turn into more money supplies. >> you have got the option to lend directly to european thanks. -- to european banks. >> domestic subsidiaries came to the discount window, we would have to treat them on an even playing field with the u.s.-only banks. we do not have any lending through the discount window. from our perspective, the u.s. taxpayers perspective, doing it through a swap is much better. it is the responsibility of the ecb to take the collateral and the side who can qualify for the loan. to decide how much is needed. we are protected that way. we are also protected in the discount window through

collateral. i think this is a better way to do it. >> we have established, you have the ability to lend directly to domestic subsidiaries. you told my colleague in december you had needed the attention with the authority to bailout european banks. do you still stand by that? >> in that conversation, i was asked and i said, we have done the swaps. they had been done before the conversation. the question was, were we going to do additional things? were we going to make loans to the imf? the answer was no. >> thank you, mr. chairman. chairman bernanke, it is good to see you. our friends on the other side of the aisle have tried to insist that it had no impact, that it

created no jobs. according to the cdo, it lowered the recovery rate in 2010 relative to what it would have been had congress not at it at all pete since that cut -- acted at all. since that time, we have created more jobs in the last year since we have in 2005. since march of 2010, 3.2 million jobs have been created. my question to you is, had we not at it and test the recovery at, with head wee -- had we not acted and passed the recovery act, would that have happened at all? there is the notion is only private markets that we should

use to help an economy or a recession tenement. are there times when you think public investment is necessary? >> to answer your question, the cbo calculated some of that on gdp and employment. that requires -- some effects on gdp and employment. we are comfortable with the conclusions. we think it did have some positive of that. -- effects. so, yes. >> shifting gears. there has also been a debate over the course of the last year over what is the best way to reduce the deficit. clearly, we all share the goal of reducing the deficit as significantly and quickly as possible.

would you agree, a weapons on the other side believe and have tried to enact only spending cuts that they deem wasteful as a strategy to deficit reduction. would you agree that wasteful spending also exists in the tax code? >> well, i think the, you are pushing me into areas that are the province of congress. i support the law of the arithmetic. if he believed the government should be doing more, you should -- if you believe the government should be doing more, you should collect to do that. if you want to keep taxes low, you have to find the spending cuts. that balance is critical. people have different visions. i do not think i am the one to adjudicate that. >> i am not asking you to make a political judgment.

would you agree with the cbo who has said the tax cuts like the 2001 and 2003 tax cuts provide the least bang for our bucks? >> i think that is debatable. they provide some demand from the point of view of putting more income in people's pockets. the other issue is how do they play into the long run and efficiency of the tax code? i have not talked about it today. i think there would be a lot of benefit of thinking about our corporate and personal income tax codes and improving those, reducing inefficient exemptions , broadening the base and so on. from a purely demand-side

perspective, tax cuts to provide income, to provide spending, they may be less in some cases. you have to think about the role of the tax code in promoting growth in the long term. >> one other quick question. would you say that deficit finance tax cuts paid for themselves? >> except in very rare circumstances. i did not think many people -- i do not think many people would argue that tax cuts fully pay for themselves. the question is whether or not they improve the efficiency or growth. >> thank you. >> thank you. thank you dr. bernanke for visiting with us today. this economic recovery has been long delayed. it remains the agile.

my constituents are frustrated. we are not doing some things here on the fiscal side of the ledger to get the economy moving. the real gdp growth was 1.7%. private sector forecasts indicate in the coming year we are going to be at two 0.2%. that is below the 3% growth trends in history. we have a jobs deficit, 8.6 million jobs lost in the recession. less than a third of those recovered. i am concerned about our country but in back into recession at this point, -- country dipping back into recession at this point. in your interaction with officials, i would like to hear from you, what preparation our fed has made for a disorderly

default by greece or some of these other countries. i have not heard any specifics. you have indicated the fed was prepared to use all the different leaguers you had. that is the general question. i would also like you to speak to the money market mutual fund market. investment income would not of -- cover operating expenses. there was an intervention by the united states into that market. could that be something that people begin demanding in washington? we bail out the money markets as a result of a disorderly default in europe? >> in terms of preparations, other than beyond the swaps,

which we discussed, the federal reserve has been operating in a supervisory capacity working with other bank supervisors to understand the exposures of banks to european nations, banks, economies, trying to help them manage the risks and reduced the risks wherever possible. the other set of tools we have in the event of a crisis, which, would have very adverse affects for our economy, no matter how prepared we are, is the modified authority that dodd-frank left us. we can first use the discount window as we always do as the backstop liquidity provision. if necessary, we can use the authority to provide additional

programs to lend to other institutions that are underfunding pressure. we would try to mitigate any resulting contagion from problems in the banking sector in the economies of europe. we pay close attention to money market mutual funds. the sec is the primary regulator there. they too have been working to reduce their exposure to europe. they have substantially reduced their exposure to the eurozone countries. all of that is good. >> if i could interject, is there a reason why the council created by dodd-frank to monitor systemic risk did not characterize -- has not characterize the money market mutual fund as a systemic risk? >> it did actually in july. it pointed to them as an area that needed more work.

imagine the bailout. the things done in 2008, the exchange stabilization fund, they were outlawed by dodd- frank. those things are not available. it is very important the money market mutual funds take the necessary action to be safe. as i said, one thing they are doing is reducing risk and exposure. they have already imposed some improvement in the regulation of these funds they are considering additional steps and consulting with the federal reserve. more might need to be done in order to ensure we do not see another run at like we did in 2008. >> i will yield back my remaining two seconds. [laughter] >> thank you for coming back. it is good to talk to you. as i said yesterday, we always

seem to talk to each other. trying to sympathize everything that has been said. i have a few questions. if we can be existing in our answers to sink in our answers. you may be repeating, -- the sink in our answers. you may be repeating. we talked about this last time. when you say you are not worried about the increase in inflation, my way of looking about this is when you are printing money or the quantity of easing and the money is piling up, for it the quantitative easing and the money -- for the quantitative easing and the money is piling up, the banks are holding on to the money. people might be stuck in money

in the mattress because they are uncertain. they are not using the money. are you not worried that when they start, when we get this government in a true free market system, the money starts picking up the loss the, aren't you worried you and not going to be able to stop that? >> we have two prague sets of tools to remove the money. one -- we have two tools to remove the money. one is to sell assets. the other is to remove -- locked up or remove the excess reserves in the banking system. when we have to raise interest rates to fight inflation, we have made it explicit whatever goal is, 2%. the markets are confident in our forecast. the private sector forecasters, they feel inflation is well

controlled and will be well controlled. we do have the tools. >> thank you. many baby boomers are retiring. 10,000 per day. the strategy to have the more elderly in our society be able to rely on less secure investments. it seems with the interest rates so low, we may be forcing our most vulnerable citizens into riskier investments. did you have a comment? >> we do take that into account. it is an issue for many people. we have to hold all the assets in the economy. a strong economy produces better returns. >> fair enough. a former federal reserve governor, he wrote an article on december 6, 2011, i am going

to quote from it and have a comment, "however well intentioned, the purchase of long-term securities, camouflaging the true cost of capital. private investors are crowded out of the market when the fed shows up as a large and powerful bidder." >> they have the best access to capital they have had in a long time. low interest rates. those who have trouble a small businesses and those who cannot access to credit. >> you mentioned canada earlier on -- access bank credit. >> you mentioned canada earlier on. >> the main reason, they have a small number of larger banks. in this case, they had better regulation. the banks did not get involved in subprimal it is.

it was one -- subprime morta gages. >> would you favor a model more like canada? >> i did not think i want to go to a small number of large banks. medium-size makes play a large role. they were right in being tougher and making sure banks do not take excessive risks. our system is much more complicated. some of the steps have been taken to provide a more systemic approach. it was less necessary in canada with a less complicated financial system. >> if you had to choose between one of the mandates, which would you rather pursue? [laughter] >> you said you had subpoena power?

in the long run, they only control inflation. price stability is a critical function. that provides a healthier economy for the long term. that being said, in the short term, in terms of supporting a weak recovery plan, like we have now. >> thank you. >> to tack on, with the statement, we know there would deliberations. you referenced -- in the next paragraph you focus on deviation. we have an expansion of the monetary base. when velocity turned back on, that is one paying higher interest on reserves must occur. what is your plan? i would argue this is made more complicated. whether that is going to occur on time.

what if the deviation is greater than the inflation deviation? with that monetary base running through a system, it is like putting a cruise missile through a goal post. how are you going to do this? how are you going to lock up on time, now that you have more emphasis? that is why these things and made more ambiguous. >> i am sure we can do it. we have the technical ability. in any situation, there is always the question of whether you tightened too early or too late. technically, we have no difficulty. i point of, the bank of england and the ecb have a larger balance sheets than we do. bernanke.k you mr. i want to -- >> thank you mr.

bernanke. i want to turn to your speech. you say, having a large and increasing level of government risk of economic consequences. i will start out here with increased debt. therefore, it reduces productivity growth. that results in more borrowing. from foreign governments, which then increases our future income devoted to interest payment, which comes back to increasing the amount of debt. i think that in a diagram will help my constituents to see why this is so important. i am intrigued by your results.

impairs the ability of policymakers to respond affectively. it is our role and our responsibility. unsustainable deficits, increased the possibility of sudden fiscal crisis. it can happen here. i think you have diagrammed that well. my point is, investors lose confidence. in the ability of the government to manage its policy. the fiscal policy piece of that is our role and responsibility. would you agree the economic growth from investments and savings -- not borrowing? >> sometimes, you have savers who want to provide funds to invest. if you are a firm, you do not

have a net of your own money to invest. you have savers. borrowing could be part of the progress. i do not think you want to get rid of borrowing in general. mortgages are how people own homes. from the federal point of view, if borrowing is so large that the deficit relative to the economy continues to grow, the feedback loop, higher interest rates, but it doesn't, the year debt, -- bigger deficits, biggert debt, it is a concern. markets can bring that forward. it is a question is, should the federal government have a long- term plan, the answer is, yes. >> can you help me with how the policies of the fed on setting the interest rates -- how will

they in fact -- affect investors? >> my comment about investors having access to capital, currently, the economy is far from full employment. there is plenty of the unused resources available to be put to work. we are not saying any evidence -- seeing any evidence that policy is crowding out private sector activity. to the contrary, to the extent we can secure growth, we can facilitate investment spending. clearly, when the economy is at full employment, deficit raise interest rates, they've reduced investment. monetary policy was too easily. it leads to inflation pressures. it is a function of with the

economy is. >> does a zero interest rate anchorage savers to save? >> it may. there are substitution affects and income of that. you may need to save more to get the san -- effects. you may need to save more to get the same return. >> i am not sure putting my money into accounts where i get a zero return is what i wanted it. -- want to do. >> suppose the fed raised interest rates. that would 30 economy back into recession. it would mean the stock market would decline. other investments would go down. it might be an increase deficits would lead to more concerned about our federal

government -- it might mean increased deficit would lead to more concerns about our federal government. we are trying to deal with the bad situation. this is one of the tools we have. >> i am not advocating a sharp increase. i am just saying there is not an incentive. >> there is normalizing policy. >> thank you for being here. i appreciate your open communication you have started. more press conferences, more communication, it is helpful. i know that is part of your strategy. i appreciate you taking that on. you mentioned about small business access to capital. that is a concern. you mentioned bank examiners are becoming more conservative in this time of instability. that is an issue. i represent oklahoma.

community bankers are concerned with the approach on compliant. the safety and soundness they have no issue with. compliance becomes a big issue. let me give you one example. the new volcker rule, that was intended to only affect big banks. our community banks have to prove they are exempt from it. you have a bank of 40 people going through pages of documents to prove they do not apply. it is adding a tremendous amount of work load that is forcing them to second-guess. when we talked about this, you said there had been some modest improvement. what improvements can we still expect? the community bankers are still not lending. they of second-guessing every bit of risk, not sure if anybody is going to come in and second- guess them. >> i will not go into safety and

soundness. your question is about compliance. many of the provisions of the franc are aimed at the biggest banks. -- of dodd-frank are aimed at the biggest banks. small banks should be stated the need. >> they do have to demonstrate it. >> what we are doing, we have a subcommittee of two governors, governor duke and of an arrest in -- and governor raskin who was the head of supervision in maryland. they are very knowledgeable about small banks. their job, working with staff, is to try to first make sure rules that it not apply to small banks are not put in force. to provide as much clarity as we can to what the small banks need to worry about.

to help us on that, we have created an advisory council. we get their feedback. i appreciate your point. i think it is progress that we are moving away from the safety and soundness. >> the think it is getting better in the next year? it is the frequency of how many small pieces. with a bank of 40 people, they cannot keep up with the frequency. >> we have a process whereby we will try to provide guidance to small banks about what parts they can throw away. >> it would be very helpful. obviously there are a number of banks out there. they of getting the brunt of this. a separate question. it is a broader question -- issue a struggle with. we have so much sovran debt.

we are continuing to add more and more soveriegn debt worldwide. at what point do we reach an sustainability? that we do not have enough capital sitting out there? there have to be some point that would be defined as unsustainable. >> at the moment, a private borrowing is way down because of the weakness of the economy. there is money out there. you are going to start seeing the crowding out. people are going to have to pay higher rates. that will have adverse affects on capital formation and productivity. i do think that from our perspective, we are the premier economy. we are the safe haven. we have a strong interest in

maintaining that. i worry less about global supply of capital and think about managing a war own need for capital -- managing our own need for capital going forward. >> every country is competing for it at a higher rate. >> there is a supply and demand. interest rates will go up. the money will be there. the rate is so high, that will be bad for the fiscal borrower. >> that would be the definition of unsustainable, we cannot get the money of the rate we need it for. are we even close to that kind of point? that is crystal ball type stuff. you have to be watching that as well. >> for countries like the united states and the u.k., rates remain low. the bond market is very forward-

looking. a lot of this depends on what the bond markets expect soveriegn financing to be over the deacdes. it is a country-by-country issue. if we can take a strong set of policies to inshore the sustainability of our fiscal situation, i am sure the funding will be there. >> thank you. the last question. >> thank you. i appreciate your time today. i remember our discussion last year. one thing i ask my staff, to read through transcripts of the two dozen six committee meeting -- 2006 committee meeting and look at the comment. is it fair to say the fed did not see the severity of the

housing crisis? >> i think the mistake was a little different. house prices were already falling in 2006. what we did not know was what is the impact going to be? we did not have a sufficient understanding of how the fall of house prices would affect the financial system. that was the linkage we did not see. yes, we did not see the prices come in. we were aware that the housing market was pulling. i talked about it in testimony. we have learned a lot of lessons. we have changed the way we do our supervision and will now focus on the interaction between different parts of the system, looking at it from its systemic. of -- a systemic point of

view. >> looking at the economic projections from last january, you projected growth of the point for% to 3.9%. at -- growth at 3.4% to 3.9%. why were you so far off? will you be that far off for the coming year? >> i would like to look at those numbers. there would two glasses of things. there were developments that were impossible to anticipate, like a tsunami in japan. the affects of the arab spring.

i think, more generally, it is fair to say that since the recession ended, we have been too optimistic about the pace of recovery. as i go back and look at the reasons, i think the two main areas, the housing sector it has not recovered the way we hoped and expected, and continued pressure in financial markets. we did not fully anticipate in 2010. >> you believe those that is where the primary reason -- those factors were the primary reason? it was an anemic 1.7%. your figures, 3.4%. for 2012, he projected 3.4%.

now you are back to 2%. pretty far off. how comfortable and confident are you on how long we will stick at this growth? >> for testing is very difficult. we do not pretend we have a crystal ball. quote we try to do is set out projections at a level where being too optimistic is equal to being too pessimistic. >> that is the range. >> we could be better. >> i would hope it would be. we have such an anemic recovery. the worst one since the war. we are millions of jobs short. i had not seen this coming out. one of the thing i want to mention, the transcripts, a big

supporter of grandparents, is there a reason you have to wait five years -- a big supporter of transparency, is there a reason you have to wait five years? >> i think it is a reasonable compromise. no other central bank releases transcript. the bank of japan does after 10 years. no other government agency to release the transcripts of confidential meetings. it has a cost to of deliberation process. the meetings became much more scripted. i think it would inhibit the discussion process and the free exchange of ideas. five years does seem to be an appropriate compromise. it is a more aggressive policy and other agencies or other central banks. >> 50 more seconds to close.

