people talking about excessive salaries? >> i do. i get correspondence on this as well. i certainly hear from members of congress and so forth, and all i can say is i believe we are trying to strike a difficult balance between ensuring that these multi-trillion-dollar companies have the appropriate expertise running them and that we are keeping salaries as low as possible while ensuring we have capable people in that the people who are there are focused on helping homeowners. we are very committed to trying to help troubled homeowners to provide alternatives to them. >> >> if we are not successful -- let me just ask one more question before my time has expired the ig has said that

-- >> are you familiar with this report? >> i am. >> both fannie mae and freddie mac were told not to refer new foreclosure cases to the firm. why did fannie and freddie just not drop this law firm? why did it take so long? i just want to find out why it took so long. >> congressman, i concur with your concern about their behavior. we took action as quickly as possible.

we need to be sure not to incur more cost to the taxpayer as well. >> that to be part of your report. >> mr. norgrove -- mr. demarco, i know you are very familiar with the process, but mr. williams and mr. alderman, are you both aware that federal ig's have the right to request assistance from their regular mp's? >> yes. >> are you aware of the document request made by the office of inspector general arguing that

these requests must go through the fhfa? >> we have fully cooperated with the ig all matters concerning the fnfa. >> it is my understanding that we were cooperating with and the hfa.rts concerning the f >> would you commit to providing the documents and information the office of inspector general request of your entity? >> we have been, congressman, and we will continue to do so. >> he will continue to do so? is that correct? >> yes. >> thank you. mr. holderman?

>> yes kollhoff -- yes, we will continue to court at bat with fhfa -- coordinate that with fhfa. >> they have to receive a request from you in order to request to the entities of regulation, in order to get information. >> that is done to get the effect of some of fhfa's activities. they will request information from the regulated entities. i believe we have worked out a very efficient process for doing that and both of the company's have had oversight.

>> and -- wouldn't commit to letting the office of inspector general directly request -- would you commit to lead in the office of inspector general director question fannie and freddie the audits that they need? >> where it concerns the audits undertaken by the ig, certainly. >> thank you. with that, i would like to yield the balance of my time to the doctor. >> thank you, mr. chairman. the title of our hearing today, as you all know, is a "paper performance: should the fannie and freddie executives be receiving millions in bonuses?"

i will be some time to answer the question directly. mr. williams? >> should we be paid for performance? yes, we should. and are we being evaluated on our performance? .es, we are we have been given some very complex challenges in this market. >> ok. mr. holderman? >> yes, we should be paid based on our performance. the difficulty is that in contrast to my years in the private sector and where other companies were profitable and it was easier to identify performance and tie it to profitability, much more difficult to taipei for -- to tie pay to performance where there are so many invented losses that we are dealing with that continue to corrupt the financial statements. >> should fannie and freddie

executives be receiving millions in bonuses, mr. demarco? >> i believe they should be compensated at a market rate that allows fhfa's conservator to ensure that we can attract and retain suitable executive -- executives to run these companies. >> thank you. i yield back. >> the johns time has expired. -- the gentleman's time has expired. >> compensation is based on how they perform, but i have serious questions about their so-called achievements. let me give you an example. fannie and freddie's filing states that the credit losses were actually lower than expected in 2010. it sounds like good news. however, the reason for these lower credit losses is that many

of these services were caught up in the robo scandal. mr. demarco, how can you take credit for fewer losses that resulted from the robo signing scandal? >> congressman, the performance over the last year that was better than fhfa had projected in a published report in october, 2010, and it is reflected only in part by delaying foreclosures. in fact, we have had better than projected under water mortgage performance. we've had better performance in loan modifications to avoid foreclosure than projected. it is reflective of the steps bearing fruit and resulting in a

resort that was better than model. >> ok, let me give you another example. part of the executive compensation was based on this factor -- whether fannie mae was able to issue of least 35% of all mortgage-backed securities issuance. according to fannie mae, they exceeded this goal. however, as the ig pointed out, the major purchaser was the government. in a report issued earlier this year, the ig said this, "it seems unlikely that fannie mae could have committed such a large share of the market without the federal reserve purchase of this mbs." mr. demarco, you cannot early

take credit for meeting this goal if it is due to direct support from the federal reserve, can you? >> the purchase of mortgage- backed securities was designed to affect mortgage interest rates and rates in the marketplace. these are separate things. >> let me ask you about another example of. one of the measures for determining performance bonuses for freddie and fanny executives was whether they provided more affordability to the housing market. they claim they met this goal, arguing that affordability has improved dramatically. do you know why? because housing prices have tanked. mr. demarco, are you serious they paying million-dollar bonuses for achievements in this area? >> that particular element is reflective of the company's

responsibility for meeting these various affordable housing goals. they remain subject to these kinds of responsibilities and that is what they were being looked at. to make sure that in conservatorship there were about stepping back from these markets that provide for an affordable housing in the marketplace. >> ok, that was the benchmark, affordability. are you actually awarding bonuses because housing prices are continuing to plummet? >> no, sir. >> what is the benchmark then? >> the goals that are in place and that we report on to the congress. >> i am mystified as to why these so-called achievements should a title executives -- should entitle executives to million-dollar bonuses.

and they have nothing to do with the actions of fannie or freddie, or they appear to reward a continuing downward spiral in our housing market. i cannot figure out which one is. can you help me? >> congressman, i appreciate how difficult this is. clearly, we are all frustrated by the conditions in the country's housing market and its economy. we are trying as concern over to fannie and freddie -- as conservator to fannie and freddie to make sure that there is recovery in the secondary mortgage market, to make sure that they take all necessary action to assist borrowers in troubled mortgages, and that the $5 trillion in mortgages that the american taxpayer is now supporting are being overseen and managed by competent professionals who can prudently manage the risk of such an enormous portfolio. as i said that the outset and in

my written statement, it is not our goal to keep this going. we're looking forward to working with the congress of the u.s. to get on with the artwork that would bring in the conservatorship see themselves to an end -- with the hard work that would bring the conservatorships themselves to an end. >> i would encourage you to work on finance reform. the doctor is reddick dunst for five minutes. -- is recognized for five minutes. >> mr. williams, you are the ceo of fannie mae, correct? >> correct. >> you think the enterprise is succeeding and doing well? >> we have been giving -- been given some very challenging goals, as i have articulated. we have provided liquidity for

both single-family and multifamily, while helping to produce long-term -- reduce long-term credit losses. i think the team has done an incredible job under those circumstances. >> and with freddie mac, you feel good about where you are going? >> i would divide the company into two parts. this is, in part, in reference to an earlier question of whether i would invest in for the mac. -- in and freddie mac. i have been an investment person for most of my life and if i could divide at freddie mac into two parts, i would definitely invest in the company from 2009 and on. i am incredibly proud of the work of our employees from 2009 on. our people are entitled --

entirely committed to make sure response will lending goes forward. >> i'm sure you have by expectations for them. -- high expectations for them. since entering conservatorship, you have taken $69 billion from the treasury and postal code taxpayers $41 billion. the 71 a different level than private-sector companies who if they are profitable, that is good. if they get big bonuses, that is fine. the taxpayers are not paying for those. but right now, the taxpayers are paying for these bento, they are very concerned. -- are paying for these, and they are very concerned. according to reports, mr. williams and mr. holderman made about $4.7 million and $5.1

million respectively last year. that in mr. williams's base salary was $900,000. and mr. alderman -- holderman, similar to that. president obama makes $400,000. as members of congress, we make $174,000. i think you made about $240,000. do you think the work of mr. williams and mr. haldeman warrants eight times as much paper as the president of the united states? >> as an economist, i believe? -- i believe that what is perceived as the total benefit of the various positions goes beyond just the salary. i do not find it fruitful to measure the compensation of the president of the united states with a ceo's of major corporations. >> how about members of congress?

the approval rate of congress -- we work hard and our deficit is $14 trillion and rising. i think of congress decided we needed a bonus because we were doing a good job, we would all be voted out of office. you do not to millions of dollars going to the executives. i understand their outrage. mr. marker, your not only the boss of mr. williams and mr. haldeman.com of but they cannot do much with our your work. -- with all your work. do you feel their salaries are justified? >> i do not think anyone is

going to agree, including me, that they're working 10 times harder than i am right now, congressman. i believe, given the framework that was put in place, they are justified. because the framework was designed looking at large financial institutions that are -- that operate as private entities, not government agencies. i believe we struck at an appropriate balance, visit to what the marketplace looks like. >> bonus should be based on performance. i think it is dubious to award million set of dollars in bonuses of taxpayer money. >> mr. maloney from new york is recognized -- miss maloney from new york is recognized for five minutes. >> i would like to continue on this line and ask about the

bizarre situation with bonuses. when things are going well with the company, bonuses are awarded for positive performance. but when things are going poorly, if we hear the argument today the bonuses are necessary for recruitment and retention. in other words, it always seemed like a good time for an executive bonus. when you announce these new compensation packages in 2009, you issued a press release defending the high salaries, even though fannie and freddie were going into conservatorship after major losses. and they have continued to lose money. they have been bailed out to the tune of $169 billion in taxpayer money. i am told that fannie has asked for additional $8 billion and freddie for additional $6 billion.

i agree with my friend on the other side of the aisle that the compensation plan here that i have looked at in both fannie and freddie -- and i would like to put it in the record? -- in the record -- stands at $6 million. the argument you have given both sides of the aisle today is that it is necessary to attract and retain talent. my question is, is there ever a wrong time to award lucrative bonuses? >> there are, congresswoman, and we have. when these companies were placed into conservatorship, all bonuses were eliminated. we had a number of senior executives leave the company. there were no severance or golden parachute payments made to them. the persons responsible for the company and the up in conservatorship left without anything being taken. in fact of collapse of their

stock price did much to reduce the value of compensation they had earned prior. the difficulty we have with fhfa is that the company -- the country still needs a functioning mortgage market. i have two gse's that need assistance in order to continue to function in the marketplace. will replace the leadership of those companies that led to the conservatorship. now i've got to be able to attract people into run multi trillion dollar companies knowing that there is going to be this flow of losses for decisions they had nothing to do with. >> a lot of your comments today sound very much like a ig's. i would like to place a i.d.'s statement in defense of their bonuses -- i would like to place defense of their bonuses into the record. in their statement, they said had asked employees who had

received retention payments or bonuses or stocks, or any type of pay in any form of $100,000 or more, to return at least half of those payments. i would like to put their statement in the record, too. my question, mr. demarco, would you do at least as much as aig did? would you ask executives of fannie and freddie to return half of their retention payments, there retention bonuses? >> i will not. i believe that would be a breach of faith with the agreement i have struck with the employees of these two companies. and i believe try to take such action -- such action at this point would be detrimental to the taxpayers. i know how difficult and frustrating this is. but i believe that to take such actions would not help the american taxpayer at this point. >> earlier, you spoke rather

movingly about public service, about people who take a job to give back to the community, to help their country. and fannie and freddie are no longer answering to shareholders. they are answering to taxpayers. they are not only answering to taxpayers for the salary, but for the continued bailout for these two entities. you are in a very different structure nad. i would say you should look for employees who want to give back to their country with their talent. in fact, yesterday, as the chairman knows, we had a bill passed out of financial services that will treat aig like any other government agency.

and it will not include bonuses. congress is acting to move in a way that is more appropriate. the american taxpayer, 14 million of them, are without jobs and struggling. it is hard for them to understand how executives get $6 million in pay for a feeling entity. -- failing entity. surely, there are talented people that can do these jobs and do it in a way that is pay scale appropriate. i have a lot more to say, but my time has expired. >> i thank my colleague. mr. demarco, we are approaching the noon hour. we have a few more members who want to ask questions. but i want to take my personal

privilege and say, thank you for serving as a human shield. i know it has been tough, but we thank you for your service. with that c'mon mr. -- with that, mr. gatti is recognized for five minutes. >> why did the entity enter conservatorship? >> the enterprise entered conservatorship in 2008, timber, because of the economic stress our company -- september, because of the economic stress our company was under and mr. haldeman told a timeout was necessary. >> do you agree with mr. demarco, when he says it was a series of poor business decisions that led to the conservatorship? >> in my 10 years at freddie mac, i tried very hard to -- >> i'm not asking about that. i'm asking about decisions that

led up to conservatorship. were there port businesses hitchens that led to that? -- poor business decisions that led to that? the answer has to be yes, right? or else there would not have been conservatorship. >> it is difficult for me to say that, because i do not want to second-guess my predecessors. >> we are paying you a handsome salary because you are supposed to be an expert in the field and you are not going to second- guess your predecessors? >> because it is the report to say what would have been done at that point in time because of the pressures they were under. >> you cannot think report sigel porges decisions -- a single poor business decision that was made prior to conserve your show? >> there are some decisions that i would do differently, but i would prefer not to characterize them as poor business decisions.

>> mr. demarcus, it is your language. what did you mean specifically by poor business decisions? he is obviously reluctant to go into that. public, you will not be as reluctant. >> both stanek -- hopefully, you will not be as lexton. >> both fannie and freddie, in terms of the mortgages, the reduced fees and they made investment in private-label mortgage backed securities that at the time all rated as triple- a-rated securities. clearly, we have seen that there was substantial risk in those instruments. these are business decisions made by those executives at the time -- this is largely from 2005 through the first half of 2008. >> who was daniel mudcat?

>> he was the ceo of fannie mae. >> what was his compensation? i do not know. >> it could have been told me in dollars? >> yes. >> -- $12 million? >> yes. >> and what was the total compensation of the ceo of for a mac? >> i do not know. >> would you disagree with me if i told her it was more than $38 million? >> i believe that. >> shirley, you can forgive us for not wanting to pay bonuses while they drive this thing through the gates of hell and then you want us to pay bonuses while they changed the tires. >> i have tried to advise policymakers, including numerous congresses of the

risks to the taxpayer in the fannie mae and freddie mac mal model. it gives me no pleasure of sitting here as conservator of these entities seen the detriment to the taxpayer that resulted. i tried to warn policymakers of the risks in the structure that was in place pre- conservatorship. i would like fhfa to work with congress to bring these conservatorship saw to an end. >> who was james johnson? >> he was the set -- the ceo of fannie mae in the 1990's. >> what was his total compensation during that time? >> it was substantial. >> $100 million. he had a good working relationship with congress, right? >> i think he did. >> franklin raines, which you

disagree if i told you -- would you disagree if i told you his compensation was $90 million? they both had a good working relationship with congress. one could argue that is what got us into this. mr. chairman, if i could have 30 more seconds. the graveyard is full of people waiting on good relationships that never came. i have heard time and time again that we need to raise compensation for federal judges so we can attract the right people, and yet when there is an opening, there are hundreds of folks who are dying for it. it will take a tremendous cut in pay. i find it ironic that the pay for supreme court justices is less than either of these two men made.

