employees that we once checked in with regularly will no longer speak to us by phone and some are reluct tonight meet in person. in one instance our journalists couldn't get a >> i can tell you that this chilling effect does not just ap.n at it is happening in other news organizations as well. other journalistic told me that they have been intimidated -- that sources have been intimidated from speaking with them. the government may love this. beware the government that love secrecy too much. i want to provide you information on the ap seizure of phone records. i want to talk about the

implications for us all. let me recap how the started. angela touched on briefly. it started may 7 of last year. ap published a story about a foiled plot of an al qaeda affiliate. aey were planning on using new and sophisticated bomb to destroy an airliner headed towards the united states. the cia had reported this attack. it was intended to coincide with the first anniversary of the killing of bin laden. that is a real scoop. it was broken by two ap national security record -- reporters. it was not, however, a story that was a surprise united states government. ap had held the story for five days, at the government's

request. the operation was still ongoing. after the administration had reassured us that the national security risks had been allayed, we release the story. ap acted responsibly. the store is important on its own merits. americans have the right to know that such an attack was being plotted and that their government was able to prevent it. the story also brought into question a statement made by jay carney. two weeks earlier, he had said that we had no credible information that terrorist organizations are plotting united states to coincide with the anniversary of osama bin laden's death. yet, here was the associated press finding out that the cia

has been in the middle of .oiling such a plot the person who was going to carry the bomb was a double agent. he was working with the cia, the saudi's, and the british. said that the associated press got the context wrong. this was a cia scheme, they said. strainserpretation credulity. this was an al qaeda operation. they constructed the bomb. its agents were working to activate that plan. the story received wide attention. the doj announced that they were launching a leak investigation. they had commission and u.s. attorney to take it on fast forward one year, last friday, we received a letter from the department of justice informing

us that they had received the records for 21 ap phone lines. we now know that that was over a 40 day. .timeframe we had never seen anything like this before. it was an intrusion by , sornment that was so wrong overreaching, so secretive. it violated a protection zone of the first amendment provides journalists. we cannot dispute that the u.s. government has the right to pursue those who leak classified information. this administration has prosecuted leakers like no other in the country's history. the justice department has how targeting the

press works. this dates back to the watergate era. they require that a demand of drawness be as narrowly as possible. they require that news organizations be notified of the .ubpoena in advance this gives them the time to appeal and courts. doing so would impair the integrity of the investigation. 's the collection of the ap phone records, the department of justice their own rules. the subpoena was not focused as narrow as possible. it was broad. the telephone records seized included the work and personal numbers of ap journalists and general ap numbers in new york, washington, and hartford. the number ofed the u.s. house of representatives press gallery

that included ingoing and outgoing calls. these are not just the phone lines of our investigative team. these are general office in switchboard numbers. and editors -- thousands of phone calls were swept up. the records include a switchboard number. while they got the switchboard broads, they also got a sweep of active numbers. they got a switchboard number dc adc bureau -- four bureau that was stopped six years ago. we do not regard these focused -- we do not regard these as focused.

what theow learned nsa has collected. they had the entire country's phone records. the doj was collecting ap just a load them into databases, this was a specific investigation. they are accessing a broad swath of other news gathering information that is protected by first amendment against precisely this type of intrusion. the department of justice violated the rules was in executing the subpoena without notice to the associated press. we could not seek review. the doj claims that they had an exception.

if they had notified us, it would impair their investigation. how could that be? we could not tip her with these records. we do not have been in a recession. -- we do not have them in our possession. theyey had notified us, say it would have tipped off the leaker. thiseaker knew about investigation. it was publicly announced. it was publicly announced nine days after our story ran. , aboutnd of reasoning tipping off leakers, would apply in every single case. the press would never be given notice. they could never go to the courts. the exception would swallow the rule. had the department of justice came to us in advance am a we could've let them -- we

could've helped them narrow the scope of the subpoena. there was never that opportunity. the department of justice acted as judge, jury, and executioner. been acting in good faith. i will give them the benefit of the doubt. i suspect they got so single minded the folk -- single-minded focus that they overlooked best. .e cannot unring that bell i'm pleased to tell you that the justice department has given us assurances that phone records will continue to be walled off and protected. .e appreciate those assurances