-- 15 more seconds to close. this is america. there is a bigger role than in other countries. i would appreciate it if he would step up. >> you have indulged us for two and a half hours. the hearing is adjourned. [captioning performed by national captioning institute] [captions copyright national cable satellite corp. 2012]

[indistinct chatter] [indistinct chatter] >> tomorrow morning, a look at the latest jobs numbers. the acting head of the bureau of labor statistics testifies before a committee. live coverage at 9:30 eastern on c-span to. on c-span 3, at a hearing on the decision to deny a permit for this -- construction for the keystone pipeline. we will hear from the president of the trans canada corporation.

treasury secretary timothy geithner al lead his priorities and challenges for the year ahead in a speech titled "the state of wolf creek reform -- of wall street reform." he said there are still a lot of challenges ahead. here is a portion of his remarks. this is 25 minutes. >> on the global level playing field challenge, our markets are global, more innovative than ever before. to protect our economy from risk and to provide a level playing field for firms to compete around the world, we need to have a more level playing field globally. this is important in capital, a margin for derivatives, liquidity, and leverage, as well as the broader reforms to the oversight to the derivatives market. we are working very closely with

countries around the world to discourage those countries from applying sock rules to their institutions in order to try to attract financial -- softer rules to their institutions in order to try to attract financial benefit away from american institutions. we want to build the but duff -- foundations for reform to the system. in our lease last february, we outlined a broad strategy with several options. we expect to lay out more details later this spring. we are going to begin the process of careful consultation with the relevant committees in the congress so we can lay the foundation for legislation. we have been consulting with housing policy groups.

as we made clear last year, our most pressing obligation is to work to repair the damage to the housing market and to neighborhood's most affected by the housing market. yesterday you heard the president speak to tools that we are utilizing to this end, including a proposal for more refinancing options for responsible home owners, putting forward a national standard, fix the mortgage servicing market, and the conversion of foreclosed homes into rental properties. a third priority for the year ahead, we are continuing to work to expand the availability of credit to parts of the financial system where people still find it hard to borrow. if you look across the economy, bank lending is rising, credit terms have eased, and the cost

of credit is relatively low. there are pockets of the american economy where credit is tighter than it needs to be, including in the mortgage finance and for many small businesses. as you know, we have a broad array of programs in place to improve access to credit and capital for small businesses and banks. one example, banks participating in the small business lending fund had increased small- business lending by $3.5 million in the last several months. that is a 10% increase. to give you another example, there is a small business lending survey, the most recent in november, which shows the volume of small business lending. it is up nearly 20% from a year ago. there are also efforts in congress designed to improve the

ability of small banks to access equity capital -- small businesses the ability to access equity capital. the president sent congress his legislative agenda to help move this process along. as conditions improve, we want to make sure we focus on helping small businesses get better access to capital and credit. in the housing market, many americans time to buy a home and making -- finding it hard to do so even for gse-backed mortagges. we have been working closely to take additional measures to remove unnecessary barriers. they are making some progress. we expect those two agencies to outline additional reform in the coming weeks.

i want to conclude by emphasizing the u.s. financial system is getting stronger and is now in a stronger position than it was before this crisis. we forced the larger firms to raise new capital, to reduce the size and scope of their business. and to build much stronger more conservative christians of liquidity. we move quickly to wean the, -- conservative amounts of liquidity. banks had increased common equity by more than $350 billion . we have shut down or restructured the weakest parts of our system, those that played a central role in causing the prices. banks with more than $5 trillion in assets have been shut down, acquired, or

restructured. we have been able to dramatically reduce the expected cost of the financial rescue to levels that were unthinkable in 2009. the financial aid we provided resulted in a taxpayer gain of $20 billion. the stronger positions of banks and the system is helping to support economic growth, including helping to finance the 30% increase in private investment we have seen since the growth resumed in the summer of 2009 and helping to contribute to the more than 3 million jobs created by the private sector over the last 22 months. the cost of credit has fallen since 2009. banks are lending more to businesses, up 10% over the past

six months. no financial system is in vulnerable -- invulnerable to crisis. we have a lot of unfinished business. the american financial system is much less vulnerable than it was. it is able to help finance the growing economy, rather than being a drag on overall economic growth. with that, i would be happy to take some questions. yes. >> [inaudible] [inaudible]

>> like a new era of pragmatic conversions? i think you are right about the trend. there is nothing wrong with it. the challenge is in making sure our political system can find a way to act and support, not just to make our economy is stronger. we face very tough economic challenges. those challenges are more political challenges than economic challenges. they require finding consensus on things that can help improve economic opportunity, help improve investment, long-term growth prospects, and, of

course, restore fiscal sustainability. there is a lot of talent. >> -- challenge. >> some of this has been avoided with derivatives. [inaudible] >> i do believe that if -- maybe we should step back. it is worth thinking about what caused this crisis. we had a complicated and formidable mix of factors that left us vulnerable to the crisis. part of it was because we had allowed a very large amount of risk to build up outside the formal banking system without the safeguards we put in place in the great depression to protect the economy. without the tools to contain the damage when people make mistakes.

that was a very damaging mistake. a simple way of thinking about the most important elements of this reform strategy is to not just make sure that banks run with more capital, that being the principal source, but also make sure we extend those protections to other institutions that are like banks. to make sure the market's come together, like derivatives, that is how crises spread. that is the power of contagion. those unmanaged more conservatively too. what these reforms provide is the ability to make sure that happened. we have made rapid progress in that direction in a short period of time. we have some work to do. we are in a much earlier stage.

but, if these projections had been in place, we would not have faced the risk of the severe crisis with this much damage. >> the authors of dodd-frank -- how does that work? >> that is the way it has to be. in finance, it is too much to put on legislation the burden of all the specific choices. the system we have that provides for a leopard rulemaking -- elabortae rulemaking has a lot

of strengths. it allows people to provide feedback. i think that is the great strength of our system. the rule is not going to be perfect. the system allows for much greater chance that we plan these things in a sensible place to reflect the balance. >> you mentioned and that global -- mf global. can you explain how a firm like mf global still failed after all of this work. what did they do in failing? >> it is a good question. i think it is important to recognize we are not attempting to design a financial system

that takes up the risk of failure of individual firms. that is not possible. it is not desirable. the only strategy that makes any sense, if you want to have an innovative modern financial system, is to create a system that is more resilient, more robust to the sebelius. -- those failures. mf global is interesting for two reasons. it was a significant sized firm whose failure caused more collateral damage, but it also shows that the protections that are very important -- to make sure you segregate customer accounts, protect them from the

judgment of the managers. that system was inadequate. recognize this, we are not trying to build a system that takes out the risk of failure of any institution. that would not be feasible or desirable. unless you want to live with a system run by the government. we are not prepared to do that. we are trying to make sure the largest institutions whose failures can cause so much damage to the innocent are forced to run much more conservatively and we are in a much better position today because of these reforms. just look at the ease with which, for example, the american financial institution is helping to compensate for, filled the gap left by, the withdrawal from credits of european banks.

yes. >> dodd-frank included that the president nominate a member of the federal reserve board, why has the nomination not been made yet? >> a good question. we had some challenges getting people through the senate. it is an important job. in other jobs like the fhfa. it is for that reason we are behind in making that judgment. we will come to that judgment. we need to have a full frame work of governors in place. yes. >> many states of being told that the repeal of the dodd- frank reform would help the economy. what would you say to people who are being told that? >> i would say, remember 2008,

2009, the fact that the reason we are living with this high unemployment with millions of americans have been lost their home, terrible damage, is because of the fears that caused this crisis. if you want to go back to that, you should be in favor of repeal of all. -- the law. there is no evidence to support the argument that these reforms are having a material negative effect on the ability of the economy to grow. the evidence is the opposite. he's a tough reforms would have to be tough. if you look at any measure, -- these are tough reforms where they have to be tough. if you look at any measure, the broad measures look good. that would not be true if we had

not moved so quickly to not just restructure the system, but to make sure it runs with more capital. capital is what you need. yes. >> the first of the non-bank institutions. does that indicate -- gradually, if you have plans [inaudible] >> there are two types of expectations that are important. one is financial market utilities, the other is a set of non-bank institutions, we are going to do it in two sets together, not over time. we are going to preserve -- the law gives us the ability to make sure in the future, as risk moves, we have the capacity to

rescind those judgments. a huge part of what caused a crisis was the fact that a huge amount of risk with a lot to build up outside the system. this is designed to make sure that for institutions like banks, take risks like banks, large enough to do that, we want to make sure that they are subject to a set of sensible safeguards and protections. yes. >> imagine talking to the senate banking and financial oversight committee leaders -- is that going to happen? is that more you want to see congress? >> there are two different issues ahead of us. one is to put the major

government agencies that are a substantial source of mortgage credit on a path to gradually reduce the amount of credit coming in. the second is to try to design a full frame work of institutions and laws we want to govern this system in the future and replace the current system that caused so much damage. we are going to move forward on both of those fronts this year. the letter challenge requires legislation in some areas. it is going to be a complicated process. what we are going to do is lay the foundation for consensus on those things by consulting on a broad range of options. we will do whatever we think makes sense in advancing the cause of the consensus. we have a lot of views on what we think the right talent is. we are going -- values is.

we are going to share those views. they are going to have some views too. if you look at the scale of activity on the hill, a lot of ideas come that are interesting. there are a lot of ideas from experts in the field. there has been some convergence in thinking about alternative models. as he saw, very broad consensus on the broad outline direction that we laid out. that is promising. realistically, we do not expect to legislate this year. we think that is going to take more time. it could be a surprise. i think it is unlikely. yes. >> two questions. financial sanctions come on the finance side -- [inaudible] forex swaps are a much bigger

risk than people understand. i do not know if you are familiar with that argument. >> before i forget that, let me answer. i did not share that view. nobody is more concerned about that risk than me and the institutions including the fed that are charged with trying to make sure that they bring about these protections. i do not share that view. but i, as you know, we are working hard and carefully to make sure that we deliver on those commitments, to make sure we have a broader set of safeguard oversights. what is your second question? >> some of the smaller nations -- [inaudible] keep them in mind with new sanctions on iran in oil --

iranian oil. all three. the negotiations with some of the smaller countries. have you been involved in these talks? saudi arabia, a day going to step in? >> there is a range of complicated choices. if he listened carefully to what countries around the world are saying, you are saying -- seeing promising evidence of movement by the major importers of the money in oil -- of you are also seeing very substantial effort collective late to help tighten the sanctions. we're going to keep at it.

i think the broader art is encouraging. >> did you announce additional details on the program? they had some additional incentives. it sounded like they were not so enthusiastic about sixth if they were to reduce principles. the measure to reduce its >> they are working with us and still open to examining their

the economic case for where the reduction makes sense not just for the homeowner but for the taxpayer. we are looking very carefully at their models. they're working closely on this. we're going to keep working on that. they design a law they gave a new authority to make them fully independent. we do not have the power to compel them to act. we can try to help explain why it is in the interest of the player. we will try to do that. in the mortgage market today,

even though we have these institutions by the government playing a very important critical role in making sure it is opened, they have been very successful in helping more interest rates come down to the low levels. it is still true that for some americans the lenders are pretty tighter conditions teheran you could say that is good news. it creates an opportunity for us to remove the things that helped contribute to that. we spent a lot of time on it for its parent thank you.

nice to see you. [captioning performed by national captioning institute] [captions copyright national cable satellite corp. 2012] >> for the last 60 years, every president since dwight attended thes national prayer breakfast. president obama talked about faith politics. that is next on c-span. and the presidential campaign trail, he was endorsed by donald trump. on capitol hill, republican lawmakers criticized eric holder over his handling on the gun smuggling investigation. our guests will be two members of the house financial-services committee.

they will take your questions about president obama's housing. it is live on c-span every day at 7:00 a.m. eastern. >> president obama attended the national prayer breakfast and spoke about the link between trade and public policy. this annual event is hosted by the fellowship foundation. [applause]

thank you thank you so much. >> thank you. please, please, everybody have a seat. well, good morning, everybody. it is good to be with so many friends united in prayer. and i begin by giving all praise and honor to god for bringing us together here today. i want to thank our co-chairs mark and jeff; to my dear friend, the guy who always has my back, vice president biden. all the members of congress -- joe deserves a hand -- all the members of congress and my cabinet who are here today; all the distinguished guests who've traveled a long way to be part of this. i'm not going to be as funny as eric but i'm grateful that he shared his message with us. michelle and i feel truly blessed to be here.

this is my third year coming to this prayer breakfast as president. as jeff mentioned, before that, i came as senator. i have to say, it's easier coming as president. i don't have to get here quite as early. but it's always been an opportunity that i've cherished. and it's a chance to step back for a moment, for us to come together as brothers and sisters and seek god's face together. at a time when it's easy to lose ourselves in the rush and clamor of our own lives, or get caught up in the noise and rancor that too often passes as politics today, these moments of prayer slow us down. they humble us. they remind us that no matter how much responsibility we have, how fancy our titles, how much power we think we hold, we are imperfect vessels.

we can all benefit from turning to our creator, listening to him. avoiding phony religiosity, listening to him. this is especially important right now, when we're facing some big challenges as a nation. our economy is making progress as we recover from the worst crisis in three generations, but far too many families are still struggling to find work or make the mortgage, pay for college, or, in some cases, even buy food. our men and women in uniform have made us safer and more secure, and we were eternally grateful to them, but war and suffering and hardship still remain in too many corners of the globe.

and a lot of those men and women who we celebrate on veterans day and memorial day come back and find that, when it comes to finding a job or getting the kind of care that they need, we're not always there the way we need to be. it's absolutely true that meeting these challenges requires sound decision-making, requires smart policies. we know that part of living in a pluralistic society means that our personal religious beliefs alone can't dictate our response to every challenge we face. but in my moments of prayer, i'm reminded that faith and values play an enormous role in motivating us to solve some of our most urgent problems, in keeping us going when we suffer setbacks, and opening our minds and our hearts to the needs of others.

we can't leave our values at the door. if we leave our values at the door, we abandon much of the moral glue that has held our nation together for centuries, and allowed us to become somewhat more perfect a union. frederick douglass, abraham lincoln, jane addams, martin luther king, jr. , dorothy day, abraham heschel -- the majority of great reformers in american history did their work not just because it was sound policy, or they had done good analysis, or understood how to exercise good politics, but because their faith and their values dictated it, and called for bold action -- sometimes in the face of indifference, sometimes in the face of resistance.

this is no different today for millions of americans, and it's certainly not for me. i wake up each morning and i say a brief prayer, and i spend a little time in scripture and devotion. and from time to time, friends of mine, some of who are here today, friends like joel hunter or t.d. jakes, will come by the oval office or they'll call on the phone or they'll send me a email, and we'll pray together, and they'll pray for me and my family, and for our country. but i don't stop there. i'd be remiss if i stopped there; if my values were limited to personal moments of prayer or private conversations with pastors or friends.

so instead, i must try -- imperfectly, but i must try -- to make sure those values motivate me as one leader of this great nation. and so when i talk about our financial institutions playing by the same rules as folks on main street, when i talk about making sure insurance companies aren't discriminating against those who are already sick, or making sure that unscrupulous lenders aren't taking advantage of the most vulnerable among us, i do so because i genuinely believe it will make the economy stronger for everybody. but i also do it because i know that far too many neighbors in our country have been hurt and treated unfairly over the last few years, and i believe in god's command to "love thy

neighbor as thyself." i know the version of that golden rule is found in every major religion and every set of beliefs - from hinduism to islam to judaism to the writings of plato. and when i talk about shared responsibility, it's because i genuinely believe that in a time when many folks are struggling, at a time when we have enormous deficits, it's hard for me to ask seniors on a fixed income, or young people with student loans, or middle-class families who can barely pay the bills to shoulder the burden alone. and i think to myself, if i'm willing to give something up as somebody who's been extraordinarily blessed, and give up some of the tax breaks that i enjoy, i actually think that's going to make economic sense.

