident and chernobyl, the rest of the world's nuclear power operators got together. they said, we have to learn from each other as to how to run these things safety. the safety reactor -- the safety record has been outstanding since that time. maybe we ought to have north korea as part of that to make sure they construct that reactors safely. people say, you can make plutonium. if you feed uranium into reactor, you make plutonium. al reactors make it, but that

is not the way they make good bomb grade plutonium. you can do a lot better with an existing reactor. and besides that, if they decide to make plutonium with this reactor, i think that is readily detected. but it requires in r enrichment. the natural uranium is .7%. you have to get up to 3.5%. a bomb is 80% to 90%. so the facility itself, as it gets two uranium enrichment, they started construction in april, 2009. that is when the u.s. technical team and the international inspectors were expelled after they did their missile launch and had u.n. security council statement condemning them. they said they completed it just a few days before our visit. i am not sure what completed means.

the renovation of building four. i will show you an overhead. they put the previous bill and i was in and the renovated it. it was 120 meetingters lopng. ng. we could not see the roof. it's blue. there are several other new buildings that are visible, because you need some of the feed material for the uranium enrichment. this is the overhead for the fuel fabrication facility. if you went and looked for something new, what would you look for? the blue roof. that is like putting a bull's- eye on behalf of their facility. so people said, they built a secret facility. for heaven's sake, all you have to look at is the roof. it's more than 100 meters long. we lock -- we walked into the

fuel fabrication facility and this time they told us that they had seven centrifuges. the best i thought they could do before it was in their news reports and president bush are said that he said -- president musharraf said -- a couple of dozen and an old workshop. we looked to the windows. the comparison of 2010 with july, 2009. and you can see that the blue roof, which is shown under the black dividing line, that was building four. things have changed, and it is very obvious. that was not there in 2008.

they were disabling it. then this is what we saw when we looked -- they did not let this take any photographs. i had to doctor up a photograph. i took a photo from the centrifuge plan, and i wiped out some of the extraneous the centrifugess. we saw three centrifuges that looked like that. my jaw dropped. there were hundreds and hundreds of centrifuges lined up two each at three different locations. it was a just stunning. in a clean, modern facility, looking down. oh, my god. they actually did what they said there were going to do. then they told us the rest of the story, the 2000 centrifuges. i guess they were six feet high, eight inch diameter.

they claimed to have steel rotors. that makes it a p-2. it is a very high strength steel. the p-2 stands for pakistani two. they copied it from the german two. the most important number on here. -- i s 8,000 kilogram swu's per year. they can make two tons of low enriched uranium a year, and that is enough for a nuclear reactor. they claimed to be operating and making a low enriched uranium. we could not attest to that. we did not hear any noises. there were people running around in the control room. there were all kinds of displays. it looked like there were things

going on, but we could not tell because we were isolated from the hall. a very modern control room. it had the latest flat panel screens and led's for readouts. very different from what we have seen at all of the other facilities. the capacity consistent -- is consistent with an lwr. the plumbing and the one on the right is closer to what we saw then the one on the left. and the one on all left is not doctored up. that is actually the pipe. don't say these are the north korean centrifuges, but they look something like the ones on the left. so the control room, we have no pictures, but we went to kim old university. and see the students there with the flat panels, the computers

appeared by the way, these were hp. hp is not on the export control. and the computers are not under export control, at least those that we saw at the university. on the right, you see what the reactor control room looked like. so the control room looked more university.l sung the problem is the dual use problem. you need to in return for light- water reactors. if you are in good international standing, it is easy to get someone to do that for you. kazakhstan is going to make fuel for a lot of the chinese reactors. it will make the fuel, but the enrichment will be done in russia. so if north korea would be in good standing, they could get

their fuel in rest someplace else, but they now feel they have to do it all themselves -- they could get their fuel enriched someplace else, but they now feel they have to do it all themselves. what you have is the iran problem. we worry about the fact that they also can go to heightened enriched uranium. you kick inspectors out of your fassel the, and now we do not have any -- out of your facility and now we don't have any in north korea. or you have another facility someplace. the problem with that is that it is a small footprint, a small signature. is not like a reactor. it would be very difficult to detect -- it is not like a reactor. they could make two tons of reactor fuel or 40 kilograms of

