.talian government ta >> the time government has responded. >> -- the italian government has responded. >> there are a u.s. citizens >> can you tell about the center for excellence and how it operates? is it a school setting or a seminar setting? >> it has multiple functions. it is first and foremost designed to train armory inspectors from around the country. wherever we have a cruise ship activity, those inspectors or go to miami where the center is located, meet with coastguard specialists and industry partners. the industry provides vessels for examinations so we can not

only have come from instruction but hands-on and understand in detail how all the systems work. it is a cooperative effort we undertake with the industry. industry members go through the center as well so they can better understand coastguard expectations. that informs the industry as to what we look for in a safety culture on board the ship, the kinds of systems that we pay particular attention to, so that they are always maintained an integrated into the ship's safety manual. with regards to the exercises, how many did you say you have conducted? >> 36, and they are conducted in every coast guard district.

not all the more cruise ships. some of them are high-capacity passenger vessels that are smaller than what we typically think of as a cruise ship. we do mixup. that operate a little bit differently, but each one poses unique risks. we exercise all different types of ships already the coast in every district. -- all around the coast. >> i will yield back. >> thank you, admiral. that is interesting, your last name is salerno and my family sailed from salerno to the united states. i will be in salerno on easter. good to have you here, and again, thank you so much for your service.

they never come and lobby me. there are a small portion of what some of the federal folks aren't. -- what the federal folks earn. i cannot say enough about what you do. right now we are all dealing with anecdotal accounts. i want to hear from the actual passengers. that is great when we bring them in. there are even bigger ships out there. is the muster drill and the like but safety drill currently adequate? i know many of the cruise ships

have gone to a much shorter time when folks board. >> we have made it a requirement as part of our examination, that drill. i think that is almost a reasonable outcome from what we are seeing from this casualty. it is a voluntary practice could then the united states. i believe it may apply -- >> we would like to take your recommendation. i don't know if it needs to be a law, but may be a regulation. also to the international organizations, we have the best possible standard for that drill. the safety drill is very important in people knowing what to do. these are massive ships, multistory. the other thing is, the

lifeboats and safety devices are at a 20 degree tilt. that might be something else we want to look at, i think it went to 35. if that had been in deep water, that puppy would have gone down pretty dramatically. there would have been a much greater loss of life. again, it is probably half of your life boats in your safety devices or on that side, so they would have been wiped out and they would have to account for maybe 2000 or 1500 of those passengers who would have no way -- may be the life vests, but we heard problems with that, too. so we may want to look at that. in the past, that would like best in the cabin or someplace like that -- they put life vests

in the cabin or someplace like that. maybe sing about the availability of boat -- both the lifeboat vessel that would take folks off, and most of these, i guess the italians see at that time was not quite that cold, but you get into a frigid waters, and the survival rate drops pretty dramatically. i think we need to look capps that -- look at that in light of the size of these mega cruise liners. would you agree? >> yes, sir, i think there are two broad categories of inquiry here. what are the technological standards that you just mentioned. we made -- we need to take a hard look a lot of this casualty. are the standards correct? did the equipment function in accordance with the standards? the other is the human factor. training, the ability to operate under pressure, all of that needs to be looked at as well.

>> let me say this. these hearings are great, and we do learn things from the hearings. we will learn things today. i would ask the ranking member, , i would suggest that we convene a roundtable with the coast guard and others and then let's get their recommendations, and what they can cover our regulation we will work with them on. if we need to change law, let's take their recommendations. if i could ask you all so, since the international standards are also imposed for americans outside our borders, that is very important for you to lead an effort, and one of those bodies is a london pickwick yes, sir, the international maritime organization. >> can you take to them our recommendations so that we can

protect americans from u.s. ports, but there are so many americans that travel internationally on these liners. we will set a date appropriate to the majority and minority for a roundtable follow up this and then we would like to try to get your recommendations for a lot changes and what you can do a regulation, and let these two gentlemen take to the international organizations to recommend an update. >> mr. chairman, you can do whatever you like. >> mr. young is more ranking as far as chairman. >> let me thank the chairman for this hearing. i will tell you this. there is nothing wrong with this ship. this was a good ship.

there are probably three errors, and they are all human errors. we had a captain that for body was a captain. as a captain, i was very embarrassed serious -- we had a captain that forgot he was a captain. he was too close to the shore. there is nothing wrong with the ships we have in the industry. in our area, have american pilots that pilot the ships in our waters, especially in the northwest. crucially important. if the pilot had been on board that ship, as he should have been, this would not have happened. was the crew trained? maybe, maybe not. i am not sure about that. i wanted to be careful about casting aspersions to the american cruise lines in american waters, because we are doing a very good job. we have had a good safety record. we have had one back fire in alaska over the last 35 years,

and had a great rescue by the coast guard. it is really important to me to recognize where the problem lies. this was a human activity that should never have occurred. we go through a very rigorous program in our waters about 74 or cruise ships. our report? no. -- are we perfect? o. princ it is important that we do not have a black guy around the world in the cruise industry. over a million passengers a year come to the state of alaska. i have never heard that complaint about any activity of the cruise or the captain princ. longshoremen have inserted --

ifs how would you respond to the concern that unqualified personnel loading and unloading vessels may endanger passenger'' safety, and do you believe legislation required to protect passengers a during loading and unloading and tying up of the vessels that our nation's ports. this is a complaint i have had from an interest group, but this also ties into the safety factor. how it is loaded, how the votes -- what are the passenger and crew requirements about handling all types of things this? you can comment on that if you can. >> as far as loading equipment, stability is important on any ships, especially when have passengers involved, looking after their safety. i have not heard the particular concerns raised by the

longshoremen's union but i would be interested in looking at that. >> i noticed how quick people forget. i was put on a timer. with that, i will yield back my time. >> i will reserve comment on that. xi for those of you who may not be aware, mr. young i believe is the only member of congress who actually holds a captain's license. mr. larsen. >> i just noted that mr. yong, in the future when he is a ranking member, i will be sure he is on a toddler. -- i will be sure he is on a timer pickwick let me take this opportunity to thank the u.s. coast guard for not just the work that you do in florida but throughout the country. we are giving you a tremendous

amount of responsibility and you all have come up to the challenge. every time i get a chance to thank publicly for how you are responding after 9/11, i have to, because you were the first branch that was their peace and protecting our country right after that tragedy. so thank you. this is no doubt, this accident in italy was a tragedy. my hearts go out to those who were killed and injured, and we must take every chance necessary to protect the safety of the passengers. cannot vilify the entire industry because of the reckless action of one rogue employee who failed to follow the policy and protocol of his own company. as a member from the state of florida and a representative of the port of jacksonville, i am particularly interested in the cruise industry. it is a critical economic engine for the state of florida. over 8 million passengers

embarked from florida and 2010 and industry contributed more than $6.3 billion in direct spending. in addition, the cruise industry is the second-largest employer in florida, generating more than 123,000 jobs, paying $5.4 billion. i do want to go back to the question that i want to ask you. do you think that the italian coast guard did everything that they could to assist the passengers, and what recommendations would you make that we add additional recommendations? >> to the best of my awareness, the italian coast guard pursued the response in a very aggressive, very professional manner. there is nothing to suggest otherwise. i think we will learn more about not only the actions of the

crew, but rescue organizations, which will be beneficial to us as we refine our search and rescue operation. >> i know the investigation is going on, but there is a great amount of concern as to how the captain handled the situation. what procedures can we put in place to make sure that -- from the press account, and you cannot always believe the press accounts, but it was at acknowledgement that it was at emergencies -- it was an emergency. it is my understanding before they had themuster drill. i understand that the cruise industry has gone back and said that before you leave that poor, you will have that training. i am glad they instituted that

throughout -- before you leave that port. >> is a noteworthy improvement am pleased with that industry for taking depths initiative even before being required to do that. as far as the actions of the master, obviously the investigation will shed more light on it. i doubt of any professional is willing to step up and defend the apparent lack of leadership that clearly took place on that ship. >> what about the training of the crew? it seems like everything was in disarray. every time i have gone on cruises, the first thing we do is, they have that training as to how it in case of an accident, you put on your gear and everything. they got on the cruise, everybody was dressed for dinner, and they had not had that initial safety training.

>> there are well defined requirements for training of crew members. anybody with a safety position, including hotel staff, crowd management, assuring people to their embarkation stations. all that is required and periodically refreshed. we enforce those regulations vigorously in our control program. we work closely with industry and convey our expectations of a safety culture. i think the results are in the numbers. the cruise ship industry in the united states has a very good safety record. it is among the safest of all maritime activity. that does not happen by accident. it requires commitment by the industry itself and the numbers bear that out. >> as i understand on the equipment, the safety bo was on one side and had to walk all the way to the other side. is there any discussion as to

making sure it is at a certain level, because i understand it is at a certain fee, it is under water. >> there are some very precise technological requirements for lifeboats. the angle at which they must be lowered, 20 degrees was mentioned earlier. that is correct. operating against adverse conditions, yes, all so the stability condition of the ship. one of the questions we do not yet have an answer to is how much flooding occurred in that ship, and should have listed over as far as it did? we don't know if watertight doors were closed internal to the ship, which may have spread the flooding beyond the design limits. all questions that we need to know as part of the investigation that we will pursue with the italian government. >> once again i want to thank

the men and women for their service and i yield back the balance of my time. >> mr. chairman, this has nothing to do with my questioning, but are the acoustics blog? it appears to be muffled. >> i am not sure if that is controlled by the control room, or just of the little bit different. >> we are deeply concerned about the tragic loss last night, admiral. will the coast guard conducted independent investigation into the loss of the two american citizens aboard the costa concordia? >> as mentioned, we are doing -- interviewing all the u.s. passengers aboard to develop as complete a picture as we possibly can as to what took place on that vessel. as mentioned, we will share that information with this committee. >> i thank you for that. is it possible for a cruise vessel to fail an inspection and