>> thank you, mr. chairman, and thank you for witnesses being here today. i know you like to do nothing better than be before this committee. mr. demarco, if i understood your testimony, you make the argument that putting aside histrionics, putting aside public opinion, even putting us ... opinion here of congress -- putting aside the opinion here of congress, the problem is that a substantial number of mortgages in the u.s. are tied up in these organizations. you have to find highly skilled, competent managers willing to manage at freddie mac and fannie mae, and therefore, you have to give a nod toward what the marketplace offers in terms of skill and

leadership, and thus, the compensation we are looking at. >> that is correct. >> would you agree that given the taxpayer has heavily invested, directly, in trying to straighten the state of both fannie and freddie that the transparency roles might be a big difference then for a private commercial entity on wall street? >> i think there can be an allowance for greater transparency, yes. >> as if a public servant, what in your view -- where is that line? what do we as policy makers here on the hill, and what more importantly, does the public have a right to expect by way of transparency in packages and

policies? >> i believe these companies are continuing to operate as private companies, and they are certainly entitled to have the same disclosures of compensations of other executives. and furthermore, the fha has detailed a structure in place for these companies for compensation. we provide numerous reports on operations, both in terms of detail in this sort of losses that have led to the taxpayer draws, and detail in the activities under way at both companies to assist homeowners. >> mr. demarco, you are familiar with the inspector general report that was critical of the compensation system. "fhfa has been developed written procedures to evaluate

compensation level at the enterprises each year, nor tested the means by which the enterprise inoculates -- calculates that." you have written procedures? >> we will have written procedures. we will have them in place by the end of this year in time for the review of the coming year's performance. >> given the ostensible and anacrusis -- inadequacies identified by the ig, why would we have a little bit less confidence performance will be less than others given the lacker of -- less than others?

given the lack of transparency, why should we have faith that is the ticket for fannie and freddie? >> that is a fair question, but the companies have disclosed the ratings. what the item is referring to is within the fhfa, they did not have written procedures as to how the scorecard process true begun. the ig did not say we did -- have bought at -- did not say we did not have a process. this is the same when you undertake normal day-to-day operations regarding document in pay -- calculated pay. we have agreed to check those again.

>> this committee -- mr. cummings on behalf of the minority at least requested compensation agreements from your office. we have received recently heavily redacted copies of documents. is it your position that this committee is not entitled to see the actual and report that compensation agreements involved with fannie and freddie? -- not redacted compensation agreements involve both fannie and freddie? but this has to do with distinguishing those that are named executive officers and those that are not. it is trying to respect the rights of those people, but i believe we have provided a great deal of information detailing the compensation that is being paid. >> mr. demarco, the majority feels that you have been generally forthcoming, but we would ask if you would be

willing to provide all compensation packages with bonuses, including the names that can be referenced we are going through the skull said. you're right. we do not need to know the names of every individual. we would appreciate it if we could go to compensation levels far below a normal $10,000 level, and i think that is what the gentleman would like to see. >> we now recognize the gentle lady from new york. >> thank you, mr. chairman. and thank you to our panelists, particularly mr. demarco for being here and especially for lasting as long. you mentioned in your testimony, mr. demarco, and my colleague

from new york at talked about the need to retain, or to attract employees and that was the reason for the salaries and bonuses. but then you talked about that the salary is almost irrelevant. maybe they have a passion for it, maybe they are interested in doing the greater good. which is it? which you think should be the motivation for these salaries? >> i believe those motivations are personal and i think that what i'm looking at in terms of overseeing companies with 12,000 people, most people are concerned about their compensation. the other thing that makes this not just such a clean this or that, but these employees -- i

do not know how long this company will be around and how long i will be working with them. that is what makes it tricky for in ceo's of these companies encouraging people to stay engaged at their companies. >> i would agree about fannie and freddie and the ability and we have now gone back to the treasury and made huge requests for disability. i think that should be of concern to everyone, including the american taxpayer. carta i would agree. it is in my written statement that we are looking again at the corporate scorecard and looking at the condition of the company, as well as the gradual string kitsch taking place in the

company. we are trying to reduce compensation and every time a position comes up and we are making serious efforts to fill that position. >> you mentioned earlier you assess performance. what do you base that on? is that based on the enhanced program? >> it is only one program. it is a critical loss program not only to benefit troubled mortgages, but to reduce taxpayer response dodi on troubled mortgages. " sure you're aware that it is a -- >> i'm sure you are aware that it is a failed program, and i'm not sure that is what we shall be basing be standard on. >> i'm aware there's a lot of criticism of the program and

certainly, the number of modifications is not what the administration projected initially it would be. but i will point out that it is not just taking have -- taking modifications, but we are working for opportunities that go well beyond hamp. fannie and freddie alone have done just under 1 million modifications. >> if you could submit that to the committee, i would appreciate that.

many would argue that the housing market was the primary reason there was such a financial crisis in 2008. in response to the -- to that, that is what was dog-franc. -- dodd-frank. fannie and freddie are not covered by that. can anyone explain why fannie and freddie was left out of the dodd-frank bill? >> it was -- there was some argument regarding dodd-frank. the administration and the legislation that was pushing the dodd-frank bill through felt that the housing market was too

unstable and it wanted a different vehicle to focus on housing finance. i say that not to be for it or against it, but just to say that there were many that wanted to see, fannie and freddie be part of the legislation. that is not how the end legislation worked out. >> i certainly appreciate this hearing. mr. demarco, my own profession before i came to the congress already had a bad name. i was a lawyer. i would say that fannie and freddie have given homeownership a bad name. that is why i'm interested in the oversight of your own lawyers. i was particularly struck by the law firm, apparently, a major

law firm that you used. this is really unusual for a judge -- it may even be a call for someone to go before the ethics committee or the bar. talk about finding falsities campaign in five paragraphs of only 10, the firm had submitted -- the case was federal home loan and the judge went on to say that it was an improper administration of justice. what struck me was that the judge said this was not the first time that the firm had

been unethical. how could a law firm operate on behalf of fannie and freddie, after being sanctioned like that? with thet familiar particular case that your site can. -- that you are citing. fannie and freddie have ceased doing business with this particular law firm. when the issues were brought to our collective attention -- >> why was this law firm kept on after being sanctioned? was this confirmed -- was this firm considered so outstanding that you had to have its services? >> i cannot speak to the timing here. i do know that when this

information regarding the firm came to our attention -- >> are you following the firm's -- are you following the conduct of the firm's buy you have? >> -- that you have? >> fhfa recently directed fannie mae and freddie mac to begin the white dog of -- wind down of their attorney networks. this whole approach to doing business this way and the direct engagement between fannie mae and freddie mac and the individual law firms is on a path to cease. we are stopping this entirely. >> that is good news. i understand that you have said that firms would now have to -- and here i am quoting certain minimum uniform -- and here i am quoting. "certain minimum uniform criteria.

-- criteria." when will a draft of those criteria be completed? >> i know a draft is going on. i cannot tell you exactly, but i think over the next couple of months we will look to have this wrapped up. we're working not just on fannie and freddie with this, but with the primary federal banking agencies because the banking agencies, as you know, have been involved in oversight. -- oversight of what the servicers are doing in this area. the law actually works with the servicers. we are trying to get a line up of the standards that we believe are prepared here and get the banks in line with that so that there is uniformity in the mortgage market with regard to the performance expectations and standards for which we are going to wolf law firms accountable.

-- to hold a law firms accountable. there is going to be better accountability for law firms that are doing foreclosure processing. >> the last thing the fannie and freddie need is law firms to drive them into further trouble. >> with the gentle lady yield? >> i will yield. >> i want to understand. payral counsel's that you millions, they are working to manage outside law firms. and that is why we had to pay nearly $3 million instead of $400,000, right? but they would begin working on standards to do better?

>> they had standards written into the contract. they were not identical. and certainly with the foreclosure abuses that have been identified, just a few firms have taken action to turner's the industry. we are taking appropriate action to try to mediate that. and this is star -- part of that gradual stepping back from the complexity of those companies. it is my judgment that the appropriate step to take was to not have fannie and freddie to continue to maintain this separate relationship with individual law firms, but it would get better servicing if it was done with an existing mortgage servicer. >> maybe they have reached a better conclusion, but it is interesting that it was government officials that interceded, people that make less than $250,000 a year because of the failure of

nearly $3 million a year. >> and the drafters of the gentleman has said it would be submitted to you? this is important. >> we look forward to that expeditiously. we now recognize the john and from north carolina. >> has the fhfa ever rejected a compensation package presented to you? >> yes, we have had proposals made and we have said, no, that is not acceptable. let's go back and redo it. >> would you be willing to submit that for the record once you can gather the documents? >> i will try to find something appropriate to submit for the record. these are done as proposals that are made from the board. i look at them and i make determinations based upon the

comparable. >> i understand. i would ask you, mr. demarco, has the white house ever been in contact with you about compensation issues? >> under the senior preferred stock purchase agreement that provides the treasury's report to fannie and freddie, part of that agreement is written into it that the fhfa will consult with the treasury department on executive compensation. this is done as a consultation. with every compensation package that i have to approve, it is sent to the treasury department and we request a consultation with the treasury on this. this area was most active in 2009 we were working with ken feinberg, who was the special master for executive compensation. >> has the white house ever reached out to you? >> i have not had any company -- conversation with the white

house regarding executive compensation. >> mr. alderman, has the white house contacted you on regarding executive compensation at your firm? >> they have not contacted me. >> has the treasury? , no. >> mr. williams, has the white house ever context you with regard to executive pay at your firm? -contacted you with regard to executive pay at your firm? >> they have not. >> this is interesting because there has been a cry from the president in particular about executive compensation and it is somewhat strange to me that in an area where he could exert influence, he has chosen not to. additionally, mr. williams and mr. haldeman, it has been

mentioned in the press the part of your bonus compensation is tied to your relationship with the hamp program, the home affordable mortgage program. but it has been reported in politico the 35% of your compensation is tied to what you actually get modified through the hamp program. it is that correct? >> we look at an ally of goals under the laws -- an array of coals under the loan modification, but also a short sales and other activities, including activities that we have done to open a mortgage help centers in many districts

and provide counseling to neighbors. it is one of many metra expect it into the overall -- >> but is that an individual metric, or as low modifications one of your mattress and hamp is within that? >> it is one goal within a series of metrics that we are looking at. >> and your bonus structure of is tied to that? >> the board looks at the totality of our -- >> i understand the board laid out these metrics for how you would be compensated. if you had these metrics, they would reward you financially. i understand the board created this. >> right. >> but you are aware of what those goals are, correct? >> correct. >> what percentage of your bonus compensation deals with mortgage modifications? >> that is what i was trying to

say, the board evaluates my performance based on the tour doughty of the scorecard. our efforts in lost vacation -- and of the totality of the scorecard. our efforts with regard to loss mortgages, that is looked at in to a dowdy. >> mayor i have more time? >> yes. >> you are not answered my question. what percentage of your compensation is tied to loan modifications? >> congressman, i am answering your questions. our compensation, my compensation is tied to the performance against all of the goals and objectives, and i evaluated how but company does based upon those metrics. the board does not decide on individual metrics. >> so, it is more a feeling, right? if you are laying out this

metric, goal number-one is your performance to help in the housing recovery, including mortgage modifications. goal number two, interestingly enough, is to protect taxpayers. this is your 10 k. goal number three is to measure, manage, and reduce enterprise risc more effectively. interesting order as to how this is to be done, with the intent to repay taxpayers. there is no waiting to do this? you have zero mortgage modifications, but you're able to save taxpayers a few more dollars, you could get the bonus the you currently get? >> if i had not performed on all of the goals, then i would be held accountable. >> we are going to have a second round. >> fantastic.

this is really important. i ask unanimous consent to submit the article from the politico about big bonuses. >> without objection. we will now start the second round. oh, i'm sorry. im getting new glasses, promise. before recognizing the gentle lady from california, it is the intent of the chair to finish, including a second round, by 1:00 p.m. sharp. if members start showing up here, i will attempt to reach them all, but i will not keep you past 1:00 p.m. i now recognize the gentle lady, my friend from california. >> thank you for appearing here today. we have been talking about accountability and it is my understanding that mr. demarco

based onermination's performance. and would you agree with that? >> yes. >> i want to ask mr. williams -- in a senate hearing yesterday, it was reported that fannie failed to contact 60% of all borrowers from loan modifications. how would you grade your performance on that? >> i am not specifically familiar with that fact, but i will tell you that we manage our servicers, and our servicers are held responsible for reaching out to the borrowers. we have undertaken a number of efforts to insure that our servicers are held accountable. >> mr. williams, 60% is not accountable. when i am asking you to do through the chair is to go back

and determine whether or not it is accurate to say that 60% of your borrowers have not been contacted for loan modification. mr. haldeman, it was disclosed yesterday at the senate hearing that 80% of your parlors were not contacted, not 60%, but 80%. are you familiar with that? >> what time frame was that statistic? >> i do not think it matters. i think the fact that a% of the borrowers have not been notified if enough -- 80% of the borrowers have not been notified is enough. >> the reason i ask to see how far off in the past that was is to see if we are making progress. rex i think it was within this year. >> -- >> i think it was within this year.