bomb grade enriched uranium. that is enough for one or to reviewo bombs. so how does this change the security dynamic? on like what is been reported in some of the newspapers, not much for what they currently showed us for the current capacity. if they are going to build more bombs, restart the plutonium facility. all modern nuclear arsenals use plutonium. a pakistanis are in the process of making plutonium to switch over. everyone has switched from uranium to plutonium. what that demonstrates is they can duplicate that capability anywhere. it is difficult to detect. however, they cannot go and build these ad nauseam because they are limited by the material and the equipment.

you need high strength steel and aluminum, molecular palms, we believe that they cannot make that themselves. but i am becoming very careful to see what they can and cannot do. their capability, we just do not know. if a duplicate this facility at several other places, make highly enriched uranium, that changes the security dynamics. it is not what they have now. they could become more like pakistan at 50 to 60 weapons. however, still more sophisticated bombs require nuclear testing for the uranium or the require plutonium for more testing. plutonium is a superior. the question i will ask, how did they get this?

what we saw, you do not build overnight. you did not start in april, 2009. it requires many years of development, manufacture, and testing. most likely decades of r&d and training. i am convinced they have a uranium enrichment program. they've done bettter. er. i'd call this small industrial scale in richmond. -- enrichment. their stories about highly enriched uranium particles on islands that north korea gave to the united states. then the production records, copies of the production records. then there was a question that somebody shipped uranium hexachloride which if you only use it if you are going to send to libya in 2000.

the general feeling is that it was most likely north korea. the current system is most likely built and tested there. unlike the original of reactors, i believe these centrifuges require health. david albright of isis just published a month or so ago and laid out this extensive cooperation with pakistan going back to 1993, including training of north korean people in the khan research laboratory. they supplied them with a research starter kit. and they started a complex web of procurement that includes the high strength uranium from russia and germany. my concern all along has been the possibility of collections to iran. frankly, what we saw, 8000 --

2,000 centrifuges. that is about twice what iran has done so far. so i'm not sure i would go to iran. it might in the future be the other way around. i worry about cooperation with iran. i am getting close to the end. another question you will have is, why did they show as this and why no? the real answer is i don't know. bob may tell you later. and john lewis doesn't know. but we can speculate. they are serious about building an lwr. the reactor would have been visible soon. they were heading off to spin, because most likely, some people would have spun that out into a

plutonium producing reactor. so they headed it off. and it is a way of admitting the uranium enrichment program with a cover story. it is needed for an lwr. the other message was, do not underestimate us. about it.lk morea bou in the seven times i've been there, each time i go, the country looks a little bit better off. it does not look like the economy is going. anytime you have suggestions, we are ready to listen. let me wind it up with a few photographs. usually you see photographs of people starving in north korea. this is a wire factory that we saw in 2009. it is one of the most modern factories anywhere in the world. this is a textile factohat we visited this time.

it was just great, very modern and great. this is the pyongyang university of music. when they decide to do something, they can build it fast and beautiful. this time we were in that hall because poland was celebrating its independence and had a couple of polish artists that played piano. poland has an embassy there, as do many other countries, but not the united states. it is a swimming pool at kim il sung university. that guy on the right is bob carter. for public effect, this is the concrete pyramid. 20 years unfinished. this time, it was stunning. you look down the street,

you see this thing. they do not have occupied yet. last year, they have phone booths. but they do not have cell phones. well, now they have cell phones. one of the european people there stationed at one of the embassy's, 350,000 cell phones in north korea. they control them closely, but they have them. so what do we do now the most important thing is to understand what the capabilities are pair. don't hype the threat, but treat is seriously. remember 1998 when they launched a missile over japan. president clinton send bill perry to reiterate the policy

