making it seem as though he was looking out for the lodi and the american taxpayers who were being cheated by apple. what was the media doing? -- senator levin rarely i have a master's degree. i have been in the professional world since i've been working and when i look and see how backwards we are with our tax. have you ever tried to deal with the internal revenue service. i have. i have to quit my job so i can take care of issues that have been brought up with my family and the small bses that we run. it's ridiculous. complex an overly tax code. that's why i think you are seeing a strong push for tax

reform. chairman of the weighs and means committee is pushing hard for tax reform. they are focusing on it and pushing it for the next 18 months, for the remainder of this congress. host: what is the heritage foundation supporting? guest: tax reform. we are in favor of the new flat tax but it's a flat tax on income you spend. host: people can check that out on heritage.org. guest: yes. host: you talk about the territorial tax. you've discussed that a bit this morning. that's something that the heritage foundation supports? guest: yes. host: this editorial today in the baltimore mother sun talk about the issues that come up with the territorial tax.

while capital would more easily flow from foreign operation back to the domestic parent, evidence from the 2,000 four repailtyation holiday indicates that most firms with stock piles of foreign cash already fully fund their domestic investment opportunities. explain that. guest: holiday is backward looking. it eppeds up being a tax windfall. when you remove the tax liability on previously earned income it's a tax windfall. we're not in favor of a backward looking repate yation holiday. we are looking at the income you earn abroad you can bring back with a much smaller tax liability than we have today. one of the objections tend to be that if you don't structure it strongly enough you end up allowing businesses like apple

to shift too much income jeefer seas. i couldn't agree more. we have to strengthen our transfer pricing rules. we have to strengthen our income stripping rules. i am in total agreement with that sentiment because a territorial system can lead to those problems. but if it's set up the right way that can be handled and we can encourage growth here in the u.s. host: here is "the new york mes" talking about it -- >> it would cost the treasure a $130 billion in revenue over . e next ten years uest: a tax holiday with a territorial system is two dumpt things. we're talking about income

earned going forward. there are estimates on how much it would cost the u.s. treasury. my sentiment is it doesn't cost them anything because the must be that a.m. has earned overseas they are not going to bring it back here and face the steep u.s. tax that would bring. they are going to keep it ffshore. caller: i was wondering if you think there will come a time that man will evolve a little bit and like the common man and even the playing fields because we are being tevert out by the corporations that sell us to the lowest bidder. it's a big game. they have no alegions to countries. they are playing us all against each other. host: what changes would you

like to see in the tax code? caller: obviously the corporations are taking more than they are giving. the nation is falling apart. what are they going to do? run to another country. my point is to go over to ireland to get that tax break in ireland, they are suffering as bad. you give them a couple of beers and they are happy. we are being duped and you are being duped yourselves. you think you are getting away with something. there is going to be hell to pay by this generation. guest: i think the idea that we need to be raising taxes on anybody right now is misplaced. if you look at where tax revenues are now according to the congressional budget office, tax revenues are at their circle average so we don't need to raise taxes on anybody. we need to reform our tax code

and that means lowering tax codes for individuals and reform the tax code for businesses. host: our democratic line. good morning. caller: good morning. i agree with the last three callers but we really like the last caller was saying big corporations are really just temping out the little man. we don't got a chance. ou got companies taking jobs overseas and leaving us without ways to work to feed our families to pay taxes to further the american dream that we're supposed to be able to get in this country. i don't know what the answer is but i think the american people are getting tired of it. we're getting tired of being taxed and tired of our jobs being sentover seas.

people are going to start standing up. these people running this country better wake up because the little people are going to get tired of it. have a good day. guest: i don't want to be the big defender of corporate america. they provide things that make our life better. if you have an ipad apple created that. they provide jobs for fellow americans and return for those of us who are saving for retirement in i.r.a.'s or if you have a pension plan from your place of employment, they are likely investing in u.s. businesses like apple and others. it's a good thing when we have companies successful here and abroad. we should be happy that app sl so successful overseas that so many foreign people want to buy

ipads, computers, i tunes because there is more demand for product of an american company that means growth here in the u.s. host: for people who want to lower the tax code is what is happening in ireland a model for what may happen in america if the cralt tax code is lowered? guest: i don't think ireland is a model for the u.s. 're not going to a 12.5% rate. at best we will get to 25%. we should get lower. e need to be between 25% and 20%. there is not going to be a lot of residual tax ode because you are paying the same no matter where you locate. st: are the irish seeing benefits?

guest: i can't speak to the ireland experience. if we get our rate down to where our come pet tors are we should see much stronger job growth. host: good morning peggy you are on. caller: hello i watched the hearing yesterday and senator portman made some good statements about the fact that we really need to reform the american tax code. we're not going to get these bigger businesses and corporations to come back to the united states until we lower our code. but what i would like to ask is they mentioned that the main reason for keeping this -- doing that is they have a tremendous amount of investors who are getting money from

this. and the international investors would have a fit if they didn't use every avenue to protect the tax that they do earn. but what i'd like to know is hen investor withdraws his money to his i.r.a. or however it's invested, then how does that work as far as the taxes are concerned on paying the taxes, do they pay taxes in the united states if they are an investor that earns money through an i.r.a. that is invested with apple in the united states? i think this is just a perfect example of why we've got to reform our tax code. guest: so if you invest in a tradition i.r.a. the money you nut you don't pay tax on the

income you earn in that year. it's free to grow over time. you don't pay tax but when you withdraw it during retirement you'll pay tax on the full value when you withdraw it. you can put in money post tax and withdraw it tax free. both are neutral to savings. it doesn't provide a discouragement or encurenlment. we have a bias to save because of the tax we levy on it today. we're in favor of going to an i.r.a. for all savings so you could say save tax free. you could safe for any reason that you want to save for. host: did that answer your question? caller: i hope we reform our code so that we can take advantage of these people coming back to our country.

i doubt that's going to happen but i wish we would. host: a tweet from tom on twitter. guest: i think he made it seem like apple was skipping on uzz tax. he was trying to create the impression that all these companies and it's not just atchle that keep foreign income abroad, he's trying to create the impression they are keeping t abroad to avoid tax. from the wall street

journal. guest: apple has come up with a way to avoid tax. st: a question on twitter -- guest: i agree. that's called tax reform. what you do it's revenue neutral. it means the new tax system you come up with doesn't raise more or less receive knew than the current tax sment. you lower tax rates but you close -- you fimple up the tax base. i don't like the term loopholes. these are things they put in the laws. it's not things people or businesses have learned to game. it's in the tax code. you clean up the tax base and that gets you the revenue you need to lower the tax rate. guest: robert from georgia on

our democratic line. caller: good morning. i'm talking to you from an iphone. i'm curious, i've heard somewhere on television that if the factories that manufactured my phone were here in the united states, this phone would have only cost $5 or $10 more. do you know the answer to that? the heritage foundation is a conservative think tank. i wonder what your position is on this: if you brought the factories here and made the phones in the united states then you would increase the number of jobs in the united states but the cost of the phone would go up. what's your position would you rather have more jobs or higher costing phones? guest: i don't know how much more the phones would cost but i don't think the question of

forcing apple to come back -- i don't think we can do that. the force that is are driving app toll manufacture abroad are the ones that are pushing most other businesses to manufacture in other locations. it's cheaper with the way the global economy is developed, labor is less expensive abroad. it's easier to transport with the shipping cost coming down. they are going to do that. there is no way to force them to come back. changing our tax policy going with a stronger worldwide system isn't going to make them come back. it's been happening for years and there is little we can do with public policy to force them to come back. host: are members of congress going to force tim cook to come back? guest: i think so. it's not going to be tim cook but google and the companies they've called in to testify are going to be back here. it makes good politics.

the policy might be off. to drag ood politics up the c.e.o.'s and shame them. host: we'll do our america by the number segment we do every friday in the third part of the "washington journal." we'll take a look at social and economic changes in rural america. we'll be right back. >> the most fundamental difference it seems to me between left and right is both look at the economic ladder and those on the left seek to reach down and physically take people and move them up the economic ladder. that is almost dritch by noble intentions and yet it never ever ever works. the only way anyone has ever

climbed the economic ladder is to pull himself or herself up one rung at a time. >> nearly all of you will experience failure. some of you crushing failure that you will recover from and yes learn from. and yes you will be all the better for because once you've had a failure that's really the only good option to take something from it. of course very few of you will never recover from your failures and stathically speaking between two and five of you will spend some part of your life in prison. >> every spring c-span visits colleges and yeeferts across the country. for the next two weekends you'll hear stories and advice or a new graduating class.

>> what has happened in the senate for three consecutive years, we didn't even consider a budget resolution. i served on the budget committee for eight years. throughout the history since 1974 there have been years a budget didn't pass but three consecutive years, this is ther fourth. they passed one but they haven't reconciled their differences and this was supposed to be done by april 15 so congress is required to pass a budget and complete that process by april 15 and here we are. they don't think they have to bother with it. it's no wonder everything has gotten so out of whack, sequestration and the automatic cuts. major debt piling up. we get 16.8 trillion national

debt. >> former republican senator olympia snow on fixing the current state of current gridlock sunday at 9:00 on afterwards. his weekend on book t.v. "washington journal" continues. >> each friday in this segment of the "washington journal" we look at america by the numbers and today we'll take a look at how rural america is changing. as we go through those numbers this week we're joined by the department of agriculture's research service and jim webster. during the segment we want you to call in and give your thoughts on what you see changing in your rural communities in your area and why you think those changes are happening. the phone lines we're doing a bit demincht this segment.

eastern and central united tates can call in at 202-585-3882, mountain and 5-3881. 02-58 guest: we're going to use a general definition of rural. rural areas may be defined in different ways. it's help to feel point out people who study rural economic trends and population change use non-metropolitan counties for that purpose. metropolitan counties shown in urban ich we refer to as counties have 50,000 or more and suburban counties tied to

those through commuting. those are the big cities of the u.s. at the county level. the orange counties are what we're studying today and looking at today and those are non-metropolitan counties or rural counties. they are the counties that fall outside of these large city labor market areas and you can see it's a pretty extensive territory. it covers 72% of u.s. land area but includes 15% of the u.s. population. that's about 46 million people. host: so we have this chart here showing today but i want to show the chart from the 1970's showing the changes in the rural and urban population a lot fewer urban spaces in the country back then. can you talk about some of the changes in numbers you found over the years?

guest: it's interesting to consider just how much rural america has changed over the years and how it's been transformed by population trends. when you compare this map with the previous map, you can see that metropolitan growth, urban growth and especially suburban expansion has been dramatic over the last 40 years. and that means that the character of rural areas, of small towns and rural across the country has been changed dramatically. when we talk about rural it's not a static thing. it's constantly changing. the rural areas we talk about today are not the rural ours our grandparents grew up in. host: between 2010 and 2012 rural counties as a whole declined in population for the first time. talk about some of the reasons why. guest: part of it was the exodus of young people and

money from rural areas into suburbs. the amentis and opportunities in rural areas, job opportunities were insufficient to attract and keep the brightest young people and they moved. which was a little bit different than we saw 30 or 40 years ago. when there was an exodus toward rural areas from people tired of the city life. host: do you go out into the field and try to find out the why behind the numbers? guest: we try to. we depend on census numbers to do the analysis. and the economic research service is trying to provide the national picture. but i work with a lot of rural soseologist throughout the country who find out what is going on in specific areas. i've done some eye opening

field work in rural areas and talking with community leaders about why young people are leaving and who returns. host: as we talk about this, it's important to note that rural doesn't necessarily mean agriculture, correct? guest: i think what makes a lot of these discussions interesting is just how diverse rural areas are. they are diverse in many ways. you have large sections of the country that are extremely remote and very sparsely pop lated. you have others that are densely settled and near metropolitan areas. you have a lot of rural counties in which the employment and earnings are highly concentrated in one industry for instance the purple counties on this map in the west and great lakes region and in new england are indcailting counties where recreation activity is particularly important for the

economy for well being and lively hoods in those areas. the green counties show where farming is particularly important. now of course that's not showing where all farm land is. farming takes place throughout the country. host: this is primary importance? guest: right it's of importance in employment in those counties. the third part is in brown and those commoice are dependant . on rural manufacture host: i want to hear about the changes in rural america and you're community. staying on the subject of agriculture for a second. is it losing it's clout in america? we talk about the changes in economic activities in rural america? guest: if one looks at what is going on in congress now the

answer is clearly no because here is still generous expenditures in the farm bill. there are farm bills that have little to do with rural economic growth. that map shows that you have 20% of the counties where agriculture is a major factor in rural areas, manufacturing recreation are the drivers in most of the areas. so the rhetoric on the hill says this is a bill for rural america. it's a bill for just a little part of rural america. ost: what is ago gri pulse communications? guest: we cover agriculture and politics. we have a daily up dated on our agripulse.com.

guest: i started for senator george mcgovern. then i was assistant secretary at usda during the clinton and parker administration. then i started a newsletter in 1981 and i've been reporting on this short sort of thing ever since. host: they are here to answer your questions on the changing world of rural america. let's go to the phones and edward is waiting from manchester connecticut. good morning. caller: good morning. i thank you for the opportunity to speak with you. the service you provide the american people is worth more than you pay as usual. host: what do you think about rural america? caller: this is just a philosophy to start this conversation. everything that happens in the center of the earth affect it

is earth's surface. everything that happens in the center of our nation affects the surface or the rural changes in our nation. i think our representatives should go after the banks first so that they have the money they need to run the country properly. host: do you think that would help rural america. do you think rural america needs congress's help now? caller: yes, sir, they need their service every day and in the future too. if anyone understands how the food chain works in nature, then they'll be able to understand how decisions that are made in our house of representatives affect everyone's lives and their

communities. host: jim webster, what about this graph from u.s.a. today piece earlier this year talking about agriculture secretary tom vilsack delivering a dire warning to the 51 million farmers, ranchers and residents inhabiting rural america last month. his message -- guest: i'm sure that he was talking very sincerely about his belief of the rural america is lagging in the numbers we've talked about bear out that. what he doesn't say though is offers any way to emil rate that. what kind of policy should we be thinking about to take care

of it? the most important thing for rural america is the food stamp program. because you have many counties and john has a map that shows it that are persistly poor from decade to decade continue to be poor. income transfers such as food stamps are a very critical part of economic activity in those counties. host: what do we know about the wealth distribution in rural counties and numbers of poor? guest: the poverty rate in rural america is a little higher than in urban america but we have seen a very sharp increase in rural poverty and especially in child poverty since the recession. but jim is right. you can map out poverty in rural counties and you can see that there are regions of the

country in the south and the rio grand valley out west that have counties that are persistently poor and have remained poor for decades. host: your thoughts on rural america and what you see in rural america near you and why ou think it's happening. eastern central folks can call 202-585-3880. untain and pacific folks 202-585-3881. host: in the time you've been studying this take us through the chart that explains that change. guest: the u.s. census bureau shows a number of shifts. first rural counties taken as a

whole are declining in population for the first time. host: this is the first time it's declining. guest: the graph is showing goes back to 1976 and it's showing how areas are changing in population. it's not population size. it's how much rural counties change in a given year and comparing that with urban count tills. so if you follow the red line back for instance to the 1990's you can see there was a period people called the rural rebound. there was growth in rural areas in that period. and in the mid two thoirks's there was a period of escalating in migration, population growth to rural areas and that halted or slowed down considerably within on set of the housing market crisis and the recession until we come

to this period where we're showing overall population decline. there have always been individual counties and in fact large riege innocence rural america that have declined in population. we think of the great plains and these high poverty areas, but the declines have been off set by higher growth in other counties until now. ost: on twitter -- guest: if we get to the maps we'll see that, this emergence of population decline is really hitting the eastern half of the united states, those rural manufacturing counties are showing up as declining at this time. host: let's go to that map that you refer to.

