you would be providing? >> he said repeatedly he would be willing and support >> what about moving american forces on the ground? >> senator mccain and senator lindsey gramm and others have called for safe havens. governor romney has not done that, he had been asked and he said no. he said that it is not his position, but he feels we should have been and should be arming the opposition, but we should not have been leading from behind. we should have been in there a year ago trying to identify and work with the opposition. >> the administration has been working with the opposition for many months, not just the past five weeks when it came out in nethe news.

most importantly, helping them to gain greater cohesion, working with the political opposition to develop a common platform, to develop a syrian derived transition plan. this is crucial. how is change going to happen in syria? the way it will happen is if you can get parts of the inner circle a round of saw to begin to defect. to do that, they need the assurance -- parts of the inner circle around assad to begin to defect. they can be part of a new syrian government. it is important for them to hear that from the political opposition and to feel that minority rights will be protected and so forth. working the political dimensions of this is the most important piece and that is what the administration has been focused on from the get go. >> move on to israel for a

secondary when the president went to cairo in june 2009 and delivered a very important speech to the arab world, is there any thought now that he made a mistake by not going on to jerusalem at that time, which is just a 40 minute flight from cairo? >> you have to look beyond the itinerary. the truth is, does anybody criticize ronald reagan and his commitment to israel? he never went to israel. the as anybody criticized george w. bush? he did not know until his second term. what has this administration actually done for the state of israel? that increased security assistance levels to historic levels. has never been higher. we have added funding to protect israeli citizens against rockets coming from gaza. we have stood by him in the un,

vetoing resolutions that were trying to condemn israel. >> excuse me, but why it is there still of feeling, the stories that are written that the relationship between president obama and prime minister netanyahu, for example, are so tense and strange? >> that is a good question. this is an issue where we have always had bipartisan consensus. it is important to hear from the mouths of israelis what they think about the obama administration and their policies. this is from time minister netanyahu. he said there is one thing that stands out clearly in the middle east today, that israel and america stand together. the obama administration gives back to israel security in an unprecedented manner. never has security or the means

of security been better met than today under president obama. those are israelis talking about the relationship. >> the governor yesterday in his speech at the vfw accused obama of treating israel in a shabby way, and adding his voice to you in course of what he calls accusations, threats, and insults against israel. what would specifically a president romney do to advance the israeli-palestinian negotiations? >> per se let me respond to something michelle covered. it is important to put some context with your question. the fact that she pulled up three quotes from israeli shows the defensiveness of the obama administration on the relationship with israel.

i think that says something. secondly, when itineraries are announced, the campaign says this is just a gimmick going there, but obama will do it in a second term. you treat your friends not only with military support, which the obama administration has done quite a bit as with previous administrations, but you try to get political cooperation, and that has not existed. there have been harsh differences, whether dealing with the palestinian issue, iran, and it is symbolized by the fact vice-president of the united states kept the head of state of israel waiting nine minutes for dinner -- 90 minutes for dinner as if he was having a temper tantrum. you don't treat any head of state that way, let alone your friends. >> i would like to not go

through the political language excessively. we do read the papers and understand that. i question has to do with romney as president. what specifically would he propose or advance to move the palestinian-israeli negotiations forward? >> the first point is something you made. the united states cannot make this worse than the party spirit you have to have respectful dialogue which is why governor romney will be meeting with palestinian leaders. you did not go public on a negotiating position before you talk to one of the parties you say is a friend. it is a difficult problem. there is not an instant solution. anyone who does has not spent the kind of time you have in the middle east or has a different agenda. it is a very different culture.

you will have to continue to try to manage that tense situation so there is less friction and violence. >> will governor romney in israel this week, to the best of your knowledge, be discussing with prime minister netanyahu the idea of a joint american- israeli operation in syria or against iran? >> that is a good reporter's question and i will give our response of someone who has been government. they will discuss it and decide what they want to go public on. >> michelle, i would like to talk about pakistan. i am sure we have all read widely and you may know from personal experience that president obama is described as being extremely disturbed, concerned about the possible disintegration of the state of pakistan. then the question comes up, what

do do with its nuclear weapons? i am wondering first of all of you think that description is accurate, and then i have a follow-up. >> i think the united states is and should be concerned with the fragility of the governing situation in the state of pakistan. you only have to look at what has happened on the civilian side and some of the dynamics between the civilian side and the military to be concerned about the long-term future pakistan and its democracy. >> is that the reason why the president would like to retain a force of some 20,000 american troops in afghanistan, just in case something dreadful were to happen in pakistan with the weapons? >> and the president talks about a follow-on force, a much smaller force in afghanistan post transition, that force is

really focused on continuing to train and work with the afghan military and pursuing joint counterterrorism operations in the region. it is not directed at any of afghanistan's neighbors. >> i don't mean it as directed against. i mean the force will be there in afghanistan in case in neighboring pakistan government disintegrates, and then the question of who controls the nuclear weapons or rises as the real and urgent problem. >> that has not been a rationale for thinking about the follow-on footprint in afghanistan. several administrations have been very concerned about the safety and security of pakistan's nuclear arsenal and have worked on this issue, and the situation has improved somewhat over the years. >> what you mean by worked on this issue?

>> i don't want to say more than i can, but there have been cooperative efforts to improve the situation. the thing that worries a lot of people is some of the rhetoric coming out of pakistan about the future nuclear plants in terms of growing and diversifying their arsenal and so forth. that would be a worrisome development should that happen. >> governor romney now seems to accept the president's 2014 deadline, which during the primary season, he did not. according to the speech yesterday, he now seems open to that. so why the change? >> the position on 2014 was last fall, so it was there, but he has been critical of the president being guided more by political considerations than facts, and he has been concerned that our military leadership has not been supported as general

petraeus's testimony as cia director. michelle is exactly right. pakistan is enormously difficult. between the intelligence, the army, the civilians, the religious factions, it is barely functioning state. they've got nuclear weapons that are extremely dangerous and there is no simple answer. the governor understands that. he has said with respect to their tolerance in the western region of taliban forces, we should look at conditionality for foreign aid, but that is what his position has been on pakistan. i just want to acknowledge that michele's description has a lot of merit to it and it is one that governor romney understand. >> what does conditionality mean here? >> if you are going to continue to give the aid to pakistan, which is well over a billion

dollars a year, the tolerance of them allowing the taliban and other factions to work in their western mountains that bleed over and kill americans at this time, etc., you begin to pull that back. >> i would not use the word conditionality, but i think the discussion with pakistan after they took some steps to close the ground lines of communication for supplies and so forth has worked our way back towards a more cooperative relationship. i think the u.s. in this administration has been clear about the areas of cooperation that we need to see to be able to continue to move forward with the assistance and support. starting first and foremost with counter-terrorism and things

related to the safety of our troops in afghanistan. >> moving on to russia and our relations with russia. governor romney seems very upset with president obama's reset policy toward russia. the governor has described russia as the no. 1 global flow of the united states. first of all, what do you think of the governor's criticism? >> i think it is unfair and it misses a couple of the tremendous benefits we have gotten from the recent policy. from the beginning, president obama has been clear that we want to have a partner relationship with russia. where we have differences, we will continue to negotiate and press and push and work through those, but we will not in any way sell out our allies. we will not allow russia -- none of that. what you get is very tangible progress in some important

areas. another step in arms control that makes the world safer, that keeps the start verification provisions in place. that is a very positive development that had broad bipartisan support in the congress. corporation for transit through russian territories, very important political cooperation on sanctions against iran. russia agreed to stop supplying iran with sophisticated weaponry and air defenses and so forth. i worry that if you took the approach of this is now out our new geopolitical follow once again, you would lose a lot of that cooperation that is really important to american interests. >> did you think that it is possible that we will see in russia, under president putin, the rise of an arab spring-like

popular uprising? there has been an authoritarian drift in russia during the last 3.5 years. ironically, if you look at the ambassador's writing at stanford at the end of the bush administration saying bush was too soft, it would have to be magnified if you applied the same standard today. european observers were unwilling to say was a free and fair election of putin. a new law passed in the last 10 days. you have a law that tries to outlaw independent political parties in the provinces. you have russia, with all due respect, who has been a lifeline in both syria and recalcitrant on iran. when i was special envoy to

sudan, there were things we could not get it through the un security council on sanctions. we put together a coalition of europeans and others, over 20 countries that put sanctions on banking and other things. you don't have to wait for us to say you can do this. you have russia against the missile defense deployment and using their oil and energy to intimidate. you talk about it. for better or worse, i have dealt with some less than pleasant guys. and saying you are not doing good things never surprises them. they know they are not. so you have this false politeness. one more thing i have to say because i want to agree with machel's earlier comment.

obama says what it means and means what he says and he did that with an open mike, and that should concern us with respect to russia and other places. >> our russian colleagues are very hard hitting. we have raised human rights and concerns about democracy. we have been pounding them both privately and publicly on syria. there is no holding back. we have been very clear on georgia and so forth. to be fair, we should characterize the record accurately. the question i have is, what exactly would you do differently or more? what would you sacrifice in the current relationship, what would you be willing to put on the table to get in a different approach? beyond the rhetoric, what would you do specifically?

>> ronald reagan -- people in this town said we cannot deal with him. you have spoken the truth, but we cannot do that. lo and behold, he got the first nuclear reduction under ronald reagan. so first, speak the truth. the russian people that are trying to get more space for their civil rights deserve it. the american people deserve you to stand up for that. you do not empower them by saying russia has control over your own security interest weather with iran or syria. i think you would see changed behavior. what you have done is allow them to constantly test the limits. that tested it and then felt they could go further. >> lex move on.