then not be permitted to operate in u.s. waters? >> yes, sir, that is possible. there have been instances where the coast guard inspector has not been pleased and has retained a ship. does not happen very often. has not happen in a number of years now, because i think we have developed a strong enough expectation with industry, and i have responded by instituting safety cultures within their companies to make sure that they meet all of our very strenuous requirements. but yes, it is possible. if we are not satisfied, the ship will not sell. >> if the coast guard does detect any efficiencies, how did you follow up to ensure that have been corrected? we do follow up, depending on the severity of the deficiency. we may allow certain -- we may allow a certain matter of time

for correction. >> are the hotel and entertainment staff aboard u.s. cruise vessels required to be credentialed merchant mariners? >> yes, sir, they are. u.s. flag cruise vessel regard to be licensed by the coast guard. they must hold merchant mariner credentials and the must have the training associated with the sec the positions they hold on those vessels. >> i would assume that would probably lead to a more competent crew, would it not? >> that is the goal, yes, sir. that training is designed to achieve a level of competency- that is a baseline. we witness fire drills and boat krill's on board not only u.s. flagships but foreign flag ships. that is how we verify that the trading has taken hold, that

people actually know how to use the equipment and communicate and they can perform their functions in an efficient manner. >> i yield back, mr. chairman. >> mr. cummings. >> first of all, let me associate myself with the words of ms. brown with regard to the tremendous work the coast guard does every day. i express my concern and paris and condolences for the losses we have suffered here recently, and those families that are going through some difficult times. the coast guard faces continuing budget challenges. perhaps the single most important thing we can do to ensure the safety of the cruise industry in the united states and the safety of our entire maritime transportation system is to ensure that the hard-won

gains in the coast guard marine safety program are not lost and that is critical program continues to receive the resources it needs to be able to engage fully qualified personnel to carry out a thorough inspections and investigations. i want to thank the cruise industry and victims for helping us as we address many of these issues in the 2010 reauthorization. title 5 established certain standards for the prevention and response of work forces. codifier requires that there be a chief of prevention who is at least a lieutenant commander case and who is a marine inspector and a qualified marine casualty investor or marine safety engineer.

is this in place in each sector now? >> yes, sir, we have qualified members that every sector and i think in the past we have also included a number of civilian marine inspectors in our work force. our goal is 30%. every sector has civilians who will be our longstanding experts in every port. the had the local knowledge and awareness of the industry and they assist in the trading of more junior people we have made considerable progress under title 5 of the coast guard. >> very good. spotify requires that a certificate of inspection must be signed by the senior coast guard member civilian employee you inspected the vessel in addition to the officer in charge of marine inspection. is the coast guard in compliance with this requirement? >> i will have to confirm that that has been put in effect. it is certainly our intention to comply. >> how soon can you get is that

information? >> i should be able to get that to you within a day or so. >> total 5 requires that any individual adjudicating an appeal or wherever a decision regarding marine safety showed a qualified specialists or have a senior staff member who is qualified specialist and who concurs in writing with the decision on appeal. is the coast guard in compliance with that? >> yes, sir, we are making sure there are qualified people. >> what is being done to increase geographics -- the work force? >> the primary methodology for geographic stability is the civilian work force. it gives us some rootedness in a report so that hedge against the military work force, which by its very nature does milorad work frequently. >> very good.

how many inspectors do you have who are qualified to examine cruise ships, and is the inspector work force currently adequate to meet the current workload? >> there are currently 326 qualified inspectors for cruise ships. in the current work force, yes, it is adequate. we have added a number of new -- over 400 until 2011 and in 2011 there are some additional and we will analyze some of were on board in 2012. over 500 overall new positions. it has been growth in a no growth environment. i think that speaks to the level of commitment the coast guard has to this mission. >> how many of the captains of the cruise vessels that call on the united states are american's

operating under use -- under u.s. coast guard issued licenses? >> the foreign flag cruise ships or almost exclusively captained by foreign masters, but they do meet international standards that we have helped develop through the i am mode. >> -- it through imo. >> for those who are not licensed by the u.s. coast guard, what review do you conduct of their licensing or fitness for duty? >> we certainly check their credentials issued by the non- government, as we go through our inspections, particularly with fire and lightboat drills, that is our ability to assess their confidence. in every assessment, which questioned the crew as to their knowledge, as to sector requirements, security requirements, and environmental. we make some judgments based on that. we have held and contained ships

in the u.s. when we have come to the conclusion that people in sensitive safety positions on board did not know their duties. >> thank you, mr. cummings. >> thank you for allowing me to be a part of this important hearing. i would like to thank the witnesses for being here today, particularly the survivors from the costa concordia. i like to have unanimous consent that a letter from the international cruise victims association be submitted for the record. the costa concordia accident is an unfortunate tragedy that once again highlights the need to constantly evaluate cruise ship safety. as does the current situation with costa allegra. the security of passengers onboard. in july 2010, president obama signed into law a cruise vessel

security and safety act, legislation sponsored after learning that one of my constituents suffered a rape colicroot vacation, and there was no process on board to properly handle -- suffered a break while on vacation. to improving medical care and support to victims of sexual assault. this law also gives the public access to information about the number crimes committed on cruise ships. it puts much needed procedures in place to ensure the proper preservation of evidence necessary to prosecute the criminals. all provisions of this law went into effect by or on january 27, 2012. i raised concerns about whether the law is being properly and timely implement it and look forward to getting answers to these questions today.

as you know, admiral salerno, the cruise vessel security and safety act requires that each cruise ship integrate video surveillance and man overboard technology to the extent that such technology is available. have the cruise lines integrated man overboard technology aboard their vessels as required by law? that aspect of the law was not determined to be self executing so we have mark -- embarked on a regulatory process. to determine the availability of technology that can be used for man overboard technology. we are in great -- hus we are engagement process now. other aspects of the law that

are self executing, we have, through policy, already implemented procedures. >> where are you in the rulemaking process now? >> we are gathering information. >> we would like to do it as quickly as possible. admiral, the law also requires at least one crew member be adequately trained in proper crime scene preservation techniques. i understand the coast guard worked with the maritime administration to come up with a model eight hour training course. have you know if a crew member has satisfactorily completed this training? >> the trading would be certified by the company -- the trading would be certified and examine during the course of our normal inspections of the vessel. >> did a cruise ships provide actual documentation that the training has been completed? >> they have to have that documentation on board.

i don't have that detail, but i will confirm that for you. >> who is conducting the trading of the crew members? >> the training is conducted by the cruise lines themselves, based on a model course that was developed in conjunction with the fbi and the maritime -- >> how do you know the trading actually follows the recommendations of the model course? >> that would be verified for routine inspections of the vessels. that is part inspection program. >> i still have concerns that the eight hours might not be adequate time to properly train crew member in crime scene preservation techniques. i hope it can work together to ensure the cruises -- cruise ships have the expertise necessary. >> the program replaces an interim one and we are open to suggestions to improve that program. >> i think you understand how important is to decrease victims

that all this be done in an expeditious manner. i appreciate what the coast guard is doing. i do appreciate your service. i know that my time is moving and i do have a few more questions. i am hoping -- thank you very much. i appreciate that. have the cruise lines integrated video surveillance aboard their vessels as required by law? this >> i will have to confirm that. i don't have the details on that. i can get back to you on that. >> say you have no idea the reason behind that at all. >> i don't have the information on that. i will get back to you on it. >> will there be a rule making process for that also? >> that is part of the rulemaking process. >> the law also requires cruise ships to report crimes committed upon the ship and the coast guard is to provide the information to the public threat

internet portal. i raise concern about the low number of crimes act of being reported. there's 16 reported the entire year of 2011. can you walk me through the pollen crimes would be reported and investigated. let's say sexual assaults occurs on the high seas and american ships leaving for cancun. who would have jurisdiction over this crime? how would the jurisdiction be determined? who would be allowed to make an arrest? >> for crime of that nature, the cruise lines would report that. it would go to the fbi. there would be an investigation by the fbi, typically conducted with coast guard investigators. the fbi would post the results was the case is final. we would put that on our portal, but we are posting closed cases. what you see isn't low numbers of closed cases.

there are more cases that are still open, still under investigation, not closed out. >> so that is not represented on the portal at all. a key element of the law was to provide the public with correct information regarding crime on cruise ships. i do hope the coast guard and the fbi are doing everything in their power to have complete information, and i would like to be followed up with you and the fbi. thank you very much, mr. chairman. >> i apologize for arriving late. i was a hearing in another building. i am sure you probably covered this, but reassurances for american citizens on cruise ships coming out of american ports, i realize that under a foreign flag vessels, we don't have nearly as much jurisdiction as we do under u.s. flag vessels.

do you feel comfortable taking your family on a cruise out of a u.s. port? >> i would, and i say that because we do have the most rigorous examination program in the world. we have received cooperation from the industry in adopting a safety culture, so that even when we are not watching, i have confidence they are doing the right thing. >> do you feel there is anything else we need to be doing to ensure cruise ship safety? again, obviously we have no jurisdiction outside of ships that call on our ports. where are we short? >> i think our interest in the costa concordia investigation is to explore that very question. we need to be open to the fact that some of our regulations may need to be strengthened. the international regime may need to be strengthened. maybe training needs to be strengthened. those are questions without

answers at this point. i think we need to be open to the fact that we will have something to learn from this and we would like to stay connected with this committee as to what those things might be. >> i look forward to working with you. >> i want to thank you all for calling this meeting, and the purpose of this meeting is to see what we need to do to strengthen the industry after 100 years since the titanic sank, and what policies we need to implement to make sure that we can protect all of the passengers. people come from all over the world to sail on our ships, and in fact, i went to barcelona and there is a cruise ship that leaves from orlando, florida, that goes to barcelona. it is and international business. taiwan to command ms. matsui for

making sure people are safe -- i want to commend ms matsui for making sure people are safe when they travel. this the cruise industry is one of the safest in the world as far as being attacked. can you tell us a little about that, because i would not want to leave here with the image that traveling on a cruise ship is not say. i send my mother on a cruise ship, so i know it is safe. >> i think our numbers speak for themselves. cruise ships consistently rank among the lowest in the category of ships that have marine casualties. collisions, groundings, fires, flooding, those types of things, the numbers are single digit numbers in all these different categories.