explain what we're seeing here. guest: so population change occurs at the local level. it has impact at the local level. 24r is a great deal of diversity in county population change. it's showing population change just for the rural counties. metropolitan counties are grayed out. for this latest two year period, the majority of counties are losing population, those are the counties in yellow. host: that's the cream color. rural counties seeing population decline. guest: on the other hand you have many counties that are showing rapid growth. those are the dark red counties. 2% may not sound high but for population growth that is above the national average. this pattern on this map is not the pattern we are used to seeing for rural america. for instance the rapid growth

we are seing in north dakota and montgomery is new. those areas have historically declined in population but with expansion of the energy sector we have seen a lot of growth. host: talk about some of the growth areas that you've been looking at. guest: well the growth areas i've paid attention to are the recreation counties. those are the eastern shore and outer banks, places like that. the declining areas when you look at the yellow areas, it seems like they are concentrated in agriculture areas in one sense where consolidation of farms, they are fewer farmers producing more and more. and in those manufacturing counties where globalization is the culprit or other things in terms of loss of jobs in manufacturing. one can argue that all day. but those are the areas that

seem to be losing. host: a question from laura on twitter -- guest: i'm not sure what a factory farm is. there is a concentration in agriculture that has been going on as long as i've been around and i've been around 75 years now that starting with the department of agriculture's founding in 1862 when we were charged with making one blade of grass -- two blades of grass grow where one grew before. we have been pushing this consolidation and efficiency. what we have is much larger farms, many fewer farms producing more and more of the food and fiber at a more reliable and cheaper way. but it has had an effect on depopulation of those areas that were 50 years ago very

heavily concentrated in agriculture. host: we're taking your thoughts on rural america and changes you are seing in your community. . vid from texas caller: i do not see how there is nearly enough focus on the issue of overpopulation. our overpopulation pressures are affecting every environmental problem we have. our population pressures are affecting food, they are affecting farm land, the loss of habitat, forresstri. there doesn't seem to be much of an acknowledgment of it. i'm glad c-span is having this program but i don't here enough concern, alarm bells being raised because it's going to

affect the total decline of our whole society. we're not going to be able to have people employed. i just don't see how it's going to be reversed. guest: so that's a very interesting point that he makes. it certainly is the quace athat in environmental -- case that in environmental discussion population pressure comes in impact of global warming or climate change. certainly in international settings it is a huge issue. but it is interesting as the caller points out but that is not what we're talking about here. part of the reason that is is industrialized countries are not growing as fast as they used to. birth rates are way down. the change we get from natural change which is the difference between births minus deaths is

way lower than it used to be. in recent years immigration has gone way down. so in the u.s. context you don't hear that much discussion about overpopulation anymore. we're not growing quite as fast as we used to. guest: the challenge with population is in developing countries where the birth rate is high. the challenge is how do we produce enough food and give access of ability of those people to enough food to prevent the 800 million people who are malnourished in the world today. host: we're getting your thoughts on rural america and why you think the changes are happening you see in your neighborhood. caller: there is three things i see. there are three problems. the immigration problem, not legal immigration but people that sneak in here, the

illegals, they are doing the farm work because they don't charge as much. they are doing the work and all the american farm boys or country boys are are having to go to town and work. the e.p.a. is hurting the farmers. and the third thing is the people in california, i'm an extruck driver and a farmer too, the people in california don't have enough water for the farmers so they are giving the water to the cities and they are cutting down on the water the farmers should be getting because the people in california say that they can get produce from other countries and they need to grow it in california anymore. host: take these one at a time. illegal immigration and jobs. guest: this is being debated right now. after the memorial day recess they will go on to a

comprehensive immigration bill which goes to these problems. question of e.p.a. hurting farmers. there has been some incensetivity in e.p.a. to agriculture but at the same time one of the most important things for the recreation counties in rural areas is strict enforcement of environmental standards. they depend on clean air, clean water for the lakes and rivers for fishing and boating and that sort of thing. and the third point that james made water in california. this is a real problem. the cost of water for agriculture is going up, up, up. and cities will always be able to out bid agriculture for it. a lot of the tent nts of trade we are going to go to the place where the come par or the advantage exist so we're going to import more from mexico than we grow in california or cspan.org or maryland.

host: you were part of the study you went to high school reunions in rural counties and talked about changes they are seeing. were these same issues, immigration, e.p.a. and water issues key drivers you saw? guest: not in the areas we chose to study. more remote areas in the grate plains. actually all in many parts of the country but areas that were relatively small in population size and relatively remote where as a lot of those areas will r being impacted by immigration. the particular areas we chose to study had not been. what we were looking at was what is it that drives young people to leave rural areas and who comes back after maybe going to college or spending a few years in the city. why do people return, what are

the barriers to return my congratulations? a lot of the communities we visited, small remote communities depend to a large degree on being able to attract people back to their communities, people who have grown up there, attract them back once they've had experience elsewhere. host: we are talking about rural america. that's on this map the counties in orange here, that 72% of the land area in the united states includes about 15% of u.s. residents. we want to hear what you are seeing in rural areas by you and why you think the changes in pap lation are happening there. jeff from montgomery is up next. caller: if you take a general look from the 1970's to this point you'll see the federal government has been involved in

decreasing the amount of production in the united states, what we pay farmers not to raise crops, where we -- when this happens you get rid of entire community that is service these people so that people have to leave. and they are replaced by people that have more money from liberal areas that come in and lock up all the hunting, all the fishing, degrade the quality of life that people have. so to me it's a pretty obvious generation of bringing united states into line with the u.n. and agenda 21, bringing the country down to the rest -- level of the rest of the world. host: if you want to talk about those changes and issues as we show a map of the rural counties. very different view from 1970. guest: well the gentleman is a

little offbase in terms of decreasing production. federal policy in the last dozen years has been increasing production. the days of the soil bank in the 1950's are long gone. we've gone to conservation reserve programs. that targets environmentally sensitive lands to take out production and that has been constricted and reduced over the years. what we have seen in the last three or four years is an effort to stimulate production because of the incredible demand for bye fuels. ethanol and soy diesel. that may be true some years ago but no longer s. of course the people going into the amenty recreation counties, tom brokaw buying up ranch land in montgomery may be a problem to

me, but it's also a way to keep that land prissstin and available for wildlife and promote environmental values. the agenda 21 is a topic for another program host: we are taking your thoughts in this program. hone lines are open. we've been giving you a large overview of rural counties in america. here is a specific example talking about southern lawrence county in rural western pennsylvania. some stats on that example. the trends have been tough in taylor which experienced a 13.6% population decline between 2,000 and 2010.

twice of its residents are over 65 or under the age of 18. hat ratio is unheard of more mupetiss. guest: that's a typical example of what goes on as a result of population change. population change can happen in a number of ways but population loss is usually the result of young people leaving rural areas right after high school and seeking education and jobs elsewhere. this has the effect of we're moving not on the young people but the families they would be having until the future and it results in an aging of the population. you can see this in rural parts of pennsylvania which

outmigration has been going on for a long time. but you can see this in the corn belt. average population age is much higher than elsewhere. host: western pennsylvania is not alone in this. if you look at eastern ohio the traditional west belt you see a similar thing, out migration and more deaths than births. this has not been happening overnight. you're not going to see tumble weeds going down the street. it is a slow process. these places can't grow naturally. guest: i think what he's talking about is coal related, energy related. that matter how much we loss in the mines it's going to continue as pressure continues

to use cleaner renewable fuels and worry about man maid climate change. it's an open ended debate right now but it's going to continue, natural gas is going to underprice coal and it's going to continue in those areas. it's going to cause problems in those counties. but we have not really looked at policy intervention that is might help it and i think we need to. host: caller from montana. caller: i'd like to reiterate about the population issue and connect that with increasingly scars resources. i used to teach math and fiss i cans for quite a while and i've

written a math book. i won't get into that. i don't want to be peddling anything. but the fact is we can go faster than the speed of light even though reallytivity says no, we can within general reallytivity. host: relate this to rural america for me. caller: the machinery has taken the place of labor. host: machinery taking the place of labor in rural america. guest: when the combustion engine came to farming, it revolutionized the way we farm. today we have 40 rural wide corn planters that have taken the place of all kinds of manual labor. massive come bynes that are a million dollars a piece that

can go down a field. we week before last planted 45% of the corn crop in one week because there was a period of time when it was too wet and cold to get in the field. because of this mechanization we are able to make up an e normous amount in one week. t's been a marvelous thing for efficiency. it means fewer people are needed for that kind of work. from ron on twitter. it cost less to live in rural america. how does the cost of living in rural counties compare to suburb and urban counties? guest: that's a difficult question to answer. we don't have relative -- good data on relative cost of living.

it's the case that housing is less expensive. it's also the case that a larger proportion of the population own their homes. it's cheaper to get food and transportation cost are higher in rural america. guest: i think one of the things that needs to be done is attention to infrastructure, whether it's broad band community indications or roads, rivers, airplane travel in rural america. i can remember when i lived in south dakota in the 1960's, we were able to get dc-3's and small jets regular service in and out of small airports. that's not true today. after deregulation it became hub to hub city to city. the cost of housing, it is difficult to make rural to urban comp sons on housing cost. but i know for instance in ohm ohm, nebraska where i have

really i was the one can have a much larger house for far less than i can have in the washington metropolitan area. home coming off of a bridge collapse yesterday in washington. talk about that infrastructure issue for us. guest: if we have a continuation of the starvation of our infrastructure projects, locks, dams, roads, bridges, this is going to happen again and again. we had a serious one in minnesota not long ago. this is just the latest. it's going to continue to happen. i don't know the numbers but the american society of civil engineers has pretty good data on how many of these bridges are need a he can of a lot of work and what the billions

would take. as long as this mentality prevails we cannot tax, we have to keep cutting taxes. we're going to have continued infrastructure problems in america. host: john with the economic research service. have you done any studies on infrastructure needs in rural counties? guest: there has been some work on transportation and the degree to which rural areas depend very much on transportation and transportation costs have a big impact on the rural economy. we can see when gas prices go up, it makes it hard to live in rural areas especially when you commute long distances to a city. guest: this is particularly true for farmers who will have jobs in town and need to commute 40 or 50 miles each way. it's not unheard of a lot of times to supplement the farm

income or get health insurance. the familiar wife will work in town teaching or in healthcare but there is a lot of commuting and transportation cost involved there. host: we are getting your thoughts on rural community. we will go to new jersey where betty is waiting. caller: i found your discussion interesting. one side of my family lives in a rural section of northwestern pennsylvania. the zip code would be 1623 franklin pennsylvania. this area has been hard hit in the last few years with manufacturing leaving and being cut back. they only had two to three major employers and it hilt all of those. i still have family there. a lot of our current generation and last few generations have went off to university.

but they can't find employment when they finish in the area so they end up leaving. so there is a brain drain going on all the time. and many who don't have the with with all to go to college join the army, navy, marines, whatever. and while that provides a career, it provides a chance for injury and there isn't adequate care for those families that are welcoming back soldiers with issues. i think largely the politicians both in harrisburg and washington have written off this division. the last person that my relatives saw as active in helping them was senator hines. they would try to advocate for them. they aren't getting much from anything recently and i think it needs to be addressed. my family has been out there since about 1790 and they don't

want to leave the area. they like the lifestyle but have you to be able to provide for your families. host: calling from new jersey. one of those states on your map hat has no defined rural areas delaware and jersey. guest: these numbers have a real impact on people's lives. one of the surprising results we've seen from the latest census numbers is just how much population loss has expanded in the eastern half of the united states in places like pennsylvania and ohio, indiana, kentucky. places that have a relatively high reliance on rural manufacturing. manufacturing jobs during the recession took a big hit. we had a big loss in rural manufacturing jobs. so yes, what this woman is describing is playing out throughout the country and

especially in the eastern half of the country. host: jim webster. guest: i think the policy question is do we have as a society have an obligation or a desire to allow people to live where they want? say ard part of me would no. the compassionate part of me would say yes that we ought to make it possible for people to have reasonable quality of life where they want to live. whether we can afford it is a decision for our society to make. host: james from missouri. thanks for calling in. caller: thank you for holding the program. it's very important that the public hear about the economic base of agriculture. my question is since 1949 the congress's legislative intent of fair party relationship of

the congress having a role in maintaining a minimum price, the cost of production has not been fully implemented or enforced. and since the temporary farm bill started in 1953 they've ignored any governmental role in maintaining price supports at the cost of production or party and i wondered if you could offer an opinion why. host: jim webster in the minute we have left. guest: james is correct in his appreciation of history but it wouldn't work to use cost of production anymore. cost of production vary so widely from farm to farm that if you put in cost of production half would have a windfall and half couldn't do it. if you used party you would have milk at $10 a gallon instead of $2.99. host: i want to thank john with the department of agriculture

and jim webster. thanks for joining us today. thanks so much. i should note that coming up soon at 10:00 the president will be holding a commencement address at the naval academy. you will be able to see that on c-span but first want to take you live to the house floor where the house is holding a pro forma session today ahead of that memorial day recess. thanks so much for joining us on today's "washington journal."

the speaker pro tempore: the house will be in order. the chair lays before the house a communication from the speaker. the clerk: speaker's rooms, washington, d.c., may 24, 2013. i hereby appoint the honorable thomas e. petri to act as speaker pro tempore on this day. signed, john a. boehner, speaker of the house of representatives. the speaker pro tempore: the prayer will be offered by the guest chaplain, reverend william gurnie, blessed john paul ii seminary, washington, d.c. the chaplain: let us pray. gracious lord, as we approach the day of remembrance for the fallen heroes of our country, we take the opportunity give thanks for each and every one of them. we recall their heroic sacrifice, and we ask that you shine the perpetual light of mercy on their shoulds. our gratitude and our sympathy

are directed as well to the families who helped shoulder the burden of service and grieve the loss of their loved ones. may the time soon come when such sacrifices are no longer necessary. god of heaven, we implore your blessings upon the house of representatives today and every day. may those who serve in this body continue to do so with honor, patience, and a genuine care for all members. give them wisdom, give them joy in their office, and give them the lasting memory that they have served their country well. we ask all these things in your holy name, amen. the speaker pro tempore: pursuant to section 3a of house resolution 232, the journal of the last day's proceedings is approved. the chair will lead the house in the pledge of aplieges -- in the pledge of allegiance. i pledge allegiance to the flag

of the united states of america and to the republic for which it stands, one nation, under god, indivisible, with liberty and justice for all. the chair lays before the house a communication. the clerk: the honorable the speaker, house of representatives, sir, pursuant to the permission granted in clause 2h of rule 2 of the rules of the u.s. house of representatives, the clerk received the following message from the secretary of the senate on may 24, 2013, at 9:06 a.m., that the senate agreed to enate con surnt resolution 17. appointments, coordinating council on juvenile proceedings. with best wishes, i am, signed sincerely, karen l. haas. the speaker pro tempore: the chair lays before the house a privileged concurrent resolution. the clerk: senate concurrent resolution 17. resolved, that when the senate

recesses or adjourns on any day from thursday, may 23, 2013rks through friday, may 31, 2013, on a motion offered by pursuant to this concurrent resolution by its majority leader of his designee, it stand recessed or adjourned until 12:00 noon on monday, june 3rks2013, or such other time on that date as may be specified by its majority leader or his dez egg nigh and the motion to recess or jdjourn or until time of reassembly pursuant to this resolution whichever occurs first and when the house adjourns on any legislative day from may 23, 2013rks through fri, may 24, 2013, on a motion offered pursuant to this concurrent resolution by its majority leader of his designee, it stand adjourned until 2:00 p.m. on monday, june 3, 2013, or until the time of any reassembly pursuant to section

2 of this concurrent resolution, whichever occurs first. section 2, the majority lead ore of the senate and the speaker of the house or they respective designees, acting jointly after consultation with the minority leader of the senate and the minority leader of the house, shall notify the members of the senate and house respectively to reassemble at such place and time as they may designate if, in their opinion, the public interest shall warrant it. the speaker pro tempore: without objection, the concurrent resolution is agreed o. without objection, pursuant to senate con surnt resolution 17, 113th congress, the house stands adjourned until 2:00 p.m. on monday, june 3, 2013.

>> the house dropping up that pro forma session. they will be held for the memorial day break until monday, june 5th. they passed a bill yesterday that ties the rates on student bills to the treasury notes and approve the keystone xl pipeline in northern route. there will return on monday, june 3. we will go now to the navy marine corps stadium where the class of 2013 is set to graduate, some 1047 midshipmen set to graduate. president obama will be speaking to the graduates and awarding the diplomas at the commencement ceremony. it is being delayed just say little bit but getting underway

here on c-span. unites states marine corps. assistant commandant of the marine corps. [applause] ladies and gentlemen, the vice admiral of the u.s. navy and the superintendent of the u.s. naval academy is escorting the president of the united states and the honorable governor of maryland and the secretary of the navy. [cheers] [band plays] plays]comes the chief" cheers]s and

[cheers and applause] >> ladies and gentlemen, we invite all forecast to remain standing for our national anthem and the invocation. >> ♪ oh, say, can you see by the dawn's early light what so proudly we hailed at the twilight's last gleaming? whose broad stripes

and bright stars through the perilous fight o'er the ramparts we watched were so gallantly streaming? and the rockets' red glare the bombs bursting in air gave proof through the night that our flag was still there o say, does that star-spangled banner yet wave o'er the land of the free and the home of the brave? ♪ [cheers and applause]

>> let us pray. have of the father, as we gather to graduate and commission our class of 2013, we ask you to bless those who lead our nation, our navy and marine corps, and our academy. with the governess in wisdom, and justice, and peace. we offer our thanks to those who have accompanied our graduates. their parents, and friends, their teachers, coaches, and clergy. their mentors and the sponsors. for all who have encouraged and challenged and supported these fine young people, we are truly

grateful. finally, we ask your blessing on are graduating class of 2013. make their memory of the naval academy bring happiness and peace always to their hearts. me their friendships sustain them throughout the lives and made their service to america make our country stronger and our world more just and more peaceable. amen. >> please be seated. ladies and gentlemen, the 61st superintendent of the nine states naval academy, michael h. miller. [applause] >> mr. president, thank you for finding time to join us today.

governor o'malley, secretary paxton, dearl friends, and the graduating elcome.f 2013, will com [cheers and applause] togather here in the stadium join a remarkable celebration of the american spirit. to date will be witnesses to another chapter in history of the long new line. this tradition dates back to least 1902. heading out the promise 111 years ago. dates to 1912.

graduates have to serve for two years in the navy and did not throw their hats because they needed them for another two years. over 75,000 covers have been launched. our newlyg their caps, minted and since signify the beginning of their careers as leaders in the navy and the marine corps. the trajectory of their careers must represent our nation's highest aspirations. long embraced the phrase, "speed is life." we recall here in our classrooms faced airal farragut

lethal force poised for battle. scatter andgan to he shouted down, what is the trouble? came the answer. you enter back just as confidently as faragut. damn the torpedoes. !> full speed ahead >> thank you very much. we are honored to have so many

distinguished guests today. the secretary of the navy. and 73,000 buildings thousands of aircraft. he directs a department of nearly 9000 people. he received his undergraduate degree from the university of mississippi and one on to johns hopkins and got his law degree from harvard. he served on the cruiser little rock before serving as a mississippi auditor. ofwas elected governor mississippi in 1988. he has been posted to saudi

arabia. he has been a highly visible leader of our marine corps. you might have seen him on the evening news while helping out on the gulf coast in the wake of the deep rise and horizon oil spill. duringtraveled 715,000 his tenure. he is also a world class photographer. a true renaissance man and a seventh secretary of the navy. [applause] >> and merle miller -- admiral miller, thank you so much for that warm welcome.