-- let's move on. the governor says the white house is leaking classified information for political gain. >> there is no one who was more upset and disturbed about the leaks and president obama. he did not authorize them. they were not authorized. he has appointed to prosecutors to pursue them and instructions have been very clear. no one is immune, nothing is off the table. i want to get to the bottom of this. he has also said that he will hold accountable, he will pursue the investigation to the logical conclusion and will hold accountable and prosecute anybody who is found to have leaked. i think that is very clear. if you look holistically across the administration, there is no administration has been more aggressive about pursuing leaks

than this one. you can look back to some the things that happened in the bush administration in terms of how difficult these things are to deal with, and yet what you need is a clear presidential direction that this will not stand. it is intolerable and unacceptable, and to go after the people who might have been responsible. >> i have to ask you this question before you let loose. do you think that romney was equally disturbed when the bush white house leaked googles of classified information to bob woodward when he was riding his four books about the iraq and afghan war, including interviews with the president? >> i don't understand the administration's incestuous relationship with wallboard or in these books that come out. i have been reading this ever since i was in school in the

watergate days. i have never had discussion with governor romney, but i find that extremely disturbing, too. but the leaks we have seen now are unprecedented. look what happened to israel that was part of the cyber engagement with iran. did they want this leak made? >> i have worked in israel. the idea of leaks not happening in the israeli government, that is routine. happens every day. >> let me just parts this then. you are saying the israelis like the fact -- these leaks did not come from israel, and you know it. maybe he'd be classified something that the last minute. the fact is, the president

picking targets for the drones, that was highly classified. the fact that we engage in the cyber attacks, even the meetings with senior pakistan officials hurt american securities. the president should do a special counsel, should publicly say i have instructed everyone in the white house to respond to every question that is asked. he should be forward leading with congress' efforts to try to get to the bottom of it. dianne feinstein misstatement can back off and identify the white house as a source. i believe every reporter in this town knows the least one source

at the white house. >> one thing that will probably save the government a lot of money, if you look at david sanger's latest book, in the back he list all the people he spoke to at the white house. so there is no need to go through this entire thing. it is all they are all open and public. >> nobody owns outrage about national security leaks that are dangerous for the country. the president feels that outrage. i am sure governor romney feels the outrage. the truth is the president is going after this aggressively and i have no doubt that they will get to the bottom of it. >> i was at a forum dealing with libya and syria and the atrocity prevention board. there's a question about intelligence leaks. steve made a very thoughtful response and i said i think the

obama administration has figured out how to do it. >> let's move on to defense spending. the show, a question for you. careers the president, in an -- michelle, a question for you. in an effort to sidestep the sequestration coming into play at the end of the year, the president has proposed a $5 billion defense cut. the question asked is based on a congressional budget office study which says that if the president got his way, it would be almost impossible to get everything and he wants in his own defense policy because you would not have the money. so how you get the difference? how do you reconcile that? >> i am really glad you asked a question. there is a lot of confusion on this question. first of all, the president is

not advocating one trillion dollars of defense cut. there are two separate issues. the first is, there is a budget control act that was passed this past year by a bipartisan majority of congress, all of the congressional republicans to worry about defense issues, $487 billion of cuts over the next 10 years. that is a planning assumption for the budget the administration in developed for the fiscal year 2013, and secretary panetta was really clear. after some years of growth, we think it is possible. just be clear, that leaves the fiscal year 2013 budget at $525 billion. it estimated the budget will grow by 2016. it is not cutting the base line

of defense. it is cutting and more funding as the war in the transition happens, but is not cutting the base budget. it is slowing the growth in the budget. it is always nice to introduce some facts in these discussions. compare defense spending based budget. this is not some devastating, radical, horrible cut in defense spending. it is a reduction in the pace of planned broke. that is what the administration has said yes, we are going to live with the law that congress passed. the second issue, sequestration. it is the sword of damocles hanging over our heads in the congress fails to come up with the $1.20 trillion deal. the president has proposed a balanced approach to putting both revenues and the spending cuts on the table to avoid

sequestration. if congress fails to act, and right now the republicans in congress are saying we are not going to touch the issue until after the election and then we may not even allow revenues to be part of the equation. if sequestration goes into effect, in you will see another half trillion cut in defense. and everybody, the president, the secretary, everybody agrees that would be devastating for u.s. national security. we want to avoid that at all costs. >> thank you, that is helpful. governor romney has said many times that he would like not to cut the defense budget, but rather to add to the defense budget. at the same time being consistent with the general republican pitch for lower taxes. within the framework of the problems the country has today with respect to the national debt, deficit, etc., i don't

know anybody who says you can raise defense spending, cut taxes, and accomplish anything with respect to the national debt. so how you do that? >> i need to introduce you to more people creeks i heard the same thing in 1979 and 1980, and the economy was crippled with double-digit inflation. >> you think it is the same as today? >> no, it is worse because of the last 3.5 years. but it can be done via the governor has been clear that he thinks we have to rebuild our navy. he has called for 14 more ships the year. he thinks that there is a philosophical difference between president obama and governor reagan -- governor

romney and president obama on the economy. it is one that the american people are intensely interested in. governor romney wants to keep discussing that issue and allow the american people to make the decision on the alternatives. that creates, what do you create growth by more revenue. converse is trying to support and unleash the private sector for growth. i would suggest that the president like to have the debate just about taxes versus no taxes. that is what they are trying to posture desperate there are reasonable legislative proposals to deal with the defense portion by mccain and gramm and others. it is fresh and refuses to

engage him because they want to talk only about taxes. we are willing to have that debate in the context of a larger economic discussion, but we don't think the current path, which allows a diminution of our defense capability, allows businesses they are in the center for american leadership, for u.s. interest in the interest of others. >> do you think it is possible, short of an agreement on the economy and the fiscal clip that it described for the end of this year, do you think it is possible short of an agreement to increase the army and put it more money into defense? do you really believe that? >> i believe we can, should, and need to have an adequate defense. >> but where would we get the money from? >> i am happy to provide working with one of our economic

advisers to cut through the details. >> please give me your answer. but we can go back. there is a difference of views. the president's view is we are going to tax more, provide more stimulus, and that will have results. 3.5 years later, and has not worked. the president does not want that discussion with the american people. he wants a discussion on taxes. >> just to put the president's current defense plan in context, the army is coming down in size with the end of the war in iraq and the transition in afghanistan. it will still be larger that was at the plan of 9/11 before the war as group. this is not harming u.s.

national security. you have every service she, every commander in full support behind the president on this budget proposal. i think that is very important it the other thing is that is free should inform us about the economy. at the end of the clint administration you had a surplus and a very robust economy. you then had the bush a administration put in place many of the same policies that governor romney is now advocating economically. at the end of eight years, you had a profound deficit and debt problem. we have tried this before and it does not work. >> i am understand the desire to run against george bush the second time. you are running against ronald reagan. [laughter] >> is part is over now. we would love to have your questions. not only questions here, but

questions in the spillover crowd next door. please, when you ask your question, identify yourself all please be brief. if you make a speech, i am going to cut you off. we want to get as many people as possible. thank you very much. >> and thanks for taking the time to speak with us and thank you for your service. i want to ask about the fact that a lot of criticism about governor romney foreign-policy during the campaign has recently come from republicans themselves. today there was a long piece in the weekly standard criticizing governor romney for saying he would not hold a national security meeting during the first 100 days of his presidency. there's a feeling that governor romney has the prioritized national security.

i wonder if you could react to that and tell us what is the priority of foreign policy with the campaign. >> good question. i think governor romney, if you read his book no policy -- no apology laid out his vision of an american century and what would be required to satisfy a very be amplified and refreshed that and the vfw speech yesterday. he has answered questions about it. there is a desire to have more and more detailed and we try to provide those in response to questions from journalists and others like yourself. in the end, what he wants to do is prevent -- present a world vision that is dramatically different than president obama's. and how he would approach it, whether dealing with china or russia or iran, he has done that.

they will never be satisfied there is enough details and he wants to be provocative, so he will write columns that can be challenging. we feel we are laying out a vision where america should go. we are comfortable and the governor is comfortable with that. bu>> speak directly into the microphone, please. >> if you candidate wins the election, what will the policy be toward macedonia?

>> specifically with regard to nato. >> we are not hearing you without a microphone. >> what would be your policy toward macedonia? >> thank you very much. >> for the obama administration, it has been an important pillar of our policy in europe that the door to nato remains open and that as democracies it develop a stable and contributing to the security of europe, the door should be open in principle. in practice, there has been a very robust engagement with macedonia, military capacity building exercises and so forth as part of the partnership for peace and so forth.

i would expect in the second term that policy to be continued. >> thank you very much. >> a question for mr. williamson. i would like you to answer a question that was asked earlier, quinn that is where the money is going to come from to rebuild the navy and raise the dickens budget. where would that money come from? >> as the governor said yesterday that the vfw, in order to have the sort of american century he envisions comic-con and to have america as a nation where it can lead internationally, the first step is to renew and rejuvenate the economy. he believes that will come

through allowing incentives in the private sector. a different approach on regulation, eliminate uncertainties including obamacare that will all contribute to a stronger economic growth in the united states, and that while we have many important issues to deal with at home, if we are unable to protect our security interest, the u.s. government is failing in its first responsibility to the american people. >> just to follow that up, until all that happened, that does not happen in one day as soon as the government under president, let's say. in that time, whether it takes three years or six years or 10 years, where are you going to get the money in order to deal with what it is that he says is

soap bottle? that is my problem in understanding this. -- that he says is the problem. you are entitled to your view. -- your view of your problem. [laughter] in the last 3.5 years, whether it is a stimulus bill, adding burns to the private sector through overregulation, whether it is dodd-frank or obamacare, etc., you stifle the growth and you have had the slowest economic recovery since world war ii. you had the longest rate of unemployment over 8% since the great depression. the policies you seem to feel are the only ones are not the only ones. >> i was asking a question.

>> have a question for ambassador williamson. what is governor romney strategy on north korea? what is the main difference between your approach toward north korea and that of the obama administration? what do you think about the six party talks on north korea's nuclear program? >> thank you. on a bipartisan basis there has been support for the six party talks. north korea is sustained by beijing's support to the north and other support to the regime. the approach now for six or seven years, through the toxin

for discussions with beijing to get them to put more pressure on north korea to abandon the nuclear program. clearly it has not worked. governor romney has not outlined in detail a contrary policy. we recognize that president bush does and president obama does. china is a leverage point to try to get changed and we have to continue to work to try to help that. >> i would like to put in a question here, a columnist from india. what would be romney's policy on china and how would it be any different from what president obama is pursuing? >> one of the strengths of governor romney is his long and very successful business record,

including international business activities. in the first foreign policy debate last october, for example, he said we have to be tougher on the ways in which china is holding the field. he called for us to go to the wto. at the time it was dismissed in washington and elsewhere. that is indicative that he looked at china as someone who is not playing by the rules financially, whether it is the support of their currency, support of state control businesses, in various trade off. he said he would use the wto and other leveraged 0.1 china. and on human rights, i am pleased the obama administration has moved. as we remember when pricked

secretary clinton went to china she said she would not raise human rights and now is part of the dialogue. the president has made good progress there in my opinion and the governors opinioned, but from day one, governor rahm it will raise human-rights issues. after 14 incidents with philippine -- beginning last summer, secretary clinton did take some initiative in trying to get talks going. they had disappointment at the recent asian meeting. governor romney has said that is the start but we have to be firmer on the freedom of the seas. so there are differences in approach and especially on economic issues, you can expect more forward leaning, confrontational approach with china.

