we certainly want to see them continue to be capitalized. his regulations is going to have a dramatic impact on the bottom line for a lot of institutions. what is your thought on that? >> they are doing it as they see consistent with the statute. we are very concerned about it. the community bank impact, they are not supposed to be subject to this cap. can you really protect them, particularly if the network provider is not required to take the higher fee? we think the 12 cents is too low. the letter that i am happy to share with you, we think they should take a broad measures into account. we think they should do more to take the incremental cost of small banks for debit card

usage. it will get the large institutions and the incremental costs are less. i dunno how we're going to come out with that, but it will take some more time with this. we hope they can find a legal justification. >> my dad told me that a long time ago, he wanted to explain why it was a good thing. thank you very much. >> thank you very much. i wanted to start off by thinking you for the excellent service you have done as

chairman of the fdic. and especially for responding for each time i call your office. you help us handle her. my state of georgia has a plethora of problems. led the nation and bank closures go. a number of banks, community banks in my state of georgia are under regulatory orders from the fdic. and i understand they are driven by the loan portfolios and capital levels. the often require a bank to reduce their concentration to some artificial level. is forcing them to not renew, even performing loans to some borrowers. it seems to hurt everyone.

they are so centered on real estate. it is difficult in these economic times while the bank loses a performing loan. surely, there is a better way to enforce rules and regulations so that they don't hurt the very consumers that are designed to protect and the bank that are designed to oversee. what might be a better way? our policies are not consistent with what you are being told. again, i will say this. if there are specific examples where you feel the policy is not being applied, i personally want to know about it. i cannot tell you how focused i personally have been on this.

it is honestly performing. if you have to keep making payments on that loan, it doesn't matter. it is a fine loan. even if the collateral has gone down, you have a credit worthy borrower, you don't have to write down the loan. if you're extending new credit or new money, the bank needs to go naked of risible. that is a basic tenet of banking. if a borrower is creditworthy, you don't have to do a write down. ellen through this again yesterday. i hear this and it is very frustrating to me. if he has specific examples, i want to know about it. >> what should my banks do.

that is not the way it should be? >> it is a confidential process, we can do it on a confidential basis. her name is sandra thompson, the head of our division. there are any number of avenues to bring this to our attention and we do want to know about it. i have found a couple of cases where the policy has been applied and we collected it very quickly. we really did have some problems. it made a different perception of what the credit worthy borrower is. we will review every single one. >> just last week, home to more banks failed in my home state of georgia. this brings the number of banks the close this year to 10, by

far the most in any other state. this is not unusual moves as banks in georgia continued to struggle. can you tell me what makes a small banks untenable the closure? there were failures of banks agreed to fast and have taken brokered deposits. they particularly have made a lot of out of area lending, that as something does not good unless you have reached that exposure. as we have progressed more to the economic troubled times, you're seeing more become. there is risk management there. there succumbing to economic conditions as well appear in is

the losses are mounting in the capital has been sufficient, if it can't raise additional capital, and as a not we can do about it. it is fairly rigid. >> are there specific things you can say right now that the fdic can do to assist them? >> >> we don't have a different role than they do. they need to understand what is going on in the bank. they need to listen to management. they must exercise their own independent judgment. it should be robust conversation with management. currently anything we can do to help them recapitalize is in our interests. but don't want these banks to fail, it costs us money.

if they can't reach new capital, if you delay for a long time, the losses will go even higher. that is why we follow ed. >> thank you for your generosity in time. >> in a meeting i had two weeks ago with your staff, they informed me that it is unlikely that the ftse will wind down the use of sharing agreements in georgia. setting aside my strenuous objection to this, i have serious concerns about the agreements that will begin to mature in a couple of years. as the sought date approaches, i have serious concerns that the banks will begin to rapidly sell off assets to take advantage of the agreement.

this could lead to yet another downturn in real estate and make it harder for people to obtain loans. what is the plan for these maturities? >> i am not sure we've got this figure. they coincide with the maturities of alone. their estimates about what they will expire. there is no cut off point where we think there is no longer any share that is going to be done in the market. that is not how it works. we think that it prevented a lot of property going into the market because it has the deposits and the access to another depositary institution. it pro we would not taken the assets. the extreme liquidation

discounts or hold ourselves and management which is efficient. it has helped keep a lot of assets in the hands of better capitalized and stronger depository institutions i want to emphasize that we have very stringent rules about loss negation. if it will have more than a foreclosure, we ought at that. >> you might to send the folks out of the regulators that i should go out and do work in the field, see were the disconnect is. >> again, if you have specific examples, we would love to hear them. >> these banks are afraid to death of retaliation. we would be glad to give you

examples, but trying to get some of these guys going forward, i have tried for a long time. i'm serious, they are afraid of retaliation. if you think the loss of share agreements are helping, the could be the problem. off, don't want to cut you but i do want to ask you another question. despite the occasional live service that some of these regulators give, talking about the community banks to provide services or for a small business, the examiners continue to second-guess bank management policies based not on the current status of the loan, but based on a scenario where there is no economic recovery.

it is a significant downgrades. if the ftse is serious, are they being second guessed on even the best documented loans. bankingunderstand how get that on a report card and then six months later, do everything but called a board member crux. >> is hard to respond without knowing what it would be in the individual case. i was said that we do not, as a said before, if it is performing, it is a good loan. even if the collateral has gone down, i want to know about them and i will personally ensure the banker that there will not be any retribution by bringing this to our attention. i know what else i can say.

the need to understand their reasoning. there have been some big mistakes. hopefully we're through this. but early in the crisis, we had a very dramatic downgrades. they went to troubled status, and for that reason, we're putting more of an emphasis on the forward looking -- that is just from a risk management perspective, if the economy tanks unexpectedly, have the startled and more capital, >> i appreciate those comments, but i really hope that some of your senior management or whatever can go into some of these banks and as my colleagues from georgian mansion, we have a tremendous amount that is either

under a consent order or cease and desist. it is still to come out of these communities. the agreement and the media write down is doing a reverse the situation on the global economies. we need some help. >> if i could just indulgent the chair, i'll go you one further. i'm happy to meet with the group of bankers personally if that will help. >> thank you for being here today. i like at my voice to those that expressed concern about banks' being told that they have to do away with performing loans and not credit worthy. or worse not getting access to that. i like to take you up on your

offer to entertain those kinds of referrals and those kinds of discussions. i have heard it from a number of borrowers. i won a follow up on a couple of questions. you address the issue of bailouts of banks and what tools are that you have today the did not have. are you better position today? are the regulators better positioned to prevent a government bailout of a troubled financial restitution? if you could highlight some of the things of how the incentives have changed and how the tools have strengthened? >> we can resolve the entire financial institution before it were only lead to the insurance bank. there is a list to put them into receivership and to the process.

if that would avoid a systemic consequences. the process is very rigorous. >> temporary liquidity support the might be provided will be paid off of the top. all unsecured creditors are exposed to a loss pinheaded that has to be assessed against the industry. as no way the taxpayers -- there are bells and whistles and this thing. we push for that. we want to the assessment to actually provide the liquidity. we really didn't have the bar from the treasury. we did not get that. even if there is a temporary borrowing, it gets paid off of the top. in the unlikely event, the be assessed against the industry. >> the management has resigned,

too. >> these are really strong. >> the is the potential for a why iar clawback that's again, i think a lot of benefit is prophylactic as well the managers going into this process have the option of going into a bailout. it will give them a strong incentive to raise capital. >> the second question is to follow up on my friend's question about the conflict between the safety regulators. what is your view on that as it relates as well to the governing bodies you discussed with my colleague from the other side? >> that will require a lot of collaboration there is the

consumer agency consulting with the bank regulators. that it will be there will help further that sensitivity and knowledge and awareness. i think it can work. early on when congress is considering this, we were sympathetic to a board approach. even though it is more difficult for me, i am not a dictator. the chairman of the committee has to do that. it is a good process, so either way, you have this model and the financial and regulatory sphere. i would say that i have reservations, their arguments for either approach.