ourhanks for all you do as commander in chief for our sailors and marines around the world every day. and all that the first lady does on behalf of those who served and those who love them. to our distinguished guests, to family, friends, faculty, and most importantly u.s. naval academy class of 2013, welcome to commissioning day. it is wonderful to be here and i cannot think of a more fitting location to graduate and to be commissioned here were so many memories of your class were formed and for the heroic deeds and battles of those who have gone before you are inscribed around us. for the midshipmen who are about

to be commissioned, and since then second lieutenants, congratulations. ns. have earned it -- ensig you have put in the time one nickel of the time. thes a journey you began day you turn down your exceptions to west point. [laughter] and in this journey, behind every single one of few helping you to succeed has been parents and grandparents, brothers and sisters, classmates and teachers, company officers, thates, and many others you may not even know. take time after the ceremony today to thank them and

recognize what they have done to make this day possible because in so many ways this is their day, too. these past four years have prepared you for the challenges ahead. you are graduating from college today like thousands of others across this country, representing that will be your diploma. it is the acknowledgement of the education you have mastered here. you will receive a second document today. it is a document you need to those who have completed a hard and demanding training program while getting that great education. it is the same document that started their careers here of officers like nimitz. it is your commission as an

officer in the united states navy or marine corps. it conveys a special trust directly from the president of the united states. with it comes a responsibility of leading our nation's young men and women. this commission is not about past accomplishments but about future contributions. i want to thank everyone of you for making the decision to commit the next part of your .ife to this country during the time you have pursue your education, the navy and marine corps that you are about to join and about to lead have been globally deployed and globally engaged. sailors and marines have continued operations in afghanistan. they have conducted massive sea-

based mission to provide disaster relief in haiti after the 2010 earthquake. they have launched tomahawk strikes into libya and flew missions into ports. the ronald reagan carrier strike within hours to the earthquake in japan. sailors and marines have deployed to the horn of africa to fight pirates and conduct partnerships inc missions. they are the guarantors of freedom of navigation and they provide global security. watch, atand the steady presence to respond to whatever comes.

u.s. sailors and marines have done this and done superbly for decades. to joinit is your turn that great legacy and to build a greater legacy of your own. you'll need everything you learned here at the academy but you also need the spirit that brought you here. you look to the far horizon wanting to know what is beyond witheady and able to deal whatever is there. andve absolute faith willdence that you can and deal with what ever is there. the future of this nation depends on it. forever navy,

courageous. from the marine corps, forever faithful. welcome to the fleet. [applause] >> it is my privilege to introduce governor martin o'malley of the great state of maryland. we share a great deal in common. we're the 61st incumbent in our jobs. he is the 61st governor of maryland. we are neighbors here in annapolis. both big fans of navy except possibly when we play the terrapins. you made known as the previous mayor of baltimore.

he has accomplished career and has staff positions on capitol hill and was on the baltimore city council prior to becoming mayor. to a secondcted term and serves as co-lead on homeland security. he was appointed to the first ever council of governors by president obama in 2010. avid supporters of this institution. a true friend of the naval academy, governor martin o'malley. [applause] thank you very much. distinguished guests, officers, alumni, fellow graduates, and

mr. president. i want to convey our gratitude to all of the graduates for your choice for your vocation. we're very proud here in maryland to be able to say that maryland is the home to the young is states naval academy and we congratulate this class of 2013. to give our country a better future, we will need the strongest military in the world and we will need the world's most highly skilled and highly innovative workforce. your training here has put you in the position to lead in both of these important national endeavors. it is an honor to stand before you to introduce the commander in chief of the united states of

america. president obama is leading our country forward. he is a thoughtful and resolute leader. he understands america is strongest when her economic and her military power aligned with the power of our principles, the believes we share in freedom and justice and in the dignity of every human being. sures committed to making that our navy and marine corps of the best and the best equipped in the world. his commitment to you is absolute. he and the first lady are working hard every single day so that our country does better by you and your colleagues when

you and your years of active duty and become the role of citizen. jobs, opportunities have been the president's focus from day one. our country has now been creating new jobs every month for 31 months in a row. your commencement speaker is the strong and decisive leader who is moving to america for. please welcome barack obama. [applause] [cheers] >> hello, midshipmen! governor o'malley,

for your kind introduction and agrees to support that maryland gives this academy. general paxton, thank you all for your leadership of our extraordinary navy and marine corps teams. to vice admiral miller, thank you for the outstanding work that you do. to captain clark and the faculty, to the moms and dads who raise your sons and daughters to seek this life of service, to the local sponsor families that cared for them far from home, to members of the class of 1963, the veterans who guided these midshipmen along the way. today is a tribute to your andort and your patriotism

i know the class of 2013 towards me in slitting your service, as well. [applause] to the entire brigade of midshipmen, you embody the highest virtues of this institution. and i know that some of you have enjoyed yourselves another local institutions. [laughter] like armadillos. but today is a day of celebration and forgiveness. tradition,ping with tuit i declared all midshipmen are hereby absolves. [applause]

as always, animal mel watt getscide -- admiral miller to decide. some of these guys are laughing ill little nervously about that. tot of all, it is wonderful be able to celebrate this incredible class of 2013. this has special meaning for me. the united states naval academy was the very for service academy i have the privilege to address as president. day four years ago, most of you were still in high school, finishing your senior years or finishing up a prep school. you were a little younger and i was, too.

you had your entire naval academy and had a view. i was started getting chest bombs of the graduates of 2009. soon after you got quite welcome. wonderful hairay, cuts, stylish eyeglasses, and the high free beer -- volume and a close range. brought on daughter here for a visit. she got a somewhat different reception. it seems like the navy was doing some recruiting. door,w a name on the of 2023.ma, class

each of you can take enormous pride. you have met the mission of this academy. you have proven yourselves treating one another with respect and recognizing the strength of every member of your team. you're the most diverse class to graduate in naval academy history. 13 will serve on submarines -- 13 women will serve on submarines. [applause] you have proven yourself mentally. i know that some think this is a small engineering school. itshave not only met

progress standing by you have help this academy earned a new distinction, the number one public liberal arts school in america. [applause] annual prove yourselves -- the herndonally with the climb. now they put the grease back on, no one will match your times. [laughter] the theth to welcome team back to the white house because you beat air force and brought the trophy back to annapolis. [cheers and applause]

, you have four years met every test before you and today is today you have been counting down to for so long. you'll take your oath. wiped ond bars will be your shoulders. as your commander in chief, i congratulate each of you on becoming our newest officers. ensigns in the navy, second lieutenants in the marine corps. and soon you will join the fleet. you'll leave marines. hasssess u.s. chains, so the challenges facing our military. before you arrived here, our .ation was encased in two wars

many of our alliances were strained. we have strengthened our alliances and restored america's image in the world. we war in iraq is over and welcome to our troops home. thanks to our brief personal, we delivered justice to osama bin laden. [cheers and applause] in afghanistan, the transition is underway. our troops are coming home. by next year, our war in afghanistan will come to an end. today we salute all the americans who made the ultimate sacrifice in these wars, including 18 graduates of this academy.

we honor them all. now and forever. wayerday i spoke about the ford in the fights to keep our country secure. as we have decimated the al qaeda leadership, we still face threats from affiliate's and from individuals caught up in is ideology. even as we move beyond supplying large crown armies, we still need to conduct precise targeted strikes against terrorist before they kill our citizens. even as we state of vigilance, and stay true to our constitution and values, we need to stay ready for the full range seekingts from nations weapons of mass destruction to cyber criminals seeking to unleash weapons of mass destruction. times, weough fiscal

have to make hard choices at home including with our armed forces. enter you to know as you one i know will be extraordinary years of service, let me say as clearly as i can the united states of america will always maintain our military superiority and i will keep fighting to give you the equipment and support required to meet the missions we ask of you and to make sure that you're getting the pay and benefits and the support that you deserve. [applause] i will keep fighting for the capabilities and technologies you need to prevail so we can achieve 8300-ship fleet -- so we can achieve a 300-ship fleet.

[applause] fighting theep budget cuts known as the sequester which is threatening already. deficits are falling and it is time for congress to budget in a smarter way to protect middle ours priorities and keeps military strong because we have the best trained, best equipped military aid history and i'm determined to keep it that way and congress should be, too. [applause] we need you to project power across the oceans. from the pacific to the persian gulf, 100% on watch.

otherd you to part with militaries from africa to the americas. we need you to respond with compassion in times of disaster as when you help response to hurricane sandy. and in all your work, in your lifetime of service, we need you to uphold the high standards of integrity and character. theh the time i've left, superintendent thomas marines and folks in the navy did not mind a little water. , ih the time i have left want to discuss today. it is no secret that many americans have lost confidence in many of the institutions that help shape our democracy. i suggest to you today that in aitutions don't fail

vacuum. institutions are made up of people, individuals. we have seen how the actions of a few can undermine the integrity of those institutions. everyday man and woman of talent and skill work in the financial institutions that fund new businesses and put families in new homes and helps students go to college. we have seen how the misdeeds of and deepened the recession that cost millions of americans their jobs. officials likeed those on the stage devote themselves to improving the condition of this country. all too often we're seeing politics where compromises were

rejected as a dirty word and policies are driven by special interest rather than the national interest. that breeds cynicism that threatens our democracy. every day our civil servants do their jobs with professionalism, protecting our national security and delivering the services that some many americans expect. it only takes the misconduct of a few to further erode the people's trust in their government. that is unacceptable to you and to me. backdrop, what is said four years ago remains true today. our military remains the most trusted institution in america. shirked ers have a s their responsibilities, our

armed forces have met every mission given to them. our men and women come together as one american team. even in normal tour, we have seen how the misconduct of some can have an effective ripples through our lives. a single image from the battlefield of troops falling short of the standard candle viral and in danger our forces. likewise, those who commit sexual assaults are committing a crime but they threaten the trust and discipline that makes our military strong. that is why we often be determined to stop these crimes. they have no place in the greatest military on earth. i say all this because you're about to assume the burden of

leadership. with the mostted awesome of responsibilities, the lives of the men and women under your command. complete,rvice is many will want to help lead your communities, america's companies. you lead this country. if we want to restore the trust, the american people deserve to have, all of us have to do our part. we have to strive to remain were the of the public trust. as you go forward, we need you to carry forth the values you have learned at this institution. our nation needs them now more than ever. that innerur honor, compass that guides you when it is hard and uncertain, that

tells you the difference between that which is right and that which is wrong. perhaps it will be the moment when you think nobody is watching, but never forget that honor is what you do when nobody is looking. more likely it will be when you're in the spotlight, leading others, the man and woman but not seem to set an example. never ask them to do what you did not ask of yourself. live with integrity and speak with honesty and take responsibility and demand accountability. we need your honor. you to move tells towards danger. thee your moral courage, strength to do what is right.

day, you wantyour to look in the mirror and say with confidence and pride, "i filled my oath. i did my duty." we need your honor and courage and your commitment, the sense of purpose that says i will do even better in what i expect of myself and the white into iraq with others including those of different backgrounds. militaryaction at our is the most respected institutions of america and one of the most diverse. treat one another with respect. when we harness the talents of every man and woman from every race and religion and creed, no nation can never match us.

we need your resolve. the same spirit reflected in surrender toodeltto, " nothing." mitch shipmentto sat where you sat in a class 2 006 and they inspire us today. was the captain of the swim team. d and lost on an ie both of his eyes. he learned to feel his way and move again and was back in the swimming pool or to says, "i am free." competed in the

london parable olympics. he joined us standing tall of the white house and said, " overcoming adversity is a decision. or can let that be yat you you can make the decision to move forward." rowingmpert was on the team here at the academy. his legs both ofh if after an ied exploded. he passes a physical test and deploy it -- deployed to afghanistan again. he is back home and looking ahead to many years of service.

helecting on his mission said he was determined however long it was going to take. you a life promise of life and ease. professionosen the of arms. classes before you could not know there would find cells but wea solution or helm outh, will know where your service will carry you. as you say farewell to bancroft newestou're becoming the link in a story chain. as a look into your eyes today, i see the same professionalism, the st. fidelity to our values as those who served before you,

snyder andtz and whoert, americans surrendered to nothing. i am confident you will uphold the highest standards and your courage and commitment will see it through annual all see yourself worthy of the trust our nation is placing in you today. congratulations, class of 2013. god bless our navy and marine corps and god bless our armed thevices and god bless united states of america. [applause] [captioning performed by national captioning institute] [captions copyright national cable satellite corp. 2013]

>> > >dean -- the academic dean and provost. candidates, please rise. i present these candidates for the degree and recommend that this degree be conferred. your coursepleted of steady in the united states naval academy and a point recommended by the academic board, by virtue of the authority vested in me, i confer

upon each review the decree with all rights and privileges there pertaining. >> please be seated. the assistant commandant of the marine corps, general john paxton jr., will administer the oath of office to those being commission in the united states marine corps. our present 263 mitt romney to be commissioned in the united states marine corps. [applause] >> i can see you out there. let me hear you. very good.

mr. president, governor malloy, ladies and gentlemen, it is and honor to recognize the accomplishments of 263 of the finest americans we know and of your fellow classmates. my friend, my shipmates, our cno, this is part of a great team and has been for 237 years. i assure you that there will be for more than another 237 years. to captain clark and admiral you for your hard work, you're on wearing commitment to make them better lieutenants, better ensigns. o the mothers and fathers, congratulations and thank you for your unwavering support. to not give up the ship.

they will be just as much in the days ahead as the half for the last four years. to the classmates who will ensigns, we look for to see you around the world. you'll find out soon despite the " it is oneairforce, team, one fight. congratulations to the ensigns. [applause] and finally to those 263 soon to be second lieutenants of marines, on behalf of the general, sergeant michael otherks and 197,000

and isnes, i salute you welcome you to your ranks. we're ready to have you. au have earned the title, title always earned and never given. never taken away. about counts you about honor, courage, and commitment. five navydidate, he promised that in addition to demonstrating character, you needed to show those marines entrusted to your career four other c's. courage,them your

candor, compassion, and your commitment. as graduates of this great institution it your more than prepared to do that. and without, will they 263 andshipmen please rise -- ith that, will the 263 midshipmen please rise. if you will raise your right hand and repeat after me. i'm graduating from the united states naval academy and sworn as a second lieutenant in the marine corps on this 24th day of may, 2013. 2013. i do solemnly swear that i will

support and defend the constitution of the united states of america against all enemies foreign and domestic and bear true faith and allegiance to the same and i take this obligation freely without any mental reservation or purpose of evasion and that i will faithfully discharge the duties of the office upon which i am about to enter, so help me god. >> i do! marines.tulations, [applause] >> the chief of naval

operations, united states navy will administer the oah of all this to those being commissioned in the united states navy -- the office. to the commission into our united states navy. >> thank you very much. >> thank you, captain clark. now.re flying an that is not in osprey. thank you for being here. dean phillips., to be bringing in the future here today. i would like to congratulate the new second lieutenants.

for those about to become ask you towant to remember we talked about a few weeks ago. look, i like odd numbered classes. i want to give you an executive summary of a few things. as the president mentioned to you earlier, i want you to guard your integrity. integrity take your away from you. it is uniquely yours. do not lose it. your allegiance is to the institution, to the country, to the constitution. not your buddies. it is in your oath today. think about it when you take your oath. be kind to everybody. treat everyone with unity and with respect. and trust your shipmates,

because your life is going depend on them. learn your heritage. that is what we're about. know who you are about. and wear sunscreen because, trust me, it takes about 20 years to take effect. wear sunscreen. [laughter] and perhaps the most important , ing you can remember today want you to call or e-mail or write your mother's every week. [cheers and applause] that is what i am talking about peer because they are the wind underneath any wings you have, and they got you here. i am honored to commission you. graduates to be commissioned to the united states navy, please rise. [cheers and applause] [captioning performed by

national captioning institute] [captions copyright national cable satellite corp. 2013] that if youeminder missed the president's remarks, you can see them at our video library at c-span.org. we are taking you to a briefing on the state of the u.s. air force with the secretary of the air force michael donley and the chief of staff. i would be remiss if i did not mention that today will likely be secretary donley's final press briefing before he steps down. he took the job of secretary during a difficult time and has worked tirelessly during the last five years to lead the air force and address future challenges. he has been leading the world's greatest air force during two wars, countless military operations, acquired a new tanker, established -- [inaudible]

a champion of our airmen and families, met with spouses, engaged with support groups, and visited members around the globe. he is a steady and humble public servant. he is not one of slayer but credible dedication. ready and capable of delivering air and space power whenever the nation calls. i want to publicly thank you for your service. identify your name and affiliation if you have a question. we're scheduled for an hour. . we will see how the questions go. the secretary and chief will comment. >> good morning, thanks for being here. first, i would like to say a few words about the situation in oklahoma, just to convey that our thoughts and prayers have been with the people of moore,

oklahoma and the surrounding area which is quite near tinker air force base. they are coping with the aftermath of monday's at devastating tornado. in the wake of this tragedy, we are also very proud of those who have come to the aid of their neighbors, including the local first responders, of course, as well as airmen and sailors at tinker air force base and members of the oklahoma army and air national guard and many others. we thank them for their selfless service, for continuing service in this time of need in that community. general welsh and i have testified before congress on the air force budget proposal for fy 2013, certainly a dynamic environment. we reiterated our concerns about the impact of sequestration on the structure of the modernization of our air force. of sequestration

are already taking a toll on our air force. 12 combat coded squadrons have stopped flying in -- and important training has been scheduled. reductions will delay maintenance, increased costs, and create backlogs. the impending civilian furlough will hamper as further. it will impact morale and reduce productivity across the air force. we have been consuming air force readiness for several years and will continue to focus the resources that we do have available to meet combatant commander requirements but with a steep in late fy 2013 budget reductions brought on by sequestration, the readiness whole we have been trying to dig out of just got deeper. we are facing a readiness crisis from which it will take many months to recover. the modernization challenge facing our air force is pervasive.