>> matt just follow up on that and ask you how do you judge the seriousness of the rising set of problems concerning the south china sea? >> we have to take them very seriously. there are a number of countries that have resources and territorial claims in the area. these disputes have the potential to erupt in conflict if it mismanaged. we have seen a very aggressive posture of some chinese fishing vessels and so forth. i think secretary clinton and the president have also talked about this, made very clear that we cannot see use of force to resolve these disputes. the fact that the u.s. has shown up and consistently has unable presence in the region,

exercising freedom of navigation across the board, it has given confidence to partners in southeast asia that they can stand up for themselves and for the rule law and for resolving these disputes peacefully. i do think more needs to be done, but this is an area of the world to watch. one of the areas we thought a lot about in making -- when the president made the decision to rebound toward the asia-pacific, given how much that area controls trade flows and contributes to our economy. >> way in the back on the left. >> can you explain to us what are the primary factors behind the administration's rejection of our remiss syrian

opposition, and do you see any circumstances under which that might change? the romney campaign has said that governor romney, if elected, would not grant exemptions thendaa sanctions to countries like china if they fail to cut their imports to iran. does that mean if governor romney would not exercise and national-security waiver to spare time of the effect of those sanctions? >> in terms of arming the opposition, the early as concerned with lack of clear information and reliable information on exactly who the opposition love, where the arms would go and how you would control that, and the real risk that given that there are some al qaeda and other extremist elements there that some of our american arms supplies could fall into the hands of terrorist

organizations in that would pose a serious downside risk down the line. beyond that, the focus of the ministration is really on trying to create the political conditions for transition. the focus on working with the opposition has been to give them communications, cladistics and all kinds of assistance to help them be more coherent and effective, but to keep open the path for assad to step down and for the transition to happen. the last element is that we have had some significant success in preventing russia from resupplying and rearming the syrian military. if you were to launch a major american weapons supply program to the opposition, we would lose a lot of leverage with russia and basically open the floodgates for russia to beat

resupplying the syrian military in full. that would just be pouring fuel on to the flames of what is looking like an increasingly deadly conflict. >> just to be clear, there are no russian arms currently going to the assad regime? >> there are lots of things on the books but we have been able to stop the last few shipments from going in. they had prepared a bunch of helicopters and rescinding those in. we were able to get the russians to turn us around. >> but other equipment is still coming in from russia. but there had been thumb, but some has been stopped and turned around. i think that is important. >> the question in the back. >> is governor romney thinking

about bosnia and cosimo and southeast of europe? >> bosnia, cosimo, they have tremendous infrastructure problems and governance problems. they have tremendous economic problems. kosovo continues to have incredible ethnic tensions. the un has to try to find them with the greatest capacity. i think the balkans and macedonia continue to be a very serious situation, but for kosovo to be sustainable, it

will have to have some economic viability that it does not have now. once you have some progress, you begin to have a more sustainable and stable state. >> thank you very much. the gentleman standing. >> you mentioned nuclear arms control. one of things that obama did was continue ronald reagan's dark framework with the new start treaty. governor romney made quite an impression by opposing that and was criticized by many republican party leaders who noted that the start treaty continues the on-site verification. the question is, with governor romney adhered to his criticism

of july 2010 and if elected, would he withdraw from the start treaty or continue? >> governor romney stated his position and he supported the start treaty when it was being deliberated in the senate. like every president, he will do our review of our existing arms control agreements and other major policies. it would be premature for me to speculate creek >> another question from the overflow crowd what are the candidate approaches to european relations and the euro crisis specifically? >> i think president obama has spent a lot of his time and energy revitalizing our alliances and partnerships across europe.

certainly europe has been -- we have gone to afghanistan and libya together and done a tremendous amount of work. it is hard to find a policy area where we are not in lockstep with allies like the u.k. and more broadly. obviously because of the interconnection between our economies, there is a great concern in the u.s. about the euro crisis and the administration has been very engaged, working with european leaders, trying to help them take the steps necessary to solve the problem. i don't think anybody invasion the u.s. bailout are things that is necessary. one of the things that was stressed to meet was in governor romney's white paper, there was not a single mention of europe or nato.

how does the governor view europe as a priority in our foreign policy, given that it is really the foundation of our most important alliance relationships? >> in response to the questions and the various speeches over the last year and a theme of the importance of us to renew and keep our friends and allies close, he has talked about europe and obviously that is where he is going on this foreign trip ticket he has expressed concern that in the libya incursion, the largest economy in europe, germany that on the sidelines. only a few players came in and that shows a certain tension within the nato alliance. he feels that europe has been and remains our most important alliance.

he will reiterate that message in the london meeting with prime minister cameron and others. he also reiterated when it goes to poland and gives a major speech there. >> that the have any specific ideas about the problems of the euro? >> as jim baker said a long time ago, it is hard to have a single monetary system when you have 17 fiscal systems and they are now bearing fruit of it. the europeans will have to sort this out. there is tremendous tension on the germans who are being asked to help the mediterranean state. he has not felt it was appropriate for him to prescribe solutions, but we recognize how difficult it is. he talked about that and the importance of trying to keep europe economically strong. >> the question right here.

>> how would like asking if you could comment on to countries that are important economically, japan and india. we have not yet heard a position from governor romney on whether or not he would support ttp for japan. india is a country we have been looking at as a possible security partner. how do you see that going forward? >> let me start with india. this is an area where we have had a lot of continuity and bipartisan support. india is an important security partner today. our military relationship has never been closer. they exercise more with the united states than with any other country. we are growing our efforts in the indian ocean.

it is arising democracy, a very powerful partner for us. we have so many common interests and values. the administration has invested a lot in that relationship. japan is also critical ally. we have not only continued to invest in that relationship but i think after this tsunami and the nuclear accident, the way we were there for japan, it was something that military forces to there were so proud and happy to be able to help and be able to be there in a moment of need. that has only solidified the relationship further. we are having very productive discussions about adapting to the security environment and those are going very well. the relationships are very

vibrant and very strong and continue to be so over the last three years. >> of wood just reiterate what she said. one of the successes of the bush administration was to strengthen and renew the relationship that is being carried on. the governor has been clear that he recognizes the importance of japan and the republic of korea to our security interest and economically and as partners. he has expressed his desire to strengthen and work on that relationship. >> in the middle, in the back. thanyou very much. >> i am from the ivory coast. we did not hear anything about

africa. in ivory coast, the forces of the current president, people were displaced and hundreds of people were killed. i just want to know how the current president or the future president of america will make sure that there is justice in africa and in particular the ivory coast. >> this administration and the president have spent a lot of time and energy on africa. the president visited the continent his first six months in office and laid out a sweeping set of policies that deal not only with very important issues like food

security but also continued democracy development and rule of law. i don't want to get into that particular is of the situation with the ivory coast today. the white house is actively engaged on that and i don't want to insert myself as an administration official. what i can say is that anytime there is violence like this, it is on the radar screen and raises a serious concern. i am sure there will be appropriate action taken. >> that is a question from the overflow crowd that concerns turkey, another key country. what kind of thinking has governor romney been involved with looking toward turkey and how he would improve the relationship? what does he think about its importance, etc.? >> turkey obviously has growing importance. that at 6.5% gdp growth in

recent years. it has come up in the context of discussions about syria and the need to work closely with ankara on our strategy and support. with turkey's efforts to protect its borders -- we know they allow the opposition to have offices. governor romney recognizes that turkey's unique role as a nato country and the broader middle east but rhaetian -- region -- it is a country where the united states has a great interest in developing the personal relationship. even though on some items of one not always be in agreement. most of our discussion has been in the context of the crisis in syria. he clearly has an appreciation of the critical role turkey

plays their. >> do you see the obama administration strengthening beyond where it is today its relationship with turkey, in general, but also with respect to syria? >> i think that turkey is a very close partner right now in syria. engagements are daily and intensive. we have been working very well together. i think the administration has recognized the new and growing role that turkey is planning, particularly looking east. they have been important on syria, on iran -- but they have also taken pains to make sure they stay anchored in nato. the president's missile defense program that has been adopted and endorsed again at two nato summits, having turkey be a key

part of that is very key. as has continuing to have cooperation with poland, romania, and spain. we have a system that will provide more capabilities than the predecessor system would have. >> we are honored to have a question from martin. if we could get a microphone. >> i wonder if i could step up a little bet and ask you a more general strategic question about strategy. president obama has placed a lot of emphasis on shipping any emerging global in which china, brazil, and india are powers. we would have receded the table and work hard on this multi- lateral approach. i wonder if governor romney has

a different approach to the rise of these powers, and whether if obama, in a second term, will still make this a priority. >> rich, you can start. >> i guess it is important to make the comment that governor romney believes that it is important to engage. it is important to seek multi- lateral collaboration, coordination, cooperation. and to recognize that the relative powers are shifting with rising power in china, india, and brazil. that means shifting some of the way you do business. having said that, i think there is a fundamental difference in

how they the world. the president has a very legitimate perspective with engagement, confidence, multi- lateral islam. deference to international law. as one commentator wrote. -- the president went to china thinking his eloquence would get good behavior. the chinese found that curious. governor romney believes all countries look at their interests. and they should. that means that sometimes you have a different way to work. there is a difference in approach where we would argue or suggest that governor romney is more in the tradition of truman, kennedy, and reagan. president obama has a different approach, a different way to look at it. the american people will judge how successful it has been. >> i spent hours watching this

president make decisions in a national security council meetings. he is first and foremost a patriot and a pragmatist. he starts with american interests, but he also believes that we have to -- it benefits us and advances our interests when we are true to our bodies. when we say respect for international law, it is not something that somebody else created. we created the international system that came out of world war ii. it is based off of our notions of the law. when we respect that, we are advancing our own interest in keeping that system. it has to adapt to accommodate new players. we need to find ways to integrate a rise in china and so forth, but this is not some vague, abstract, idealistic notion. this is very central to who we

are. you do not have to choose between pursuing the interests and being true to bodies. you can do them both at the same time, and that is exactly what he has been doing over the last four years. >> he just wishes he did it more in syria. >> would you like to comment on that? >> we have been clear on the differences on syria. this is a president who was one of the first, if not the first to call for assad to step down, to recognize the horrors, to put millions of dollars of humanitarian on the table and lead defense of syria effort to bolster the opposition and get them to be cohesive said they have a viable chance of transition. i think we have been consistent with their bodies in the way we approach syria. >> what i would like to say, as we wrap up, and i am terribly sorry to those of you raise your

hands, but our time is up -- this has been a wonderful discussion. we have to take it on the road. thank you both very much. [applause] may i first just ask that you all remain seated while the panelists have an opportunity to leave. it would just be one minute or so. thank you again. [captioning performed by national captioning institute] [captions copyright national cable satellite corp. 2012]

>> mitt romney will be highlighting his foreign-policy message as he travels overseas over the next few days. tomorrow through saturday, he will be in britain, where he will attend the summer alembics and meet with prime minister david cameron. he was in israel on sunday for meetings with the prime ministers of israel and palestine. on monday and tuesday, he will be in poland. follow all of our coverage as he -- at c-span.org/2012. coming up, a c-span official comments on china's human rights record. then, a panel on forecasting grabs. -- droughts. >> this weekend, frederick harris argues that barack obama election victory undermine the

civil rights movement that major possible. sunday night at 9:00, followed at 10:00 by edward klein with a critical look at the president before and after he reached the white house. from his best seller, "the amateur." then, the former chief economist at the world bank on why growing economic divisions are bad for our economy in "the price of inequality." part of book tv, this weekend, on c-span 2. >> the assistant secretary of state for human rights said today that human rights in china continue to deteriorate. he made this remark at a state department briefing after the annual u.s.-china's human rights dialogue. this is 20 minutes. >> afternoon, everybody. thank you for joining us. as you know, we have a special briefing today by michael posner

to talk about are just-completed annual dialogue with china on a human rights. without further ado. >> before i begin, i want to say how much we are welcome -- how much we welcome the appointment by the european union of a new position of special representative for human rights. we welcome the first appointee. he has a long record of working with the european union on of human rights, and the creation of this position strengthens that commission -- commitment. we look forward to working with him. i want to make a short statement and then i'd be glad to answer questions. on monday and tuesday, we hosted our annual human rights dialogue with the chinese government. i was pleased to lead the u.s.