but for me as a christian, it also coincides with jesus's teaching that "for unto whom much is given, much shall be required." it mirrors the islamic belief that those who've been blessed have an obligation to use those blessings to help others, or the jewish doctrine of moderation and consideration for others. when i talk about giving every american a fair shot at opportunity, it's because i believe that when a young person can afford a college education, or someone who's been unemployed suddenly has a chance to retrain for a job and regain that sense of dignity and pride, and contributing to the community as well as supporting their families -- that helps us all prosper. it means maybe that research lab on the cusp of a lifesaving discovery, or the company looking for skilled workers is going to do a little bit better, and we'll all do better as a

consequence. it makes economic sense. but part of that belief comes from my faith in the idea that i am my brother's keeper and i am my sister's keeper; that as a country, we rise and fall together. i'm not an island. i'm not alone in my success. i succeed because others succeed with me. and when i decide to stand up for foreign aid, or prevent atrocities in places like uganda, or take on issues like human trafficking, it's not just about strengthening alliances, or promoting democratic values, or projecting american leadership around the world, although it does all those things and it will make us safer and more secure. it's also about the biblical call to care for the least of these -- for the poor; for those at the margins of our society. to answer the responsibility we're given in proverbs to "speak up for those who cannot

speak for themselves, for the rights of all who are destitute." and for others, it may reflect the jewish belief that the highest form of charity is to do our part to help others stand on their own. treating others as you want to be treated. requiring much from those who have been given so much. living by the principle that we are our brother's keeper. caring for the poor and those in need. these values are old. they can be found in many denominations and many faiths, among many believers and among

many non-believers. and they are values that have always made this country great -- when we live up to them; when we don't just give lip service to them; when we don't just talk about them one day a year. and they're the ones that have defined my own faith journey. and today, with as many challenges as we face, these are the values i believe we're going to have to return to in the hopes that god will buttress our efforts. now, we can earnestly seek to see these values lived out in our politics and our policies, and we can earnestly disagree on the best way to achieve these values. in the words of c.s. lewis, "christianity has not, and does

not profess to have a detailed political program. it is meant for all men at all times, and the particular program which suited one place or time would not suit another"" our goal should not be to id who is infallible, not us. michelle reminds me of this often. so instead, it is our hope that people of goodwill can pursue their values and common ground and the common good as best they know how, with respect for each other. and i have to say that sometimes we talk about respect, but we don't act with respect towards each other during the course of these debates. but each and every day, for many in this room, the biblical injunctions are not just words,

they are also deeds. every single day, in different ways, so many of you are living out your faith in service to others. just last month, it was inspiring to see thousands of young christians filling the georgia dome at the passion conference, to worship the god who sets the captives free and work to end modern slavery. since we've expanded and strengthened the white house faith-based initiative, we've partnered with catholic charities to help americans who are struggling with poverty; worked with organizations like world vision and american jewish world service and islamic relief to bring hope to those suffering around the world. colleges across the country have answered our interfaith campus challenge, and students are joined together across religious lines in service to others. from promoting responsible fatherhood to strengthening adoption, from helping people find jobs to serving our veterans, we're linking arms with faith-based groups all across the country. i think we all understand that

these values cannot truly find voice in our politics and our policies unless they find a place in our hearts. the bible teaches us to "be doers of the word and not merely hearers." we're required to have a living, breathing, active faith in our own lives. and each of us is called on to give something of ourselves for the betterment of others -- and to live the truth of our faith not just with words, but with deeds. so even as we join the great debates of our age -- how we best put people back to work, how we ensure opportunity for every child, the role of government in protecting this extraordinary planet that god has made for us, how we lessen the occasions of war -- even as we debate these great issues, we must be reminded of the difference that we can make each day in our small interactions, in our personal lives.

as a loving husband, or a supportive parent, or a good neighbor, or a helpful colleague -- in each of these roles, we help bring his kingdom to earth. and as important as government policy may be in shaping our world, we are reminded that it's the cumulative acts of kindness and courage and charity and love, it's the respect we show each other and the generosity that we share with each other that in our everyday lives will somehow sustain us during these challenging times. john tells us that, "if anyone has material possessions and sees his brother in need but has no pity on him, how can the love of god be in him? dear children, let us not love with words or tongue but with actions and in truth." mark read a letter from billy

graham, and it took me back to one of the great honors of my life, which was visiting reverend graham at his mountaintop retreat in north carolina, when i was on vacation with my family at a hotel not far away. and i can still remember winding up the path up a mountain to his home. ninety-one years old at the time, facing various health challenges, he welcomed me as he would welcome a family member or a close friend. this man who had prayed great prayers that inspired a nation, this man who seemed larger than life, greeted me and was as kind and as gentle as could be. and we had a wonderful conversation.

before i left, reverend graham started praying for me, as he had prayed for so many presidents before me. and when he finished praying, i felt the urge to pray for him. i didn't really know what to say. what do you pray for when it comes to the man who has prayed for so many? but like that verse in romans, the holy spirit interceded when i didn't know quite what to say. and so i prayed -- briefly, but i prayed from the heart. i don't have the intellectual capacity or the lung capacity of some of my great preacher friends here that have prayed for a long time. but i prayed.

and we ended with an embrace and a warm goodbye. and i thought about that moment all the way down the mountain, and i've thought about it in the many days since. because i thought about my own spiritual journey -- growing up in a household that wasn't particularly religious; going through my own period of doubt and confusion; finding christ when i wasn't even looking for him so many years ago; possessing so many shortcomings that have been overcome by the simple grace of god. and the fact that i would ever be on top of a mountain, saying a prayer for billy graham -- a man whose faith had changed the world and that had sustained him through triumphs and tragedies, and movements and milestones -- that simple fact humbled me to my core. i have fallen on my knees with great regularity since that moment -- asking god for guidance not just in my personal life and my christian walk, but in the life of this nation and in the values that hold us together and keep us strong.

i know that he will guide us. he always has, and he always will. and i pray his richest blessings on each of you in the days ahead. thank you very much. >> businessman donald trump endorsed mitt romney. last year mr. trump had talked about a possible run for

president, either as independent or republican. >> thank you very much. it is a great honor for me. as everybody in this country knows, our country is in serious, serious trouble. whether it be opec, or the opec nations, or china, or anybody we do business with throughout the world, they take advantage of us, they laugh at us, they can't believe their good fortunes. i knew these people, and they can't believe what they are getting away with. though we really have an opportunity to do something great for the country. just a little while ago, i didn't even mention this, but the cbo chief in washington announced that unemployment is going up to 9.2 percent by sometime in january. thet's going to go up, and growth rate is going to be at about 1 percent. so this just came out, not so good news. it's my honor, real honor, and

privilege to endorse mitt romney. [cheers and applause] and by the way, this is a great couple. you look at this couple-but mitt is tough he's smart, he's sharp, he's not going to allow bad things to happen to this country that we all love. so governor romney, go out and get them. you can do it. [applause] >> there are some things you

can't imagine happening in your life and this is one of them. being in donald trump's magnificent hotel and having his endorsement is a delight. i'm so honored and pleased to have his endorsement and of course i am looking for the endorsement of the people of nevada. [applause] donald trump has shown an extraordinary ability to show how our economy works, to create jobs for the american people. he's done it here in nevada, he's done it across the country, he understands that our economy is facing threats from abroad, he's one of the few people who stood up and said, you know what, china has been cheating. they've taken jobs from

americans, they haven't played fair. we have to have a president who will stand up to cheaters. we believe in free trade and free enterprise but we don't believe in allowing people to cheat day in and day out. i'm going to work very, very hard to make sure the people in this country that that just being projected by the cbo. their analysis of what's going to happen in the future of america is driven by the policies from a president who's failing. he's frequently telling us that he did not cause the recession, and that's true, but he made it worse. and he made the recovery long and tepid. the people here in nevada are suffering. so many people have their homes under water, it's extraordinary. and nevada leads the nation in a very negative way, which is if you look at foreclosures of the last 90 days, nevada is number one in the nation. this is a very tough time for the people of nevada. and i want to do everything in my power to get this economy going again. so people can be in homes they can afford, so people can come here for tourism, so the american people can have rising incomes again, so we can make sure america stands strong around the world.

we have a president who may be a nice guy, but he is way over his head. he does not understand what it takes to get america working again. and i do. i spent my life in the private sector, not quite as successful as this guy, but successful nonetheless, sufficiently successful to understand what it takes to get america to be the most attractive place in the world for innovators, entrepreneurs, and business and job creators. i want america to be the place where people want to come and grow. and i will use all my energy to get america working again, to help the people of this country to have rising incomes and good homes that are worth something again. so i want to say thank you to donald trump for his endorsement. it means a great deal for me to have the endorsement of mr. trump and people across this country that care about the future of america. i think it's time for us to recognize we can't keep going down the road we're on. we have to dramatically change course.

we have to restructure the way the government interacts with people. our government is too big, it's too intrusive, it's placed too great burdens on people of this country. i will dramatically change the way this country is working. i'll also stand up for our friends abroad and make sure america remains the shining city on a hill. thank you so much for your help and your endorsement today, and i look forward to seeing you on the trail. [captioning performed by national captioning institute] >> a couple of people i should mention, the lieutenant governor has been chairman of my efforts in this state and i appreciate that. governor and first lady, please stand up. i look forward to seeing you all out on the trail. i need every vote i can get. thank you. [applause] ♪

at republican candidates campaigned throughout nevada today which has the caucus on saturday. next week, colorado and minnesota will hold party caucuses. primary voters go to the polls in missouri. at the end of the month, arizona and michigan hold primaries. then washington will have the presidential caucuses on march 3. for more information go to c- span.org/campaign [applause] >> [laughter] [applause] -- c-span.org/campaign2012. >> we kept us close first in the nation. my leadership will and the obama

era and began a new era of republican prosperity. >> there is a mess in washington that they have created. they have given us a lousy budget. they have given as a lousy recession. this is grass roots. people are beginning to realize that the problem is too much government. we been more personal liberty. >> if you are prepared to do what it takes to make sure that we change the direction and not just the presidency but the congress, the bureaucracy, the judges, and the policies, so that the entire system gets on the right track so our children and grandchildren can have a better future, and this is how big the gap is pierre >> follow the candidates as they me with -- how big the gap is. >> follow the candidates as they meet with voters.

>> the head. >> you can use our web site to view recent video. next, attorney general eric holder is questions about his handling of the investigation into the bureau of tobacco and alcohol is fast and furious program. it is shut down after the death of a border security agents. >> the committee will come to order. please close the outside doors.

americans have a right to know that the money washington takes from them is well spent. americans deserve an efficient, effective government that works for them. our duty on the oversight and government reform committee is to protect these rights. our solemn responsibility is to hold government accountable to taxpayers because taxpayers have a right to know what they get from their government. our job is to work tirelessly in partnership with citizen watchdogs to deliver the facts to the american people and bring genuine reform to the bureaucracy. i will now recognize myself for an opening statement. today we are joined by the attorney general of the united

states for a matter that this committee has invested in more than a year in research. in november of 2009, fast and furious opened. in december 2009, va meets with the atf and gets info on fast and furious targets. in so they could well have ended the operation. on january 6, 2010, fast and furious becomes in fact a joint exercise. on march 15, 2010, the first federal wiretaps are issued in this case. december 15, 2010, ryan terry is murdered with weapons found at the scene that came from fast and furious. an january 27, senator grassley first asked the department of justice about fast and furious, and within days, we are given a false statement of facts, denying that guns were ever

allowed to walk. within days of that, we began to note that fast and furious was going to be difficult. that was more or less groundhog day a year ago. today is groundhog day again. this committee has lost its patience to wait longer. we will not wait until next groundhog day to get answers for the american people for brian terry and four others. on march 3, john dodson goes public. agent dodson is here today. he, too, deserves to have this

nightmare of uncertainty of having the temporary assignment of not being allowed to do the job for which he has dedicated his rear put behind him. on october 11, after months and months and months of this committee trying to get further voluntary cooperation, we issued subpoenas for documents. today, we have been told to things. first of all, they are difficult and time-consuming to give us, and yet 10 times as many documents were provided to the inspector general. more than three times as many people have been able to be interviewed by the inspector general. during that time, whistle- blowers have consistently brought us additional information. that information allows us to glean more than most of the documents we have received through discovery. the minority can say what they want an issue the opinions they want, the memos they want.

they have been absent from this, and i am disappointed for that. this is a legitimate requirements of this committee to get to the bottom of it and to get genuine change so this cannot happen again. and i repeat, the genuine change, the safeguards, the protections that were not there, apparently, before, so this cannot happen again. mr. attorney general, as we go for questioning, my question will be when is the primary investigative committee of congress, of the u.s. house, going to be allowed to have the same access that your own, essentially self-appointed inspector general has question marks the 12,000 people of the inspector general's office throughout the government are important, and we expect them to be respected and we expect them to receive information. but the 70 men and women that work for the majority and that

30 or so that work for the minority are very small fraction of that. we ask very little government by comparison to what the internal controls historically and always will ask for. our budget is less than 1/20 of what the inspector general's office is. we are not an agency that can ask for vast amounts of documents. we have asked you for documents, and if you look at the totality of government, we have asked for very little compared to the ig office. it is our opinion that we have not gotten the need for over managing and redacting in careful looking by teams of lawyers have gotten in the way of the legitimate speed with which we should get that. we are going to ask you many things today. hopefully you came prepared to

know a great deal about fast and furious. the important things i am going to ask today are, what can you do to bring this to a close? what can you do before the ig completes her investigation to allow the american people to see change that tells them this is no longer going on and it will not go on in the future? before i recognize the ranking member, it is this majority of the committees to believe that this is an operation that included reckless behavior at atf, failure to push harder and four more by dea and the fbi, u.s. attorney a clearly did not do his job in a way that anyone should be proud of. we now have adjusted to permit

official who has taken the fit. we have moved up a ways, and all those people should be ashamed of that ryan terry is dead because they did not do as good a job as they should. kenneth nelson has said publicly and privately that he bears a great deal of that blame. the point here today is, we want to know how justice will oversee every local operation, every state, every one of the very agencies that are either under your authority or in a joint task force become under your authority, how you will ensure for the american people that this will not happen again, or at least the systems are in place to give us the confidence that it is much more unlikely to happen. those are the items that i come here today, ask you to come here today, and i appreciate you being here voluntarily, to answer. i hope we would get the answers and the commitment today that

we ask for. >> thank you very much, mr. chairman. i want to welcome the attorney- general today. mr. chairman, when the committee started this investigation almost a year ago, you and i made pledges to the family of agent brian terry to find out what led to the release of hundreds of firearms to criminal networks on both sides of the border. we pledged to follow the facts wherever they may lead and provide the public with answers. mr. chairman, i want to of knowledge your efforts here, and over the past year, we devoted incredible amounts of time, money, and energy to investigating this issue. we interviewed 22 witnesses, including senior officials at the department of justice and atf. we also reviewed thousands of pages of documents and we had four full committee hearings on this very topic. because of our extensive work,

we have had concrete results. the committee has exposed a five-year pattern of gun walking operations run by the phoenix division of the atf, the arizona u.s. attorney's office. more importantly, we have put a stop to it. this is a significant accomplishment, and i commend you for it. in addition, we can now explain to the public how this series of reckless operations originated and evolved over the past five years. i ask unanimous consent to place into the record a report i sent to members earlier this week. >> without objection, so ordered. >> this 95-page report called fatally flawed, five years of gun walking in arizona, provides a detailed and comprehensive account of what we learned in our investigation.

it documents how suspects in 2006 and 2007 barricaded more than four hundred 50 firearms during operation wide receiver as atf agents who knew they had probable cause chose not to make arrests in order to build bigger cases. as one field agents said at the time, "we want it all." it documents the case in 2007 in which suspects purchased 200 firearms and atf failed repeatedly to coordinate interdiction with mexican officials. despite alerting then attorney general mukasey about the spelled operations, they continue. it documents a case in 2008 in which atf agents watched in real time as suspects who were part of a trafficking ring that

bought more than 100 firearms pack weapons into the backseat of a car and drove them across the border. it documents operation fast and furious, during which the same atf special agent in charge of the phoenix steel division in all three previous operations, take an order from the deputy director of atf to shut down the operation. as the agent stated, "i don't like headquarters driving our operation." instead, field agents continue to encourage gun dealers to sell firearms suspects for months. there are several things are investigation did not find. we found evidence that agents or prosecutors in arizona acted in bad faith. they sincerely wanted to put away gun traffickers and higher

level targets. in pursuit of that goal, however, lots of predictable collateral damage by letting guns walk. contrary to many unsubstantiated allegations, the committee retained no evidence indicating that the attorney general authorized on walking. none of the 22 witnesses we interviewed claimed to have spoken with the attorney general about the tactics used in operation fast and furious before this controversy broke. mr. chairman, although you deserve credit for exposing these operations over the last five years, we part ways in what we should do next. you now appear intent on escalating the controversy and promoting unsubstantiated allegations in a campaign that looks more like an election year which taught at an even- handed investigation. this is the sixth time the attorney general has testified on these issues. in contrast, you have never

once called the former head of the atf to testify at a public hearing, even though atf was the agency responsible for these reckless programs. although attorney general holder has answered questions repeatedly, he refused to even interview former attorney general mukasey. when i was the starting as a lawyer some 37 years ago, the senior partner in the law firm said to me, young man, you have to take the facts as you find them. you cannot manufacture them. now that we have the facts, i hope that we can put aside the politics and the rhetoric and focus on concrete reforms to ensure that this never, ever, never happens again. with that, i yield back.