it is one that we support and one that we think we can work with. >> of the kinds of things they might be doing a round consumer protections, they see a big conflict with these issues? >> particularly with regard to the board, one of the things that puts pressure and led to a lot of that lending was by competitive pressure to have a lot of nonbank mortgage originators and had no regulations whatsoever. they were selling these loans in the securitization trust. they weren't really driving down lending standards. having it for the nonbanks will actually help level a competitive playing field to mention that we don't have competitive pressure. >> thank you for your service, i

appreciate it. >> of like to recognize him from texas for five minutes. >> the fdic report about the possible order liquidation, who they said had the resolution authority granted to them have been in place, the estimated losses to the creditors may have only been 3 cents of every dollar. officials at the federal reserve including chairman bernanke have stated that one of the primary reasons that the fed did not step in to save lehman was because the estimated losses were so large. and they did not have sufficient collateral to post. chairman bernanke stated in his testimony that there was not merely of collateral to provide enough liquidity to meet a run on laymen. the company would fail anyway at

the federal reserve would be left holding the very large amount of collateral. the fdic seems to think that there was significant value in lehman while the federal reserve thought the risk was too large to lend to it. how could the federal reserve, such different conclusions? >> 97 cents on the dollar is a senior is not all the creditors the residue of bankruptcy, you work your way with equity at the bottom. because of significant equity, we think the bond holders with a taken very small hair cuts based on a very aggressive assumption about what the loss rates would have been. i think there is a difference

between what is available for collateral panel was available to lend as well as legal constraints against the lending institutions that really drove his comments. the value of unsecured collateral shouldn't be confused with a broader franchise value of the institution have the ability of a significant losses. which they could not rely on because there is no resolution process that we have now. >> the difference of conclusions, was this discussed with the proposed rules for living wills? >> and and think there really is a difference. it was talking about equality, the very high standards for collateral. that was well over a billion dollars into the broker a deal. because the counterparties temple of their collateral out,

it meant a lot already and was a very destructive process. items think we are inconsistent with what we are saying. it is a joint proposal. >> they called the past experience with an orderly wind down instructive. they argue that the fdic is readily equipped to handle the authority a quick because from 1995 through 20 07, he agency was responsible for the wind out of 56 financial institutions in hotbed questions as to just how readily they are to handle the new responsibilities. according to data from the web site, the total assets of those 56 financial institutions wound

down to 2007 was about $12.23 billion or an average $218 million per banks. most were smaller than that. at lehman brothers had $639 billion of assets. this is the largest bankruptcy in american history and it was 50 times greater than all of the combined assets of the banks that the fdic shutdown over the 12-year high time. what makes them wind down such a large institution? >> it may better attempt the failed bank assets over the past 2.5 years. washington mutual was over 300 billion and was resolved over a weekend, a process that was not

a similar. we ensure these banks and we understand them. and i get this question sometimes, people try to paint it. we ensure these big banks. regrettably participated in the bailout of some very large bank. unclear quite prepared. and complex financial structures, with a very smart people that do this for a living. we're the only agency and the world that has the experience of financial institutions, and others look to us. others look to us for expertise. >> my time is up, but i hope that the fdic has changed its own personnel and operating

structure for the benefit of our financial system >> we are designed to expand and contract very quickly. we have reservoirs' of contractor helped because our work is cyclical. this is a challenge for us. and certainly compared to the expertise process, i think this is a good approach. how to prove to you that can work. >> gentlewoman for 5 minutes. >> last congress, this committee held a hearing to examine community bankers' concerns that regulators were being overly restrictive, as the ftse address this concern to work with banks to increase small-business lending?

i am concerned with the ranking member of the house. we held a joint hearing in this committee to address a lack of access to affordable capital. i would like for you to comment on this. i think this is been a major impediment and certainly your expertise with the small business sector, you know that much better than i. and then there are a variety of reasons. i think risk aversion is part of it. our demand is driven by a couple of different factors. what is the uncertainty of how robust the economic recovery is. that is another downturn a year from now. that is a problem with the borrowed commands. because so much small band in regent small lending has dropped

substantially, they don't have the collateral any more to borrow against. we encourage it and focus on it. i was very disappointed that balances were down in the first quarter. small-business lending was down. we want our banks to lend. with special want them to lend to small businesses and i think they obviously need to find creditworthy borrowers. they're still standing on the sidelines. >> they recently implemented in and day to expand the deposit insurance assessment which will result in community banks pay a 30% less in premiums while large banks pay more. what effect on small business

lending will the new system have? >> i think it will help them. it will ease the assessment burden. is quite consistent with the loss exposure with larger institutions. it will help them and to the extent of the small banks to about 40% of the small business lending done by the depository institution. >> under the proposed rules for qualified residential mortgages, home buyers will have to put down 20% of the purchase price. we're very much concerned about this. because it will have a significant potential impact in high-cost areas like new york city. should requirement to be based on local market conditions?

>> i think they are meant to be exceptions to the general that if you're issuing a securitization, you need to maintain 5% of the growth. i think that they should not have skin in the game with these loans by and large. it led to a lot of underwriting and abuses that we saw in the mortgage market. it should be the rule. it is meant to be in their own part of the market, and with a not very broad standard. if you maintain the risk or all of the, have broad flexibility. the only applies to what i think will be a small slice >> have you looked at any other alternatives to a down payment? it will reduce the number of defaults in the future.

>> the staff of all of the agencies, it is a significant driver on whether a loan defaults. i will say that we are out for comment on exec to the question among others and i anticipate this is a huge issue that we get a lot of comment on it. that indicates the 20 percent down payment was a really strong indicator. >> you understand my point? >> i understand the point. this is a huge issue. what is a meaningful down payment for a low-income person could be very different for a meaningful down payment for those with other means. >> how do we meet those needs. and with the risk retention, you have a robust market and will have more flexible underwriting standards to me that's what and

a continuation of the program. i would like to recognize the man for questioning. >> i think a lot of my colleagues here have been pretty impressed overtime with the straightforward way the responded to questions is not always the rule around here. let me say i have laid out for you the arguments that i think are made via the studies. that if there is this advantage, this resumption that a that is their systemically speaking, the show the same relative magnitude. to go back to the markup or the conference committee, i've put forward several amendments to try to overcome this tendency.

one particular required the fdic to estimate at the outset of the resolution process what creditors would have received in bankruptcy and a limit payments to bankruptcy a hair cut at 20%. it would act as a sort of insurance mechanism against future write-downs. if following the resolution process under that scheme there were additional funds, the fdic would have the authority to pay back all or part of the 20% premium. that it sold the market this presumptions. we did not carry this argument, but i think it still holds true. especially for the most

interconnected and largest firms. now the resolution process. we're talking here about short- term creditors. those creditors are going to be considered essential under the fdic proposed rule. lending to these large complex financial firms, subject to resolution authority is close to that. if these firms fail, creditors are going to be made whole or close to hold. these are going to be able to borrow more cheaply end of the will grow even larger and they will become even more significant, systemically significant. there is a second problem also that arises. to go back to again, it is the

clawback provision. it is going to be very difficult to recover, and that is why you see this basis point difference. bankruptcy verses resolution authority for the large is not hard to see a situation for a recently built up creditors strongly argues that handing a over these sums may jeopardize their unstable firm this is an argument that regulators having just bailed out these creditors to name a financial stability may find very difficult to resist. additionally, there is no guarantee that a given predator will be able to pay back the difference between the advances and what they would have received under the bankruptcy code. and under this mandate. to the president richard fisher that recently said this about these arguments

that i have made in the past. incredible big bank resolution processes will be difficult to enforce, especially when regulators are explicitly directed to mitigate disruptions to the financial system. as they are in the bill. i understand you believed regulators need a broad authority to handle a crisis. the unintended consequences here have got to be considered. if we were to look at tightening the language while working within the resolution authority mechanism, are the steps we can take to minimize the potential for abuse down the road? and the amendment i made earlier, is a hold water with you? is our way to get at that? a couple of things, we're all for tightening as much as we can. we want markets to come back.

there is obviously a moral hazard. we need to market discipline to complement the regulatory process as a weapon against excessive risk-taking. remember, we will work with you. we're trying to allow this through regulation. please do not interpret that to mean that you're going to get it, because they are very much subject to loss absorption. one of the things with liquidity is a commercial paper. even though you lose the funding, you replace it with government funding. the present and for the short term should be that they are taking losses, too. and i find that for instance with the derivatives, maybe they

don't want to, if there are counterparties under secured or under collateralized, to find an hour with uninsured deposits, it will be a mathematical determination, however well maximize recoveries, that is what we will do. we think of the statute does have limitations. we are trying to tighten those even more. i am happy to look at language and talked to you. there is nobody that wants to and this and more than you. >> i will thank the chair, her, and thank you for being here, i echo his comments. i appreciate your forthrightness. yet testified many times and we thank you for your service. all wanted to ask you, based on something you had in a written statement, he said that if

properly implemented, it will not only reduce the likelihood of the future crises but will provide tools without resorting to taxpayer supported bailout are damaging the financial system? >> will lead to believe that we don't have future taxpayer bailouts. is to leave the door open. >> and that is his point, but we look at the breakneck pace of rulemaking, and you see regulators in many respects overwhelmed with the volume and the pace. you have concerns about the quality of the rulemaking? >> we are comfortable with it. we did not have the huge number of the way that they do. so i think we see that we are

proceeding at a reasonable pace. for anything major, we're giving 60-day comments. at least from their perspective, we are comfortable with the implementation so far. i understand especially if the market regulation issues, there is a lot being thrown. a special with derivative oversight. the rule making these to continue. it might have some merit. a think it is important to continue to proceed, and a think the market needs to understand that these rules are being placed in the need that to adapt as well. once they know what the rules are, the financial sector is pretty good at complying with them and figuring out how to do it. some sequencing might well have some errands. >> with the harmonization?

thus even on the international front, and the you hear different things from some. this is getting his sea legs, but it is forcing us all to get together have the staff talks regularly. having thus been a good deal of harmonization that includes the international front. they are really -- in addition to resolution authority, we have strong capital buffers. i think there has been the work of harmonization. and we should continue to focus on that. another is concerned about the treatment of derivatives rules, and we're talking with each other. that may be that sometimes you want some differentiation. wante probably going to more finish with the banks and then was completely outside the safety net.