delegation at these meetings for the third time. our delegation included representatives from the department of justice,usaid, the department of labor, national security staff, and the department of state. my counterpart is the director general for international organizations in the chinese foreign ministry. he led a chinese delegation which also included representatives from a range of government ministries. place inmeetings take the broader context of u.s.- china relations as president obama and secretary clinton have made clear -- we welcome the rise of a strong, stable, and prosperous china. we are committed to building a cooperative partnership with china. we have recognized china's extraordinary record of economic development over the last three becketts. during this period, hundreds of

millions of chinese citizens have been lifted out of poverty. a remarkable achievement. at the same time, we see that political reforms in china have not kept pace with economic advances. like people everywhere, chinese people want to be treated with dignity. this means that they banks seek economic opportunity and jobs. at the same time, they ct lawfully to voice legitimate grievances and have a -- seek eight lawful way to voice legitimate grievances and have a role in society. we focus particular attention on the growing discourse on human- rights in china today. we seek -- discuss restrictions on free expression and internet freedom, on religious and ethnic minorities, and internationally recognized labor rights that chinese citizens raise with their own government. we discussed legal reform issues. this dialogue is about applying

universal human rights standards. indeed, regular news from china makes it clear that the subject of our discussion are matters of great concern to many millions of ordinary chinese citizens whose voices are increasingly heard around the world. let me say what this dialogue is and is not. it is a chance for us to engage and human rights issues and to do so in an in-depth manner focusing on specific issues and specific cases. it is not a negotiation. rather, it is a forum where we need to engage frankly and candidly. most importantly, it is the only is on the one forum among many where we raise these issues. these issues will continue to be raised by numerous senior u.s. government officials and a variety of settings. secretary clinton addresses human rights as part of the u.s.-china strategic and

economic dialogue each year. the overall human rights situation in china continues to deteriorate. over the last two days, we focused on a number of cases were lawyers, bloggers, advocates, but journalists, religious leaders, and others were a certain universal rights and calling for peace for reform. a number of these individuals have been arrested and detained as part of a larger pattern of arrests and extra-legal detention of those who challenge official acts and policies in china. among the cases were raised where lawyers who have been imprisoned because of their legal advocacy on behalf of clients to espouse controversial positions and two were critical of official actions. we urged -- and who were critical of official actions. we urged the chinese government to release those lawyers and

democracy advocates -- activists who have actively pursued political openness and the promotion of a fundamental freedoms for chinese citizens. we expressed concern about the denial of access to legal counsel, to criminal defense -- legal counsel to criminal defendants, such as one person whose lawyers have not been able to meet with him. we continue to state our position that chinese policies in ethnic minority areas are counterproductive and aggravate tensions, and that perceptions of human rights activists -- persecution of human rights activist for these communities violates their rights. we continue to raise concerns about more than 40 self immolations in tibetan chinese populations. we believe people will allow

the aspirations of their own people are more prosperous and stable. we strongly believe that the change occurs from within the society. these discussions are ultimately about chinese citizens' aspirations, and that the chinese are navigating their own future. in every society, we believe it is incumbent on government to give their society an opportunity to voice concerns and pursue aspirations. i am pleased to take her questions. >> you mentioned, i think, one of dissidents and nephew who has been denied legal counsel. how did the delegation respond to that? more generally, how would you characterize their responses to the individual cases you raised? did you give any assurance that they were taking action? >> in a range -- in discussing a

range of issues, the general approach we take to these discussions is that it is important to talk about the broad subject and then to use specific cases to illustrate and to get into a deeper discussion. we did that in the case of chen's nephew and the denial of access. a number of lawyers for the family had tried to meet with him, tried to represent him actively, and have been denied access. we raised this concern is openly. we will continue to raise those concerns. i am not going to characterize every response we have gotten from the chinese government, but i can assure you that that is an area of great concern. >> in general, did you get any assurance that they would listen -- be mindful of your concerns? >> they are mindful of our concerns and that these are issues we will continue to race. these are issues that addressed the fundamental human rights.

every individual charged criminally, especially with a felony, is entitled to a lawyer of his arturs in. that lawyer needs to have access to represent them. that is a broad concern. raised in a particular case and will continue to do so. >> to step back -- this is maybe the third of these. from your perspective, what has this dialogue accomplished in concrete terms? every year you say that they take on our complaints or things on board -- you yourself are saying the situation is deteriorating. why is this dialogue with the tundra takes to do it? secondly, did the chinese have any issues they might have with u.s. human-rights -- what were ?hey in terr

>> we take our lead from those in china at the kitchen for human rights and are on the receiving end of improper actions -- advocating for human- rights and on the receiving end of improper actions. people whose family members are detained tell us that it is critically important for us to raise these issues, raise specific cases, to do so privately, to do so publicly, to do so on an ongoing basis and not forget. this is a piece of that effort. it is not the only effort. we work on these issues 365 days a year. i am not the only person raising these concerns. but this is an opportunity for us to go into these cases and the issues in greater depth. to appear, as i am here today, to make clear what our concerns are. we will continue to raise these issues throughout the year. i think that, over time, we are responding to a very heartfelt

and -- thing decide by people living in china, that their issues not be forgotten. we are amplifying their voices. as i said, there is greater attention to these issues by chinese people on the web, in -- these are issues commanding greater attention. >> anything about the u.s.? >> as always, there is back and forth about issues in china and the united states. there were some questions and discussions raise about issues, for example, of discrimination, prison conditions, and the like, which we discussed openly. the point that the maid, which i feel very confident and proud to make, is that we have seen in rights issues in the united states, but also a strong system to respond to them. we have an open press, lawyers

who are ready to represent unpopular defendants and to do so without fear of retaliation. we have a political process that is robust, to say the least. we are open to that discussion. we also had some visits yesterday. we took them to politico.com but to be american anti- discrimination committee, to get a better sense of power are free press works and how minority committees -- communities are represented. that is part of the dialogue that is important. >> what is the case of the gentleman who died in hunan province last month and whose death has been described by authorities as a suicide? there's a certain amount of disbelief as to whether it was. >> i do not remember -- i can come back to you on that

particular case. we raise several dozen cases, honestly, and i will not go into every one of them. i mentioned a few in my opening statement. in general, we, in addition to the cases we specifically described and discussed, we have a list of broader cases that -- of people in detention whose cases we continue to follow and use information we continue to seek from the government. >> secondly -- >> i can get back to you. >> secondly, you mentioned you raise issues about minority areas. was there any discussion about the uighurs? >> on monday afternoon, we had a quite lengthy discussion of the issues related to them, as well as the tibetan population in the various places where they reside. we discussed a range of concerns about both the self-immolations,

which i mentioned, but also the broader issues that apply to those communities relating to discrimination in terms of language rights, the ability to practice their religion freely, discrimination in employment, a range of issues involving their cultural rights and their religious freedom, etc.. >> sorry -- what was their response to raising these? >> i am not going to characterize every aspect really had quite a long discussion. our position is that these are -- these minority communities and representatives of religious minorities are entitled to live freely, to express their religious these, to practice their religion, to express their cultural differences and customs. this is an area where clearly the chinese government has a

different view. >> do you see any progress of the chinese doing anything for human-rights? you are saying that human rights is deteriorating -- why do you say that? >> on the positive side, i think that it is becoming a more -- the discussion is now firmly embedded and is one where we are raising issues in a variety of ways and context. should,anaging t, as we to make human-rights a priority, along with a range of other priorities. i feel very confident that, the more we raise these issues in different contexts, the more we will have an effect over time.

it is a frustrating time in china because lawyers, loggers, and journalists are having a difficult time. we races issues directly. part of the issue is that there is a growing frustration among chinese people that they cannot have the ability to express differences in a peaceful way. our message is -- you have made progress on the economic front. this is the months to open up the space to allow people to dissent and question government actions without fear of government retribution. >> yesterday, secretary clinton was at the holocaust museum and brought that issue up. >> we did. we raise, in particular, the case of fung chenmae, who was beaten, detained, and then forced to have an abortion at

seven months. as a matter of u.s. policy, any course -- coercive measures, including forced abortion, we deplore. there are a number of other cases including some that have been reported recently. we have raised that concern. >> what was their response? >> i will not get into every back and forth, but this is clearly an issue we will continue to raise with them. is there anyone from the congress responding to this talk? have you passed the message to the chinese delegation? >> we have been eager to have a broader discussion beyond the two governments, the two executive branches. that could include congress and could also include non-

governmental organizations. we have not been able to persuade the chinese government to do that. at this stage, it is a discussion among the executive branch from their side and ours. we will continue to encourage that proper -- broader discussion. we will certainly inform members of congress of the discussion we have. >> secretary clinton has to be on the hill shortly. we will take to denmark. -- two a more. >> could you speak up? >> day u.s. state department has -- were falun gong petitioners raise -- practitioners raise? >> we raise that in the context of religious freedom and other kinds of discrimination. we did raise the issue of some of the falun gong

representatives. we did not go into every back and forth, buttered was part of our discussion. >> i wonder if you would specifically talk about the organ harvesting. we know that, earlier this year, the police chief went to the u.s. consulate in chengdou/ there is evidence he is deeply involved in the crimes like or -- organ harvesting. i'm wondering if he provided any useful material to the u.s. government on that. >> we have plenty of our own information from our own embassy and our own reporting. we relied on that for the discussion. thank you, everybody. >> thursday on "washington

journal," randy forbes discusses possible defense budget cuts. the armed services committee member will talk about his opposition to sequestration. then we will hear from democrat tim hines of connecticut, member of the financial services committee. he will address the sequester and his views on the tax cuts expire. "washington journal," live at 7:00 a.m. eastern on c-span. >> this weekend on american history tv -- >> let me begin to open up the discussion by asking this -- what was the nature of the clash between macarthur and truman? is this a clash over policy? is this a problem of personalities? >> truman and macarthur --

elliot cohen on the relationship that led a general to relieve a -- a president to relieve the general at the height of the korean war. sunday, more from our series of books that key political figures who ran for president and lost but changed history. this week, at least the vincent. he said he had a bad case of a hereditary politics -- his grandfather was vice-president under grover cleveland. his great-grandfather was first under abraham lincoln. he ran twice against eisenhower. "the contenders," on c-span 3. >> in the u.s. is receiving -- experiencing the most widespread drought since 1956. in response, the house science committee held this hearing focused on improving drought forecasting and response. they heard from the director of noaa's route information system,

the head of the oklahoma water resources board, and the mayor of indianapolis. this is just under two hours. >> the committee on science and technology will come to order. i say good morning to you and welcome, everyone, to today's hearing on drought forecasting, my veteran, and decision making.