and the dynamics of the career and korean peninsula. i think we need to do a policy review. we have not done one since 2000. for now the most important thing is to not let the threat grow, especially in light of the altercation that just happened over there in the sea again. for me, to contain the nuclear threat is three no's . no more bombs, no gutter bombs, and no export. no more plutonium. that is what they are doing. on the highly enriched uranium, let's get people in there to make sure that they are making low enriched rather than high enriched. no testing. cannot make better bombs without

testing. no export. that is the issue of pakistan, burma, iran and so forth. the yes is you have to address the fundamentals of north korea's insecurity. that is what my colleagues have told me in their op ed piece in "the washington post" yesterday. you have to address the fundamentals. with that i will introduce my colleague bob carter. this is a great photograph. these are ones that i took with my camera. there would not let me take them in their facilities. this is a great shot. there's no heat in pyongyang. there are more lights this time. there are lights at night.

ooh. >> go back. >> somebody took it off. my favorite slide. with that introduction, i give you bob carlin. >> scroll down. i don't see a mouse here. the last slide. >> for some reason, the last slide was left off. >> my apologies. >> i am sorry. anyways, the last slide head bob karlin's silhouette in front of one of the little cultural houses, and itas just beautiful. with that, ladies and gentlemen, i will give you back to jeff pritchard and bob karlin of joining -- will join me.

>> get green lights on both. that's good. all right, ladies and gentlemen, we will have a microphone. it will go down the center row. if you would, please identify yourself and a very clearly ask your question. who is first? beige jacket. >> thank you for your presentation. did you have a chance to ask north korea about the manpower

for operation [unintelligible] >> for the -- in terms of power supply, we saw nothing, because i saw nothing inside. we did not get down to the first floor. so we saw no power supplies. in terms of manpower, we met with the chief process engineer who runs the facility. then we saw a number of people in the operating room. they tickets to the control room and then what they called the recover -- they took us to the control room and then what we called the recovery room. we did not get to talk to any of the people. in terms of asking about their credentials, i did not ask about the enrichment people's credentials. i did ask about the reactor designers. what we were told there is that is a new team of designers and

they are being mentored by the people who built the old gas graphite reactors. >> we will pass the microphone down. please wait until it gets to you. >> i am with the american association for the advancement of science. i am wondering if the program is a cover-up and they intend to do weapons. all nuclear power plants prefer plutonium. it is hard to what denies. --there was -- it is hard to weaponize. might there be a reason that they want to work and training because of the weapon is asiaizn being easier. >> you cannot rule out -- i would say they certainly would be looking at uranium design, also.

particularly what we know is that a.q. khan gave the uranium implosion designed to the libyans. there is speculation that he may have also given those two irao n and north korea. for plutonium, what you have to do is take the plutonium the size of a grapefruit, put explosives around it, implode it. for highly enriched uranium, you can make a simple device by putting it into a gun tube and shooting it together. you can make the plutonium device, and that is the device that a.q. khan gave them. i imagine they have exercised their capabilities for design.

we have no indication as to whether the second test for the plutonium tests or how the enriched uranium tests, what they told me when i was there in november, 2006, that the first one was plutonium and what i was told later on, also -- that was related to the first test. a first test was plutonium. we did not know what the second test was, but my speculation was that it was plutonium. >> first against the wall here. standing up against the wall. bear with us on this microphone, because it is linked to the cameras. >> i am sorry if you mentioned this before -- >> please speak up. i have difficulty hearing. >> could you speak a little bit more about what the north koreans said about possible

return to negotiations. he said they are still willing to engage in six-party talks? what did they have to say about the obama administration's diplomatic efforts, what did they have to say about it china? >> i am just a scientist. so i turn to my colleague who understands the policy much better. >> i'm his escape route on certain questions. i would say that surprising way they talked a lot less with time about the the diplomatic route. it is not that they were suggesting he did not exist, but the thrust of the conversations was not really in that direction. they did say that there were