comparatively safe, and i think overall, effectively speaking, it is a state industry. as mentioned, that does not happen by accident. that takes a lot of effort. from the coast guard perspective, we are relentless in applying that effort and working to keep them safe. >> i would like to have an opportunity to respond -- are going to have adequate time? thank you. >> i just have a question or two, just to follow up on what ms. brown just said. last week in oversight and government reform, we had a hearing on the chevy volt. one of the things that came out of that hearing is that we wanted to make it clear that it was a safe car. one of the things that the head

of gm said to us was that while it is nice for you all to have this hearing, the car is safe, but there is going to be some collateral damage. just following up on what ms. brown just ask, i want to make sure that we are being fair to our cruise industry. i work very closely with the cruise industry when we were trying to pull all of this together, and i found them to be very fair, very reasonable, and as they would say to me over and over again, this is just as important to us that we have safety on our ships as it is do you. i thought that they were very fair and very balanced, very reasonable prurience i do not want the word to go out that because of these incidents that

really, not us. i want that clear. i know what happens, just like with the chevy volt, and when the president of gm said he was concerned that there were be collateral damage, when we talk about collateral damage here, we are talking about an industry that hires a lot of people. an industry that provides families in these difficult economic times, with one of the most cheapest and most inclusive vacations that they can get. i don't want there to be collateral damage to that industry. i want to make it very clear, i want you to reiterate what you just said, that is still a safe industry. that leads to my question, are there things that you would like to see us do more than what we are doing to make it even safer?

nothing is perfect. it is a project that is ever evolving. we learn every day from our mistakes. is there anything we should be doing that we are not doing? i am just curious, because i don't want the word to go out that we have not fulfilled our responsibility. i believe the industry is doing the best it can, but i don't want them to be blindsided by a hearing that hangs them in a like that is just not accurate -- that paint them in a light that is just not accurate. effects >> that is not my intention. >> i just want to make sure we are clear. you know how people are. they get a little bit of

information, and the next thing you know, that industry and then suffers when it should not suffered. >> we look at our casualty statistics very closely, and they do bear out the fact that this is a safe industry. they have a good record. we obviously want to work with the industry to maintain that record, but it is objectively speaking a safe industry. >> how do we protect our progress? >> we continue to stay engaged with the industry. we will watch this casualty and see what unrolls from it. we would like to stay connected with the committee as to the results of what we find in that investigation, see if there may be other things we need to do. we don't have the answers yet, but we need to be open to what we learn from this investigation. >> thank you very much. hess i yield to the lady.

>> you said cheap, and i just want you to know it is affordable travel, having been a travel agent. >> i take back the word cheap and i would substituted with affordable. i yield back. thank you for correcting me, ms. brown. >> mr. larsen. >> i ask unanimous consent to enter into the record a statement. quick without objection, so ordered. >> anything else? admiral, thank you very much. i think this was extremely helpful, as we proceed, i would just like to emphasize a couple

of things as we close off this first panel. the request was made that we have this hearing over the tragedy with the costa concordia, that we also use this opportunity, as the admiral has pointed out, that the u.s. cruise industry has been very proactive with the coast guard, which we look forward to following up on, and highlight the reality, as mr. cummings and ms. brown amply did, but to make sure that we don't have a collateral damage with u.s. citizens with the cruise industry because of our safety record house of being so incredible. that is due to the proactive nature of the coast guard and working with the industry. we will look forward to the results of the investigation, which as you said, will give us more. at this point, i feel

comfortable in saying, not being a lawyer and all the qualifiers that need to go with this, every indication is that this was incredibly poor judgment on behalf of one individual mariner, at best. at worst, it is much more damning, and when you have somebody that exercises extremely poor judgment and lack of judgment, it is very difficult problem to deal with. admiral, we thank you for being here. we'll have a brief adjournment as we get set up for the next panel. >> thank you, mr. chairman. [captioning performed by national captioning institute] [captions copyright national cable satellite corp. 2012] >> the committee will return to order.

for a second panel, we have survivors of the costa concordia. they are here today to give us their firsthand account of what happened. we welcome you both. we thank you for taking the time to share with us, and you are now recognized for what ever statement you would like to make. >> thank you, mr. chairman. >> thank you, mr. chairman. first of all, thank you for giving us the opportunity to come in here and present what we have to say. i would just our of saying that this was our fifth your wedding anniversary trip, the first trip to europe. we were both very excited. as ms. brown had said earlier, it is a very affordable way to travel. we had cruised before, so that helped us make up our mind to

take another cruise. we boarded the costa concordia on friday rick -- on friday, january 13 from italy between 5:00 p.m. and 6:00 p.m. the boarding process was fairly easy. we had to surrender our passports to the crew members. after that we went to our room that was on the ninth deck. at this point we had no communication regarding the emergency safety drills or any instruction from anyone from the crew telling us where to go in case of emergency. we were very happy to be on board. soon after getting situated, we started to one pack of luggage and started to get ready for our dinner reservation at 9:00 p.m. on the third deck. at about 9:50, we were at our dinner table on deck 3 and in process of ordering our food.

house and that moment there is a violent shaking of the ship, followed by a loud crash noises and plates and glasses broke due to the listing of the ship toward the starboard side. lights went out immediately, but there was no announcement as to what had happened. it was pitch dark with no visibility. everyone started to scream and a few minutes later the emergency lights came on. we observe the ship was no listing on the port side. this is when the first announcement came on, telling us it was nothing but an electrical failure and that everything was under control. crew members urged the passengers to remain calm and seated. the stuff started to bring out the people's food as if nothing had happened. we saw a few crew members in our dining room break down crying, extremely panic. when it left outside, we saw five-seven crew members wearing life jackets, but still they

were telling us to remain calm and seated and the electrical issue was being worked on, and everything is under control. about 30 minutes into the situation, we are still in the dining room when my husband decided his " time for us to go and at least get our life jackets from the room. at this point we have no idea if we don't go back to the room, where rich can get our life jacket from. i had spotted the life jackets and the closets of the room, as i was unpacking and putting our luggage away. as we went out of the dining room, there was water and wine in broken glass on the dining room floor. it was extremely hard for us to walk and maintain our balance. once outside, will immediately unable to locate the stairs as we had taken the elevator to get on deck 3. there were dim emergency lights indicating the stairs. we climbed six course to our

room on that night to get to our room without a guiding us in the dark. somehow we manage to get to our room, holding the guard rails esperance, very much exhausted and no panic. there was a constant announcement of the same message. ladies and gentlemen, everything is under control and it seems to be a generator failure. please stay, and the cooperative. all the announcements were made on behalf of the captain, and never once did we hear the captain speak. however, there was a sense of panic in the announcer's voice that kept making the announcement. finally we did manage to get our door unlocked, using our party, after several failed attempts. the room had no light at it was extremely dark. i stumbled upon a few things that had fallen on the floor. i husband decided to stand in the middle of the door to keep it open and pushing the furniture back to make some room to get our life jackets.

the room furniture had shifted significantly. i knew where the life jackets were because i had just unpacked the luggage to range in the closet. once we got the lifejackets, we got out of the room and spotted our state room attended nearby. at that moment i asked the room attendant where are we supposed to go? she replied in a very irritated tone, saying madam, at this point, there is no emergency. you do not need to go anywhere. please stay here and wait for further instructions and further emergency alarms to sound, which we had no idea how it would sound like. and she started walking away, we asked her again, in an emergency, where are we supposed to meet? she replied, the muster stations are on deck for. there were no emergency alarms going off. the same announcement of repeating, telling the passengers to remain calm, and the electrical issue is under control.

we saw crew members running around panicked and frustrated. no one seemed to have a clear idea as to why -- what to do in this situation or where they were supposed to send us. people seem to direct themselves onto the deck 4 and stood near any available lifeboat. we saw a lot of people just sitting outside of their rooms, waiting. people were also sitting on the stairs closest to dec 4, but we went ahead and stood closer to a lifeboat. at this point, there were three or four crew members for lifeboat and they were trying to keep the crowds away from the boats. there is no communication from their side as to when that would allow us to get on the lifeboat or what we are supposed to do. the time by now is around 10:30 p.m., and one of the crew members came in practically gave us the same instructions, urging all of us to go back to our rooms and wait for further instructions, and everything is under control.

we decided to stay near the exit door near the lifeboat. by now it was difficult to stand straight as that ship was listing toward the port violently. we decided among ourselves and located a rock which could swim to in case they kept us waiting any longer to get into the lifeboats. all asking a couple of crew members to tell us what had happened, they simply shrug their shoulders and went on. the lifeboat crew kept waiting for further instructions from the captain that never came. people started to panic and get frustrated as the ship is tilting more by the minute. we were aggravated and the cup was pushing and shoving against each other -- the crowd was pushing. there were no sign of emergency alarms or evacuation instructions from the captain. finally the life boat crew let us on as they saw the crowd getting in rage and out of control. everyone was shoving, pushing

and kicking to get on to the lifeboats. at this point i would like to close and handoff to my husband, mr. chairman. >> once on the lifeboat, we both -- people stood, whatever they could do. within one minute, the boat was full with all the people. now the lifeboat was overcrowded, and while the crew members were trying to disengage the boat from the ship, it would not happen. at this point, the crew members are asking people to get off the lifeboats because it is overcrowded. however, we did not see anybody at this point go to another lifeboat. once we are in their, in the

life of, that was the most scary part of all the tragedy for us, when the lifeboat was still stuck, followed by the bank and noise of the hammers, the equipment they were trying to used to break off the ropes. once the ropes broke off, a ripping noise came like something had ripped from the boat, and now we landed right into the water. we thought that now we are on to the water, at this point we will be able to at least get out if we have to, because now we can see a rock near by. once we were on the water, it was not immediate the boat started to move because of the overweight of the boat.