>> i'm not familiar with what was reported in the senate yesterday, but i would find these numbers hard to believe. >> would you review that and provide that information to the committee so we can assess your performance based on that kind of information? >> absolutely. to you, mr. demarco, you have been at a number of meetings that have been scheduled with the gentleman from maryland. i thought we made great progress at the last meeting. we already know that the harp program has only reached about 800,000 homeowners, that there are some 11 million homeowners under water with their home. about 3 million of those homeowners fall under fannie or freddie. based on the proposal that the president suggested, where these are homeowners will have been

paying their mortgages on time with the exception of maybe one in the last year, that they could in fact refinance their loans, from whatever the percentage is now, which is probably close to 6% and may be as much as 12%. that looked all good. we have not heard a peep from you since. i would like to know what is happening with that program. >> certainly. i am pleased to answer that. fannie mae and freddie mac to not have 3 million under water mortgages. that is referencing something closer to the harp eligible universe, but you are right -- we have had very productive discussions. when i made the announcement regarding the changes to the program, we said that we would have the directives out to the seller services, the people that actually service mortgages and originated them along.

now, the mortgage community, the lenders out there now have the updated guidance with regard to how the program is working, with the changes are, what that means operationally for them. as of today, they have that information and should be gearing up to implement the changes to the program. >> i can say to my constituents, they could go to any bank, any of the big 5 right now, and ask them to refinance their loans, and if one will not do it, another will because the servicers will just make money off of this, correct? >> we were trying to encourage them to reach out to borrowers to let them know the opportunity is available to them. different institutions will need different amounts of time to make the operational changes to implement the new program. but they have known it was coming, and the big ones have been all geared up and are

looking forward to participating. they might be ready at slightly different time periods, but i would expect in the very near future all of them to be up and running. >> i thank the gentle lady. i recognize myself for a second round. earlier, i brought up the subject of general counsels. mr. williams, what were your legal fees in 2010? outside legal fees? and a congressman, i will have to check on that and get back to you. >> i will have to get back to you with a good number on that. >> do you know how much you are spending in outside counsel? >> not off the top of my head. >> is it fair to say that all these lawsuits that you earlier justified, a $2.9 million compensation package, was because you needed somebody that could manage these various

lawsuits? the question is -- are these lawsuits being done by his observation, or are they basically being done by outside counsel? do you need to spend $2.9 million or roughly $1,000 an hour if you work 3000 billable hours a year -- do you need to spend that much to get somebody to hire outside counsel? >> there is a team effort in pursuing this litigation. >> how much does the entire team pay? >> the general counsel over at fannie mae -- it is not a whole lot different. when i hear a team effort, i think, great. i go to baseball and football games. i am not asking what the whole roster got paid. i do not know whether he is the quarterback or the coach, but the question is -- if i go to major fortune 500 corporations that have huge patent portfolios, and they are suing constantly, and they pay 25% as

much or 50% this amount, including bonuses, very seldom will they get to 2.6 -- but more importantly, i see some sort of direct relation. what i heard earlier is you guys kind of got swamped in how to administer the job because this was so unique. $2.9 million is a pretty good chunk of money. is it not enough to get some of the finest former u.s. attorneys who make $160,000 a year who know about suits and litigation -- we have a former u.s. attorney as a member of this committee. i believe when he went from being a u.s. attorney to when he went to being a congressman, he got a small pay raise. your salary seems to be sufficient to keep you overseeing people who make more than 10 times what you make. >> we are putting that to the test on a daily basis. >> i would like to move to

another one. although executive compensation and performance is the subject here, this is tangentially involved. today, when i read "uncle sam is a reluctant landlord of foreclosed homes." the reported 200 million homes. they have a number for the down in the article closer to 1 million. mr. williams, have you done everything you can do to quickly sell and get back in the hands of people who will maintain homes or to rent to people who can afford to people who can afford to pay the rent on the homes even if they are the existing current better -- debtor? >> we have an expensive operation we run. first we rehabilitate the property. we look to preserve the community through the execution. we work with community groups, and, more importantly, we focus

on people who want to come in and on the home because that is the best thing you can do for the neighborhood. >> is it true that by the time you did the liquidation sale of a home, it has typically been in foreclosure and of an unoccupied and even occupied not by the original owners bought by somebody the sublet to or somebody who squatted for a your award and the home is devalued considerably because of the intervening time? >> we try to take over the properties as quickly as possible when they go to foreclosure. much of what we're dealing with today is the fact that properties are staying in foreclosure for extended times, which ends up adversely affecting the property. >> have you come to congress for relief so you can foreclose more expeditiously or in fact even subvert a homeowner who clearly cannot and is not making payments into a tent? >> we do have a tenant in place program, of which, we are

running back properties to about 10,000 borrowers. back out of millions? >> out of millions. >> the question i asked you -- do you need -- and congress give you greater authority so that in fact, the sort of expeditious conversions will cause less loss of assets to the community? mr. cummings and i come from very different communities. - more suburban. his is more urban. the one thing we know is no matter where it foreclosed property is, the entire neighborhood suffers. not just the asset that the taxpayers are losing on. do you have all the tools? 10,000 rentals into 1 million homes does not sound like the tool is working very well. do you have all the tools you need so these homes are occupied, maintain, and as productive as possible regardless of whether or not the current debtor is able to make

payments? >> mr. chairman, we have worked with danny and with -- fannie and with fhfa on an agreement which i think will allow us to more effectively deal with the problem you are talking about. that puts increased pressure on our servicers to do some of the things you're speaking of. >> two other points. one, foreclosure laws are state laws. if congress is willing to act to take responsibility for what are currently state laws, that would be one thing. the second thing i would highlight is we are working with both fhfa and freddie mac on opportunities to expand or rent programs. then you did not get paid as much, but you are welcome to give phalangers. >> thank you, mr. chairman.

it has been a challenge for me as conservative to look at the difficulties that you are talking about -- properties that are occupied or where there is a squatter. part of the difficulty here is that these are governed by state laws and there are some states that have foreclosure processes and for closure requirements that are designed to protect the borrower but at the same time, that is imposing greater losses because it is such a time- consuming and costly process to move these properties through foreclosure, even if the property has been abandoned or if there is a squatter sitting in it. it still is in some states and enormous length of time to move that through foreclosure to get that property back into the marketplace to help the local community, and i do believe that that is a problem and it is not being addressed. >> i have over used my time even on the second round, but i will tell you on behalf of this committee that if you will bring to us the bad actors, the ones

that you believe the state are hurting you and not helping your and thus hurting the taxpayer, i shall not -- when it comes to federal preemption, we hand the states a lot of money. we're looking at the various federal programs helping those citizens, we have every right to say that this money will not be as available to -- i will take north carolina because i have a member present. north carolina, we could say this program will not be available in north carolina unless north carolina gives us the tools to have a reasonable opportunity to in fact rehabilitate these. i would say for one, even my home state of california, given the choice of not getting the federal dollars for making changes as to freddie and fannie underwritten homes, they would make changes necessary to help. we have never been asked. so i would hope that you would

really look, use your general counsel, some of those 3000 hours, and please, give to us where the problems are. we are the committee that happens to also own intergovernment relations. all the states, the cities are within our portfolio to try to help them help you and help all of us. >> thank you, mr. chairman. i will say the state of california has one of the faster processes. i believe that has helped certain markets in california to recover better and faster. >> thank you. >> one clarification, the chairman has asked for agreement with regard to compensation agreements and certain information. i just want to make sure that we're talking about those executives named in the sec filings. is that right? >> i believe that is what we're

talking about. if it is more, we will certainly clarify. >> second, a lot of these -- you mentioned with regard to those law firms dealing with foreclosure. i think he said two firms had given the rest of them a bad name. is that what you had said? >> i said a few. >> i was going to say, it is a lot more than two. >> i said that a few firms in the industry have given the entire industry a bad name. >> what, other than exchanging the lawyer network system -- has anything been done to bring any kind of punishment to these guys? in my other life, i used to represent lawyers. people would be -- lawyers would be suspended from the practice of law for some of these if not

this barred. i find it interesting. and they sort of keep working for us. i just do not understand it. i just wonder whether we underestimate what they have been doing. this whole robo-signing stuff, we created a "normal." that is not supposed to be normal. i could go on and on. i just wondered if there have been any efforts to punish these folks. >> i am not an expert in this, but my general awareness is this would be something that would be done by state bar's. what has been puzzling to me is i am not aware of hardly any debarment or state disciplinary action that has been taken against law firms. there may be people behind me that no more, but that is in

their realm. we have been working with state attorney general's on this issue. as you well know, state attorney general's have been taking a close and a long look at foreclosure processing issues, both by servicers and law firms. >> did you have something on that, mr. williams? >> i was going to echo that point. we have been cooperating whenever the we find these situations with state attorney general's and local councils on this matter. >> did you have something? >> i have nothing to add. >> last but not least, let me say this -- i know that there have been some that say that you all probably felt a little uncomfortable being here, but i have to tell you, i do not have any sympathy. because of the people that i

face every night when i go home in my block in baltimore. probably in my block, of about 30 houses, seven or eight are in foreclosure, and those were my neighbors. we see it over and over again. i just think the there is more that we can do. i believe that. and i really wonder sometimes whether the president even knows how significant this problem is. i say that with all due respect. sometimes i wonder whether he even has the information available to understand how many americans are drowning. we just had naka in baltimore, and they tell me some 16,000

people came out to try to get their mortgages modified. 16,000 in four days. so i just hope that when you go back to your drawing boards -- you know, i wish i could hang out in the board room and just whisper in your ears constantly, remind you who are the people who are suffering and who need some urgency and who do not feel like they are getting it. i know what you're saying. but when you have people like the man i talked to yesterday, who comes home and all this stuff is out on the corner and it is about christmas time for thanksgiving, and he does not know where he is going to go, listening to people who make $7 million in two years who are supposed to have something to do with his plight and helping him out of it.

does not give him much relief. he cannot afford a house. he cannot even afford a turkey. i hope that you will keep that human element in mind. we look forward to -- we will be meeting with you again. not the committee, but our group of legislators, hopefully within the next two or three weeks. thank you very much. >> thank you. >> thanks, ranking member. i recognize myself. mr. williams, i ended with you and how your deferred compensation is calculated. reading the politico article on this, it is not clear if it is fannie or freddie with this

package works this way. we have a scorecard, which is weighted into broad categories, categories such as financial results, mission, technology and infrastructure, and there are waiting's attached to those large categories. they are on the order of four or five of them, and a category waiting is typically 20% or 30%. hamp would be a sub. under one of those larger categories, and there are not waitings attached to a sub point, so it is difficult to be very precise about the percentage weightings. but is one of the broader sections mortgage modifications? >> it would be mission or

supported in the housing market, that kind of language. sub points under that would be all of the tools that we have to try to be supportive of the housing market, including modifications. >> what other modifications would be in that sub-category? >> it would be refinancings. there would be traditional modifications and hamp modifications. it could be affordable housing goals. >> that piece is largely modification? >> that would be a big piece of it. it certainly would be a significant piece of it that our board would be looking at. it is not precisely waited, but because of the attention afforded that in the press, i am sure they look very closely at the numbers of modifications that are done. >> what percentage of your

deferred compensation comes from that? >> i do not recall the precise number and it does vary from year to year, but it would typically be a number like 25%. >> but you know at the beginning of the year that the board is going to measure you against this scorecard. >> yes. >> is the similar for your organization? >> yes, congressman. >> is it in a similar form? >> i have not looked at freddie mac's scorecard? >> if you listen to the gentleman -- >> i have never seen a scorecard. we look at very similar sets of priorities providing liquidity and stability, injuring we're doing everything we can to manage present losses and all the other activities related to our financial results that we control and also making sure that we continue to address -- improve the operational and risk

areas. >> our mortgage modifications part of that scorecard? >> yes, they are part of that. >> is hamp a part of that as well? >> hap -- hamp modifications and administering the treasury's are one in the same. >> you outline this about the corporate scorecard. back in march, the ig said teh fhfa did not have a written policy on how to handle that. with your testimony today, it sounds like you have incorporated that critiqued, and there are some solid policies by which to judge these scorecards. >> to clarify, i have committed that it will be completed by the end of this calendar year, the work going on now.

>> ok, that is -- okay, thank you. thank you for clarifying that. i do appreciate that. the additional question would be -- will you make public that policy? >> well, i certainly could. >> do or do not. there is no try. >> i will make it public. there is a written internal procedure for how we would go about the internal review. >> ok. will you make your scorecard public for your institution? >> i can see no reason why not. they would have to be reported anyway. these are publicly disclosed. >> right, but it user-friendly format. we have three broad goals. i have now lost it in my stack of paper. here it is.

it is very unclear in a couple of pages. would you make this -- if i may, i will work to make sure that we have greater clarity and transparency with regard to the scorecards going forward. >> i appreciate that, but since we do have the heads of the two institutions here overseeing -- i mentioned you as a human shield earlier today. my intention is not in his questioning for you to throw yourself in front of this questioning. i appreciate your willingness to do this. it is more of a soldier-like sacrifice. i appreciate it. but with massive losses -- we want to be able to understand at the beginning of the year how you will be judged and what success looks like. >> it is a reasonable request, and i am happy to do it subject to the approval of our regulator. we are a regulated organization, and i like to check with the regulator before doing it or

committed -- >> nicely done. says it is just politics on the hill? mr. williams? >> we have disclosed our goals in accordance with the sec rules. we also disclosed how individuals have performed. we provide the scorecard to mr. demarco. we will work with him going forward. >> he indicated he would like to see housing reform, as well. i have been in congress since 2005 trying to articulate that and it still has not happened. ministration has not taken a leave here the president has not taken the lead. president has complained about executive compensation packages, but two large entities where he could have a larger and direct say, he tends to make speeches rather than actual consultation. there are discussions about fannie and freddie's losses going forward. at what point will your

institution be able to repay the taxpayers for this extraordinary support? then a congressman, i do not know what time we will do that. we are very focused on our credit losses, as you have seen probably from the conservatives report, the activities we have undertaken. future expectations around this area. we will continue to focus on this, but much of what we're dealing with is also driven by the state of the economy, unemployment, and climbing oil prices. and as you know, we do pay a 10% preferred dividend on our outstanding draw. our annual preferred dividend is $7 billion. i think the best place to go to get an answer to your question is detailed analysis put out by

fhfa, which looks at enterprise is going forward and looks at the amount would be required going forward. >> you do not have any planning purposes in your institution that outlines when this will happen? >> we do. our numbers i am planning were submitted and made part of the document put out. >> you are not willing to say what year it is? >> i cannot recall from the document. >> mr. williams? what you will fannie have repaid the treasury? >> as you know, with a 10% dividend on the amount withdrawn, we will not ever fully be able to pay back the amount that is due to the treasury. this is why the director has highlighted the need to move forward. >> what year will b -- the gh

be able to pay? >> i did not believe they will ever be able to repay in full. >> ever? >> unless we keep going until my grandchildren are paying, no. >> at what point -- would not venture a guess, but at what point will freddie be able to repay the extraordinary support? >> i do not believe either company will repay the extraordinary support in full. i look at the current financials of the company, the fact that we are shrinking the retaining portfolios of the company, looking at the expenses that are there including the dividend, which is paid to the treasury department for that which is already borrowed, and i do not have a timeline looking forward that i can point to and say, "by this year, this will be repaid." i do hope we have moved beyond conservative ships in the

relatively near future, so we will not get them repaid before them. >> if we just left this as it is currently structured, we could be back here having this same hearing in five years? >> no, i think it will look quite different in five years. the business we have been taking on since conservatorship is a profitable book of business for the taxpayer and i believe that as we finish watching through these bad mortgages that were rejected in the 2005 through 2008 time, eventually, we will look past that and the new book of business will be profitable to the company, so i believe that is one of our fundamental obligations with the companies in conservatorship, to insure the new business we are doing is profitable. that is not going to be profitable enough to be repaid in this amount of money. >> what you do you think that would be? >> i believe our projections -- it will depend upon house prices. >> that are dependent on a lot

of different things. >> we believe that by the end of next year, we will have moved through a good chunk of most of what is left with the previous book. >> ok. i appreciate your willingness to answer questions today. i have referred to you as a human shield a number of times. i said on financial-services and this committee, you have been very forthright. we understand the difficult situation that has been thrust upon you. we do appreciate your career of service to the federal government. we certainly appreciate your willingness to head up very challenging institutions. we do. the concern here today is the extraordinary taxpayer support and the fact that in essence, we have two nationalized entities. we also have a it, for instance, but we have two nationalized entities here, and that is where your compensation becomes a question for the taxpayers.

