determined by conditions on the ground. as my good friend and ship mate, general jim mad us noted, it undercuts the narrative of the taliban that we will be there forever, that we are determined to maintain a presence forever, and it does, indeed, as i have told this committee before send that message of urgency that president obama sought to transmit on the first of december at west point in 2009 when he also transmitted a message of enormous additional commitment in the form of 30,000 additional u.s. forces, more funding for afghan force and additional civilians. >> thank you. now, relative to the pending request to increase the size of afghan security forces by up to an additional 70,000 personnel, i believe you have made that request, is that correct? >> i have, mr. chairman, and m

understanding is that the secretary has forwarded that. this was made in consultation with ministers of intior and defense in afghanistan who also gainedresident karzai's support for it. keeping in mind that it reasonable degree of medical certainty a floor of 352,000, and then if there are certain reforms carried through, which are already very much entrained by ministry counterparts in afghanistan in terms of additional commitment to leader development, recruiting, retention, and attrition issues, that the growth would be to 378 total. >> is that a floor of 352, that is approximately 45,000 more than the goal for october, 2011 as i understand it. >> that's correct, mr. chairman, and the afghan forces are on track it appears to reach that goal probably even early as is the case this past year. >> secretary flournoy, are you

recommending that incrse? >> the secretary has forwarded the increase over to the white house for the president's consideration. we do expect a decision on that soon. >> are you able to say that you support it or the secretary supports? >> yes, i think the secretary does support the range that general petraeus suggested between 352 and 378. >> you both -- thank you. you both made reference to pakistan and the safe havens which exist there with the pakistan government basically looking the other way in two key areas, that's north i'm sorry ear stan and down in kwet a where they know where the people are who are crossing the border, and terrorizing afghan citizens, atcking us, attacking afghan forces, coition forces. now, pakistan may be looking the other way in that regard, but i don't think we can look the other way about what they are not doing in those areas.

so i would ask you both what, if anything, more can we do to persuade the pakistanis to be the hammer which i think you made indirect reference to, general petraeus, so when those forces css the border, we can be the anvil? >> mr. chairman, first, if i could, i think it is always important to note what pakistan has done over the course of the last two years, and that is very impressive and very challenging counter insurgents operation toss clear swat valley and a number of agencies in the tribal areas of rugged border regions. and then to note the enormous sacrifices they have made, their military as well as their civilian populous, which has also suffered terrible losses at the hands of internal extremists. there is indeed as aesult of a number of recent visits and

coordination efforts in recent months, unprecedented cooperation, coordination between pakistani, afghan and isaf forces to coordinate in operations that will complement the other's forces on the border, say for example where the pakistanis go the border and we are poised indeed to be the andville on which they are driven. the fact is that the pakistanis are the first to note more needs to be done. there is, i think, a growing recognition that you cannot allow poisonous snakes to have a nest in your backyard, even if they just bite the neighbor's kids because sooner or later they're going to turn around and cause problems in your backyard, and i think that sadly has proven to be the case. having said that, there is, of course, considerable pressure on al qaeda and on the hakani

network in north wi seer stan. the campaign there disrupted significantly the activities of those groups, and then of course on the afghan side of the border, there has as i noted in my opening statement been an enormous effort to establish a defense in depth to make it difficult for in filtration. again, we conducted a great deal of coordination with afghan partners and ultimately as senator mccain noted that the way to influence pakistan is to show that there can be a certain outcome in afghanistan that means that there should be every effort to help their afghan neighbors and indeed to ensure that they do that on their side of the border aswell. >> mr. chairman, if i could just add from a strategic level, i think what's needed is continued

investment in the strategic partnership that we've been developing with pakistan, and very candid engagement with them on these issues to influence their will to go after the full range of group that threaten both of us. it means continued efforts to build their capacity, things like the pakistani counter insurgency fund, but not only efforts to build their milary capacity but also their capacity for governance and development in areas like the fatah and other parts of afghanistan to meet basic needs of their people. wean't walk away from this problem, and we believe a strategy of engagement, investing in the partnership is the best way forward. >> well, i think that's all well and good, but it is actually factually true, i am afraid that simply investing in their capacity is not what we need at the moment in north wi seer stan and in kwet a with the taliban. those folks using those areas are attacking our people, and

the pakistanis basically resisted going after them in those areas. they have done that for their own iernal reasons, and o the other hand, we've got to continue to find ways to impress upon them that their backyard is a backyard where snakes are permitted to continue to exist anthose snakes are crossing the border. yosay simply increase their capacity, i am not willing to simply increase their capacity without some kind of an understanding that that capacity is going to be used to end these safe havens which are deadly to our people. so i'll simply say that. if you want to comment you can. i should have announced we have a seven minute round, i probably used mine already. in any event, i will end my round there, unless you want to add a comment. >> if i could just add, we are having extremely candid conversations about our

expectations of what we wou like to see our pakistani partners do in areas like north wi seer stan and elsewhere. we are continuing to apply as much pressure as we can from the afghan side of the border and also in terms of pressure on al qaeda senior leadership in the border region. >> senator mccn. >> thank you, mr. chairman. and i thank the witnesses again. general petraeus, i have been a memberf this committee for a long time, and i've sat through hundreds of hearings and one that stands out in my memory was in stember of 2007 when you and ambassador crocker came and testified when the majority of americans and the majority of members of the committee and majority of the senate wanted to have an immediate pullout from iraq, which obviously was -- and

that the surge could not succeed and would fail, obviously that turned out not to be true, that the surge did succeed, and i have a bit of a feeling of déjà vu here because this morning, i am sure you may have seen "the washington post" indicates, the headline is on the front page, quote, most in u.s. say afghan war isn't worth fighting. nearly two-thirds of americans now say the war in afghanistan is no longer worth fighting. the highest proportion yet opposed to the conflict, according to a new washington post, abc news poll. could you respond to that poll and maybe have a few words for the american people about this conflict? >> well -- >> and you might mentio the coequences of failure. >> thanks, senator. up front, i can understand the frustration. we havbeen at this for ten

years. we have spent an enormous amount of money. we have sustained very tough losses and difficult life changing wounds. i was at walter reed yesterday, seeing some of our troopers whose lives have been changed forever by their service in our country's uniform in a tough fight. but i think it is important to remember why we are there at such a time. it is important to remember that that is where 9-11 began, that's where the plan was made. that's where the initial training of the attackers took place before they went to germany and u.s. flight schools. that is where al qaeda had its most important sanctuary in the world, and it had it under the taliban. at that time, of ourse, the taliban controlled kabul and the vast majority of the country. and indeed, we see al qaeda

looking for sanctuaries all the time, frankly. they are as i mentioned earlier under considerable pressure in their north wi seer stan sanctuary, and there is a search for oer locations. and afghanistan would be an attractive location were the taliban to control large swathes of it once again. indeed, there is a small presence of al qaeda in afghanistan, some probably less than 100. we killed the number three leader of al qaeda in afghanistan several months ago, and have detained another very important individual there as well. and we do see the exploration, if you will, of certain possible sanctuari sanctuaries. the other thing to remember is the one i made in my opening statement. that is it is only recently we have gotten inputs right in

afghanistan. as undersecretary flournoy explained, there were a number of years where our focus was elsewhere, where afghanistan an economy of force effort to use the military terminology, and it is only since late 2008, early 2009 that we have focused back on afghanistan and have deployed the military, civilian and financial resources necessary, adjusted our campaign plans and concepts, staffed the organizations properly, and so forth, so that we could indeed say that we actually had the inputs right. we judged that that was roughly la fall. that is what has enabled us to make the progress that we have made. i do believe that we can build on that progress as difficult as that will be. and i believe it is imperative we do , because again, i think this is as president obama has said a vital national security interest that again al qaeda not

be allowed to reestablish sanctuaries in afghanistan. >> let me then ask you to responto a los angeles times story this morning which says national intelligence director james clapper told congress last week, i think the issue the concern the intelligence community has is after that and the ability of the afghan government toick up their responsibility for governance. tame general ronaldburgess, head of defense intelligence agency offered a sobering view, one that is shared by the cia. uchlt officials say it contrasted sharply with the optimism expressed in recent days by petraeus. quote from general burgess. the taliban in theouth has shown resilience, still influences much of the popution, particularly outside urban areas. burgess said u.s. led coalition has been killing taliban militants by the hundreds he said, but there have been no apparent delegate rad agency in their capacity to fight.

would you respond to general clap errand general burgess's statements? >> first of all, with respect, i have tried to avoid what might be labeled optimism or pessimism and have tried to provide realism. and i think that the opening statement speaks for itself in terms of expressing what we believe is reality on the ground, with a very significant note of the challenges that lie ahead. there is no question that governmental capacity is an area of in a sse strategic risk as we identify it. in the slides we provided along with the statement, you will see the so-called cloud slides, and i think there's a double thunder bolt coming out of that particular cloud. the reason is that indeed it is very difficult to transition tasks that are currently performed by international

organizations or isaf provincial reconstruction teams to afghan institutions if that capacity is not present. i had a long conversation with minister of finance in kabul, and then president karzai the day before leaving and discussed the imperative of increased efforts to expand this governmental capacity, particularly in the arena of budget execution. now, that may sound like an odd item for a military commander to be engaged in, but with our civilian partners, we absolutely have to help afghan partners increase their abilit to spend the money they're provided, to speed the very bureaucratic processes they have instituted to enable them to take money that's provided in through the top and gets down to the province and district to replace again service provision by international organizations and

provincial reconstruction teams. ey are seized with that. they realize that the trend that is currently in afghanistan has to be changed and that indeed budget execution has to increase substantially again to enable president karzai's goal of doing away with parallel institutions to be achieved. >> could i finally ask very briefly, do you see increasing evidence, evidence of increasing iranian involvement in afghanistan? >> we did in ter dikt as you saw i think press reports, senator mccain, a shipment from the force through a known taliban facilitator. this was in ter dick ted, three of the individuals were killed. 48 122 millimeter rockets were intercepted with various components. this is a significant increase in more than double in range over the 107 millimeter rockets

we have typically seen, more than double in terms of bursting radius. >> do you see other evidence of iranian involvement? >> we do see certainly iranian activity to use bh soft power in the way they shut off the fuel going into afghanistan a couple of months ago and also certainly to influence the political pcess there as well in ways similar to what we saw in iraq. >> thank you, mr. chairman. >> thank you, senator mccain. senator lieberman. >> thanks, mr. chairman, thanks secretary flournoy and general petraeus for your service and testimony. general petraeus i don't think we can thank you enough for is service and leadership you've given our country, particularly in this case you had gone from remarkable leadership in iraq, helping with a lot of help from state department and our troops turning that situation around, then the central command.

suddenly with general mcchrystal's departure from afghanistan, you are called to the oval office. the president asks you to go to afghanistan. you could have found a lot of reasons not to. you just didn't hesitate. you said yes, sir, and you've been there with a lot of support from the administration and others, and we're turning it aroundow in afghanistan, without any illusions about the difficulties we face. i just think the country owes you a tremendous expression of gratitude. you set by your example the standard for everyone who serves under you in afghanistan and frankly for any of us who have the privilege of serving our country in whatever capacity, and i thank you for that. the public opinion polls are on our minds today. i think we all know from experience you can't make decisions about war and peace

based on public opinion. once you commit to a cause as we did afr 9-11 to the cause of a different and new afghanistan and you commit troops to it, you can't be effected by waves of public opinion. we know from recent history, when wars are succeeding, when wars are failing, seem to be failing, public opinion is negative. when wars seem to be succeeding, public opinion turns more positive. in this case, we are succeeding in afghanistan today and therefore i thinthe downward turn in the public opinion here in the united states has more to do with the understandable preoccupation of the american people with the economy, with jobs, with the deficit. in that sens i think we have to come back and remind the american people of why we are in

afghanistan, why it is worth it, and that we are now succeeding. and i think secretary flournoy and general petraeus you have done tha most effectively in your testimony. secretary flournoy, i want to quote from you. you said just right to the point, the threat to our national security, and the security of our friends and allies that emanates from the border land of afghanistan and pakistan is not hypothetical. there is simply no other place in the world that contains such a concentration of al qaeda senior leaders and operational commanders. this remote region has served as a crews bell for the most catastrophic terrorist actions of the past decade as we learned at great cost after abandoning theegion in 1989, staying engaged over the long term is critical to achieving lasting peace and stability in this region and securing our national

interests. end of quote. i don't think we can say it better and have to keep saying it about why we're there. second, general petraeus, i think your presentation today tells us, again, nobody is under any illusions that this is turning around. i can tell you that i've been going to afghanistan since january, february of 2002, after our initial victory there, overthrowing the taliban, going back at least once a year, usually twice a year. and for a period of years just to validate what you said about us turning our attention away, every time we went, if we looked at the map, every year the taliban was in control of more of the territory of afghanistan until the last year, until 2010. and i don't think this is an accident, because as you both said in some sense we only fully engaged in afghanistan for the

last year. president obama made the decision to commit the surge troops. in fact, since the president has been our commander in chief, we have increased our troop presence not just 30,000 but 87,000, when o cnsiders the previous commitment made. so we're there for a reason, we're making progress. i can't thank you both enough for all of that. i want to just get to a couple of questions briefly. we've talked about the safe havens in pakistan, but what strikes me as really significant and i think underappreciated is that as of two years ago, there were large taliban safe havens inside pakistan, such as marja, and one of the things that happened in the past two years, our coalition has taken the safe havens away from the enemy, and shut them down. i onder, general, if you would comment on that.

>> well, indeed that has been one of our most important objectives and indeed one of our troopers' most important accomplishments. these were significant safe havensn the case of kandahar city, the well spring of the taban movement and right on the doorstep of the secondz;zu largest city in afghanistan. indeed, there was a period in early 2009, i remember the intelligence analysts came in and told me they thought kabul was being encircled once again in the same way it was during the civil war. so these are very important accomplishments and the increase of afghan security forces and the advent of the afghan local police program now also enable us to prevent other safe havens and much less populated areas from springing up as well.