a review of the national integrated drought information system. this hearing is timely, given current drought conditions that are impacting much of the country, including much of my home state of texas. i'll take a bit of my time to tell you a story. i passed a bill five years ago. i was in paris, texas making a speech. one of my good friends said, congressman, will you be able to make rain? it had not reagan days. i said, it well, that is sectiod page. he said, really? i said i just gave him a silly answer to a silly question. three years later, we had rainfall that drowned people and

all of the farm programs below it. it rained incessantly day and night. i called him at 3:01 morning and his wife said he was mad when he got to the fund. he said, hello. i said hello. do you remember the question you asked me about that bill? go outside. >i have to go through that every time i go to paris, texas now. he was a good enough for and i could tell that to him now. we know how really timely this hearing is. we are very grateful to you all for your time and preparation to get here. for the time to help us. according to the u.s. drought monitor, over 70% of the u.s. is currently abnormally dry or worse. further, over half of the continental u.s. is experiencing moderate to extreme drought. once last three of the country is in severe to extreme drought.

these widespread conditions are negatively affecting corn and soybean output. the department of agriculture reported that 80% of corn and 87% of soybeans were in the drought-stricken areas. in response to the pervasiveness of such conditions, the second and roger secretary tom vilsack designated areas as disaster areas. drought continue to be a recurring defense. over the past 110 years, droughts have frequently occurred in the united states, the worst being the dust bowl years of the 1930's and the droughts of the 1960's. there are those who would attribute this to climate change this year, but the congressional research service tells us that drought has affected portions of north america for thousands of

years, and history expects it is an inevitable part of the natural climate cycle. in any event, debating because of drought is not in front of us today. the real question is how to enable state and local governments and individual citizens to better deal with drought impacts, and how to have better forecasts and quicker reaction by government entities. my bill -- i wanted to let them know we were concerned about what we were going through and sorry for them. there was not a heck of a lot of the duet that time. the national integration -- national integrated drought information system established by the act of 2006 is one such effort undertaken to answer this question. the climate program office within the center of

atmospheric research, its goal is to "improve the nation's capacity to proactively manage drought risk by providing those infected with the best available information, and assess the potential impacts and better prepare for and mitigate the effects of drought." websiteram operates a that features a range of services that are related to drought. this includes historical data on past droughts, current data and climate observations, early- warning is about a merchant and potential drought, support services for managing drought, and a forum for stakeholders to discuss drought-related issues. the authorization expires the end of this year. we'll receive testimony from witnesses that represent federal, state, and local governments, as well as stakeholders on the program. the national integrated drought

information system reauthorization act of 22 of -- i welcome our witnesses and look forward to their testimony and now recognize ranking member johnson for her opening statement. >> thank you very much, mr. chairman. this hearing is to discuss legislation reauthorize the national integrated drought information system. in recent weeks, virtually every media outlet across the country has shown a map that depicts over half of the continental united states as experiencing severe drought conditions. the federal government has declared 1/3 of the nation's counties, roughly 1300 across 29 states, as federal disaster areas as a result of the drought. in my own home state of texas, over the last three years rain

fall and high temperatures have conspired to wreak havoc on the economy. farmers and ranchers are bearing the brunt. that hits the pocketbook of every american. food prices go up. the damage is not limited to agriculture. for instance, in texas, conditions are again ripe for the kind of extreme wild fires that scarred large portions of the state last year. tourism is suffering as water levels and -- in the lakes and rivers plummet, leaving boat stranded on dry land. communities are imposing water restrictions and exploiting more expensive water resources and technology. power plants and grid operators are taking a serious look at emergency plans for water supplies.

given the potential for massive economic damage, we need to recognize drought for what it is, and extreme weather event, and design policy accordingly. unlike disasters such as tornadoes, floods, and hurricanes, drought still not the people scrambling for cover. there are no sirens or emergency evacuation plans. the onset is slow, with no defined beginning or end. the path of a drought is a sprawling. it often encompasses entire regions of the country. duration is typically measured in years. as we design policies and programs to make predictions that limit the impact of the other extreme weather events, we should strengthen our capacity to do the same for drought. one tool at our disposal is the

nidis program. in its six years, it has already provided important short and long term drought information that has aided committees in mitigating the impact of drought. we cannot have a comprehensive approach to drought research and mitigation without exploring the potential linkages with a changing global climate. while i will be the first to urge caution on jumping to conclusions about the impacts of a warming planet, i know that climatologists around the world are coming to a much better understanding of this complex relationship. we should leave the science to the scientists. two did -- to categorically deny the linkage between climate change and severe weather is irrational and irresponsible. policymakers at every level have

a duty to protect public ignoring the -- welfare, and ignoring the reality of climate change -- leads is less prepared for catastrophic events. we recognize that nidis is an important step, and i commend the chairman for recognizing this bill, but this is only one step. i'm not typically want to look a but iorse in the moumouse, will say that the bipartisan support for this leaves me a bit baffled. my colleagues have otherwise been relentless in trying to outright killut li every other climate-related product or program. i'm encouraged to see republicans recognize the vital services of nidis, and help the other climate-related programs receive similar treatment.

again, i think witnesses for joining us today and thank you, mr. chairman. i look forward to the testimony and yield back. >> thank you, ms. johnson. the gentle lady from texas yields back. if there are other members who wish to submit additional opening statements, they will be added to the record. at this time i would like to begin to introduce our panel of witnesses. i will introduce three and recognize representatives to introduce witnesses from their home states. my first witness is dr. roger pulwarty, director of the national integrated drought information systems and chief of the climate institution at the national oceanic and atmospheric administration. he has worked on at disaster restoral -- reduction -- risk

reduction in the united states. he asserted the u.s. academy of science. our third witness is jd strong, executive director of the oklahoma water resources board. under his leadership, the resources board updated the oklahoma comprehensive water plan that is a 50-year assessment designed to make oklahoma's -- meet oklahoma's future water needs. mr. strong orseas their rated $2.7 billion financial assistance program. the board works as an environmental specialist. our next witness is dr. james famiglietti, did i do good with that? a professor and director of

earth system science at the university of california, irvine. his research group uses the climate experiment satellite for remote sensing to track water availability. before joining the faculty at the university of california in 2001, he was an assistant and associate professor in the department of geological sciences at the university of texas. glad to have you there. i now recognize rep bouchon -- representative bouchon. >> our second witness is the honorable gregory ballard, mayor of indianapolis. the city of indianapolis reelected him to a second term on november 8, 2011. in 2010, he announced an initiative to rebuild a

deteriorating residential streets, sidewalks, and bridges, as well as to address flooding issues for the city. this is on a successful pathway. mayor ballard has also helped lead a team that helps that this year's super bowl -- congratulations to the city of an apple -- indianapolis. based on that success, it will be winning, we hope, the super bowl in 2018. welcome, mayor ballard. >> thank you. i think the gentleman from indiana. i recognize representative harris to introduce our final witness. >> thank you very much. it is my pleasure to introduce mrs. patricia langenfelder, president of the maryland farm bureau. she is a member of the maryland agricultural board. she and her husband and family operate a large grain farm in the first congressional district and raise livestock.

she has hands-on experience that she will bring to our testimony. among her recognitions, she and her husband were inducted into the agricultural hall of fame in 2001. they were named to mid-atlantic master farmers. they were honored by the conservation district. again, a pleasure to have her join us this morning. i yield back. >> thank you. thank you for the good introductions. spoken testimony is limited to five minutes, after which members of the committee will have time to ask questions. we will be liberal with your five minutes. we'll be tighter with those of us up here. we are not here all day, but we are honored to have you. we thank you very much. i now recognize -- dr. pulwarty,

you are recognized. >> good morning, members of the committee. i am the program director of the national integrated drought information system. it is an honor to be here today. in this testimony i will highlight our role in improving the nation's capacity from the standing -- withstanding, predicting, and responding to drought. dress is part of the american experience, from the 13th century to the offense of the 20 center. from 2000 to 2010, the annual average land area affected by drought was 25%. recently, over the past month, half of the country has experienced moderate or strong regret conditions. we are authorized under a public law to provide an early warning system that includes indicators of drought severity an impact reflecting regional and state differences. it is directed to do so by

coordinating relative -- relevant federal research and building on existing forecast and programs 32 volvo this task, we have a four elements, all of which work together. first, coping with drought surges to assess the impact of drought and develop tools. secondly, a tool that accelerates a scientific research to improve the operational climate forecasts products. thirdly, the drought portal that provides a one-stop shop for easily accessible monterey products. the fourth element is a network of regional early-warning information systems, which recognizes the drought impact -- that drat impacts various regions. the early warning system integrates information from the above three elements, the portal, the observations, the research, and federal and local partners. but a recent example of a product for wyoming, utah, and

colorado, is provided as a supplement. to date, we have implemented an early-warning system, the first of its kind in the u.s., in the colorado river basin. we're working in the flood basin and the state of california. the approaches and tools are intended to be transferred to other regions such as the pacific northwest, the great plains, the carolinas, and the chesapeake bay tributaries. since 2006, we have improved our effectiveness by increasing the number of states and institutions with debt and capacity for draft risk- management. needs assessments, and the percentage of the u.s. population covered by warning systems has increased. i will give examples of products and services and their impact. since spring of 2010, we have supported weeklying updates and

seminars for the upper colorado warning system, bringing together agencies from water conversation agencies and others to raise awareness of reservoir conditions and what fire risks. our products in the colorado basin include drought indicators linking seasonal climate forecasts and estimates. according to the colorado state climatologist that leads the seminar in the upper bassin, -- basin, he says that since it was initiated, entities have refined the product into more useful products for basin- specific needs. this was long sought after by various groups. the second example comes from a southeastern city. the researchers worked with the watershed division of auburn, alabama.