there may be reasons for differentiation. >> and his international harmonization, and they are shrinking from an international level and a level playing field. you mentioned capital standards. i understand, there is a balance here, i want to measure the width of safety and fairness, also want to make sure that we of lending and economic recovery. are you wrestling with that? the way that when you're going through this process? >> the primary focus has to be with the capital requirement, hitting that sector to be leveraged about the french rolls, it is more expensive than equity. a double hull not only provide a better buffer, it will help

differentiate funding costs of the capital discussions have been targeted primarily at the larger institutions. have been larger institutions holding companies regarding the quality of capital. the companies have something called trust's preferred securities that ended up having that is only capital issue. >> my time is short, but i want to ask you about the trm. to insure the lower down payment, it will be part of the qrm. >> that is out for comment.

there is a private sector mortgage insurer. i think those are the things early to think about. and mortgage insurance can be a good product, but do it was demand for it driven by markets or regulations giving them an extra penny? i know you feel about the markets the way i do and that maybe the trade off that we think hard about. >> was it you who said that you thought that consumer protection and safety and soundness or two issues on the same side of the coin? >> general abuses will end up costing banks money. but just banks.

mortgages are a prime example. more of it was on the side of banks that consumers could not afford. the defaulted and a lot of losses incurred. >> when he sees going together, we want to make sure that the consumers are protected and treated fairly clear in will also want to have banks in the profitable, make sure that they are not going under? do you have a concern when we separate consumer protection from safety and soundness? the commented on the mission statement that there was no reference to safety and soundness. does that give you some pause or some concern? are you ok with the oversight that comes from outside? >> we support the consumer agency. there are different iterations

early on, but i support the final outcome. we think it is a positive thing that they will be on the board because they will provide an interaction to make sure that they are considered together. >> they don't have that consideration. reciprocity,for but given that, i think that again, we're fine with how it came out. it is important to understand how it has always been separate from the enforcement process. >> he talked about reciprocity, and you don't really have its except to review what is coming. the standard is so high, you

need seven out of 10 votes to overturn the rule and the director is one of the members. it is incredibly high, and he risked their, we're talking about playing russian roulette with the economy. i introduced a bill that will reduce the requirement to just a simple majority of some pretty significant folks. we talked about reducing the standard. but if the rule was inconsistent. it could be overturned. the thing that is reasonable that we have a different standard of how we can coordinate consumer protection with safety and soundness? >> there are a lot of things that all of us would have written differently. at the end of the day it was a compromise.

we can support the final product. if it can work. >> can we improve upon it? >> if you're going to draw me into a situation where -- and thank you. >> i am from a more rural district with zero community banks, credit unions we don't have big wall street banks in our district and i hear this nonstop from my local bankers. we're talking about how they are crushed by some many rules and some any regulations. the impact that it has on them, we don't have the ability to diversify the cost. you may hire a lawyer or a compliance officer in the costs go up. that makes it difficult for us to compete with bigger banks. sometimes we can't even stand the market anymore. it is the lifeblood of the economy.

and this is not stopped coming from them and i don't know if you're hearing the same thing or trying to figure out how we can still be safe. but still have rules that allow the local bankers and don't have anything to do with the financial crisis to do business. >> i think they have a point. every time you have a new safety requirements, the incremental cost of doing that will be significantly higher and we should do a better job of taking that into account. of all the problems, we have had a lot of them. this is a problem of scale that affects a very large service. if they're going to be a lot of new rules on servicing, and see a basis for and where in all of that on the smaller banks as well. the smaller banks have really been relegated.

and we want them to diversify their balance sheets. the regulatory barriers, holding back into those lines of business may be an impediment. of like them to do more mortgages again. i think that we should look very hard at the structure. the issues are completely different. >> that is something you are taking a look at. >> and we have an adviser on community banking. there are a number of the ideas for making regulations more effective. at the very top we say it applies to community banks shot. we ought to the community bank impact and why it will apply the community banks. we're looking at more automation. recall the fdic can act where

every year kid is going to update. >> i appreciate that because we hear that from the community banks. i appreciate your looking at that. i yield back. >> and the chairman has consented to go to a second round of questioning. and we're still going to be calling for votes in the next 15 or 20 minutes. i will go ahead and start the second round. i appreciate you spending time with that. we also had a discussion in the markup for the bills. on the differences or the interchange ability or not of safety and soundness and profitability for banks, one witness said that safety and soundness is used as a code word by the institutions as profitability.

by trying to reshape or reform this, using safety and soundness, we are being accused of protecting the profits of an institution. and i think while a safe and sound bank may realize a profit, that is a good thing. a profitable bank is not necessarily safe or sound. could you comment on the surgeon and the interchange ability of that? often they are two sides of the same coin. a product does not serve consumers or the customer's long term benefits and it will be a product that loses money for you and can result in litigation exposure as well. we're seeing that with the relaxed lending on mortgages and the litigation on overdraft protection.

having sensitivity from goods and business practices from the outside are eventually going to lose money. there will probably default or that could result in litigation exposure. on the other hand, i think you need to have -- need to have a full analysis of changes for the safety and soundness of how it is going to impact the financial health of the institution. and i think those factors need to be waived. you need to consult with the bank regulators. there are ways built and now. >> safe and sound consumer products will, and the long run, in your opinion, bring about

profitability for the institution? >> yes. >> and while there is a distinction between safety and soundness and profitability, the un safe product or the one that takes it too far is eventually going to be a non profitable an instrument for the institution. >> my final question, we'll talk a little bit about commission and the one to draw you into a political argument on that, but in looking at your own commission, or corporation, the service the chair, have the vice chair. , it is going to be grandfathered out or however in july. it is a chair that we don't have.

it is not such in the imagination to say that it will have to be senate confirmed. we have the independent director that also has an expired term. ande losing your expertise the longevity and history. another you're not really going far. in all fairness to you and to the corporation, this means to live on for me, it is a political statement. these appointments out and get the senate confirmed. let's have stability here or we will end up in a situation where there is an ever-changing transitional situation where it causes me concern. >> i have profound concerns and i am frustrated that there is

not greater urgency. i am very worried about my agency. it could go down to the board members after i leave. the names are not up yet, and there are still vacancies. i think this is very urgent. [unintelligible] there are still reforms to be implemented in a comprehensive and effective way. having a two-member or three- member board making these decisions is not a good thing. >> having a director in place on july 21, this is a great concern for me also.

44 senators have signed a letter saying that they will not confirm anyone. other policy positions that they want such as losing the funding to the political appropriations process, it may make it more difficult for them to do their jobs. i think this is a tremendous abuse of the confirmation process basically holding the entire congress hostage, that you have to look -- we have to write legislation. five or six major editorial boards. the good government groups will remove it from politics or the

democratic or republican perspective that these have gotten dismantled, disrupted, and destroyed for the consumer financial agency they will have to gut the entire agency and make it basically a non- performing situation. of leave the have a role to play in protecting consumers -- there is a degree of profitability that they will end up on the street and the overall finances were greater.

you can go out and buy a house. it was so easy to get a mortgage. it became clogged and the system and helped bring down the financial crisis. there is a basic disagreement between the republican party and the democratic party. the democratic party supportscfpb. -- supports the cfpb. you have republican senators saying that they will not confirm anyone unless you do exactly what we want. using it, taking hostage the entire legislative process to get what they want. they have forced the president really with no other choice since he supports it and the overwhelming majority, they would like someone to look at

their loans, their credit cards, their student loans and making sure that they are fair. making sure there is a fair playing field that consumers can understand what the terms are. that they are printing for everyone out there to understand. we have a basic disagreement between the parties. i do want to address my questions to our distinguished guest in the areas in which she has played such a fundamental role. i want to go back to the too big to fail, which is a big issue. i know it is the closest of the hearings we will be having. some have argued repeatedly that the financial reform law, particularly the orderly backwardation authority, perpetuates rather than eliminates too big to fail. i would like to ask you what is

your assessment of the allegations that the authority perpetuates too big to fail. >> i do not believe it is in any way a perpetuation. two big to fail was with us before the crisis. it was reinforced by the bailout. we need to end it. dodd frank gives us the tools --.-frank gives us the tools. i think it is there. the clear legislative intent is there. as i indicated in my testimony, implemented effectively, it will and too big to fail. >> my time is running out. which part of the financial reform law did you think is the most critical to ending too big to fail? >> i think titles one and two. title to brings us the orderly liquidation authority powers for non-banks. we already have it for banks. the little one holds higher

standards of -- title one hold higher standards of capital requirements. and they must demonstrate they are resolvable. >> i thank you for your testimony today. i think you for your distinguished service to our country. i think you for your non partisan response to -- i thank you for your non partisan response to questions and policies. i think you have done a wonderful job for our country. >> chairwoman bair, i think you for being here, for your testimony and your service to our country. the one question i asked before several other people already asked. so i am going to move to another topic. it regards the orderly liquidation authority. i know several times in your testimony today, you talked about you believe -- or at least the impression i got was you