>> i thank the gentleman. i will now recognize myself for five minutes. i am sorry, i am a little off on that. to be honest, i just thought i would respond to a few of your things, that will wait. mr. attorney general, we are pleased to have you here as the highest-ranking law official in the land, we appreciate your commitment to the time both here and in the sense that you have given. contrary to the ranking member, i believe that today will be one of the first times in which you are fully briefed and prepared to answer in detail questions exclusively about fast and furious, and i would caution both sides of the aisle to stick to the subject. we are not the judiciary committee. the attorney general is not here to answer a plethora of questions we may have about the

conduct of his office. he is not here to generally tell us about law enforcement. i will assert the gavel if someone goes on a broad expedition beyond fast and furious, and as the ranking member said, related activities including wide receiver and others. i think respect for the attorney general's time and the legitimate portion of the jurisdiction that our committee has taken requires that i ask all of you to please stick to that, particularly since the attorney general's time is valuable. pursuant to the rules of the committee, i would ask that you rise and take the oath. >> mr. attorney general, do you solemnly swear or affirm the testimony you are about to give will be the truth, the whole truth -- let the record represent an affirmative answer. thank you, mr. attorney general. in order to allow time for discussion, the committee, like

all committees, will tell you to stay within five minutes. i have no intention of picking up the gavel as long as you present what you have here today. i would ask that to the greatest extent possible, you realize that your opening statement in its written form is completely in the record and that you certainly have our permission to include material not in the record in order to further delineate prepared testimony today. with that, attorney general, you are recognized through cracks i am here today because i understand and appreciate the importance of congressional oversight and because i am committed to ensuring the highest standards of integrity and professionalism at the u.s. department justice. that is precisely what i pledged to do exactly three years ago tomorrow when i was sworn in as attorney general and it is exactly what i have done over the last three years. i dedication to the department's mission is shared by extraordinary group of colleagues, over 170,000 employees to eat each day in

office all round world worked tirelessly to protect the american people from a range of urgent and unprecedented threat from global terrorism and financial fraud, crime, human trafficking, civil-rights abuses, and more. of the last three years we have made a number of significant improvements, including policy and personnel changes that address many of the concerns that are the subject of this hearing today. a lot to discuss some of these improvements in specific terms and outline the steps we have taken to ensure that the flawed tactics in operation fast and furious and earlier operations under a prior ministration are never used again. in some of my comments today, if they sound familiar it is because this marks the sixth

time i have answered questions about this operation before congressional committee in the last year. that is start something that cannot be said enough. allowing guns to wall, whether in this administration or the prior one, is wholly unacceptable. i have been consistent on this and said it since day one. tactic of not interdicting weapons despite having the authority to do so appears to have been adopted in misguided effort to stem the number of firearms that are traffic each year from the united states to mexico. stopping the dangers low of weapons is a laudable goal, but attempting to achieve it by using improper tactics is neither acceptable nor excusable. that is why when i learned early last year about the allegations raised by atf agents involved with fast and furious, i took action. in addition to requesting an inspector general's investigation, i order that a directive be sent permitting the

use of such tactics. there have been important personnel changes in the department. and bought reformer reflecting lessons we have learned from operation fast and furious have been implemented. today i want to reaffirm my commitment to ensuring that these blog tactics are never used again. i reiterate my willingness to work with congress generally and with this committee more specifically to address the public safety and national security crisis along our southwest border that has taken far too many lives. congress has legitimately saw answers to questions about law enforcement operations wide receiver and fast and furious. i colleagues at the board of justice have worked diligently to provide those answers. in addition to my frequent testimony before congress, i have answered and am continuing

to answer questions that have been submitted for the record during previous hearings. the department has also responded to more than three dozen letters from members of congress and facilitated numerous witness interviews. you have also submitted are made available for review some 6000 four hundred pages of documents to congressional investigators. this has been a significant undertaking court justice department's employees and our efforts in this regard remain on going. we have also brought a congress with virtually unprecedented access to internal documents to show how inaccurate information was initially conveyed in a letter sent to senator grassley on february 4, 2011. these documents show that the park officials relied on an affirmation provided by supervisor from the relative components in the best position to know the facts. we now know that some of the information they provided was inaccurate. we understand that in subsequent interviews with congressional investigators, the supervisors stated that they did not know at the time that the information they provided was inaccurate. in producing internal communications regarding the

grafting of the letter, the department made a rare, ltd. exception to longstanding executive branch policy. this decision reflected unusual circumstances and allow us to respond and most comprehensive way possible to congressional concerns and the departments of concluded that information in the letter was inaccurate. the documents reduced have answered the question of how that letter came to be drafted and put to rest questions of any intentional effort to mislead. all of our communications to congress should be accurate, and that is the standard i expect the department to meet. at my direction, the deputy attorney general has instituted new procedures to increase safeguards in this area. as i testified a previous hearing, the department does not intend to produce additional deliberative materials. i want to emphasize deliberative materials about the response to congressional oversight or a media request that -- this decision is consistent with a longstanding approach taken by the department and about democratic and republican administrations and reflects

concerns for the constitutionality of separation of powers. robust internal communications would be chilled and the executive branch's ability to respond to oversight request would be impeded. for both branches, this would be an undesirable outcomes. the brokerage functioning of the separation of powers requires that executive branch officials have the ability to communicate confidentially as they discuss how to respond to inquiries from congress. i want to note that the separation of powers concerns are particularly acute here because the committee has saw information about open criminal investigations and prosecutions. this has required a permit officials on how to accommodate -- also ensuring that critical ongoing law enforcement decisionmaking is never compromised and this freak from even the appearance of political influence.

such candid internal deliberations are necessary to preserve the independence, integrity, and effectiveness of the department's law enforcement activity and would be chilled by disclosure to congress of such materials. just as we have work to accommodate the committee's legitimate oversight needs, i trust the committee will equally recognize the executive branch constitutional interests and will work with us to avoid further conflict on this matter. the committee is keenly interested in policy changes that the department has undertaken in the wake of operation fast and furious. the atf, which is now under the leadership of acting director todd jones has implemented a number of key reforms and critical oversight procedures to prevent such a flawed operation from occurring again. these reforms are numerous and include a number of things. i am pleased to report that under the leadership of the department's criminal division, we have bolstered the crime- fighting past the on both sides of the u.s.-mexico border.

we have done this by doing a number of important things as well. this is an important start, but we have to do a lot more. no one knows this better than the members of our nation's law enforcement community, including the atf agents to testify before this committee last summer. not only did these agents bring the inappropriate and misguided tactics of operation fast and furious to light, they also sounded the alarm for more effective laws to combat gun trafficking and include public safety. these courageous agents explain that atf's ability to stem the flow of guns from the united states into mexico suffers from lack of effective enforcement tool. members voted to keep law enforcement in the dark. individuals can purchase multiple semiautomatic rifles and shotguns in gun shops along our southwest border states. in this new year, i hope that we can or together to provide law enforcement agents the tools that they say they desperately need and that they have

requested to protect our citizens and insure their own safety. incidents of violence against law enforcement officer or approaching highs level we have seen in nearly two decades, even though by crime is down overall. that is simply unacceptable, and the justice department is committed to turning back the rising tide and protecting those who serve on the front lines. we have designed and implemented comprehensive new training initiatives to bribe law- enforcement leaders with the information, analysis -- to provide law enforcement leaders the information they need to respond to threats. that me be clear. nothing is more important than ensuring the safety of the great lawn for professionals who put their lives at risk for us each and every day. but we cannot make progress we need and that the law enforcement partners we have deserve without your assistance and without your leadership. as i said before, i am determined to insure the are were shared concerns about these flawed law enforcement operations leads to more than just worn out washington games

and cynical finger-pointing. the department just to stand ready to work with you, not only to correct the mistakes of the past but also to strengthen our law enforcement capacity in the future. thank you. >> before i begin my questioning, would you agree to release to us legal opinions on the constitutionality of the material that you have thus far refused to supply the committee could door cracks to the extent that there are legal opinions, i will look at them and to the extent they can be provided, i have no objections to that. to the extent that i can, i will make those available to you. >> i will begin my questioning by following up. mr. attorney-general, the executive branch has executive privilege. it is narrow, well-defined, there is case law. if you do not find a legitimate

basis to deny us the material we have asked for, and we will seek remedies necessary to compel. having said that, i appreciate you being here today and i don't want to waste any of yours or my time on this at this point. the scope for a couple of items here. first of all, it is reported through discover that we have received that mr. monty wilkinson may have been formed to of agent terry's murder in a timely fashion. is that true? >> i know the murder occurred december 14. i heard about probably within 24 hours of its occurrence. >> we were informed about that within 24 hours, did anyone inform you or allude to the fact that the weapons found at the scene were from fast and furious creston or >> know, i did not know about operation

fast and furious until the beginning part of 2011 after received that letter from senator grassley and at the end of january. that was about operation gun runner. i actually learned about fast and furious in february of that year. >> would you make available to us through whatever records you can find the name of the person who inform you, so that we can ascertain why that individual would not or did not tell you what was widely known almost immediately, that in fact, law enforcement allow weapons to walk, that basically these were fast and furious weapons. the emailed we have received through whistle-blower show extensively that law enforcement was aware and concerned about it. we would like to know why someone kept that from you. >> i am not sure anybody kept it from me. i found out about it in january or february of 2011 and i am not even sure how found out about it.

it might have been a letter received from senator grassley on february 9. i am not sure if it was included in there. there were certainly media reports about it in february. i am not sure exactly how found out about the term " go fast and furious." >> would it be fair from your own knowledge to said that no one did anything to stop the program after they learned what it was about? fast and furious, prior to brian terry's death. >> they both admitted that they were aware of operation wide receiver. they never connected the techniques to operation fast and furious, and as a result, did not take any action. and above the din that was a mistake. >> of want to make sure we do deal with quite wide receiver

versus fast and furious. as of today, your law enforcement authorities, did have the ability -- have the ability to see a straw purchase and follow them to the next location? in other words, that law enforcement have the ability to follow suspected gun traffickers with the weapons in their car from location to location? >> and keep them under constant surveillance? they still have that capacity. >> as far as we have been reported, every piece of evidence shows that in wide receiver, every effort was made unsuccessfully many cases, which is one of the things that concerns us, to follow the weapons. to your knowledge, was there ever an order under wide receiver to abandon following the weapons and let them walk? >> isiah leggett seymour on

quite receiver caught " -- as i have seen more on wide receiver -- >> do you know of any time that people were ordered to peel off and let the weapons walk under a wide receiver? >> i know that in the early days of the investigation, observations were made of people buying guns and decisions made not to surveil them after those purchases were made. as a result, hundreds of guns walt and there were complaints raised by people connected to the investigation about the fact that guns were walking in operation wide receiver. >> since it was never allowed to it simply let known gun buyers fall into their hands, have you taken any action to fire or discipline anyone from operation of wide receiver? >> it occurred in the prior administration.

>> we are talking about people who would trends in the transition period to your knowledge, have been disciplined anyone from wide receiver? >> no, i have not. >> have the discipline anyone from fast and furious? >> no, i have not, as yet. there have been personnel changes made at atf. revenue u.s. attorney in arizona. we have made personnel switches at atf, people have been moved out of positions. i am certainly going to wait and see what i get from the inspector general, the report we have from the majority. -- from the minority. i will be taking all that into consideration and make personnel changes as i think they are program. >> my time has expired. i will say that i don't think the minority report is going to do you a lot of good, since it seems to say that nothing happened.

i recognize mr. cummings for his round of questions. >> are respectfully disagree with what you just said. our staff worked very hard on that report. by the way, it is based upon the evidence that the majority presented. you all heard the same evidence that we heard, and we basically look at the facts as presented. mr. attorney general, i want to thank you again and i am sorry my colleagues on the other side of the aisle have made completely unsubstantiated allegations against dedicated and hardworking fbi agents, dea officials and others, and i want to thank all of them for what they do every day to protect the american public. i have to ignore the political sideshow and keep my focus on the real problem that led to these flawed operations.

as our report explains, we have no evidence that you approved gun walking. we have no evidence that you knew about it. this and can probably be said of the former attorney general. i assume that if either of you actually heard about god and walking take thuringia up if you heard about gun walking -- it either of you had heard about gun walking, you would have put a stop to it. hundreds of weapons went to criminal networks on both sides of the border because agents did not arrest suspects when they could have. i also get upset that this one on for so long. you identified four different operations in phoenix over five years, across two administrations, involving hundreds of weapons. these weapons put law enforcement agents in danger. in your written statement, noted that 177 officers lost their

lives in the line of duty last year. 70 of those debts involved firearms. as the country's chief law- enforcement officer, what is your reaction to the fact that these operations continued for so long? >> it bothers me a great deal when one sees the death toll we have seen in mexico, 40,000, 50,000 people have been killed over the last five years, 60,000 guns traced from the united states into mexico. that means they are probably substantially greater numbers and have gone into mexico. a concern have is that some point these guns will be trained on law enforcement officers, though we have seen the historic drop in the crime rate, we have seen a rise over the last two years of the number of police officers, federal enforcement agents who have been killed. i've been to far too many

funerals and had to talk to far too many widows about the death of great people who have died in the service of their country, and we have to do something about it. we have to. >> and the atf director william hoover became concerned in 2010 about the number weapons involved in fast and furious. he told us he did not know about gun walking, but he ordered an exit strategy based on his overall concerns. he told a phoenix office to end its operation within 90 days and bring indictments. but they did not do it. but did not like atf headquarters won their cases and they continued for months to encourage gun dealers to sell to straw persons without arrests. mr. ruder also told us that he never told anyone at the department of justice about his general concerns with the operation or his order for an exit strategy.

in our interviews with justice department officials, would confirm that. i understand that field agents do not like bureaucrats in washington looking over their shoulder. but how can a field office effectively ignored the directives of atf headquarters in this way, and what specific reforms are now in place, or should reconsider, to ensure federal coordination and oversight? >> there is a tension between the field and headquarters. depending on where i sit, i think greater wisdom exists in that place. we have to come up with ways in which we make clear what the policies are. after i heard about gun walking , i was very firm. i had a directive, sent out by the deputy attorney general to the field that indicated that those kind of techniques for

simply unacceptable, were not to be used by the department of justice. todd jones, the acting director at atf, has instituted a number of reforms. the report you have put out contains at the back a number of suggestions with regard to reforms. a substantial number those have been instituted by todd. among them, coming up with ways to ensure that the trafficking of guns does not occur. more levels of review have to occur. also significant is that we have to have ways that those who have concerns about 80 of operations have greater of -- ability of servicing things so that people, the leadership at atf and ultimately headquarters can take necessary, corrective actions.