and that is certainly one of our objectives. >> i appreciate that answer. let me go to another important matter that you both talked about. we're on a path now to transition control of security to the afghan security forces by the end of 2014, but both of you have testified today about the importance of the signaling and enduring commitment to the security of afghanistan and i couldn't agree more. i wonder if both of you would describe, i know there were some discussions going on now seriously between the u.s. and afghan government. what kinds of long-term commitment you might contemplate, and i wonder if you would comment on the possibility of some continuing base presence, perhaps jointly operated system of bases in afghanistan between us and the

afgha afghans? >> senator, thank you. when the president first announced the strategy at west point, he was very clear that we were making an enduring, long term commitment to afghanistan and the region. having made the mistake historically then paid a very dear price for that. so that's been clear from the beginning. it an important message to emphasize as we begin this transition process. we just had a team in kabul this we can starting to discuss the outlines of a strategic partnership with our afghan partners, being clear abou the kinds -- our expectations of that partnership and the kinds of commitments we would be willing to make. the president has also been very clear fromhe beginning that we do not seek any permanent bases in afghanistan, that we don't seek to have a presence that any other country in the region

would see as a threat. that said, we are committed to the success of the afghans to continuing to build their capacity, and so we do envision if the afghans invite us to stay the use of joint facilities to continue training, advising, assisting the afghan national security forces, conducting joint counter terrorism operations and so forth. so we are in the process of discussing what kind of parameters should outline our partnership. i should also add, it goes far beyond the military domain to look at how we can support further development of governance, economic development and so forth. >> general, do you want to add anything to that? >> well, again, i think it's very important stay engaged in a region in which we have such vital interests, and i think the concept of joint basing, concept of providing enablers for afghan

operations and so forth frankly similar to what we have done in iraq since the mission changed there would also be appropriate in afghanistan, again, depending on the circumstances, noting we have nearly four years to go until that time. >> i thank you both. i think the important points you made, obviously we will only stay in afghanistan after 2014 to the extent we are invited to do so by the afghan government, and we determine we are able and want to do so, but i think, general, you point out very correctly that we have -- that we would do this not just for the afghans, but we also have security interests in the stability of afghanistan and in the region more generally. i thank you both very much. >> thank you, senator lieberman. >> thank you, mr. chairman. let me identify with the remarks of senator lieberman about your

service, general petraeus. i might also add that in the 17 years i've been on this committee, i don't recall a better opening statement, more comprehensive. i appreciate that verymuch. one thing hasn't beenalked about, i thought you might have a comment to make briefly about what's happening now with the budget and about the crs, how that is affecting the military. >> well, thanks, senator. the fact is that the services will do everything in their power to make sure that those on the frontlines are provided everything that is required, and they will do that even as they start toinflict pain on themselves. we've been through this before. i remember this, i think one of the years i was commander in iraq, the services did some very serious belt tightening, but they continued to provide the support to us out there. now, there does come a point, wever, at which some of that

pain has to be passed on where you just can't continue. and our assessment, again, strictly from an afghan perspective, not from the perspective of those here in the pentagon, but we sense somewhere in the june time frame, probably with that there would start to be a limiting factor. and that obviously would cause us enormous concern because the last thing that we want to have to do is to halt our progress in an area that is so important to the ultimate transition of tasks. if i could add a comment on that, while we're on this topic, though, senator, that does have do with the growth of the afghan national security forces. again, making very clear my job, of course, is to state requirements. m a battlefield commander, every level above me has a broadbroad er purview and broader considerations. of course the challenge with the growth of the afghan national

security forces, the conce, is the issue of sustainability. so while it is clearly desirable from the perspective of the ministry of interior, defense, isaf and afghan leaders, there is an understandable concern about the sustainability of that over time and you all had quite a bit of dialogue with secretary gates on that. i think that's the discussion that has taken place here in washington with respect to that growth decision. >> i appreciate that very much. in general, i do want to -- i notice you made a request for additional $150 million in the sert program and that's been one of my favorite progms. you've spoken very favorably about it. i notice, though, when the special inspector general for iraq reconstruction, they had a report where they were somewhat critical of it. i would like your response to that. >> again, there was -- there were in some areas grounds to be

crical about it. we have taken quite considerable steps to improve our oversight of this and a number of other programs, frankly. we have increased significantly personnel who are in the business of tracking our contracting, overseeing the implementation of the various construction efforts and so on, and also monitoring serp. i established new procedures. we have done more training of the serp individuals. we have, indeed, structured the program so now the average of the is entirely what i think the committee's intent was all along, roughly $17 million on average, this particular year. we have already done more projects this year than we did in the last fiscal year because, of course, of the increase of our troopers now on the ground, deployed, and they have gains that they want to solidify and build on with t help of this program. so that additional $150 million

that we requested over the $400 million in regular serp is very important to us and that would be something that would cae a significant halt in some of the programs that we seek to capitalize on the very hard fought and costly gains of our troopers on the ground. >> we talked about this back during the iraqi thing, we went through the same thing. and, you know, i look at this, perhaps they're the same safe guards in there, but there is so much more that can come by the immediate decisions to carry them through and those figures stilstand. let me just mention on a much larger scale, we talk about train and equip, our figures have gone up from fiscal 10 to 12, 9, 11.8, $12.8 billion. i would say i had both of you have been very complimentary about the changes in this and the changes taking place with

the iraq -- with the after gagh. i was over there, spent new year's eve with the kids over there and took a long time at the kabul training center. and i was just really in shock at the attitude -- well, first of all, being on new year's eve, the attitude of our kids over ere, just the spirits are high, they are -- they know what their mission is, they're excited about it and they're dedicated. but in terms of watching the military train, it isn't all that different from the training that takes place here. we have done a great job over there. and i think tat -- we should make comments about the successes we had in the training of the afghans. >> well, this is another area, senator, in which, again, it is only recently that we got the inputs right. key input in this regard was lieutenant general bill caldwell, commander out of ft. leavenworth, before taking this

command, and he has guided this effort very impressively. the fact is that we have increased very substantially in every single area of the so-called train and equip mission. the funding has, indeed, gone up because we're in the stages of building the infrastructure to allow the additional forces. buying the equipment for them. and we still do have fairly substantial numbers of contract trainers, but we're starting to bring those down as we replace them both with nato, isaf trainers and increasingly afghan trainers because we have an afghan train the trainer program among all the other efforts. one of the most significant steps forward in this regard is in the literacy arena. and we have actually already had some 50 to 60,000 afghans go through literacy training and we have even more than that number in literacy training now. now, you may say that's a strange pursuit for a train and

equip mission. but the fact is that one of the major challenges in afghanistan is human capacity because of the more than 80% illiteracy rate. and if a soldier can't read a serial number off a weapon, a policeman can't read a license plate on a car, needless to say that is mission limiting. and so we bit the bullet and decided that as part of basic training for the army and for the police that would introduce basic literacy training along with it. without having to extend the courses, night program, interestingly the afghans have really taken to this. not surprisingly many of them were quietly ashamed of not being able to read and write, they now get themselves to a first grade level, a funconal level, and then we build on that in the subsequent noncommission officer training courses for the soldiers and police as well. this is a huge investment in afghanistan at large and a major investment in the afghan national security forces. but the same is true of a number

of fferent areas. there are now 11 branch schools. the institutional side of this is building the leader development side is beginning to take off. and we're starting now to build the so-called enabler forces. for a long time, we were basically training and equipping infantry battalions. but, of course, a force of infantry battalion is only as good as the military intelligence, the logistic support, the transportation, the maintenance and all these other, again, enablers, and so that has been a key area of focus in the past year. >> and that's going great. my timehas expired but i wld only say we were able to randomly -- select some people out, afghans and get their take on this thing. and i understand that literacy issue. the training is going very well there. thank you very much, mr. chairm. >> thank you, senator inhofe. senator reed is next and after his round, we will then have a

break of perhaps five minutes after senator reed is finished. >> thank you very much, mr. chairman. madam secretary, general petraeus, thank you very much. not only for your appearance today, but your extraordinary service to the nation. thank you very much. general petraeus, we are countelaying a serious issue inerms of the budget, the department of defense budget. many have suggested that we have to move forward regardless of other aspects. but integrated within your plan is a strong state department presence in afghantan. and the state department request for ocho funding $2.2 billion, civilian personnel, economic activities, aid work, et cetera, how central and critical is this funding to yo overall strategy and your assessment of ultimate success in afghanistan? >> well, thanks, senator,

because it is critical. it is absolutely central to what we do. this is a comprehensive civil military counterinsurgency campaign. it is not a military only campaign. and as i noted in my opening statement, we have recently revamped the u.s. civil military campaign plan and essential to that is the ability of state aid and other implementing partners to capitalize on the hard fought gains of our troopers on the ground and those of our afghan partners in joint operations. again, it is not enough just to clear and hold. you do have to build and the build includes local governance, local economic revival, if you will, improvements in basic services and so forth, so that the afghan people see that there is a better future by supporting the afghan government, a legitimate government, and it has to be seen as legitimate, rather than a return to the repressive days of the taliban. and there are various eas in

which the taliban c actually compete, conflict resolution is one of them, by the way. so, again, if the afgh government can't or doesn't provide those basic services, then there will be a reversion to the taliban. however little the people have regard for them. and they remember what it was like under the brutal rule of the taliban. so this is very, very central to what it is that we're trying to do. >> thank you very much. and i'll ask both of you to comment on, we hear various comments emanating from kabul, the civilian leadership of the afghan government, from our nato allies about the strategy, the long-term commitments, et cetera. but what struck me along with senator levin is that the local level there seems to be much more traction with respect to local afghani leadership and

also there seems to be continuous improvement in the afghan security forces that gives a different perspective than listening to the announcements of the president or some of our allies. i wonder if both of you might comment on that and i'll just -- to what extent is one overwhelmed by the other to what extent one is a better sign of the reality on the ground than the other. and general petraeus and then secretary flournoy. >> local government has been growing and develong as has the development in other areas of basic service delivery. as i noted earlier, tre is no question and president karzai and his minister of finance are the first to recognize it that at the budget level, execution has to be involved and they're determined to do that and they

have plans to do that so tha more money can be put on budget rather than being injected through what president karzai understandably is concerned with, this term of parallel institutions. certainly some things are said in kabul at times for domestic political reasons. i know that that never takes place in washington. >> never. >> but occasionally in kabul that does take place. and beyond that, though, i think secretary gates made a good point the other day. i think before this committee, that sometimes we don't listen well enough to president karzai. we have -- he was understandably concerned for years about private security contractors, which he sees as the ultimate parallel institution under the control and in some cases former warlordsr members of what he and we, by the way, have agreed to call criminal patronage networks, which he's very concerned about. and we had a long conversation just again the dayefore i left with general h.r. mcmast, speer

focus the right attention on this very, very challenging element that can erode the very institutions to which we need to transition if, again, these are criminals, they're breaking the law, they have political protection in some respects, and they're not just acting as individuals. they are part of networks. and president karzai sees these and he wants to deal with them. when he heard that evidence and his surgeon general, for example, he fired him on the spot. in a subsequent previous briefing between an afghan parter and general mcmaster. he did the same with the afghan national military hospital, when he heard what they were doing and how derelict in their duty and frankly immoral in failing their moral obligation to their soldiers. so, again, i think at times we have to listen better. what he says is understandable about civilian casualties. we cannot harm the people that we are there to help protect.

and we have to protect them from all civilian casualties, not just those at our hands or those of our afghan partners, but those of the insurgents as well. so i think that's how you do have to look at this. and i do think that periodically we have got to think about walking a kilometer in his shoes and understanding the dynamics with which he has to deal. the political foundation that he has to maintain because it is not -- though the executive has enormous power in that system, there are also significant checks and balances on it that may not be as apparent to individuals who haven't lived this the way some of us have there in kabul. >> madam secretary? >> senator, i would just add secretary gates also said this is a case where the closer you are to what's happening on the ground in afghanistan, the more positive you are about the ultimate outcome. because when you go to -- at the district level, very small

changes can have huge impact. if you combine some basic security with a decent district police chief, a decent disict governor, a shurahat is representative of the local population, you start to see the basis of transformation at the local level. and that is what we are seeing in many, many villages and districts across particularly the south. and, you know, i think -- i would totally agree with general petraeus' comments about president karzai. but i would also expand to say, look, we work with many, many afghan partners. and many extremely competent minists who are committed to fighting corruption, who are committed to afghanistan's success. i'll just cite for you the new minister of interior, minister amadi, he has personally gone district by district. he's removed 66 corrupt police

leaders. 2,000 officers, personally rooting out corruption where he finds it, holding leadership accountable. those -- each of those canges can have a profound effect on the pulation in that locality and so as we see our afghan partners stepping up to take on that accountability, the anti-corruption, the transparency, we are seeing -- starting to get real traction at the local level. >> thank you very much. thank you, mr. chairman. >> thank you, senator reed. we'll take a five-minute break.

come back to order. >> thank you, mr. chairman. secretary flournoy and general petraeus. i want to welcome both of you and thank you for your distinguished service to our country. i also want to associate myself with the remarks of senator lieberman. you truly are a role model about what it means to be a public servant and we're deeply grateful and honored to have you erving us in afghanistan and what you have done for our country. i also want to thank you for the

a sa sacrifices that serve underneath you serve on our behalf. i was very encouraged to see the progress that has been made there. and i think sometimes the press focuses often on the bad things that happen, and the progress that is being made there is not reported about enough. in particular i was very impressed with the military training center as senator inhofe mentioned, particularly the work done by general caldwell in standing up the and work with you and then, of course, when we transition to allow them to protect their own country. i also had the opportunity to meet with so many of our brave soldiers who are working along with their afghan counterparts. and very impressed with, for example, walking through the village in nawa where months

before i never would have been able to do that. now more than ever i think it is important for us to follow through on our commitment in afghanistan, to make sure that afghanistan does not become a haven for terrorists again and that we disrupt the terrorist networks there and in pakistan to make sure our country and our allies are protected. i would like to ask you today about the amount of money that we're spending on contracting in afghanistan. in 2009, the u.s. and nato common funding expenditures for contracting in afghanistan amounted to roughly $14 billion. this is obviously very significant amount of money. and one of the issues that i know you are concerned about, both of you, is the issue of contracting funds ending up in the hands of power brokers and those that are working with our

enemies and working to undermine us. i want to commend you general petraeus and secretary flournoy for the efforts you are taking now to make sure u.s. dollars are not getting in the hands of the wrong people. for example, i know, general petraeus, you have put together a contracting guidance that was issued in september 2010 that is very important to make sure that we are getting the hands -- the money where it is supposed to go. i believe that more work must be done, however, to fully implement the guidance that you have brought forward. i believe that the law must be reformed to allow you to more quickly terminate contracts that directly or indirectly benefit our enemies and to ensure that no additional funds go to those who undermine our interests or attack our troops. for this reason, senator brown

and i raeecently introduced legislation to quickly allow us to terminate the flow of money that goes to the wrong people. general petraeus, i thank you for the feedback that you gave senator brown and i on that legislation. we will be incorporating your comments. i just wanted to ask you, general, what is your view on this type of legislation and the need for it. >> well, my view is very simple, senator. the sooner the better. as my comments back to you indicated that would be very helpful to us. indeed the fact is that we were not spending anywhere near enough time, energy or sheer man hours and focusing on where our money was going. don't misinterpret that. we knew who we were contracting who the subcontractors were. but in the subs to the subs, occasionally we found out that money is actually going to the

insurgents or there is bribery, corruption or some other activity that is going on. the counterinsurgency contracting guidance in the past i've issued counterinsurgency guidance. in that guidance we have the phrase money is ammunition at a certain point in the fight. in this case, i said if money is ammunition, we need to make sure it gets into the right hands. and that was part of the counterinsurgency contracting guidance. we subsequently developed tasks for transparency, mcmaster is in charge of that to come to grips with our afghan partners with the whole issue of, again, criminal patronage net works and how they undermine the very institutions to which we need to transition tasks in the months and years ahead. we also formed two subordinate task forces, 2010 and spotlight. one to look at all contracts, review every single contract to the best of our ability with much greater intelligence focus

on them, and the other to focus specifically on the issue of private security contracts. again, a subset which we believe we have reached in agreement with the afghan government, again, one that i think was -- was of underable concern. an issue of understandable concern to president karzai that you cannot have armed groups being funded through our contracts, running around the country. we called them road warriors in some cases, and they actually were becoming part of the security problem rather than necessarily a solution to it. these groups have enabled us now in the past, oh, year or so alone, to debar some nine contractors to suspend several dozen others that are pending debarment and to terminate a number of contracts as well. though, again, it is a difficult and laborious process without the legislation that you have

proposed which is why we strongly support it. >> thank you very much, general. i also wanted to follow up to, i believe a request that has been made from centcom contracting command and perhaps the secretary could comment on this as well. as i understand it, we haven't had enough contracting officers to be able to police the contracts. and i know that centcom has asked for, i believe, an additional 60 officers to make sure that as we go forward with the legislation and your guidance that we have the people scrutinizing these to make sure the money goes in the right place. if you could comment on what the status is of getting those additional officers in place to be able to move forward with this initiative. >> secretary gates already signed deployment orders to increase the number of military personnel and in some cases civilian personnel to provide

additional contracting oversight and to support general petraeus' efforts and there may be more of that coming. the other thing we have done is started a dialogue with our interagency partners. the usaid, the state department, who also have substantial contracts on the ground, to make sure that we're all doing this together, that they share some of the best practices and lessons learned from the efforts that general petraeus started and that we, as a government, are better monitoring and overseeing our contracts. >> my time is up. i want to thank you, both, for your efforts you're making in this regard and for everything that you're doing on behalf of our country and i look forward to working with you both to make sure you have the tools that you need to be able to make sure that this money goes to our efforts in advancing the cause in afghanistan. >> thank you, senator. >> thank you. >> thank you, senator ayotte. senator nelson. >> thank you, mr. chairman. let me add my appreciation for your service as well.