we started seeing the blue smoke coming out of the boat and it was not moving at all. it was making almost like a circle, as there was a current nearby caused by the ship. the boat is not moving at all. now we are seeing a tall, gigantic building of the ship leaning on top of our boat. at this point, i asked my wife, who does not know how to swim, i said we have a life jacket, i am going to try to take this tarp off and we are going to jog now, because we are about 10 minutes into the boat that has not moved an inch, and the ship is moving on top of us every single second. so from this point, as i am trying to lift the tarp in order to jump out of the like but, i am unable to do that. instruction by the crew member was to keep the tarp on while we were on the water, and a lot of

people were working against an with me to pick up the tarp. but i was unable to do it. soon after, inch by inch, the boat started to move, and finally we were able to get away from the cruise ship. that is when we were spotted near by -- we spotted nearby there was a lighthouse and we were able to get out. one of the things i noticed while we were on the boat, the coast guard from italy or also nearby, and that is what was giving us the assurance if we had to jump out and stay on to that rocked nearby, someone would come and get us. so we do thank the coast guard who were there, which we now learn that it was by the people, passengers who had called the coast guard, and not any member

from the crew who had gone to the police or to the coast guard for help. once on shore, confusion and chaos continued. it would not end. while we were on the ground, we were thinking we were being assured by a crew member all the time, held a electrical issue could cause a ship to shipping. there was not one instance where a crew member or anybody had mentioned that there was anything wrong other than the electrical issue. we felt very frustrated, very much like to at that point. i and my wife, who were celebrating our fifth tier wedding anniversary, a trusted our people with -- we trusted these people with our lives, and they took it for granted that were not honest with us at any

given point. thank you. >> that is a pretty compelling account of your experience. i had a number of questions, but the thoroughness of your statement, you have covered the questions that i had. >> thank you for your statement in testimony. i'm sorry about your experience. i am having nothing to do with it. i am embarrassed by what happens. it is shocking what happens. anytime that we are informed that the vessel had struck a rock, >> never. the first time we got to know that iraq had struck was one wawhen we were in the u.s. embay

the next day. we saw a completely submerged in water. >> at any time were you given any guidance about how to evacuate the ship at the time? >> no. there's the time as long as we were on the ship or the life boats that what to do or what ever, and it was the crucial time they had. not one person from the crew or anybody had mentioned what had happened. >> that even when things were calm? >> not at all. life the city's bought his jackets. you leave me with the impression that you were not acted told they were.

>> it is only one that are the only because i was tanking 1 up. that is when i ended up spot sing it. they did not tell us where they were. i opened the closet and i saw the jacket there. >> i have no idea where they were. only she did. >> the italian coast guard, it sounded like a good response. >> yes. >> i am glad you are here to give us this firsthand experience but i am sorry. thank you very much for coming.

>> thank you for being here for what occurred. i am sorry that both of you have to go through this as well as every member on that ship. a couple of quick questions that i have. was this your first cruise ship or did you have experiences? >> this is our second. this was our first transatlantic cruise. >> were there any differences between the one needed before and this one's in terms of safety procedures that's correct absolutely. the one before we were explained of the security drill. we are told not to go back to your room. they showed as for the life jackets were. they made is go through how we are supposed to get on to the lifeboat and what is the protocol. >> to that happen for this cruise? >> no. .

at no point where we told or the muster stations where are who we are supposed to contact. luckily, we do not have any kids. i'm grateful. a lot of times the kids are separate from the parents. we had no information what to do. >> is it fair to say they you feel you are not properly communicated to regarding the safety standards what you're on the ship? >> correct. >> can you talk a little bit about -- i'm trying to understand what was communicated to you after you vacated once you are on safe ground. >> at any point, the crew members were kept waiting for

some announcements. it never came from the captain. now people were very enraged and very angry. the ship had tilted. at every point we were told that it was in a logical issue and that everything is under control and that we do not have to get off the boat at this point. >> this is coming from either the crew or the staff? >> yes. it to someone on behalf of the captain. >> how long was the message communicated? >> from 9:30 to 10:54, while we were on that lightboat, the same

message was being presented to us. the only reason i know specific times is because i had gone back and recorded the timing. >> can you convey to this panel when you were first notified or aware of actual damage that occurred? or you on the ship the? i saw when we are off the ship. >> with at to see the damage and what happened. we came to know the reason the announcements were because the captain was not there. >> can you convey, how has the

company managed communicating with you in terms of offering you a tax have been compensated you? >> we have made a lot of independence plans. -- be on this cruise ship. immediately, if the cruise line had for what was charged by then. they requested to send this other charges that had occurred. of the communication had been mailed. >> thank you for testifying. my apologies to you. >> thank you. >> thank you so very much.

everything you're saying is what it is that went wrong and how we can improve. step one, every game was not held properly. did you all embarked there are some other place? i understand this was not the first sailing. have you just entered the shift? >> this is our first day. that was another thing we notice. all the other people had some paperwork in their mailbox. my husband happened to ask what was going on in. what did they have the paper and why do we not? they said because it was a nonstop crews.

for the people who are in the other rooms, it is the last day and there disembarking. since he embarked elsewhere, this is your first day. >> we were in the hours of fire crews. we had just gone on to its. >> you on it around dinner time. >> yes. >> the new procedure is regardless, that they will give you the safety information. we really need to record everything that happens to make sure that it never absolutely happens again. i am so happy for your safety and coming here to enlighten us as to what happened step-by- step. there is no excuse that the captain was not there. he did not up his

responsibility. i understand he was dining. he did not see him at dinner. he was not at the captain's table. >> no. >> i'm trying to make a joke. but it is the joke. clearly if you're the captain of a ship, you have a responsibility to make sure that your passengers are safe. it goes back to one person i cannot imagine anyone responding in that mannerism. i am happy that you all are safe. thank you so much for coming. i yield back the balance of my time. >> >> i agree. this is a teachable moments. >> this is the fifth wedding

anniversary? >> yes. congratulations. >> thank you. i'm sorry you had to go through this healtll. hopefully nothing like this will happen again. going back to the teachable moment, i know you thought about this. i want to thank you for your testimony. it is very clear. the city had been on cruises before reduce said you had been no crises' before -- you said you had been on cruises before. there'll be some testimony later on. on feb 9, they instituted a new passenger muster requirement, mustard drills before embarking

passengers prior to the report. this is a new policy which exceed existing requirements. to those people that may be in the room, what would you like to make sure it's in the drill? having had this experience, many have not gone through this experience. looking back on it, what kind of information would you have loved to have seen or heard? >> the first thing we would have liked to see is getting some kind of information, even if it is the basic information.

they were telling us please proceed to the deck. this is where the security durablarea will be. we went to this occurs, we trusted the captain and the crew members that they know what they're doing. no deserves to die on their vacation let alone go through all this trouble. we would have loved to see some sort of assurance or direction saying where the life jackets are, where the life of both star, who was supposed to do what. we knew who to contact. something like that would have been really nice to see. language was another barrier. a majority of the true

neighborcrew members had difficy speaking and it made more frustrating. we had to wait for someone to translated into ingress. it started to change. that also added to the aggravation and confusion. >> allotted time we try to find people who spoke english. they'll let us know what had happened. we relied on a third party. a life jacket location would have been nice. i actually had no idea. if joe was not for our team, we would have to go all the way

from the third deck to the ninth pair it is for any other things that were in the room. >> you said that you had contact with the cruise. you said they compensated you for certain losses that you may have sustained? >> directly for ouwhat we pay ft alone, we have made our separate

arrangements. there are other companies that we flew with. this is the only thing that they are funded immediately. >> to your knowledge, have you now release them from any future liability? had you wanted wanted to claim any other damages, heaviside anything that says the company is no longer liable? -- have you signed anything that says the company is no longer liable? >> no.

we of not signing anything that replaces them from further liability. >> they had mentioned that they will try to recover our belongings and get back. at this point there would like to know the estimated valuables that we left behind in case they are unable to get those to us. >> would you take a cruise again? >> not in the near future. >> thank you very much. >> anything else? >> thank you for being here. it is very thorough, a compelling. it helps us piece together what our mandate was for a complete

picture. at least from my standpoint, it points to one individual who judgment has resulted in a lot of as much worse from others. we believe we will be following up with the investigation as it continues. your being here was helpful. we thank you very much. we do not have any more questions. we will take a brief adjournment to go to our third panel. >> thank you. [captioning performed by national captioning institute] [captions copyright national cable satellite corp. 2012] >> we will come back to order. we will recognize christine's

death the who is president and ceo of the cruise line. she is accompanied by the executive director and vice presidents. the only u.s. high-capacity cruise vessel currently in operation. wii thank you for being here. >> thank you. thank you for inviting me.

i am president and ceo of cruise lines international association. michael is a required capt.. before i begin my remarks, let me state that the cruise industry where three closely and depend upon the coast guard. we wish to express our condolences. i would certainly prefer it to be with you today under very different circumstances. the incident has had a profound impact on our entire industry. i speak for all of our members in expressing our deeper

consults as to everyone that has been affected. as an industry, and we're committed to examining what happened, lessons that can be learned, and working with governments and regulators to ensure that recommended measures are adopted. my remarks today will not focus on speculation over the causes of the concordia incident. there are ongoing investigations of law enforcement authorities. we hope to have their conclusions as soon as possible. this represents 26 major cruise lines serving north america at a more than 16,000 affiliated travel agents across the united states. last year our member line 211 ships, surged 16.3 million passengers, up from 7.2 million in the year 2000.

safety is this industry's number one priority. it is absolutely essential to our business. nothing is more important than that. every aspect of the experience is heavily regulated. a united nations industry mandates global standards for the safety and operation of cruise ships. the most important of these standards are the details and the international convention for the safety of life at sea. if provide its the world wide set of mandates. there are evacuation and navigation standards. a vital parts is the international safety management code which assigns safety

responsibilities and procedures so that every member understands and is trained in his or her responsibilities, especially in the event of an emergency. the stringent standards embodied by the organization have multiple layers of enforcement. in the united states, the u.s. coast guard enforces all maritime regulatory requirements through the announced and unannounced inspection and a rigorous inspection of every ship that embarks passengers. at any time, the local coast guard captain can prevent any cruise ship from departing a serious violation.