otherwise, if you are a private institution, we have had these hearings before with private institutions. that is not the proper curve you of me, for instance, that is a taxpayer fiduciary. however, because of the nature of the hearing, that is where this comes. we understand you of patriotic americans. we're not questioning your patriotism by any means, but we are questioning whether or not this is an appropriate level of compensation. thank you for being here today. i appreciate your willingness and time. with that, this committee stands adjourned. [captioning performed by national captioning institute]

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>> oklahoma senator tom coburn discusses how congress is tackling the u.s. deficit and how republicans and democrats might reach an agreement. "newsmakers" -- today at 6:00 p.m. eastern on c-span. on tuesday, military officials said the u.s. will continue limited counter terrorism training with iraqi forces beyond the end of the year. the announcement came at a senate armed services committee hearing on iraq security issues. testifying were defense secretary leon panetta and joint chiefs of staff chairman general martin dempsey. this is two and a half hours. >> good morning, everybody. the panel receives testimony on iraq, including the withdrawal

of u.s. troops and the long-term u.s.-iraq relationship. our first panel consists of secretary of defense leon panetta and chairman of the joint chiefs of staff, general martin dempsey. this will be followed by a panel of outside witnesses. first, a very warm welcome to you, mr. secretary, and to you, general dempsey. last month, the president announced that all u.s. military forces would be coming home from iraq by the end of this december, as required under the 2008 u.s.-iraq security agreement, which had been agreed to by president george w. bush and prime minister malaki. the fulfillment of our obligations under that agreement represents a bipartisan u.s. policy set by a republican president and carried through to completion by his democratic successor. u.s. forces iraq is on track to

meet the december legal deadline for the withdrawal of the remaining u.s. military forces and equipment. as of today, there are around 30,000 u.s. military personnel in iraq down from a peak of 160,000 during the surge in 2007. at the beginning of operation new dawn in september last year, united states had 92 bases in iraq. defense department property in iraq has declined from 2 million pieces of equipment september a year ago to around 600,000 pieces of equipment now. we arrive at this point after 8.5 years of conflict and a great sacrifice by our service men and women, their families, and the american people. many of our men and women in uniform have serve multiple

stores in iraq. they've been separated from their families for months and years at a time. many will bear the scars of this conflict for the rest of their lives. over 4400 u.s. personnel have been killed and nearly 32,000 wounded in iraq in the direct cost of operation for it and told over $800 billion. we owe an immense debt of gratitude to our military men and women and their families. the administration has sought to reach an agreement with the iraqi government for military trainers to remain in iraq after december 31. however, those negotiations reached an impasse on the issue of legal immunity for our troops. that is -- protections from prosecution in iraqi court. once it became clear that the government of iraq was not prepared to grant our servicemen and women the same legal protection that they had had under the 2008 security agreement and the same legal

protections that the military has with other countries in the region, president obama decided the zero u.s. military forces would be provided before hand. i believe our military commanders supported leaving a residual military force if and only if legal protections were provided and that they did not support keeping u.s. troops in iraq without immunity from prosecution in iraqi court.

our military withdrawal, as agreed to in the 2008 security agreement, sends a clear message to the iraqi people in the arab world that the united states keeps its commitments and puts the lies and propaganda that the united states is an occupation force in iraq. it is time to complete the transition of responsibility for iraq pose a security now to the iraq government. the iraqis are in a position to handle their own internal security. violence in iraq has dropped 90% from its peak during the surge. at the same time, the iraqi security forces have made significant progress. according to u.s. forces, iraqi security forces exceed 650,000 people. in addition, iraq can assume the costs of its own security. with oil production in iraq reaching record highs, government of iraq oil revenues

during the first nine months of 2011 were more than 50% greater than during the same time the year before and exceeded iraqi budget projections for 2011 by more than 20%. but the withdrawal of the u.s. forces from iraq, one chapter in u.s.-iraqi relations closes, and another opens. the new chapter in u.s.-iraqi relations is not an abandonment of a rack. united states remains committed to the bilateral strategic framework agreement, which was entered into at the same time as the 2008 security agreement. the strategic framework agreement sets out numerous areas for continued u.s.-iraqi cooperation, including on defense and security issues. united states has stood up a robust office of security cooperation at the u.s. embassy in sites across iraq to manage

security cooperation efforts in support of the government ever act. by january of next year, this office will be administering nearly 370 military sales to iraq totaling nearly $10 billion. certainly iraq faces a number of significant security challenges, which the united states can assist iraq in confronting. al qaeda in iraq and affiliated terrorist organizations seek to exploit ethnic divisions among iraq was a sectarian groups and minorities. in this regard, recent arrests of sunni political leaders by the government had exacerbated tensions, potentially creating an opening for al qaeda to exploit. we would be interested in hearing from our witnesses this morning what steps the administration has taken to try to diffuse that situation. in northern iraq, the internal boundary remains under dispute

between the kurds and the government of iraq. the initiatives put in place by u.s. forces iraq to reduce or avoid conflict, which it called the combined security mechanism is transitioning from a three- way mechanism involving u.s.- curd and iraqi security forces to one operating bilaterally between kurds and iraqi security forces. i hope our witnesses will address how the united states intends to plug in overwatch roll along the disputed boundary. our concern about the security of the christian minority is very strong. we need to work with the government of iraq to ensure it

has the will and capability to protect iraq's religious minority communities from targeted violence and persecution. the status of the residence at camp ashraf remains unresolved as the december 2011 deadline approaches. ministration needs to remain vigilant that the government of iraq lives up to its commitment to provide for the safety of the residents until a resolution of their status can be reached. we need to make it clear to the government of iraq that the conflict cannot be done against camp residents. another challenge is the insurance efforts to influence the political and security environment in iraq. iran continues to fund, train, and equipped extremist groups,

groups that have targeted u.s. forces in iraq for deadly attacks and logistic capability of the iraqi security forces and the willingness of the government to respond forcefully to attacks by these groups after the withdrawal of the u.s. military forces. the departure of u.s. military forces in iraq in the coming weeks can contribute to advancing normal relations between the united states and iraq based on mutual respect and shared interests with sovereign nations. that can strength and stability not only in iraq but also throughout the region. senator mccain. >> thank you, mr. chairman, and thank you for convening this important hearing. let me thank our distinguished witnesses for joining us today for their continued service to our nation and for their tireless support of our men and women in uniform. the purpose of this hearing, as

the chairman said, is to examine the implications of the president's decision of october 21 and negotiations with the government of iraq over whether to maintain a small u.s. military presence there. as a result, all u.s. military forces will withdraw from the country by next month. i continue to believe that this decision represents a failure of leadership, both iraqi and american, that it was a sad case of political expediency, supplanting military necessity both in baghdad and in washington and that it will have serious negative consequences for the stability of iraq and the national security interests of the united states. i sincerely hope that i am wrong, but i fear the general keane, one of the main architects of the surge, is correct once again when he said recently, "we won the war in iraq." we are now -- we won the war in

iraq. we are now losing the peace." like all americans, you're so eager to bring our troops home. i do not want him to remain in iraq or anywhere else for a daylong unnecessary. but i also agree with our military commanders in iraq who are nearly unanimous in their belief that a small presence of u.s. forces should remain a while longer to help the iraqis secure the hard-1 gains that we made together. general petraeus, general a piano, general austin, and other military leaders -- all of them believe we needed to keep some troops in iraq. this is what they consistently told me and others during our repeated visits to iraq. our commanders held this view for a very specific reason. they made clear to this committee on numerous occasions. for all the progress the iraqi security forces have made in recent years -- and it has been substantial -- they still have

some critical gaps in their capabilities that will endure beyond this year. this capability gaps included enabling functions for their counter-terrorism operations, the control of iraq's aerospace and other external security missions, intelligence collections infusion, and training and sustainment of the force. indeed, in the latest report of the u.s. special inspector general for iraq reconstruction, the chief of staff of the iraqi military is quoted as saying that iraq would not be able to fully provide for its own external defense until sometime between 2020 and 2024. specifically he says, cassette and iraq will not be able to defend its own airspace until 2020 at the earliest. unfortunately, the president chose to disregard the nearly unanimous advice of our military commanders, not for the first time, as well as the clear long-

term needs of iraq pose a military hereaq's advocates of withdrawal are quick to point out that this current security agreement which requires troops to be out of iraq by the end of this year was concluded by the bush administration. that is true. it is also beside the point. the authors of that agreement also intended for to be renegotiated at a later date to allow some u.s. forces to remain in iraq. as former secretary of state rice, who state department negotiated the agreement but it recently, i said ira that we would negotiate something that looked like residual training for the iraqis. she said everybody believed it would be better if there were some kind of residual force. clearly so you can be the testimony and statements we have heard or you can believe the comments of the then secretary

of state believe would be the case as regards to an average it -- a residual force in iraq. clearly iraq is a sovereign country and we cannot force the iraqis to do things they do not want to do. but this also misses the main point. all of the leaders of iraq's major political blocs wanted some u.s. troops to remain in the country. along with senator gramm and senator lieberman, and that with these leaders this year, and that is what they told us. problem had more to do with the administration's unwillingness or inability or both on more than one occasion to provide the iraqis with a clear position on what our government wanted. the administration seemed more concerned with conforming to iraq's political realities than shaping those realities focused more on deferring to iraq's interest than securing the critical interest we had at stake at this process. so what will be the implications

of a full withdrawal of u.s. troops from iraq? my concern is that all of the most distillate -- disturbing and destabilizing trends in iraq are now at much greater risk of becoming even more threatening. and the events of the past month alone offer many reasons to think that this may already be happening. one such threats is iraq's stability is rising sectarianism. at the end of last month, the prime minister's government arrested more than 600 iraqis who were characterized as baptist coup plotters but the move may have also included ordinary political opponents. at the same time, longstanding tensions between iraqi arabs and kurds are rising over the control of the country's

hydrocarbons. last week, the president of the kurdistan regional government warned that the withdrawal of u.s. troops could lead to "and open-ended civil war." in short, while iraq's nascent democracy seems to be at a growing list from a new centralization of authority, the secondary and rivalries have almost pulled the country apart before the search are now showing trawling signs of reemerging. a related that comes from a brazilian al qaeda in iraq. on the other side, shia militias that take orders from iran. an article in the "new york times" reports growing concern that al qaeda in iraq is "posed for a deadly resurgence." similarly, one of the most dangerous military groups recently been debated in a gathering of military terrorist groups in beirut, suggesting that iranian-backed forces in iraq may seek to establish a

state within a state or engaging in destabilizing activities beyond iraq. at the same time, not one day after the president's withdrawal announcement, it was stated that iraqis should you u.s. embassy officials in iraq as occupiers and that they should be targets of his resistance movement. this points to a final threat -- the rise of iranian influence in iraq. while there are certain limits to this influence, the fact remains that iran's number one priority this year was to get all u.s. troops out of a rat. they will now accomplish that goal, and in his public comments, iran's supreme leader has barely been able to contain his enthusiasm. he has referred to the withdrawal of u.s. troops from iraq as constituting the golden pages of iraq's history. other iranian leaders have described our impending

withdrawal as a great victory for iran. iraqis, on the other hand, appear to be making the necessary accommodations to an emboldened iran. we get to the president's announcement, kurdistan's president went to iran during next week, the chief commander of the iraqi army plans to visit iran. it is hard to see the withdrawal of u.s. forces from iraq as anything but a win for iran. when ambassador crocker departed in 2009, he warned, "the events for which the iraq war will be remembered by us and by the world have not yet happened. unfortunately, the events of the past two years, culminating in the administration's failure to secure a presence of u.s. forces in iraq, have greatly and unnecessarily increased the odds that the war in iraq may be remembered not as the emerging success that it appeared when the administration took office, but as something tragically

short of that." considering all our troops have sacrificed in iraq and considering our enduring national security interests in iraq poses stability, we have a solemn responsibility to stay committed to iraq's success, but as we do, we cannot avoid the fact that iraq's progress is now at greater risk than at any time since the dark days before the search and that it did not have to be this way. i thank you, mr. chairman. >> thank you, senator mccain. secretary panetta. >> thank you, mr. chairman, senator mccain, distinguished members of the committee. thank you, as always, for your continued support for our men and women in uniform and for their families. we deeply appreciate the support we get from all of you that helps those that put their lives on the line. i appreciate the opportunity to describe our strategy in iraq and to do so alongside general dempsey.

will has overseen so many critical efforts of the iraq campaign from its outset in 2003. general dempsey has been deployed multiple times to that area, served in key positions both in washington and at centcom in tampa and has a pretty good feel for the situation in iraq. it is helpful, as always, to recall the objectives here with regards to iraq. in february 2009, president obama and before president obama, president bush, i heard him say this directly to the rat study group -- laid out a clear and achievable goal that was shared by the american and iraqi people, and that was simply an iraq that a sovereign, stable, and self-reliant. in the words of president bush, an iraq that could govern, sustained, and secure itself. today, thanks to innumerable

sacrifices from all involved, iraq is governing itself. it is a sovereign nation. it is any merging source of stability and eight -- in a vital part of the world. as an emerging democracy, it is capable of being able to address its own security needs. for our part, the united states is ready to mark the beginning of a new phase in our relationship with iraq, one that is normal, similar to others in the region, and based on mutual interests and mutual respect. as the president announced last month, we are fully implemented the 2008 u.s.-iraq security agreement, and under the outstanding leadership of general board austin. i cannot compliment him -- there are no limits to what i can say about his leadership. it has been absolutely

outstanding in a very difficult time. we are completing the drawdown of our forces by the end of this year. this fulfills a pledge made by president bush as well as president obama which call for an end to the combat missions in since august and the removal of combat forces by december 31, 2011. we will to -- we will continue to pursue a long-term training relationship with the iraqis. through the u.s.-iraq strategic framework agreement, we also have a platform for future cooperation and counter- terrorism in naval and air defense, and in joint exercises. we will work with the iraqis to pursue those efforts.