and the men and women who serve under you so ably. and general petraeus, as you know, i've been an advocate for benchmarks, metrical -- metrics of evaluating progress and giving something that is more objective than a subjective explanation of whether we're winning, losing or whether we're doing better. i notice that in your evaluation of the benchmarks from the report, november report, to congress, regarding progress in afghanistan that the focus on the assessment of governance from march of '10 to november of '10 was a flat 38%. in other words, 38% in march and roughly 38% in november.

no appreciable change. in your opinion, since november -- that november report, has anything changed? are we moving forward or could we be losing some ground? >> first of all, senator, of course one reason i provided the packet of slides for you indeed is to provide some of the measurements that we do focus on in terms of terrain gained and in terms of afghan national security force progress. not just growth in numbers, but also in capability, and in quantity, the danimage done to e midlevel and below taliban fighters and so forth. and with respect to governance, i think since the fall there is no question that there has been, as one of your colleagues noted

already, improvement in local governance, especially in these districts that were cleared during the course of the fall. and so you see the establishments of districts, subgovernors and the arrival of schools and a variety of other areas of improvement in some of these very important districts and so forth. and you see the gradual re-establishment of afghan security force presence in those locations as well. with respect to national governance there has been progress in these areas as well, but there clearly, as i mentioned earlier, is recognition by the key individuals, president karzai and minister of finance foremost among them, that there has to be more done in the sense of governmental capacity building. and in particularly with respect to budget execution. again, we all want that aid to arrive where we can achieve the kabul conference of last year's

goal of putting 50% of the donor money on budget rather than injecting it directly through a variety of implementing partners or international organizations. it is very important to the development of afghan capacity. but they have to then execute that budget and although there has been good performance with respect to the operations inside of the budgets, which is salaries predominantly, they have done well. with respect to the so-called development budget or capital investment, there clearly is substantial work that needs to be done. president karzai personally is seized with this as his lead with this, the minister of finance and we will be working together to support that, that the growth in this particular area. >> in terms of evaluating a percentage, is it fair to ask

how this compares to the 38% in november overall governance local as well as national? >> senator, that's probably one that we should say for the record and consult with our civilian partners on as i think that's the embassy and aid that put that together with u.s. forces afghanistan input. >> okay. now, that would be great to get for the record. the effectiveness and capability of the ana and anp, you've indicated that it is challenging, some improvement in certain areas and not necessarily in other areas. is it possible to begin to look at that in terms of metrics as well? >> senator, in fact, if you look at slide 16, you'll see that the

development in these forces, not just in terms of the growth of additional army battalions and so forth, and police districts and precincts, but in absolute terms, but also the growth in terms of capability. this is an assessment, not just based on math, if you will, not just numbers of vehicles and do they work and some other functions, it is an assessment by their partners who are actually in the fight alongside them. >> so the -- i guess it would be the orange and the yellow that would measure what kind of effectiveness they have in the right -- >> that's correct, senator. that shows the growth in their capability, again, as assessed by those actually in the field with them. >> and you're comfortable that this is a fair appraisal of that

capacity. >> i am. in fact, we have worked a number of months on these metrics candidly. this is a process you'll recall we went through in iraq. i think it took me six months as the commander of iraq before we unveiled it to all the press and everybody else. we spent two full days explaining how the metrics were evaluated and assessed and so this is the maiden voyage for some of these with your committee. >> well, we appreciate your efforts toward that because obviously it is better to be able to establish it in terms that are more objective than those that are usually subjective. so i appreciate your continuing to do that. now, in terms of isr, i know the department has put forth spending proposal about $4.8 billion procuring additional isr assets. i think three global hawks, 84

predators and over 1300 various small and remotely pilot aircraft systems. it also sets a goal of achieving 65 predator -- by the end of 2013. do you -- do you have all the isr assets or -- that you can use at the present time, recognizing that their increased use will require most likely additional assets, but are you somewhat close to what you need is now. >> sir, we're much better off, as i stated in my opening statement, certainly than we have ever been in afghanistan. but as you know, i did request additional isr assets and i think that this is becoming an area, frankly, where there is probably not a commander, not a u.s. commander in the world who has really worked closely with what these assets do for us, who would say that he is satisfied with the number that he has. but we are vastly better off,

again, than we were when i took command 8 1/2 months ago. it makes a huge difference for our troopers. it is becoming increasingly difficult for a taliban member to plant an ied on the road covered by a tower or a blimp with an optic and to do that successfully, just to give one example. these are also a reason for the very high success rate of operations by our special mission unit elements. the fact is that the reason that they are so good is not just because they're the best assaulters in the world and extraordinarily fit and great shots and everything else. it is all of the enablers behind them. it is the linguists, the interrogators, the documentation exploiters, the isr platforms get them to the right place than other systems that get them the final five or ten meters. it is all of this together that

inserts these individuals and provides them real time information on their targets. isr platforms of a variety of different types, manned as well as unmanned, i might add, are critical ingredients in this. >> my time has expired. but i am getting -- gathering from what you're saying that it is a joint effort between our forces and the other forces that are there using this intelligence and gathering all together. >> that is correct, senator. and, indeed, other troop contributing nations are providing a variety of systems as well, but clearly the united states provides the vast majority of them and has the most effective command and control and pipes as well. because, remember, all of this requires massive communication pipes and that is unique to the united states. >> thank you. thank you, mr. chairman. >> thank you, senator nelson.

just your comment about maiden voyage for these metrics, double-check with your staff on that, because these metrics have been reviewed by us, presented to us for many, many months in a different form, but it has been a long battle and senator nelson has been in the lead in terms of metrics but we have seen these numbers and battled over the numbers for the last year. >> and we have the chairman levin metrics as well. these are a little bit different, but -- >> in a much more readable form, i'll say that. >> point well taken, sir. >> senator collins. >> thank you, mr. chairman. let me echo my colleagues in thanking you both for your service. general petraeus, you've answered the call to duty over and over again and we are extraordinarily grateful for that. nevertheless, i do have some

difficult questions that i want to ask you today. madam secretary, in your testimony you spoke of our goal as achieving a "durable outcome." admiral mullen has testified that one of the necessary conditions to succeed in achieving sustainable security in afghanistan requires neutralizing the insurgent sanctuaries in pakistan and, indeed, in the strategic risk chart that the general has given, it talks about the external sanctuaries as well as actions by our neighbors. how can we have a durable outcome when insurgent sanctuaries exist in neighboring pakistan and when the iranians

are continuing to supply the insurgents with weapons, money, and by some reports even training at camps on the iranian side of the border? >> senator, i think that we have to continue to halt the flow of arms into afghanistan wherever it comes from, whether it is coming across the iranian border or the pakistani border. i think we are -- have a number of forces focused on that. in the particular question of the sanctuaries in pakistan, i think there is a multipronged strategy of applying with the pakistanis additional military pressure on those areas and having very candid conversations with the pakistanis, very clearly stating our expectations of where we would like them -- where we need them to do more.

i think, but in addition, i think it also involves a long-term strategy that tries to shift their calculus to get them to buy into our success in afghanistan. a friendly stable afghanistan is in pakistan's interest as well. and as we pursue some of the political dimensions of our strategy, enabling the reintegration of foot soldiers who gave up the fight and renounce al qaeda and agree to come back into their communities in afghanistan and by the constitution, as we begin to create the conditions where we might see some reconciliation of reconcilable elements more senior, those are the kinds of things that will begin to fracture the insurgency and degrade it to a level that can be managed and ultimately

defeated, even as we build up afghan capacity. there is many parts to this problem that have to be worked together. but make no mistake, we continue to apply as much pressure as possible on those sanctuaries and in working with our partners and allies to try to deny them. >> pakistan may well have an interest in a stable afghanistan as you and the general have said. i would suggest to you that i do not think that the iranians have an interest in a stable afghanistan. i recognize the difference between the shiites and the sunni groups here. but the iranians certainly view as making life more difficult for us if afghanistan is

unstable. and we don't have that kind of relationship with the iranians. that's why i am particularly troubled by the interception of weapons coming from iran. but we know it is more than weapons. it is money. it is also according to some reports training at iranian camps as well. general, would you like to -- >> i would, senator. because it is interesting in this sense that the iranians seem almost conflicted, frankly. on the one hand, they don't want the taliban to come back. this is obviously an ultra conservative, some elements extreme, extremist, sunni movement. they are, of course, a shia state with a sunni minority. so they're really not happy to

see that happen. beyond that, though, they also don't want to see us succeed too easily. they certainly want to have influence in whatever state does evolve in their neighbor to the east. and that's why you see different activities ongoing. there is a significant amount of trade in economic activity between the two countries. afghanistan imports a great deal of various goods and services from iran and it is an important economic outlet for them. and iran knows that if afghanistan is over time able to develop the infrastructure of human capital value change and so forth to extract and export the trillions of dollars of minerals in its soil, that it wants to have a good relationship with afghanistan for that time and, indeed, to have some of those exported

through afghanistan's neighbor to the west and not be shut out of what president karzai terms the asian round about as his vision for the afghanistan of the future, of the new silk road running through afghanistan from the energy rich central asian states to the north, to the very populated subcontinent to the southeast. so, again, if we see these different impulses, and we see, in fact, in truth different elements of the iranian government, there is the part of the iranian government that responds to president ahmadinejad and there is the part that is the security services which achieved much greater power and influence as a result of the supreme leader having to turn to them to put down the -- the unrest in the wake of the hijacked elections some year and a half ago, i guess it is now. and so there is some very, very interesting currents that run

within iran and you see them playing out in these different fashions inside afghanistan. and in a number of cases, of course, in a very unhelpful manner as you noted. >> thank you. i know my time has expired. let me just very quickly say that i'm also concerned about whether we're sending mixed messages to both the american people and to the afghans. on the one hand, we hear the president, and general petraeus has repeated it, today that we're going to start withdrawing our troops this summer in order to underscore the urgency and undermine the taliban narrative that we're going to be there forever. on the other hand, both of you have said how important it is that we not repeat the mistakes of the past, where we turned our

back on afghanistan and that we do need a long-term relationship. i would just suggest that i think that's part of the confusion that we see reflected in the polls about exactly what is our long-term strategy. >> and, again, senator, as i mentioned earlier, i don't really see those as mutually exclusive strands of logic, if you will. i think, again, as secretary gates has laid out, i think it is appropriate to talk about getting the job done as he emphasized with his nato counterparts in brussels. i think it is also appropriate, as he did when he spoke before this committee, to talk about the commencement of transition and the commencement of, again, the responsible drawdown at a conditions-based pace of the

surge forces while even beyond that discussing the initiations of discussion on a strategic partnership with our afghan partners. so i think all of that actually can be seen as a coherent howho, but i certainly understand the challenges you have described about that. >> thank you. thank you, mr. chairman. >> thank you, senator collins. senator hagan. >> thank you, mr. chairman. and my compliments to both of you too for your outstanding service to our country, thank you. i am one -- the new chairman of the emerging threats and capabilities subcommittee, which has under its purview ieds, the continued threat of ieds. as you know, roadside bombs are by far the leading cause of death and injury to our u.s. troops in afghanistan. and one of my highest priorities is to improve our capacity to counter the ied threat. just this past week i had the

honor to talk to a wounded warrior from ft. bragg who was currently recuperating at walter reed. he was involved in february with an ied and has lost both his legs below his knees. and, you know, he's getting great treatment at walter reed and i was truly inspired by this incredible young man's service, honor and his attitude. but last year the obama administration started a worldwide effort to stop the flow of ammonium nitrate into afghanistan and the campaign, as i understand it, is running up against stubborn hurdles and neighboring pakistan where police routinely waved tons of ammonium nitrate shipments across the border into afghanistan despite afghanistan's ban on the import of chemicals. it is unclear whether the border guards are being fooled by clever attempts to disguise the shipments or whether they're being paid to turn a blind eye or both. and i think the problems also

exacerbated by the lax enforcement in afghanistan, the afghanistan government has passed a law banning the chemical, but pakistan has not yet done so. and we know that ammonium nitrate is commonly used as a fertilizer but in pakistan, most of the farmers used urea, an organic chemical to fertilize their crops and there is only one plant in afghanistan that manufacturers ammonium nitrate. can you give me your assessment of the ied threat and can you provide us with the detection rate? and is there -- do you think progress in working with the pakistani government to stop this flow of ammonium nitrate into pakistan -- into afghanistan which is, i think, the basis of so many of these ieds? >> well, thanks very much, senator. by the way, i spoke to that great seventh group

noncommission officer myself yesterday and he is, indeed, a very inspirational american. and i actually think it is very realistic that he will be back in the fight by the next time that his unit deploys. with respect to the detection of ieds, obviously a number goes up and down, but we are somewhere in the neighborhood of 60%, i think, in recent weeks and months in terms of detection of the ieds. i think that that is probably a bit higher than it was in the past because we are getting more tips from local citizens in the same way that we have been able to detect or to find four times the numbers of weapons caches and explosives caches in the last probably four months over previous time. i think there is a slide on that in your packet as well. clearly there is an enormous effort that has gone into the

protection of our troopers from ied blasts. as i mentioned the all terrain vehicle version of the mrap. the increase in isr platforms of various types and also various sensors and optics and so forth that are helping us to detect this, of course that help us detect ammonium nitrate which is used in the production of homemade explosions that form the base for the number of improvised explosive devices. you are correct that there are no ammonium nitrate factories in afghanistan. i think there are actually two actually functioning in pakistan. i have spoken about this. i have written formally as well about it to general kiani with whom i meet at least once a month and have done so since -- saw him twice in the last three weeks alone.