because of the commitment to safety is supported by strict regulation, it is one of the very safest forms of recreation and travel in the world. there were a total of 28 fatalities on cruise ships related to operational casualties out a 223 million passengers and crew who sailed during those years. 22 of those fatalities involved crewmembers. six involved passengers. let me be very clear. not a single fatality is acceptable to our industry. we have and we will continue to work hard to urban such incidents as. we treat these as a profound reminder of our duty to

continuously improve our practices, procedures, and performance. the incident is the difference. almost immediately following the accident, they launched a cruise industry operational safety review. it is a comprehensive assessment of the critical human factor and operational aspects of maritime safety. this review is under way. it allows them to share best practices on operational procedures consulting with experts and collaborating closely with government and regulatory bodies to implement the changes. i am pleased that on february 9 the instituted the first of these recommendations announcing the new buster -- muster policy

for embarking passengers prior to departure. this policy has been taken by members both here and abroad and exceeds existing legal requirements and became effective immediately. as best practices emerged, recommendations will be made on an ongoing basis. this is a long tradition in our industry to focus on continuous improvements to proactively improve safety procedures. they work with congress to enact new laws that are dedicated. the work of many members to assist in the development and enactment of the security and safety act in july 2010 bringing consistency and clarity to the

security and safety regulations for the industry in the united states. the cruise lines are already in compliance with all affected precision's. we will continue to work with law-enforcement agencies both in the united states and around the united states to ensure all of the provisions are fully implemented. thank you again for the opportunity to provide this testimony. we remain fully and deeply committed to continued enhancement of the safety of our crew members and guests as it is

without question our most important priority. i look forward to respond to your question. thank you. >> thank you. you are recognized. >> members of the subcommittee, my name is george. i'm the senior vice president for marine operations for princess cruises. it is a subsidiary of the carnival corp.. on behalf of the entire carnival family, i want to first of all say that we are all deeply saddened by this tragic accident involving the concordia. our thoughts and our hearts are with the passengers, crew, and their families. the safety of our passengers and crew are our top priority. every day we strive to achieve

high levels of safety. we're committed to intensifying his efforts as much as we can. prior to working for princess cruises, i worked in the coast guard for 27 years. a retired in the rank of captain. my last assignment was the coast guard captain of the los angeles port. when or responsible for all coast guard operations in southern california. varied widely. including surrey and as a member on the u.s. delegation to the international maritime organization where we were committed to progress the emphasis and focus on the role of the human elements in preventing maritime casualty is. the casualt -- casualties.

my goal is to provide environmentally sound operations that are safe and secure in compliance to the rules and regulations. we accomplish this through the establishment of policies and procedures that meet or exceed national and international requirements entered training and inspections both internal and external. with respect to the compliance, the take control. if aboard the ships at any time. regular ones are with ports. training is an integral part of safety.

it takes years and years of experience. pryor's to being hired, they must perform the functions required for their level of response was the on board. our crew members focus on the safe and secure sound operations every day. they have instructions as to their duties. they also participate in on board safety drills including fire and abandoned ship drills and attend one every month. specific life-saving in firefighting training is also provided in either shore based

or ship programs. we regularly inspect are sifting equipment. we insure their available and always in good working condition. educating passengers regarding safety procedures is deeply important. regarding musters, we announced the policy voluntarily adopted that exceed international requirements by calling for an from departingryoprior from port. these are explain to the passengers. the carnival group of companies have engaged outside industry leading efforts. it brings training to conduct an audit.

but to take procedures and conduct a thorough review of the accident. this initiative will identify it lessons learned. it answers the safety of all our passengers and crew. we're committed to taking the audit and providing recommendations to the industry- wide operational safety review so that the entire cruise industry can benefit from our learning. i appreciate the opportunity to appear in the four to answer any questions you have for me. thank you. >> thank you. >> before i begin my formal statement, i like to give my condolences to members of the

u.s. coast guard that we have lost. i currently served as captain of the norwegian cruise lines and have more than 30 years of seafaring experience. i am pleased to testify before you on behalf of the entire cruise industry. all of us appreciate the time in consideration you are applying. we appreciate you giving us this opportunity to appear before you and address your concerns. while i am unable to provide specific information or speculate on the causes of the concord the incident, i can provide expert opinion on the training of captains, oversights, and emergency preparedness. i make captain for norwegian cruise lines that operates foreign flag ships and a u.s. flag ship. i commended for norwegian cruise

ships since 2005 and have served as master for the u.s. and international fleet. prior to joining norwegian cruise lines, and served as captain of the u.s. maritime administration. i graduated from the marine academy in 1982. as the captain, the safety of passengers is my priority. i take into account every factor possible in determining the best course of action to ensure the safety of my passengers and crew. the industry is heavily regulated with strong enforcement mechanisms, the international maritime mandates for safety and operation cruise ships.

it provides comprehensive mandate on safety equipment. the laws of governing the operation of cruise ships whether they are u.s. or foreign flags. the outlines chipboard and crew procedures. they have drills and exercises that are required. the bus to fully documented. they're subjected to internal and external audits by comprehensive network from the

shipping classification society. they conduct oversight occurred ship operations. there ithere recently expense of cruise ships. there must be trained in accordance with the stringent ones. while there remain a safe form of transportation, we train for worst-case situations with the safety of passengers and crew is given the highest party. another critical part of the duties has to do with the management of the bridging team. it is a process by which all members of the bridge team coordinate and maximize effectiveness of procedures

during critical operations to enhance navigational safety. all crew members received training in emergency procedures, safety, and training. what to but is paid in emergency drills. they also address record-keeping for the drills. they're constantly reviewing the operations. they can improve the safety and security but passengers. want to thank the subcommittee for the opportunity to testify.

the well-being of our passengers and crew members will remain our highest priority. i will be pleased to answer any additional questions regarding these topics. thank you. >> thank you. good afternoon. i in the legislative director for the international union. there are a variety of capacities. we blunted thank you for conducting this hearing. they have highlighted the critical need for well-trained crew members aboard the cruise

ships. it is important given the vast majority are hospitality staff not mariners that all crew members are well trained. training makes all the difference. our training center has been training maraniss for almost a century. the change over 185,000 students. we have been trading cruise ship personnel since 1978. we are proud to be a part of the reestablishment of the cruise industry. our members currently sell alongside capt. hoyt. in order to assist, we opened a new state-of-the-art training facility.

it provides basic safety and training to meet the needs of our fleet and the increase demand for mariners and the hawaiian trade. we have changed over 4000 crewmembers and provided training in outside groups. all our programs are designed to comply with requirements that are discussed earlier. the specifics are available for our written testimony. at the end of the day, all of our crew members must know what to do in the event of an emergency. not because they must do so under the law, but because so many lies depend upon their training. what we are confident that we provide the best training in the world, the coast guard is there to ensure they some of other legal requirements.

we believe the proliferation create a growing concern for safety. the vast majority of cruise ships calling on u.s. ports are sailing under the baton in flags of convenience. the issue is not whether proper standards are available internationally. so long as there complied with. it is that millions out of work. it is critical we know she is she says she is. this is best done under a system with safety control. we are concerned with the issue of communications between crew members and passengers. the crew is often of various

nationalities and it must be the same language. there were crewmembers a member of 30 nationalities. there were issues with communication. that contributed to some of the issues. we find it hard to believe that the crisis will be inevitable. all this is important, and we believe the best order to protect passengers, passengers as a confident they know to do in the event of an emergency. we strongly support this. the policy requires this. this is not the case under regulations.

this is simply not good enough. access can happen at any time. the rest see what happens during the emergency. as we all work together to avoid accidents, we must remember the best way to protect passengers is to ensure that crewmembers are well- trained and professional. they know what to do in an emergency. training saves lives. it is that simple. thank you for allowing this to testify. the >> thank you. i would like to start with you, captain hoyt. i come away with a distinct impression that if you have been the captain of the concordia, we will not be having this hearing.

you heard their testimony. >> yes. >> could you walk us through if you were capt. of a ship that had an unforeseen accident, how after the accident he would have handled that situation? >> i would not want to comment on the actual come korea. >> to lead to a hypothetical. >> in the event of an accident, we have procedures in place to put out a general alarm at the moment when you need to bring passengers. >> i understand the nature of the investigation. we cannot go there. can you say would you have

turned off the track for any reason? >> i cannot see getting into the situation. >> i think the balance of the questions would be a problem for you. it did not want to put you in that situation. have you made or do you plan to inke other policy changes an response? >> we have announced the safety review almost immediately following that incident. we are working for a process with our member line to are conducting internal reviews. it is required whenever there is an incident like this under

the safety management code. this review will have several different phases that it will go through. we anticipate there will be other best practices and lessons learned that we will be able to communicate particularly as the italian authorities complete the ongoing investigation. policyn't have a model on the abandoned ship policy? have your members adopted the ?olicies tax hike it sits as a non-government organization. it was discussed as well as the international safety code.

this is the prayer in is required. >> in light of all this, have begun back to training on all of their ships? >> that is one in the areas under the review focused on human factors which will include crew training. >> thank you. >> can you tell us what the difference is between training aboard a u.s. flag, a cruise vessel, or a foreign vessel? >> el this under our situation, all the members receive the same training that qualifies them. the requirements are fairly similar. a master of the coast guard requires. all of our members aboard the

flight vessels are required to take a number of courses in addition to the standard by safety training. the also learn how to handle the crowd. they are given the basic training to direct passengers to their muster stations. some of our members are given specific strain on the operations. we have a course that trains member to do that. we have training for search and rescue on board the vessel as well. we have a very good track record. they're bringing in a number of emergency situations whenever there has been a need to give

folks off of optics very quickly. our members were the first on same. chips in the hudson river were able to take crews off of it. >> thank you. >> i do not know why it was so ingrained in me. at the watching a lot of television. if there is this pop culture phrase that was ingrained in me. it is the ultimate response ability. it goes with the person in charge of the ship.

somebody has to be irresponsible when something is under way. i think that is why u.s. viewers were in such a shock. it runs counter to everything that many of us are learning. one of the reasons why we are here today is to understand not just what is behind that idea but what is behind what we do on a cruise vessel pair they answer the responsibility is distributed. folks know what their jobs are.

a couple of questions on that about the responsibility of the ship, the cruise line industry has to evacuate people in 30 minutes. how does that happen? >> behind the train for that? >> the training is constant. the keys are the weekly training that we have. they have a scenario based training. there is training going on throughout the month every day.