>> thank you. we now go to mr. burton for five minutes. >> nice seeing you again. >> it has been a while. >> it sure has. it is very interesting, mr. attorney general. for six years, remember when you were with janet reno and the deputy attorney general, and we fought to get documents, and we had a difficult time. the center today that there are certain documents that you will not give us because of the separation of powers. we have been down the road before. and we got them, but we had to threaten that we would have a contempt citation in congress. this is not just during reno administration, but during gonzales as well. and we got the documents. so i think you are hiding behind something here that will not

stand up. so you ought to give us the documents. now we have received 6000 documents with reductions, and i know that is an old school policy. send them up here in cross out everything of relevance and let us try to figure out what it is. and you dump them on us on friday night so that the staff here cannot do anything with them unless they stay over the weekend and were 10, 12, 14 hours. i have been down that road, too. there are 93,000 documents that you are not giving this committee, and you are saying the separation of powers prohibit you from doing that. that is baloney. that is just baloney. and i have worked with you -- i have worked for six years when you were the deputy attorney general. so why don't you give us those documents? the conclusion i come to is there are some things in there that are being hidden that you don't want us to see. i don't know if it involves you

or some other atf agents or some other members of the justice department, but this committee is the oversight committee and we have every right, under the constitution, to check on what you are doing. we are supposed to oversee the executive branch, and you are part of that branch. for you to deny this committee is dead wrong, and i don't think you'll find anybody can do it. i would urge the chairman to move a contempt citation against you if you don't give them to us. now, let me just ask you a couple of questions. let patricku cunningham, the head of the criminal division in phoenix, and emery hurley, why won't you let them come and talk to the committee? why won't you let them do that? >> a couple of things. just for the record, i was only a deputy attorney general for

four years. it seemed like six. >> it seemed like longer than that for me. >> with the gentleman yield? >> i would be happy to yield. >> since mr. cunningham has now taken the fifth, i would say none of us have the direct authority, but would you make all testimony and information of mr. cunningham's immediately available to us, unredacted, so we may evaluate what you know about why he took the fifth? i yield back. >> in terms of making available, i am not sure where you get the number of 93,000 documents. the reactions that have occurred are only because there are things that are either not relevant or are protected by a grand jury secrecy rules, court orders that have sealed material. we have provided to this committee material that is

relevant and only redacted that which is necessary. with regard to the two people you talked about, mr. hurley is a line prosecutor and we never make them available. every attorney general i know has called that policy. mr. cunningham no longer works in the justice department and i don't have the ability to compel him to testify. he left the justice department this past monday. >> you ask him to leave, i guess. >> know. he had planned to leave well before he invoked the fifth amendment privilege to take a job in private practice, or at a company. >> as i understand it, the ig has a 80,000 documents and you have given us 6000. whether we are talking about 93,000 documents or 80,000, this committee has asked for them and has not gotten them. it appears as though we are

being stonewalled and there is something being hidden. have you apologized partially to the whistle-blowers who were in effect called liars by those within your own agency, when we now know they were telling the truth, and that we would not know any of this that they had not come forward? i am talking about people like john dobson who is here today. >> i have not apologize to them. i have spoken to agent dodson when the chairman gave him my and telephone number and i told him to give me a call pierre >> why don't you call him and apologize? you are the attorney general of the united states and you are in charge of these people, and they were in effect called liars, and they were telling the truth. it should be your responsibility to say i am sorry that you were called liars when you did tell the truth. >> i am not aware of them being called liars.

we tried to treat them with respect. i don't think any adverse actions were taken against any of the people who came here and testify before this committee. i would be more than glad to talk to him. i know he has had a meeting with acting director of atf and he has expressed his pulse. i am more than glad to have a conversation with him. >> i wish you would call a general -- call the gentleman. >> taking the fifth is not a cloud? >> i don't know why he took the fifth. there are a variety of reasons, not the least of which is apparently there was a report or statement by this committee that he had acted inappropriately. i don't know why he invoked the fifth amendment privilege. that is certainly his right as an american citizen. we have provided 153 documents,

387 pages of material. we will continue to look at that material and to the extent that there is information that is relevant, we will provided to the committee. >>we now recognize the other former chairman of the committee for five minutes. >> thank you very much. this committee has not obtained one shred of evidence that would contradict your testimony. not one witness, not one document, not one e-mail, and still, some suggest that you authorized gun walking in the tactics in operation fast and furious. i hope this will be the last time you have to answer this question. did you, mr. attorney general, ever authorized and walking?

>> i did not. i am from new york. i will say it that way. i would say it a different way. i will say i did not pay >> i am from new york so i would understand your accent. did you ever authorize the tactics employed in operation fast and furious? >> not only did i not authorize those tactics, when i found out about them i told the field and everybody in the united states department of justice that those tactics had to stop. that it would not acceptable and that gun walking was to stop. that was what my reaction was to finding out about that technique. >> to your knowledge, did the deputy attorney general or the

assistant attorney general ever authorized gun walking with the tactics employed in fast and furious? >> to my knowledge, they did not. >> if you had been asked to approve the walking, what would you have done or said -- approved begun walking, what would you have done was -- gun walking, what would you have done or said? >> no. there are questions you have in narcotics cases, all you going to let the drug is what. we have a spirited conversations. the notion you would let gun is absurd. it was the reason i said it could not happen. it is not our policy. anyone who does it is breaking a direct directive.

>> if you had been asked or told by atf or the united states attorney's office about the tactics in operation fast and furious how would you have acted? >> in the same way i did in early march of 2011 by telling everybody, i do not do this. this is unacceptable. it is stupid, dangerous, and not something we can ever do. >> i want to thank you for coming. thank you for your testimony. i think it is clear that the attempts to tarnish the reputation -- it is pure politics. it has a political flavor. that is unfortunate. on that note, i will yield back. >> i thank the gentleman. we now go to the gentleman from

north carolina. >> thank you. thank you attorney-general holder for being here. listening to the interview had for the former chairman, -- the insert you had for the former chairman, we are here 13 months after we found that an agent was murdered for policies you did not support. we find out you have not fired a single individual. we find out that you have not rebuked any staff members. you have not even put a letter in people's personnel file saying they acted and an agent was murdered. that is absurd. so i ask you, why had he not taken steps -- why have you not

taken steps to make sure this does not happen again? >> i have taken steps. >> you told people you were mad. that is silly. you have not taken action. you have not fired anybody. it is clear you did not enforce the policy before. you did not even know about it. it strikes me as incompetence in terms of management. >> i am not sure you understand how the justice department works. i did not express the fact i was mad. i issued a directive that says this kind of technique is inappropriate. we are still in the process of trying to determine where this policy originated. we know it started in the atf office in phoenix.

who the people were who actually approved the technique, we are still in the process of trying to work through. that is not all i have done. i have made personnel changes in regards to leadership positions. we have instituted a series of policies that a design to make sure that does not happen again. >> an agent was murdered. your action is to merge -- move people around. that seems to inconvenience people, not to rid them of federal employment. >> to the extent we find out who was involved, i will assure you that unless there is a compelling circumstances, those people will be removed. we are in the process of investigating that murder and the people who were responsible for it will be held accountable. you will hear something about that soon. >> relatively soon.

13 months later. it is 13 months after the fact. that is what i am saying. at what point a year going to take action? >> as soon as we are in a position to hold people accountable, put them in a court of law and try them. >> is that this year? >> i think that is likely this year. >> it is it in the next six months? >> i think it is in the next six months. >> dc is happening this quarter? >> is possible. >> 13 months later we have a possibility of someone being punished for an agent being killed. this is absurd. >> it is not absurd. it takes time to build a case you are going to be able to take before a jury with the high standards of proof to convict somebody.

it did not want to go in and put yourself on a time limit because critics are going to say we are not acting fast enough, lose the case, and the people responsible are not held accountable. we go into court when we think we have cases that are ready to go. i am not putting pressure on people except to do it as quickly and thoroughly as we can. >> i thank the gentleman for yielding. noted. mr. brewer is not going to be criminally indicted. when will asking about holding people accountable, we were asking about people who work for you. if you're managing style hands off or hands on? >> i think i have a hands on

style. >> if you had a hand on style, have you read any of the wiretaps -- if you have a hands on style, have you read any of the wiretaps? >> i have not read them. >> we were told, this has been reported, that he was sick to the stomach, this was approved by the office. indications are your chief deputy new about this. it comes through a criminal division at some point. the question is, is it not appropriate that he know about these wiretaps so you can know what former atf director is new. these wiretaps are believed to be -- directors knew? these wiretaps are believed to be -- this should have stopped sooner. the office of criminal division

knew or should have known. that is the thing we were asking about, holding people accountable. are you prepared to do any of that prior to the final report? you have not done any so far. >> i think you mean the inspector general's report. >> i keep confusing the two generals. i know the report. it seems to be the reason in the delay on executing on disciplinary action. >> first off, there is no indication that my former deputy was aware of the tactics that were employed in this matter until everybody became aware of them which was january or february of last year. the information, i am not, at this point, aware that those tactics were contained in any of

the wiretaps. to the extent those have been shared, that is in violation of court orders. if i find that somebody in the department of justice has shared the contents, that will be something that will have to be looked at there is a wide variety of information we can share. i am not going to go against ceiling orders. anybody who reads or estimates that material does so at their peril. >> i appreciate that. members of congress are not covered by that. members of congress are not under that order. if we receive the information from whistle-blowers, it is legitimate for us to know it and act on it. we are not covered by that federal court order.

if you want to respond? >> i think what you just said about the media and congress and court orders is incorrect. i think you at a apparel did you think that is the truth. >> we will say the release of information from out testimony of mr. nelson that was leaked to your people was also inappropriate. with that, we recognize the lady from new york. >> i would like to respond to my good friend's statement that they had not responded to the death. he responded a immediately. he has expressed his concern for the other agents that are being killed at a higher rate than ever in our history. i will not yield. not only did he do that, he took

swift action to stop gun walking, which did not happen in the prior administration, and established reform to prevent this from ever happening again. he called for, we could all help him do this, to confirm a permanent atf director. that would help more than anything. he also called for a federal firearms trafficking statute. he called for appropriate funding for the atf to do its job. these are some of the actions he has taken in response to that debt. once again, this investigation continues on its vast and curious mission to fix the symptoms rather than the cause of so much that legal gun violence on the southern border. -- so much a deadly gun violence

on the southern border. we have refused to examine the underlying problem that so heavily contributed to a series of ill-conceived, they dili flawed programs such as fast and furious. as everyone should know, fast and furious was not the first but the fourth investigation to use gun walking as a tactic. the strategy dates back to 2006, the prior administration. just to underscore how fast and curious this investigation is, is this the sixth occasion that you have been before congress? >> it is the sixth time i have testified about fast and furious. >> it is the sixth time he

testified. he handed up a list of what his responsibilities are. i would like him to be able to do. i would like to ed implementing the health and compensation bill -- ad implementing the 9 /11 health and compensation bill. an ongoing review. all of this is taking place. in your testimony, i appreciated your tribute to the courageous agents that worked in the atf. you spoke about the whistle- blowers and outrages they are. i wanted to point out -- and hell courageous they are. i wanted to -- how courageous they are. i wanted to point out one agent who called current laws

toothless. he said also it of things. do you agree there is no enforcement? law enforcement does not have the tools to crack down? >> i agree with the agent. there is a need for a statute. we need increased penalty for stock purchases. -- straw purchases. these measures that would help atf and the federal government be more effective in the fight against the flow of guns into mexico. >> after that hearing, i worked with a ranking member and also with a congressman and a congresswoman and we drafted a bill conduct. it would go -- but did a bill that would crackdown on this

conduct. we do things that are far more helpful than going on a politically motivated fishing trip, which i feel is what we are doing today. the real agenda of this investigation does not aid or honor those who risked their lives every day, working to keep american safe from gun violence. i must say, this is getting out of hand. the testimony, over 60,000 guns you said have been traced in mexico that are directly tied to having been brought in there from america. i must say, one chilling example was an advertisement that al qaeda put on the website sang, go to america, it guns, it is so easy. if your guns -- get your guns.

i want to congratulate you for your vision and mission of wanting to give law enforcement the tools to get the job done, to ban gun trafficking. >> will the gentle lady yield? >> i will. >> i join with you in believing the 2010 designate should be given an up or down vote. should be given an opportunity to be confirmed. i will note, he was not put up. no one was put up for the first two years. it is said they did not have somebody earlier. i thank you for yielding. >> i want to thank the chairman for supporting the confirmation. he can help us make that happen. >> we will do what we can. we brett -- recognize the

gentleman from utah. >> thank you for being here. i had an opportunity to ask a question in 2011. i ask if you had spoken to president obama, secretary clinton, or secretary nepal ton of. you said you had not spoken to them about fast and furious. is that true today? >> clinton, yes. >> you have spoken with her? >> i should say, no. clinton, no. i have had passing conversations with the president. >> on wednesday, the viewer 16, you issued a press release saying you had met together. a man had just been killed in mexico. there were questions about whether there had been ties.

you say you did not have any interaction about fast and furious. my question is about secretary clinton, what interaction did you have with the state department. >> i am not sure if at lower levels there was a correction. i know i have not interacted with secretary clinton. >> i was questioning whether you had had some interaction. you said, you have to understand something about the way washington works. explain that to meet in the interaction your agency has had? >> what i was trying to say, i got cut off, when people know i am going to be the subject of these hearings, six times, nobody wants to get involved in these things or dragged into it

and have some interaction or conversation be made more than it is. i understand when people do not want to talk to me about best and furious. -- fast and furious. >> you know they are withholding information from you. >> know they are not to request you just said. >> i said they did not want to have conversations with me. >> if you cannot tell the boss what is going on, you will be oblivious. >> i say the people who work under them, executive branch agencies, are providing information. >> is the justice department providing the intermission to the state department or homeland security? you cannot have been face-to- face discussions, which troubles me.