he has pledged support for this. he has gone to the ministry of interior which has purview for it. having said that, we have not yet detected any appreciable reduction in the production or importation -- infiltration into afghanistan of ammonium nitrate. there have been enormous seizures, colossal, i think there was one the other day of 10,000 pounds found of ammonium nitrate. but there is still a substantial amount getting through. this then comes to the whole issue of improving detection at the borders, and then also this so-called defense in depth concept because a fair amount of is infiltrated through some of the borders as well. >> we very much appreciate your focus on this and the whole gamut of this, every piece of

the chain from someone even training an individual, then constructing it, financing it, doing the reconnaissance, planting it and so forth, the whole -- there is no civil bullet as we say that can take out ieds. there is a civsilver pathway an you have to attack the silver pathway on it and the whole variety of issues on attacking that pathway have been very important. >> thank you. i want to do everything possible to be sure we can detect as many and prevent this ammonium nitrate as the base. i think it would go a long way. >> again, senator, that's a major reason for the request for the additional funding for the isr that secretary gates conveyed to the committee when he testified. >> thank you. >> the demand for a sizable afghan national security force continues to increase and at some point down the road this demand mayroad, this demand may when the afghan security and

governance capacity becomes more secure and security gains are not easily reversed. and there would not be a significant breeding ground for the afghans to join extremists. and as you know in the president's fiscal 2012 request, it includes $12.8 billion to grow, train, and equip the ansf. and on february 17th, when secretary gates -- he indicated that it's unsustainable to fund the ansf at these levels for the long-term, he suggested that perhaps the u.s. could temporarily fund the ansf as a sort of surge and security assistance and then reduce that as conditions as afghanistan improve and as the afghan security force becomes more capable. would you -- both of you, if you so desire describe your thoughts on this issue and should any increase beyond the ansf's current manning levels be

temporary? and how can we ensure that our nato partners significantly contribute in this regard? >> well, first of all, to answer the last one first, secretary gates was quite clear in his request to our nato and other troop contributing nation partners when he addressed them in brussels and asked them to maintain forces at appropriate levels and so forth, but also provide funding for the afghanistan national security force trust fund and there are other mechanisms, as well. japan, as an example funds the salaries of the national police, a very significant contribution. so continuing that and increasing that is hugely important. the very high levels of afghan national security force funding right now are, of course, necessary because we're building them. and it requires the

infrastructure equipment, in some cases various contract trainers and other contract assistance. these are the big cost drivers, actually, not salaries per se. so once the infrastructure is built and then it is in the sustainment mode rather than the construction mode, costs will come down. obviously as equipment has procured. the element of that cost will come down. as afghan trainers take over for contract trains, that cost will come down. it will still be considerable. and secretary gates talked about that. and certainly over time, afghanistan itself as it is able, again, to exploit its extraordinary mineral blessings, the trillions with an "s" on the end of it of dollars. as they are able to extract and get those to markets, that will help them sustain it, as well. but certainly there could be a point at which this would be an

afghan surge that could come down, as well, and would need to come down, as well because of the cost and because of the sustainment. and again, that is the issue with respect to the decision on the growth of the afghan national security forces in the future. what is is ultimately determined. and as i said earlier, i fully recognize that situation. again, i'm someone who is supposed to forthrightly statements others are supposed to determine how to resource those. and those of us whose state requirements understand that you can't always get full resourcing for everything it is you've requested. >> senator, if i could just add. i do believe as the insurgency is degraded, there may be possibilities to sort of re-size, right size the force over time. i also think this is a very important area for potential reinvestment by our nato and

isaf partners. as some partners are pulled out or some countries change the nature of their mission, reinvesting by contributing more to support the ansf is an important -- your an port part of that. we're also hearing from our counterparts in the ministry of defense and interior that they want to take on this issue of how to make the costs more sustainable for them by finding efficiencies, different ways of doing things that are sustainable in an afghan context. and finally, revenue generation. general petraeus mentioned the strategic minerals extraction. but also afghanistan's in the process of putting in place a whole system for customs collection, taxation, et cetera. so as their economy begins to grow, we expect them to be able to pay for more of these costs, as well. >> thank you. >> thank you, senator higgin, senator graham? >> general petraeus, how long

have you been deployed since 9/11? do you even know? >> well, it's more than six years. it was a year in bosnia, nearly four years in iraq, then 8 1/2 months here and then it depends on your rules. i think 300 days of the first 365 on the road. >> what keeps you going? >> obviously it is the greatest of privileges to serve with our young men and women in uniform. when the president turns to you in the oval office and asks you to do something that's important to your country, there can only be one answer, frankly. i strongly believe that our young men and women in uniform in places like afghanistan and iraq and elsewhere around the world have more than earned the title new greatest generation. >> what percentage of the people in afghanistan have served at least one tour in iraq? >> well, there's a substantial

number. although senator, as you know, colonel graham as having served, i have been privileged to serve as your commander. >> we're doing well in spite of me. >> the -- each cohort, each brigade combat team deploys with as much as 40% who are going to combat for their first time. almost all have served at least one tour down range in afghanistan or iraq. and there are increasingly individuals with several one-year tours, and in some cases even more than that. >> one of the things i hear a lot, general, when i'm over there is what makes you do this? the most common answer is i want to do it so my children will not have to. >> well, you know, i think i

talked to you one time, senator, about the reenlistment ceremony we had on the fourth of july in 2008 in baghdad. we never invisionnvisioned it w 1,217. and it's a pretty inspirational thing. and we all sort of asked ourselves out loud, you know, why are they doing this? the economy at that time was still booming, it wasn't for the stock options. we think it was because they believed that they were engaged in something that was hugely important to our country, that they felt that their fellow citizens recognized it, and that they felt very privileged to have those individuals on their right and left who had also raised their right hands and were willing to serve in such circumstances. what's particularly remarkable

about that ceremony, of course, is that by raising their right hands at that time in iraq, they knew that they were volunteering for another tour in combat. and again, our country can never thank them or their families enough. >> madame secretary, i would like to acknowledge the civilian component of this war. some of the best people i've met in iraq and afghanistan have come from the department state and other agencies, civilian contractors. general petraeus, you wrote me a letter about the essential need for a civilian surge and that the holding, building, and transition cannot possibly succeed unless we have enough investment on the civilian side. mr. chairman, i would like to introduce this letter into the record. >> can we succeed if we do not get the civilian piece right? >> we cannot, senator. this is not just a military campaign. this is not a campaign where we take a hill, plant the flag, and come home to a victory parade.

this is a civil military comprehensive endeavor that requires building on what are troopers in uniform. >> i hate to interrupt my commander, but we only have seven minutes. at the end of the day, should the foreign operations accounts for afghanistan be considered overseas contingency operations? same category? >> it's certainly as important. i don't know how to classify categories. this is a national security issue, not just a foreign aid issue. >> from your point of view, it would be a national security expenditure? >> correct. >> private contractors, we have thousands of contractors. i received a letter from mr. zolick, the head of the world bank who was about ready to withdrawal his force, his presence from afghanistan because of some changes the karzai government were contemplating regarding private

contractors. do we have some good news on that front if you could share it with us? >> my deputy commander e-mailed me this morning right before this said there had been an agreement on the ability to continue the use of private security contractors for a specified period as a bridge to achieving what, i think, president karzai understandably wants to do, which is to bring these kinds of forces underneath the oversight of the afghan public protection force, an element of the ministry of interior so they are not in a sense armed elements that may be working for a former war lord or another. >> i totally understand that. but the position that mr. zolic was about to take i think is shared by many. they're very reluctant to keep in afghanistan. you believe this bridge is going to accommodate their needs? >> i do. and again, president karzai was instrumental in getting this

done. the point man, but clearly it was, again, president karzai and the ministry of interior who enabled this to be achieved. >> let's talk about leaving and staying. we had a pretty interesting conversation. we're talking about leaving and staying all at the same time, and that can be confusing. i understand the poll, i know this was a war ridden nation. and the only reason i ask is the people that are doing the fighting really do believe they can win. i certainly believe you can win, and winning is probably a hard concept to define, but not for me, i think i know it when i see it. i certainly will know losing when i see it. can you tell us why it is important to announce this summer that america will have an enduring relationship with the afghan people if they request it. and part of that enduring relationship will have a military component. it is my belief, general, and madame secretary, if the taliban

believed that the american military forces at the request of the afghan people would be around for a while, providing american air power and support, it would be a demoralizing event, and it would encourage the people we're trying to help. what is your view of how this would play out in the region? starting with the taliban and go around the region. >> well, again, that was also in my statement, perhaps not as eloquently put as that, but it was in there. that, indeed, if the taliban recognizes there an enduring national commitment that they perhaps should consider some other alternatives in fighting for a longer period of time. indeed should consider the conditions for reconciliation that have been established by president karzai. the fact is that, again, already just in a few moments since the peace and reintegration process has formally begun, there's some 700 members of the taliban mid and lower level who have decided to reconcile. there are 2,000 more that are in

various stages of it. and we think there are, perhaps, a couple thousand more who have informally reconciled, if you will. they've just gone home to their village and laid down their weapons. a lot of this, again, because of the progress that our troopers have achieved on the ground because of a sense that afghan forces are growing ever more rapidly. and that even if there is, again, a stain in smaller numbers, if you will, there will be an enduring commitment, sustained substantial commitment that should give them confidence that this afghan government can over time develop the capabilities to secure and to govern itself. that's a critical message for the neighbors, as well. i think one of the lead members of the committee mentioned earlier, the best way perhaps to influence pakistan is through afghanistan by seeing that there can be an enduring solution in afghanistan, pakistan can then recognize how to achieve its

understandable national security aims over time, as well. and that would not include allowing elements on its soil who create problems for their neighbors. central asian states very much want to see a stable and secure afghanistan. they are very concerned about the illegal extremism problem and also about the illegal narcotics industry. >> one last thought. i know my time's up, mr. chairman. there's some discussion about the operations. what would we do if we caught someone tomorrow, a high-value target. where would we jail that person? would you recommend that we take future captures to afghanistan? >> i would not, senator. again, that's from the perspective of the commander on the ground. >> it would do enormous damage to the afghan government potentially, is that correct? >> potentially, it would. >> do you have people in american military custody in

afghanistan, third-country nationals that we need a home for outside of afghanistan? >> we do. and again, as i might let the undersecretary answer because what we have is a process where we identify these individuals to the department, which then has to determine in an inner agency process with capitol hill, i believe, again can they be returned to their country of origin? or are they going to be retained there as we sort out literally what to do with them? >> i would also add, we are -- detainee operations is one of the functional areas we are in the process of transitioning. and that will obviously also affect the nature of what can and can't be done. >> thank you, both, for extraordinary service to our country. >> thank you, senator graham, senator manchin. >> thank you, both for your

service, and i just returned a couple of weeks ago from afghanistan and pakistan and had a great discussion with you, general, and i appreciate it very much. and i like senator graham and everyone who has ever visited have never been more impressed with the quality of soldiers, men and women we have serving and the quality of people we have over there. with that being said, i know that everything relies a lot on the training of the security forces and also of the police force. and i know we're spending about $1 billion a month in that effort. with that, sir, i would simply ask and to general petraeus is what skill sets will they have knowing that we have about 80% plus illiteracy when they enter into it is and when they finish the program, they're at maybe no more than a third grade level as far as reading and writing? and what do we expect them to do? and what can they do? and does that give you concern? >> well, again, the reason that we're investing in them in their

basic training with persuasibas literacy because it's vitally important they be able the read a serial number or basic instructions and so forth. and the idea is to get them to a first grade reading level by the end of their basic training, and with each additional rung with their professional development that there is additional investment in them. and we're well over 100,000 that have now completed that or who have -- or in training right now. we think it's a very important investment in the security forces of afghanistan. >> the thing i'm having a problem. being the governor of the state of west virginia, we train through our state police, paramilitary training. for $1 billion, we could do 100,000 state policemen in my state for $1 billion. and the cost is so enormous. by the end of 2011, we will have

spent close to they tell me to $40 billion. and to me, we're trying to -- this has to be the largest undertaking of literacy program ever in the history that we as a country or military have taken on. >> well, a lot more than literacy, i can assure you. we are building infrastructure for them, buying equipment for them. we are conducting, needless to say, all kind of combat training, everything all the way up to including pilot training for them. this is, again, the development of institutions, not just infantry battalions. and, of course, it's being conducted in the midst of an insurgency which creates all kinds of challenges not to be found in west virginia, the last i checked. with respect. >> thank you. i take it as respectful. if i may ask you this, i know everything depends in 2014 if we're asked to stay. if we're not asked to stay and

they're not at the level, and the investments we have made at that point in time, what do we do? >> senator, i would hate to speculate because, first of all, i think that's an unlikely set of conditions. but -- >> so you assume they're going to ask us to stay? >> i think everything that we have heard they have asked us to stay, it's -- they are, you know, this is a region after decades of war where people and states have survived by hedging their bets. their don't want to hedge their bets. they want to be able to have a reliable, strategic partner in the united states, nato has already signed a strategic partnership agreement with afghanistan. they want -- they want our continued engagement and support. but obviously we -- you know, closer to the time we will be able to -- to evaluate that. but, sir, on the ansf, if i could just make the point, this -- our investment in this

force is our part of the pathway to diminish the burden on the united states and our armed forces. it is by standing them up that we will eventually be able to withdrawal, providing continued support to enable their success. it is much less expensive to build the ansf than it is to support our own continued involvement at these levels. >> if i may, it'll depend an awful lot on the determination and equipment by their own government and their own leaders to continue this or it'll be a catastrophic failure at the greatest portions and money committed by the united states citizen. and if i could go on the question real quick to you, secretary. can you explain to me that basically with the usaid areas, we've secured the area. and there's quite valuable resources in afghanistan? coal being one of them, which i have a little flaherty with. and copper being the other.

why is it that china is the only country that's able to go in there and extract these resources and they're making an investment at $3.5 billion, looks like a return of $88 billion, and we're paying for the security? >> this is an area where we would like to expand the opportunity in foreign investment and assistance to develop the strategic mineral resources of afghanistan. the united states through something called the task force business stability operations, a very important function that we have. that they actually were the ones that brought in the u.s. geological survey to survey everything that's there. and now sort of give the government of afghanistan a map, if you will, for this long-term development. >> how is it -- >> we are trying to bring in other western companies now to see if they are willing to invest. >> how is it that china is the

only country that is willing to go in there? and how can china do it successfully? >> first of all, they're not the only country. in fact, there is now open for bid some other mineral resources. and there are, indeed, other countries than china that are contemplating serious bids for it. with respect, the security for that particular location is paid for by china, i might add, as well. >> my time's up too. but there'll be a time i'd like to go into that further because i have talked to an awful lot of the companies that aren't willing to go there right now, but china is willing to make a $3.5 billion investment because of the security of what we've given there for them to be able to do that. they believe they can and no one else has ventured in. a tremendous rich deposit. >> there are actually other contracts that have been left recently. there's a contract for small

oil. actual extraction. again, it is minuscule by iraq standards, but it is providing money. there's a gold mine that has actually been bid on just in recent months. again, facilitated to some degree by task force business support operations. and it is, i believe, a joint venture between a u.s. and afghan country. china has bid on mineral extraction around the world because it's trying to build its growing basic industries. but india has been equally aggressive in various locations, as well. >> senator, if i could. i'm so sorry. the authority for this task force to operate and do this economic development work that's so crucial to afghanistan's long-term sustainability, that authority is basically going

away. and so we -- this is a place where you could help enormous uhly by providing the authority for that work to continue in afghanistan. >> if i could second that. because in iraq, which was vastly more violent. i mean, we're talking about 220 plus attacks per day in iraq, and, you know, we will have somewhere in the neighborhood anywhere from 20 on up to 60 depending on the season in afghanistan, and there were vastly more easily extractable elements in iraq, of course, with the oil, with natural gas, with sulfur and with some other -- not to mention fresh water. and it was very difficult to attract industry back to iraq. some had literally given up completely and gone home. and deputy undersecretary paul brinkley and the task force business support operation came in, would guide investors back in, we would help secure them.

this is part of a comprehensive approach. and ultimately, for example, i think boeing, by the way got a $5.5 billion deal, ge came back after a personal call. many large energy companies came back in and did, indeed, bid. it wasn't just for the united states. this was for the success of a mission. and that's what he sought to do and had quite considerable success in it. and i think that prime minister maliki in iraq and indeed, certainly president karzai in afghanistan would personally attest to the important role that paul brinkley and his team have played in each of those missions. >> again, thank you for your distinguished -- >> thank you, senator. >> thank you, senator manchin, senator brown? >> good to see both of you. good to see you. i actually share the concerns of senator manchin. i've also spoken to many companies they say it is very difficult to, you know, get in there and establish a base. and seems like we've done all

the work and everyone's coming in reaping the benefits. you have a potential couple of trillion dollars of natural elements under the ground that need to be, obviously, retrieved and secured and make sure that money from those sales actually stays in afghanistan. and it's obviously distributed to the people the right way. so we don't have to keep supplementing what's going on over there. because there is, obviously, a point where we have to draw a line. and i'm wondering a couple of things. when i was there, there was a -- i have to admit, i wasn't too impressed with some of the training that was going on. and i know there was a big concern about trainers that other countries were supposed to provide. to get the police up and running. has that gotten any better at all? >> there has been an absolute increase in the number of trainers provided by the isaf nations quite substantially. but the requirement has grown, as well, because of the course

of the need to train greater and greater numbers for the increased end strength. we see right now a shortage of 750 or so trainers after one takes out the pledges noting that there are a couple of countries, canada and the netherlands who have not yet worked out their final contribution. those could be significant in helping us reduce that number. but again, premature to announce that. but even after that, there will still be a shortage of trainers, and we're looking how to compensate for that. >> has there been any effort? what can you tell us about those efforts with canada and netherlands with regard to kind of adhering to the terms of their agreement? >> i talked to the defense ministers of both countries recently. they're both intent on it. we're in very substantial negotiations. but again, it's premature for us to announce what they're going

to do. >> is there a concern that we may be doing it alone? are countries pulling out to the point like they did ultimately? are we ultimately going to be the last country standing? >> secretary gates just came back from the nato defense ministerial. and he had a very clear message that we need to stay focuss efo the fight, stay in this together. the level of resolve and unity within isef, countries are committed, they are staying in the fight by and large. and they understand the concept of reinvestment. that even as they may start to change the composition of their force, the expectation is reinvestment to continue to support whether it's through training or through funding and other ways. so at this point, we feel that the resolve is there. >> i know when senator graham

was speaking, he said he knows what losing is, but he was a little -- he didn't really say what winning was in afghanistan. what is your opinion as to -- what's a win? when do we say, hey, we're there, we won, it's time to really go on? >> a win would be in afghanistan that, again, can secure itself against the level of insurgency at that time. and that can govern itself, see to the needs of its people, presumably still with some level of international assistance, but with vastly reduced levels of assistance. and a very different character to whatever security assistance is provided. and ultimately, of course, winning is really ensuring that there is not an al qaeda sanctuary again in afghanistan. and what's necessary for that is an ability to secure and govern itself. >> and that being said, would it also have to include pakistan and iran basically saying, you know, we're going to stay out and let afghanistan self-govern

and let them do their own thing? >> needless to say that the more that all the neighbors of afghanistan -- not just pakistan and iran, but the more that all the neighbors help afghanistan, obviously, the higher the prospects are for an enduring win as you put it. >> well, are you seeing that type of help? i know when i was there, it didn't seem like there was a whole heck of a lot of help. >> we are seeing considerable help by afghanistan's neighbors to the north who provide electricity, who are allowing the northern distribution network as we call it now to transit their soil, and who are providing a variety of different forms of assistance. everything from humanitarian assistance, again, to goods and services. as i mentioned earlier, iran has, indeed, without question provided weapons, training, funding, and so forth for the

taliban. but still in measured amounts. it's certainly not an all out escalation or something like that. and we think, again, that's because they are conflicted. they don't really want to see. it's a very cynical approach if you think about it. they want to provide enough assistance to the taliban so they make life difficult for us. and others, but not so much that they might actually succeed. and then, of course, with respect to pakistan as i mentioned, they have taken very considerable actions against the taliban and some of the others that have threatened the existence of their country as we know it. we are coordinating more closely with them in that particular fight than we ever have before. there is significant pressure on al qaeda and on the network in north waziristan without question. i think the pakistanis are the first to recognize that there are big challenges there that have to be dealt with if they're to help their neighbors to the west.