it is their training in drilling. >> is running quick pace lawyer under way? -- does training take place while you're under way? >> yes. it is the route the operation. >> -- it is throughout the operation. >> are you capt.? >> retired captain. >> with regard to the training, when folks report for duty, how much contact in your particular company to have with folks before they even get to the ship's decks so they're prepared

for the first cruise as well as the ongoing training? >> they undergo all the mandatory training identified. do you have a team of safety instructors. they have been trained in all the required mandatory training. there is the survivability and all those crown management ones. the good there for a week or two. maybe three times a year. they train the crew right unseen with the ship's equipment. they spend the time they can in

that situation. they're taking away from their other duties. it is comprehensive training for all the people who have the samlet. -- that have the training. the know the proper information. they make sure they turn on the channel to the emergency channel that shows the passengers as they get in the cabin. it shows them or their life jackets are. that is the ongoing thing we do on the ship. >> can you talk about the retraining that has occurred? >> folks keep coming through. cracks we got here.

they're able to come back. to get the training. we provide as much as they possibly can to get the training. it is a union benefit. generally we do our best to make sure when they walk up they know enough. they have a systems on board the vessels. they can do their jobs. with the card to working. >>, often today muster the passengers? >> three times per month. that is the all hands training in emergency drills.

the fourth week in the month we do the entire muster. the good there the entire process. from the initial stages of a plan scenario up through the evacuation process. >> to have any unplanned scenario emergencies ta? >> we do. >> what is the difference? >> we are taking 1000 crewmembers and putting them through the processes. >> you also have on plant emergencies and things that would activate certain set of emergency response teams.

they help maintain readiness. >> the have had some experience. what would -- tell me about planning? >> the planning for cruising? >> planning for the emergencies in the settings. >> we have been several years. the messieurs that we go to our to conduct an exhaustive risk assessment of the whole operation. some of the measures we implemented as a result of that risk assessment was to do some

extra damage. it is so successful we decided to implement that. we also manned the ship with two captains said that they could run on/off. there's always a captain on the bridge. we brought a pilot from argentina to give us advice as well as another captain whose expertise was an icebreaker. they positioned a member of the marine operations.

they employ of this. we employed someone like myself on the ship.

but i think those are the two directions, one, debates in congress with a set of goals, for example, and the other is to get voters on our side after education. >> i sympathize very much with that point of view and have said so myself as well, that is about education and awareness. the fiscal cliff to which you refer would be the enormous tax increase that we face? >> a number of measures, including both tax increases, expiration of the payroll tax cut, the sequestration that comes out of the super committee negotiations, all of those things are hitting on the

same day, basically. >> thank you for emphasizing how important that is. thank you for your great work. i yield back. >> a very good point, mr. chairman. and miss hayworth. i appreciate your thoughtful questions. >> thank you, mr. chair. mr. chairman, i want to pick up where congressman what left off. i am the lead democrat on the europe eurasia subcommittee, so europe is very much on the mind. we just recently came back from a trip over in europe where there economy was much discussed. i would like to ask, too, because i know i have limited time, two questions and see if i have anything left thereafter. first, given the close linkage between our economies, it seems

access to the fed's swap lines is crucial in times of market attention. can you discuss how american companies benefit from the ability for the fed to swap lines with foreign central banks, and the difficulties u.s. companies and workers would face if those swap lines did not exist? and secondly, could you also tell us what would be the exposure of u.s. financial institutions to european sovereign debt? can you categorize our financial systems -- would you categorize it as exposure that is significant? >> very good questions. on the swap lines, european banks do significant business in dollars. they need dollars in order to conduct that business. they were having great difficulty accessing those dollars. what those dollars are used for -- about half of them are for making loans in the u.s. they directly affect credit of

of-credit availability in the u.s., and then they therefore affect households and businesses in this country. the rest goes for trade finance, which helps facilitate international trade and prosperity. it creates confidence in the dollar that those markets are working properly. these swap lines seem to be very successful. they have reduced stress in the dollar funded markets, and it looks at this point that demand for those swaps is starting to go down as stress has been reduced. in terms of u.s. financial institutions, we are monitoring it very carefully. we continuously look at bank exposures. we are making them do stress test of european banking exposures. our initial conclusion is that direct exposure to european sovereign debt is quite limited, particularly on the periphery. exposure to italy and spain is

somewhat greater, and obviously to the smaller three countries. we think the banks generally have done a pretty good job of hedging the exposures that they have to sovereign debt to the extent that it is european banks. the sec has provided guidance with their exposure to the market and to the public. having said that, if there was a major financial accident in europe, the main effects on our banks would not so much be through direct exposure as it would be through general contagion, flight from risk- taking, loss of faith in the financial system, economic stress and so on. i think there is a significant risk, even though we have done what we can to make sure banks are managing their direct exposure to banks and sovereigns in europe.

>> [inaudible] >> we are obviously very integrated. about 2% of our gdp is in the form of exports to europe. if europe has a significant slowdown, we will feel that. our companies are highly integrated. you think of companies like ford and gm, which produce their as well as in the u.s. however, we think that europe has a mild downturn, which is what they are currently forecasting, and if the financial situation remains under control, the effect on the u.s. might not be terribly serious. at least, it probably would not threaten the recovery. but nevertheless, it would have an effect, certainly. >> one of the things that we discussed over in europe was

the fact that they said that greece equaled about 2% of the economy. and they were going to keep them so they would not have to lose the europa, but they said if they did have a great default, there would not be contagion. they thought it was pretty much contained and they were looking at what was happening in italy. i would like to get your opinion. if greece were to default, do you see the possibility of contagion to italy and portugal and spain? >> if you would just give a brief answer. >> i would say that leaving the bureau would be very difficult, and an uncontrolled disorderly default would create problems. >> the jump from new york is recognized for five minutes. >> thank you, chairman. if i could switch gears a little bit and ask -- obviously, the volcker rule is a topic of discussion in the financial

services industry. in section 619, it becomes effective this july. just last month, the federal government's role unmentioned that it probably would not be completed until january, 2013. when do you expect the volcker rule to be finalized? and do you expect there will be a reproposal for public comment? >> i do not think it will be ready-ready for july. just a few weeks ago we closed the comment timeframe. we have a lot of difficult issues to go through. i do not know the exact date, but we are working on it as fast as we can. as i understand it, the volcker rule includes a two-year transition time for in, starting in july. for example, starting with the interchange fee, where we were also laid relative to the statute. we will make sure that firms

have adequate time frame to adjust their systems and comply with the rule. >> i am assuming that you will not be strictly enforcing a will that is not in place yet. it does leave some ambiguity in market underwriting. that contributes to uncertainty. i would emphasize that bringing uncertainty to the market's should be part of the goal. >> it is. >> thank you. mr. volcker was unable to give a clear definition. it was "i will know it if i see it." that is about as uncertain as you can get. do you have a definition of what proprietary trading is? >> it is short-term trading in the financial assets for the purposes of the profits of the bank itself, as opposed to the customer.

that is my best definition. of these the, it is hard to know in every case whether it fits that definition or not. >> but you believe this is the definition that regulators will use in enforcing the rule? >> the most difficult distinction is between proprietary trading and market- making. in market-making, firms often have to buy assets, which they hold for a short time and then they sell to a customer. the question is, did they buy the assets for proprietary purposes or a market-making purposes? we will have to determine those. >> switching gears again, i am concerned that the president proposed budget for 2013 could lead to massive increases in capital gains, i think, as much as triple from 15% to almost 45%. i believe a dramatic rate

increase like that will discourage investment in a entrepreneurship. over the long term, i think it would be detrimental. your views on increasing capital gains that much significantly, do you think it could have a negative effect? >> a tax on investment, that is for sure. i have been advocating, at least, consideration of doing some more comprehensive type of reform. we have a lot of inconsistencies, let's say, between the way corporations are taxed and the way private individuals are taxed. for example, if you eliminate the deductibility for interest at the corporate level, and then you still have private individuals paying taxes, then you are double taxing interest i think these decisions are ultimately congressional decisions. it would be useful to put this all in a broader framework and try to find a reform that both

the corporate and individual tax code that fits together and achieves both the equity and efficiency goals. >> from a purely economic point of view, from an economist's point of view, we are seeing that in the u.k., they raise the top rate to 50% and in the first month they took in less revenue than before the increase. is it logical to say that is a strong possibility if we were to raise our rates substantially and see the reduction? >> yes, in the short run, because people can choose when to realize a capital gains. if they decide to delay their realization, that could affect the short run. in the long run, in my be less elastic. >> i see my time is expired. i will yield back. >> the gentleman from texas. >> thank you, mr. chairman. chairman bernanke, i want to thank you for coming before our committee and giving us your thoughts.

i would like to thank you and your staff at the federal reserve for offering your insights on the dry and in the housing market and the economy in the recent white paper. that paper explains that foreclosures are considered dead weight losses to the economy. meaning, they cost everyone, the banks, the government, families, and society. i think there is no better word for the glut of vacant properties in my district in deep the south texas. i think they are being dragged by this deadweight of foreclosed homes and the head winds of negative equity. project rebuild would put americans to work, refurbishing and repurchasing currently foreclosed properties to help ease the shortage of affordable housing options.

my question is, if programs such as the real estate owned to read program, and the project rebuild would be enacted and fund it, what do you predict would be the effect of not all of the housing market, but the rental market? >> first, i agree that foreclosures impose a lot of cost not only on the family, the borrowers and the lending institution, but also on the neighborhood and the community and the national housing market. >> that is right. >> it is very costly. i am not that familiar with the specific programs you are referring to. we have discussed in the white paper the idea. it would seem to make sense to remove any artificial barriers to let the market do what it wants to do, given higher rents and the lower house prices, it would make sense to take those empty houses and put them into

rental. the gse's are doing a pilot program to see if that will work. the issues have to do with whether or not there are enough foreclosed homes in an area. is there financing available for mass-purchases of homes? are there supervisory restrictions on banks that would prevent them? there are some areas we could remove that might make this -- we might see the private sector undertaking this. part of that would be refurbishing and repairing dilapidated homes. >> the biggest barrier ic has been the lack of community banks giving loans to those who want to carry out those programs. let me move to another question that is of great interest to me. i have served as ranking member of the higher education subcommittee.