they then used forecast to reduce the impact of drought. in march 2011, based on misinformation, the city issued an update to manage water demand. -- based on this information, the city used an update to manage water demand. the city now uses seasonal drought information and water supply planning and demand management on an ongoing basis. many other examples of research product development exist. as a dodge by our partners in the state and regional and federal offices, the research data supported by us, including during the seven drought of 2011 until 2012, they significantly improve planning and coordination for events prior to the legislation. our ability to meet drought information needs is strongly depend on enabling observational capabilities. these include the usga national resources conservation services , the usgs water census under

the water's mar efforts, reservoir levels from the army corps of engineers, and the bureau of reclamation and the national water service. the central research partners such as the drought mitigation center at university of nebraska, lincoln, work actively with us to improve operational products and improve and inform ing planning at every level. while drought onset is important, warning of intense vacations', duration, and the potential returns are critical. to achieve the truly national early-warning presence envisioned by the act, that requires improvements that we have begun to address, but for which further advances are needed. these include understandinging variability and forecast reliability from a season to a year and even to a decade, including expanding the role of precipitation events in ending a drought. a collaboration among resource

managers and the public to enhance the value of existing observation networks, and the transfer of successful tools and approaches to areas not having early-warning systems. most critically, working with the private sector to develop value added products. key to our future success is a sustained national system of credible, consistent, and authoritative observations. we're grateful for the committee's continued interest. i look forward to working with you in helping the nation and all communities tickle of advantage of us to anticipate and reduce the impact of -- to take advantage of us to anticipate and reduce the impact of drought. >> i now recognize mayor ballot. mayor ballard. >> thank you to the full representatives committee to welcome me. i am the mayor of indianapolis,

indiana, the 11th-largest city in the country. my testimony is focused on how the drought impacted the city of indianapolis, are residents, and our business community. the drought of 2012 is what it historic proportions and has been compounded by extreme temperatures. the indianapolis division of homeland security monitor the weather using city's emergency operations center and data from the national weather service. repeated activision of the extreme heat plan prompted them to seriously consider seriously be evaluating the burden to risks of drought conditions. the indianapolis water utility, which operates the city's water supply, use weeklying status updates as posted on the website to determine whether to enhance water conservation efforts when necessary in response to dry conditions. by late june, citizens had been delivering record amounts of

water amidst record-breaking heat. 40% of their water load was four lawn irrigation. citizens ask customers to stop voluntarily what vermont and 2006, resulting in a modest -- voluntarily watering their lawns. in july 14, i enacted mandatory water use restrictions to ensure there was adequate water for public safety and well-being. these included a ban on watering lawns, washing vehicles, cleaning out for services with water, filling the empty swindles, landscaping, and other -- swimming pools, landscaping, and others. water was allowed only for fire suppssion. in less than one week, water usage dropped an additional 58 million gallons a day. some businesses that depend on water to operate were exempted from the band. examples included nursery's, car washes, golf courses, parks, and

the like. we did not have complete and comprehensive information on the impact of this drought for residents, government, or businesses, but many businesses voiced concerns over water use restrictions. these included coal companies, lawn care businesses, irrigation repair companies, power washing companies, car dealerships that detail their own vehicles, contractors, and builders. none of these were exempted from the mandatory band. many are small business owners to provide jobs. it'll be sometime before we understand the full impact of the drought on indianapolis. anecdotally, we know that the drought and soil and water restrictions to place an incredible business -- burden on businesses that rely on water operators and homeowners who need water to maintain property. these have been and -- a necessary response to a severe and serious drought that is expected to persist into the fall. the sooner indianapolis knows,

the sooner indianapolis can begin planning public information to prepare our leaders and our committee for water conservation. that said, we expect the accuracy of the prediction will have to be quite high before we result in an earlier implementation. regarding the reauthorization of nidis, i certainly support more accurate drug addiction services. that would certainly help all of us. >> thank you. i now recognize mr. strong. >> thank you for the opportunity to appear before you today to discuss an issue of critical importance to oklahoma and other western states. that is dropped much and forecasting and coordination. -- that is, drought monitoring, forecasting, and coordination. in addition to coordinating state drought monitoring activities, my agency carries out numerous water-related

responsibilities for the state of oklahoma, all of which are heavily influenced by drought. i testified today as director of the oklahoma water resources board. i know to my involvement and coordination with those in the western states water council and western governors association that many other western states share a similar thoughts and suggestions about reauthorization of the national integrated drought information system or nidis. why is drought such a challenge? unlike other natural disasters which strikes suddenly and generally and within minutes or days, the effects of drought settled in slowly and steadily over months or years. it is referred to as the creeping disaster. it is often difficult to know when a drought has started, and more challenging to know when a drug will end. additionally, and partly because of its subtle onset, society falls into the hydro-a logical cycle. we ignore drought until the

situation is dire. with amend the impacts and clamor for emergency funding but invariably it raines, at which points we forget there was ever a problem. we must break this cycle. drought also means different things to different regions, and different water usage. that highlights the importance of focusing research and monitoring and reporting, not so much a national scale, but on measures and predictions that are relevant to state, regional, and local and tribal stakeholders. oklahoma is no stranger to drought. some 80 years removed from the infamous dust bowl era, we are experiencing a third major drug episode within just six short years. -- drought episode within six short years. every year, up 25% or more of the state is classified in a severe drug category. my agency and the water development board in a texas were created in 1957 on the heels of what is the worst drought of record on the great

plains. we have come far in oklahoma in understanding and mitigating drive compacts.

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>> the chairman of the federal reserve, the chairman of the sec and the secretary of the treasury. probably the chairman of the

fdic at that stage but those were the core members. >> but these were all bush appointees. i think this is a problem not of the regulators but of the private-sector and that the british because this was a british association. >> you are not a presidential appointee. >> no. >> so these were five or six people above you to whom you were reported what you found and maybe things were not done tough enough. so we have a situation where private banks formed in a british association but american bank participation previously misbehaved. you hear about it, reported to the financial work group

consisting of bush appointees, many of whom live value highly, and some people are dissatisfied that not enough was done to take a responsibility. but ask you this about too big to fail -- the legislation says that's a large part nestle institution cannot pay its debts, it is put out of business and no money can be spent by the federal government on the process of putting it out of business. they were for big banks. the ceo and other officers have gone. the shareholders are wiped out. that is what the law says. the law also said if there is any money that had to be spent to wind it down responsibly, you or your successor is mandated to recover it. what i read is, for instance the president of the federal reserve of dallas and his staff, that that's not going to work

because it there was a failure, there would be pressure on you or your successor to provide federal funds to keep that institution alive. do you think that is likely? >> i would not have the authority. what congress did it change the law to limit the authority available to the regulators to protect institutions from their mistakes. >> they are then put out of business. there are some now who lament that. there is a new book out by mr. conrad, a managing director of bain, complaining that we have restricted the ability of the federal regulators to intervene to save an institution to much. but i appreciate your point. if a large institution fails, you would have no option under the law but to have it fail and

if anything had to be done to put it out of business, you would get the money back from the banks. thank you. >> mr. chairman. good morning, mr. secretary. i do not quite understand your answer concerning the fed's use of libor. i think you have said that we acted very early in response. we were concerned about it but it appears that the early response was to keep using it which means it appears you treated it almost as a curiosity or something akin to jaywalking as opposed to highway robbery. i think i heard you earlier in your testimony say "it was our best choice." there are other interest rate index is out there. how can a number that you know has been manipulated possibly be the best choice?

>> we were concerned about this and we did the important consequential thing of bringing it to the attention of the full complement of regulatory authorities that congress had given responsibility and authority for market manipulation of use. >> but you were not obligated to use it. yes or no? >> of course not. but we had to make a basic choice among alternatives. i think that was the right choice back then. >> to include a manipulated number and a non manipulated number? >> i would not say it this way. it was a rate that was structured in a way that was vulnerable to miss reporting. well we decided to do was try to initiate a reform of the process with the british but also make sure that the relevant authorities made use of it. >> we have a limited amount of time. i would like to ask another

question. as i review the annual report, i see a lot of discussion of the european debt crisis. i see little discussion of the u.s. debt crisis. we know that on a nominal basis, this country has now racked up more debt in the last three years than in the previous 200. our debt to gdp ratio exceeds our economy. even the president's own budget after the tenure window states the fiscal situation deteriorates badly. the president has previously said that the major driver of long-term debt is medicare and medicaid, our health care spending. nothing comes close. that was in 2009. i have yet to see a reform plan or entitlements spending out of this administration. you testified before the budget committee in february of this year. he said paul ryan was right to

say being ministration is not coming before you today to say that we have a definite solution to the long-term problem. what we do know is we do not like yours. that was in february. i assume i have not missed any of the news clips that the administration has come out with a plan. so if the president says this is a major driver, we know that the head of the federal reserve also spoke about are unsustainable spending driven by entitlement spending. i cannot find one mention of the word entitlement or medicare or medicaid. yet your own budget says fiscal situations deteriorates badly. how can this not be sided as a major factor that could disrupt u.s.

financial stability? when is the administration going to move on this? isthe fsoc's councils job not to recommend solutions to our long-term fiscal crisis. we agreed that our fiscal deficits are unsustainable. >> what is chapter 3 of this report all about? does this not impact the competitiveness and stability of u.s. financial markets? >> we identified in the report that these brought long-term risks are a significant risk to the economy and therefore the financial system. >> you make no recommendation on what is actually driving according to the president of the united states, the debt crisis. >> i think it would be a strange thing to ask the fed to recommend a detailed medicare

reform plan. that would be a strange thing. you are right to say it is a risk. the council is right to highlight the risk but i do not think it is correct to say the council should have laid out reform recommendations for restructuring -- >> perhaps next time you could help me with a highlighter. >> thank you very much. according to angelo, a professor at mit, this libor scan looks worse in the financial scam in the history of markets. i will like you to tell me if you think that statement is true. i would also like to know what impact this manipulation had on our financial markets and what impact it would have moving forward. take time to tell us about your series of changes that you

recommended. i would like to give you time and not take all the time so please go ahead. >> let me just say a bit about the broader question and thank you for giving me the chance to do so. in the detailed recommendations we gave to the british, we identified specific things that would make it untenable for this rate to be affected by the banks' incentive to lower their reported cost of funds. we keep them there is specific detailed changes for doing that. if those had been adopted,sooner, you would have limited this risk going forward. right now, let me highlight a few things we think are important given where we are today. you will want to know what is next. let me just walk through that if he does give me a minute. the fsoc and relevant agencies -- the fed, the sec and tftc,

are looking at how to address any potential implications of this remaining challenge for the financial system. these bodies are carefully examining other survey based measures of interest rates and financial prices overseen by private financial firms to assist in the potential there for miss reporting similar problems. they are carefully examining a broad range of potential reforms and alternatives for libor. there is a global effort led by the financial stability for which includes all of the world's major central banks and regulators together in a global effort to review potential reforms we are considering how to deal with the careful and delicate question of how do we make it possible for enforcement agencies that reveals behavior that could impact the financial system as a

whole? how to make it possible for them to share that information with appropriate safeguards with the relevant agencies that have responsibility to the overall functioning of the system? a very important question. we need to take a careful look at parts of the system where we rely or the market allies still on informal private bodies run by financial firms like the british bankers' association that have some formal or informal self regulatory role. a very important question your colleague referred to earlier. we all need to make sure that these enforcement agencies have the resources they need to do their job. you have a small town with a police department. the population of that town increases by 10, 100 times. you will need to increase the size of the police department. it is the necessary and responsible thing to do. if we do that, you will have a

more powerful deterrent. in addition to the things, we will cooperate fully and be fully responsive for broader information on this and we will brief the congress on the progress of each of those efforts looking at applications and how to reduce the vulnerability of the system in the future. >> given those recommendations and the problems we have had with the economic meltdown in this country, what else can congress do to ensure that the interest rates that are being paid between the banks is fair and equitable and somehow will not negatively impact a person who is taken out a mortgage in the united states? >> i think what you should do is what you're doing.