if unaddressed, it will seriously undermine our ability to accomplish the missions the nation asks us to undertake. last year in programming the air force share of the first $487 billion in defense reductions in the budget control act, the cancellation or delay of modernization programs accounted for 65% of total air force reductions across. this year, each program was reduced by more than 7% in the recent sequestration. looking ahead, if there continues to be resistance to core structure changes, to base closures, too constraining growth and compensation, and given our current focus on trying to improve readiness, it is very likely that out year reductions in the budget control act would require further disproportionate cuts to our modernization programs. as advanced technologies proliferate around the globe, these cutbacks in modernization

would put at risk the air force capabilities this nation will need in the decades ahead. despite our near term and long term concerns, we're working to ensure that our most significant or kforce priorities remain on track, including the fifth generation f 35 joint strike fighter and the kc 46 tanker, and the long-range strike on -- bomber. i want to highlight an important milestone in the kc 46 tanker program this week. on wednesday we announced the preferred and reasonable alternatives for the summer training unit and the first to the main operating bases. this was a disciplined and diller britt -- and deliberate process that started with 54 bases and narrow that down to nine which yielded three good candidates and selections for our initial kc 46 basing.

final basing decisions are expected for these bases in the spring of 2014. before turning to the chief, i would like to take this opportunity to thank our airmen, the active-duty guard reserve and civilian percent now who are the living engine of our air force. i am so proud to serve with them. over the last decade, they have served our country in operations around the globe. they have controlled the skies to protect america's homeland and have responded to people in need following natural disasters. our total force has performed magnificently. now our nation asks for even more. the draconian budget choices we face during this extraordinary year have forced very painful decisions. but we will continue to work with our dod leadership and congress to fashion a practical way forward and to ensure that

we remain the world's best air force with whatever resources are provided. our airmen and our nation deserve nothing less. so we look forward to your questions. general welsh? >> thank you. thank you, folks, for being here today. he devastation and the human toll in oklahoma that the secretary just mentioned is simply heart-wrenching, and our thoughts and prayers go out to everyone. the homes of 140 am in stationed at tinker air force base were completely destroyed in the storm, and the homes of 196 others were at least partially damaged. it has had a big impact on our air force ma as well. two airmen lost family members, one granddaughter and one father. there are no words that can erase that suffering. we are also very sorry for their loss. the world is inspired by the fighting spirit of the people of moore and the state of oklahoma. people have shown a commitment to serve their fellow human beings, which is always

noteworthy. airmen from tinker air force base in from the oklahoma national guard, both army and international guard, including firefighters, medical personnel, and countless volunteers have been on the front lines of this recovery effort, both search and rescue efforts as well as providing aid to all those affected. the civil air patrol has flown since immediately after the storm to provide aerial photography and to assist in the efforts. to all these great airmen, thanks for yourself it's -- you're selfless service during this difficult time. they make us proud. the boss mentioned this, but our air force fully understands that america is working through a debt and deficit reduction problem. we are ready to a combo shower part of that solution. we just want to get to the bottom line or the new top line, the budget, if you will, and get on with repairing error -- our air force to remain the best in the world. here is the challenge baird operational requirements have outpaced our resources over the last 10 to 15 years.

readiness levels have inclined steadily since 2003. we have been trying continuous combat over two years now. we're supporting the current fight. we have been trading readiness for modernization for the past several years. the budget control act exposed the management risk we have been excepting to do that. now. estrogen has driven us over that cliff. sacrificing that readiness negates many of the strategic advantages of airpower that this nation enjoys, and that is always a bad idea. we have entered into a time from which we must first recover before we can think about what else might be possible down the road. we have combat fighter and bomber squadrons flying at reduced rates or not at all. stopped repairs this year and have deferred facility projects across 24 states and three countries. sadly, we have asked a critical

part of our air force family to take an involuntary 20% pay cut. our readiness continues to decline, even while calls for potential no-fly zones and responses to syrian violence are reaching a new crescendo. we're still the best air force in the world. our great airmen will rely on the experience and their unmatched dedication. .levate risk stagnant proficiency will only grow over time if we cannot restore some sense of budget normalcy. that is what we are hoping for. while we do all we can to minimize this, we remember that modernization is not optional if we expect to be a viable air force in the future. we have to figure out how to make that happen while maintaining a ready force along the way. that makes the success of current modernization initiatives like the kc 46 and the f 35 all the more important. force needs -- our

the kc 46. in 2028, when the final kc 46 is delivered, only about one third of our than 65-year-old fleet will have been recapitalized. so the work is not over in 2028. much more needs to be done to keep the global vigilance and power. the f 35 program has remained on track over the past ew spirit sequestration's impact on the money for the program will likely affect software development to some degree. sequestration cuts will cut up f 35 aid this year. we need this for technological gains. it provides multirole capabilities to what is needed in the future. the multiservice international nature of the program will also have interoperability gains in future combat and will save us money along the way, just like the f-16 program did the

benefits of the multi-for national program. currently, 22 f 35's are flying, forming the backbone of our training fleet. they have flown over 1200 sorties eared we have four f 35 a's that have been delivered for operational testing peer it we are excited this program is on the road to success. we are grateful that our international partners remade are.mmitted to this as we the future of the usa is an air space and cyberspace future. in the years ahead, those domains will be the most congested and competitive for both commercially and militarily. they are also where the united states air force happens to do our job. secretary donley and my job is to make sure americans are forces capable, credible, and responsive enough to meet national security objectives. we will work hard to ensure whatever resources the air force receives will be used responsibly to attain the absolute best balance of

foresight, modernization, and readiness. our nation demands the timely, effective, and precise delivery of the worlds greatest greatest airpower by america's air force. and fully we are blessed with 690,000 fantastic men and women who will provide just that. they amaze us everyday, and it is an honor to stand beside them. mr. secretary, as you enter your final month as the leader of the world's greatest air force, i would like to publicly say thank you to you for your steadfast guidance for five years of rocksolid leadership and for your patience and personal memory ship. i have learned more than i can last nineuring his months. i would also like to thank you for bringing your wonderful wife. g has been a joy to work with and has been taking care of airmen. she just rocks, and we're going to miss her, too. you are a great airmean.

ladies and gentlemen, we can answer any questions. >> thank you very much. [indiscernible] ,y question is, first of all what is going on between the india and the u.s. as far as the air force is concerned? any deals going on right now? finally, any comments on the recent chinese missile? their budget is going up in the u.s. budget is going down. most of the countries depend on the u.s. air power, u.s. military, u.s. air force. what do you think of future? followll offer that we the chinese military, especially their air and space development, very carefully, as well as other activities that have been discussed in the cyber arena as well. no specific comments for you there, but we do track this on a

regular basis. maybe ask the chief to talk about the relationship with important.h is very >> the relationship is one of the focal points for our pacific air force commander, general carlyle. has become closely attached. i hope to meet the indian air chief within the next to the month as he travels to the states on his next trip. we have exchanged letters and i think that meeting has been arranged now. i can talk to him about this relationship. recently we had to cancel a red flag exercise that the indian air force planned to participate in, and we were very sorry that we did not have the resources to conduct that exercise. we will try to get india back into one as soon as we can. it will be very viable not just for them but for us. we will learn from the indian air force. >> there was something between

the u.s. and india on f 35. is that still on? looking at the future of modernization of the indian air , is india on the list of participating more? >> i believe india has made different choices on its fighter force structure. but we will get you an answer for the record. >> has india shown interest in the u.s. willing to provide f 35? >> let me get you an answer on the record for that. >> general welsh, and you talk about sequestration have driven the air force over the readiness cliff. is it your understanding that members of congress understand the gravity of that? so far there really has not been much of a reaction to the standing down of 17 squadrons. >> i think the members of congress are pretty smart people and understand the impacts.

it is a very difficult problem. i think we all understand that, and everybody is looking for a solution. we are doing the best we can to live with the resources we have been given at this point in time. i think the members of congress are looking for a solution so that the best defense can be provided to the nation over time. and they will come up with something. >> when you say it has given us the the cliff, are using air force cannot execute all the missions the nation expects of it right now? >> no, what we are focused on are the missions we know about and that we are committed to appeared we are executing all of those. my concern is the unknown, because we are funding the known and taking risks in the area of the unknown. and theer this goes less training our people have compared to what we would normally require them to be fully combat ready. air force magazine --

congress does not seem to be in a hurry to fix the situation. if you go past september and sequestration continues, what are your next steps in terms of flying stand downs, force structure reductions, modernization cuts? >> i am sure the senator will have a comment on this, too. we're looking at every modernization and acquisition program we have. we are determining which ones we can afford to continue, which ones would be the first to go if we had a continuing problem. we're looking at the reality of next year's expectations for deployment support, where we can support them, where would be the biggest impact if we continue squadrons not flying. we are going through that discussion inside the services and with the joint chiefs to make sure everybody fully understands it. i think that picture will play out over the next couple of months and we will see where we

go. all of us are looking for budget solution to provide at least an ability to plan ahead. then we can mitigate most of the major concerns. you probably know, the whole department is involved in an ongoing discussion in strategic choices and management review to assess the potential impact of budget reductions at various levels, including full wouldtration which include, obviously, sequestration continuing from .013 into 2014 that is ongoing discussion of the departmental level. not just looking at 2014 but all the way for the next 10-year period. anyway you slice it, the impacts are significant and negative in just about every aspect of our military

capability. there will be force structure impacts, modernization readiness impacts across the military including the united states air force. we are working through what that would look like in more detail. specifically with respect to has, the deputy secretary us focused on what we call the financial plans, the execution atns for fiscal year 2014 levels potentially below the president's budget to reflect the potential for sequestration continuing into 2014. of what theome idea danger is, what do you think would be most at risk in the early months of the next fiscal year? will it be the modernization program as you have tried to shield those so far or where the readiness situation persist? >> the biggest concern is that

the readiness situation persists, and we have to figure out someway forward to either start digging out,, create a ramp for improvement, and perhaps not at the beginning of 2014 but later in the year or into 2015. the negative situation we are in would continue into 2014, no question about that. if sequestration hits 2014, that could be extended through that fiscal year potentially. we would like to figure out ways we are,ate that, but frankly, not there yet. also, i think, speaking for the air force leadership, we would like to be making strategic decisions that inform how you andoach resource planning force structure planning for the next decade.

we really do not have, except for the reverse situation, if you will, and budget control , changing forg the next decade, we do not have a solid set of top lines to work against. just moving from month-to-month or from quarter to quarter, that is not the way we would like to operate. that was the chiefs reference -- we need sound top line said that we can plan for in the department with congress. mr. secretary, are the f-22 costs that were deployed to korea still there or had they returned to japan? if they are still in korea, how long do you anticipate they remain there? >> we will have to double check that. i believe they are back in japan. i would have to get you an answer on that.

with everything on the table and theideration review, i wonder if you might address the possibility for new forces -- they have been protected somewhat from what i understand. , do you all have what i would call clan be -- off the shelves when it comes to modernizing the bomber so you do not have to eliminate those that do modernization? >> the short answer is that the department and the nation's way forward on this deal is dependent on some national-level decisions that the president plans, as i understand, to make next year. we have conveyed to congress

that the force structure issues will not be sorted through in terms of how we would implement the new start agreement until , ibably summer of 2014 think that was the guidance. i will check that date. with respect to how it impacts air force planning, i think it is a little bit more -- has a little bit more effect on the icbm side of the force structure, because on the bomber side, we know we're going ahead with a long-range strike. there will also be nuclear capables, so we have a way forward on the bomber side that is really independent in some respect from the nuclear decisions that are still pending. >> do you have ways in which

you could execute both of those modernization programs more cheaply? toyes, there are ways address different aspects of the nuclear enterprise and how to modernize it, how much, and what was scheduled. options, manyf programs involved. the folks are focused on is size of the nuclear enterprise and the balance between sea- based and land-based forces. all legs of the triad need modernization in some fashion. so there is still a sort of overhanging requirement to upgrade and modernize these systems, including the command and control that goes with it. are either of you at the point where you are growing

concerned that a competitor may misjudge our ability to respond should we need to? because of sequestration cuts in the budget uncertainty? >> i would offer that it is a very important as we undertake all of the very challenging fiscal issues confronting the nation and our military that we continue to engage with allies and partners around the world, to collaborate on international security matters in various regions and to continue to ensure effective partnerships, , toeter potential conflicts get ahead of international thatity problems and do in a team-based coalition

approach. and of our military political partners is in a different place with respect to their militaries. they offer different capabilities, different real estate. they are in a different place for modernization. but we work with each as an independent partner and we work sith them in regional context to address the issues in their region. i think we share a common goal of adding ahead of, deterring conflict where we can, addressing conflict, terrorist organizations that are operating in various regions, as the president outlined yesterday, and doing this with partners. very important to us. >> i would hope that before someone made that calculation that they would think very carefully about the risks associated with it to my because it is clearly, the longer we go through this situation where readiness is theaded, the greater

opportunity for someone to make that unwise decision. to the back. >> i am from south korea. the air force is planning to fighters.ext-ge which you have any problem for in next generation fighters allied operations or exercises? >> these are national decisions. we could see to support our south korean allies in their selection process and providing the data hophthey need to make

their decision. more than one american platform involved in that. our job is to provide the information that they need to make their decisions. they are strong partners and allies. i think would remain so in any situation going forward. >> amy/ >> i would like to get more discussion. we have to start out now. we have been told for a couple of years that this was something the department need to get its arms around and that it was a big problem. each has done their fixed excersions. it is

ouhour. cost for flying how should we take that? what some of the fixes -- are some of the fixes to get the cost down? off, ando start assured the chief would have some comments as well. willur last question, we make an ioc notification to congress next week. .e owe them a report by june 1 that is on track. we're working on that and a report will go to congress next week. first question was -- ons cost. it continues to be an issue in

the department. you saw the numbers that came out. there is no final answer on ons cost. we continue to work and discuss share costs and mitigate cost and to make smart choices between how we structure contracts and logistic support between blue suit and contractor support. be ank it continues to issue they would look at and we'll look at driving those costs down. .> we continue to be told this we, not necessarily the media but people who might want to buy this aircraft. -- about this discussion

howes not just rhetoric -- this is not just rhetoric? >> it will be reflected in program estimates going forward. it is and matter of continuing discussion. there are always questions internally to the program about how we do logistic support and how we cost operations cost going forward. there is no single member that locks in for the lifetime of the program. this isa three-year -- a 30-year program-plus. >> can i get your input on this, general, and your assessment for the f-16 cost? been going on for

last year it is trying to come to agreement on an apples- apples comparison on the numbers. a lot of people are involved in this discussion. we have normalized to a couple of numbers. about 32 for the f-35. that number may continue to adjust itself. that gives us an idea. that number is down from the original estimates. we're getting more practical data based on the number of .orties that we're flying we are not flying in a fully operational mode yet. we're just starting our training programs. that data has to mature.

we do not know until we support and sustain it for awhile. once we get more fidelity, i think we'll have a much better feel for how much the airplane is going to cost. >>hi. hi. report force delivered a my congress sent the cost -- air forceding is the belfort will fit each of the hawks. 110 of the cost1/ -- there was a deal for 1/10 of the cost. asi would not describe that a complete offer over with the full cost would be.

there were operational implications from the proposal u-using -- of bringing down 2's. colleges offer this continues to is ani was offered this issue on the hill and continues to be debated inside the department. we continue to get the best understanding of cost and operational comparisons between the platforms. sir? "the new york times." pivotof people said the an emperor

without clothes. -- this is a problem in asia and the persian gulf. what is your assessment of current stealth-jamming missiles to deal with the problem/ do we need new tactics are problems? chief dealet the with the tactical problems. we're sustaining the presence across the asia-pacific that we have had for decades now. we will get the numbers here to clarify. i will try to remember some of the top of my head. -46,000 airman in the

pacific. we will keep you the numbers, tom. we remain -- we continue to be engaged in the pacific. time in thes in and, about 60% is around the pacific theater anytime. we have done a routine feeder security packages up and down the pacific. we have patrolled bombers in that region on a regular basis. this work continues. the department has announced the first location overseas for the f35 a will be in the -- on potential

challenges in a number of theaters around the world. the capabilities we are developing for more contested in varmints apply in a lot of areas around the world. in the middle east and the gulf and potentially in asia and other areas as well. we are developing a more effective capabilities across the air force told used in the asia-pacific. the threat sensors are getting longer ranges and becoming more capable. we have to worry about that globally. the pacific makes us look at the problem in terms of range. how do you become more interconnected so you can plug into a network or system that is

already in place? that is what the capabilities mean to us as an air force. likeed to look things speed and stealth and how they affect killed chains. .hat is the business we're in speed compresses killed chains. execute.it harder to they are good things. none of it stands alone. a big question is what this stuff really mean in 2035 or 2020? developings towards capabilities that operate in that kind of environment. ora push to develop strengthen existing partnerships because there are new partners available in the

pacific. there are capabilities that we can help them develop and there are things we can learn from our partners. it pushes us towards a different kind of training. something we have to do to get back to full spectrum readiness. >> yes, sir. providing the necessary air power. what kind of presence of the u.s. will have after 2014? >> i will let the chief address that. i will provide a set up for this. an important mission is to help train the emerging afghanistan air force.