i am concerned about the cost of higher education and the increasing amount of debt that our students are burdened with. last year, students received more than $100 billion in college loans. the spending is expected to pass $1 trillion. default rates on college loans have jumped up. i would like to hear inside on the possible effects of such an unprecedented student college loan debt on our economy and the possibility of a student loan bubble crisis here in our country. >> student loans are becoming a large category of loans. my son in medical school recently informed me that he expected to have $400,000 in debt when he graduates from school. i do not know about a bubble. going forward, most of the new

lending is done by the federal government. there could be losses that might affect the taxpayer. that program is not adequately managed. i think it does require some careful oversight. there may be ways to -- on the one hand, it is good that people who do not have the means can obtain the means to go to school. that is important. student loans play an important role. one might consider whether there are ways of tying up repayment to financial conditions, for example, as a share of income earned. there are various ways to look at have to repay student loans that might better adjust the cost of the loans and the capacity of the student. they are a good thing in principle. the program has to be well

managed. it has become a federal responsibility to do that. >> the time has expired. >> thank you. >> the gentleman from texas is recognized. >> thank you. thank you for being with us here today. allen nation's fiscal health is in bad shape and only getting worse as medicare and social security begin to absorb all of the baby boomers entering into the system. former white house budget director and the senate budget chair said that while the budget stabilizes debt over the next decade, the real problem arrives after as entitlement cost spiral out of control and revenues are inadequate to deal with a wave of retiring baby boomers. you said that congress needs to act now to put our house in order. would you agree that in order to do that, congress must

address the unsustainability of medicare and social security? >> entitlements are one major category of spending. i do if congress to not be constrained by the 10-year budgeting window, but to think further. the lunker in advance economic changes, the more time there is for people to adjust to them. >> so your answer is yes. >> especially on the health care side, costs are very high. >> in your opinion, was the budget passed last year a serious effort to address our nation's fiscal problems? >> those are congress's decisions.

my role is to encourage you to address the long-run sustainability issue. >> i hope i'm not putting you in a political situation. i highlight the word serious effort. would you say that any legislative effort to deal with our nation's long-term fiscal health that is not addressed medicare and social security is not a serious proposal? >> it is a fact that health care costs, medicare and medicaid, have become a large part of the federal budget. unless you are willing to have the government be a bigger share of the economy than it is now, those programs would squeeze out the other components of federal spending. >> we will see a situation where our entitlement programs are 90% or 80% of the budget,

and the rest we will have to fight over. has the administration put forward a plan to address the bankruptcy of medicare and social security? >> i think the focus has been in the next 10 years. the administration has addressed the long run issues to some extent through some of the aspects of the affordable care act that has oversight boards and other things that would reduce cost. it is still a major challenge for congress to reduce health care cost. >> would you say that the administration's budget would not address our long-term deficits because it does not address of entitlements? >> i would reiterate that the budget they put out was for the next 10 years. by definition, if you are only looking at the next 10 years, you are not addressing the

long-run implications. >> thank you. let me go to regulations. i do not know if you read this cover of last week's "economist." it presents a dark portrait of our financial system in the wake of dodd-frank. i think the last sentence of the article sums it up, "ambition is often welcome -- everything is overwhelmed." dodd-frank required regulators right over four hundred rules for the financial system. would you agree that this lack of clarity is a hindrance on the financial sector? >> i think so. we are working as fast as we

can. we want to create clarity. some of these rules are complex. it is important to do a good job. >> the time of the gentleman has expired. >> thank you. >> the gentleman from missouri is recognized for five minutes. >> thank you chairman and thank you chairman bernanke for your return. unemployment is declining and is now at 8.3%. we can get pretty technical in these hearings. my constituents in st. louis would like to know what we in congress and you at the federal reserve can do to put americans back to work in ways that we can all understand. what do you suggest?

>> well, from the federal reserve's point of view, we have been keeping interest rates low and trying to create a financial conditions that will foster entrepreneurship. that should help bring the economy back to a more normal level of functioning. the fed bank cannot affect the long-run health and productivity of the economy. that is up to congress. having a fiscal program that achieves fiscal sustainability and its protective of the recovery, which is still not complete. we need to talk about skills. we need to talk about the tax code. infrastructure that allows the economy to function. there is a lot to be done.

i guess i would put the fiscal stance first from the congress's point of view. >> it has been suggested by the house budget chair that if interest rates remain low until 2014 this will hurt the dollar. do you think that is accurate? would it risk fuelling an asset bubble? >> i would like to make a distinction that is not often made. when people say heard the dollar, there are two definitions of the dollar. what is the buying power. does the dollar by more today than it did yesterday. the of the definition is the dollar reverses other currencies. if in fact, our policies have been accommodative since 2008.

on both counts, we are doing ok. inflation has been about 2%, which is lower than previous chairman. at the same time, the dollar, in a foreign exchange sense, is roughly where it was three years ago. i do not think that is a big problem. those two components -- you asked about interest rates. >> will it risk fueling an asset bubble? >> that is something we have to pay close attention to. we have expanded our ability to monitor the financial system broadly to take a macro approach. we do not see any bubbles in the economy. that is something we are going to need to continue to monitor. >> thank you. many citizens are concerned about the rise in gasoline

prices at the pump. especially the working class. what measures can the federal reserve to take to stabilize the recent rise in gas prices? >> we are concerned about it as well. it has a direct effect on inflation. it is bad for growth. it takes away buying power for households. it is a real concern for us. overall inflation is low and stable. it is a question of this particular product becoming more expensive. again, the main reason for it is the higher price of crude which relates to a number of factors, among them is uncertainty about supply in iran and in africa. i do not think the fed can do too much about the price of gas. i think it is more important we

focus on demand. the united states has been reducing its dependence. we have been importing less. >> if i asked, would you suggest tapping into the reserves? >> that is for the administration to decide. the reserves are typically used for destructive situations where there has been some breakdown in supply chains, during katrina, for example. again, that is an administration decision. >> thank you. >> the gentleman from ohio is recognized. >> thank you. thank you for the chairman for coming to testify. i want to ask you about one big picture question and then talk about some things that are

important in my district. i have been here 13 months. i have realized that the only things that happen in this town are the things that have to happen. you have heard some robust debate in this committee about how we might solve our fiscal crisis. you have admitted it is the thing we should stay focused on. i believe the best way to fix it is a balanced budget amendment. that does not say how we will balance the budget. it requires it to happen. i do believe we can do that in a thoughtful way. usually, you punt these questions. i am going to ask anyway. what the think about a balanced budget amendment as a technique or solving our fiscal crisis long-term and forcing it to become one of the things that have to happen? >> there is evidence that rules

or structures are helpful in getting better outcomes. for example, things of that sort -- i think one year might be too short of a time. over a longer period of time, some kind of rule, i do not know if you want to go the amendment route, some kind of rule for the congress to provide a guidepost for its own deliberations and for the public's awareness could be a helpful structure to make things happen. >> thank you for that thoughtful answer. i do want to follow up on a question. i ask you this last year. i know labor statistics does both of your measures that the measure yourself against, unemployment and inflation. i want to ask you to continue to pay attention to the way they measure things. the unemployment number does

not count the people who are no longer looking for work. it does not account for under- employed folks. i am worried about the way they count. i am worried about the way they account inflation. the reduction in the prices of housing is masking the increases in commodity prices, including oil and gas. if you think about the way that people in my district and the rest of this country manage their finances, they lock in long-term rates on their houses. they have a known amount they are going to pay, changes only a minor amount. the thing which changes -- their real inflation is commodity prices. i know the bureau of labor statistics does that work for you, i learned a long time ago

in the military, what you measure is what counts. i remind you to review how they measure it. >> i would comment that the bls does have measurements that do take into account other workers. >> the last thing i would like to talk about is community banks. you mentioned it in your testimony. community banks were not the cause of the crisis in 2008. they bear a disparate impact of many of these regulations because of their size and the fact that they do not have a compliance departments. i will tell you a story and then remind you to talk to your friends at the fdic and occ. i have not heard a bad story about fed regulators. i have heard horror stories

about the fdic. i will tell you a new one. there is a community bank that recognized a borrower was in a deteriorating position. they asked him to put money in an account and sign a forbearance agreement. the fdic ask them to put all that money towards principle and write the loan down and downgrade the loan. they know the loan is going to be good for a year. the man's financial condition may change in the year. the fdic has forced them to do things that were irresponsible. my time has expired. i would ask you to go back and ask them not to encourage our community banks to do things that hurt borrowing and our

economy. thank you. >> the gentleman from california is now recognized for five minutes. >> i want to commend you on everything you have done to keep short and long interest rates as low as possible. we face a difficult circumstance. the fed is doing more than any other agency of government to try to get us out of it. i will have a question for the record for you on the volcker rule and applying it to international situations. my first question is about the society for worldwide interbank financial telecommunications, swift. i am on a bill to expel iran from swift. do you think that we can exclude a all iranian banks from

swift instead of just those under eu sanction. >> on swift i will say the fed is one of the supervisors of swift. we work with the bank of belgium and other international supervisors'. my understanding is it would be feasible. it is a very important system. it is part of almost every international money transfer that occurs. it could be a real problem for iranian financial markets or institutions if they were banned from using it, yes.