you are conducting oversight of these agencies and you should ask for periodic updates from these agencies on the reforms under way to address that risk. that is fully a profit. we welcome that effort. we will be fully responsive to it. >> thank you. i yield back. >> thank you, mr. chairman and good morning, mr. secretary. i have a question about the president's working group on financial markets. there is an article that said that if the president's group was briefed on financial markets in june of 2008, i assume you are president of the new york fed -- >> it was actually in may that we briefed them. >> does that mean you did it or someone else from the fed? >> i went to provide -- i was

not a member of the group but i occasionally went. my staff subsequently briefed officials of the treasury. theou're the chairman of group right now? >> yes, i am chairman of the council. >> in relation to that meeting you had and the meetings you have had sense, do keep detailed minutes of those meetings? >> we do keep minutes of the meetings and we put them in the public record. >> how often do those meetings lead to policy changes where you make a decision and it meant changes? >> the congress gave it two different sets of authorities. one is responsibility for things like designating

financial market utilities that have systemic implications. that is a specific responsibility the fsoc has. it gave a broader responsibilities to make sure you are not leaving large gaps in the system. agencies are working together, not against each other. >> not specifics. on libor, i do not want to get into the details of fraud and who committed crimes and who should be punished. i want to talk about the principle. the principle here is that people are complaining because they believe libor was fixed. and that it benefited somebody financially. i do not think there is a big argument on that. that is what barclays was penalized for it. theisn't this like what

federal reserve does? aren't they fixing interest rates all the time for the benefit of specific individuals? if banks get into trouble, interest rates are lowered. right now, interest rates are like zero and banks get a lot of free money. they turn it around and put it back and earn interest. they are doing quite well. it seems that there is a tremendous amount of manipulation of interest rates for the benefit of some individuals but as manipulation of interest rates harms people who save money. they are retired and cannot earn anything, it seems like -- in the sense of morality and economic policy, our monetary system -- everybody is as guilty of what we are accusing of libor of doing. the fed may be protected by

rules and laws but isn't there something we should question about the manipulation of interest rates for the special benefits of some individuals at the fed does this? >> i would not make any comparison. i do not think they are remotely similar. the fed with authority congress gave it to maintain -- >> i am not talking about the authority but what they did. >> but the fed is doing is with the responsibility congress gave it to keep prices low and stable over time. and unemployment low over time. it is using a set of tools in the public intert to achieve those objectives. i would say it's a fundamentally thing from the behavior of individual banks to misreport the price they are paying to borrow -- >> i do not think we will resolve that because i have another quick question. will you support change in policy with the fed can buy debt directly?

wouldn't this be better for the american taxpayer? >> for the fed to directly finance? >> why can't they buy treasury? the fed buys these bonds and bond dealers make money off this. >> let me be careful answer this question. i am a strong defender of to strong principles, one is to make sure the fed has a full independence and to make sure there is nothing in this relationship between the fed and the treasury that would raise concern that the federal reserve is directly financing the fiscal deficits of the united states. that would be something very damaging to the fed's independence and to the fiscal credibility of the united states. i do not think that is what you are implying.

so maybe i should talk to you in more detail about your specific questions about the market function issues. >> thank you. >> mr. maloney, five minutes. >> thank you for your service. it is huge that sandy has called for the breakup of the big banks. i would like a detailed answer on what this means to the financial crisis in investment- banking and banking have been separated, what would that have meant for aig, lehman, wachovia, all of the big banks? i want to use my time on crises now which is libor. and the debt ceiling crisis and what is meant and financial loss to the american families last summer and what it could mean in the future. specifically on libor, was this a british problem or a united

states problem? >> it was a rate set in london that has implications far beyond london. not just the united states but financial markets around the world. >> was it set by an association in the united states or elsewhere? >> it was said by a group of banks in great britain. >> were you aware of any other members of the president's working group following this issue? >> the cftc started at that time -- went to their credit. >> did the new york fed have enforcement authority in any way?

>> the new york fed has a range of authority but the enforcement powers of the fed rests with the board of governors in washington. the other agencies that are part of our system, it is complicated, involved a range of responsibility for things like market manipulation and abuse. >> could you have taken any action as secretary against barclays? >> as secretary of the treasury? i do not think the secretary of the treasury has enforcement authority. congress has given that two other agencies, which is appropriate. >> at the new york fed is? >> i believe, and i have thought about this, i believe we did the

necessary thing early in the process. >> could you put this in context in terms of the other things that you were working on in 2008? i know i was getting calls from my constituents screening there was a run on the markets, there was a fear of a complete financial meltdown. what was it like for you? what were you working on? can you put this into the context of what was happening? >> at that time, it got worse later. but the pressures on the financial system more acute. they were creating a real risk of a broader collapse on the american financial system. the recession was already many quarters and accept. and it was going to get

dramatically worse. and of course we had a lot to do but on libor, we were worried about this. that is why we did what we did, despite the preoccupations. >> could you comment on the debt ceiling crisis this suffered through last summer? what did it cost our country? what did it cost american families and what would happen if we had another in debt ceiling crisis? if we went over the cliff again in terms of the suffering an increase in debt and deficit and unemployment, could you explain what the impact was and what couldn't be a free cannot come forward within a reasonable agreement? >> the threat of default was

very damaging. it caused economic growth to slow. it cost stock prices to fall sharply, doing a lot of damage to the savings of the average american. it caused a drop in business confidence. the shock to consumer confidence was larger than you see in a typical recession. very damaging, completely avoidable, and not necessary and would be irresponsible to put the country through that again. >> this may be the last time you testified before us. thank you for your service. >> the chair recognizes the gentleman from north carolina. >> mr. secretary, thank you for being here today. i have said many times that the worst choices i made or the iraq war, which was unnecessary, and

the repeal of [inaudible] . i was here with many of my colleagues when president bush and secretary paul some called on congress to bail out those who were gambling on wall street. with the taxpayers' money. we bailed out those in trouble. i did not vote for it then so i will not take the blame. but it seemed like every time that the financial institutions get in trouble, they came -- they come to the congress and a taxpayer and say we need for you to help us out. well, mr. dimon acknowledged they had made a $2 billion mistake in investments. then it later became $10

million. the american people are tired and sick and fed up. i think a lot of it, if i could create public financing, we would like to bring some sanity to this issue, the financial institutions and really have oversight that we should have but we are not going to change the way you finance campaigns. my question to you is, isn't it time to have a discussion and a debate about the reinstatement of class spiegel? >> congress thought about that in the context of the dodd-frank discussions. i am sure it will consider it again. it is an appropriate thing to do. the reforms congress enacted were very tough, just to the rescue said.

they forced the bank -- that is an important thing. they limit how large banks can get. that is an important thing. as your colleague said, they deprive the institutions of government from the ability to rescue a bank from its failures. all we can do is protect the economy from the failures and banks will make and they will make mistakes. it is inevitable. our job is not to prevent them from making mistakes. it is to make sure that when they make mistakes, they do not imperil the broader economy and people's savings. this law was the most far- reaching, most comprehensive set of protections than the u.s. has ever experienced. should we keep looking at what we can do? absolutely.

you should always go back and examine those judgments. but i think it is a tough set of constraints and we should give those reforms a chance to take effect and work. >> mr. secretary, i appreciate your comments. i think that we continue to, i was one of the few republicans to vote for dodd-frank. it was a decision i made that was more and could then debt in the legislation and if it were properly implemented, maybe it would do what was necessary to bring some integrity to the markets. therefore i hope that most of my colleagues will give dodd-frank a chance. maybe certain aspects of the need to be reviewed. that is true in any legislation. but i continued to say that i would hope that we would take a

serious look -- i joined in h.r. 1489 to reinstate glass = spiegel. it seems to me that the benefit to have a hearing from experts, about the possibility of reinstating parts of glass- stegall. i yield back. >> be chair recognizes the gentleman from illinois. >> first of all, i would like to go back, how did you find out about the manipulation of barclays and libor? >> as i said, there was a lot of

concern in the market, much of which was published in major newspapers of record, about not just the potential that banks could misrepresent what they were paying to borrow but they were actually doing that. we first learned about those concerns in the early parts of spring 2008 and we acted very quickly. >> you learned about a to published reports? >> a variety of ways. one of the things the fed does is spent time talking to people about what is going on. on the basis of those reports, not just in the press. >> what you did, what did you do as a consequence of that? in order to respond to what you were saying in the libor rate? >> we took a careful look as if

there is a basis for those concerns and we thought there was. then we briefed the relevant members of the american oversight bodies, the treasury, the fed, and others. then we brought this to the attention of the british. we wrote them a detailed memorandum for how to fix it and they responded affirmatively to those recommendations, said they shared the concern, and would pursue them. >> the investigation that led to the fine, against barclays and the continuing investigation begins and where? >> that is a question you should refer to the cftc, but roughly

the same time. >> it begins at the moment in which you are made aware, as head of the new york reserve and carry out responsibilities and then you inform the secretary of the situation. what was the response of the other major stakeholders in our markets and the protection and oversight of our markets to your comments about this? >> i believe they share our concerns. the british share concerns. the concerns that we shared or sufficient basis to initiate this investigation. >> i want to ask about the annual report, which i am sure you are dying to get to.

promote market discipline by eliminating expectation of bailout, respond to threats to the financial system. tell us how you are doing. you agree those are your three major goals. how're you doing? >> i would say it is early. i will tell you what the main challenges. we have a complicated system which involves a lot of agencies. they are writing a set of rules that are complicated, by definition. we have an interest in making sure they do that carefully with all necessary speed but do so in a way where they are not creating new gaps in the system, and new incentives to move for risk where regulations are softer. that is a challenge. congress did not give council the authority to override the

independent authority of those agencies. >> can you give us examples of measures you have taken to protect and ensure -- >> i think you have to look at the scale of the changes that have been put in place in our system, not just by the measures we took in the financial emergency, but in the reforms. to taking few examples, four hundred billion dollars more today. we moved much more aggressively than any other country that i am aware of to force these banks to hold more capital against the risk they were taking. >> that was in direct response? >> and to the authority we have and what we did in the crisis. the derivatives complicated challenges. these agencies have made progress in making reforms that

bring more transparency to those markets and give them new tools to combat manipulation abuse. the consumer financial protection bureau, they have taken a very important steps to make mortgages and credit-card forms easier to understand so that individuals can compete for better terms and are aware of the risks. i think those are the best examples. the fdic has put in place an innovative framework with a huge amount of support to implement these important objectives to make sure that when firms make mistakes, we put them out of their misery was no tax to the -- cost to the taxpayer. those things in bank capital, in derivatives overside, consumer

protection, what some people call it bankruptcy for large banks, those things are consequential reforms. we have a lot to work -- a lot of work to do. housing, a lot of work to do. >> the chair recognizes the gentlewoman from illinois. >> thank you, mr. chairman and mr. secretary for being here. which regulators dropped the ball with regard to afg-- aig? and let two is near collapse? were state insurance regulators in charge of that or was it the fragile holding company? -- central holding company? >> i do not believe there was

any competent -- authority responsible for the broad centities of that system. the ots did have somewhat broader responsibilities but i do not believe their excess -- authority extended to the types of oversight that would have been necessary. >> who was regulating aid? the tarp inspector general issued a damning report about aig oversight. aig has had no consolidated banking regulator of its non insurance financial business. that is a tiny piece of the aig operation. but not the rest of the company.