believe the fdic have authority over liquidation is better than bankruptcy. >> for financial institutions. >> for financial institutions. there are a number of people in the bankruptcy community that believe that if bankruptcy laws changed that bankruptcy would be better. i know a lot of it deals with derivatives. can you give me some ideas of thoughts where you might believe that bankruptcy would be better? one of the issues with bankruptcy is that we are looking out for the creditors as we wind things down. i would like to hear your thoughts on some things that could be changed in the bankruptcy code that would actually make bankruptcy better. >> i think you are right. how derivatives are traded is very important. we would love to work with this committee and the judiciary. we deal a lot with bankruptcy court. banks we resolve are frequently restructured and go into bankruptcy. we are quite familiar with the

strengths and weaknesses of the process. how bankruptcy treats derivatives is a big problem. having the ability to require counter parties to continue to perform on their derivative contracts, versus now, where they have the ability to terminate the contract and clinical lateral, is quite disruptive and was a major problem. -- terminate the contract and claim their collateral, is quite disruptive and was a major problem. we were opposed to the kind of bailouts under cig. they went into bankruptcy process and were fine. the commercial paper was fine. bankruptcy worked just fine. i think there are ways to make bankruptcy work even better. for the larger entities, i think there will be a couple of things we can do that banks will never be able to do. first is we will be able to have

a continuing on-site presence. we will have ongoing access to information about the counterparty exposure and concentration of overseas operations. with the bankruptcy board, we will be able to do that. similarly, we will be able to plan and work with the international regulatory community as an institution becomes more troubled, to find and identify any options for resolving our domestic entity if they have foreign operations. we do that now. we have resolved banks that are national -- international operations. one of our banks had a subsidiary in china and hong kong. we identified what we needed to do to make sure that work within our receivership process. we were able to keep the subsidiary in asia open. they got the regulatory authority to do that.

it is hard to see how bankruptcy court could involved in that kind of international coordination in the event of a failure, or be involved in pre- planning. finally, we can be involved in the "support to maintain franchise value. -- in that liquidity support to maintain franchise of you. -- value. >> i am going to take the question. when you say you can provide immediate liquidity support, is that from the ability to go to the treasury? >> yes, for banks. we have the deposit insurance for banks, but for non-banks, we have the ability to withdraw from the treasury. >> that is where the root is of the perception. if you are going to the treasury, you are going to the taxpayer. >> we wanted to pre-fund a

reserve. that did not pass the senate. i think it is a very important to emphasize that any funds that are provided through that treasury line have priority over everything else. they are paid off the top. i can't believe there have ever been any losses on that. you are not guaranteeing any liabilities for the non-banking institution. whatever assets are sold, that goes to treasury first. in the unlikely event there would be losses, it would be assessed on the industry, the way we assess now for deposit insurance. right now, there is no reason for fares of taxpayer exposure on this. that in turn, the fact that the industry would have to pay for any losses that would occur, in and of itself will create pressure against creditor differentiation. they will know that the receiver -- we would do this anyway, but

if the receiver tries to show favoritism, the loss will go against the industry. >> thank you, madam chair. happy to yield any time you might need. i have really been enjoying this hearing this morning. i want to reiterate the comments my colleagues have made on both sides of the aisle about your candor and straightforward answers. we do not always get that and i think it has a positive effect on the members and the questions they ask. you said before you thought the financial system was healing but not out of the woods. could you expand on this? >> yes. i think they are still working through some trouble spots. loan volume is down. i think there may be too much risk aversion with some banks. there is also a lack of a borrower demand and banks need to make loans to make money. that is what they are supposed to be doing with their funds and equity to make money.

longer term, as i said in my testimony and in an op-ed last december, i am worried about the pressure from the low interest rate environment on bank balance sheets. obviously, banks are heavily exposed to interest-rate volatility. specifically, their liabilities are shorter than their assets. anything we would do to undermine confidence in this, in the fiscal drink of the united states government, could have an adverse impact on financial industries. we hope these discussions can produce a long-term deficit reduction plan. the mortgage market, i think, as i mentioned in testimony, are exposed. >> that was my next line of questioning. you said we need to get mortgage lending going again.

what are the barriers there? i hear, as i said a minute ago, from bankers and borrowers that regulators are tightening down and not allowing them to make those loans. >> i think i would put more of a priority on small-business lending. certainly, mortgages in housing is an important part of our economy, but we need to accept going forward it will be a smaller part of our economy. it got bloated and overheated. i do think we need ultimately -- there needs to be an exit strategy. we know that model does not work. >> do you have any idea what model might work? >> it is really outside my portfolio to recommend. i will say this. i think go one way or the other. i think this hybrid model where you have a for-profit entity

with a backstop of providing non-profit support was a bad model. going forward, i would say if you are going to continue to have government support, making exclusive. charge for it up front. make sure that is where we stand in terms of what being is -- what is being charged for the credit support. make that explicit. >> explicit and narrower? >> explicit the way the fdic charges insurance premiums for default insurance, they charged that has the government charged a guarantee fee that accurately reflects the need. or get out. one or the other. >> there was some back and forth about lending standards. 20% is huge. i don't see how that works. >> that is the exception, not the rule. i think there are mortgages out

there with 20% down payments, but that is meant to be an exception to the general rule. if you are going to securitized mortgages, you need to retain 5% of the risk. if you retain 5% rise, you have a lot of flexibility on the underwriting side. >> what sounds reasonable to you in terms of the down payment? >> i think it is a combination of factors. clearly, a borrower with a strong credit history and a low debt to income ratio -- there may be other flexibility is that you can provide. we provide them with banks now. but you need to have some down payment. >> let me speak one more question. liquidity, as you mentioned -- do you have a view of what we should be doing there? >> one thing we are doing is

getting rid of credit ratings in our regulations. that is required by dodd-frank. we had already started telling banks they need to do their own independent evaluation of the creditworthiness of investments and cannot rely on ratings. we used to use ratings for our assessments and we have gotten rid of that. i think that has been in process for some time. like anything, if you are not using credit ratings, what are you going to replace them with? that is really a hard question. >> thanks very much. >> thank you. this concludes our panel. some members may have additional questions they may wish to submit in writing. without objection, the hearing record will remain open for 30 days for members to submit additional written questions and these people to submit their responses to the record.

thank you for a very productive hearing. we appreciate your great service for our country. this hearing is adjourned. [captioning performed by national captioning institute] [captions copyright national cable satellite corp. 2011] clacks up next on c-span, we will hear the marine corps commandant james amos talk about u.s. strategy in afghanistan. then juan wiliams of fox news on journalism and freedom of expression. then, in case you just missed it, she liber testifies about -- sheila bair talks about -- testifies about the banking system. we will look at the supreme court decision requiring

california to reduce its prison population. republican senator john barrasso will talk about the house proposal to make changes to medicare. after that, a historian and author joins us for a segment about the world war ii memorial. in the afternoon, a member of the palestinian legislative council will discuss the recent political unrest in the arab world, and what it means for the middle east peace process. that is live from the carnegie endowment for international peace at 12:30 eastern. >> not available, c-span's congressional directory, a complete guide to the 112th congress. inside, contact information including twitter addresses, district maps, and committee assignments, and information on the white house, supreme court

justices, and governors. order online. >> this weekend on c-span 3, washington post journalists on watergate and the fallout from president nixon. an associate professor at george mason talks about the foreign- policy of president reagan. and we'll learn more about the army's oldest active infantry unit and its role in military and presidential burials. get the complete schedule at c- span.org, or have it emailed to you. >> next, general james amos is interviewed about the future of the u.s. marine corps. other topics include the conflict in afghanistan, iraq, and libya. from the brookings institution, this is one hour and 20 minutes.

>> good morning, everyone. it is a big treat and pleasure for me today to welcome the marine corps commandant, general james amos, to bookings. peter singer and i would like to welcome you all. we have the opportunity to hear from the common bond on a number of issues that i know this crowd needs no briefing on. the report everything on the status of marine corps operations to the status of the war in afghanistan, and how various budget exercises may be going at the pentagon, to the extent we can talk about those. but i want to begin briefly with a word of appreciation for the general. i was very fortunate to be with him and his team recently in afghanistan, watching him and his outgoing sergeant major. it was an inspirational

experience to watch how these two applauded, supported, and boosted the morale of their marines. i know it went in both directions. they gave you inspiration. they were incredible to watch in the field. i wanted to make that brief observation. but really i wanted to welcome you to brookings. i will ask everyone else to join me in a round of applause. [applause] and of course there are some big issues. we could start with afghanistan. if i could just ask you to give your assessment of how you see things going, based on the trip, based on the things you are calling in washington and learning about. >> we had a great trip. we were on the ground for about five days. we did our best in the helmand province.