let me briefly walk through obviously some of the major challenges that have already been quite out. that will confront iraq and mention why i believe iraq is at a stage when it is able to deal with the uncertainty. with our continuing long-term relationship, i think they can deal with these issues. i expect we will see extremists, including al qaeda in iraq and the iranian-backed militant groups that will continue to plan and continue to carry out periodic high-profile attacks. while these groups remain capable of conducting these types of attacks, they do not enjoy widespread support among iraqi population, and more importantly, the iraqis have developed some of the most capable counter-terrorism forces in the region. they have been active against iranian-backed militants in

recent months, and we will be in a position to continue to assist them in building these capabilities through our office of security cooperation. the fact is that despite our reduction in forces from well over 150,000 to now approximately 24,000, levels of violence in iraq remain low. the second challenge for iraq is the conflict between political blocs. sunnis, shias, kurds, others. as in any democracy, iraq deals with a range of competing agendas, but the solution to these challenges lie in the political, not the military realm. our diplomats continue to work with an assist the iraqis in bridging these remaining divides. in particular, the formation of the government and the

appointment of defense and interior ministers, which still has not happened and should. the cooperation along the arab- curd divide in the north, resolving all of these issues will take time, but iraq's political leadership remains committed to doing so within the political process that has been established. the third key challenge is closing the gaps in iraq's exiled defense. iraqis will need assistance in this area, including logistics and air defense, and that will be an important focus for the office of security and cooperation. recent decision by the iraqis to purchase u.s. f-16s as part of a $7.5 billion foreign military sales program demonstrates iraq's commitment to build up its external defense capabilities and maintain a lasting nil to mill training

relationship with the united states. finally, one last challenge is the iranian regime's attempt to influence the future of iraq and advance its own regional ambitions. iran has sought to weaken iraq by trying to undermine its political processes and, as i have mentioned, by facilitating violence against innocent iraqi civilians and against american troops these destabilizing actions along with iran posing nuclear capability constitute a significant threat to iraq, the broader region, and u.s. interests. and yet, the strong, sovereign, and self-reliant iraq we see emerging today has no desire to be dominated by iran or anyone else. with our partners in the region,

united states is committed to with aing iran's efforts destabilizing influence. the iranian regime is more likely than ever to be marginalized in the region and in its ability to engage the iraqi political process. our long-term commitment in iraq as part of our broader commitment in the united states to peace and security throughout the region our message is very clear. we have 40,000 troops remain in

the gulf region. we are not going anywhere and we will continue to reassure our partners, deter and our aggressors and counter those seeking to create instability iraq has come true, this is a difficult time in history and emerge stronger. is increasingly responsive to the needs of its people. it is a testament to the strength and resilience of our troops that we help the iraqi people reverse a desperate situation. the record provided them the time and space to foster -- we have provided them the time and space to foster these elements of government. more than 1 million americans have served in iraq. more than 32,000 have been

wounded. and 4500 service members have made the ultimate sacrifice for this mission. americans will never forget the service and sacrifice of this next cordis generation and we will always show them a heavy debt. -- this next greatest generation and will always go them a heavy debt. they have earned the nation's most profound gratitude. are there concerns about the future? of course there are. concerns about what slaughter would do -- what solder will do, concerns about iran, concerns about shi'ite extremism along with this year to another sectarian areas. -- disputes in other sectarian areas.

no question, a lot of pressure was brought on the iraqis. there were pressures by the senators who visited there, by the president, vice president, secretary clinton, secretary gates, and myself. the bottom line is this is not about us. it is about what the iraqis want to do and the decisions that they want to make. we have now an independent and sovereign country that can govern and secure itself and hopefully make the decisions that are in the interest of its people. the u.s. will maintain a long- term relationship with iraq. we will establish a normal relationship as we have with other nations in the region.

in talking with our commanders, and i ask this question yesterday to general odierno, who has been there for a good frame of time. he basically said, the time has come, the time has come for iraq to take control of its destiny. with our help, it hopefully can be a stable and secure nation in that region of the world. >> thank you very much, secretary panetta. general daunte. >> in june of 2003 i arrived in baghdad to take command of the army's first armored division. i was given responsibility for the city of baghdad. nine months later in april of 2004, our efforts to develop iraqi security forces unable services for the iraqi people

and encourage them to take control of their own destiny. this was at risk. our tour of duty was suspended in order to suppress an uprising of shiites in the southern provinces of iraq. over the course of the next few days i went to every division to explain to them why it was important that we remain in iraq for another four months. to their great credit, they recognize the importance of the mission, embraced the challenge, and it with their nation ask them to do. as i look back and i remember most the toughness and the resolve and resilience of american sons and daughters. always, their character shines through in the toughest of times. i remember one female staff sergeant listening intently as i explained why we were being

extended. she interrupted me to say, listen, do not worry. we trust you. but, she said, when we get to the point where iraqis can and should do if what they need to do for themselves, i also trust that he will bring us home. today, we are gathered to talk about the future of iraq. in preparing about this -- in preparing for this discussion, i thought a lot about that discussion with that young staff sgt. i thought about what we set out to accomplish, what we have accomplished, and we seek to accomplish. today, we will talk about his dovish in a normal securities -- security relationship with iraq. let me put that in context. in 1991, i left my family to go to kuwait. in 2003, i love my family to drive saddam hussein out of iraq. if your a colonel or a master sergeant in the armed forces of

the u.s., or more senior than that, this has been a 20-year journey. we have shed blood and invested in america's treasure in iraq. our future are inextricably linked. it is not a question of whether we will continue to invest in iraq. it is a question of how. we must continue to support the above and of the iraqi security forces. and there's no question that we must continue to support our diplomatic effort so we can continue to demonstrate support for iraq's democracy. forces are proud to have been part of this effort to provide iraq the opportunities it now has. and we are eager to be part of the effort to determine how we can continue to partner with them on issues of common interest for the future. i look forward to your questions.

>> thank you. let's try and eight-minute round for the first round. let me ask you both this question about the 2008 u.s. iraq security agreement, which was agreed to by president bush and prime mr. maliki, which would require the withdrawal of u.s. forces by the set -- by december of this year. there has been an effort made to negotiate continuation of a limited number of u.s. forces beyond december of this year, particularly trainers. let me ask you first, general, did we make a strong effort to negotiate a continuing presence of trainers, providing there was an immunity agreement with

iraq, our people will not be subject to iraqi courts? >> i was the chief staff of the army during that time frame and i can tell you that in conversations among joint chiefs, with rawl asked to engage our counterparts, encourage them to accept some small, permanent footprint. our recommendation was a small permanent footprint and a rotational training for field training and such. it is built fundamentally around the foreign military sales case. i can only speak for the joint chiefs, having first been encouraged by the secretary. >> did you make the effort to support a continuing limited presence of u.s. forces?

>> i did. willing to haveyou them remain -- are you willing to have them remain for the support of those troops? >> it was the strong advice of the joint chiefs that we would not leave servicemen and women there without protections. >> why is that? >> because of the many institutions in iraq that are still evolving and imager, the iraqi judicial system is certainly among those. -- and immature, the iraqi judicial system is certainly among those. we did not feel that was appropriate to leave the service men and women in a country with the challenges that we know it has and an immature judicial system. >> was it your understanding that was the sticking point, that iraq was unwilling to provide that assurance?

whatm not sure i knew prime minister maliki's fundamental bottom line was, though i have spoken with him in the past six months. that was part of it. i think the other part of it was that he believed it was in his political interest to cause us to live up to the agreement we made it to withdraw from iraq in the 2008 agreement. that was called the security agreement. underneath that was the security framework agreement, which establishes six lines of operation, and it was his preference in my conversations with him to base our enduring relationship on that, and not simply on a matter of military presence. >> for more you know, there was an unwillingness on the part of the iraqi leadership to negotiate the continuing presence of our troops for two reasons. one, they would not give us the assurance of legal protection for immunity, and secondly, it

was not politically in their interest to make such an agreement? >> that is my understanding. >> and given that, is it your understanding that our military commanders are also unwilling to have our troops there with about legal protection? >> it was the topic of many secure conferences. >> the decision of the president to comply with an agreement the was agreed to between presidents bush and maliki, that decision to comply with that agreement unless we could negotiate a satisfactory continuation of a residual force with protection, with immunity, do you agree with

the president's decision to proceed in that way? >> i do, senator. >> secretary panetta, some have expressed the concerned -- expressed the concern that u.s. troop withdrawal from iraq will give a propaganda victory, with iran claiming to have driven u.s. forces out of iraq. do you believe that iraqi leaders and other leaders in the arab region will buy into the propaganda, that they drove us out of iraq? >> i really do not. the one thing i have seen time and time again is that prime minister maliki in iraq and other countries in the region basically reject what iran is trying to do. the view of iran -- and they view iran as having a destabilizing influence in that

part of the world and they do not support iran in what they do. the region largely rejects iran and its intentions. i think iraq is at the top of the list. >> let me ask you about the protection of religious minorities. since our invasion of iraq in 2003, i have worked and many members of congress have worked with are still a billion and military leadership both here and -- with our civilian and military leadership both here and in iraq to ensure that those small religious communities within iraq are protected from violence and persecution. give us your assessments, secretary. and what is the iraqi capability to protect these minority religions in iraq, particularly the christians? >> i believe that ambassador

jeffrey and the state department continue to work very closely with the iraqis to ensure that a religious minorities are protected. it is a problem. it is a concern. it will demand continuing vigilance, continuing pressure by all of us on the iraqi government that they do everything possible to recognize both human and religious rights. there is a lot of history and a lot of challenges here. but i'm convinced that when you talk to the political leadership in iraq, they do not want to have these kinds of divisions. they do not want to have this kind of discrimination take place within their country. but it will require constant vigilance to make sure that does not happen.

>> general, do you have a comment? >> just a comment on this time when it was very common for state security to be carrying out attacks on those groups that did not agree with their faith, we have not seen anything like that. these security ministries have become responsible agents of government. not discounting the pressure on small religious communities, but there is no evidence that it will be state-sponsored. that is a significant change. >> thank you. senator mccain. >> since you brought up, regrettably, 2003 and 2004, the fact is that you did not support the search and said that it would fail. secretary panetta was part of

the iraq study group that recommended withdrawals from iraq and opposed the surge. we are all responsible for the judgment that we make, and obviously that affects the credibility of the judgments we make now on iraq. i regret that you had to bring that up, general m.c.. there were some of us that were over there in those years that you talked about. in fact, maybe had members of family over there and saw that it was failing and we needed to have a surge, and a surge succeeded. the fact is, we could have given sovereign immunity as we have and other countries to keep our troops there and give them the in your d that they needed. we have other agreements with other countries that guarantee sovereign immunity. the fact is that every military leader recommends that we have a

residual force of at minimum 10,000, and usually around 20,000. that was the recommendation made by this committee by general oard -- general odierno, by general patraeus commodified even lower ranking military, who had spent a great deal of time there and did not want to see that sacrifice and service wasted away because of our inability and lack of desire to reach an agreement with the iraqis. as i said in my opening statement, the iraqis are largely responsible as well. the fact is, when senator lieberman and senator gramm and i were there, the ira ready to and what was the administration's response? they did not have a number of missions, so things fell apart.

can you tell the committee, general dempsey, if there was any military and commander that recommended complete withdrawal from iraq? >> none of us recommended that we completely withdraw from iraq. >> and when did we come up with the numbers of troops that we wanted to remain in iraq? do you know when that final decision was made and the exact numbers that we wanted? >> 29 am -- my understanding kollhoff the press started in about august of -- to my understanding, the press started in about august and ended up with about 10,000 and then migrated to 3. >> do you know when that final decision on the numbers was reached? >> it was based on a conversation between our president and president maliki. prior to that and i do not know. >> the reason i think you do not

know is because there never was an exact number in missions articulated by our government, which would have been a concrete proposal for the iraqi government. to say that the iraqi government did not want us, when they did not know the number of missions that we wanted to have there, it is understandable that we could not reach an agreement with them. as you mentioned, it cascaded down from 20,000 down to the ridiculously small number of three. we will now have the residual presence of iraq -- in iraq of some 16,000 american personnel. is that correct? >> i believe, with contractors, that is correct. >> and how are we entering the security of those 16,000? -- how are we ensuring the security of those 16,000? >> many of them are security

personnel. >> will be using civilian contractors to protect and maintain the safety of state department personnel. >> that is correct. >> and the comparative cost of contract personnel iverses military personnel is dramatically different. the con -- the cost of a contract personnel is dramatically higher than that of a service member, correct? >> i believe you are correct. i can give you an accurate answer later. >> we withdraw our military troops and hire a bunch of contractors to leader write your wrongly -- eager rightly or wrongly, do not have a good reputation for the security of

that 16,000. >> if i could just for the record, as director of the cia, i talked with prime minister maliki regarding this issue. when i became secretary of defense, i had a number of conversations with him as well in which i made very clear, along with a general loss and an ambassador jeffrey, that it was extremely important that we needed to have an agreement, in your adis for our troops, that we need to have that protection. he believed there was a way to do this but did not involve having to go to the parliament, to their council for approval. it was very clear among all of

the attorneys here that we absolutely had to have their approval through their parliament if we were going to have an agreement that provided the kind of immunity's we needed. i cannot tell you how many times we made that clear. i believe the prime minister' understood that and he said, i cannot get it through the parliament. that is why we were left with the decisions we made. >> then we should be having to withdraw our troops from those countries where we have a presence that we do not have going through the parliament, that it is done through sovereign immunity. the fact is, the president was presented with options, either the declaration of sovereignty as made by the government, which the iraqis may have been willing to do, and which would not

demand it go to parliament. i guess now we should we withdraw those troops from countries that we do not have parliamentary approval. if we had done what consulate -- condoleezza rice as secretary of state had said that everybody would be better if there was some kind of residual force. we met and they were ready to move forward. the fact is, they were not given a number for the missions that the u.s. troops would be there for. it cascaded down over months from 20,000 to 13,000 to 10,000 to 5000.