the federal reserve did not regulate aig before the bailout or a sense. but the -- or since. the fed current takeover if tarp would be the savings and loan company but they do not think that is going to be in existence. i take that back. the treasury, and until the treasury holds less than 50% of aig, then maybe the fed could take that over. meanwhile, aig is investing and other things. the credit swap portfolio sees $160 billion. the proponents of dodd-frank say it was about ending too big to

fail and regulating the financial industry. yet after dodd-frank, there is no regulator for aig. >> what dodd-frank did was it gave the united states the authority to designate a non- banks financial institution that could cause damage to the system, that is the council the authority to designate those firms and gives the fed the ability to provide comprehensive oversight you referred to. with that authority, the council and its agencies are carefully examining which of the firms out there at present that risk need to be brought within these constraints on capital. the council is in the process of doing that.

it is looking carefully not just -- >> they really have not done anything. there is not a any oversight. who is in charge of regulating aig? >> the congress gives the council and the fed, we are moving to put that in place. >> does that mean there is no regulator? >> right now that is true. that is why in dodd-frank we ask for the authority to make sure we can designate and we will use it carefully. we are moving carefully because as you know when you think about how to apply these rules to insurance companies, you want to do it carefully. we are movinga carefully areig is a different -- and moving carefully. aig is different than it was. >> could your team and submit the plan to save tarp?

>> let me say it briefly. we have our remaining exposure to aig in the form only of equity now. we have sold a large trunk of that. we plan to sell as much as we can as soon as we can because we want nothing more than recovering that money but i would say to remind the committee that on estimates, this is a remarkable thing, on current estimates, the taxpayer will earn a substantial, positive return on the full scope put tens of billions of dollars of exposure we took to protect the economy from its failures. >> if you can get back that would be great. >> happy to respond and lay out what our view is of how we get out of our remaining exposure. >> the chair recognizes the woman from new york.

>> thank you for your service. some stakeholders -- as you know, community banks, we have dealt with this issue since 2008. the lack of access to capital for small businesses and we passed a small bill. some firms have estimated that u.s. community banks have paid in damages for that year alone. my question is, how does an artificially low libor rate hurt small banks that operate on thin profit margins and rely more on interest income than large

banks? >> that is an issue which a lot of people are taking a careful look at. it is a matter of litigation an ongoing review and by a bunch of agencies that should be taking a look at it. i think it will take a little time for them to give you a good answer to that question but i am sure they would be happy to do that. >> the 10 trillion dollars in loans are affecting the costs of many financial products including mortgages and small business loans. what impact will be libor scandal have on access to credit for small businesses? >> i do not think it will have any impact on access to credit for small businesses. >> how do we restore public confidence in the financial sector? >> we do it by making sure we put in place tougher rules and give people the authority

necessary to enforce those rules and where they found evidence of bad behavior, they should be punished for it. that is what it will take. we have a long way to go in restoring the trust and confidence of the american people in their ability to protect consumers and manage the risk they face. >> thank you, mr. chairman. >> the chair recognizing -- recognizes mr. miller for five minutes. >> good to have you with us. fsoc ask for a study on the asset management industry to the extent to which they most -- might pose a risk. we sent you a letter and i would like to have some of the questions we put to you in a letter.

when you anticipate they will conclude the study? >> i know they are making progress on it. it is an important thing to do in part because the council has to figure out what to do with their designation authority, if anything. what they are doing right now is take advantage of all of the public information available about the risks in those institutions, what it means for the system. it will be able to take a good vantage of the new reporting requirements -- take advantage of the new reporting requirements. >> we do not have time, a section when 75 of dodd-frank requires fsoc to confirm regarding regulations. this will likely increase cost and confusion, even worse they may contradict risk.

what are you doing to make sure it is coordinated and does not become worse? what impact will that have on the economy? >> what your colleague is referring to is the requirement we have negotiated globally to put on the largest firms higher capital requirements against the risk they hold so they are forced to hold more capital against risk and a smaller institution. that's insensible -- that seems sensible. we have uniform rules. that is not enough. you want to make sure they are enforced on a common basis. that is a very challenging process, and to have a level playing field. what the fed is doing is working out with other supervisors ways to make sure that the rules are enforced in a consistent way. >> are you are applying that to

foreign regulators? >> everybody wants a level playing field. >> it's free do not, it will be detrimental. >> exactly. -- if we do not, it will be detrimental. >> exactly a. risk will shift to those markets and that will hurt us, too. >> basel 3 has been criticized as bank-centric. what actions do they need to take to make sure they treat insurance ans insurance? that is a concern that they are getting into an area that they were never authorized to get into and it looks like it is going to go into areas it should not. >> i am aware of that concern and what the federal reserve has said is that they recognize, if

they were in a position where they had to apply the standards on capital and leveraged to a financial institution that includes an insurance company, they would have to make changes to it to recognize the specific differences from banking. that makes sense. they understand that and they are taking a look at how they would need to be adapted if the council decides to designate aig. >> the question, do you agree that capital standards need to be recognized and the difference between banks need to be defined where they do not splash over and one encompasses the other? i have been meeting with more and more bankers and the insurance sector is concerned that the spice over they are

seeing is going to have a detrimental impact on their organizations. >> i agree with you that they have to be modified. i think the fed shares that view, too. i am much more confident that they will be able to, if they are faced with that, they will be able to do it in a way that mitigates those concerns. >> they need to be mitigated. >> absolutely. >> i would like to see that implemented. i would like to make sure. >> the gentleman from north carolina is recognized. >> thank you for being here. you have gotten a lot of questions about libor and i think it is important because it affects at which individuals are able to get loans. i do not want to minimize the importance of it but i do not want to dwell on it.

i want to deal with two other things that are important in my community. one of which is referenced on page four of your testimony, where you said the council recommends reforms to address structural vulnerabilities, particularly in short-term funding markets such as money- market funds, a lot of my constituents have funds invested in money market funds. i am wondering if you would send me, or tell me where i can access what these recommended reforms are so that we can take a closer look at them. i will not dwell on that but that is important also. what i want to dwell on is automobile dealerships because

the special inspector general came out with a report. i am distend you are disputing some of the conclusions but the facts are hard to dispute and those facts suggest that by a in june 2009, -- by june 2009, gm had terminated many dealerships -- i am sorry, chrysler had terminated 789 dealerships and general motors had wound down 1454 dealerships. that is a significant impact. i want to approach it from the minority perspective because the statistics indicate that the

number of ethnic minority dealers was disproportionate in the number that were terminated and that african-american and dealers were hit the hardest, with a decline of 50%, from 523 dealerships to 261. a number of those were in my congressional district when i was practicing law 20 years ago. i had five african-american dealerships in my congressional district that i represented. they do not exist anymore. my question is, what leverage to do we have with these automobile companies to leverage them into being more aggressive and

rebuilding those minority owned, or at least in the new dealerships that are being opened, giving some preference to minority dealerships? >> i would be happy to think about that question and come back to you on it. i understand your concern with it. i would say that even though as part of our effort to save this industry, we ended up owning, and still own, a significant amount of common equity. we have been very careful not to get in the business of running those institutions. >> i understand that. i am not criticizing. i think it was wonderful we

bailed out the automobile industry. i am not questioning that. the inspector general says the government had quite role in pushing a determination of these things. what i am asking is for you to give thought to how we can go back and help restore. we can talk more offline. i think i have 10 seconds left in this five minute intervals. we can talk more. i want your commitment to brainstorm about how we might be able to address this problem. >> you have my commitment. >> thank you, mr. chairman. i hear all of this, on my door you cannot have your cake and eat it too.

you have been before this committee countless times and if this is the crime of the century, never once did you ever mention it as being a problem. never once did you say this is where you're going to do. never did you say this was the new legislation. you worked with the ranking member trying to pass a to a -- 2000 page piece of never -- legislation. never did you say this is a problem and we think they should be included. you never did that during the last four years and now it comes out this is the crime of the century. the chairman said, knowing these problems, and knowing the falsifications, why did you set up these bailout programs with aig where you used libor and worked with the benchmark?

your answer is, well, you know, what investors did elsewhere. we are like investors around the world. mr. secretary, if you are the secretary treasury of the united states of america. you have the authority to come to us, layout the problem and the solutions and for four years you did not do anything. i am not defending the banks for one minute boat we are looking to the secretary not to come in after the fact and do what every other regulator has done an. the finger at someone else. when people do wrong things, they should be punished. in the private sector that occurred. they have been punished hundreds of millions of dollars. someone lost their jobs because of this. when something happens with regulators, they did not catch

this, it did not do anything, did not tell anybody, will they be finance? will any regulator lose their jobs? >> in my judgment, the regulators did the necessary, appropriate thing and they started that process very early. >> you told congress about this? >> no. these concerns were in the public domain. i take full responsibility for this. having looked into these concerns and believed they were a problem, we took the initiative to brief the broader regulatory community so they had that information, and we pushed the british to resolve it. we did that very early. >> did the regulators implement any changes with regard to their reporting of this information?

did the banks take any action to make sure this information, you're guaranteed that the problem has been solved? >> the two things that happen, there will be more that has to happen, the british set in motion a set of reforms and day cftc initiated a very far reaching investigation that ultimately included an enforcement action. >> the same justice department that you indicated there were none of the table. you did not notify them. there is so much finger-pointing by the regulators after the fact. let me turn to the non-banking designation. what we have seen as a result, those with over $50 billion of

assets have been designated to big to fail. we have seen a doubling down of this. they know with the designation they are going to find their funds are cheaper. why in the world would we want to extend this problem to the non-financial sector? i think it is the wrong way to go. i will be dropping legislation to prevent this. there is no reason to look at asset management firms and designate them as too big to fail and spread the problem we have in the banking sector and allow them to get cheaper funding because of this and allow them to swallow up their lesser entities. why would you want to do that? >> we have no intention of doing that. we would not want to do that for the reasons you said. i do not think you are right to believe that to designation

itself will confer a financial advantage. let me explain. the purpose of this authority is to make sure that institutions that could threaten the economy are required to hold capital against risk an accord -- hold more capital than any other institutions. if you listen carefully, there is a debate right now, you will find it hard to justify the view that designation is something firms would welcome. many of your colleagues are spending time trying to prevent are worried it will come with constraints. i respect your views and we can debate this a long time. i am sure we will in the future. >> i am tryingi'm trying to