-- you are not having a face-to- face discussions, which troubles me. >> i am not afraid to come to congress. >> you can claim ignorance on the issue. that is the problem. my question is, is there an expectation there is interaction? >> there is not only an expectation, there is that interaction. i know that dhs is working with the fbi. >> what about the state department? >> state does not have as direct a role. we interact with out of it but in mexico. we talk to the state department -- of our counterparts in mexico. we talked to the state department. of it hasible of five the money, you talked about -- >> paragraph 5 of york has the money, you talked about the

border. >> through other ways in which the law enforcement components talk to one another. >> my time is so short. >> do you have a point of order? what if he asks a question, he should have an opportunity to answer it. without him being able to respond, what a we doing? >> the dead woman's point is valid. -- gentleman's point is valid. >> i asked for one additional minute. mr. attorney general, at the end of any round of questioning, within a reasonable period of time, if you feel you have been unable to answer a question, we

will give you the additional time so you may answer it. i do respect that a member may want to go onto a next question. with that, i mean no disrespect. i wanted to make that clear. our policy is to make sure that people get to make full answers. >> i would ask that without the starting of the clock, if you want to fully into that. i want to be able to pursue the follow-up question. if you want to more completely answer that. >> i am not sure where i was. >> the interaction between the department of justice and state department. >> we work with the state department counterparts on a number of things. there is an initiative which is

the umbrella way in which we operate in mexico. there is a lot of contact at lower levels. not so lower levels. i know are deputy attorney general speaks with his counterpart. >> the testimony from october 27 of this year, secretary clinton gave in the senate. she said, "i can tell you we have no record of any request for coordination. we have no record of any notice ." how is it she is saying, we have never been involved in fast and furious and you of testifying is happening on a regular basis? >> you have to look at it in context. we interact with them in a number of ways. fast and furious may not be a primary thing. we are working more closely with

dhs. those things are discussed. it might not be a primary thing that exists in a topic of conversation. >> you have 1500 weapons. we have 300 dead people. we have a dead u.s. agent. we have a press report. you have the people at the highest level sang, we do not talk to each other. we have to remain ignorant because we are going to have to testify. at the same time, you are telling me they are interacting on a regular basis. the state department is telling us it is not happening. they are saying similar things of the department of homeland security. if we are going to solve this problem, we have to solve these challenges. >> the gentleman was a time has expired. >> i am not sure -- the

gentleman's time has expired. >> i am not sure about the context of that remark. when it comes to violence in mexico -- >> can i read the question? the question that secretary clinton got. you asked a legitimate question. if you make that available to the staff so they can brief him. we will return to that of of order to get an answer. in fairness, we have given sufficient time. if you make it available to staff. with that, we go to the gentle lady from the district of columbia. >> thank you. i do not know if conversations with secretary clinton are of

major importance. i do know this, after calling the attorney-general six times book for the congress, i think the public would have expected -- six times before the congress, i think the public would have expected we would talk about a remedy. there is no remedy to give the justice department the tools they need to prosecute people. here we go again for the sixth hearing. i want to commend you for the changes you have made. the multiple changes you have made, while this matter was unfolding and the facts were coming forward, recognizing that until you get the inspector general's report, particularly considering this is the justice department that without due process would be unseemly.

you have to understand that when there is an issue like this, it was very important because of the death of an agent, there is an instant, if a committee can get hold of a high place government official, to call him as much as you can. my concern, for the attorney general who has foreign and domestic matters, that a remedy come out. we have not seen anything. i would like to go through the five years of gun walking. they all get merged. we have three years of gun walking in the bush administration, five years total. two in this administration, beginning with the arizona-u.s. attorney.

we have not had the of the kennedy to have him before us. the problem of the merged -- we have not had the opportunity to have him before us. the problem emerged but of his office. there were issues that the atf raised issues about moral objections. we do know, we have not had the opportunity to speak with him, he was briefed. he continued to allow hundreds of guns to walk across the border to mexico. the nine koreas hernandez case the rose during the bush administration -- notorious hernandez case the rose during the bush administration. the gun walking case continued. now come to this administration.

when you became attorney general in 2009, were you aware that atf had this long history of gun walking in its phoenix office? >> i did not become aware of it until the beginning of 2011. >> mr. attorney general, if every attempt at coordination, and remember, mr. hernandez was never arrested. no one was ever taken into custody. if every attempt at coordination fails, do you think the agents should have stopped of the rising further attempts -- stopped authorizing further attempts to coordinate between mexico and the united states? >> do you think they should have

allowed that? >> do you think that, given the repeated attempts of built coordination, that the agents should have stopped authorizing -- of failed coordination, that the agents could have stopped authorizing it? no of arrests being made on the mexican side. >> i think based on what you have noted, there was no basis for a continuation of gun walking. even conceptually, the notion that you would let them walk is something that i think is not a seventh technique. >> when does it become -- not a sound technique. >> when does it become gun walking? >> when you have the ability to arrest someone for fire arms transactions they have engaged in, you make a determination not

to make the address, -- arrest. you do not take any affirmative action. you allow that person who has committed an offense to simply walk away with the fire arm. that is gun walking. it is not a good thing to do. >> thank you. >> a note for the record, the attorney general has testified as to fast and furious, on november 8, on december 8, the of the previous testimony is when not on this subject of fast and furious. he was not able to answer it during that time. this is the first time before our committee. the judiciary has not taken the

lead the way this committee has. >> if i could correct the record. i did speak, the no. 5 or 6 is correct. >> the times you were asked. >> i was asked questions about fast and furious and answer those questions -- answered those questions. >> the next gentleman will be the gentleman from michigan. >> thank you. thank you for being here today. i am tempted to ask your opinion on joe paterno. it might be an interesting conversation. i would state that joe paterno reported allegations of child molestation to his superiors but did nothing else. he did not want to just does

procedure. -- jeopardize procedure. one man knew about them walking as early as april, 2010. after meeting with atf about it, he failed to follow up. joe paterno, a legend in his board, and yet, he was unceremoniously fired. weinstein continues in his current position even though fast and furious has held deadly consequences, most importantly, to an agent. my question is, what is the difference between the case of joe paterno and the justice department? >> i am not going to get into

the paternal case. i will talk about a --pterno case. i will talk about one's diet. he knew about wide receiver. he has indicated he did not know about the tactics, the inappropriate tactics, the gun walking tactics involved in fast and furious until later on. he did not connect those tactics with the ones used in wide receiver. he admitted what he did was a mistake. he has indicated he failed in not making that connection. >> and so he continues on, as do other senior officials. no consequences of significant nature at this point in time. no admission except that now when brought into the public light, that this has gone wrong, it was set up to go wrong. frankly, i believe it was set up

to go wrong in order to deal with second amendment liberties of law-abiding citizens and pushing into perceptions it was the problem of second amendment. more importantly, you overside of an agency, of a department, of leaders in a department, that have not been held accountable. >> with all due respect, the notion that this was a set up to do something about second amendment rights is absurd. the operation that was put together here was an attempt to stop the flow of guns from the united states into mexico. >> it was not affected. >> it was not. it was flawed. >> very flawed. >> i have said that from day

one. the notion this was a set up to come up with things to impinge upon the second amendment -- >> with all due respect, i would concur your mention of it impinging upon the second amendment liberties but that up. an article yesterday noted that you launched a reckoning of cia interrogations of terrorists by directing the justice department to reopen investigations closed years before. this decision was opposed by leon panetta and his seven predecessors. the article notes he made the decision without reading memos prepared as prosecutors -- by those prosecutors. you are well known for not reading memos.

you said you fail to read memos addressed to you in fast and furious. you failed to read memos related to the arizona immigration law. what does that say about your leadership and management that you continue to fail to read extremely important papers? >> the gentleman will suspend, this hearing is limited to fast and furious. i would answer you limit your answers to the management style that may relate to fast and furious. >> i disagree with that. i will respond to some of that. i am the attorney general of the united states. when it comes to deciding what

i'm going to investigate, how i am going to investigate, i take into account a wide variety of things. the decision i made to open up those matters, i was aware this was opposed. i read a great deal before i made that determination. i had access to material to other people have never had access to. i have great respect to people who put their lives on the line to protect this nation in a way -- i see a briefing every day above the great work they do. there were things done, things that were done during the course of those interrogations which were and difficult to american values and resulted in the death of certain people. that investigation has run its course. we are at a point where we are about to close those investigations. it would have been irresponsible given the new information not to

order that investigation. with regards to your more general point above me reading or not reading memos, i read those things that are brought to my attention or things i think i need to read to make appropriate decisions. i am confident the management style at have, the involvement i have is adequate to allow me to make appropriate decisions based on interpretations of a lot. i have a good step that brings to my attention those things i need to read. >> before i move on. we are speaking to your staff. the report that on numerous occasions congress has interviewed attorneys, including in the rocky flats investigation, i would ask that your staff review that so you

may correct the statement that it never happens. we go to the gentleman from massachusetts. >> indulge me if you will. our obligation is to the families of the deceased, the citizens of this country. we are charged with first find out what happened, and then once we have determined that, making sure we can work on practices so it never happens again both members of both parties -- again. both members of both parties have or to determine the facts. they have gone on about the number of interviews and documents. it also laid out in number of actions that were recommended. i know you have taken some actions and the new atf director has set up some actions. we have a couple of alternatives.

we could explore how the program began in two dozen 6 -- 2006, repeated itself in 2007, two dozen 8, 2009, but to do that, -- 2008, 2009. to do that, we would have to bring in front a former attorney general. he was the only one he knew about those programs. certainly, trying to find out more? about what happened, he would be somebody with talking to. -- worth talking to. we could explore what reforms -- what statutory changes might be involved. the majority does not seem interested in that. we could continue to chase the political agenda, trying to find

out that somebody had knowledge or authorized this operation. if that were the case, it would seem to me a good witness would be the then acting atf director. he indicated he is willing to come as a witness. he even testified, or was interviewed with staff from both parties. they asked him if he ever approved gun walking. he said he had not. they asked if he had ever been briefed the he said no. they asked if he had been aware of senior officials. he said no. he would have known about it. this is what he said, "i do not

believe i had knowledge of this specific tax 6 -- tactics until the facts were disclosed in the media. " the justice department never authorized it. he was not aware of it. he never briefed the attorney general or anyone else about it. i think that is the label information. if the information is going to be who knows what, when, and where. that was seven months ago. we can draw some conclusions and of our own as to why that testimony contradicts the assertions that the operation was approved at the highest levels. that leaves us with finding out whether or not there were any bad actions by people in high levels. mr. attorney general, did the director of atf ever raised

issues about the conduct of operation fast and furious? >> no he did not. >> do you rely on them to bring significant issues to your attention. ? >> short. -- sure. >> and a disappointed that nobody raised concerns to your attention? >> i am disappointed that other people in the department who had this knowledge and did not bring it to my attention and who admitted they made a mistake in not bringing it to my attention, the fact that gun walking existed in these operations. >> as anybody tell him accountable for not bringing those to your attention? >> he made the determination and we agreed it would be better for him to leave atf. >> thank you.

i ask consent to enter into the record the transcript of the interview. >> i object. you know that is inappropriate. >> it is inappropriate to have a witness who is not allowed to come before this committee and testify. i thought we would go to the next best thing. both parties had an opportunity to interview him and talk about issues you say our core. >> -- are core. >> i reserved. speaking on my reservation, does the gentleman believe that is the right thing to do? to make public an ongoing investigation that includes a number of officials, a situation in which an official has taken the fifth and left the justice department, to make the publicly

available -- those publicly available? >> i hope we have made the point. what is important is for you to allow him to come here and testify in public and answer the questions that have been core to the allegations you continue to make erroneously but refused to acknowledge. >> i would note, i have not called for the attorney general's resignation. i have not said he knew. i have said that people did not know who should have known things. we are a crime to find out where the figures were made other it -- we are trying to find out where the failures were made. the acting director in fact it

is callable for not knowing more what a director should know. i join with the gentleman in saying that it does concern me that somebody who is supposed to direct over 1800 individuals did not know that this involved a gun walking. remember, on february 4, well after these events, the attorney general's office gave us a document which said we never let guns what. that is of concern too. the committee is not shy about having additional hearings. the attorney general made himself available at this date. we are not saying this is the culmination. >> the interview was seven months ago. a direct quote from you, "atf

and justice is telling us this goes to the top. it goes all the way to the office of the director and the office of the attorney general. this is at the highest level of the obama appointees. quote those are allegations you are going to make. it would be important to have him come in here and testify. >> i appreciate the gentleman giving a plug. those allegations were made with in number of other false allegation. i might note, we were given statements that the atf director was viewing on an internet connection the actual purchases being made. after receiving testimony, we discovered although he inquired

about the capability of viewing these tapes, no such event occurred. this often happens in an investigation. >> i am glad you recognize that those comments are false. maybe we can move onto the business of determining what we can do. >> a follow up on what you just said. i know you are reserving. i was just wondering if there was a way we could have a portion of that document that goes to the testimony where he clearly states he never told the attorney general about fast and furious and where he said he did not know. >> i think the gentleman has done a good job of making that

available. >> i want to make sure the record is complete. the attorney general has been accused of some very unkind things. his reputation hangs in the balance. i think we have the former atf director who stated he never said anything about this. he even said he did not know about this himself. i was wondering if we could have that portion of the transcript. >> i will work with the member to find a corporate coarsens that can be made available. i might note, -- find appropriate portions and be made available. i might note, my side has quoted where he said he was sick to his stomach when he read the wiretaps and discovered what he

did not know. although it is inappropriate, i will work with the gentleman, we will hold the record open to make of corporate statements that you believe unnecessary to make the -- to make appropriate statements that he believes are necessary. >> it is why i want to make it part of the record. when he said he said at his kitchen table, i have read it, he said his stomach was in not, his point was, he did not know about it before. if he did not know about it, it is impossible for him to tell the attorney general. >> i apologize mr. attorney general. i am not going to allow this to turn into a sequence. both sides could get into testimony. i will work with the gentleman. we will return to regular order. >> thank you.

>> can i say one thing? when he said he became sick to his stomach, it was not when he was reading the wiretaps, he was reading reports of investigations. >> i appreciate that. we now go to the gentle lady who has been waiting patiently from new york for five minutes. >> thank you mr. chairman. thank you mr. holder. i want to make a couple of comments to start up. we have heard it from the other side of the aisle with regards to this being a democratic or republican issue. whether this is a political game. if this is an election year survey. -- charade. i think it is important to recognize that you need to be held accountable, or somebody

does, as to what happened. i am amazed that of all the issues that face the country, this is the issue i hear from my district so frequently about. today, i will enter them into the record, i had no fewer than 30 questions from folks who wanted to know what happened, why it happened, and who is going to be held accountable. i was taken aback by a response when you sort of declared i am the attorney general. with all due respect, yes you are. you are accountable to the folks in my district and the american people. if you will indulge me, play a recording, most importantly, we had a hearing here in june. in that hearing i asked his

mother -- we will play that. >> you would like us to ask. >> we would want to know if the net that is set to find everyone involved in his murder will be set deep enough and wide and not -- enough to encompass anyone involved in the operation fast and furious? if the guns used in the his murder or part of the operation, then we would want to know everyone in the operation who had to deal with those weapons be brought up on charges of facilitating the murder of brian terry.

>> thank you, we will ask that question. on behalf of brian terry's cousin, to what lengths has year investigation gone? will everyone in that operation that had to deal with those weapons be brought up on charges? >> we are working nell -- now, this is an ongoing investigation. it is a very sensitive time. i am not sure i can talk and all a lot about where the investigation is. i have indicated a think we are close to making some announcements. we will seek to hold accountable those people responsible for agent terry's death. with regards to people involved in the operation fast and furious, we are trying to find

out who made the determination to allow guns to walk. i am not at liberty to talk about the weapons be used -- we used in the incident. that will come out during the course of the trial. we will hold accountable the people who are involved in this investigation. one other thing, i did not mean to imply that i should not be held accountable. i also think there is a thin as component to this. i ought to be held accountable for those things that are within my area of responsibility. i should be held accountable for things that are factually correct. i am more than willing to admit mistakes when i have made them. i also think, if we are going to

get ahead here, if we are going to make progress, we need to put aside the political gotcha game and focus on matters that are serious. when one looks at the debt held in mexico -- death toll in mexico -- >> i have one more question. i did call for your resignation. i feel the department of justice, you are responsible for all of the activities. i think that you have denied, you should not be held accountable. what more could have been -- gone wrong that he would have been held accountable? the president has been quiet about coming to your defense. how many more border patrol agents would have had to die as

a part of operation fast and furious for you to take responsibility? >> the gentleman may answer. >> >> that is the kind of thing. you wonder what you are getting those kinds of calls. as a member of congress, and you know, really, is that the way you want to be seen or known? i should be held accountable for my role in whatever i did or did not do in connection with the supervision of fast and furious. i am the attorney general of the united states and i should be perhaps given some credit for the things this justice department has that under my leadership whether it deals with national security,

revitalized civil rights enforcement effort. one has to balance all of these things. i am not claiming to be a perfect person or attorney general. i get up every day and try to do the best job i can. that kind of question i think is -- i think that is beneath a member of congress. >> >> that was attorney general eric holder testifying before the house oversight committee. he appeared for nearly five hours taking questions about an atf

.