deliver the capabilities that they will need for the future. they are rebuilding and air force. we're interested in the development of new pilots and of a professional afghan air force. they are coming up to capability ramp. they have shown increasing capability with the mi-17 in particular. c-130's intoet the afghanistan. >> i was in afghanistan a couple of months ago and i went to the training bases. i think our role will be to continue to trendy f kenny air force base -- to continue to

train the afghan jet air force. solution. part of the i was strucky by the tall well of the air force -- i was level ofy the talent globa the air force. their expertise in executing the mission is not insignificant. most of the people being trained to not have a lot of expertise in managing an air force. the infrastructure management, those kinds of things that they didn't do because there were much under when the air force was running in the past. they are trying to learn that

now. they have no problem flying airplanes and helicopters. they are good at it. >> yes, sir. ,> i want to get a quick update of the nuclear operations. i aniston that is underway right now -- i understand that is underway right now. large? the exercise? ok. we had 19 17 and crewmembers who were not on full missile status. four of the 19 as of today work reinstated. the other, completed the training. the leadership is happy with how

bad is going so far and are happy with the efforts that the crews have put into this. they're getting encouragement from the rest of the force. the commander has been involved in this from the beginning. as has the commander of u.s. strategic command. day wee from the first heard about this. the inspector general -- one of the things the collaboration led they did his inspections on the missile units, including the one at minot. those inspections all went very well. minot was selected to do a fromeman 3 launch vandenberg earlier.

i think it was on the 22nd of may, and i went very well and that was good to saee. toyou continued resistance the benefit issues coming from congress. your counterpart in the army said he has a number of bleedings that are this service strike in terms of upkeep and maintenance. dc-8 pushed back coming back on the hill -- do you see a push back coming back on the health? >> we estimate 20% of our infrastructure is access to need. depending on the changes we have to make if there is a budget

control act that continues with sequestration for the next decade, we'll have more access capacity and probably a smaller air force and therefore excess capacity. we are working through those issues now. , there are three difficult and hot-button issues with congress right now. the national at level with congress and the department of defense, the way ford on the budget and what it means for the department of defense. we need a broader discussion with congress on the strategic choices we're going to have to make as a nation to make sure that we retain an effective and capable military. and maintain our role as the best air force in the world over

the next 10 years so that we end force2023 a strong air and able to do the nation's business as called upon to do so. i do not think we have a consensus with congress and on how to do that. and what the choices will be. it will be important for the department and the congress to have that conversation and a strategic level so that the services do not necessarily have to fight on foot on every single individual issue that will come up. if sequestration does continued for the next decade, we have to take $1 chilean out of the out of -- $1 trillion the defense. we will have tough decisions to make on the size of the force,

compensation, all these things. it is important that we have a strategic approach to this work. i think this is with the joint chiefs most want from the strategic levels discussions in the department and obviously with the congress as they mark individual bills. we need to gather a strategic approach for how long they approached the challenges that we are presenting to them. >> another quick follow-up. given that consensus you're looking to with congress, do you think there is enough he political -- to reach that consensus, to get past these tough issues? >> not yet. " we need is the alternative to

the budget control act. able to describe to congress the devastating impact potentially of having to proceed with another $500 billion reduction over the next decade. that work is ongoing in the department. the secretary will see that later in the weeks ahead, the months ahead. i'm sure congress has been asking for this information and i'm sure at some point that information will be conveyed and shared. but we need the congress to reach a budget agreement that sets those topline numbers for the next decade or so that helps frame what the military needs to do to plan. into the to buy strategy on how to implement it. if we have annual flights on these kinds of fundamental

issues every single year, that is a recipe for hollowing out the force. the military will build a balanced program. it tries to buy save for this resource level. it will be ready to do these things. there has to be this much the amount as part of that for modernizing the force in the decades ahead and the decade after that. it is that strategic approach that we have to develop in concert with the congress. if we fail to do that, we're running the risk of a hollow military. that is what is going to happen every year. we will stop this, starts something we didn't plan on.

we will be blocked from making important changes that we think need to be made. those things will produce a hollow military. the impacttalk about allowed on the grounded squads? -- the air force ande is about $1.8 billion the reprogramming. addressthese funds to operational shortfalls for the remainder of this year. we would try to buy back some of that areness of units flying at a basic military capability. we like to take up to be full combat mission readiness and

tried to buy back some of that. we would still have some ground units going forward. have we don't have the resources to buy back the furloughs. this was a challenging and difficult decision. we were able to get the furloughs down to a 11 days. the secretary would like to revisit that to see if we could mitigate that further, if opportunities present. the reprogramming is a big party for the department and the air force. we have asked for urgent consideration of this. groundedny will remain if it did go through? >> this is ongoing work. we will try to get you something

for the record. there is some number we will provide. we'd to continue to revisit on a month-to-month basis. there is a lot basis on how to finish fiscal year 2013 over the next four five months. .ntense focus on that we're dealing with severe shortfalls. the rich programs will not fix everything -- the fixrammingreprogrammings will t everything. by squadronnaging day today as money is made available and we find made-- anything we can do to find money, we're doing.

the number of squadrons will adjust itself as we go but not any meaningful way unless money appears. >> we have time for one more question. -- is there aid danger of that turning into a readiness crisis? crisis --to a moral morale crises? how does that worry you? it is furloughs this year. are you looking for reductions in force next year? our airmenonfidence understand that we're working through a very severe financial

constraints for fiscal year 2013. it would be of concern if the readiness challenge we have today continue into 2014 are get worse in the future. as the chief alan, the nation faces fiscal challenges. solutions. part of airmenmportant that our have confidence in his defense leadership and the national leadership that we're working through these issues. the congress and president -- the defense leadership will make the in right strategic decisions going forward.

in the absence of that conference, i think we would be worried about how these overall in packs might affect the morale of our experiment in the months ahead. thene economy improves, those become issues. we of specific areas where we anticipate we may have some the demography of the changes.pilot cohort we're concerned about the number of pilots we have over the next several years. that we need areas to work on a carefully. i am confident our airman understand we're going through an extraordinary time and making difficult decisions we do not

want to make but that we have the right focus on doing what we can on taking care of far as best we can. it could get more difficult. we may ask more of them. they just need to have confidence that we have a good plan and that the nation has a stable way for it in resource planning for defense. aboutot want to talk those issues at this point. in terms of the need for a plan and the need for an agreement on world, in the personnel you want as much time as possible to plan for those things. our personnel managers are asking those questions. they would like to establish r

ramp.amthe correct we cannot give that to them just yet. >> secretary's closing remarks. my lastis probably scheduled press briefing. i want to offer thanks for those of you who have maintained such an enduring professional interest in the future of our air force and in our airmen and in our national security establishment. what you do is extremely important to us and to our military community am a to the national security community. we are going through challenging times, so we will depend on you to tell the story of what is going on in our military. the difficult choices that we face and the rationale and the

intentions, the goals that we are trying to achieve in the difficult choices that are being made. finally, i will take another opportunity to thank the men and this of the air force for crate opportunity to serve now. thanks. secretary michael donley stepping down. the president said those who commit sexual start threaten the discipline that make our

military strong. you can see his speech at www.c- span.org. later this weekend the president , oklahoma, to moore and oklahoma city on sunday. stay tuned for our live coverage plans. this is more video from oklahoma, the town that bore the brunt of the tornado earlier this week. [captions copyright national cable satellite corp. 2013] [captioning performed by national captioning institute]

oklahoma officials said yesterday that tornado damaged some 12,600 homes and affected 33,000 people. -- followingking

the work of fema and other agencies. stay tuned for live coverage plans on c-span. >> the most fundamental difference between left and right is that both look at the economic ladder and those on take peoplek to and move them up the economic ladder. that is almost always driven by noble intentions, and yet it never works. way anyone has ever climbed the economic ladder is to pull himself or herself up one rung at a time. >> nearly all of you will experience failure, some of you crushing failure that you will recover from, and learn from, and, yes, be better for us,

because once you have a failure, there is the only good option to take something from it. very few of you will never recover from your failures, and statistically speaking, between two and five of you will spend some part of your life imprisonment. [laughter] >> every spring c-span visits elledge campuses across the country. tonight at 8:00, senators al franken and ted cruz, james clyburn, and saxby chambliss and tammy baldwin. ,aturday at 8:030, peter king paul ryan, nancy pelosi, elizabeth moran, and mark warner. i want you to take good care of the furniture in the house

and not let them get lost or broken. i want to find everything just as it is now when we come back for years from today. >> they returned to the white house winning the election. we continue our series on first ladies live monday night at 9:00 eastern, on c-span, c- span3, c-span radio, and www.c- span.org. wednesday jack lew defended his handling of the irs conservative groups saying he is prepared to hold officials cap accountable as other agencies learn more. he testified before the house financial services committee. this is just shy of three hours. the committee will come to order. the chair is authorized to declare a recess of the committee in a time.

the chair recognizes himself for five minutes for an opening statement. this morning we welcome treasury secretary jack lew for his first appearance before the financial services committee. today he is here to present according to statute the third annual report of the financial stability over nice -- oversight council. regulators of agencies that helped cause the financial crisis or were largely negative agent in preventing it the first place. cause of theoot crisis was not deregulation. it was dumb regulation. federal policy, strong arms and loanted institutions to money to people who cannot afford homes.

the subprime mortgages that led to the financial crisis, war than 70% were incentive and backed by the federal government through fannie mae, freddie mac, fha, and other programs. this speaks for itself. in many respects as we examine f the regulators who helped precipitate the last crisis are in charge of preventing the next. according to the gsa, after 3 they do not have much to show for it. last month we received testimony that fsoc has not developed a structure that has a product sets for identifying potential emerging threats. fsoc has been granted new powers within our economy, and this is disconcerting to many. as we know, on occasions regulators may not just be dumb. they may not just be negligent.

they may actually be criminal. just down the hall as we speak, the house oversight and government reform committee is holding a hearing where, according to her attorney of lerner is pleading the fifth for having led a division that tripled up on the first. the american people are appalled that the feared government agency has been permitted to attack their most sacred rights. the american people are appalled at the arrogance of the agency. they are appalled by this abuse of power. months,he last 2 1/2 this agency, the irs them a just fsoc, reports to you, mr. secretary. although the irs is accountable to you, the consumer financial protection bureau and the office of financial research, to not.ies part of fsoc, are

needed a bureau nor the financial research office interest to anyone. a zynga director who cannot be removed by the president at will heads right. spending by both agencies is unaccountable to congress or the administration. neither is bound by the constraints of the government's pale scale, and both agencies have subpoena power. something else the agencies have is, is they are engaged in gathering massive amounts of information about private american citizens. at the same time the irs, thanks to its enforcement powers that it gained with obamacare, it is building the largest personal information database the government has ever seen. the cfp be is monitoring how millions of americans interact with their leaders, and the

ofr is gathering enough information that will equal all the data held in all the american academic libraries come behind. this is big data for big brother. as the irs scandal reminds us, the freedom of every a mangle -- american is in danger when it abuses its power and misuses sensitive information. in light of the recent scandal, this is an appropriate time to remind everyone that our committee maintains on its website a confidential way for americans to report evidence of abuse of power by the federal agencies under our jurisdiction. we encourage all concerned and informed citizens to use it. secretary lou, we look forward to discuss these issues. i will now recognize the ranking member for purposes of twopening statement for

minutes. the gentlelady is recognized. >> thank you. i am pleased to welcome lew to his first appearance to deliver the annual report of the financial stability oversight council as her card by the dodd frank act. we are aware of your tremendous responsibility. we are pleased you woulere confirmed and we look forward to working with you to ensure that you are able to do the best job possible. as the council notes in its report, despite some positive developments in 2012, a housing market remains and the meek and the foreclosure crisis continues to waste heavily on our fragile economy. mortgage lenders about poor servicing standers have yielded ongoing shor challenges, leaving millions of homeowners in limbo as they contend with the inadequate government programs and mass settlements. realty trac reported that from january 2000 72 december 2011, there were more than 40 in -- 4

million foreclosures. while estimates of future foreclosures range widely, there was an estimate that foreclosures will strike another 3 million homes in the next three or four years. i hope that you can discuss with the committee housing, both inacy issues and factors this agenda. i'm concerned that that our financial system remains at risk from delays in implementation of dodd-frank and continued challenges, here in congress and in the courts, to weaken the roles before they have been implemented, while title vii was designed to increase transparency of the derivatives market. many of the most critical components remain stalled in rulemaking, challenged in the courts. this slow pace of title vii rulemaking combined with the lace in implementation of the folk were rolled -- volcker

rules, are only made troubling when considered in the context of the financial scandal from libor and the money laundering case to illegal foreclosures that have occurred since the passage of the wall street reform act. i'm concerned our system remit fragile, despite improvement since 2008. i look forward to your testimony and insight that you may be able to provide on all of fsocbove matters and what is doing to monitor systemic -- systemic risk. recognizes the gentlelady for two minutes. >> thank you. i would like to welcome our witness. i was shocked to learn that the irs'admission on may 10 that they had targeted conservative

groups. this is an insult to be reckoned people and to the freedoms that our art to heart of our democracy. no group should ever be discriminated against because of their political beliefs. the first amendment protects the rights of individual americans and groups to express their views without fear or concern of intimidation. lew serving as the secretary of the treasury, he was also on the white house staff until his confirmation in 2013. we need to know more about what steps are being taken to ensure this breach of trust never happens again. we need to know further examination is necessary to ensure this behavior is not occurring in other divisions of the irs, and we need to know why and how as chief of staff and secretary of the treasury he did not take immediate steps to -american actions to like. --orts indicate that series

senior irs officials have known this for two years. deserve the people truth. theaken ofoath to uphold constitution. it is clear that actions taken .o by the irs violated that trt this is a sad chapter for our democracy, and it is incumbent to take all appropriate measures to ensure this intimidation and discrimination does not happen again. i yield back. thank you. >> that chair recognizes the gentleman from new york for 2 1/2 minutes. i know in your testimony before the senate banking committee yesterday you emphasize making sure that dodd-

frank implementation is a quickly to provide new protections for tumors while ensuring we take a well rounded approach to look at the system as a whole. i look forward to your testimony and commend you on the findings regarding basil three implementation, international coordination, and protecting nation from cyber attacks. the encouraged by your -- sole source for mortgage should not be held to the same standards as larger banks. i was pleased to hear during your testimony that basel 3 would be a ceiling and not a floor. i'm interested to hear how the council will do the

coordination of regulation, domestically and internationally. not only by pulling up standards and reducing systemic risk into the united states, but also in the cross-border cooperation that is key to implementing the liquidation authority under title ii of dodd-frank. i want to briefly talk about the development last week that the treasury's inspector general's report. finding shows that some employees at irs exercised poor judgment and used inappropriate methods to determine if groups qualify for tax-exhibit status are troubling. alle unacceptable, because individuals and organizations should be treated fairly, the report stated the conduct was not politically motivated. i commend the president and you for taking swift action to restore public confidence in the irs, and i hope that while

irs is taking these measures it does not charge away from curtailing organizations attempting to abuse their tax ivan exempt status. i have an example in mind when i raise an issue, the irs 501(c)(3) exception requires states to be tax exempt other section 501(c)(3) of the internal revenue code, the organizations may not attempt to influence legislation, and it may not participate in the campaign activity or against any political candidates. i have a fund-raising letter from a 501(c)(3) organizations. .> the time has expired the chair recognizes the , mr.eman from alabama baucus, for one minute. >> thank you. congratulations on your appointment, secretary lew, and thank you for appearing before the committee today. you are obviously familiar dodd-frank as

director of omb. now you are about to confront all of it among the good, the bad, and the ugly, as i have said. one of the common elements in the democratic and republican reform proposals that preceded dodd-frank was the formation of some type of systemic risk council to help regulators share information and coordinate their actions. sels differed in their details, and the result was the financial oversight council. thatxpectation throughout rulemaking was that it would be transparent and have accountability, especially considering the high level nature of the regulators involved. it is particularly disturbing to me, considering the events of

the news over the past weeks, that gao has found that there are is a serious lack of transparency at fsoc. very little is put down in writing. you do not have a record, you do not know the details, and there is no accountability. my hope is that the chairman share morel information with us. >> the chair recognizes the gentlelady from alabama for one minute. >> i want to thank the ranking matter and the chairman for scheduling this hearing today. i would like to welcome and thank secretary lew for his testimony. i encouraged to find that since the council's last report, the u.s. financial system has continued to strengthen and progress.mental

i am encouraged to see many of the measures and regulations put into place by odd-frank has succeeded in providing transparency and continued liquidity in the marketplace. this report is sobering and that it identifies significant and unresolved risk in the financial marketplace. twoe reports point lingering structural vulnerabilities in the wholesale funding markets, continued over dependency on governmental agencies, and the emerging risk to our financial system posed by increasing cyber attacks. -- our work is far from done, and we will remain vigilant in providing the necessary guidance and oversights to realize the over all objective of god-frank. there may be reforms that we may consider to take --rections for its purse up purpose to be solved.