>> i was thankful the senator signed on to my bill regarding the corruption and accountability aspects of, you know, where's the money, and i was shocked. going to the taliban potentially through really not legal or appropriate means, and i was listening, obviously, as i was doing another matter, and i appreciate your endorsement on that. and i would encourage, mr. chairman, anyone you would really throw a lot of weight behind this if you could join in. not figuratively. >> we've been very actively involved in that contracting issue, and it fits very, very well with the kind of effort that we've made to look at the way in which contractors have actually assisted our enemy at times, grateful for your initiative. >> thank you. finally, with everything that's happening over in egypt in that area, have you noticed any similar types of activities in the region that you're really focusing on? >> we have not, senator.

there have been and always have been small demonstrations on this issue or that issue. i think it's actually a strength of afghanistan that there are peaceful demonstrations periodically in the capitol or in some of the provinces for the citizens to voice pleasure or displeasure at some action that has taken place. but there has certainly been nothing on the scale or the order of what we've seen in egypt or some other countries in the mideast. >> well, sir, thank you. i'm looking forward to coming over in the capacity we spoke about. we're working on that so thank you. >> that would be great. >> thank you, senator brown, senator blumenthal. >> thank you, mr. chairman, and i want to join the chairman and others on the committee who are expressed their appreciation for your extraordinarily distinguished and courageous service. both of you are certainly owed a debt by this country and to your spouses, as well. in particular, i want to express

my appreciation to holly petraeus for the work that she's doing on behalf of our veterans when they are threatened with scams. both of you have spoken powerfully and eloquently about this greatest generation. and at the same time, we know that many of them are threatened by wounds that may not have been visible or diagnosed. traumatic brain injury or post-traumatic stress. and i wonder if you could describe the hopefully enhanced efforts that are being made on the battlefield and at home given that the suicide rate, i think i saw on the cns report is estimated to be at annual rate of 1 every 36 hours and 35% of all troops are estimated to be

afflicted by post-traumatic stress or traumatic brain injury and sadly and unacceptably 7,000 veterans of iraq or afghanistan are homeless every night in this country. so if you could respond, thank you. >> well, thanks very much, senator. and, first of all, there has been an extraordinary effort, i think, to improve every aspect of battlefield medicine. all the way from the training of those and the equipping of those at the point of injury. the medical evacuation, and we have devoted -- especially with secretary gates' leadership, considerable resources keeping us within the golden hour as it's called from medivac from point of view to the field hospital. the average for last month, i think, was 44 minutes as an

example. and that's despite, of course, vastly increased number of troopers on the battlefield. and much more spread out across afghanistan. the advances that the field hospitals are extraordinary, as well. they really now approach those of the major medical systems in the united states. of course, through germany, and then to the various hospitals appropriate for the injury. and then even into the v.a. system. and as one who during the command at central command in particular had an opportunity to visit our wounded warriors, not just in places like walter reid and bethesda, but also in various v.a. system hospitals. my impression was that our country had devoted significant additional resources to those that we used to provide to this in years past. having said that as you noted,

there are first of all in a sense signature wounds of this conflict. and they are, of course, the very visible losses of limbs. and then the unseen wounds. again, the post traumatic stress syndrome and so forth. these, i think clearly deserve the resources that have been devoted to them. and my sense is that we continue to be on the very cutting edge of medicine in our military medical system when it comes to addressing these. and i have been personally very heartened by it as one who was privileged to command these individuals when, indeed, they sustained these injuries. >> if i could just add, senator. this is an area where i think secretary gates has made it a real priority. he sees this as part of his stewardship to focus on caring for our wounded warriors, but

our people more broadly. one of the things that several people have remarked on is we actually talked about people and preserving the force as an element of our strategy for the first time ever in this last defense review. but in -- it's not only investing in these programs, it is as general petraeus says, really pushing the boundaries of science to get towards more innovative approaches. and as the wife of the deputy secretary v.a., i can also attest there's a whole government approach here. there's unprecedented cooperation between d.o.d. and v.a. to give a sort of cradle to grave type of care for -- not only active duty members, but veterans. but also to ensure that once people leave active duty, we don't lose sight of them. we continue to invest in the care they're going to need to deal with some of these injuries that may last a lifetime. >> you know, if i could also

add, senator, this goes way beyond appropriated funds, as well. and i think it would be appropriate to thank the -- you know, the millions of american citizens who have supported a variety of different foundations and non-profits and others that have also devoted enormous effort, again, to taking care of our wounded wars to looking after the children of the fallen to indeed ensure that those who have served and been injured in those service for families left behind are indeed looked after by more than just government; but by fellow citizens, as well. >> and i would agree with you having worked with and supported some of those groups. and they do wonderful work. but we heard in response to similar kinds of questions from general mattis about the effort

he is making to really implement the kind of preventive measures on the battlefield to reach out to the gunny who says to the corporal, you're not going out tomorrow, we're just in concussive incident. and because you have such great men and women who are so eager to return to the battlefield, i think it may be more than just medical science or the gold -- it's part of the culture. >> it is. with traumatic brain injury in particular. this is, again, essentially an accumulation of concussions in some cases. and again, can be unseen. trooper wants to suit up, no one wants to leave his or her fellow members behind if they're going outside the wire. we have had to institute procedures to allow them a

break, a recuperative period just as frankly we are finding i guess in the football and other violent or very contact sports is needed, as well, to allow recovery before exposure of further such injury. >> i want to thank you for your testimony. my time has expired, and others will fall on this issue and others, but i am particularly interested in the detainee question. and i believe others on the panel may follow with questions on that issue as lindsey, senator graham has mentioned. but maybe we can follow up on those questions. thank you, senator. >> thank you, senator. >> thank you, mr. chairman. my questions really relate to concerns reflected in polling in america. "washington post" said this week

in a poll that 2/3 of americans now say that the war in afghanistan is not worth fighting. and i think part of the problem is not that it isn't worth fighting because i do believe it is. but i'd like to give you an opportunity, general, in particular, to state the reasons why you believe it's worth fighting. but also because frankly above your pay grade there have been mixed messages about timetables or drawing down troops and about what our objectives in aven afghanistan should be. so general, we all know that public opinion is very important, that the american people have to remain behind our military and we've seen the consequences when that doesn't happen. but would you please articulate the reasons why it is the

fighting in afghanistan and the service of our men and women in uniform is worth fighting? >> again, you come back to two words and those are 9/11. those attacks on 9/11 were planned in afghanistan by al qaeda when it enjoyed a major sanctuary there, when it had training camps there. that's where the initial training of the attackers took place before they moved on to u.s. flight schools. beyond that, other attacks that emanated from that region. and, again, we, i think, as the president has said a vital security interest in ensuring that al qaeda and other transnational extremist elements that might attack our country or our allies cannot establish robust sanctuaries there from which they can plan and launch attacks. the fact is that we have gotten frustrated with this region

before as the undersecretary mentioned earlier, we did leave the region in the past. in the wake of "charlie wilson's war," we headed home and cut off funding, and cut off professional military education for our pakistani partners and so forth. and the fact is that we have paid for that in the long run. and i think it would be a mistake, a big mistake to go down that road again. >> would you explain in your opinion what would be the perception of the al qaeda -- and there's like-minded people in the region if the united states were simply drawn down its troops and leave before finishing the job in afghanistan? >> well, i think there would be a propaganda as well as a physical victory in a sense. this would be a sign of having prevailed.

indeed, it's very hard to calculate what would happen in afghanistan itself. a renewed civil war in the wake of the soviet departure and again, in the wake of charlie wilson's war. and again leaving that. in the wake of the soviet removal. and this, again, would be very, very damaging to the world, not just to afghanistan, the afghan people and, indeed the immediate region. i think it would pose a grave danger for the entire world. we have seen, again, on numerous different dates beyond 9/11 attacks that emanated from this region. >> since you and senator collins mentioned mixed messages, i think as petraeus has said -- >> madame secretary, i wasn't saying you were delivering mixed

messages. >> i understand. >> those above your pay grade at different times talking about drawing down troops in 2011 and then i was pleased to see modifications through 2014 and status of forces agreements beyond that. so that's just to be clear. i was not talking about -- >> i understand. but what i was -- what i wanted to say is that i don't think there's any inconsistency between the beginning of a transition process that allows afghanistan -- afghans to step up and take the lead in areas like security and so forth. i don't see a tension between that transition process that begins a drawdown and the commitment of -- the statement of an enduring commitment to afghanistan and to partnership with afghanistan. >> as long as it's conditions-based, i agree with you. >> yes, it is conditions based as the president has noted, yes.

>> general, let me ask you about pakistan. i know that subject has come up numerous times. helping pakistan deal with that poorest border, the trusts exploit on a regular basis. that we're not going to be successful in our ultimate goal, but i want to ask specifically as our attempts to grade al qaeda are successful, as well as the taliban remain a powerful force. what is their aspirations in terms of getting their hands on pakistan's nuclear weapons and regime change in pakistan? and is that a concern that we ought to have?

>> with respect to the afghan taliban, senator, i think their aspirations are truly are within afghanistan. in particular, it would be to reestablish the kind of state that they had established, there again in the wake of the afghan civil war that came in the wake of the soviet departure from afghanistan. there is quite considerable security for the pakistani nuclear weapons. there are certainly other elements in pakistan, again, different -- the pakistani taliban and several other varieties of elements who generally have symbiotic relationships. in the most extreme of which might, indeed, value access to

nuclear weapons or other weapons that could cause enormous loss of life. again, they killed several thousand in one destructive act, and some have shown a willingness to carry out similar destructive acts if they had the means of their survival. >> well, my time is uh, but let me just say in conclusion that i think, again, in terms of garnering public support for what i believe it's important we do in the region, i think the extent to which someone -- and i think that someone may end up being you, general, be able articulate our objectives in a way that our american people can see the importance to our national security here at home because i worry that if there are mixed messages in terms of when we're leaving and how long we're staying and what our objective actually is and people are confused about that i think

you're going to continue to see some erosion of public support of our mission. thank you very much. thank you, mr. chairman. >> thank you, senator. >> thank you, chairman, thank you both for being here. general, i've had a number of conversations with you over the years. and i want to make sure i'm clear about something. it appears to me that we have taken some of the funds and put them in a category called afghan infrastructure fund, and the other category task force for business. so we've taken the around about amount of $1 billion a year and we've now broken it up into three parts. and i was worried enough when it was one part in terms of the oversight and whether or not there was clear communication from the state department. and this is what, you know, where we have kind of morphed this into -- and it's a little bit like who's in charge of security at -- security contracting, how this has gone back and forth from state to

d.o.d., state, d.o.d., and now we've got an acknowledgment for the first time that d.o.d. that the army -- that our military is going to be, you know, doing major infrastructure projects as opposed to the traditional place that we have done that kind of work, which has always been at state. so i'm really worried about the oversight of this. and what i'm also worried about if you would address, the gao noting that it doesn't appear that we're sharing excel spread sheets maybe about the various projects that are ongoing. we do not have a data base that is realtime that a.i.d. and defense can look at on a realtime basis. i'm worried about the duplicadu. then i really get worried. we know what kind of money walked away from infrastructure projects in iraq. and once again, my concern has really been heightened about money walking away from

infrastructure projects in afghanistan. >> well, let me just state up front as we have discussed it in the past. i absolutely share every one of those concerns. and that's why we requested as an example between 60 and 80 quite well-trained and specifically experienced individuals to help us with oversight of our contracts. and so i mentioned earlier this is a big reason why we established the two different task forces led by general officers. in addition to the task force led by hr mcmasters which is looking with our afghan partners with the issue of corruption. with respect to -- first of all, the task force business operations was not funded through serp. that was not approved and not being done. the traditional category of serp, if you will, i think is very much meeting what the

intent of it was in the beginning. as i mentioned earlier, projects are averaging somewhere around 17,000 to 17,400 and solidifying and building on the gain that our troopers have fought so hard and sacrificed so much to achieve. the afghan infrastructure fund component of serp, if you will, was created and, in fact, this was an initiative when i was the central command commander so that we could support with our state and a.i.d. partners in a carefully coward thatted way. so carefully coordinated that the projects nominated for this that again are central to the conduct of a counterinsurgency campaign. these are not economic development, not economic assistance or something, these are projects that directly enable the success of our troopers on the ground. the first tranche of these, for example, is almost all energy

related. infrastructure related and so forth to enable the revival of the areas in kandahar and the greater south and tieing in a power grid to that, as well. the ambassador and i both approve the projects that are sent forward. and ultimately they have to be approved by the secretaries of defense and the secretaries of state. obviously a.i.d. is instrumental in all of this. so there is again absolutely full coordination on this particular program. >> if i could just add. it's also jointly funded. so state department and a.i.d. contribute funding via reprogramming from their resources and d.o.d. uses the $400 million from -- that was formally in serp to contribute. show there's joint funding, joint decisionmaking and validation of the projects, and joint oversight.