>> let me assure you that every institution of the federal government that is involved in national security policy would like to see iran as financially isolated as possible. well you do not have a national security staff, whether it is the foreign affairs committee of the house, the full house, the senate, the state department, i think you should use your position at swift to achieve what is already the national security policy. >> we will do whatever congress it instructs us to do. >> i want to commend you for your white paper on the u.s. housing market. i think it is appropriate for the fed to comment on the housing sector. there is this program of going reo to rental. i think it is important that we not sell these homes in such large packages that only huge

wall street firms are likely to bid. i think it is important that you sell packages of homes in the same area so that the same management company could administer 20, 50, 100 homes. i think it is important you deal with local investors who have a stake in the local community. i do not know if you have any comment. >> we are running a pilot program. the trade-off is you need to have enough homes that it is economic for the management company to maintain them. otherwise, i think it makes sense not to over-concentrate the ownership. >> i think whatever package you have ought to be in the same area. >> certainly. >> mel, we have seen adjustments to the llpa from the fanny and the freddie, the

gse's. congress needed to fund the lower security tax. we hit another basis point for the next 10 years. do you see us hurting the housing market if we go back to that well again? >> here is the trade-off. the benefits of a higher fee are the fiscal benefits, increasing the profits. by raising those fees, you may begin to bring in private competitors into the market.

that is part of the strategy. if you make it more costly to get a mortgage, that will hurt the demand for housing, which is already pretty weak. >> another decline in housing prices or if it to stabilize would be very bad for the economy, and for the people i represent. i yield back. >> the gentleman from california is now recognized for five minutes. >> thank you. i would like to go back to that chart, government spending as a share of the economy. the congressional budget office puts this together every year. they show the point at which the general fund transfers to entitlement equals the total tax revenue for the federal government. i would ask you, is this

production sustainable? is this situation sustainable? >> i do not think it is. >> what impact might continuing on this trajectory have in terms of interest rates? say that the bond vigilantes' start to turn on us the way they did on europe based on the projections. what impact could that have on the cost of borrowing? >> if market participants are not persuaded, something will give. >> since this is a projected budget, what do we do, and what responsibility do we have to elevate this issue and get americans and get the congress to realize the necessity of dealing with reform on this

front? >> it is one of the most fundamental responsibilities of the congress to manage our finances. it is politically very difficult. part of the problem is the public may not fully understand the issues. they need to be further educated. >> part of the responsibility also lies with the central bank, the federal reserve in terms of demonstrably explaining to the public the consequences of this. your colleague, the head of the ecb, he made headlines last week. he said he had some harsh words for member countries of the ecb. he said there is no trade-off between economic overhauls and fiscal building. he had some harsh words for the

future of the european state. i would like to get your thoughts about the comments. in light of the 2012 projected deficit, 8.5% of gdp. i am looking at these numbers, for the big nations, it is worse. looking at what you described as the sizable structural budget gap under current policies, and beginning to compare that, i ask, structurally, is there any material difference between us and these nations? is it simply that the markets turned on europe? they turned their but they have not yet turned on us? let me get your thoughts on that. >> there is a structural difference in europe.

they have a common monetary policy but not a common fiscal policy. the united states is a single state. social security and medicare payments still get made. there is no a equivalent of a federal government in europe. part of their reform process is to see to what extent there should be greater fiscal union. europe does not have a bigger deficit than we do. that is true. all i can say is that he is right at least for the peripheral countries, like greece and portugal and ireland, which have no alternative but to tighten the belt of immediately. there may be more flexibility in other countries. >> with our debt to gdp, with structural deficits, at what point do our calls for debt reduction become more in line with the comments that your counterpart is making?

at what point do we say, the long term structural adjustments have to be made? >> you mentioned 8.5%, a part of that is cyclical. part of that is structural. you have to pay attention to the recovery. you cannot ignore that. it is important to create a credible plan as soon as possible. that would remove a risk to our economy. >> i agree. to the extent you explain this to the public and explained it loudly and more demonstrably i think they could understand the need for structural reform. >> thank you.

thank you, mr. chairman, for your willingness to help the committee. your remarks, he cited the concern regarding the downside risk of the economic outlook due to stresses in the european banking system and the eurozone in general. there was an agreement between the greek government and private bond holders where the greek government would impose a hair cut of over 50%. there is a clause that says once a certain amount of the old bonds are redeemed, then the government will impose a collective hair cut across all of those bond holders. there is a question here, i guess you could say that,

charitably, there is a default here. i guess there is a controlled the fault. what remains that it is unclear is whether these bond swaps will constitute a credit event. whether it will trigger the payout on credit default swaps on greek debt. what that means to u.s. bank's exposure to greek debt. whether credit default swaps are still a mechanism for protecting against that event. does this make you concerned about what those balance sheets look like?

>> there is a private sector body that determines whether a credit event has happened. i do not know what they will determine. if they invoke the collective action clauses and forced the breakdown on all private lenders, there is a high probability that body would invoke the contract. that would be my guess. in terms of u.s. banks, their exposure is either hedged or un-heads. it is very small. i do not expect any direct impact. it is important to maintain market confidence more broadly, the idea that whatever happens in greece stays in greece and

does not spread to other countries. that is why i talked before about the need for financial fire walls or other protections that would prevent contagions from greece to other vulnerable countries. >> i guess -- what if the decision goes the other way? what if they say a default has not occurred? there is no pay out? i know that is hypothetical. i know the derivatives association will probably not come out that way. what if we ended up with that scenario? with that undermine the idea of this protection? >> in some people's minds, i am sure it would. it is up to this group which is interested in maintaining confidence in the contracts to make that determination. >> thank you. i yield back.

>> the chair now recognizes the chairman of the capital market subcommittee. >> thank you. i appreciate your stamina for being here. i would like to talk to you about what is necessary in some economists's view to get the economy going, and that is dealing with the money multiplier effect and for the need for that to expand. it would appear that the decline in the multiplier effect is related to or has some correlation to the fact that the fed pays interest on reserves. the purpose of doing that is to pay interest on -- is to do what? create a floor, if you will. you have already created a floor by where interest rates are now set.

can you elaborate as to why the fed continues to see the need to pay ior? >> yes. we have looked at the possibility of not paying that 25 basis points that we currently pay. would it be beneficial to the economy? the federal funds rate is currently around 10 basis points. eliminated that might lower it further, but not below zero. the stimulus of fact, the limiting that, or the effect on credit extension would be small. on the other side, we have concerns about the affect of the almost zero rates on various financial institutions. also, the functioning of the federal funds market itself.

we have weaker guidance from the market in terms of what the funds rate actually is. the participants, there are fewer participants because the rates are so low, it does not cover the cost. we think there are some financial side effects which would be negative. the benefits to the economy would be small. for that reason, we have not reduced. >> am i correct to understand, what you are doing is incentivizing the banks. you are incentivizing the banks to keep their excess reserves? that contracts their incentive to lend. is that not counter to what your policy should be? if you did away with it, there would be less of an incentive for me as a bank to leave my reserves with you and to lend with a business.

>> quantitatively, it is trivial. the banks also have to pay an assessment. they are getting one-tenth of 1% return to hold the money with us. that is not going to prevent them from making good loans. >> if i am a bank, that is still a better bet than what i am getting elsewhere? if you did away with that, would i have an incentive to try to find that? >> it is pretty small. >> it seems that would run counter to what your opening statement was, as far as the incentive and the money market. it is only the minimal amount. >> remember, loans are typically a year or more.

money market funds are typically under 30 days. the federal funds market is an overnight market. >> another question, you talked about this situation in greece. my only concern is that you have an open swap line, not just with greece, but with europe. could you comment as to why we should not be concerned about the potential for contagion if things did not stay in greece and europe, that the swap line may be negatively impacted as asset values drop over there? >> on the cost side, it is a safe proposition. our counterparty is the ecb. it is well-capitalized and has behind it the national central banks of over 17 countries. the swaps are also

collateralized. in addition, the contracts are such that they pay us back in dollars in interest rate that is determined in advance. we have no credit risk. >> the time has expired. the chair now recognizes the gentleman from georgia. >> thank you. welcome chairman bernanke. very good to have you. i think it is no small measure, your monetary policy of accommodation and creating credit facilities and insuring liquidity for borrowers. unemployment is going down. we are at 8.3%. we are averaging 200,000 new

jobs each month. we are not out of the woods, but it is important to recognize your contribution. let me ask you about these stringent credentials standards that you are required under dodd-frank and under section 165. you were given the opportunity to differentiate among companies on an individual basis or by category, taking into consideration the capital structure, risk, and complexity. congress put this in because we expect you will differentiate between the largest and most complex bank holding companies and those with more traditional activities, who also exceed the

$50 billion level in assets. can you tell us, have you established, conceptually, the different categories or tears or subcategories, including specifically with regards to capital that will exist for the bank holding companies that have access above $50 billion? >> the sections, we have put that out for comment. we are still receiving comment for that. we have also made public of discussions on the capital rules, basel iii. both of those called for an application to banks with the highest application to the largest and most complex banks and less going down. that will be in true of supervisory efforts and in terms of capital. basel iii involves a capital

surcharge. that will be determined by a formula that will put the highest surcharge that only the most complex banks -- it will be graded down to 0 when you get to less complexes. it will be gradated in terms of size. >> let me turn to the volcker rule. let me add, i think your policy of the firewall to keep what is going on in greece, in greece -- how is spain doing? i think spain's situation is the next most egregious. is this fire wall doing a good

job? >> the fire walls, which are european funding to stand as a backstop unless there is a contagion, we think more needs to be done there. the europeans will be looking at that. i think there is more to be done there. spain, on the one hand, spain is doing better. they have made progress in terms of their fiscal consolidation. they are taking actions to strengthen the banking system. the cost of credit has gone down, probably in part because of fundamentals, and in part because of the ecb's operations. >> let me ask you about the volcker rule. i am curious as to why you believe it is appropriate to extend the jurisdiction of the united states throughout the world?

it seems to me we should wait to see what other countries are doing in this regard so that we do not put the united states capital market for investors at risk. are other countries planning to adopt an approach like the volcker rule? >> not to my knowledge. we are not extending jurisdiction outside the country except in so far that american based banks will have to follow the rule in their worldwide operations. we are not going to require european banks operating in europe to obey the rule. >> but where our banks operate, they will. >> yes. >> the time has expired. the chair recognizes the gentleman from texas. >> thank you. it is good to have you back again. i have two or three questions. the g-8 had expanded their

balance sheets to about $15 trillion over the last two years. what do you see looking for? how much more expansion in these balance sheets, in these central banks do you see? what could be some of the consequences of that? >> i do not know what the expansion may or may not be. the japanese have begun some asset purchases. the ecb half a trillion euros of bank lending. it does not all reflect a larger balance sheet. each of these central banks is dealing in a similar way. the federal reserve is not unusual. they are trying to find more accommodation where interest rates are close to zero. rates are close to zero. cutting the federal fund