i want to apply at the secretary and administrators for their efforts in providing that transparency. thehe chairman recognizes -- thech > representative from michigan for one minute. >> five years after the greatest economic crisis since the great depression, home values continue to recover. one way we can improve financial stability of increase property values, and rebuild neighborhoods is by eliminating blight and abandonment in our communities. yesterday i hosted a meeting or members, including from this committee with assistant to discussssad the importance of demolition in housing markets, including flint and saginaw michigan. this issue is not just important to my district, but

the cities and towns across the country. targeted volitions strengthens me disabilities and affects their long-term sustainability. inding plan blight neighborhoods not only hurts homeowners nationwide, but also makes our communities less safe, as vacant rundown properties often are the side of crime. i look forward to your testimony today and working with treasury continue to identify ways to eliminate light and abandonment in our communities. >> time has expired. the chair now recognizes the gentlelady from ohio for what he hopes will be one minute. , andank you, mr. chairman thank you mr. secretary for your testimony and to your focus -- service. this report discusses areas of concern that continue to pose ongoing threats to the systemic

financial markets stability. although some are uncontrollable, there are some that i believe can be resolved through the actions of this congress. specifically, the reports mentions the u.s. fiscal policy in the absence of bipartisan ongoing risk,n and as we have over the last two years unfortunately, most of what has been showcased has been our bickering and disregarding the deficit, government spending, and raising the debt ceiling. today hopefully with your guidance and testimony we can look at this report seriously and work together to find a common cause. thank you very much for being here to help us do that. >> thank you very much for coming in under time. [laughter] welcome the secretary of the department of the treasury, the honorable jack lew who was confirmed by the senate on february 27 of this year to serve as our nation us 76 secretary of the surgery.

his prior government service ombudes in years heading up for both the obama and clinton administrations as well as the state department as a deputy secretary, in addition to secretary's public service vice presidentutive of new york university. no stranger to the halls of congress, our secretary has served for eight years as an adviser to former speaker tip o'neill. the secretary holds degrees from harvard, georgetown university law center. you will be recognized to give an oral presentation of your testimony. without objection, your written statement will be made a part of the record after your oral remarks. i wish to inform all members that we have agreed to release the secretary at 12:45 p.m. today. mr. secretary, welcome. please proceed.

but thank you, mr. chairman. i would like to at the outset say that i think all of us are in the same place, our thoughts and prayers aren't those affected by the tornadoes in the oklahoma city area, a reminder of the ranchers >> -- ravages that can happen. ,hairman, ranking member members, thank you for the opportunity to testify regarding the financial stability oversight council annual report. before i address the report, i want to say a few words about the inspector general for tax administration costs report last week. it showed that some employees used outrageous methods to see if certain groups applied for tax-exempt status. while the conduct was not

politically motivated, it was inexcusable. administering the tax code without bias is an obligation that must be carried out at the highest of standards. that is why i moved rookie to take steps to restore confidence in the irs. within 24 hours of the report coming out, i asked for and received the resignation of the acting commissioner. within 24 hours later, president appointed a new acting commissioner. he is a person of high integrity and he has earned the confidence of democrats and republicans for his professionalism. i have directed the incoming commissioner to carryout a thorough review of this conduct and take action on three specific things. first, making sure that those who acted inappropriately are held accountable. second, examining and correcting any failures in the system that allow this behavior to happen. third, taking a forward-looking view in determining whether the irs

have problems that needs to be addressed. they commissioner will hit the ground running. he will take actions as needed and will report to me on his progress within 30 days. we will make sure that nothing like this ever happens again. i would like to turn now to the council's annual report. this report represents extensive collaboration among council members, agencies, and staff. to provideance congress and the public and assessment of significant market and regulatory departments, potential threats to financial stability, and recommendations to strengthen the financial system. i want to point out that the strength of our financial system depends greatly on the strength of our economy. there is no doubt that we have made significant progress recovering from the worst economic crisis since the great depression. the economy has grown from 15 consecutive quarters. the private sector has been creating jobs for 38 straight months. the housing market is healing.

at the visits are falling the fastest rate in decades. there is more work to be done. we need to keep our foot on the accelerator, economic job creation needs to be more rapid. the president has put forward a plan that strengthens the recovery by making investments in manufacturing, innovation, infrastructure, and worker training, while taking a balanced approach to restoring our long-term fiscal health. the strategy will not only help grow our economy but will record place the sequester was sensible measures. since the council house last report, the system has grown stronger in a number of ways. capital and liquidity levels have increased. regulators have taken additional steps towards improving transparency and risk mitigation and derivatives. the limitation of the.-frank and coordination priorities have brought significant progress through establishing a more

resilient system, domestically and globally. the topic of.-frank implementation, agencies continue to put reforms into place. we are closer to the and then the beginning. we have seen a good deal of a conference recently, including the a valuation of a set of companies for potential designation. progress on a new framework for the consolidation -- consolidated supervision of financial institutions, progress on a framework on the authority, progress on provisions related to living wills, progress on reducing whiskey and conspiracy in the derivatives market, and enhancing protections for borrowers and participants in the mortgage markets. despite the developments, there are still risks to the financial stability. the report identifies those risks and makes specific recommendations to mitigate them. it is our judgment that market

participants and regulators need to take steps to reduce former abilities and funding markets. businesses need to address operational risks posed by technology failures, disasters, and cyber attacks. the reforms are needed to onress the reliance is interest rates to like libor. i want thank the other members of the financial stability oversight council and all the staff involved with the 2013 report for their hard work and the location. this is an ongoing effort and we look forward to continuing to work with you, this committee, and covers to make sure we have a more resilient and stable financial system. with that, i conclude by opening marks and look forward to answering your questions. thank you. i remind thatand the direction of the speaker that later today or are both series there will be a moment of silence for all the victims of the oklahoma tornadoes, and

an opportunity to reflect on that great tragedy. the chair will now recognize himself for five minutes for questions. mr. secretary, i'm personally not going to spend a whole lot of time with you on discussing who knew what, when, with respect to the irs scandal but i would like to say this -- i don't know the level of responsibility that you and the president bear for this scandal, but i know it's not zero. i think the american people would like to hear a little bit more from you and the president that the buck stops here, as opposed to "hear no evil, see no evil, and i know nothing, nothing nothing." and that may just be a little bit of unsolicited advice. so i'm not going to look retrospectively, i'm going to look prospectively. i know you've seen the forms that the irs has sent american citizens. the irs now reports to you, mr. secretary, and has for the last 2 1/2 months.

so i look through these forms and i find out where the irs is asking american citizens for all of their activity on facebook and twitter, including hard copies of all advertising on social media. under your watch, will it be appropriate for irs agents to ask for this information? >> mr. chairman, i take responsibility for the management of the treasury department and for the management oversight of the irs. there is a difference between general management oversight and the very important line that exists between policy roles and and the administration of the tax system. for decades we've had appropriate lines -- >> mr. secretary, the administration just fired someone. that would seem to indicate there is some control over the policies of the irs. so to the extent that you have the ability, and the administration has the ability,

to hire and fire the head of the irs, will it be appropriate for the irs going forward to ask for this information from american citizens? >> mr. chairman, if i could just finish the thought that i was on. there is a very important distinction between hiring a commissioner of the irs and there is one other political appointee at the irs -- that is the general counsel -- >> ok, are you positing an inability to impact the policies >> and there is involvement on policy matters, but on administration of the tax -- >> so are you unable to impact the policy? >> on policy, i will continue as secretaries of treasury have, and should, to express views on tax policy -- >> ok, in your view is it appropriate -- >> mr. secretary, in your opinion, is it appropriate to ask american citizens about their prayer life, how often they attend prayer meetings, and what percentage of time organizations spend in prayer groups?

>> mr. chairman, i'm not familiar with the specific document that you are looking at. as a general matter, there is the highest regard for the personal privacy -- >> it's been released by the irs so i hope you do look at it. >> of individuals is a very high priority. protecting individuals from the kind of questions that invade their privacy. this is a very high priority. >> you have some ability to impact who heads the irs, so in your personal opinion, is it appropriate for the irs to be asking about the prayer life of american citizens? >> mr. chairman, it's a hypothetical question, since i'm not familiar with -- >> it's not hypothetical, mr. secretary, to the people who received this application on penalty of perjury if they didn't disclose their prayer lives to the irs. >> mr. chairman, i cannot respond to a form that i haven't had a chance to see. i'm happy to get back to you. >> ok, if you would, mr. secretary. and after being on the job for two and a half months, and it's one of the biggest scandals that has rocked washington in years,

i would hope in the matter of priorities of the secretary of treasury that you would undertake to review this material going forward. >> mr. chairman, i have made clear that it is an extraordinarily high priority, my highest priority to restore confidence in the irs. that's why we have a new acting commission who is taking over today. his first job is to find out who is accountable and make sure people are held accountable for any actions that were wrongful. secondly -- >> mr. secretary, regrettably my time is running out. i assume you will have ample opportunity to to speak more about the irs. i'm going to change subjects which may be more pleasant for you. in the fsoc report, on page 13, it states "the counsel recommends that the treasury, hud and the fhfa continue to work with congress and other stakeholders to develop housing reform system." mr. secretary, i have been either the chairman or the vice

chairman of this committee for the last two and a half years and i am unaware of any activities of either hud or treasury to work with congress. i'm aware of the white paper that was released that has now gathered dust for over two years. so i'm not sure who treasury and hud have been working with but it hasn't been this committee. and i see my time has expired. i would like to have the opportunity to speak to you about this later to find out if the administration intends on doing anything with their white paper besides allowing it to gather dust on housing reform. the chair now recognizes the ranking member for five minutes. >> thank you. i want to talk to you about living wills, but it is important before i deal with public aussie that we are concerned about that we make clear some things on the record. thatunderstand it,

knowledge about the irs problem was only learned recently i you. is that correct? >> that is correct. >> the president was not told about the problem by his chief of staff or anyone. is that correct? >> that is correct, until the report was completed. >> i understand there is an investigation going on. there are multiple reviews here on the hill and by the department of justice. and within irs. >> and so the administration has not in any way said they are not willing to try and find out what was happening in the correct way. is that correct? >> on the contrary we are determined to make sure the activities is closed by the

inspector jerry all are unacceptable. we have appointed an acting commissioner who will make sure that people are accountable, to make sure how there was a breakdown of break down in communication and look at the irs to make sure that nothing like this can happen again. we're determined to restoring -- confidence, which is our obligation and we are committed to doing that. ,ut again, and my colleague the chairman of this committee, you and thes that president must have known something. he said a sickly that you had -- you must've had some information. dude you please take as much time as you want that i have left, because you were interrupted and you did not have .ime to respond to that if you feel the need to say something about it, lee's use my time to do that. rexx i was informed of the fact

that there was an audit underway on march 15 when i had a meeting with the inspector general. it was brought to my attention at a high level, that it was an investigation regarding 501(c) four approvals, and was told finding. a troubling i did not do anything to get in the way of an independent ig review. that is what agency heads should do. they should give the ig the opportunity to complete their --k, access to people work people plus records as they need. there was discussion between attorneys and other staff at agencies and the white house or situational awareness. i want to make clear, the reason it was not brought to my attention before the report came public, what the facts were, and the reason it was not brought to the president's attention before the inspector general completed his report, there was nothing that we should have done to interfere

with an inspector general report. just like the rrs should not one any political influence the tax system, agency heads and senior political officials should not exercise any action to interfere with an inspector general review. the first we knew of the fax was when they become public on tuesday and on friday for last in a general way, and then just last tuesday when the actual ig report was delivered. within 24 hours of getting the ig report, we took action. we asked for, cut the resignation of the acting commissioner, and 24 hours after that, the president appointed a new commissioner who will undertake the task that i described with three very important parts, accountability, making sure what happens ever happens again. >> now for some public policy. what can we do to help get these living wills in so we can make sure that we have a process that ?orks in the orderly wind down

progress. made great we now have living wills on file for the very largest institutions. i think the challenge is to make sure we know those can work. i think the operational issues are not insignificant. we are not going to have a test of these anytime soon. we need to do the kinds of exercises to make sure you have confidence in the capital available and the structures that are available so that if there is a crisis, they work. we are committed to doing that and the agencies are as well. i thank you very much, and i look forward to working with you. i yield back the balance of my time. rexx the chair recognizes the gentlelady from west virginia, for five minutes. >> you heard my opening statements, so i will ask for a

question regarding the irs cannot. i think what would be in the best interests of the taxpaying citizens of this country is to know that this could never happen again. be able orgoing to the administration going to be able to convince the american public that being targeted for political beliefs or religious beliefs or lifestyles or for this-- in order to lay the american mind at ease, which is going to be very difficult, you got to come forth with everything. and so how do you plan -- are you going to issue a report, fire more people could, what kind of endgame will be here to lay this to rest? >> there is nothing more important than restoring the confidence of the mecca people in the irs. it is central to the capacity of the irs to function effectively, which is central to the capacity

of our system of government function effectively. i taking the action we took last week in bringing in new vision immediately we now have a person in place who will very quickly get on with first, making sure we hold people accountable. we have to get the facts and make sure any actions taken are based on fact. secondly, the kind of scrutiny that we need to do now has to get at how did this happen, how could adjudications be so bad, how could the management be so loose, and i cannot tell you we have completed that. haveody began today who i utmost confidence in to get that underweight break quickly. the third piece is really all ultimately answer. we have to look beyond the fact here and ask more broadly is there something systemic about the management structure of the internal revenue service that needs to be fixed, so we can say with confidence that not just with regard to this area,

but more broadly, we have taken the kind of look to be able to say that we can be confident that this will not happen again. there are all kinds of information people have to provide insight confidential basis. we have to protect that eventuality, and i think most of us would rather not have to file a lot of forms, when you want to get approved as a not for profit -- but how is that going to be done when there is not the strictest of confidence. the erosion of confidence is tremendous. bad news does not get better with time. you have got to get it out there and out in the strongest and most honest way with the american people. i will move to the substance of your appearance here today. i have two questions. terry geithner are, your predecessor, talking about implementation of god- frank, he had conversations and

we talked about how we had all this regulation, we are going to get rid of outmoded regulation, and he could not come up with any regulation that he actually was draining from the over piling of regulation in the financial sector. is this an area you are interested in question mark we hear daily it is not one regulation, not it is a continuous weight of regulation that is dragging down our bags. >> in general, that is an area of great concern. i have not had the time to go backwards. i am committed to making the dodd-mplementation of frank happen. we did a look back to look at agencies, what the you have on books that is out of date and could be eliminated?

we eliminated a bunch of regulations. as an exercise, that we should not just move forward, we have to look backwards and forwards but, and i hope we can get dodd- frank in place. getting it implemented is a fair amount of work, and quickly is a very important thing. >> the next time you come forward and i hope you can me specifics because i will ask you about the regulations you have been able to >-- to there committed general principle. >> thank you. we have had with ranking member talk about this a bit of the inability of community and --ll eggs to deal with the small banks to deal with the basel iii?s ofbase is important that

all the revelatory agencies take into consideration whether or not there are special issues regarding small and medium- sized institutions. the law in many regards has reflected that. and the review of regulations, the agencies are looking at that as well. the discussion that i have heard in the last few weeks suggesting that maybe , iel ii should not be used worry about that as a principal, because it is a floor for the world and we want the world to to the top, and if we do not keep that, we face financial -- >> the time of the gentlelady has expired. the chairman recognizes the gentlelady from new york. >> thank you. i would like to discuss an issue that is on the minds of

the americans, the state of the economy. we continue to see improvement in the housing sector with ,ncreased construction activity more sales, and higher prices. as you know the economic recovery relies heavily on a healthy housing market, and in your opinion, could complete privatization of the secondary policymakers have proposed, create conditions where so much credit is available in good times, and too little is when there are , exacerbating ?ownturns questio >> our challenge as we wind down fannie mae and freddie mark is multiple. we need to make sure that taxpayers recover the investment they made during the crisis in those institutions. we are working to do that. assets and itved

will take a while to wind down those institutions. how do we have a argot that strikes the right balance, that provides the opportunity for homeownership and the economic activity that goes with that, since so much of the construction employment and other employment is related to housing construction. with the prudential considerations, institutions and ,ndividuals not be overextended creating the seeds of some future crisis? we are working on that. it is important that we have a reduction in the presence of federal direct and guaranteed loans, that we have an active private capital market for mortgages. that is our goal as we move forward. >> thank you. mr. secretary, some last year lost libor manipulation was the detriment of community and regional banks. community banks are sitting in

sources of small lending, and we continue to hear the obstacles that small businesses are facing in accessing capital. what have federal regulators done since the libor scandal probe to prevent manipulation of rates that impact the credit for small businesses? >> they are separate issues. the manipulation of libor was a terrible abuse of trust. -- the worldo financial community and participants in it had accepted libor as something that was a market-determined reference rate, and then the manipulation , int was very unsettling addition to being just very wrong and bad behavior. going forward, one of the thing the report makes clear is that we need to work on international basis with other

financial regulators, with market participants, to develop on alternative to libor because there needs to be a broadly accepted market reference rate to take the place of libor if there is a need to replace it. that is what area where there is substantial progress being made. in terms of the transmission mechanisms for capital to be made available to small business am a that is a complicated practice. wasink the trade-off that i describing in the area of housing lending, that same trade-off exists in commercial lending. for small andd medium-sized enterprise to access credit. that means taking some him level of risk. banking involves some risk great need to make sure that institutions do not take risk that become birds afterward. striking that allen's correctly -- striking that balance is important. also have to provide a

level playing field for those regional and community banks that are really the ones that are lending to small business and not put them at a disadvantage. >> i have met with small and medium-size bank representatives. i have shared the concerns they have raised with me with regulators. i have a clear understanding that the regulators are sensitive to this concern. as they work to the implementation of these roles, they are -- rules, they are working to try to wrest the issues being raised. >> thank you, mr. chairman. chairman recognizes the gentleman from new jersey for five minutes. >> i want to get to the issues on financial services, but let me touch on the issue which .-the issue on the irs

your initial statement was this as soon as you found about the situation you are outraged, you took immediate action, you made it a top priority, this is going to be your first focus, and the very first question from the chairman, asking you about documents from your own agency that are from your agency, in the public domain, that have been in the press for weeks now, from your agency, your response was you know nothing about them, you do not know the details, and you would have to get back to us. is this really your first priority, if you're going to solve the situation, i would thek you would know about basic document that everyone else in this room knows about. that is a rhetorical question. we can judge for yourselves whether you're going to make this a priority. my time is limited. in another room, there is another woman who is a woman from the irs, formerly from the irs, who has stated in her

statement that she has done nothing wrong, she has she did not violate any rules or regulations. you agree with her assessment ?hat she did nothing wrong >> congressman, i think it is important we get to the bottom of the facts. >it is not a yes or no. you have asked me a question which we have a new acting commissioner, who has taken office today, who is beginning today to get to the very bottom of who should be held accountable. i am meeting with them this afternoon. i am not waiting 30 days. i do not wait for five minutes after i read the report to get on top of it. i got on top of it right away. >> what did you do? toi put in wheels in motion put a new commissioner as soon

as possible. >> you did fire someone, so you are maple -- able -- >> if you are talking about a report where behavior was total ly unacceptable, you begin at the top. we are going to get to the bottom of it. anyone accountable will be held accountable. >> so you do not know whether she did anything wrong? >> i am going to wait until i have all the facts. >> you were able to make a decision to fire someone -- >> i knew -- >> what public position does she have? >> there was a standard that is unique. even if -- >> do you know what position she held? >> yes, i do.