it would be -- and that was what they told us. maybe they were not telling the truth, mr. secretary, but we have a relationship that goes back many, many years. this administration was committed to the complete withdrawal of u.s. troops from iraq and they made it happen. " senator mccain, that is simply not true. -- >> senator mccain, that is simply not true. that is not how it happened. >> it is how it happened. >> this is about negotiating with a sovereign country, an independent country. this is about their needs. this is not about us and telling them what we are going to do for them or what they are going to have to do. this is about their country making a decision as to what is necessary here.

and in addition, once they made the decision that they would not provide any immunities for any level of force that we would have their -- and this is a lot different from other countries. this is a country where you could very well be engaging in combat operations. if you are going to engage in combat operations, you absolutely have to have immunity's and they ought to be granted by a sofa agreement. >> they were ready to make that agreement. they were ready to get it through the parliament and for months, we did not give them the numbers and missions necessary in order for us to remain there. again, your version of history and mine are very different, but the way it has turned out is the way unfortunately many of us predicted it would. if you and every military expert that i know, we are now at greater risk than we would be if we had a residual force there.

and by the way, i understand the american people approve that we withdraw from iraq. it would probably approve if we withdrew from korea. that is what -- that is because they do not take into account what is at stake here. i yield back. >> thank you both for being here. i add my voice as one who also felt during the time that the status of forces agreement existed between the u.s. and iraq based on conversations i had with leaders in both countries, that the expectation was that the residual force would remain at the end of sofa, at the end of this year, 2011. and the reason was clear. from our point of view, we have

invested so much blood and treasure, and the extraordinary and unexpected success we have achieved in iraq, it would not make sense to pick up and leave unless we felt that the iraqis were totally prepared to protect their own security, and the progress that they have made. which incidently, would not have only -- this has been transformational for them as well as throughout the middle east. the iraqis pulling the statue of saddam hussein down, showing people throughout the arab world that those tyrants were not for ever is one of the preconditions that enabled the arab spring, or the arab awakening that is going on now to occur. i also believe that president

obama and prime minister maliki must have wanted a residual force to remain in iraq after january 1 of next year or they would not have had people on both sidesso, it to me, the inao reach agreement, causing the total withdrawal of our troops at the end of this year, was not a success but a failure, and i worry about the consequences. general, as senator mccain said, everybody said that we should keep some troops. the numbers went from a low of 7000 to a high of 25,000 at different times. i was really interested in your answer. that no military commander, including yourself, recommended zero troops, american troops,

after january 1. i presume that is because you thought there was an unnecessarily high risk for us and iraq if we had troops remaining after january 1 of next year. is that a fair assumption? >> yes, senator, and the cascading that i mentioned to senator mccain was a result of negotiating the missions. the structure was completely dependent on the missions that you ask us to do. tell us what you want us to do. i can build a structure to do it. there was on a what they want us to continue execute. the highest number i touched on was 16, and it could have been down to about five, but at the end of the day, the iraqi prime minister deemed that he wanted to rely on the security

agreement and base future relationships on the security strategic framework agreement. >> understood. in your own thinking, since you obviously did not recommend the zero american troops, what do you think now are the greater risks that we face as a result of the fact that we will have no continuing military presence in iraq? >> well, some of the things that a larger military footprint addresses, it will now have to be addressed diplomatically, and these are some of the things that come up about the protection of the small religious communities. the added tensions, if you will, but i also want to mention that this will help us ensure the program of record, as we call

it, that continues to build this. it will continue to be addressed. this is not a divorce. it may feel that way because of the way the numbers, the way that the iraqi government came to the decision, but the fact is we will be embedded with them as traitors, not only tactically but also at the institutional level, and i think that is an important way to mitigate the risks and that we talked about. >> let me pick up from that point. i have heard from friends in iraq, iraqis, that prime minister maliki said at one point that we needed to stop negotiations that he was prepared to begin the negotiations between the u.s. and iraq about some american troops being in iraq after january 1, said that is what i

have heard from there, but i want to ask you from administration point of view, and i know that prime minister maliki is coming in a few weeks to washington. are they planning for the discussions with the iraqi government about deploying at least some u.s. forces in iraq after the end of this year? >> senator, as i pointed out in my testimony, what we seek with iraq is a normal relationship right now, and that does involve continued negotiations with them as to what their needs are, and i think there will be continuing negotiations. we are in negotiations now with regards to the size of the security office. there are 90 troops that are going to be there. there are hundreds that will be present by virtue of that office, assuming we can work out an agreement there, but i think once we have completed the

implementation of a security agreement that there will begin a series of negotiations about what exactly are additional areas where we can be of assistance. what level of trainers do they need. what will we do on exercises that work together? we have these kinds of relationships in the region, and that is what we will pursue. >> there would be a normal relationship. a normal relationship would not exclude the presence of some american military in iraq, correct? >> correct. >> so what i hear you saying, assuming that these questions of communities can be overcome, do you believe, mr. secretary, that it is indeed benefit of the u.s. to have this as something?

>> i would stress to you, but mr. lieberman, that we have to be able to have them basically say these are our needs. then we can assist them and saying we can provide this in order to accomplish these missions. it has to be a two-way street. >> we have been concerned about the fact of iran over the course of the war has been training and equipping extremist groups that have come back into iraq and killed a lot of americans and even more iraqis. what is your belief now about them continuing to train iraqi shia extremists militias to come back into iraq and cause havoc?

>> as you know, we went through a difficult period, when the iranians were providing military military weapons to shia extremists groups, and those weapons were being used to kill americans, and we indicated our concerns about that. that was part of the discussion we had with the prime minister when i was there, my concern about that. they did take actions. they did take actions against the shia militants groups. in addition to that, al maliki made it very clear to the iranians that this had to stop. we did go through a period where it did stop, but we continue to have concern that the iranians will try to provide that type of assistance, as well, and we have made very clear to iraq that

they have got to take whatever steps are necessary to make sure that does not happen. >> ok, we appreciate the answer. thank you, senator. thank you, mr. chairman. >> i just want to follow up on a question that senator lieberman asked. do you think it was important to have a military presence in iraq. you did not answer. do you or do you not think that we should have a military presence in iraq? >> i think that providing a military presence that assists them with training and with operations, continuing to work against terrorist groups there is important, but i have to stress to you, senator, it can only happen if the iraqis think it should happen. >> i understand that, but i get the impression here that everybody is deciding what we want for iraq and that that is

what should happen, but it does not work that way. this is an independent country. >> i understand that. i want to ask my question, and i have some very specific questions. a follow-up with senator mclane -- mccain, it is a tremendously large dollar amounts. how does this agreement affect the contractor does? they will have some very serious legal challenges, as well. how is this different? >> i can take that, senator, because when i was running the security transition command, training and equipping the iraqi security forces, i had a rather

small military staff, about 1000, and i had more in contractors. the contractors are often third country nationals. security contractors could be from a third country, and as part of the contract, there will be a position on protections and immunities, but oftentimes, they are not protected. oftentimes, if something happens, they can be imprisoned and tried in the host nation. that is common practice around the world. we ought to take for the record, i think, the issue of cost, because there is a distinction. a truck driver driving a cargo truck of foodstuffs from kuwait into baghdad, it will get paid at a certain rate. a security contractor at a different rate. these are not contractors making $250,000 per year. >> i think it is important to

let the american public know, because when i was in afghanistan talking to the soldiers who were deeply concerned about those drivers, going from post to post, getting up boards of $100,000, and you have a soldier that can do it at $20,000, $30,000, quite frankly, we could be -- i would hope that you would look at that. and you committed to not allowing it iran to get nuclear weapons, and i am still -- do you think we are accomplishing that? >> i think that the united states to working with our allies and implementing the sanctions that have gone against iran, they have combined with

other efforts, is impeded their effort to move forward in that area. that is correct. >> we have so many sanctions, and yet, i think the biggest problem we have is actually enforcing them. doing business in iran, how involved is russia in actually helping them with the nuclear capabilities? >> -- >> we are not putting any teeth behind the sanctions, and i think we can do better, is my point.

maybe we can talk off-line about that. speaking to members of the committee and others, the prime minister has picked out some and replace them with their own foiles. a record to wonder people have been arrested since october. they've been charged with affiliation, wanting to conduct terrorism. to make a footprint reduced. >> i understand reactions that were taken with arresting the baathists. they are being held this point without charges, and that raises concerns about due process.

at the same time, i have to say that the sudanese, and it is a reflection of what has happened in iraq -- that the sudanese -- the sunnis, that did take place within the institutions of government, and they are bringing their pressure through the parliament and the government to try to change that behavior, and i think that is what democracy should do. >> what would you give the counter-terrorism forces today? >> the number about 4500. >> out of that rank in terms of capability in being ready to perform their mission? >> i would describe their readiness rate to be about 80%, and there gap is in their ability -- they are extraordinarily good, an extraordinarily good at identifying a target. what they lack is the ability to

fuse intelligence, signal intelligence, human intelligence, and identify a network. by the way, nobody else in the world does it like this. with operations centers in iraq, they will have a wiring diagram in their particular area, and that comes after years of learning, that we have not managed to pass over to our iraqi counterparts, but we have in this office of security cooperation, we have a cadre of traders to continue to bill that and close that gap -- to continue to build that. >> how functional is the air force? is it capable of defending the airspace? does that matter at this point? >> i will tell you where they are, and then i will take a stab at where it is at. they have got f-16s on order as

part of the sales program. the first 80 or so of what will eventually be 24 will be delivered in the 2015 time, so there is a gap between now and 2015 with their ability to protect their air sovereignty. does it matter? it does not -- it is not apparent to us that it matters that there is an air threat to iraqi sovereign airspace right now, but after the first of the year, as prime minister al maliki's aziz how this is involved, what looks like as we begin our withdraw, i expect there will be some negotiation with issues related to their sovereignty. they have also got long-range radars on order to help pay themselves and their picture, so there is a gap, at least through 2015, perhaps on, because you have to train pilots.

when the general, the chief of defense, speaks about not being ready until 2020, it is that type of capability that they are talking about, not the day-to- day capability on the ground. >> thank you, senator. senator? >> was it the uniform recommendation of all of the joint chiefs and yourself that there be appropriate immunities for the forces, that you could not maintain american forces in iraq to >> it was, senator. >> and that was, from your perspective, the government of iraq was not prepared to give appropriate immunities to american forces? >> yes, that was the feedback that we received, based on the feedback of not only the department of defense lawyers but across the interagency, that

the protections can only be achieved the council of representatives inside iraq. when that was not forthcoming, then our advise was -- and by the way, just to senator mccain's point, we have senators -- we have people combined in exercise teams, but these are small groups of soldiers during training missions, not what we believe would be a large footprint of men and women, particularly at checkpoints conducting combat operations that could be very prominent, very visible, and therefore very vulnerable to a very immature judicial system. >> meaning that they could be thrown into a system without any adequate due process and be subject to the women's of whatever the iraqi justice is at the moment? >> that was the concern.

there was concern that there is some type of incident about trying to wrest some of our soldiers. >> in the worst case. >> the necessity for their general assembly, this is the result of an agreement, i presume, that this would have to be with the parliamentary procedures? >> that was both their interpretation and our own. >> so this notion of who can distill immunity rests on the agreement which the bush administration negotiated and signed? >> i do not know how bad it goes. this is longstanding legal interpretation that i am sure goes back before the bush administration. >> my understanding is that there is a very explicit

language calling for the withdrawal of all military personnel, that there is no language or explicit language calling for further negotiations as to the continuation of forces. is that correct? >> that is my understanding. >> everyone understood that this was a placeholder, to withdraw from iraq, which was approved, simply a placeholder because going down the road, we would negotiate that we would come up with another situation. do you think that is realistic? >> this terminated when the

iraqi prime minister determined that they did not need the missions, that we were willing and kibble to perform, and would not provide the protections. >> this was the determination of a sovereign leader about what was in the interests of iraq, and without the approval of this parliament, we have no standing essentially other than to follow what was agreed to in 2008 during the first administration. is that correct?

>> yes. >> with iraqi personnel? >> there is the opportunity for them as part of routine security coordination, the general will travel there in january. there is a committee called the high court nation committee for each of the six lines in the strategic framework agreement, some of which were economic, but there is a security line. there is a high coordinating council. they will convene one of those meetings in january to look at this. >> mr. secretary, and i presume, but of the record, with mr. al maliki and his cabinet? >> absolutely. >> it seems like this is a time

when mr. maliki and the government begin to reevaluate, and without that, then the 2008 agreement, which they negotiated and agreed to, and they seem to accept, stands. >> that is correct. >> thank you. i have no further questions. >> thank you. senator? >> i went to thank the secretary panetta for being here on this very important topic. to make sure that what we did there does not become undermined. this is very, very important, and i think all of us share a bed. there are serious questions remaining on whether the iraqis will be able to maintain their own security, and i think that is what we are trying to get at.

i wanted to ask you, in a conference call, an announcement from the administration that my staff participated in, the national security adviser to the vice president, they were asked is now the iraqis change their position, and we received the immunity that we need, whether we would maintain our position on maintaining troops in iraq, and what we got to that was no. so my question to you, is that accurate? would we keep troops there?