so you're actually probably getting double the oversight rather than, than less. >> if i could also, senator, you also authorized us to spend a portion of serp, $50 million to support afghan-led reintegration of reconcilable elements of the insurgency. and we think this is a very, very wise investment as well as i mentioned earlier, you don't kill or capture your way out of an insurgency the size of the one in afghanistan. you've got to try to get as many as possible to reintegrate back into society. and this is supported that as a bridge fund, if you will, until the larger funding provided by the international community to the high peace council can make its way through their bureaucracy and out into the provinces. and that now is in the process of happening. >> your sense is the gao sense of criticism is just because of their pension for data systems not because there really isn't a realtime sharing of information and coordination on these

projects? >> we are very carefully sharing it. and in fact, we actually want to go to a joint visibility -- i forget the exact term. i'd like to provide the term to you because general mcmaster again has been pioneering this. but where we have literally a joint procurement oversight effort between all of the u.s. elements, not just the military, but state department elements, as well, so that, again, everybody knows where the money is going from all u.s. programs. >> there's a concern on this money that we're using to fight the insurgency through the small projects and the big project. the issue of, are we doing these projects where we can? where we should? in terms of the security issues. do you have availability to you, general, the information that

allows your folks to make decisions based on where, in fact, we should be making these investments based on the insurgency? or is it just natural these things are happening where there's the least security danger because obviously when you're doing these kinds of things, if you're out there exposed, especially when you've got the civilian component, it worries me we may be doing it where we can instead of where we should. >> well, i mean, there is this joke about the drunk who looks for the keys under the light post because that's where the light is, not necessarily where he dropped them. so we certainly try to build the projects where they are needed and not just again where we can. but there are cases in which there are projects needed that we know are needed but where the the security conditions do not allow that. and in some cases, we are literally fighting to create the

security environment to enable very important economic projects such as hydropower plants in particular that are crucial to the sustainable energy sources for afghanistan. but where we cannot at this point in time yet carry out those projects. >> if you have an overlay available of where a tax are occurring and the serp moneys are being spent, i would love that information. i would assume that you would probably have that somewhere. and i would love to look at the overlay between population, a tax, and expenditures. i know my time is up and i didn't have a chance to get to l.e.t., but i'm very concerned about l.e.t. i'm very concerned -- >> so are we. >> i'm very concerned about this organization designs on a global presence. i'm very worried that we've gone beyond a proxy for isi and beyond a proxy in terms of just

an issue as it relates to india and cashmere. and i am anxious to get some kind of briefing from the record on l.e.t., especially in light of the instability of the pakistani government right now and some of the issues we're having with incidents that have occurred in pakistan and how the pakistan government is responding to those. but i -- i worry that we're honing in and doing what we need to do with al qaeda. and we're honing in and doing what we need to do with the taliban. and as senator cornyn mentioned, pakistan has nuclear weapons and l.e.t. obviously has got a great deal of power, it appears, with certain people in the pakistani government. thank you. >> that'll have to be for the record. will that be okay? >> fine. >> thank you very much, senator sessions? >> thank you, mr. chairman, and thank you, secretary for your leadership and leadership and commitment to our country. general petraeus, thank you for

what you've done and we value so much your commitment and effort. to follow up on a very important point that senator mccaskill raised is something that's concerned me a bit. we know that the provisional reconstruction teams in iraq, for example, and really to be under the leadership of the state department a year or two ago and in essence, most of the personnel that dominated those areas were dod, mostly military. now we have a plan to remove our soldiers from there and i understand the state department's plan to go to 17,000 personnel from maybe seven now in iraq. they do not have the kind of force protection capability that we have with the military.

i guess i'm just concerned that this rapid withdrawal and there seems to be an expectation that state department personnel who didn't sign up to go into harm's way as the military have and for the most part unarmed, do you see a danger there? is there something that we need to be thinking about that we do not place our state department people in position that we can't accomplish what we expect them to accomplish? >> well, i -- i'll hand it off to the undersecretary in a second, but i'm obviously not the commander in iraq anymore, but i obviously keep an eye on an area in which we invested an enormous amount and my concern with iraq is similar to the concern that i voiced about afghanistan and that is funding for our state and a.i.d. partners. the idea was and it was back

when i was central command commander and even when i was developing concepts when i was still commander in iraq in rate between the 08 that as military forces came down, the state and a.i.d. presence would take on more tasks than they did in the past as they were handed off again from some of our military elements to them. and subsequent to that the funding for those particular endeavors has not been forthcoming and so you have a situation in which military forces are drawing down and transitioning tasks to elements that are not sufficiently resourced to carry them out. >> thank you for -- >> i would just make the point, though, that the state of our personnel have the right to reject deployment in areas where security cannot be guaranteed and isn't that a complicating fact, secretary? >> senator, we have developed the iraq transition plan with

very realistic expectations about what the security environment is going to be. in being looking at the dod and state department pieces of that as an integrated whole in terms of the footprint of the presence, what the activities are, continued security cooperation for the iraqis and continued training for the police and continued engagement on the intelligence side and so forth. the challenges keeping the coherence of that plan as it comes up to be considered by multiple different committees who will take a look at the different funding streams that are still piped by agency. so we would appeal to you all to help us as you look at that plan to look across agencies to look at how do we maintain an integrated coherent plan to support really finishing out the job in iraq and ensuring that we protect our interests there.

>> i would say count me as someone concerned about the viability of the plan if it's funded. secondly, we do have a funding problem. you're exactly right. how we move funds. the state department has the sufficient numbers. on the budget committee, that's where i was earlier this morn g morning. the education department is calling for 11%. the president's budget projects an 11% increase in their spending. energy, 9.5% increase next year. transportation, 62% increase and the state department ten.5, most of which i think is an overseas contingency and we have a -- so these are getting the monies in the right way is going to be critical, but we don't have the

increases and congress will not get that kind of increase. we don't have the money and it presents us all with a real challenge, and i'm concerned about it. general petraeus, you spent virtually a year in iraq leading the training of the iraqi forces. now training of forces in afghanistan is such a critical part of it. we are thankful that you're there and you've had the experience that you've had. we're thankful that you've written the book about how to conduct a counter insurgency operation that defends manual. tell us, are we obtaining sufficient support from our nato allies? i think the answer is really no, but secondly, that which they have taken over often has not been as effectively managed as the military training programs

and we're moving the numbers in afghanistan up, both military and police how -- can you summarize it for us how well that's going and are we going to be in a position to rely on them in the near future to provide a security that's necessary for an independent afghanistan? >> well, thanks, senator. in fact, we often get the question when general or the afghans are going to step forward and start leading security? i say, well, you're in kabul right now, interviewer and in kabul which is one-quarter to one-fifth the population of the entire country. it is afghan security forces who are very much in the lead. it is afghan police who are the face of security on the streets and it is the afghan army a bit further out that has security responsibilities in every given night in that city.

there are a couple of operations conducted by afghan sperl operations forces either from the police or intelligence services or from the army. so indeed they're very much stepping up to the plate and they're taking losses at a higher level than our losses at a considerably higher level so they're very much fighting and dying for their country. our nato and non-nato contributing nations are very much providing superb individuals in the train and equip mission. yes, there is a need for more of them as we mentioned earlier, a shortage of 750 or so, two nations that have announced intension are still working out what it is that they will provide, but while there is that shortage the troop contributing nations have very much stepped up to the plate and provided substantial numbers of additional trainers and that does continue.

there were a few more pledges, in fact, in recent months that will be significant as well. in fact, the challenge now is what we call specialized training. it's training individuals and we don't have these. we don't have mi-17 pilots or at least not large numbers in our invento inventory. we don't have pilots of some of the other aircraft that are being used in that air force. some of the specialty skills, again, it's very helpful to have former warsaw pact nations that are familiar with the artillery that is being used by the afghan forces and some of the mortars and some of the other weapons systems as well. so i think, actually, that they have done a superb job and the creation of the nato training mission in afghanistan from the formerly u.s.-led multinational, the combines security transition in afghanistan has been a very important step forward. the fact is that during my time

in iraq where i led again the u.s.-led multinational security transition commander is dual headed as a nato training mission in iraq, but those were not merged. those were two separate organizations and the nato one was quite modest in its size, certainly in comparison. in this case, sticka and mtma have been merged and it's been done in a very effective way and in large measure attributed to general caldwell's leadership because he's been in command of the organizations and he oversaw a concept for and then the actual establishment of mtma. >> well, thank you, mr. chairman. to clarify my concern, the state department has fabulous people and they're willing to take risks, they are taking risks, but they're not trained and

committed as military people are to be in dangerous spots, and you've done such a good job, i believe in iraq and afghanistan that the transition so rapidly from the military who is out there who is now learning to manage money and funds and so forth to the state department is that it would be a dicey handoff, i think, and i wish you every success in that. thank you, mr. chairman. >> if i could just a moment about our foreign service, officer comrades and the members of a.i.d. >> okay. they're awesome, and they are putting it on the line every day as well. they're going outside the wire. i'm not aware of any member of the foreign service's who's declined one of these assignments and i think they have service to all of them by volunteers and again, certainly this presents some challenges as we try to transition, but i think the challenge is more one of funding than of any other,

but what it's worth, we also have established what we'll do in afghanistan where we have military-led prts is we will not try to transition them wholesale to state department over time. rather what we'll do is just reduce the size of them as we do the transition. >> thank you. thank you very much, senator sessions. senator udall? >> thank you very much. i was going say good morning, but good afternoon. . i know you're a marathon runner and we're about to break the magic three-hour mark. although you aimed your goal at breaking -- reducing the time that you would run to under three hour, but thank you for your persistence and your endurance. if i might, i would like to turn to the counter insurgency doctrine you authored and it's been implemented in a number of places, and i think the core of the concepts is defeating insurgencies that's 30% military and 70% political, yet it seems

our exit strategy is focused primarily on the transition of security and selected districts from the isap to afghan forces. if i could, i would like to just direct a few questions at you and you can pick and choose in your responses. are you concerned about the taliban's ability by attacking specific targets of choice during the transition? in other words, does this handoff strategy telegraph our next play and put a bull's-eye on the districts while they're in that vulnerable transition process and more broadly, how closely is this military transition strategy being coordinated with a political endgame in terms of ensuring the delivery of the basic government services in these districts and reintegrating taliban fighters who have had enough. >> first of all, up front, transition has three components to it and security is just one of them. the other two are governance and development. and so there is, i think, an

understandable focus on security. that's the foundation, if you will, for all progress, after all, but at the end of the day security is not enough. military action is necessary, but not sufficient. you must build on that foundation again with the establishment of local governance that can earn legitimacy in the eyes of the people. it does that by serving the people and being transparent and representing integrity and indeed, providing a better future for the people than they would have by going with the insurgents and then, of course, the development is obvious as well. this also encompasses basic rule of law, basic development. again, there's measured aspirations and no objective to try to turn afghanistan into switzerland in ten years or less or something like that. now, with respect to a concern that transition might put a bull's-eye on a province or municipality, absolutely.

there is concern about that and indeed we will try to take mitigating measures so that as locations are identified for transition that as they become targeted that we do all that is humanly possible to prevent enemy from causing major disruption while recognizing that there will be attacks. again, kabul has enjoyed a period of touch wood. the best security i think is for a nine-month period now and even during a nine-month period there have been periodic sensational attacks and again, it is inevitable that there will be some continuation of that. the objective is, needless to say, to ensure that all of the security challenges have been reduced below the threshold that is necessary for continued growth again in the governance and development arenas. and because of that recognition that there are three components and not just security, there has

been very close coordination especially with the joint afghan nato interkohl or transition boards which is chaired by dr. afghani working directly with president karzai and co-chaired by the nato senior civilian representative ambassador from the uk with the committee that includes heads of the relevant ministries and the major troop contributing nation ambassadors as well. so there is again, a keen awareness that transition requires much more than just the security foundation although that is the most important element without which you can't transition and you can't succeed with transition if you haven't built on that foundation adequately in the governance and development arenas. >> thank you, general, for that. i would like to turn to the secretary flournoy.

before i do that, i would like to acknowledge as you have the test scores for stability operations and i know the acronym and i know the important work they've done and paul brinkley has been the leader in that effort and i look forward to working with you as we make that important transition. if i could, i would like to turn to pakistan and india. and we've been hearing for quite a while that the pakistani leadership is unwilling to band and support for the taliban because they view it as a hedge against the possible influence in kabul and india denies any such ambitions. in the context of our new strategic partnership with india, do you think that there are any new openings to engage a more positive political solution that might reassure pakistan? >> i think we've been heartened by the fact that india and pakistan are resuming their own

dialogue on a number of disputed issues from kashmir to counterterrorism issues and trade and so north. so we think that dialogue is extremely important. i think pakistan in particular views so many issues in the region through the prism of its relationship with india and so in getting at some of those root problems between the two of them is one of the most important initiatives that can happen in the region and so we're being as supportive of that as possible. but i want to come back to something that was said before and that is that i do think that our success in afghanistan will be a calculous-changing event for many activists in the region that have been hedging. the fact of that stability and

that success will force a recalculation by a whole number of parties that will have to reckon with that and may choose to approach that reality differently than -- than what, you know, and change some behavior that we've seen in the past. >> not to get ahead of ourselves, but that sounds like one of the prizes when we are successful in the long run. i know that i spoke recently to a keen observer of the india and pakistan relationship and the case that this gentleman made to me was if india and pakistan could liberalize their economic relationship it would result in enormous gains and positive developments. >> would you care to comment on that? >> this ties in again to what i think is a very reasonable ambition of president karzai and an aspiration and that is the idea again of afghanistan as the central asian roundabout. again, the transit location for the new sill k road, and if you

can tie in the extraordinary energy resources of the central asian states with the rapidly-growing economy, you have to tie into pakistan and india and that's obviously beneficial for all of the countries in the region, but it obviously requires a degree of economic cooperation between pakistan and india which has been elusive so far because of the context in which they've been seeking to do this. >> one step in that direction has been the conclusion of the afghanistan-pakistan transit trade agreement which we very much helped to encourage and now we need to see them implement it as a step in that direction. >> thank you for the image of the roundabout, having spent

time in rounds about particularly in that part of the world in another life and thank you both for your extraordinary service. >> thank you, senator. senator chambliss? >> thank you, mr. chairman. welcome back to both of you. general petraeus, i feel like i welcomed you back so many times that when you retire we'll have to get you back just to report on something, but it's just an indication of the great leadership that you've provided and thanks to you and as you get back express to all of the troops serving under you how much we appreciate their great service. >> i'll do it, senator. >> you've already talked extensively about the training situation, and i'm not going to ask you to repeat anything there. and i heard your comments on the progress of the literacy program for the training programs from both the police and the military and that's such a great step in

the right direction when we ultimately do turn the total security force over to the afghans to take care of themselves without being somewhat more literate than what they are today we all know it's simply not going to be possible on their end. so i'm encouraged about what i hear and i'm glad to hear my friend general caldwell continues to do a great job, and i know he has been doing under your leadership. you know, this war is not very popular among the american people. it's though different than any other war, no war is popular, but it has been important in ridding wart of terrorists and bringing afghanistan to a point where it cannot be used as a safe haven for terrorists, but as we look back today after spending almost a decade in that part of the world, we see a

government that is rampant with corruption. the stability of the leadership is questionable. there's arguing back and forth among the parliaments there now and they're not even able to elect a speaker of the parliament. the economy and avg of aing does not have the luxury of the economy on iraq because there basically was no economy. whereas iraq does have an oil-based system. the education system in iraq, excuse me in afghanistan, continues to be very weak even though we are seeing improvements and i say that just to ask both of you to comment on what kind of shining light or hope can we give the american people about the future of afghanistan when we are gone completely in some period of time which is likely to be not far down the road from a military standpoint and

secretary flournoy, we'll have dod civilians as well as state department civilians in afghanistan for a long time to come. the safety and security of those individuals is of great concern to us. so having -- giving that glowing outlook on what i see happening in afghanistan right now, i would ask for both of you to comment as to where we go in the future. >> first of all, senator, if i could, i would like to go back to september 2005 and that's coming home from the second tour in iraq and standing up with the train and equip program and secretary rumsfeld helped me to come to afghanistan to train and equip the mission there with the situation more broadly. at that time levels of violence in afghanistan were very, very low. it was described as the, quote, war that we were winning and so forth. the truth is that i came back after looking at it because of the various challenges, you

could just feel how difficult various aspects of this were and you could also sense that the taliban was beginning its comeba comeback. i went back and reported in addition to various observations in the train and equip program they thought this would be the lockest campaign in the long war. now that didn't elicit wild applause in the floor of the pentagon, as you might imagine. it's a sobering assess am, but it's something that i stand by and the reason is why because of the various challenges that occurred over 30 years of war in a country that was when the wars began among the three poorest in the world. so there's no question about the difficulty of this endeavor, and i think it is understandable, again, that the american people could be frustrated that we've been at this for ten years and we haven't won yet. on the other hand, as both the undersecretary and i mentioned