i have watched afghanistan change over those four years. those areas were extremely dangerous and under heavy television control. and there were places where you and i got out now and there is no body armor. people were shaking hands. i have watched it change. there are responsibilities. it is out west of that. my sense of that is that there is a reason for optimism. i use that term to try to avoid winning or losing, which folks want to try to gravitate to. a reference that just on things i have seen. the district governors, like

mayors in america, our courageous men -- are courageous men stepping up and rebuilding their towns and creating marketplaces and getting children to school. we talked about children going to school and little girls going to school. this is a nation that did not value education for their girls, and yet we have gone in and out of schools now and you see those people young afghan children, the girls, with their resplendent presses on, going to school. i am encouraged by the markets that have opened up. probably, even more so, just the leadership you and i saw in everything from the provincial governor all the way down to the us district governors we have seen. -- down to the district

governors we have seen. we talked about the taliban spring and the spring offensive. the taliban, if they do return, and they will in certain numbers, are going to see a completely different helmand then when they left last fall. i am encouraged. commentsvid petraeus's about it is fragile and reversible. i think that is realistic. but i am encouraged. i will tell you i am convinced that we have the right formula, taking care of the people, helping set up local governments. >> let me ask, if you don't mind, about how your marines are doing. they are working very hard. i just mentioned i had the good fortune and pleasure of seeing how they rallied through the effort of what you are asking of them, we are all asking as a nation. it is inspiring, but it also has

to be tough. your experience in combat is also in iraq. it has to be eight years ago when you first went in. we have been at this war for a decade. there is a reminder in the field about how they have created their own legacy. but it has to be tough on people. it is incredible how often, when you ask someone from the field, how many are on the second or third deployment, almost everyone raised a hand. how long are marines holding up? how much can we ask of them? are other measures we need to take not to adjust -- need not to adjust for replacing them because it is getting to be too much? >> we have a community. i cannot speak for the service. we were always asking how is morrell.

what is the reality. sometimes, the more senior you get you get accused of, "you are not in touch with what is really happening out there at the youngster level." i do not think that is the case. we have the active duty young marine. in some cases, the active-duty old marine. the young marines and their families. we have two communities that we pay very close attention to. war and counterinsurgency are separate. but we talk about the young marines first. it is almost counterintuitive. you saw that with them morrell -- their morale. it is extremely high. i am always hesitant to say that in public. people say, "you are not plugged in."

actually, i think i am. i think our commanders are. i think our generals are. morale is very, very high. it defines, in some cases, our normal way we think about things. a good example is we just pulled a battalion of the northeastern part of afghanistan. they were rotated their about a month and a half ago. they followed all practical from october until march. it was really a dangerous area for helmand promise -- province. they had a lot of casualties, both wounded and marines we lost. yet you could be with these kids. we were there at christmas time with them. we just missed it when you and i got there. there -- their morale was off the page. how can that be? it is who we recruit. it is how we train, and an

expectation of legacy. you would be surprised how many are on their sixth or second deployments. they like what they are doing. not every marine comes in and says, "i like it so much i want to reenlist." one of the things i look at is the measures of how we are doing. if you want to be a marine today and walk into a recruiter's office in macon, georgia, it will be seven months. it will be seven months before we can send you to boot camp. the other thing that is kind of a litmus test is that these young men who come and, really men and women who come in, they want to be in the infantry. the infantry is the currency of

this war. those young men and women are the currency. so morale is high, and they are willing to return with their brothers and sisters again. the other piece of this is they feel good about it. we often do not see that they feel good about it written in the papers back home. but they feel like they are making a difference. they feel that when they are in a village and watch the market come to life. they feel good about it. the second community is the family. we put a lot of effort into -- not that there is a measure of family happiness, but we recognize that as the family goes, so goes the marine. we have i think leading family programs we are doing, all the way down for our families trying to take care of their needs.

understanding the psychological framework of families as a husband or spouse goes through their second or third or fourth deployment. i personally feel the strain on the families more than i do on the marines. >> let me follow up on one policy question regarding this issue. it is the only question i am going to try to pose to you about july 2011 and what it means for the drawdown. and, it is a sensitive topic and discussions are ongoing. we know for years ago a different generation of joint chiefs was very concerned about the surge in iraq and was not sure that the forces could sustain it. that was an ongoing subject of discussion between general petraeus, who was in the field than in iraq, and some of the joint chiefs back home. if i hear you right, if you are saying there are multiple considerations that have to go into drawing down.

but the state of the marine corps is not one of them. in other words, the marines can do what they are asked to do, at whatever pace. >> absolutely. there is no doubt in my mind about it. i think you saw this by some of the questions that came up. when we met with the marines, we always opened it up to questions. we quite often got the questions about, "general, how are we? are we going to be able to complete what we have started here?" that was the typical question that came out of the youngsters out there. are we going to be able to finish what we started? are we going to be able to ensure the iraqi army and the afghan army are trained up and in position, along with the afghan national police or the afghan police, to be able to sustain the area, keep the taliban out, and all of the

culture of that community to seek a sense of normalcy again? that is their concern. it is not a matter of can we sustain it. the answer is yes. i am really not worried about that. >> the other main area i wanted to discuss with you, before opening things up to the crowd -- i did want to ask you about libya in passing. you have experience in italy and nato. we went through nations on our trip and got some briefings. you also had experience with the operation in cause about a dozen years ago, in which we tried to use -- operation in cosa row -- in kosovo eight dozen years ago, in which we tried to use air power in the same way. you are a marine corps aviator. i understand you still fly airplanes very well.

from personal experience, i was able to do -- able to see that. but what can airpower do and not do? i wonder if you have any guidelines for us about the campaign. is it the sort of thing where you feel pretty good about it? is patience the most important virtue and if we stick with it, it will be ok? >> your last point is important for all of us to remember. >> when you went to tunisia and egypt, different pockets blow up and wanted to move quick. other folks wanted to be very cautious and move very very slow. my sense is that we got it about right.

when we talk about those in graduate schools and you are dealing on the national diplomacy level, things are not always that crystal clear like they are in a classroom. in a classroom, you have a problem and the professor pretty much knows what the two or three best solutions are. when you are dealing on a national stage, it is not always clear what the next stage is. we are a member of nato and i think that nato stepped up and even though everyone, i wish that they had done it this way. if you step back and look at it, we probably handled it about

right. >> i know this is an ongoing discussion. i don't think that there are any secrets when we spent a 14-hour going from base to base and having town hall meetings, the general had to get up at about 1:00 a.m. to do a video teleconference with the chiefs back home because this was the from the chiefs of the ongoing budgets. i'm sure this is probably not over yet. what can you tell us about the nature of the ongoing exercise and specifically, the $400 million number that the president outlined, is that set in stone? or is that subject to reconsideration and the chiefs have a chance to weigh in on what that means for the size and strength of the military? >> i cannot talk about what this

is in concrete terms. i don't know. i think the greater signal was to the department which was, our nation is working his way through some fiscal struggles. everyone must be part of the solution. our secretary has been pretty strident. a year ago, what we worked through $100 billion worth of efficiencies. in our case, we found a significant amount and actually applied to them to recapitalize some of our equipment. there are some of the near-term expenses. we actually spent that money pretty efficiently. i don't know where this is headed but the one thing that

the department has is that it has the message. this was just received. we are team players in this. where we are, there is no numbers within the department of the defense. this is your peace of this. none of that has happened. at this point, in a typical wise way that he did business, let's look at the strategy. if the nation began to draw down its military and reduce the department of defense as part of the federal budget, then let's put that on pause while we take a look at strategy. what is the the u.s. needs of the military? i think all of the service chiefs are in line on that.

what is it that america wants its department of defense to do? this was being birthed a couple of years ago and the physical landscape has changed. if you look at what our nation needs which is the department of defense. what does it need us to do? you start there. then you say, based on that, i have all of these things that i would like him to do, i would like you to have forward presence around the world. who has the capability to do that? what services? you come up with your list of the dudgeon major things that the military should do for our nation. then you lay in the budget. this is where i am right now.

i look at what is going on in the world like in afghanistan, helping our japanese brothers and sisters up in sendai, off the coast of libya, helping with the humanitarian disaster that took place in northern pakistan. all the things that we do and i have this kind of confluence, this nexus of budget reality. they are coming together and where they cross is where we are paying close attention. we will not want to be where we are now in the future. who can provide what is inherent? what have we already paid for? what is it that we cannot do?

if we say that this is important to our nation and we don't want the department of defense to do these things to this degree and then we lay that on top of a fiscal reality and we say that we can only do this much and these things we cannot. we will no longer be able to do that. that becomes risk. whenever we are doing that, there is always risk in every single thing that happens, everything that we have been involved in. it eventually comes down to pieces of risk. if you have to ask yourself, i can either ignore that risk or is there a way that i can mitigate that risk? in other words, is there a

hedge. is there something that i can do that in the event that this will happen, i will be okay because i have mitigated it with this kind of capability. you have asked to comment on to come here and speak. forgive me for being parochial and i will put my joint chief's hat back on. i think that is what we do. that is what the marine corps does for our nation. we are that hedge against that risk that we might not be able to have everything we want and everything we would like it to to do. those elements of risk, is there a way to mitigate this? >> i would like to ask you about the main modernization efforts. of course, we know that these are an ongoing major concern. one of your first acts as

commandant was to cancel the expeditionary vehicle. and you have a big burden in shepherding the -- you have an even mix and people who know what about this and people who are more generalist. maybe once i posed the question, if you can explain how that will fit into your strategy. then there is the tilt rotor aircraft doing so well in afghanistan and i know that you have been pleased. am i correct in asking about these three in a sense that not the only important marine corps items but what gives the marine corps it's unique capability to and characteristics and the three systems that are at the center of your concern as commandant. how do you see these three programs going forward?