but your testimony also appointed out that there's a danger in overreacting to that in the near term in terms of the negative impact it could have on economic growth. the other strategy you've laid out is the need to nurture this very fragile economy we're in right now. so, if you could just briefly talk about some of the lessons we've learned from the european experience, recognizing that the debt crisis and early warning system, but the austerity only and immediately approach, some countries can't avoid it, like greece, because they've got themselves in a fix, but talk about the fact that an austerity-only and

immediate deep cuts, whether or not that can have a negative impact on the very fragile recovery that we're having now. >> well, the european situation is complicated. among other things, of course, they have monetary union and fiscal disunion. they don't have the same kind of situation we have here. and you're correct also that there are there are some countries by greece obviously and others that have very difficult fiscal sustainability issues, and they've tried to address those in the near term. you know, i hesitate a bit to advise my colleagues in europe, but i would cite the i.m.f. and others that point out that very slow growth or recession makes fiscal improvement more difficult, because tax revenues fall and spending automatically

rises and there are social safety nets in place. so, it's important to try to figure out what the right balance is there. and i want to be very clear. i don't want anyone to interpret me saying anything other than that this congress has a very difficult and important job to address the long-term fiscal sustainability of our federal budget. that's a critical thing. i think that even more aggressive strategies that have been pursued recently are warranted over the longer term, but i also think that that can be done in a way which is persuasive to markets and achieves those objectives, but doesn't quite jolt the recovery quite -- and it doesn't do it all at once. i think that as long as there's a credible, strong plan over a period of time and we move into

that plan, that we'll achieve most of the objectives of fiscal sustainability. we need to at least avoid doing harm. i would say do no harm is an important piece of advice i would offer you. so there is a balancing act that is important to pay attention to. >> thank you, there. bernanke. those two goals are important to be consistent. sometimes they get muddled, and i understand that sometimes people hear and interpret the need to prevent doing harm to the fragile economy now, as many we shouldn't move ahead on long-term deficit reduction. of course we should, you said. if you undermine the fragile economy, as the i.m.f., as you indicated, has warned is being done with certain fiscal policies in europe, that just creates an even bigger hole.

and as i apologize, have to leave to go to the conference on the payroll tax extension, if you could just comment on whether or not failure to extent the payroll tax consult for 160 million americans and whether failure to extend unemployment compensation for millions of americans who are out of work through no fault of their own, whether failure to do that would be a drag on what is already very fragile economic growth. >> i know you appreciate that i don't endorse individual tax and spending policy. i think that's a good approach for me to take. obviously you need to look at the whole picture. i agree with what you said before, that you can't do one and not the other. you can't say, well, we got to protect the recovery and, therefore, we just completely put aside all fiscal issues, approaches to fiscal sustainability.

you got to do both simultaneously, and you got to do both credibly. so i think it's a question of balance which is important. >> just to follow up, as i look at your g.d.p. numbers, your projected fwrothe numbers, it seems pretty clear that they assume some extension of current policy, for example, an extension of some of the, at least through the end of the year, payroll tax. i'm not saying specific numbers, but there are differences than those and c.b.o. c.b.o. had to assume current law. they had to assume we don't extend the current tax cut, and they have to assume all the tax cuts at the end of the year, including middle income tax cuts, lapse. that's one of the reasons the c.b.o. economic forecast projections are lower than yours. >> yeah. >> i thank you, mr. chairman, and thank my colleagues. >> yield the rest of time. >> yield my time, and i think he also has time of his own as well. >> so, members, he's leaving, so we're going to allow him to

finish his time and then go back. >> thank you, mr. chairman, and thank you for your testimony, just continuing along the same line of questioning. chairman ryan has expressed some concern that under certain circumstances the fed pursues a balanced approach. do you believe that the fed is having any difficulty in achieving the goals of both employment and price stability? >> well, i think it's evident, particularly on the unemployment side, we'd like to see greater progress than we've seen. on the inflation side, i'm very cognizant of chairman ryan's concerns, but at least for now we appear to be pretty close to target. i think what i would say about

that is, you know, of course we're going to have to continue to evaluate monetary policy as the new data come in, as we see how the outlook changes and so on, but i've said before, and i think it's important to emphasize that monetary policy can't do everything. it's not a panacea, and this body and others, you know, need to think about the troubled parts of the economy, places where improvements can be made, tax code or other areas, so, again, to answer your question, we're obviously not satisfied with where we are, and we look to -- and while we will continue to do all we can to meet our dual mandate, which congress has given us, we hope that all of you and the administration and like will look for alternative ways to strengthen our economy. >> and you army have the capacity to recommend to the

congress that it alter that mandate if you thought it was interfering with the objectives of the fed. >> i think it's been -- the dual mandate has worked fine. it hasn't -- we have as good an inflation record as any other central bank. i don't think it's been a major problem. so i think it's served us well. that being said, congress created the fed, congress gave us our mandate. if you determine that you want to change it, we will, of course, do whatever you assign us to do. >> and you, of course, determine how to implement that mandate, and you said, with reference to price stability, a goal of about 2%, and with reference to unemployment, did i hear you say 4.5% to 6%? 5.2% to 6%? >> the difference -- congressman, the difference between inflation and unemployment is that the fed can control inflation in the long run. we cannot control unemployment in the long run. that's determined by many other factors and labor markets and other policies.

we do not control that. so we can't set an arbitrary target. but what we can do is try to make our best guess of where the economy -- what level of unemployment the economy could sustain over a period of time. we don't have an official number, but 5.2% to 6% is the central tendency of the estimates provided by members of the fomc. >> while we would certainly be delighted to be at that range today or at the end of this year, that's still a substantial amount of unemployment, isn't it? >> certainly. we have a very high level of unemployment. we have not come remotely close to replacing the jobs that were lost in the recession. we have a very high level of long-term unemployment. i think we all agree that employment, underemployment, and people leaving the labor force and all those things are a serious problem. the problem is certainly there. >> right. and all i'm saying is that the

objective that you've set in implementing the goal -- i think i have another -- >> another five after -- >> ok. let me finish on this one point. the objective you set is not an overly demanding objective as far as unemployment is, the 5.2% to 6%. >> we'll let you answer that in the next five minutes. >> mr. chairman, thank you. so, i heard your answer to mr. van hollen before, and you said normally you don't like to give a comment with regard to policy and tax bills and the like, and i thought, really, mr. chaian? is that still your opinion? i was truly taken aback. just recently the fed issued an unsolicited white paper, if you will, on housing policy, where, if you didn't advocate for, you certainly mirrored much of the positions of this administration. so, i don't know how the two go together. on one hand you say you don't

get involved in these areas, but here you had a white paper that was not solicited from us. i know you're protective of your independence, but when you advocate for a position like that, why would you issue such a paper when we don't ask for it? >> congressman, first, the fed has a lot of interest in housing. it's important for the economy. it's important for monetary policy. we are bank supervisors, so we're interested in mortgage and lending -- >> so let me ask you this then. congress has a lot of interest in monetary policy. i guess the comparable would be for us to do a house resolution with regard to monetary policy. is this an invitation to congress that we should be issuing resolutions to what the monetary policy that the fed should be doing? if so, i'm sure a lot of members would like to engage in this. >> well, i hear lots of advice from congressmen, but -- the bottom line is we've done a lot of work on this. we've gotten a lot of requests from individual congressmen for our views and for our analysis. it was not the intent of at

per recommendations. it was not a list of recommendations at the end of the white paper. we were trying to provide pros and cons, analysis, background. i'm sorry if you think we went too far, but we try to provide that. >> but within 24 hours after that paper was out, the new york fed president was advocating for some of the positions in there. governor duke was out there advocating for positions out there. so you can't be on both sides of the issue, this is what we think, and then the fed president -- i mean, the governors are saying advocating. and it's because you're saying that members were asking your opinion, but we were asking your opinion, we certainly would have liked to have seen a white paper back when the president's colossal failure with the stimulus was going through, and we certainly would have liked a white paper at that time from the fed to say just how that would have worked out. why didn't we see the white paper at that time spelling out whether this would work and whether you advocate or didn't? >> well, again, i know you're skeptical, but we are trying very hard to avoid encroaching

on congress' fiscal responsibilities with respect to the points you made about governor duke and president dudley, they are not representing any official position of the board. they're speaking on their own recognizance. if you pay attention to the speeches that reserve bank presidents give, you know there's a wide variety of opinion, even on monetary policy. so there was no official endorsement of those positions. we are, again, trying to provide useful background. i apologize if it was misinterpreted. again, our goal was just to be helpful. >> well, i guess i would just sort of take off -- you have two mandates, in the area of employment and monetary policy, and that's a lot for the fed to be responsible for. we have fiscal policy, and we would like to retain it. you do have a responsibility where you're the owner of $1 trillion of mortgage-backed securities, right? in that position of the owner,

wearing that hat, can you comment then on the president's new proposal on the refi plan? what would the impact be as far as realized losses to the balanced sheet, if that plan was to go through? >> no, we haven't done that specific calculation, and once again, i'm not going to endorse or not endorse -- not endorse? what does it cost if we were to do that? >> there are costs as the president acknowledged. there are costs to it, and they would have been raised somehow, whether it's from a bank tax or some way. he mentioned $5 billion to $10 billion. we haven't looked at that number. we don't know if it's correct or not. there would also be cost to investors. >> well, you're the investor in this situation. you bought these things at a premium, but not to the cost to the taxpayer, but your cost. have you begun to look to see what your cost would be as it's also realized? >> no, we haven't, although i think it could be acknowledged

in that the rates of refinance have been extremely low, lower than expected over the last couple of years, and so, in some sense, that is reversing a gain that we got. but you're right. there are costs to the program, there are costs potentially to investors, and there's cost to the government potentially. >> so that would be one area we would like to have information back on. also, as a regulator, what the impact would be for banks that you regulate, what the impact would be if you increase the fees on them. i see my time is up. thank you. awe mr. doggett. >> let me return to the last question, and that is many economists would think that unemployment of 5.2% to 6% leaves many people out there hurting badly, and the economy, even though it's much, much better than where we are today. in setting your goals of trying to assure

price instability and inflation, you have not taken a drastic position on unemployment. you've tried to have, as you said, balance between the two, have you not? >> well, we are not -- there's nothing in our statement which suggests that we think the 5.2% to 6% unemployment is desirable or is a good outcome. we're just saying that given where the economy is today, that's what we think it can sustain under more normal conditions. there are many policies that congress could consider, workforce skills and other things that might affect the unemployment rate. if that changes, then we'll respond to that. >> on your estimates of what type of growth we will see in the near term in the economy that are in your testimony and the reports of the fed, what assumptions do those estimates make concerning fiscal policy and where the congress will be? i understand you're not getting into specific bills, pro and con. >> well, in order to make

forecasts, we make guesses about what congress will actually do. there's no endorsement or not endorsement involved in that. basically the c.b.o. present sort of two kind of extreme proposals. one is the current law proposal, which stumes, for example, that all the tax cuts are ended and that the doc fix is not adopted and so on. and then there was an alternative scenario which sort of took the most -- >> right. we had testimony about both yesterday. >> which assume all the tax cuts were extended and took the opposite approach. our numbers obviously are based on an intermediate level, assumes that some of these policies are undertaken, not all of them, and we try to make our best guess, but it's only staff guesses about what they

think congress may do. you know, i don't think those forecasts -- the details are particularly helpful for you. obviously you're going to try to figure out what the right thing to do is. >> with regard to an issue we've discussed wheny been here on the committee before on whether the policies of the financial community concerning risk rewards and compensation for taking excessive risk remain a problem, you've finally issued a report in october dealing with that. it indicated that there had been some improvement, but among the largest banks, there continued to be a number of problems with regard to risk taking and how that leads to reward from some of those that are taking the risk with other people's money. could you give us an assessment of what's happened since that report came out in terms of what progress is being made to deal with this issue that many of us are concerned could lead to another financial meltdown. >> well, the federal reserve

undertook, even before financial reform was passed by the congress, we undertook to look at this as a safety and soundness matter. very early on, we began working with the boards and the compensation committees of the major institutions to try to structure their compensation in ways that did not lead to more or excessive risk taking. and i think, as the report suggested, we made a good bit of progress. it's really sort of about that time of year when a lot of this information is finalized in terms of what the compensation packages are going to look like. we continue to make progress on that. we continue to work with the banks. as i said, i think that a lot of the major institutions have taken serious steps in this direction. i would point out, in addition, that beyond the actions that the federal reserve took independently, dodd-frank requires the fed and other bank

regulators to establish incentive compensation standards, and that rule-making process is underway. so that will augment and add to the guidance that we've already provided. so, we have seen progress, and we continue to work actively with the banks to -- i think in everyone's interest, to make the banks safer and reduce the risks to the taxpayer. >> does more need to be done? >> well, we continue to work on t. as we said in our report, you know, we don't think that where we need to be necessarily -- and i think that there's a lot of interesting questions. this is actually an active topic of academic research of how best to structure packages, what kinds of -- what role should options and stock payments and so on play.

so more does need to be done, but i think part of the process will be learning in our consultations are the institutions and with academics and others about what works best. of course, europeans are doing similar things in this interchange there as well. >> thank you. mr. simpson? >> thank you, mr. chairman, and thank you for being here today and for your testimony and comments. i've been a member of this committee, and i think the chairman has also, for eight years now. and for eight years, we've had economists and other experts come and tell us that we have a structural deficit problem that is unsustainable, and we need to do something about it. so far we've failed to heed the warning. we are now in a situation where i think if we don't heed the warning, there's going to be consequences that nobody is willing to accept. and the sad thing about it is that both parties, republicans and democrats, sit and demonize one another no matter what we try to do to address this problem. we call the democrats just tax and spend liberals that don't care about the economy and they show us pictures of paul ryan

pushing grandma off the cliff. unfortunately, that doesn't solve the problem. when everyone in this room, everyone listening to us and everyone on this committee knows what has to be done, we've had several commissions that have looked at what needs to be done. they all say -- almost universally that you've got to get $6 trillion in savings if you're going to have an impact on the long-term deficit of this country, whether it was simpson-bolles, the gang of six, whatever. we all p that we've got to restrain discretionary spending. we all know we've got to get entitlements under control. and we all know that we need a pro growth tax policy in this country instead of a 19th century tax code, one that fits the 21st century. we all know that. we might have some differences of exactly how to do some of these things, but we all know that the problem exists and we all know we've got to come together. what we need is an armistice between republicans and democrats to solve this problem, because if we don't, all of these other things we talked about aren't really

going to matter, are they? >> that's correct. it is, i think, striking that when the u.s. debt was downgraded by s&p last summer, it was more about -- what they cited was the political concerns about the ability of the congress to work effectively to make progress, so it's easy for me to say. obviously i recognize that politics is a tough game and that there are a lot of disagreements in congress, but obviously the more that can be done to show cooperation and collaboration on this very important issue, i think we all agree on the issue, as you say. >> i was surprised this first of january, i was in new zealand and australia and the philippines, and talking with official there and -- officials there and businesses there, i was surprised they're watching congress. they're worried about congress' inability to solve this problem, because they know the problem is going to extend to

them if we don't solve our problem here. and i was surprised that they follow us as closely as they do. let me ask you, do you believe that the general assumption that we have to get to $6 trillion in savings is the right number or a number that will stabilize our deficit and get us headed in the right direction? it's sometimes hard for us to explain to the public what could potentially happen if we don't do anything. could you paint a picture for us of what you think will happen to this economy if we don't take the steps necessary to stabilize our debt? and if we put it off for another year or another year after that, as we've been kicking that can down the road forever. >> the $4 trillion to $6 trillion was a number that was talked about for the next decade, and the idea was that achieving that would stabilize the debt g.d.p. ratio and maybe get some progress there, and i was supportive of going big, so

to speak, when we were discussing all these issues, we, the country, were discussing these issues last summer. so, yes, i think a very substantial additional attack on the deficit is needed. but the other point i would make is that the $4 trillion, the $6 trillion number is about the next decade. the biggest problems we have are beyond the next decade. they stretch out into the next 20 or 30 years as entitlement costs in particular begin to rise further and as our demographics begin to move, i guess some would say, adversely. so one thing i would urge you, as you think about these issues, is not just to focus only on the 10-year official budget window, but to think about the longer term, even beyond 10 years, because what we've seen -- i think the sample would be the social security reform that was done in the early 1980's, which is

still phasing in. the more time you give people, the slower the process, the more warning, the more likely it's going to be successful, both politically and economically. so you need to look beyond 10 years. in terms of the implications for the economy, i think the good scenario is that, you know, we have -- when the economy recovers, that we have higher interest rates, we have higher borrowing abroad, we have a slower growing economy, slower productivity gains, etc. as i discussed in my testimony, the bad-case scenario, which ultimately will happen if we don't change this trajectory, is that, analagous to what we've seen in some countries in europe, that investors will begin to lose confidence that we can manage our long-term fiscal situation and we'll see sharp movements in interest rates or loss of confidence in u.s. debt, in which case changes would have to be made,