>> as i have said here, we are prepared to continue to negotiate with the iraqis. we're prepared to try to meet whatever needs they have, and if those require an agreement in order to assure that our troops are protected, we would be prepared to do that, as well. >> when it was said that even if we have community, were they right, or were they wrong in terms of this? >> i think they were reflecting the decision that was clear from the iraqis and the prime minister that it wanted to proceed with the implementation of the security agreement, and i

think the decision was met implement that and negotiate for their presence. >> rather than to take all of the troops out and bring them back, if we could work this out now, you would agree with me there? >> it came down to the fact that it was very clear from the prime minister, and as senator mccain said, other members of the leadership were interested in trying to pursue this, but when it was clear that they could not get immunity, that was a concern. >> the answer from the administration was even if immunity was granted tomorrow,

we would still withdraw altogether. that made me concerned. i want to ask you about the wartime commission. money going to the hands of our enemies, we have lost between $31 billion and $61 billion of taxpayer dollars that were wasted, and the worst part of it is that some of it went to our enemies. we had a hearing on the wartime contracting commission report. and there is testimony before the committee, and i asked about what was happening in iraq.

you stated today roughly 16,000 contractors that will be left there, many performing security functions by the end of the year, and when i asked about that, the department secretary, the state department handle that. he told me that there is a lot of risk and that the state department has never done anything this big. would you agree with me on that, mr. secretary? >> that is right. >> we had commissioners that did the analysis in iraq and afghanistan, and there is testimony before the committee today, and i asked about what was happening in iraq and what

the implications would be for the state department putting 16,000 contractors there, many of them dealing with security, and what he said it made me concern. i am more concerned than answers. clearly, if the state department until now has had trouble managing its contract, and there is no question, i do not know how they are going to manage all of this. he went on to say that if you get a budget contractors with guns, doing all sorts of things, to me, this involves security that is in high -- inherently governmental. you're going to have a bunch of contractors being shot at or shooting iraqis, and this is a disaster waiting to happen. this is how he described it to me. can you assure this committee

that -- i guess i would ask you first that my concern is that we're putting a civilian army there of contractors as an unprecedented level, when we have already had some significant issues with contrasting. we are going to ask these contractors to protect our diplomatic security, the personnel that are there, our security personnel that will still be serving in iraq. will they be secure? will these contractors be able to perform the function that they are needed to perform? that they will be able to perform this unprecedented task? >> there is no question that there are risks involved here. there is a continuing and

important state department role that relates to economic issues that relates to education issues, that relates to the other pieces that we have been assisting the iraqis with, and the state department is taking the lead in trying to build those relationships, so they have got a presence. they have got locations where state department officials will be. not having a military presence, and in order for them to do their jobs, they have got to have security and support and food and transportation, and that is obviously brought about through a contrasting approach. are there going to be risks associated with the contractors? yes, i think those are the case. do we have any other alternatives? >> no. -- no. >> this is not entirely new.

even from the beginning when it was the provisional authority, and then it became the u.s. mission in iraq, the state department has always contract for personal security, so it is not as though they have no experience doing that, but these are orders of magnitude, and i think this is what people are responding to, but in order to respond to that, we had a joint staff committee in place to talk about transitioning activities in iraq. 437 activities. we have transitioned many of them. we will be happy to brief you on that. the department of defense will maintain through the directing of the management authority, we will maintain oversight or control of the contracts because we have the expertise. the contract office the representatives will be the department of state personnel on the ground, so we have recognized and are working to mitigate it.

>> thank you, general. secretary panetta. i would just add this, though. back in 2010, we will all talking about having some military support there, and what i hear from the wartime commission is that this is a disaster, i have real concerns about this in terms of protecting our personnel and also in terms of taxpayer dollars. >> thank you for your service and for being here today. i am going to try to bring things a little closer to home for the moment. the aviation detachment from the army national guard is scheduled to deploy in iraq in may. given our pending departure from iraq in december of this year, i understand that this deployment might be able to be moved or shifted to a new location or canceled altogether, and maybe the decision has not been made,

but if it has, it would be interesting to know what it is. concerning the end of the military missions in iraq, how is the department candling be scheduled guarded deployments? i understand that soldiers will of already started to make arrangements with their families, employers, and communities, everything from hiring temporary employees to moving families. so how will this work now? to use units that are sourced for mobilization, and even when things seem to be changing right before our eyes? >> yes, senator, i will answer that. this is something we watch very carefully to make sure that before we hit a mobilization date we understand where these organizations can be used, so we reduce the risk of having to demote them. the specific unit that they are

talking about, if it is inside of a year, it is training, and therefore we will find a place to use it. what we have done is found a place to do it where they want to stay. the first is to see if there are volunteers who want to stay at home. the rest of the unit will typically be re-missioned. there are other opportunities to do that, as well. that is kind of the procedure. if you do that and the mission changes, we either re-mission them or change it going home. what kind of unit are they, sir? aviation? aviation is in high demand. it is unlikely that they would be used in iraq.

>> i would like to talk to you about providing security. cost-cutting and cutting spending, particularly as relates to the department of defense, dealing with military pay and compensation and benefits. i think that obviously, these need to be maintained and as promised delivered. what are your thoughts and recommendations to change military procurement for members that are already serving? >> we obviously discussed this as we have gone through the budget exercise, and part of it is that this needs to be given to the commission. the president, if he made that recommendation, we would support

that. we also made clear that with regards to those that have served, they ought to be grandfathered. we have made a commitment to those that have deployed. we think we ought to stand by the benefits that were promised to them. >> keep your promises is important. general dempsey, you may have eight point of view on that as well? a few years ago, i visited in iraq with you, i think when you were in charge of the training and acquisition mission, and you outlined at that time how the iraqi government engaged with our military for the contract of equipment, because we were able to do it more efficiently and cost effectively than they were because they did not have the acquisition structure in place in order to be able to do it.

do you remember why we engage them at that time in that bilateral agreement, through the use of their money, the equipment that they needed? >> even then, senator, it was clear that we but of something we would describe as a normal relationship with iraq. one of the ways we solidify this is through a sales program. in those early days, we were able to convince the ministry that it was about $600,000, and today, they have invested about $7.50 billion, and it is both a point of managing their relationship but also growing their own capability. >> we have had a lot of

discussion with the pros and cons of hiring outside contractors, and that discussion will be ongoing for how it works out, whether or not it is advisable. in connection with that, in the costs -- cost differentials, it may be there. cost sharing, helping them to secure, stabilize, and self govern? >> yes, sure it is, governor. when we do these exercises around the world, there is always a negotiation on the cost and who will bear it. i also have to mention in terms of the contractors, and any nation in which we are present diplomatically, the first

responsibility is the host nation, and then there is the other security that deals with the support. >> given the fact that the contractors will be paid, military requires more than just a soldier, this is a factor that is not necessarily included in the agreement. >> that is correct. >> that may not be as out of whack -- i am not an advocate for this, but it may not be as out of whack as it sounds up front for the level of contractors when you add in the support for the military providing security. >> i believe that is correct. >> do you have any thing as far

as what that may consist of? >> i do. we can actually feel that back -- peel that back. when it is fully incumbered, it may not seem as dramatic as it is. >> thank you. >> before i turn to my question on iraq, i want to share with you and experience that i had yesterday. i visited a wounded marines from made at bethesda. he was severely wounded by an ied in afghanistan. he lost part of one leg. the other leg has a lot of shrapnel in it. both of his arms were wounded, and he has a traumatic brain injury, as well.

he has recently been moved into a little apartment that has been built. it is one of accommodation for the troops and family members, and his spirits are amazingly good and upbeat, but i asked him if he had any concerns, and i want to share with you his concern. he said that while he praised the care that he was getting that there was a severe shortage of physical therapists and other trained clinical personnel to help them in what is going to be a very long recovery. he is expected to be there for another nine months, so he is looking at a long haul. this really troubled me, because here we have this non man who is probably 19 to 20.

he was wounded just six weeks after arriving in afghanistan. he faces a very long recovery period, and his spirits are high. his morale is good. but he is worried he is not going to get the care that he needs because there has been a freeze, he said, put on at the number of physical therapists that can be hired, and he described his session where the the physical therapist helps him for awhile and then has to turn to other patients to help them, and he feels that is impeding his recovery. i promised him i would bring this to the highest levels. i am delighted that you are here today so i could keep this promise, and i asked you to look into this, because none of us want to be scrimping in any way on the care that we owe

these wounded warriors who have given so much to our country. >> senator collins, i appreciate your bringing that to my attention. i have not -- and i have been out to bethesda number of times, but i had not heard that there was a problem with physical therapists, because, quite frankly, most of the soldiers, the trends that i visited with, all the tremendous physical therapy. that is the only way they are going to make it. they have great spirit and hope for the future, but we have got the ravages of therapist to try to assist. you can give him my assurance that i will look into this and make sure that is not the case. >> thank you so much. i am sure he will be delighted that we had this exchange. turning now to iraq, we have been training the iraq security forces for nearly eight years

now. and yet, concerns still exist about gaps in the numbers, the training, the capability, particularly as their ability to successfully defend the borders against the infiltration of weapons, the militants, of iran. now, some people contend that until we withdraw most of our forces, the iraqis are never going to step up to the plate folate -- fully to defend their country, and i personally feel that is a legitimate argument, but others say if we withdraw our troops that we will lose the security gains that have been so hard fought. so, in general, given the outstanding concern about the iraq ability to defend itself

against the threats and against the infiltration of weapons from iran, are you concerned that we are jeopardizing the security gains and that we will see a deterioration and a step up in violence as we withdraw our troops? >> that was always a concern of mine, but i will say that over the last three years, in my contracts with those -- and i am dated. i have not lived in iraq for about four years, but in my trips back and forth and with conversations with those that are partnered with them, but they all have considerable confidence that the iraqi security forces that we have built at great cost and effort over, as you said, the last eight years will be able to maintain security inside that country, and what they lag in

the institutions, and that is where our effort ought to be at this point. >> what about the kurdish region in iraq. there are concerns that kirkuk stands out as an unresolved area, where there is still a lot of tension in the government, in baghdad. i understand that only a small dod contingent will remain there, and it is my understanding that the state department is going back and forth on whether or not it should have a full presence in kirkuk or maintain a less formal diplomatic presence. if there is no u.s. military presence between the kurdish forces and the iraqi security forces, are you worried that

this region of iraq will become a destabilizing flash point? >> i worry about a lot of things, senator, and i will include this in the list of things that i worry about. there were joined checkpoints, where there was a member of iraqi security forces, the u.s. service man or woman, and others, and a coordinating center, and part of office of security will include harper dissipation in the coordination. it will not be on the check points anymore, that is true, and so we will have to rely upon the continuing negotiations between the kurdish political leaders and the government of iraq, but this is not, again, where we are completely removing ourselves, but your point is accurate. we have the checkpoint as a

buffer. the risk goes up, but our present in the coordination center provides a stabilizing influence to get them to have answers, not violent answers. >> thank you. secretary panetta, finally, we have military relationships and agreements with countries. of their other countries where we have a military presence that goes beyond protecting our embassies, where we do not have the big protections that another provides, or will iraq be the only one? >> there are obviously -- in different areas, there are going to be different approaches.

there are some areas where we have agreement and some areas where we basically put them under diplomatic protection of one kind or another as they worked out of the embassy, so it does vary, depending on the area we are talking about in terms of protections, but in each area, i guess what i want to assure you is that in each area, we do try to get protections, because the concern that they be treated correctly if any kind of incident takes place. >> and that is absolutely critical. what i am concerned about is why a diplomatic immunity is pretty easily extended to troops that are guarding the embassy, for example, it sounds like our mission for the remaining troops in iraq would be broader than that, and so i am worried about whether the legal protections will be there for that. >> and that is a concern that we all have.

if there is to be in the future a larger presence there, we have to insure that they have been given the proper legal protections, and depending on the size, that would determine whether or not the agreement would be required. >> thank you. thank you, chairman. >> thank you. senator? >> we all appreciate what you are doing. in light of senator collins' question concerning the wounded warrior that she met, my office posted a wounded warriors luncheon for a number of soldiers from north carolina, and they brought with them their family members, and we have done this before, and it was certainly a welcomed event for

me to attend. they appreciate the outreach from the office, and they also got a capital to work. but what was really intriguing was one young man had lost his leg to an ied about two months before. he had been recuperating for about two months, and he said he was most anxious to get back to the battle and that his job was i, too,t ied's, and highlight the morale and what these young men and women go through every day. we need to have as many physical therapists as possible to make sure that they get the treatment that they need and paid for and deserve. but i wanted to talk about our special operations forces. ed you know, our special operations forces have engaged with the iraqi counterparts and counter-terrorism and training and advising.

what will things look like in iraq from its special operations standpoint and what type of engagement will be operation forces have in iraq could >> -- in iraq? >> they are organized into a counter-terrorism section, commanded by an iraqi general. he partners at the headquarters level and will remain so. the discussion about trainers that would stay inside the wire of the places where this counterterror force is located, not go with them on missions but rather continue to train them to go on missions. as i said earlier, the gap is in their ability to identify the network and target it.

we call it the exploits -- exploit and access cycle. we are very capable of finishing, not susceptible of exploiting and assessing, you continue to keep pressure on a network. they are extraordinarily competent individuals. soldiers. what we have got to do is keep raising the bar with them on their ability to do the things. >> with the drawdown in less than two months, what is your outlook for the training process to enable them to do this on their own? >> they will be limited. they will have an airlift to deliver them to a target that we may be able to provide. they do not have the platform to keep their surveillance overtopped. they will be limited to ground movement, and they will be limited to human intelligence,

but part of this provides the trainers to keep developing these other capabilities, but we are some time off in reaching that point. >> as we continue this drawdown of our u.s. military personnel from iraq, i really remain concerned about the protection of the individuals that are remaining in iraq. what are these remaining challenges for the military personnel in iraq in terms of managing their vulnerabilities, managing their exposures during the drawdown? >> senator, are you talking about getting from 24,000 -- the existing force, having it retrograde down? >> the ones that will remain. their protection. >> senator, they will have first and foremost, we have got to an office of security cooperation in iraq basis, and their activities will largely be conducted -- they are

fundamentally for and developing the program. f-16's get developed. -- delivered. understandping iraq how to use them to have their sovereignty. these are generally located in a range east of baghdad, and the team supporting states. this is not about us moving around the country and very much at all. they will always the responsibility for their own

self-defense. >> repeatedly removing the groups and the senior level leadership. the counter-terrorism forces to continue this operation, some of which you were describing, against al qaeda in iraq. in the absence of our forces, how will the counter-terrorism activities change, following the drawdown of the u.s. military? and you just identified some, but it seems with the lack of all of the of the personnel led

this is going to be a very hard task. >> if i could, senator, in my capacity, we were helping to provide a lot of intelligence, and i think some of this will continue to provide assistance in these areas. having said that, the one thing that i have been impressed by is the fact that the operations have been very successful, and despite the we have drawn down 24,000 now, they have been very good at going after al qaeda, if you can know the threats they are to proceed. i think the general pointed this out, with regards with being able to have the is, those are the areas that we will have to

provide assistance to them. they are still very good at going after those targets. >> thank you, mr. chairman. >> thank you, senator. >> thank you both for testifying. this is a very important issue for the country and a good discussion. number one, i completely concur with american troops not being left behind in iraq without protection. it is not fair to them. to say that the iraqi legal system is mature is being gracious. if an american soldier were accused of raping in iraq, i do not think they would get a fair trial. iraq has a long way to go on the legal side and i think in other sides. my concern is that i have never gone in with the impasse get ready to approve the immunity agreement, and i would just give you one vignette. i went over with senator mccain and senator lieberman in may to

talk to the prime minister about eight follow-on force, and i was discussing with him that no american politician, republican or democrat, he would accept a follow-on force without legal protections, and as we were talking about it, he said, "how many people are you talking about? what is your number?" i asked the general, "you have not given them numbers?" and he said, 16,10,5, cascading. then we came back with 10 and they said no. then 5 and then zero? clucks that is not what i testified to. >> what caused the testifying -- the effect? he said he told me 19,000, and i

said it was probably more than the market could bare. the numbers were around 15 or 16. then the numbers came down to 10. i know what the general had on his mind. at the end of the day, general, it is the mission you want that determines the numbers. we need to make sure that they have a better intel and they the airainers, ct's, dispute, and i think turner told would do what you need. at the end of the day, down to zero. i guess my question is if iran is comfortable with a democracy on the border? secretary panetta?