>> it is the mission of the marine corps to be always ready force. there are a couple of things implied. you are ready to respond to today's crisis. you don't have to back up and say that i will be there in about 30 or 40 days. i will get my stuff together and put it on ships. this is our mind set. this is the way that we think. we buy equipment that fits on ships that you can swing underneath helicopters.

everything fits with the expeditionary nature of the marine corps. i was in the pentagon when it was struggling. it was really a vision then. it was a program, programs were flying. we said, this will give us the ability to carry three times as much -- excuse me, twice as much, three twice as far.

this is on its ninth deployment, its sixth combat deployment. you and i flew around. i suspect that they were running from the libyans at night and they were thankful they did not have to wait another two hours on the ground for a traditional rotary airplane to come get him because from the time the ship was notified of his going down in libya to the time that they launched, found him, uphold him out of the ground and brought him back, it was 90 minutes. this allows us a longer range, a greater payload. you can fit 24 combat loaded marines with all of their stuff

very comfortably. you can get in and out of the landing zones very safely. even though it had a publicized start, right now this is the safest airplane that we had in the marine corps. it just passed 100,000 flight hours. this became too expensive. i watched it for the 12 months i was the head of acquirements. i had the conclusion that we just cannot afford it. this does not mean that we don't need the capability. back to the expeditionary nature, america needs the capability to come with an

offshore option and be able to come from the air and be able to come on the surface with the marines. people talk about the forcible entry and then kinda get stuck on that and they say, i don't know whether we will do forceable entry operations again. let me show you the sense of magnitude. when the marines surrounded the town of fallujah in iraq, we had five infantry battalions on the edges of that town. the fallujah is a different place today and you know that. a superpower has the ability to put six battalions and marines

to shore and amphibious vehicles and so this is a pretty modest investment for a nation that has global reach and international responsibilities. we need a vehicle that can come out of the ship and swim ashore and then operate on land. you get the see form of transportation and maneuverability on the sea. we need to that into the last thing is the f 35. our nation has 22 capital ships. i'm talking about 11 carriers, 11 large amphibious ships.

if we don't have the --, right now we are carrying hairy ears. if we don't have the ability to put a fifth generation airplane, then when it is all said and done, our nation will have 11 ships to do the nation's bidding instead of 22. this transcends the mission and this is important to the united states of america to have the fifth generation capability of 22 capital ships. >> you feel that program is doing better? >> i do. i have been watching this and we are reclaiming ownership. i think i used the public statement, no one would beat me up for it. you are looking at the program manager of the f 35.

i understand the rules but i am a player/coach. i'm like bill russell of the celtics. you cannot put a pound of weight on that airplane that i don't know about. we're making business decisions at the headquarters. congress does not give the program management money. congress gives the united states marine corps the money. i take that responsibility very seriously. the plane is doing well. it is ahead of the scheduled test flights. the engineering fixes will come in in the next couple of months.

>> on the issue of military pay and entitlements. this great and revered respected secretary of defense did not see some speech for the history books to see where we stand and two wars vs three wars. he came down with try care as well almost his valedictory set of issues. perhaps that is all that he could say right now. it was striking that he said that we will have to rethink the pry care system and the

premium structure. most americans would believe and support the idea of the military compensation which should be very robust, especially in the time of war. if we are going to approach $400 billion in savings, we will have to rethink in some fundamental ways our policies? >> i absolutely do. i have been in the marine corps for 43 years. i've seen the budget cycle go up and down. and i am probably more concerned now than i have ever been before. i think that the service chiefs, all of us, this has caught our attention. this is probably exacerbated because we are at war. we have 20,000 marines on the

ground in afghanistan and 20,000 deploy it on ships around the world. we have this friction that is building. we are heavily engaged in some pretty important parts of the world. the vision is that the budget will go down. this has caught our attention. this does not surprise me the secretary, in his last major address, that he talked about that. we are looking at how we can be more efficient, how can we be more frugal? we are returning the marine corps back to its frugal roots as penny pinchers of the department of defense. part of that is that it cannot just come from programs. you cannot just say, we are

going to cancel these programs because five years from now or 10 years from now when we will be at the next part of the world history, we will be dealing with decades old equipment that is outdated and worn out. this cannot just come from programs. we were paying about 60% of the marine corps budget. 60%. it is about another 25% that goes to operations and maintenance. if you do the math, i am down to below 20% to buy new equipment and to put money out for research and development and that. this is a sensitive topic.

we are doing that while we have these forces engage to and we are asking a lot of them and all volunteer force. i think there is a balance their. we are innow where this. we are taking a look at the entitlements. i think we should look at it. what was it when i joined? you enter that arena. this is a healthy look at where all this money is going. this is increasing. the entitlements peace is increasing and our personnel costs are increasing.

you can add an addition to your cost. this was not for active duty. this was not for the retirees who are truly retired. it is for those who are still in the work. >> we have not adjusted the premiums as the 1990's. what will it end up with. as a service chief, i am sensitive to that. >> one last question and then we will go to the crowd.

is there a range of marine corps numbers that you decided had to be completed as options. you have a plan for what the marine corps should look like once we get past this time of intensive engagement and afghanistan and you hope that would be the plan that we stick with but i am assuming that every service is being asked to redo their structure. is there a range of numbers that you can't tell us that this is under active consideration for marine corps active-duty and strength? >> we spent all last fall. secretary gates in september told the marine corps and i was just about to become the common thought so i was just about a month away. he told the comment on it then and he gave it to me and he says, you shepherd this.

he said, build a force that is able to understand -- we drew the marine corps from 304,000 in 2006 and 2007 to help ease some of the turnaround. think about when you come out of afghanistan and build a force now that meets the department of defense's demands and all of these requirements that we talked about earlier and he said, i want you to build a force that kind of focuses on what we call the center of the range of military operations. those states today crisis response stuff. i'm not talking about a humanitarian assistance but we do that as well. also the range of military operations that are in the center.

we had the capability to do this. we put our best minds to this and there is a lot of analysis and rigor behind it. we have incorporated the lessons learned of 10 years of combat. we have not started dialing the force down yet. we have the plan and we will continue to refresh that plan. it would be premature to say that that was then and this is

now. we can show just about anybody what the value added is. i am not prepared. we need to start from there. >> you mentioned watching the -- go through a death spiral. what are the lessons that you drew from that experience and how are you apply those lessons

to the current f 35 program and to the potential replacement an amphibious assault? how're we applying them? are there some that can be applied and simply others that we learned a lesson? >> i have been in this job and i am in my eighth month. i have learned a lot of lessons. the acquisition piece of the major programs is a lesson, i have learned that lesson now. it is in here. we have over the years as we have taken our acquisition

cycle and retrain folks and we have them certified and then we lay out the programs, we lay out a milestone charged and we have changed that a couple of times since i was a young brigadier- general. we put more scrutiny on it. what happened in my view is that the acquisition cycle has been pushed out. this has been extended to mitigate risk. we do a lot of things sequentially. very seldom we do we do things was parallel. if i anticipate that this is done, we can do this and arrive at a point that we have a product that is acceptable and at 8. and space -- acceptable at a point and space.

he does not give them the service chiefs. we turn around and say that i am not qualified to manage this thing work for a fight over side. you take this >> we go often focus on other things. >> then we turn back. and now we owe more money. have that happen? we are entering our second and have a decade.

ego up to $13 billion. how did that happen? he took do people there really understand development. they tell you the best thing the services can do. and you are really developing this think it is being engaged. they need to trade off as a cost become reality.

it is going to cost you this much more. 50 knots is what i want. each is go away and tell me how much that costs. back to the comment idea. we have a systematic approach to the best engineering minds. we know how much across. it is a bunch and of space. we can tell you how much they again will cause.

they are working faithfully in that. we are within 60 days of having this thing. guess is making those decisions? it is the senior leadership of the marine corps. if they are sitting here and across the engineer. they are taking lessons learned. did what are the trades? we can build a vehicle. how much will it cost? the other thing i would say is that we have to accelerate production of these articles. do you know how long it took the black bird from the time it was being drawn to the time it flew

right thing was 18 months. here is what the acquisition guys said. only a going to cancel it, they came to one of my premier stars. they said ok. we will go for an alternative vehicle. they said it to be a while before they will do it this. they are not making it up. a want to pick the heaviest thing up and throw it out. think about that. how will the lessons apply? let's be engaged. let's do requirement trades so we can realistically have an idea of what it will cost.

let's get the acquisition cycle not as aggressive. we did that in a year. it saved lives. maybe not quite that. it is a rudimentary thing. there was a gun on top. this is going to be more efficient. that compares this faster. it is a product that is affordable. i think we are coming into this late. i was here when it was all power point. we are farther down the road on that. that is why the marine corps came back with what are the

requirements. >> we are looking for it right now. i think you can accelerate the time an acquisition. you can reclaim ownership of those major programs. i really think we can do a whole lot better. okay? >> let's start working back a little bit. >> do you have any reaction to the proposal sets forth to merge the station and the air force base? >> i do have a couple. i think they are available. i think we have a good plan.

i have flown in and out of the air station many times. i think they need to find another location here he is they are there. the reason for those of you who are not familiar, it is a great air station. it is wonderful to fly out of. it has been encroached. the building, the construction, at the schools, they are all around the airfield perimeter. i think it is in the best in

trench of our nation and japan to find another location. another thing he did not ask about, there is a significant amount of land south of it. these are going down there. the agreement is to give that land back. we have logistics down there. we have some down there. the plan is to give it back. i think the plan is sound. i support the movement. it is in the best interest of all of us to do that. where does that capability go? that is what our nations are looking at.