but in a much more chaotic, rapid, and scruptive way than by doing it in a long-term, thoughtful way. >> thank you. thank you again, sir, for joining us. i cringed a little with my good friend from new jersey's portrayal. it seems to me that you are independent of congress. you're not c.b.o. you are managing the monetary system, and you are purposely an independent agency trying to insulate the notion that somehow you're at the beck and call of a particular administration or congress. my understanding is that's the structure that is in place to try and give you that independence. am i missing something here? >> well, the fed was created by congress, but congress did set us up in a way, for example, 14-year terms for governors and so on, to try to create

independence in making monetary policy decisions. we have a number of roles, including supervisory roles and so on, which bring us into contact with issues related to housing and mortgages and so on. but again, i want to be clear to this committee that our intention was to try to provide useful background, and in all cases we looked at both sides of the issue, and we recognize we have no doubt whatsoever that it's congress that has to make those decisions. >> and i appreciate that. having been here through some of the stormy weather, i think there are lessons to be learned by all of us. i think you, some of your governors, in looking at the events, i hope congress is looking at what we did or didn't do. hopefully people in the private sector. the notion that somehow we might ask the fed to come up with a report on the recovery act, i mean, there is an independent agency. it's called the c.b.o., which we set up to give us that, who produced such a report that

said that it raised real inflation-adjusted g.d.p. between point .3% and 1.9%, that it lowered the unemployment rate between .2% and 1.3%, it increased the number of employed between 400,000 and 2.4 million, increased the number of full-time equivalent jobs by between 500,000 and 3.3 million. that's an independent agency that congress set up. you may not like the answer, but asking somebody else, an independent agency, to do it is not going to get us any further down the line. i am personally struck by what my good friend from idaho said, because as usual, he's making sense, get to it, you know, deal with the notion, and i have opined in this committee and elsewhere that we know what to do, it's not that hard, that

we could do things to rein in military spending without putting us at risk, we could reform agricultural spending, we could, in fact, move to have a healthcare system that rewards value instead of volume that meets mr. bernanke's test, which isn't just in 10 years. the real test is 20 and 30 years that potentially sinks us.i am it hopeful we are able o focus on the big picture. this budget committee can look at things that actually enjoyed bipartisan support that could make a difference over the next quarter-century and not have the picture that is being portrayed today and yet today by independent experts become a eight fulfilling prophecy. i feel from the bottom of my

heart that this is something we ought to be focusing on and, in particular, the notion that we are looking at the longer-term. we live with a 10-year budget window, but the real challenges are beyond that. that is where the savings have to occur. that is where it actually gets easier, not harder. for us to bludgeon the fed -- i think you've done an extraordinary job trying to balance being more transparent in what you are doing, but not spooking people. not adding fuel to one fire or the other. i appreciate your continued patience coming year. you do it with good humor. i do not know that we have subpoena power, but i am hopeful that we can focus on the lessons

that we learned or should have learned and get to the work that mr. simpson talked about in terms of getting to it. >> it sounds like an endorsement of our budget. >> i yield back. [laughter] >> the gentleman's time has expired. [laughter] mr. campbell. >> thank you. a suggestion was made earlier bet you make policy pronouncements on housing. i am very deeply involved in trying to restructure housing finance and housing markets. as much as i personally wish that was true and that you would weigh in on the side of the proposals i have made, you and

the fed have been quite judicious in not doing that. but what you have opined on and what i would like you to say in your own words is the importance of the housing market and the housing recovery if we wished to have a robust economic recovery and job growth. would you care to comment? >> i certainly would. the reason we have a housing committee, basically, -- we are looking at this all the time. one of the main reason is the recovery has been as disappointing as it has been is that usually housing provides an important amount of the impetus to growth. not just construction, but all of the related industries and services. in this case, housing has been very weak. we have seen a few sponsors

predict positive indicators. it generally remains a very low level. the recovery in housing would be a very important boost to the overall recovery. it works through a number of the for ways, not just through construction, but by affecting the wealth of consumers and their financial well-being. the mortgage market, the problems with access to credit mean that the federal reserve's monetary policy is less effective than it would be because not as many people are taking advantage of the low mortgage rates we have tried to create. there is a lot of other implications for both borrowers and lenders. continued poor conditions in housing markets, people under water who cannot move or sell their houses.

a lot of cost in the neighborhood and household level as well. the lack of a housing recovery is one of the big reasons the recovery has not been stronger than it has. >> without advocating a specific solution, a type of light of the budget deficit, you are saying is simply not -- it is something in which we should see policy extensions? >> there should be ways to remove some of the barriers to the recovery in housing. i think there are a number of legal and administrative and regulatory barriers to housing being as strong as it should be. >> thank you. shifting gears for a second and going to europe, in the last 30 or 60 days, has eight recovery or a positive solution in europe -- is a closer or further away

in your view? we cannot control this, but if they were to have a failure of some sort over there, not well constructed or whatever, that would affect us. can you comment on what impact it would have on us. we cannot control it if they were to have some sort of failure. >> there have been a couple of positive developments. the european central bank has provided extensive financing to the european banking system and will provide another round of financing at the end of this month. that has reduced some of the banking -- stresses in the banking system. it has brought down some extent the borrowing costs, -- to some of the more fiscally troubled countries. it has given a little bit more breathing space.

progress in terms of an international agreement in the year rose 0 to have a mutual surveillance of fiscal policies to try to get long-term agreement on fiscal stability within the eurozone is a necessary condition. those are positive things. there is an awful lot that needs to be done. greek negotiations are still ongoing. we do not know how those will come out. the banking system remains undercapitalized. it has been contracting its credit which has contributed to a weakening economy in many countries in europe. i think, you know -- of the backstops that are needed to protect if one country has problems, to protect other countries from contagion. the europeans have been setting up financial backstops to do

that. there is still a lot of uncertainty. more work needs to be done there. it is important to conclude that there are some deep, fundamental problems. not just slow growth issues, but issues of competitiveness. countries on the periphery are not at all competitive like germany. they have big current account deficits. they cannot change the value of their exchange rates because they are tied to the euro. all of those things put together mean you will have very slow growth in some european countries for quite a while. dr. bernanke, the economy is creating jobs. we have had 22 months of private sector job growth. the unemployment rate is at its lowest level in three years.

in 2007-2000 a, the headlines in the newspapers were devastating about companies closing and people losing jobs. it is noticeably different. it was noticeably different last year with companies hiring. it is pretty steady right now. obviously we can do better. i in your testimony, you said a more robust recovery will lead to lower deficits and debt. here it is the frustration. our colleagues who gave us the list of ways to reduce the debt and deficit -- it was very noticeable that he did not include job creation in that list. it was cuts. we are doing that in the budget control act. we need to do more.

entitlements. there is some common ground we can find there. what he left off is job creation. the cbo said yesterday if we had a lower unemployment rate we would have a lower deficit. that followed up on his letter of october where he said the underutilization of capital and labor resources in the economy -- if we had better utilization, we would have more people working. the projected federal deficit under the current law in fiscal year 2012 would be about one- third lower. it would be equal to about 4.0% of gdp compared to 6.2% projected for 2012 in the cbo's baseline. if the economy was operating at its potential, the deficit would be lower because and come and,

therefore, revenue would be higher. here is our frustration. the frustration of folks back home. they know we could be doing more to reduce the deficit and put people back to work, but the congress has not been able to get to a common agreement on ways to invest in infrastructure and research and development. give us some words of wisdom on this. going forward, what do you believe are the most effective policy options that all of us can be -- can pursue to speed job creation and thereby lower the deficit? >> first off, but to hear the tone is a little better in florida. there has been some progress, but it is still very slow in my testimony, i made three related points about fiscal policy. whatever we do for confidence

purposes and for long run sustainability, we have to keep our eye on the long-term brigid we need a credible plan put in place that will be moving us towards stability and sustainability in our fiscal policies over the next few years and into the subsequent decade. we have to keep that always on the table. that is really important. secondly, we can avoid, if we can avoid, unnecessary destruction to the recovery. i think that is important. mr. elmendorf pointed out that under current law there will be massive fiscal contraction in 2013. without addressing any specific policies involved, i think congress should be aware of that and try to avoid having too big a hit on the recovery in 2013. finally, again, without taking specific policies, my third

point was that fiscal policy is not just about total spending. a lot of it is the quality of the budget. are a lot of the things we are spending on, are they going to help our economy? do they support research and development, work-force skills, or other things will help the economy grow in the long run? on the tax side, we are moving towards more efficient tax cuts. you want to look at the top lines -- total spending a total taxes -- obviously, it makes a difference the quality of the programs, the way the money is spent, the way the money is collected. >> thank you mr. chairman. before i get to my questions, i want to thank you for the role you played during the current

situation, which typing was a critical point for the country. i want to thank you for your transparency and efforts since then to try to restore a measure of public confidence in the fed. a lot of people said there will be a lot to answer for, but in a moment of crisis, i think you did a terrific job. i appreciate it very much. you laid out pretty compellingly the fiscal challenge that we face going forward. i think that is what we wrestle with on this committee more than almost anything else. let me try to get your opinion if it is appropriate. first, you mentioned spending restraints. that is beginning to happen. the appropriations committee has cut discretionary spending two budget years in a single

calendar year. we have agreed to let out the belt a little. in the context of the federal budget, not a lot. we can argue about whether it was good policy or not. we did tie long-term spending cuts to the debt ceiling increase. there are lots of signs, at least on the discretionary side, we are beginning to see some discipline. on the revenue front, the president obviously extended all of the tax cuts. he had the ability not to do that. he could give -- we could not have possibly overridden a veto. he told us pretty clearly that he thought we needed those tax cuts for another two years. he bargained and exchanged for that and an extension of unemployment. obviously, the payroll tax holiday.

come january next time, we are going to have a revenue increase from a high income earners if i am still president of the united states. let's just posit for a minute that he is in a position to do that. that will be a revenue increase of some sort. are those two things in and of themselves -- spending restraint and revenue increases of the time we are talking about -- sufficient to deal with the long-term structural deficit that you described? >> i do not think they are. i think standard cbo calculations would support that. discretionary spending is not particularly high relative to history. i think you could cut discretionary spending pretty close to zero and not solve the problems in the long term. cutting discretionary spending will not be enough on the

spending side. >> only on the revenue side? only on the tax side? >> on the other side, there are many arguments for and against changing the taxes on higher income individuals, but that by itself is not going to close the budget deficit either. we need a much broader set of policies. i think the elephant in the room is really a health care cost. as i mentioned in my testimony, we are heading towards a 9%-10% of gdp on total spending of health care. another a percent sign-and i% in private-sector spending. that is a broad issue that affects the budget and affects the efficiency of our economy. i do not the we will get a resolution without some way of

addressing the problem. >> i agree very much with that. we had an effort in this committee to do that in the so- called ryan budget. i expect we will have something similar this year. i think that is the crux of the issue. we have a lot of commissions that put out a lot of ideas. are you aware of any other and elected officials that have passed or proposed -- the pri that laid out a set of long-term reforms and entitlement spending or anyone else other than my friend, the chairman here? >> i do not know of any comprehensive plan. as you point out, there have been a number of commissions. even those commissions are not fully detailed. for example, i do not pay bo wl think bowles-simpson had a lt

to say about health care. >> thank you very much. thank you mr. chairman. >> thank you, mr. chairman, for bringing us together today. i want to associate myself with the comments of mr. holt. i can appreciate it is not an easy task. nor is it an easy task for this committee. the first chart up there, mr. chairman, we have heard a lot about some people could take 15% tax rate, up 10% at 30% lower than firefighters, teachers, or police officers, as an example.

particularly in north jersey. i understand you can use a 15% rate on investment income rather than the higher 35% top rate on wage income. we have been told that increasing the rate on capital gains will discourage investment. warren buffett said that he had worked with investors for 60 years and he has yet to see anyone, not even when capital gains rates were 39.9% in the midst 1970's, he has never seen someone shy away from a sensible investment because of the tax rate on the potential gains. people invest to make money. potential taxes have never scared them off. according to the national income and product account tables, the

top tax rate on investment income significantly changed of the past 80 years. in produce big about it. it was -- i heard you speak about it. it is 15% today. yet investment grows with the cycle. chairman, i in your opinion, do changes in the capital gains tax rate mainly affect investments already made rather man new investments being considered -- rather than new investments being considered? what is your opinion? >> you are pulling me into a complex topic.

the economic theory says that you should contact consumption rather than savings or investments. that is the rationale for lower rates on capital gains and capital income. that is a theoretical results. there are a variety of estimates. it is hard to pin it down exactly. there are many issues related to this. i do not want to be pinned down on a simple response. on the one hand, of the low tax on investment income can be justified by economic theories. it can be justified by arguments for the need for corporate tax integration and so on. i think congress has an appropriate task to try to balance whatever benefits lower

taxes on capital income hand against considerations of equity. the people convert regular and come into interest income or capital gains income? there are complex issues on both sides. to try to enter your question -- i think there are certainly some disagreement in the literature. there is some affect on the rate of return, which after-tax rate of return on investment decisions. there is a lot of disagreement about how strong it is. >> do you see a problem as it is, not just with the rate on capital gains is so much lower than the rate on earnings. we can discuss that at length. we have seen a real turnaround in the last 50-70 years of what we do tax. some say that income earners are

at a disadvantage in terms of what we make, how we are taxed. the problem is amplified. we debated this. the loophole that encourages the difference. what is your opinion? >> the gentleman's time is expired. >> candy answer the question? -- can he answer the question? >> if it's a complicated question. -- it is a complicated question. >> warren buffett has become a kind of financial guru, making recommendations. he is a gentleman who, as i understand it, will not release his tax returns, who plays himself and income of $100,000. he does all he can not to pay taxes to discourage his responsibility.

mr. chairman, i can thank you for coming i am. to turn our attention to the european situation. the european situation is "leading to increases in sovereign borrowing costs, concerns about the help of european banks, and a reduction in the confidence and availability credit. my first question is do you believe that loans to european countries today carry a greater risk than they did two-three years ago? >> do you mean to the government's? >> yes. >> surely they do. you can see it in the interest rates they have to pay. >> would you please explain what the exposure of the united states, the american taxpayer, is to that credit challenge that

they haven't? >> in the official sector, the united states is at 15% shareholder of the imf. the imf is involved in programs for the three small countries -- greece, portugal, and ireland. the imf has a very good record of being paid back. they have a senior position in the debt of those countries. they are very much engaged in making sure those countries are taking appropriate policies. as i have explained in previous venues, the federal reserve has a swap line with the european central bank. that is not an obligation of any european government directly. ise european central bank

highly creditworthy. it is owned by the central banks of all the countries in the eurozone. they give us euros as collateral. it is a swap of currency rather than a loan, per ce. from an exposure. of view, they take all of the credit risk and all of the exchange rate risk. it's a good bargain for us. >> are you able to quantify the exposure of the u.s. taxpayer to the risks through the imf and elsewhere? >> i do not have the number exactly, but it would be in the tens of millions. >> it may even be higher than that, i think. do you believe is appropriate for the united states, for the

fed, and, hence, the united states taxpayer, to have a greater exposure through the imf or are we about where we ought to be? >> i think the imf plays an important role in helping to stabilize countries that are in stress. the administration, the treasury secretary is our director. he has the most direct responsibility for the imf. he has been very clear that he is not supportive of any increase in the u.s. contribution to the imf. i would leave that to is judgment. his view, as i understand it, his view is that it is up to the europeans first to take the necessary actions to stabilize the situation. >> let me switch very quickly to the comments you made about health care and medicare- medicate.

our discretionary budget is about $1 trillion the amount of the deficit is greater than $1 trillion. one could do away with all discretionary spending and not even get to a balanced budget without addressing medicare, medicaid, social security. >> part of the deficit is due to the fact the economy is in very weak condition. the cbo suggested that if the economy returns to normal state by 2017 that the deficit would be more on the order of $75 billion. the balance is not quite what you said, but what you said before is true. discretionary spending cannot bear the entire brunt of the deficit. it is not possible. it is not possible.