going to have nuclear weapons for a long time, and we had better get used to it. unless and until we satisfy their concerns about their security, that if there were not addressed -- that were not addressed, they will not give up their nuclear weapons. i cannot recall but they said too much about six-party talks. they gave us the obligatory statement that they were prepared to go back and to honor the september, 2005 statement. they did say that, if we wanted to get back to the situation prior to april, 2009, there were a couple of things that we could do, and one of them really was to reaffirm the sorts

of statements that had been made when the dialog was really on october, 2000.n it is interesting that they did that, and i think it is important, not because of the substance of the statements dating from october, 2000, but because of the symbolismf those. those came during a period when it was the culmination of a very long, involved a series of negotiations. those statements stood at the top of that, when we in fact have an element of trust, we have thousands of hours of contact. we understood what we have accomplished and what remained to be accomplished, but most of all, we recognize the existence of north korea as a system as it

was. in effect, those statements put on paper the recommendation that dr. perry had made in his review, that if we were going to make progress with north korea, we cannot insist that they change first but we would have to do with them as they were. >> let me add to that. le and i prior, nicoel an talked with the vice minister and the ambassador on this. we talked about the six-party talks. there referred back, when we go back to the six-party talks were interested in going to a period of time prior to april, 2009. they are talking about the pre- un security council presidential

statement that followed their launch of a missile on the fifth of april. what they also talked about was a little bizarre re-ordering of priorities. they talked about what was imbedded in the september, 2005, statement, in which we agreed to discuss a peace treaty. we agreed to talk about the normalization between countries. and we agreed to talk about compensation for north korea's whatever they are going to do. what they did not talk about is ization of them.tati that statement talks about denuclearization. that is what they are focused on. the vice minister also said, we understand from the chinese, that the united states, japan

and south korea are not ready to return to six-party talks. so we will not be hasty in pushing for six-party talks. >> if i may add one thing on the technical side, having the enrichment capacity that the show does, clearly they got it ready someplace else, certainly complicates the technical part of getting back to the six-party talks. before i could have written the script of what to do to contain the plutonium program. now you cannot read the script the same way anymore, because if they are reluctant to give up the bomb, they are not going to give up the centrifuge capability because they can say, it is a done for the light water reactor, and we are building a light water reactor. so we will have to change the dynamics in some fashion it to accommodate the fact that they are in reaching and building -- enriching and building a light water reactor.

we will have to go back to what we did in prior years. >> jill from cnn. professor hecker, you thought that they had come very far very fast and you were very impressed. how do you think they did that? did they get the information that you talked about from kahhn and build on that? was there someone at helping them? do you ascribe to the theory that there were other sites doing the same thing? and also, is it possible to ask professor carlin about the implications of what happened today? is he the proper person it to talk about that? >> that is later. >> maybe we will leave it at that. >> the real answer is i don't know. as i said, we can speculate.

first of all, they need a lot of material which is very difficult for them to make. this is material that pakistan and iran cannot make and they managed to import that from other places. if you look at their procurements history, they have been able to import a number of import materials liek thke the high strength steel and aluminum alloys. it must've had those already and have probably been procuring them for the last 10 years or so. you need that. second, you do not just put up a centrifuge facility and start the reconstructing of the building of april, 2009, and have it spin away by november, 2010. it took the iranians 20 years to

make this work. what they must've done -- this is speculation -- they did it somewhere else. they had some number, and it must've been more than a few centrifuges. got it all perfected and brought it on to the site. to do that, you still need to train your people. if you read the albright piece, they had them in pakistan. it is a combination of all of those things. >> make sure the mike is getting green on both sides. >> i have one more mike here. >> second to your right. >> we can have one of those. >> now you're red. one more.