we hadn't gotten the inputs right until really the last six months or so. last fall is when we assess that we had the organizations necessary for the conduct of a comprehensive sif is ilmilitary counter insurgency campaign, all of the concepts, plans, directives, ideas and the staffing of those organizations and above all, the levels of troops, civilians and funding together with the gradual growth of the afghan national security forces that turned into much more rapid growth. there's no question about the challenges. again, whether it is in literacy, lack of human capital, human capacity, governance capacity and the rest, but i will submit there's no question about the progress in these areas. let me just give you one very important metric. under the taliban there were less than 1 million afghan children in school. this coming academic year the minister of education projects

there will be 8.2 million in school and the growth from last year to this year will be the largest of any year since liberation from taliban rule in late 2001. the fact is there's been progress in every component of the comprehensive campaign and the fact is every component has been very, very xal efrjing and very difficult, any by the way, they have elected a speaker i'm happy to report and they're actually now selecting committee members and they're reasonably along in that roes is with their parliament. certainly, democracy in afghanistan at times can be noisy, if you will, but i think that's probably true of some other countries on occasion, as well. >> i would add to that that as we think about the future and how this partnership will go forward, i think there's tremendous strength derived from the fact that we really do share

the same goals, fundamentally. the core goals are very strongly held by both the united states and afghanistan. i take heart from the tremendous resiliency and patriotism and dedication of many of our interlock tours. many of the ministers and deputies, people who suffered 30 years of war and who are just absolutely committed to reclaiming their country to rebuilding capacity and re-asserting their sovereignty. and then, if you really want to get a boost, go talk to the next generation. meet with the students who are now back at school, coming out of kabul university, coming out of other universities who are not leaving even though they could, but who want to make a future in afghanistan and change afghanistan and create the kind of country that they think is possible with our help and the

help of the international community. i think we tend to focus on the challenges and they are significant, but the more you get out and talk to the people who have chosen to stay and why they're staying and why they're committed to doing in their country it gives you great hope. >> general, just quickly, those numbers on the children in school is pretty impressive. that 1 million that were there and in school under the taliban rule, how many of those were female versus what percent are female with the 8.2. >> thanks for pointing that out. it's a very, very small percentage that was female under the taliban, needless to say, and now it is a considerable number. we'll get you the exact number and i think it's in the neighborhood of 30% to 40%. i might add as well that the percentage of females in the afghan parliament is something like 10% higher than the percentage of females in the

u.s. congress as well. >> thanks again for your leadership. >> except for that last note, thank you so much. i wish that everybody had heard all of your testimony this morning, but particularly these last comments in response to senator chambliss' question is certainly quite uplifting. senator shaheen. >> thank you, mr. chairman and thank you both for being here and for your stamina for still being here. i think some of us think that if we could design our democracy again we could put in a required percentage for women's participation. that would make some of us happier. >> as they did in afghanistan and that's one reason that they have that percentage which is an interesting innovation. >> you both talked about the need for a comprehensive approach in afghanistan. so both the military commitment and the civilian commitment, and i applauded the creation of the senior civilian coordinator back

in january of 2010 and i know nato has recently appointed a new civil issian coordinator, am, simon gas, but i'm concerned that that coordinator has the sufficient authority to do what the position was envisioned doing on the ground in afghanistan so i wonder if you could speak to that and to also the coordination that's involved between general petraeus, your command as the nato head on the ground there and the coordination with the civilian coordinator. it's a very, very close relationship, actually. in fact, he and i are located in the same headquarters. he starts each morning the same way i do after the initial intel updates and so forth and our morning was called stand-up

briefing and we sit together during that often as long as an hour or so and then we meet many times a day and periodically and quite a frequent basis will brief the members of the diplomatic community of the nato contributing nations meet with the u.n. assistance mission in afghanistan srsg together at least once a week. that also includes the u.s. ambassador and a variety of other four in which together we take actions, but he also has an independent series of actions that he oversees that he pursues through the regional sers as regional command sers who are seeking to coordinate the very civilian activities that take place within those regional commands. this is a different situation than the one in iraq, for example, where iraq was a very

u.s.-centric multinational force iraq and it had a sing issel chain of command and i reported only to the sent is ral commander operation alley as well as chain of command. in this case my operational chain of command runs through the joint forces command to supreme allied commander to nato headquarters with the u.s. chain running through sent is ral command and of course, on to the pentagon. very close relationship with our u.s. ambassador carl eikenberry, a friend of over 30 years, but again, a different relationship because against operational command being nato and the u.s. command being more of an administrative, if you will, troop provision and so forth and resource provision command. really, the three of us, the nato s is cr, simon gas, ambassador eikenberry but also very much the srsg, the eu,

special representative and actually a number of other senior members of the diplomatic community of the contributing nation nation nations. the uk ambassador and this is is more complicated than in iraq in that particular regard. >> well, let me -- let me try and refine this and perhaps you can speak to that, secretary flournoy. my understanding is that one of the roles or responsibilities that we hope for the civilian coordinator was that that person can help address waste and corruption and abuse ask civil issian assist issance and i know several people have raised concern about how the assistance is is actually being used on the ground in afghanistan. so perhaps you could speak to

that, secretary? >> i probably live it in that sense and the truth is that because funding is provided nationally and not through nato at large, there is a limited ability of the nato s is er to, in a sense, to oversee the contracting aspect of this and this is where it all ends up with procurement aspects. on the u.s. side and the u.s. is far and away the largest donor nation. what we have done is is that's why we've brought in brigadier general mcmaster and a very talented sifil and is military team and he has an fbi official as his co-director and this is a civil military element with the u.s. embassy and there is a board of directors that is again, civil military and ultimately ambassador eikenberry and i oversee the efforts of this new task force, but this is

what was necessary and, this is is why as i mentioned earlier, we also want to go to an oversight of all u.s. procurement in coordination of that with this organization as well as we are now focused on increasing intelligence assets on determining what is this corporation? who runs it? are there any silent partners in it? where is the money again ending up through subs to subs and that kind of thing? this is a very complex endeavor and as i mentioned it was only with the establishment of this task force and the other subordinate ones that we have been able to focus the kind of attention any resources on the contracting aspect of this to the point that we have then de-barred. i think it's nine total right now, and i think it's 30-something that are actually suspended and in the process of either being debarred or proving that they didn't do what we believe they did.

>> thank you. did you want to speak to that also, secretary flournoy? >> it was really to the broader point of the importance of properly resourcing and gaining greater coherence on the civilian side and at this particular point in the campaign, at the point of which you finally gain military traction and you're creating momentum on the ground and you're creating the security and the space for other things to happen that's the point where it becomes that much more important where the diplomatic and political and development and other civilian elements of the strategy are fully resourced and properly led and in place. i think there we still, you know, we're struggling to get the resources and to fully achieve the coherence that i think is necessary to make and to consolidate the gains. >> thank you very much. my time has expired, but general

petraeus, i hope that at some point when you do retire that you will plan to come and spend some of your time in new hampshire where i've been told you own a home. >> live free or die. >> good. thank you. >> we thank you both for your great work for this count rry jt two-second comments. first, in the size of the military in afghanistan i would just point out that even if the size of the security forces were increased to 378,000 which is what the top limit is, i believe, that that would still be about 300,000 fewer than are in the iraqi security forces. . even though afghanistan has a larger population than iraq. second isly, the cost of even a 400,000 iraq security force is a tiny, tiny fraction of what the

cost is is of having our forces in afghanistan. i think the total payroll of 400,000 iraqi security force would be about a billion and a quarter or something like that. our expenditures in afghanistan, this year, i believe are something like $80 billion, if i'm not mistaken. it's a tiny fraction of what our costs are and finally, general, i notice in your charts which are really very helpful. i want to thank you for them. you didn't make too many references to them, but i hope all of us will have a chance to take a look at them because there's a lot in here. there is a slight omission on page 3 where we talk about the inputs of people. your name is left off, and i know that's one of two things. either undue modesty on your part or someone's trying to give you a message on your staff, but

i would point out it belongs there with ambassador eikenberry at the top. we thank you both. you've got great staying power and we'll stand adjourned. >> thank you, chairman. . .

>> yesterday, and timothy died barrett testified about creating a new finance system and scaling back the role of government. the hearing is next on c-span. we will discuss the nuclear safety and spending priorities. each morning at 7:00 eastern. the house approved a spending measure that would fund the

government through april 8 while cutting $16 billion in spending. the senate is expected to approve the measure. the current measure expires on friday. when the house returns, it makes grants to state and local governments to purchase and redevelop abandoned homes. it is back at noon eastern. live coverage on c-span. >> the author is live starting at noon eastern. known for his satirical approach, he has written over 25 books including barack obama and the jim crow media. join our conversation for ishmael reed. watch previous programs at

booktv.org. >> right now you can listen to c-span with itunes. there is the story of the day, your latest books and authors, and interesting conversations. listen to a variety of podcasts whenever you want. >> government sponsored mortgage buyer at fannie mae reported losses for 2010. the obama administration unveiled a plan earlier to dissolve both fannie mae and freddie mac. testified about the plan at the senate banking committee. this committee -- this is an hour 55 minutes.

>> i call this hearing to order. i would like to thank the secretary for coming before the committee to discuss the white paper. in february, i issued a committee agenda which stated housing finance reform would be one of my top priorities. it provides us an opportunity to start a long term discussion with top administration officials about the future of housing policy in america. we are here today to get to work on determining how our system should function. i want to emphasize that the purpose of this hearing is not to lay blame for the housing crisis nor is it to revisit

every boat taken in this committee before and during this crisis. we are not here to point fingers and score political points. there is plenty of blame to go round. members of both parties shunned regulation and pushed home ownership, they all contributed to the formation of the housing bubble. despite some persistent talking points to the contrary, the financial crisis report included the dissent -- dissenting views many people who concluded that fannie mae and freddie mac or not because of the crisis.

others point out they lag behind wall street. but because fannie mae and freddie mac, mortgages continued to beat the available as -- to be available even as they dried up. it is one of the most important reasons why the economy suffered a great recession and not a great depression. today, fannie mae and freddie mac account for more than 90% of the mortgages in the country. determining the proper level of government involvement is just one of the questions before this committee.

it is what we need to thoroughly examined. as we consider our options, there are other questions we must answer. do we want to reserve 30 year fixed mortgages, should that lenders have equal access to the secondary market? will newt structure provide equal access for all qualified buyers including rural areas? should we have stable mortgage market for single-family and multifamily housing? how will a new structure protect the taxpayer's dollar? we must find solutions that

protect homeowners and for future buyers. the report before us is available for this discussion. i would like to thank the staff and the treasury for the work putting -- in putting it together. i look forward to your testimony and to a constructive discussion of the challenges ahead. >> thank you, mr. chairman. last month the treasury department and the department of housing presented a report to congress on options for ending fannie mae and freddie mac and improving our finances. during the debate, republicans insisted on dealing with the failed housing enterprise in

response to the democrats' refusal to discuss that. it is that report we will be discussing here today. the joint report contains several positive items. it recognizes that many structures. fannie and freddie were poorly regulated and took on excessive risks to maximize profits. these views are in sharp contrast to the position of their defenders who denied there was anything wrong and aggressively fought reform until it was too late. the consequences of their actions have cost the american tax papers more than $150 billion. i am pleased that the

administration is beginning this debate by recognizing the serious floods in the gse's. the report concludes that the finance the system must be reformed and that the goal should be to scale back the government postal -- the government's role. this is a goal i believe we must embrace. the report was not without its flaws. it is near 31 pages. given the vast resources and the importance of this issue, i believe the american people deserve a more thorough study. it is vague on how the administration thinks it should be reformed. the report presents three options. subsequent statements by the secretary suggest that the

administration only sees a third option which resembles the status quo as a viable path forward. while it appreciated the dish -- and willingness of the administration to reflect on the failures of the reform, it would be helpful to know which items they believe should be included. should there be any reform of housing or a minimum down payment for back mortgages? it is impossible to tell what the priorities are for the moment. it -- the best way to reform -- it is narrowly focused on reforming fannie mae and freddie mac. it says nearly nothing about the other numerous housing programs operated by the government. each year the federal government spends billions on aimed at

insuring americans have equal opportunity to housing. these programs usually received little scrutiny from congress. they are an important part of our finances. they should be included as part of the consideration on housing reform. so far the majority has yet to lay a plan on how they will be developed. i would encourage the chairman to set out a plan for a comprehensive examination of housing finance and the government's role in housing. it has before it difficult task. the vast subsidies to wall street and special interest groups means that real reform will face an uphill battle. in 2005 when the senate considered reforming our system, politics and special

interests triumph. millions were against reform. the anti-reform effort cost billions in bailouts. for far too long a housing's system has been distorted to benefit special interests. hopefully the collapse of fannie and freddie means congress as an opportunity to enact reforms that will correct our past mistakes. the question remains if we will see the opportunity or squander it. we will see. >> before i introduce our witnesses, what other members like to make a brief opening statement? >> just a brief statement, i think it is important to note there is bipartisan agreement that we need to restructure. how to do it will be consequential nudges to these institutions but to homeowners,

taxpayers, the construction industry. you name it. everybody has an equity in this issue. i think it is important to note that a lot of the issues we are dealing with, we have seen before. the evolution of fannie and freddie began -- before the crisis. there was no mechanism. the government stepped in to create a mechanism. without its existence, we would have a much more serious consequences in the financial markets and on main street. we are wrestling with an issue that has come up repeatedly throughout our history, how to provide support for the housing

market without risking unnecessarily taxpayers and the stability of the financial system. that is not an easy challenge. it is what we have to accept and work to accomplish. as we did with the freight bill where there was an agreement that we moved forward. >> does anyone else want to make a statement? >> thank you, mr. chairman. i appreciate our witnesses. i am eager to talk about how to stabilize finance a bring private capital into the market. we need to walk before we can run. that crisis must be our priority.