>> >> good morning. i am here. quick can pick up the microphone? >> in the wake of the death, i find it interesting that it is what killed him. i was wondering where uc this going specifically. it is coming here. >> i do not focus on this very much. i'm just a marine. is this answering your question?

>> it is a tactical system. >> >it is interesting. we crossed this in 2003, a link to this underground. probably about 60 of those are the forerunners. i have limited experience. i use these things. i think all of us use it. we are all in cahoots with the army on this. it is very effective.

we had to squadrons of these. we now have built almost four. we are doubling the size. there is the ability to move this around the mouth and see things. and be able to rally that information down to forces underground.

it flies out and deliver as ammunition. i am not there and by this at all. i hope this answers your question. >> if i could follow up. >> this is not meant to be a critique. we have seen a stay at about 2500 airplanes. you are just talking about some of the cargo and

irresponsibility. is it possible in this drill that they can reasonably be asked to rethink the 2500 number? is it possible to do too many? >> i do not think there is any question. we are doing a lot more. i think there is a piece of the future that he holds. i cannot tell the house much. is it 2500 plus? right now we have four of them delivered. we are about to take our fifth one. the navy has won. the air force has for r five. it is too premature to say we have it.

technology will advance. that is a decision that does not need to be made right now. it can be delayed out there. we think about how long it takes. it takes a long time. we will be building them and delivering them into 22 bit 5. i do not think -- until 2025. i do not think it will decrease significantly. we need to get the airplane built. >> here in the seventh row. >> hello. he talked about the reasons for optimism earlier including government leadership and increase in education. could you shed some light of the

potential challenges we are still facing. why these reasons might are might not have a snowballing effect. or how they might spillover. >> i think the education peace is critical especially in a country like afghanistan. the have a 85% of literacy rate. education is important in the marine corps. we do not have an 85% rate. it is critical for security in any maturing organization like guess. i am very optimistic and

hopeful. i think education is what is key. we are training the 85%. we teach the language of to the third grade. i am very optimistic. i think it is an important part of the future. >> do you have any additional part of the question? >> >> it would offset the challenges. >> we and it is going to good of the fundamental counter insurgency things in helping the

people reclaim their country. it is not a matter of the change. they are like to have peace. some of the most fundamental things we take for granted. we like the freedom of movement. i will not be threatened. in that country some of the most basic freedoms of being able to take your good out of your small garden and put them in the market and sell them, that is significant. can you imagine that in the united states of america? that is what they want. if they lack the ability to put their children in school.

he is strong leadership. it is a tribal system. we cannot view it the way the view ourselves. it is a strong system. the chiefs have a lot to say. it is different than a was in iraq. they have an awful lot to say about what is important to that town or village. while we were there one and the chief said and i will not tell you where it is. this is not unanimous. one of the tribal elders in a very rural area said, " i do not care about electricity. i would like to have fresh water

and to take the stuff we grow to a market and sell it." that is pretty significant. that is visceral. battier issue. -- back to your issue. a strong local government with irresponsible leaders and inability to provide security -- and what is that? that is a credible police force that is honest, that has the best interest of the local community at heart and an incredible military that should something happen they will step then and reinforce the police or do the bidding of the nation. that is pretty simple. that is the fundamental basics. this is what is important for

afghanistan. we are in the villages. we are in the villages down here. imagine this. a year ago we were on the lips of every one. now for the most part unless you are visiting with us, unless you are visiting with us, he probably cannot remember the last headline news salt. this was on the tips of our tongue. they have a series of governors. they are doing a credible job.

if they can do that at that level, we can help train them to do that. the united states can eased out. that is the plan. we held them dig wells. forgive me for blowing this. what is it that they really want? >> one of the district of honors i was when is a courageous man. -- was a courageous man. she wanted fresh water. this is what we might call it pretty shallow creek. he said you like to have fresh water. he would like to have some kind

of medical care. i would like to have some medical care. i just put two of my women in the back of a pickup trucks that were about eight months and 29 days pregnant and they were having problems. i drove them and they died in the route. that is all he wants. he just wants gainers. it is pretty this role. this is what the village's one. >> i will say to briefings -- briefings about what needs to be done. as you all know, governance has been a challenge.

i was encouraged to see that the number of afghans populating the position has roughly doubled its to about 60%. that is not adequate. it is still an encouraging number. another thing i heard that was encouraging was that governors are not able to travel by road in meetings. they are moving by road. this is one indication of headway. let's go over here. jason will be after this one here. >> i am with the office of senator lugar.

he has voiced his concerns that cost the interest in the vital need. i was wondering what your response is to that perspective and how the marine corps is vital to securing those interests. >> i am not qualified as a outweighed the the national interest. i cannot answer that. that is for the most senior leadership of our country. there has them fairly healthy price. if you use iraq as a model, we lost 851 marines killed in action. that is with 9000 wounded.

that is a pretty healthy price. as you look at them right now i say when was the last time you saw anything about the paper. there are these places that were in the headlines. was it worth it? they have not put a lot of heart fell time in there. the answer for me and if absolutely yes. if i take that same concept, that is why i look. i'm very encouraged. they want to finish the job. >> i do not mean in a bad way, i

mean in a good way. when you have a young marine his excited, because it is opened up a bakery, he was runouts years earlier. he is 19 from akron of ohio. this is what they mean. they want to help train the national police. they want to finish the mission. i just want to give you a sense for what they were feeling. >> jason has the gold tie from standing near the door. >> thank you for the directions. >> over the last few months there has been fairly well

publicized increase in the number of representatives of civilian agencies. there have been reports that many are not able to get out to the field as much as they hoped. can you speak to the impact fed has had? >> everything we have done in the last 10 years has been evolutionary. of we do not let things the same needed in 9/11. i suspect they do not use things they did in 9/11. q about we would have been hiring people in the civilian agencies now. you are able to go to some of these places around the world.

at times they are dangerous. my sense is that we are absolutely had it in the right to election. we spend a couple of occasions with the team. it is headed up by hand. he is steering a hero. the staff is coming together. there are others that need to be a part of that. they are coming in. it is slower than they like? yes. i would argue that we are going to have to hire a specific kind of people to be willing to go

out with the skill set and do something that will be part of the solution. but only as a heading in the right direction, it has to head to the right direction. it is imperative. we talk about the government. people use that phrase. there really is the truth. we are in it together. the marine corps has no business thinking that will go someplace all by ourselves and we will just take up their claim. i will be happy to be in support somewhere around the

world. we are all in this together. it is heading in the right direction. >> the young woman with the red hair. >> a few months ago we talked about how their right to reorganize it. i was wondering if any of the marine corps positions look like they are going to be rolled up in that effort and reorganize under a different acquisition structures were to see this

affecting the way they do business. do you see the marine corps taking an interest in your class at all? >> your class specifically. >> d.c. the marine corps taking an interest at all? are you looking at modifying it in any way? >> the first part of the started with this. what was the question? >> the talk about organizing

this bi capabilities. he mentioned this as a naval denigrated one. i was wondering if there is any sign of whether the programs will end up getting rolled up in the new structures or whether you think it will affect the marine corps capability? >> i personally do not know of any. i am aware of that. i'm not saying it is a bad idea. i was primarily talking about how we take what we have and make it better. i was not lumping it under capability. i cannot answer that. i heard you back there. i think you are talking about the thing.

i think this is tremendous. we go back here. here is an example of taking technology and that should bringing it aboard. we have to be seen them flying right now. we are optimistic. i do not know how to pull this together right now. >> that time for one last question. >> hello. concerning one of the budget difficulties, he mentioned strategy first. my question is how it is action

going to take place. is there more emphasis on capability now a more emphasis on the desire to shape the marine corps after afghanistan? >> that is a good question. we start talking about budget items. the talk about the fiscal pressure. we are talking close to of afghanistan. if we were to look at the written guidance, there is a bunch in the air. i have for priorities. my number one is to do everything that is required to guarantee success. that is my number one priority. i promise to the marines underground that i will spare

whatever is required. i'll take what ever expenditures are required. i will do all of this even at the expense of the rest of the morning to guarantee success. he heard me talk earlier. afghanistan is my number one priority. i know it is absolutely a top priority for our nation. i do not see this changing until such time as the withdrawal plan. and do not think this is going to change.

the rest is in the future. we are out there. probably the next decade in mecham make the case that if you are going to look at it probably a out -- should look at our the next two decades. it takes a long time to buy it. my sense is the rest will be addressed with what they will do for our nation. q the get the bulk of the effort it will be toward strategy for the world beyond afghanistan. what can we do? what is required? how do we mitigate it? >> please join me in thanking

him [captioning performed by national captioning institute] calle[captions copyright nationl cable satellite corp. 2011] >> freedom of expression was among the topics that juan williams spoke about. his remarks are next. sheila bair testifies about financial regulation in the banking sector. later a kentucky senator on the patriot act. >> on tomorrows "washington

journal, we will discuss the u.s. supreme court decision requiring california introduced the prison population. republican senator john will speak about the house gop proposal to make changes to medicare. after that, douglas brinkley joins us for a segment about the world war ii memorial. it is each morning at 7:00 a.m. eastern. a member of the palestinian legislative council discussed the recent unrest in the arab world and what it means for the middle east peace process. >> the c-span video library makes it easier to follow campaign 2012. get instant access. it is all searchable and free.

the video library is washington your way. >> are the three day memorial day weekend, commencement addresses from across the country. leaders from across entertainment offer their advice and insights to the graduating class of 2011. it is memorial day weekend on c- span. >> juan williams talks about his experiences as a journalist and commentator. he was fired from his job as an npr analysts after comments he made about muslims. following the remarks he takes questions at this press club event.