>> it says "on," but bear with us. >> thank you. i am from the -- i am a north korea analyst, and i think it is very significant for north koreans to mention the importance of returning to the october, 2000 joint communique between the united states and south korea, because it was a comprehensive resolution of the korean problems, north korean problems. bob, i have a question for you. dr. hecker talked about -- the ability to accept north korea [unintelligible]

what do you sense about washington, d.c.? americans are ready to accept that kind of -- to take care of north korean's sense of insecurity to solve the nuclear issue? >> you know i am not a washington analyst. i am here to analyze -- it is much easier to analyze north korea than washington. i hope that people now recognize that as it -- there is a policy that they have been following and it could stand some re- evaluation, that a development like this suggests that we need major refinement, and maybe we need to go back to basics. are they ready? i honestly don't know. sorry. >> chris nelson. >> just one comment.

because i put the words of their. -- up there. deal with it as it is, rather than what we would like to be. people would say as it is, but that would mean accept them having nuclear weapons. they have accepted the 19th agreement under the right circumstances. visual, youmuy start with the fact that there will be denuclearization. they have had the bomb for seven years, and even though we have said they cannot have the bomb up, but they have had a bomb. the issue is you clearly have to start that the end goal is the denuclearization. >> doctor, your clear in your report yesterday we released it that you do not see this as a weapon program right now. and you were quite critical of

administration, various officials, right off the bat. what is your advice to the administration in how they talk about this? should they stop calling it an heu? it does have that potential if they keep going. the other thing that kept coming up yesterday when we were making our phone calls is that this puts the chinese on the spot. does it? do you sense a chinese involvement in the plan or knowledge of it? what is your advice on what we should say to china? >> on the china question, i will turn to bob. [laughter] on the first issue, of what you were concerned about and that is what one says to the administration. let me address the newspaper, at

least some of the news coverage. i chose my words carefully and to say take the uranium enrichment program, and if they make heu, that's serious. don't hype it. what the risks are associated with the investment program that they can go to he. yoeu. if you make a lot of it, that can change the size of their arsenal. to get from what i saw to a hydrogen bomb, that is an incredible step. i do not believe that it any way, shape, or form. >> the china question. 've reallyink we heard them declare themselves

on that. and until they do, we will not have much of a sense of what their view is. the chinese have never said the north koreans cannot have a peaceful nuclear program to produce electricity. since the north koreans say that is the purpose of the program, i suspect that will be where the bulk of their position is for a while. >> can i use this -- i cannot resist. >this is ironic. the north koreans are building an lwr, and they have been in richmond facility. this raises all sorts of problems, concerns -- they have enrichmentg an facility. will they be able to make

uranium bombs? we have been here before, but we are going to build them the lwr, and we were going to have complete control of the fuel. we were going to ship the fuel in, we were going to take the fuel out. for reasons not altogether clear, we decided we did not want to do that. and so we scrapped that program. >> he is going to do this because i could not get to it. this is an actual kido cap. the is alal thal that remains f several billion dollars expended on this. does not help to remind ourselves that we had a bite of his apple once upon a time. the fact that the north koreans are doing it now is not our fault, but the more we wait on this problem, the more things

develop and make it more complicated for us to address it. >> let me do a couple things along those lines. whether it is correct or not, you may go back to october, 2002, when the united states suspected that north korea was creating a second route to a nuclear weapon by highly enriched uranium. there was a confrontation in which we in shooaccused the norh koreans. coming back, the bush administration decided that yes, the north koreans were doing this. they were in violation of the technical letter of the law. the bush administration seized the provision of heavy fuel oil to north korea. that led to a cascading of events that created the second

nuclear crisis that began in december, gender, late 2002- 2003. -- december, january late 2002- 2003. after we left pyongyang, we went to beijing and met with some prominent academics. we posed to them the question of, what is china going to do if north korea continues with some very serious, provocative behavior? we have a couple here that you may suggest that qualify that. the revelation of this low enriched uranium facility or what occurred yesterday or last night and that was the artillery barage. we got a surprising answer from the chinese. the chinese is said, the chinese will react even milder the next

time. they are very concerned about the stability and a long-term survivability of the regime. this is from a chinese academic. >> on the china part, putting this technical thing in perspective, as far as the chinese technical people, they've continued to underestimate the capabilities of the north koreans. i have dealt with the chinese for a long time. they did not think they could get the reactor back up in 2003, and they did. they did not think they could reprocessed plutonium. they did. they did not think they could build a light water reactor. enrichment they said, not at all. but the chinese to underestimate. underestimate.