she wast is or was? >> the deputy commissioner in this area. >> when she be responsible for a?is area > answer questionst right now. we make clear that everyone accountable will be held accountable. >> let's look at the people who may be you are responsible for. going to the testimony last week, the ig alerted the officials. have you confirmed the general counsel and deputy secretary were briefed by the inspector general in 2012? >> we have made clear that the deputy secretary was aware the fact that an audit was under way. he did not become familiar with the details until i did last

tuesday. >> do you know whether or not deputy secretary neal wolin, if the advice to anyone about the investigation at that time? >> over the last few days we have made clear that there were appropriate conversations among staff where the fact of an investigation was clear and subsequently in the last few weeks as reports, the fact in them or the reports themselves were available, but there was conversation. there was no action taken by anyone in the treasury department in any way interfere with the inspector general's report. that was the number one goal. >> did the contact the irs commissioner? >> that there were conversations as appropriate for people who needed to understand there was an investigation?

>> the time of the gentleman has expired. the gentleman from north carolina for five minutes. >> thank you, mr. chairman. and i thank mr. lew for being here. let me turn our attention to fsoc, because i thought that's what this hearing was about. i assume not the internal revenue service.

some financial institutions as particularly significant to the >> one of the things you all have been doing, according to your testimony is designating some financial institutions as particularly significant to the economy, which results in them being given enhanced scrutiny and some higher standards. so you have designated some financial institutions. at the bottom of page 6 of your prepared testimony you say you have designated 8 financial market utilities. what kinds of utilities are >> the test is whether

those would be a threat to financial stability. the question that would happen in a non--bank entity that could become a systemic problem, that is the way to review is structured. it is the international between the company and the broader state of financial stability. >> which gets me to what i was d become a kind of systemic problem, and that's the way to review the structure piccata. is the interconnection between the company and the broader state of financial stability. >> which gets me to what i was trying to get to. a number of people has raised -- have raised concerns that by designating these entities we somehow give the impression that they are so important that the government will not allow them to fail. walk us through how we would make sure that does not end up happening, both statutory under dodd-frank and the process that

the council is following? >> the determination is not at all to create the impression that a firm might be too big to fail. it is quite the opposite. it is to ask the question of does a firm need to be regulated in a way so it will not fail and cause the kind of distress to the broader financial stability. the more likely consequence being designated would not be to get bigger. so i don't think that any designated firm gets any protection by being designated. with a gatt is a higher level of scrutiny and regulatory oversight by the appropriate regulatory body. fsoc does not actually take on the regulatory function. if the vote is to designate a non-bank, there will be regulatory oversight by the appropriate regulatory bodies.

in many cases it will be the federal reserve board who gets authority over ban and -- banks and such institutions. >> would each one of those institutions have to do a living will scenario, if fsoc designated them? >> i think there's a size level that would require that, case by case determination, but i would have to get back to you on that. >> on page 2 of your testimony, you indicate that reforms are needed in the libor system to address the reliance on voluntary self-regulated and self-reported reference interest rates. can you tell us what kind of reforms might be in the contemplation on that front?

>> briefly, if you could, mr. secretary. >> thank you, mr. chairman. these reference rates are woven into millions of financial transactions on a contractual basis. we need to have reference rates that are reliable and not subject to manipulation. if libor is not in that status, they have an alternative to go to. working with the international financial regulatory agencies and working with market participants developing an alternative is critical, because even if you don't ultimately need to move to a different reference rate, there needs to be in a reference rate available. >> the time of the gentleman has expired. recognizederitus is for one minute to speak out of order. >> thank you. today the staff of the house of

representatives loses one of its most valuable staff members. i think we all know and love warren, and served as a deputy staff director, a very intelligent, diligent, inform the individual. the tribute to him and all valuable work on our staff both on committees and our personal staff, i would like warren to stand up and take about -- a bow. [applause] thank you. i appreciate that, mr. chairman. >> the chair recognizes the chairman emeritus for his five minutes. >> thank you. secretary lew, the gao and many

press reports and articles have criticized the secrecy of the fsoc. last week there was an article in the paper rare one gentleman heading up a non-profit organization with liberal leanings said fsoc's proceedings made the politburo seem open by comparison. asy treat their information it were state secrets. the council does not transcribed its meetings, correct? >> minutes are kept. >> would you commit to transcribing the meetings that the gao has recommended and releasing those transcripts with appropriate reactions after a certain period of time as the fed does? clerk mr. chairman, i think that

fsoc deals with matters that range from very company- specific proprietary information to a broad policy. parkside understand appropriate reductions. the fed redact confidential matters. policysoc has moved in areas, it has tried to be very open in terms of public notice and taking comment. for example, in the area of the money market rule recommendation to the fcc, they've been open for comment. you understand, but would commit at least the following the same thing the fed does about releasing the transcripts? >> i would have to go back and look at that. >> thank you. take a look at that is all i am asking. the fsoc does not keep transcripts. i don't even think they keep minutes of their staff meetings or subcommittee meetings.

the committee meetings is where most of the work is done. would you commit to transcribing those minutes -- i mean transcribing those proceedings and keeping minutes of those meetings? >> congress man, i am not aware of practices where meetings like that are normally transcribed. the challenge of working in complicated areas involve many, many meetings. i'm happy to follow up with you on concerns you have. >> as you know, you are chairman, this is one of the most important committees or councils in response to financial crisis. athink it's important from historic basis. >> congressional staff need to draft important legislation. there are minutes of those conversations. it's a complicated question. >> take a look at what the gao recommended. >> i will take a look. >> and secretary language that

encourages transparency, and see if you cannot give us some transparency -- some assurances. >> you have been questioned about this irs thing. you now know that there was a beyond a lookout list that included tea party, patriot groups, and 912, which is glenn beck/s group. and that it was maintained since early 2010. in 2012 there was quite a bit of press reports about this. it's my understanding that in may, several people in treasury were briefed but then the chief -- as chief of staff of the white house you were briefed in june and alerted by mr. george. >> my first conversation on this with russell george was march 15, 2013 after i became treasury secretary. heare you aware last friday testified that he briefed you?

>> testified that he briefed in march of 2013. -- briefed me. >> he says tyler did -- the talk about may and june of 2012, douglased commissioner shulman on may 30 and subsequently alerted the general counsel join forces and subsequently alerted the deputy secretary neal wolin about this matter. and then upon the assumption and into the position i mentioned it to secretary lew." >> that was march 2013. i was confirmed on february 27. it is important to note that the fact the ongoing audit was not a secret. it was publicly posted on the inspector general's website. >> it was the subject of numerous newspaper articles. >> there was just the fact of the audit being undertaken. >> there was specific information that even democratic legislators have leaned on the

administration to conduct investigations. >> the time of the gentleman has expired. the chair recognizes the gentlemen from new york. >> thank you, mr. chairman. i want to finish off where i attended on my opening statement, because we've got to make sure that we tighten up. i want to make sure that we don't lose the fact that some people abuse their tactics and status. i stated i had a specific example in mind and i talked about not only the 501 (c)(3) exemption required to be tax- exempt under section 501(c)(3) of the internal revenue code, an organization not attempt to influence legislation and may not participate in any campaign activity or against any political candidate. 501(c)(3) is supposed to be more confined. i of a fund-raising letter from a 501(c)(3) organization. it's as a " i'm writing to ask

for your help. we want to finish him off. let me explain why this is important. barack obama is president. the democrats controlled congress. your gift would allow us to show the interest nancy pelosi -- that the empress nancy pelosi has no clothing. soon barack obama will have to take a stand. your gift would help us expose the bureaucracy of barack obama. so is this ok for 501(c)(3) organization to send a fund- raising letter like this? i hope that in the face of the very real need to prevent any future overreached in targeting by the irs that we don't lose sight of the important role of the irs in answering questions like these that are also at the heart of public trust. with that i will go to the issue at hand. i just wanted to make sure to let people know that the irs has oversight over this and it's important for all the people to make sure that once you get the 5013 c or 501(c)(4) designation, they should still

oversee those organizations to make sure they don't overstep their bounds. going to fsoc and the issue and hand, as i stated in my opening, i am encouraged to hear that while you have stated that there's a need to and implement dodd-frank quickly, you also mentioned the need to look at the system as a whole. that by crafting rules that are more tailored to institutions rather than a one-size-fits-all regime. youram asking what are thoughts on bifurcating bisal 3 in order to make community banks more secure by establishing a single cap ratio applicable to community banks in order to allow them to operate more effectively for our economy? >> congressman, i think that the rules that are being worked on now by the federal reserve board will in all likelihood, based on public statement being

made by members of the fed, reflect the differences in risk in some ways. so there are capital surcharges for very large institutions already. i don't know where they are going to set the rates, how they are going to address it. but i think there are important differences between small and large institutions. the thing we have to keep in mind is small and medium-sized banks are not without some element of systemic risk. and we are all focused on the financial crisis of 2008, and the 1980's the financial crisis was a savings and loan financial crisis. so i think we have to look at risk of not just as a question of size but as a characteristic of the activities and exposure. we are very much aware of the fact that community banks play an important role in all of our states, in all of our

communities. i think that the law reflects that. and i think the regulators are attempting -- attentive to it as they are writing their rules. it is difficult for we to address how they will not exactly be taken into consideration, but i know there's an effort to do so. >> also, yesterday you mentioned that 3 would be a opposed to a ceiling. implementationit pull up global standards everywhere, thereby reducing the risk that the united states faces by undercapitalized institutions around a role? >> we have made a lot of progress since the financial crisis in terms of putting liquidation authority and resolution authority in place. there's a lot of work to be done. is financial stability

connected to the financial well-being of institutions that are regulated in other parts of the world. it has a lot to do with our ability to address some of these cross-border issues. we will not lower our standards to some other standard. we're going to have to have the world standard at a higher level. we're working in the g-20 and in other bodies to try to bring world standards up. basal 3 is a piece of that. >> the time is expired. the gentleman from texas. >> thank you, mr. chairman. secretary lew, welcome. in your previous life as the chief of staff to the president, i'm sure you are where the president was not fond of the citizens united case. he is quoted as saying the supreme court reversed a century of law that i believe will open the floodgates for special-interest. you may also be aware that some of the senate democratic leaders wrote in 2010 that, including chairman baucus and schumer, a call for the

investigate conservative 501(c)(4) organizations. at that time, did you or the president think that was a good idea, with the senators suggested, that the irs look into those organizations? >> congressman, i was not familiar with that statement at the time, so i cannot comment. greg they sent to the irs. you're not aware of that? -- it was a letter sent to the irs. >> as chief of staff, i would not get a letter. >> i think it was rarely publicized. let me ask, had you known about the letter, would you think you and the president would think it's a good idea for members of the senate or the house to ask

the irs to investigate or to audit organizations? >> opposition has and always will be that the irs has to be beyond -- my position is that the irs will always have to be beyond political approach. there can be no question of bias or political motivation. that's why we made it so acceptable that these practices happened. -- that's why we said it is so unacceptable. the question is how to fix this. we are committed to fixing this. there are legitimate questions as to who qualifies, but it has to being under a politically neutral manner. i've said that the democrats and republicans and i have said that before this set of facts became available. >> i would say that how america will be watching how you handled this, because i think it

will define a lot of your service in that capacity. i want to move to another question. as the secretary of treasury, you are governed by laws including a provision set forth in dodd-frank. you are also one of the three representatives on the financial stability board, which i understand is about to finalize their designation of what we call [indiscernible]. given the policies that will be determined by this board versus what we will do with them, which many of us are very concerned in particular that some of our u.s. insurance companies could be disadvantaged by this designation because it would be a lot less transparent process than what is going on in the u.s. can you comment on what you can assure us that we are not going to disadvantage domestic companies with a process that is going on that is not as

transparent? correct congressman, as we go through the review of whether or not to make these determinations, we are working with all the firms and understanding will have every opportunity to comment. there will be a full visibility into what we are doing. we have worked at the international level to try and to have as much as we can common approaches. it's more complicated in an international setting, obviously. it's important that we strike the right balance of protecting the u.s. economy. sometimes that means taking actions that may be higher levels of credential concern that other countries are taking. what we are trying to do is convince them to raise their standards, try to level the playing field, because it is in their interest and in our interest for us all to be comparable in taking steps to make sure we don't have financial crisis.

the questions we're asking for these non-banking institutions get at their interconnectedness to the broader question of the financial stability. so we are not stepping into the role of being a state insurance commissioner. we are looking at whether or not there are levels of risk that aren't the designation. >> having different capital requirements for the people that are inside the box versus the people outside the box will cause some competitive disadvantage, would you agree? >> i think we need to make sure we are addressing the statute's requirement that we do the review based on whether or not there's a material risk to financial stability. >> the time of the gentleman has expired. the gentleman from massachusetts. >> thank you, mr. secretary. and thank you, mr. chairman. i want to associate my remarks with the likes of mr. meeks. the only difference this is we are willing to give you the benefit of doubt that you are

willing to do the right thing, but you know the country is watching. all of us are watching. i have faith you will do the right thing as we move forward. it strikes me as not surprising that had you not fire someone, today you would be criticized for not having done so. it is interesting box of tricks to play, but i think it's worth pointing out. either way, you would use that argument. i'm not point to participate in that. i will try something else. mr. secretary, i want to talk about what fsoc does. all the money almost given out in the bailout and in difficult times has been paid back. almost all the money. most glaring example of who has not is fannie mae and freddie mac. $187 billion of taxpayer money went to them. none of that has been technically paid back. $65 billion has been paid.

another 66 is about to be paid, which would represent 76%. but that money is not allowed to go towards payment of principal. it's my understanding that treasury or fsoc could simply change the way that is and allow them to pay off their debt like everyone else was allowed. company, every private was allowed to pay off their debt with interest and dividends. every penny that has been paid back, the government has made a very good profits. i am not suggesting we should not make one on fannie and freddie. i'm simply asking as you will forward to take a look within your own shop now to make sure that we allow fannie and freddie to be credited as they pay back that they met. if that happens, it's the right thing to do. no. two, it is reality. reality is they pay back almost $130 billion of the money or

about to do it. money $130 billion of the we have loaned them. they should get credit for at least some of that. it's my understanding that could be done internally at treasury. i would like you to get back to us. if you can, please do it. tell us what action we need to take. similar to the fha, the fha right now is probably about to have to take a draw on treasury. even though they have $30 billion sitting in the banks and no thoughtful person thinks there will have to access taxpayer money, the law requires them to do it because it's below certain percentage of the outstanding members. that's ridiculous. at the straight-a should be allowed to draw when they need the money but should not be required to draw when they do not. -- i think fha should be allowed to draw. younder if that's a move

would like to see amended? butve one more after this, go ahead. >> i'm happy to get back to you on both issues, congressman. briefly, the treatment of fannie and freddie was set up so the all the profits go to taxpayer until they are out of conservatorship, until they have discharged all their obligations. that is a very high priority. i'm happy to follow up with you on the other question. >> as currently done, they will not be able to get out of conservatorship because they will still owe us $187 billion at any given time. rason the fha the drawdown, -- >> on the fha drawdown, i'm happy to follow up with you. we are following prudent practices of the role to make sure fha is able to continue functioning.

>> i totally agree. but it distracts us from the real discussion of fha. derivatives, i know you had a discussion on the libor issue. libor issue might involve a 500 trillion dollar market. there's an international review going on. i have read recently about another potential scandal that is interest rates and in the interest rate swaps category, another $400 trillion market that may be the exact same thing in the exact same place. close to $1 quadrillion, which is ridiculous. that is 15 zeros. i've never used the term quadrillion in public before. i hope to never do it again. i'm not a scientist, i don't get to count molecules'. [laughter] i would like to know what fsoc

will do about the scandals that are brewing. >> the time of the gentleman has expired. gentleman from california, mr. campbell. >> mr. chairman, thank you. i will say quadrillion just so it's a bipartisan term. secretary lew, getting back to the irs issued, the ig's audit determined whether or not there was targeting and they determined there was targeting. you believe it is important to know why that targeting occurred? >> congressman, i think it's important to hold accountable everyone who is accountable. that process is under way. we have a new acting commissioner who has taken over today. that will be his first order of business to make sure we know who made what decisions, and xavier warrants' accountability. >> should they not know why this occurred?