>> i think they're very nervous about having a democracy there. >> let me tell you about the state of iraqi parliament said. "iraq now supper's points of weakness. if they think we are incapable protecting its borders, there will be interference. and a difference does not exist now." he was talking about how i ran will step up their efforts -- iran would step up their efforts. do you believe that is a more likely scenario? they will only do it more if we do not have anybody there. >> there will be a continuing threat. the reality is that the iraqis do not want to have iran phaser that type of influence. think that,unni's it s there any doubt the kurds

want us there? we know the sunni's are worried and the kurds would have 50,000 if we would. that allng concerned the blame on the iraqi political system is maybe not quite fair. secretary panetta, you were a politician in another life. would this be a political problem for president obama to announce this year that we will keep 15,000 people in iraq past 2012? would that ever be considered in this administration? did anyone ever talk about the numbers changing because the democratic base would be upset of the president broke a campaign promise? >> that was not in any discussion directed dissipated with? >> do you think anybody in the

white house of wonder about the political effects of having troops in iraq during the 2012 elections? you talk about the iraqis having political problems. you do not think there are any politics going on on our side? did any commander recommend that all surge forces be pulled out by september 2012? >> i honestly do not know, senator. >> let me tell you. the auction was presented in july to recover all search forces by september 2012. you put general allan in the a trouble spot. it is no accident they are coming home two months before the election. but if you believe that to be true, as i do, i do not think is an accident we got down to the no. 0. you think it the people in the camp they're going to get killed? what will happen to them?

>> as you know, senator, the state department is leading an effort to ensure -- >> can you tell the people back here that the likelihood of their friends and family being killed has gone up greatly there are no american forces policing? >> i will not say anything to the people because i am not involved. >> i asked out from mullen -- adm. mullen what the terms of the conflict would be if we were not present. he said it would be high. >> i would say moderate. >> you believe the risk is only moderate, not high, if there are no u.s. forces bordering -- policing the border. >> i would like to take some

time to articulate why i believe that. >> do you believe it is marked the united states not to of counter-terrorism forces? is it in our national security forces not to have any counter- terrorism forces in iraq? >> it is in our interest to continue pressure on all qaeda wherever we find them either by ourselves or through partnerships. >> do you think the counterterrorism problem in iraq is over? >> i do not. >> you say there are 1000 out qaeda in iraq. i know you are very worried that they will reconstitute. will you do the best you can to convince the iraqis -- i tell you what. i'm willing to get back on a plane and go back myself and say they would benefit from a counterterrorism partnership with the united states? >> i have made it clear time and time again. >> they say they are not

concerned about that. >> what he told me that they are concerned about it and they obviously have their forces that are dealing with it. >> is it your testimony that the iraqis would not have 3000 u.s. forces? they do not want any u.s. forces out all? they are not willing to expend political capital to get this agreement done because they do not see a need for u.s. forces. is that the iraqi position that have come to the point in their political-military life that they just not need us all? >> i think the problem was that it was very difficult to try and find out exactly, when you say the iraqi position," what exactly the point was that the point. >> the position of iraq without u.s. forces.

the speaker of the parliament's position by u.s. forces? >> i think the same. >> the next day, he announced that he would accept if all along force the other parties would agree. >> i heard the same statements and read the same statements, but the problem is in negotiations that involved those ambassadors, general austin, and in those discussions, they never came to the point where they said they want so many troops here. >> i can tell you in may, they had no number given to them by us. they were in the dark as late as may about what we were willing to commit to with iraq. this is a curious outcome with sunnis and kurds on tehree recrd

with the prime minister saying he would accept forces. if i had three people saying those things, i think i could get it through the finish line. we are where we are, and thank you for your service. >> i will just have a second round for those of us who are here, maybe a couple of questions each until the second panel. mr. secretary, did iraq ever request u.s. trainers or other church to remain in iraq after december 31st? if so, what number did their request? were they willing to grant legal protection to our troops? >> there was no such request. >> senator mccain. >> just briefly. i do not know how you could have expected the iraqis to a green when we could not give them a number. that was not just the case in may. we kept asking the president's national security advisor and

others want our proposal was, and we never had one until it got down to come i guess, 5000 or 3000. history will show, secretary panetta, that they were ready to negotiate and we would not give them a hard number, as far as numbers and missions are concerned. it is hard to understand how anyone would believe that they were reluctant to negotiate when we would not give them a number to negotiate from. history will provide that, and i am sure we will have further spirited exchanges on this issue in the future. i also wanted to thank you for the letter you wrote to me and senator gramm. i think it crystallizes the challenges that our nation would face if we had sequestration. i do not think there are any two greater despot hawks and us, but i hope your letter is read by every member of congress and

every citizen of this country because we cannot put our nation's national security at risk. you give this a very definitive answer, and i thank you for that. thank you, general, for your continued leadership in putting up with the occasional insults that you have to endure here. [laughter] could i just say finally, on the base issue, i know the secretary of state is addressing this issue, but it is american troops protecting them now. i hope you can give us some ideas as to what the disposition will be. i think it is very clear that the lives of these people are at risk. thank you. >> i appreciate it. >> just on that point, to turn it into question. maybe this needs to be addressed to you to come in general. there's obviously a greater risk because there.

unless the iraqis keep a commitment. what will be done to make sure coming to the best of our ability, that they keep that commitment? and what about the question of removing them -- not them, but the organization, from the terrorist list? we are all concerned about that. >> we share your concern. i know it ambassador jefferies shares are concerned. we are not sparing any diplomatic effort to encourage the iraqis to do what we think is right in this regard to ensure the protections of those people. right now, the iraqi security forces regard the camp with our advisor and assistance group with them. the concern when we do in that capacity is a real one.

i think we need to put the pressure on them diplomatically to have the outcome we think is correct. >> there is a real strong feeling around here that if they violated a commitment to protect those people, assuming that there are still there and have not been removed from the terrace lists to find a locations. if they violate that commitment to an estimate it will have a severely negative impact on the relationship, and i think i can speak here for the congress, although i'm reluctant river say that. i think there's a lot of concern in the congress about it. in my opinion, it will severely negatively impact the relationship with the u.s. congress. i will leave it at that. >> i want to assure you, senator, that ambassador debt- free had made it what it clear to the iraqis. -- that ambassador jefferies has made it clear.

>> i do think you speak for the congress in expressing our concern about the safety of these people. this is one of a series of what i would call "what if's" that have different answers now that we're dealing with a sovereign iraq. we are going to be relying, and i suppose this is true whether we have troops in iraq or not. we are outside in the neighborhood and will be relying on diplomacy patrolling. what appears of victimization, and attacks on the people there? what did they say they want the u.s. embassy out of baghdad and begins to strike beyond the capacity of the security forces? what a conflict breaks out between the kurbndsds and sunni arabs? that will be an answer that will

be spelled out in our negotiations with them. why did not know if i'm quoting someone whose testimony read, but thought it was a great quote. frederick the great apparently said that diplomacy without military force behind it is like music without instruments. there's something to be said about that. my question is to ask you, mr. secretary, if you could just developed in a little more detail the statement you made earlier that we will have a 40,000 american troops in the region. does that include the 24,000 now in iraq? or have we made a decision to increase the number based on the failure to have more troops in iraq after the january of next year. have we made a decision to increase the number of troops in the region outside of iraq for some of those what ifs' that i talked about?

>> that did not include iraq. what we have now is coming in kuwait, almost 29,000. saudi arabia, 258. bahrain, 6000. uae, 3000. watar, 7000. -- qtar, 7000 >> have there been a decision made to increase that number at all? because we were unable to reach an agreement about the continuing presence in iraq? >> i would not describe it as a cause and effect relationship based on what happened in iraq, but rather a continued concern with a more adversarial iran. looking at the central command footprint. you know, senator, prior to 2001, we routinely rotated brigades in and out of kuwait for training and also as a part

of a deterrent. we have not negotiated this with kuwait yet, but it would be my view that we should have some kind of rotational presents, ground, air, and unable. >> and some of the combat troops? >> absolutely. >> senator, if you could limit to one question? if you could just limited to a couple of questions for this second round? >> secretary panetta, general dempsey, nice to have the book here. general dempsey, you mentioned a more assertive iran. attempted to's assert influence throughout iraq. can you discuss how we are working with some of our partners in the region to affect

that influence, specifically turkey? we have cooperated in the past with turkey with the kurds in the north. we're seeing that violence between turkey and the rebels have escalated since this summer. we sought a major turkish operation into iraq. yesterday, there were reports that u.s. drones have deployed into turkey from iraq for a surveillance flight. can you just give us an update on that situation? >> i can. thank you, senator. each combat commander has a theater plan that supports both building the capability of our partners which allows us to make ourselves better and to deter those potential adversaries. in turkey, for example, we recently, as you have described to come to take in the platform

flying out of iraq and is now flying out of answer like in turkey. but it is to support them in their fight against terrorism. the recently agreed part of the european-phase adapted approach radar against the possibility of their rogue missile strike from iran if they develop the capability. if you walk down the gulf cooperative council, we have bilateral agreements with each of them, some of which are multilateral come air-defense, some of them are exclusively by- lateral. this foreign military sales program becomes a significant cornerstone of our relationship with these countries. >> relative to the u.s.-turkey cooperation, how is iraq responding to that box >> erakat

is consistently denounced the presence of the kurdish people on iraq's oil. so, too, has the regional government. there has not been friction as long as there has been transparency about content. >> we are cooperating with them as we do these types of actions? >> we are. >> you talked about some of the other neighbors in the region. obviously, again, back to iran and their efforts to influence iraq and the region. does iraq view its potential to be a proxy for iranian influence and other influences in the region play out in iraq?

do they see that as a possibility? are they concerned about it? >> they are aware that it is a possibility. i think, more importantly, they clearly resist that effort. they have made it very clear that iran should have no influence as to the government in iraq. >> i know the evening is it about iraq, but given the recent reports of this week from the iaea about their pursuit of nuclear weapons capability, obviously that threat is not only to us, the region, but iraq, i would assume, is very frightened about that prospect. are we working with iraq to try and isolate iran? or have we been doing other actions around the potential to

get nuclear weapons? >> we work very closely with iraq in trying to make it very clear to iran that they're not to provide any type of military weaponry, particularly to the extremists and they have cooperated fully in that effort. in addition, i think they share the concern about any kind of nuclear developments in iraq. >> are they also working with other nations in the middle east to share that concern? in terms of their relationship with others, saudi arabia, catarrh, some of the other -- qatar, others, do you see this as a collaborative effort? >> i do not know the extent, but they have made their position clear. from my experience, the other countries in the region share that viewpoint.

>> in your opening statement, i believe you talked about are continuing strategic relationship with iraq. as we look into the future, the next 10, 15, 20 years, what is the continued interest we continue to have in iraq? we have spent a lot of resources and human lives to help defend iraq and support their ability to have a free democratic country. long term, i think we are in a different situation than post world war ii where europe and japan had the threat of communism to help us have a mutual strategic interest. would we see that interest being in iraq? >> the president and prime minister has made it clear.

we will continue in long-term relationship with iraq. it will be multi tiered. my hope is that we can develop a normal vacation trip that we have with other countries in the region so that we can assist on training, counterterrorism operations, can assist with regards to the intelligence and other areas. i think if we can develop that kind of relationship with iraq, that we can actually strengthen their ability to deal with the threats that we are concerned about. >> if i could add, senator? i lived there for three years and studied quite extensively. we talk about the future of our relationship with iraq, they sit on three prominent fault lines -- arab-kurd, arab-persian, and sunni-shiite. the of the potential to be a stabilizing or a destabilizing

influence. they have enormous economic potential. i do think we should take a long view at this point. >> thank you, senator. senator sessions? he did not have a first-round either. >> can i yield to senator gramm and my first round later? but he had time constraints? >> we have people in military custody in iraq. is that correct, secretary panetta? >> correct. >> there is one suspect from as long -- hezbollah that has plotted the murder of five or six american soldiers. do we know what will happen with

him? >> we have made our concerns known to the iraqis about the importance of detaining that individual, and others as well, that we are concerned about. >> the you agree that if he is tried in an iraqi court that justice will not be delivered in the should be tried under a military commission and in the united states? >> he would certainly find better justice here. >> i promise to be quick. general, did any iraqi commander suggest to you that they did not need it a follow-up force? did the other object to a follow-up force? >> the iraqi military leaders were universally supportive of our continued deployment. >> one last question. do you agree if we had 10,000- 12,000 u.s. forces "performing a referee duty and doing intel-

gathering training that the likelihood of iraq becoming a successful, stable state is dramatically improved? >> i am not equivocating. i do not know, senator. there is a higher likelihood that it would be stabilized, but nevertheless, there's the possibility that it would be destabilizing. >> would you recommend to the president if the iraqis would accept a treaty for us to keep troops there? >> if they approached us with the promise of protection to negotiate mission, i would want to find a way to assist them. >> thank you. senator sessions. >> that is a very significant question because it is serious

to make. this can create a great concern that, as a result of an artificial deadline, we are placing at risk a goal that we spent many years now working towards and expended a great amount of money, lives, and blood. to accelerate to fast in the last days or some artificial reason, not a core military reason, is very worrisome to me. now, that is just my perspective. i am a little worried about it. secondly, mr. secretary, you have been in the white house and you know how the world works. there has been a belief, somehow, that the state department can fill the role of the military. we do not have a big embassy

there. does this include the security personnel also? that will replace the military. forgive me, but i am just not confident that they're capable of fulfilling that role. state department people cannot be asked to go down dangerous roads. general dempsey said. down a road, salute, and go. it put on their bulletproof vest, go do the job. they go meet tribal leaders, regional officials, and that is what they do. now we're going to have a series of state department compounds, apparently? there will be some private security. would you not agree, secretary panetta, that a determined rs