>> that afternoon. welcome to the national press club. i may broadcast journalist with the associated press. and the 104th president. we are the leading professional organization for journalists. we try to foster this worldwide. for more information, please visit our web site. to donate to programs we can also visit us online. on behalf of our members, i like to welcome our speaker. our head table includes guest as well as a working journalist.

i would also like to welcome our c-span and public radio audiences today. you can also follow the action on twitter. after our guest speech concludes, we will have questions and answers. it is time to introduce our head table. i would ask each of you to stand up briefly as your name is announced. from your right, he is a free- lance pundit and comic. thank you for being here today. peggy is the congressional correspondent. she is the chair of our

freelance committee. then comes my colleague from ap, michelle. she is president of the national association of hispanic journalists and member of the national press club as well. congratulations to rafael williams, the son of our guest speaker. we can allow one round of applause. [applause] an independent freelance journalist, and she has formerly worked for npr. the devoted wife of our guest speaker today. bob keith is the senior press secretary for the national resources defense council. bloomberg news, he is chair of our diversity committee. he and i worked together in buffalo, new york, many years ago. my colleague from ap broadcast,

and new member of the national press club. she works for ap television news. steve taylor is a fox news correspondent. eric is media critic, moving over to the "washington post." a new member of the national press club. please give them a round of applause. [applause] we begin with a quotation. "yesterday, npr fired me for telling the truth." that is how our guest speaker started a column in the wake of the disaster from npr. his departure from npr set off a firestorm. just a few months later, the president and ceo resigned under pressure. after his departure from npr, he explained that he did not fit in their box.

nor did he fit into any box, which makes him all the more interesting. our guest speaker was born in panama, the son of a boxing trainer and a seamstress. when he was 4 years old, his family emigrated to brooklyn. he would go on to earn scholarships to an exclusive quaker prep school. it was at student newspapers that he had his first taste of journalism. a column after the npr dust-up described him as being "cut from a different cloth." he started his career as an intern at "the washington post." he spent 23 years as a reporter. he reported on everything from problems in the d.c. public

schools to corruption by the mayor before going on to cover the white house and every political campaign. his insight and reporting led to many television appearances. npr initially hired him to host "talk of the nation." later, he was the senior national correspondent and political correspondent there. it led him to regular appearance on fox news. during an appearance on the show, he said this, "when i get on the plane, i see people who are in muslim garb, i think they are identifying themselves as muslims. i get worried. i get nervous." npr's says that his remarks were inconsistent.

clearly, he has moved on from that. and he might be doing better than ever. along with daily journalism, he is the author of best-selling books. our guest has taken on expanded roles on fox news. please give a warm national press club welcome to juan williams. [applause] >> it is a pleasure for me to be here at the national press club. i want to thank you all of you for coming out today.

thank you for the invitation to be here. i have been in this room more than a dozen times to hear speakers. i never thought i would be the speaker. never. of course, i never thought i would be in the situation that mark described to you just six months ago where i find myself not having my byline or my column on the front page. it was me, the controversy was about me. i found my picture and my voice being replayed nationwide for being the journalist fired by npr, accused of bigotry. having said that i keep my comments between myself and my psychiatrist, and the suggestion being made that i

should seek guidance from a publicist on what it is i say to anybody in public. if that was not enough to ruin a journalist's, the official reason given for my firing was that i violated journalistic standards, something that all of you in this room will understand that i hold quite dear to heart. the idea was because i had made the statement that mark described to you, i could no longer be an effective journalist. i was a black guy making fun of muslims for the entertainment of white entertainment. i was an unrepentant employee of fox news. there was quite a list of charges against me at the time. given that tarring of my reputation, i want to emphasize

how much i appreciate the opportunity to be here today. especially to you members of the press. you suggested that i be invited to speak after the former npr president spoke here in march. the personal attacks -- it led journalist to ask that i be given this platform today. i thank you. let me remind you that as mark described, when that person was here, they refused to accept the platitude and the efforts to minimize the idea of the major news organization silencing a commentator. all this fits with the great tradition of this press club. debate that touches on the heart of journalism. journalism is in the midst of such a transformation. to help people make sense of the posturing, the provocateurs that line today's mixed media

landscape. i also appreciate the chance to speak here because when i was fired, i was not given the chance to speak. this is such a strange thing, but i was given a phone call and told that my contract was being terminated. this was after working for npr for 10 years. in essence, i had been muzzled, not been able to go in to explain myself, what the entire context that was prompting management to make the decision

they made. in that context, i have to tell you that i feared that my career as a journalist was over. i feared that i had lost my credibility. npr certainly had a large microphone in every town in america. i did not know how this was going to play. to get back to my earlier point, i never thought i would find myself in this situation. i did not think i would have the opportunity to speak at the national press club. with the ensuing congressional debate over npr funding, i found myself caught up in a whirl went great -- a whirlwind. i have worked in tv since the late 1980's. i have written a best-selling books. by comparison, the focus brought on by the recent

controversy, i was fairly anonymous before all this happened. one man came up to me and said, i did not know what you looked like until i saw your picture on the front page of "the new york times." npr listeners used to say to me that it was nice to put a face with the voice. my instinct was to say, i did not know what you looked like either. it was a surprise to me. now i have the situation with fox viewers that when they meet me they said, it is nice to be able to put a body to a face. that is a new twist. as we are speaking here today, i want you to engage in an act of imagination. i wanted to play around a little bit with imagination and have you imagine that you are

listening to a talk show. let's pretend that our topic today is the firing of our guest. we will take your calls. we will have questions afterwards. let's begin with an update from juan williams. since my firing, i was hired full-time by fox news to be a political analyst. i appreciate fox making that decision. i am also writing a column "the hill" newspaper. i have been writing this book. the book will come out in late july.

that is an update on where i am now. let me change hats and pretend to be the radio talk-show host. i would say, tell us exactly how you think this storm started. when did the tornado rip into your life? i guess my response would be, i did not even know that it had ripped into my life. what happened was that bill o'reilly was on the "the view" and expressed his belief that muslims attacked us on 9/11, which prompted joy behar and whoopee goldberg to walk off the set. the following monday, i was the guest on his show. he asked me, where am i wrong? i said there was no way to get around the fact that there is a worldwide problem with adical

islamic thought. when i get on an airplane, and as the people were dressed in muslim garb, identifying themselves as a muslim, it makes me nervous. that was an expression of a feeling. then i added to that we cannot jump to violate the rights of american muslims or any muslims from any place in the world because of religion. think about timothy mcveigh, think about olympic bomber, think about the westboro baptist church. we cannot violate the rights of

people of any faith based on the actions of people who are extremists. i said all of this at the time in the full context of the interview that was taking place. i made it clear that we cannot tolerate people using rhetoric and words to attack muslims because based on those fears, you could get into a situation where a cab driver had his throat cut because he was a

muslim. that discussion was honest and heartfelt, and led npr to fire me. let me switch hats again. did you realize when you were making these comments that people might view them as inflammatory? i have to tell you that i never had that thought, not to this day. here we are may 26, 2011, about six months later, i never once had that thought. some days you catch yourself in the shower thinking, i should have said this. i have never had a second bought because what i expressed was a genuine feeling.

it was not an analysis. it was not a suggestion that we base our tsa policies on such a feeling. it was a statement a feeling. it strikes me that even in admitting to a feeling, how difficult it is in this country today to try to solve problems of racial, ethnic, religious discrimination if people are unable to speak frankly, if people are unable to start an honest dialogue. seems to me incredibly difficult. in fact, some people who wanted to criticize me said, he is black. what if that had been said about three young black guys walking down the street late at night? somebody said, i did not feel comfortable because i saw these

three young black men approached me. i said, i am black, if i was walking down the street late at night and i saw three young black men dressed in a thuggish manner, i would be nervous, too. you are not allowed to say some things. what has been rewarding for me is that through all of this, there has been an incredible amount of support from left and from right, people saying that this is a time when political correctness needs to be called out. it is corrosive to public discourse and to public debate. i am reminded that george washington, one of the founding fathers, said, if men are to be precluded from offering their sentiments on matters that are central, which may involve the most serious and alarming consequences, then reason is no use to us as americans. he said this in 1783. i think it applies to this very day. let me switch hats again. let me switch hats again.