>>correct it's very important that the ig's report noted there was no evidence of political pressure being brought to bear. i can tell you -- >> mr. secretary, because the idea did not present any evidence in that report, does that lead you into conclude that there was no political involvement in the saddle? anyeral did not present evidence? >> that report came out just a week ago. there are ongoing efforts with a new commissioner coming in to take review of the personnel involved and to take any necessary action. we have multiple hearings underway at. the department of justice is undertaking a review. there's an awful lot going on. >> including to determine white? >> their review is to determine if there was any criminal activity. >> have you asked? >> we have said it is

unacceptable behavior. those who participated will be held accountable. the fact that there's no evidence of any political involvement is very important. it does not make the actions and less acceptable. >> just because there's no evidence now does not mean there's no evidence we have not found, correct? evidence? if somebody robs a bank, mr. secretary, it's reasonable to conclude they did it for the money. you cannot assume they did it for the money, but it's reasonable to conclude they did it for the money. when someone target organizations entirely of one political bent, it's reasonable to conclude that it was the reason for doing it. >> when concerns like this arise -- >> should you not be trying to find that out?

thehe place you go is to inspector general to do an investigation. that is what has happened. that is what is ongoing. >> so now it's out there. it's in the irs and you are the secretary of the treasury. don't you want to know why these people did this? >> congressmen, i have said many times and will repeat, i am committed, the president is committed to making sure we figure out what happened, hold people accountable and make sure it never happens again. of course i care, but i also believe it would be inappropriate to stand between it and investigator general and an investigation or to interfere with other investigations like criminal investigations. >> and be spoken to anyone in treasury or the irs about this since you found out in terms of why these people were doing this or what they're trying to accomplish? theongressman, i think facts -- >> have you had any conversations like that, as a question?

>> i have had many conversations about what steps we need to take. step number one was getting the resignation of the commissioner. i am going to meet after this hearing with the new commissioner. i've not had a chance this morning to do so. >> have you learned anything you can share with us perhaps about the motivation for this? >> congressman, we all have to piggybac -- have to but look at the facts before us. we will cooperate with the investigation, because we want to know the facts. i will not put any kind of political intervention in the review of an inspector general. political don't want intervention now, but we need to find out whether there was political intervention then. this is significant. >> he found no evidence of political pressure. if there becomes evident, that would be significant. but i cannot respond to

evidence that is not yet been uncovered. there will be much time into figuring out what happened. >> thank you. i yield back. >> the chair recognizes the gentlelady from new york for five minutes. ranking member. and welcome, secretary lew, to the great state of new york. the residents of our state are proud of your public service and proud of you. congratulations on your appointment. >> thank you. >> in dodd-frank there were a number of regulations that we call upon the agencies to come forward with. could you bring us up-to-date on how quickly we are going to get these regulations into effect, specifically i'm interested in three areas,, the non-banks designation, the volcker rule, and the capital rule requirements. i do not favor legislating capital rule requirements.

i think it dependent on many changing factors. could you comment on the geisel requirement of roughly a 3.5% which looks awaits. but also the new build and has been put in the senate with mr. vitter and others that would require 15%? and again, congratulations on your service. >> thank you very much, congressman. in my first day as treasury secretary i have been putting an enormous amount of my time into stepping on the accelerator in the implementation. of implementation i went from my swearing in to a meeting of the financial stability oversight council and shared my first meeting within an hour of being sworn in. i have met with -- we have had three fsoc meetings and i've met in between that with many regulators independently. the role of the chairman is to keep the pressure on for action.

i've made the case to them and publicly that we have to measure our progress in weeks and months and not years. we have to get to the end of implementing the regulations. it's important to stake a step back and remember one of the reasons for delay was that there was a political fight over repealing dodd-frank. we had an industry that was fighting with everything it had to slow down the implementation. i think we are beyond that. i think there's no consensus in the industry and certainly from the view of myself and other regulators that getting dodd- frank implemented is a top priority. i think that will give stability in terms of knowing what the rules of the road are. like everything else we do, it will require fine-tuning as we go along. one of the problems we got into was between the great depression of 2008 is we took more than half a century without taking a hard look at what we had done. this will require constant

attention. the financial history involved too rapidly to take 60 years off without taking a look at whether the tools we had were affected. on the non-bank rules, we hope to make a determination soon at the fsoc level. fivee vocal role, we have agencies working together trying very hard to come out with a common approach that would be the best way to have clarity in the marketplace. -- on the volcker role. on capital requirements, the fed is looking at working on finalizing regulations, from statements made by the fed members in the last weeks, i think they're working on trying to create a system that get as close as possible to meeting the concerns of small financial institutions while being able to say we have ended the big to fail. we are encouraging them to get to a conclusion as quickly as possible. then the volcker rule, institutions i have the

privilege of representing have already implemented the proprietary rule. they have moved out of their major headquarters in the proprietary trading into a different organization or stop it completely. could you speak a little more on the market-making rule that wey are working on, on how maintain liquidity in the market but at the same time have financial stability and safety and soundness? many people are very concerned about getting that rule right in order to keep our competitive edge. >> it's very important to get the roll right, because what looks like the same activity may be a very different activity. if you are market makers and if need to have an inventory in order to play the role, it's very different from taking a bet and buying with proprietary capital a stake for yourself. so the rules are going to after distinguish between the different reasons that financial institutions hold

assets. they're working very hard on this. the definitions matter. the coordination amongst the agency's matter. i will be reconvening those groups to make sure all five agencies are talking to each other. >> produce stand on gse reform -- where do you stand on gse reform? [laughter] my time has expired. >> the chair would like to yield a few minutes for the witness to speak on the matter, but he will not. the chair recognizes that gentleman from new mexico for five minutes, mr. pierce. >> thank you, mr. chairman. thank you, mr. secretary, for being here. in college i had a professor of statistics who was making the point that you put an incident number of chimpanzees with their role in an infinite number of typewriters and they would eventually write the work of shakespeare.

you are asking us to believe that you have an infinite number of irs agents conducting an infinite number of audits and they all just happened to be conservatives. that is more preposterous than my statistics professor. the fact that i got an e-mail before the story broke from a gentleman in new mexico who had been singled out andy did not know why he was singled out and there was nothing in the audit that said what it was about. but he noticed a handwritten name on the outside of the folder at the end of the interview after no significant questions on his practices in his business was asked if he knew that name. he did not know the name at. all the way home he said, by

golly i think that is the guy i went to that meeting three years ago. the tea party had not yet organized, but it was the same guy who will eventually organized the albuquerque the party. went to one meeting, wrote a check of $25. for that, three years later he is picked out, and you want us to believe there are no political overtones. you don't find any political nuances to the situation, and i find that to be an incredible situation. we have been told, as we have in many other scandals in this administration, that the administration had no knowledge. to run a few, fast and furious, the administration had no knowledge. we had an american border agent killed with rifles sent illegally to mexico. crime was committed. no one has yet been held accountable.

jon corzine took $1.5 billion from segregated accounts. 2011. i hear you saying things like i don't want to get in the way of the investigation. the facts will come out. youhat point, sir, are going to be suspicious the facts will not come out? in 2011 jon corzine has yet to be charged. it's a crime to take out money from segregated accounts. we could take a look at the gsa conference. the doj tapping of ap telephones. doj tapping of mr. john rosen's telephone and his parents. they said he is a co- conspirator. the co-conspirators says guilty. i wonder what his parents were accused of.

we are sitting here today understanding that this administration had no knowledge of any of these circumstances, not even of benghazi. we are to sit here -- i think one of my colleague said we are us to sit here and take the artful answers that you give. myself, i don't know what i'm calling to ask about is the war on the poor that this administration is engaged in, and driving interest rates to zero. you are decimating the people who have no financial sophistication. these are people eight times more likely to have money in just bank accounts, the aging, the elderly. they are the people who come to my town halls and say i live my life correctly, i bought my home, i have a savings account,

i was expecting that i could live on my savings and now i'm having to dip into it because i get no interest every month. this administration continues to have its war on the poor, the elderly at the benefit of wall street. you are doing so much for the 99%, you said, when the case is opposite. so i don't have any great impression that you are going to answer any of the questions today. i don't have any great impression that you will stop your warrant on -- war on the poor. mexico -- new mexico, $31,000 is our per capita income. i yield back. >> the time of the gentleman has expired. the gentleman from georgia, mr. scott. >> thank you very much, mr. chairman.

welcome, secretary lew. good to have you. i think that you have expressed your concern over this issue, the administration's concern. we certainly look forward to you helping to move to a speedy conclusion of this irs situation, where there is no more penetrating -- for there is no more penetrating agency that penetrates into the personal lives of the american people as the irs. let me say that this concern of this investigation goes for democrats and republicans as well. this is not a democratic or republican issue. this is an american issue. and the american people are expecting us to get to the bottom of it and not politicize it. one of the things i do want to mention to you is yesterday in the senate finance committee, former commissioner douglas

shulman mentioned that he knew about this investigation, that there were facts shown to him, but he did not take that information to allow the higher-ups. he was a bush administration appointee. he served as the commissioner of the irs from may of 2008 until october of 2012. my question is in getting to the facts of who knew what when, would you not think, since irs is the agency of the treasury department, that the agency head should have brought this administration to the department when he knew of it? should he have not done so?

>> congressman, i think that the first line of responsibility is the irs commissioner. the commissioner is in day to day contact with all the different departments of the irs. fixing anything that is wrong in the irs is a fundamental part of the irs commissioner's job, making sure the system runs well is part of his job. we're bringing in a new acting commissioner today and we are charging him with first making sure we find out who is accountable and second finding out what went wrong and third making sure anything that needs to be fixed is fixed going forward. >> the point i wanted to make is because everybody is looking at where this goes, does it go all the way up to the president? it's very important for the record to show that this commissioner, who was the commissioner during that much of the investigation and what was going on and testified

before the senate finance committee yesterday, that he did not take it to be higher-ups. let me ask about basal. >> one additional word. i did not even know there was an audit until march 15. i did not know the results until it was final. the president did not find out until the report went public. is there any sense of political involvement in any way interfering with this investigation, that would be a real problem. and it did not happen. so it's a good thing we did not know about the investigation. >> let me ask about basal 3. the would you say are likely effect that the differences of the implementation between the u.s. and other foreign jurisdictions of the derivatives credit evaluation or judgment capital requirement might have on american financial institutions

and end users of these derivative products? do you share the concern of implementing basel iii requirements? >> congressman, we are concerned with basel and with other areas of implementation of dodd-frank and other financial rules that we do what we need to do to protect the u.s. economy from the kind of risk that we never want to see again but also to work with our international partners to where we can harmonize standards and reach a level so there's a competitive level playing field. we have made good progress in the g-20. we're working with our g-8 partners. i've already been in many meetings with my counterparts at finance ministry level and with central bankers. it's going to be a complicated undertaking. we have different legal systems, different standards. the thing we have to be clear

about is our first obligation is to make sure that we make the u.s. financial system sound. and then work with others to bring their standard tire. >> the time of the gentleman is expired. the gentleman from florida. >> thank you, mr. chairman. mr. secretary, how long was left on the term of the commissioner was a wreck -- whose resignation that you sought? gretzky was an acting commissioner he is a career employee said there is not a term limits. employee, so there's not a term commissioner forever if not for this event? >> there was a limit of how long you could have the title. >> how long remains on that timetable? >> it was coming up sometime in june. >> on the have five minutes. >> he would have remained in the position he had with all the

authority afterwards, unless he resigned, which he did. clerk i read your written testimony. it says the strength of our financial system depends on the strength of our economy. you said sequester has hurt the economy. i think everyone knows that spending more money than you make does not do anything to inspire confidence either. representative speier never balance does not do anything to inspire confidence either. in plain english, you might have recommended we try to do the budget process and not [indiscernible], and they send that message to the senate. you mentioned job creation and economic growth path to be a top priority. next to obamacare, the biggest impediment to job growth in this country seems to be over use and overstepping of rules that are killing more jobs than this administration could never begin to put in place. last year the treasury wrote a

rule that would require all banking institutions to submit to them the names of all non- resident alien depositors. they said that could have an impact of over $88 billion. it the department of the treasury never did a cost- benefit analysis, which is required of every agency invites a rule with an impact of shafting the public of more than $100 million. can count on you to at least to a cost-benefit analysis before that rule takes effect. and before we add further financial harm to our country? >> congressman, i will have to get back to you on that specific rule. and i'm happy to do so. getow long before you can back to us, because we would like to stop this in its tracks as soon as possible? >> in two and a half months i've been involved in a lot of different matters. i've not work on that specific matter. i will take a look at it and get back to you. >> any idea how long it? >> i will take a look at it and

get back to you. >> in regards to mr. pearson's question, and mr. campbell's from california, said there's a lot you would have to look into to answer mr. campbell's question, but when the gentleman from georgia ask you, you had no hesitation in saying there was no knowledge of the talk about what was taking place. how do you make the distinction between the two dancers? -- the two answers. >> i know when i heard about this for the first time. i did answer with great confidence on that. >> there's a pattern. admit nothing, denied everybody everything, and blame everybody until it blows over. i think that would be the proper answer to your question, mr. pearce. my time is up. i yield back, mr. chairman. >> time has been yielded back. gentlemengnizes the from texas.

>> thank you, mr. chairman. i thank you and the ranking member for the hearing. thanks to the witness for appearing today. i also thank the witness for making notes of those who are victims in oklahoma. nots important that we forget, notwithstanding all the other things on our agenda, we should remember what has happened. i assure you that at the appropriate time i will cast my vote for aid to the victims in oklahoma. usould also like to remind that dr. king called to our attention that on some questions we have to do that which is neither safe nor political or popular. your not interceding in the audit may not have been safe, may not have been political or

popular, but it was the right thing to do it. and you don't need validation when you are doing the right thing, secretary. it was the right thing to do. let us move to page 5 of your testimony or your statement that you provided. on page 5 you indicate under the impact of fiscal policy, "to guard against future threats our economy and financial stability, policymakers should avoid using last-minute resolutions to fiscal policy matters such as debt ceiling and deficit reduction as a negotiating tactic." i would like for you to elaborate on this, because we will again confront a debt ceiling and deficit-reduction question, as you know. would you elaborate on how this

adversely impact the economy, given that you have indicated that the economy needs confidence, the consumer's need confidence, businesses need confidence. would you elaborate on how this impacts the confidence factor? >> happy to, congressman. in 2011 we had a series of crisis-driven, deadline-driven negotiations that created a broad sense that there was dysfunction in our government. that undermined confidence in the business community in the united states, confidence in ratings agencies who saw a downgrade in the u.s. credit rating for the first time, because of our economic conditions but because of our political condition. i talked to people around the world in positions of authority. it makes them very uneasy, whether they are in businesses or making economic policy decisions when the u.s. looks like it is in constant crisis. i think if you look at 2012,

there was some progress made. we saw less of the brinksmanship in 2012 than we did in 2011. we saw issues getting addressed and an attempt was being made to avoid having that kind of anxiety which makes it harder for businesses to invest and harder to get the economy moving. we got to stay on a path where we do our business, where congress does its business. on the debt limit, the president has made clear congress has the responsibility to raise the debt limit. every bill that we owe, whether it is interest on treasury bill or a patent for the rent in a building that we are leasing, it's an obligation of the federal government. for our entire history, the u.s. government has paid its obligations. the way to control spending in the future and to reduce the deficit in the future is to make sensible tax-and-spend policies. it's not to say we will not pay the bills we have already obligated. that's why congress needs to

pass the debt limit. >> let's move to an additional topic. you talked about how we have to concern ourselves with the ability in terms of the oversight council. justld like for you to explain briefly how important it is to maintain fsoc, given that you have made a comment about too big to fail. how fsoc will help us to maybe not eliminate but help us keep taxpayers off the hook on too big to fail issues? >> fsoc is unique. it has some areas of direct responsibility but mostly it is a coordinating role and it is to pull together the different actors in our complicated financial regulatory system to act in a decisive way and

coordinated way. i think that is very important. if you have five regulators going in five different directions, it could cause mass of concrete -- confusion and a large burden. there is a large burden of work being shared and i hope that i will play the role to drive the process toward sensible decision making in a timely manner. >> i yield back. >> the chair now recognizes the gentleman from missouri. >> q. -- thank you. one of the problems with being on the lower part of the totem pole is a wind up with the questions already being passed. let me go through some things to clean up couple of questions. one thing with regards to the investigation going on -- because ofear you the door. >> there we go. one of the questions that when

you talk to you new commissioner this afternoon and discussed his investigation, it's not only to have him investigate what ms. lerner and herger per doing to the conservative folks in the tax- but also the request that was made by lots of folks with regards to liberal groups and not investigating those. i have sent you personally about 3000 documents in a request to investigate one and last week to ask for the investigation to take place, and that was three years ago, and was never given anything but a stonewall the last three years. i think this investigation should be broader instead of just looking at conservative groups but the lack of action investigating liberal groups. as the gentleman from new york said, the oversight that was supposed to be provided with in regards to those activities. one of the questions that came up in terms of civic de