84 acknowledge and the problem in your testimony. it was the first time in 15 years we had not had more foreclosures than the year before. until 2010, we had an increased number of foreclosure for 14 years. you know what that does to neighborhoods. you know what that does to the economy. you know the pain it inflicts on families. several of the -- that would have increased again in 2010. 400,000 zero high ends -- ohioans are still under water. i disagree with some of my colleagues who blamed this on homeowners. unlike some other states with similar crises, ohio's problems were not limited to subprime

loans and real estate speculation. they lost jobs because of washington's policies including trade agreements and a fine natchez -- deregulation. and a bias that our government has toward the financial industry and against manufacturing. that is why senator reid and i are introducing legislation against homeowner abuse of -- in ohio and across the nation. it means comment cents investments -- common-sense investments and constructive suggestions not to improve the program. to eliminate it is not the answer. all of those things we need to

look at. i appreciate the service of you. thank you, mr. chairman. >> would anyone else like to make a statement? >> i would ask consent to submit my opening statement for the record. >> everyone will have their statement. >> i would remind my colleagues we will keep the record open for five days for additional statement and question. do either one of the witnesses need introductions? we have the honorable timothy died there and we have the 15th u.s. secretary, the honorable

john donovan. -- sean donovan. we welcome you back to the committee. you could proceed secretary to fight their -- tim geithner. >> last month will release the report to congress outlining our proposals for the finance market. it is designed to create a system in which the government's role is limited to consumer protection, targeted assistance for low-income renters, and carefully designed support for market stability and crisis response. private markets and investor protection would be the primary source of mortgage credit and

bear the burden for losses. banks and other systems will be required to hold more capital to withstand future recessions or declined in house prices and to adhere to more conservative underwriting standards. homeowners will hold more equity in their homes and the security markets will play a major role in housing finance subject to risk retention and other reforms and requirements. we propose a three part plan. we want to wind down fannie and freddie and helping private capital back to the market. private capital has retreated and not yet returned. that assistance has been the essential in helping bring in measures to the housing market and ensure americans have access to mortgage credit. it is not a long-term solution.

we recommend a combination of tools to wind down fannie and freddie overtimes such as guarantees to load limits and underwriting standards. we need to wind down the investment portfolio and shrink our footprint in the housing market. we're not going to get private capital to come back and replace the government unless we fix the remaining problems in the private mortgage market. the second part of our plan is to make the necessary reforms to provide better protection for lenders and investors and help restore confidence in the market. this means helping consumers making informed decisions that protect them from deceptive practices. that means participants will retain a risk and transparency. bakes' will have to hold more capital so they are in a better

position to withstand future downturns. it means of addressing the chronic problems we sell -- we still see by improving industry incentives. our third objective is to target the government's support for affordable rental options. it puts forward a limited number of options for structuring the future role for replacing fannie and freddie. each of these options would produce a dominant role in the mortgage credit the bearing the burden for losses. each ads unique advantages and disadvantages you must consider carefully. the overwhelming majority would be financed by financiers and investors. this would limit the government's role to initiatives that provide support

for affordable housing and access to sustainable mortgage credit. in the second option, that function would be complemented by a backstop available only at times of mortgage stress and crisis to help to provide continuing access. in the third option, the government provides certain securities backed by high- quality mortgages. the securities would be guaranteed by private companies under strict standards and oversight so the big tape the first loss on any mortgages reinsured by the government. we considered but opposed two alternative models. we do not recommend a complete private -- privatisation of the market with no role for the government.

nor do we recommend was some have called the full nationalization option in which the government would have explicit guarantees and there the cost of most of the credit risk in the finance system. the alternatives lie between those extreme options. eight key criteria in evaluating these options, we encourage you to carefully consider their advantages and disadvantages. we have to strike the right balance between providing access, and limiting -- and maintaining a healthy market. whatever path you choose will require some trade-offs and tough decisions. reform will take time but we cannot put this process off indefinitely and leave the market with too much uncertainty

about the alternate solution. delay will make a harder to get capital return. each of the options would require congress. we look forward to working with this committee and your colleagues in helping to design a comprehensive legislation as quickly as we can. we would like to do that within two years. we have to proceed with care. the housing market is still in a crisis. we have to make sure we proceed carefully to avoid adding to the many burdens on this market and not to disrupt the economic recovery underway. thank you. >> thank you. you go ahead secretary donovan. >> thank you chairman johnson.

on reforming american finance. i would like to focus on the administration's commitment to affordability and credit. we propose -- and help congress must work together to ensure housing finance the dances opportunity. since taking office, the obama administration has helped stabilize the market and support for homeowners. we helped diverted deeper collapse and a more severe crisis. our efforts preserve access to the market at the moment there were threatening to seize up entirely. since april, more than 9.5 million homeowners have refinanced to benefit from lower interest rates and saved $80.1 billion collectively. more distressed borrowers have received modifications since april 2009.

looking forward, the president believes an integral part of reform must be insuring americans have access to quality housing they can afford. this includes numerous options. we are committed to stay for mortgages -- safe mortgages. every american who has the desire to own a home should have the opportunity to take that step with fairly priced access in all communities. for the millions that read, a system that can provide the financing needed to make those properties as the port development of affordable housing with decent jobs and good schools. the question is how we provide those options. the administration lays out four key principles in having affordability that will lay the foundation for our system. first, strengthening the fha.

it strengthened fha remains important. that is why we will continue to ensure low-income borrowers have access. as we have done, we will do so in a way that is healthy for the long-term finances. because of the reforms we have implemented, fha is projecting to generate $9 billion in receipts this fiscal year. fha received a distant authority for premiums and we look forward to enact a broader reform that protect taxpayers. while fha has a policy and that they make larger down payments, we will have other options as well. in considering any changes, fha will continue in -- for lower

and middle income americans including providing access to credit for first-time homebuyers and underserved markets. we must provide targeted support for affordable brand team. half of renters spent more than a third on housing. it's showing the largest increase in needs, the need to express strong support for affordable housing has never been clear. credit markets do not serve renters well. they prefer-development. they were able to assist this market segment without the losses that occurred on the single-family side. we must insure the infrastructure capacity they build remains. when capacity -- one capacity could be to share risk to expand

their capacity to support lending. we could also develop programs to ensure we capture hard to reach segments like smaller properties inrural areas. we have to have capital in all communities including economically distressed regions and low-income communities. the plan calls for greater transparency by requiring disclosure of demographic characteristics of the loans the package. a key lesson we have drawn is that decisions made in secondary market drive lending practices in the primary market. the quality of mortgages is a very real. the administration is committed to exploring other measures to ensure a secondary market participants are providing capital to all communities consistent with their obligations of safety and soundness.

support for housing requires transparent funding. that was the goal of the national housing trust fund authorized in 2008 but has yet to receive funding. we will work with congress on developing a new financing mechanism to support home ownership and rental housing that we cannot now adequately addressed. there is a commitment to affordability and accessibility. as we consider these options, one element i would like to highlight is affordability and not just when we buy but over the long term. for decades, the 30 year mortgage has allowed the families to build wealth and climbed the ladder to the middle class. we should carefully consider the pricing and availability of those mortgages. this plan is about bringing private capital back and

insuring that americans have access to credit for those in a position for home ownership, rental options near good schools and good jobs, assistance for those who feel the strain of high housing costs, and choices that make sense for them and their families. the more the american people can participate to expand beyond necessary discussions of market -- and consider how we said to the system is to the futures of their families and communities, the better system we will build and the stronger in our country will be. thank you and we look forward to your questions. >> how would each of the

administration's options ensure that mortgages which continued to be available to americans in underserved areas and small community banks and credit unions would have access to the secondary market? >> it is a very important question. it is one of the elements we highlight to focus on as we look at the three options. we have seen a significant consolidation in the mortgage origination to the point where the top five lenders today account for 60% of all new mortgages. it is important we consider the ability of community lenders and others to be able to originate mortgages. first of all, through fha, we

would continue to provide that option. it is important to recognize that the potential for a lack of any guarantee outside of fha to further increase consolidation of the market because of the requirements for a substantial capital to originate those loans, that is an important element we should consider as we consider these three options. >> for both the secretaries, of looking at the housing report, it states we need to have a plan to address multifamily mortgage finance but does not provide much detail. what are your recommendations to

provide financing for multifamily housing including affordable housing inrural areas? >> as i mentioned in my testimony, one of the forgotten aspects of this crisis is that we have not seen at multifamily financing contribute substantially to their failure. in fact, they have been able to continue it multifamily mortgages profitably. it points to the need to look carefully at multifamily financing distinctly from single find -- single-family financing and to recognize that because of

the broader mix of products, the broader range of housing types, the broader range of communities, that have different types of multifamily properties, the need for standardization is more significant and can contribute to giving us lower interest rates. having a targeted the guarantee has been a significant contributor to improving the provision and building of multifamily housing and the affordability of that housing overtime. there is a number of ways we suggest we ought to keep that commitment. one of the lessons we have learned is that we should be looking at f h a that would pervert -- that would put more

private capital in front of the guarantee we provide. that is an option we suggest in the report. it is what we would look forward to look at that we did with the committee. >> the report says the administration believes the market should play a key role in housing finance. what appears to be the most challenging issues to address while the agencies take time and care to make sure they get it right and to avoid -- avoid unintended consequences? either of you. >> the entities responsible will take care in designing this to

make sure they get it right. one of the strength of our system is they will put out a draft for comment so all parties can provide a shaping of the final rule. it is not just how to get all of the agencies on the same page with a reasonably integrated approach but it comes out to the question of how much equity you think home owners should hold in their homes. how'd you get the incentives better, a whole range of problems. we are getting close to a consensus. i expect we will have a draft reasonably quickly. that is just a draft. >> thank you, mr. chairman. secretary donovan, would you describe your involvement on a mortgage service settlement

under way between servicers, federal agencies, and attorney general's? it has been reported as high as $30 billion. >> we are one of the federal regulators that has been called into discussions. that is because the fha and the taxpayer has a stake in the performance of servicing by the lenders that originate and service loans. >> has elizabeth warren been participating as your special adviser or as assistant to the president? >> you have a copy of a letter i

sent it to the house. i thought it would be helpful if i quote directly from this letter. >> to is the letter from? >> it is from me. i will reach you these three sentences. under the consumer protection act, the consumer protection euro b --ureau cannot administer penalties. under that same law, we will obtain significant authority to set standards for the mortgage servicing industry on july 2011, the date when the protections transfer to the bureau. for this reason, we have invited elizabeth warren to advise other agencies on how to

design the industry. >> she has been involved. >> we invited her to advise on this. >> my question is has she been involved? >> yes she has. that is part of the formal authority of the bureau. >> the recently released a draft of the proposed service settlement would force financial institutions to submit a third- party monitoring of their compliance with the agreement. these parties would be selected at the did -- discretion of the attorneys general. do you believe it is appropriate for regulators to outsource compliance monitoring to third parties? does this read any safety concerns? if not, why not? >> that is an excellent

question. i want to be careful in how respond. it is a complicated question. i am not going to comment on any of the provisions in that draft or that have been discussed in the press. we're trying to get all parties together. all of the agencies with authority to come together and bring about an improvement in what is broking -- broken. all parties have an interest in trying to resolve this. we want to bring more certainty to the market. and that people who are vulnerable to get assistance. >> with respect to the reform which we are all interested in, what role do you believe third parties like the former a corned should play here? >> in the debate?

>> in the recommendations and so forth. >> congress will decide who they hear from. i would expect to want to hear from people who spend their days trying to help people in this mess. you will have the opportunity to consult whether you want to consult. >> going back to housing, i would like for you to clarify your position on a few issues. do you believe that the explicit government guarantees should cease or merely be modified? >> in the report, the three options we suggest you focus on it involves some form of government guarantee. either through the fha or

potentially through one of the two other options. or a much more limited guarantee. as you know, and guarantees are perilous. governments are not very good at doing them, and not very good at designing them as we saw in this crisis. you can leave taxpayers with huge losses. we are committed to avoiding that. fundamental to any design is trying to take the politics out of setting the standards and pricing. that is why we have been careful to say and of these options have their advantages and disadvantages. whether they work will depend a lot on how they are designed. >> that we do not keep the politics out of the, we are going to repeat where we are

today down the road. >> that is right. it is a challenge to get right. humans are not perfect. it is a hard thing even without the politics. without -- you have no chance of getting it right. >> it is not be an explicit or implicit nature of the guarantee, it is the pricing that is critical as well. what of the failures the report points to is the guarantees that fannie and freddie, because they were implicit, were not at the right pricing levels. that contributed to their lack of adequate reserves. i would point out that in the case of the fha, while the crisis has challenged those reserves, we have remained able to operate through the crisis

without our reserves dropping below zero. >> they have dropped a lot. >> they have dropped significantly. we have been able to gain more flexibility to price those guarantees. we have raised our pricing 25 basis points next to that flexibility. that has allowed us to be able to operate effectively through the crisis. >> do you believe that conforming loan limits should be reduced? what figure would you target and timeframe? >> we think they should be allowed to revert on the current schedule. we have not made a judgment yet. we want to make sure you design a carefully phased in set of

tools to reduce the government's role. how we do that will depend on the evolution of the market. >> one last question. you have any confidence that the new european bank stress test will provide any meaningful results? it seems like they may have a credibility problem. >> a very important question. as you imply, it is important that for these things to work, they have to be tough, transparent, and disclosed. they have to come with a clear commitment to provide the capital banks need. i am not in a position to know whether it will meet that test. the market will know whether it is strong enough. >> transparency helps the

market judge. >> markets do not always get this things right. >> in the context of this ongoing discussion that has been dragging on many months, and i think should come to a conclusion, if it does not, there is the potential for numerous suits by attorneys general in 25, 30 states in terms of protection laws and other statutes. there is potential for bond holders with billions of dollars of risk on suing. there are individual suits by homeowners to claim they were unfairly for closed. this would have a deleterious

effect on the marketplace and on the stand of -- on companies. is that accurate? >> yes, it is very important. all parties have a stake to bring this to resolution as quickly as possible. it would help solve the legal uncertainty about the process. that is very important. it would give this a better chance to move beyond this and focus on the things we have to do to help repair the damage. it is important we tried to -- not just the servicer is, but the federal agencies have a strong stake in doing that. >> just a follow up. these are allegations, but legal processes that would take several years to determine responsibility, that itself

could have a significant impact on the market, both on the value of these companies and their ability to move forward and to robustly contribute to the recovery. >> that is right. it cannot solve all of these problems. it will help provide a measure of certainty with respect to the government. that is important to do. >> if i can add on that. when the issue that would result as well, we have made clear that insuring we have clear standards for servicing mortgages is an important element of our recommendation. one of the reasons we ended up in this crisis was there were no consistent standards for servicing mortgages.

the result which had a fragmented set of standards that might come from individual settlements with various states or agencies would be a real negative result. i would also point to the fact that for many homeowners who have not been offered the options they should, that have ended up in foreclosure because oregon in the process they were not contacted as they required to do, it means that we have not only hurt them, but blank and the foreclosure process -- lengthened the foreclosure process. we want resolution for homeowners and the market as well. when a homeowner has to contact a bank, when paperwork is lost, it is good for no one.

it is important these bandits get established in a single way as soon as possible rather than in a fragmented way. >> one of the insights in the report you submitted in looking back, we, the nation, congress, were obsessed with home ownership. rental property, multifamily, was a distant second. i think this report says we have to have a balance. for many, it is affordable rental housing. our goal should be to provide people the option so they can choose the best form of housing for their family, their proximity to work, their

lifestyle. what of the things i'm glad you commented on was the national fund which was devoted to try to build affordable housing for americans and all of us. i wonder if he might comment on this aspect of the report. >> very important senator. thank you for raising it. one of the things folks missed as we have gone through the crisis, we have seen rents come down at the top end of the market. at the same time, at the lower end, and some moderate renters, rents have increased to the point where between 2007 and 2009, we saw the single greatest

increase we have ever measured. clearly, the range of options we are providing has not been strong enough to meet those needs. the need for some kind of targeted effort that improves on many of the shortcomings we had in our goals, a much more targeted, a transparent way of meeting those needs would be reverse of the crisis while protecting against some of the negative impact the goals had. >> perhaps a very much. --thank you very much.

>> thank you for being here. i know the administration has laid out three options. i am one of the folks that believes the administration, we work best when you lay out something clear and we offer editorial comment here. i think we've made mistakes where 500 folks tried to craft something on their own with no supervision. kopp -- you have laid out three options. which one do you like the most? >> i'm going to disappoint you not answer directly. they each have advantages and disadvantages. i will say that it is likely -- we have to consult on how to do this -- i think after debate and discussion, i think it makes sense for us to tell you what is the best mix an alternative.

we will reflect and consult with your colleagues. >> i understand. that is kind of a punt. you are letting those options layout and people will comment on them. the second and third options involve price in brisk. --pricing risk. if we can price risk effectively, is there any need for government involvement? it is kind of self predicting, isn't it? if you can price risk appropriately, they would never need to be involved. >> i am not sure -- there are two classic arguments people

make. first is the affordable access argument. second, in terms of how an economy can invest -- they are slightly different arguments. in option one, we are suggesting the government to limit its role to the affordability option. even that option, you can have the fha expand what it does in a crisis, provide some protection against a recession. in that option, the government may be left with a lot of exposure to risk. the fha provides guarantees for mortgages with very little down payment. i guess my suggestion is to look carefully at the impact you have all concentration on small community banks. look at what the ultimate exposure of the taxpayer is. but at protecting the innocent from the kind of mistakes you

see. look at the moral hazard and remember that as in any guarantee, you need to make sure you separate it from political influence and other people with powerful objectives so that you can design it so the taxpayer is not exposed. >> we are running out of time, if you have the ability to price risk appropriately, which we do not because you do not know when the hundred year issue is going to occur, you do not need the government in the first place. let me go to fannie and freddie. all of your options say that they end. right now they are under conservatorship. what occurs for them to end? what occurs for them to end?