it does not excuse what they did. we want to make sure that it does not happen again. asked theobama has attorney general for recommendations on the justice department's regulations in these areas. to that end, they have been consulting with a number of news organizations and first amendment lawyers. meanwhile, in congress, there renewed support for a law that would protect reporters from having to reveal their sources. this would extend into the federal realm -- this would extend, into the federal realm, laws that already exist in 30 states. that the following measures are imperative. we want the justice

department to recognize the right of the press to advance notice and a chance to be heard before their records are taken by the government. this would have given us the chance to point out the many failings of the subpoenas. we believe that notice was required. the department of justice sees it differently. the regulations should be strengthened to remove any doubt. we want judicial oversight. we need to ensure the proper checks and balances. phone records case, the justice department determined that they could not -- that they could skip advance notice. denying constitutional rights is not how the government should work. third, we want the department of justice to update their guidelines.

the guidelines were created before the internet. they did not foresee e-mails or text messages. the protections afforded .ournalists we want a law that will protect journalists from secretive government action. to institute a formal protections from the justice department, that they will not prosecute any reporters for doing their jobs. they call journalists co- conspirators under the espionage act. this needs to be part of an established directive, not limited to this administration.

no one should be prosecuted for committing journalism. ap has no political bloc in this fight. it is not about democrats or republicans. our issues is freedom of the press and the rights protected in the first amendment. if a reporter's phone records are open territory for the government to secretly monitor, news sources will be intimidated from talking to reporters. we are not going to be intimidated. our sources will be. to asources are critical free press. they're critical for holding a government accountable. otherwise, you just hear from official sources. then, the public only knows knows what the government wants them to know. that is not what the framers had in mind when they wrote the first amendment. this headline, if he shows us

anything, shows us how much information the government has. it is why a robust free press is more important than ever. this issue resonates beyond our borders. the freedom of press is a model and aspiration for nations and peoples around the world. the department of justice's actions could not have been more taylor rate -- more tailor-made for an authoritative regime. does it to,tates they can say. it should not be this way. freedom of press is what differentiates democracy from dictatorship and a free society from tyranny. the first amendment is our collective covenant -- covenant. a should be concerned about

failure of the justice department'. thank you very much. [applause]>> thank you. not surprisingly, we have a lot of questions. >> you said that the department of justice violated its own rules. you want them update those rules. do you believe that revision will make a difference in how they carry out their practices? >> i hope they do. i can tell you that the greatest protection afforded reporters has been through these guidelines.

that is why it is the focus of us going forward. we want them updated and approved. the president asked the attorney come forward with improvements and recommendations. all of us, in the media, and everyone in the country should look at what happens in july and what the improvements to those regulations are. we are extremely hopeful that they can provide clear guidance to the justice department's and increased protection to the media. regarding the strained interpretation that the justice department is applying to those rules. >> what can guarantee that this will not happen again? we believe that the

rules were violated. the department believes that they were not. , in secret, and got their way. they scooped up all the records and told us, up to 90 days later. theiry can do that, perspective will always prevail. we need a check on that. the check is in another branch of government. we need to notice. that is what the rules contemplate. can in exceptional cases they go in secret. you don't want to tip off the leader in a public investigation? give me a break. we want the rules clarified.

to make sure that department of justice cannot fight that exception. we think that will provide a much greater protection. we can help them clean up the subpoena. we could have helped in that regard. not agree, a court could decide. none of that happened. that is because of their interpretation of the rules. they can be improved in a way that is good for all of us. >> you consider this administration's response to the news mania -- media any difference -- any different than other administrations? >> no. >> why is he getting more attention now?

why are we seeing these publicized instances? >> this administration has been more aggressive going going after lakers than other administrations -- leakers than other administrations. this administration came in on a platform of transparency and more access. unfortunately, like past administrations, they have not lived up to that promise. >> did the federal government threaten a form of retaliation against ap for advancing the story? >> no. nothing like that. nothing like that happened. .p got the scoop

it was a very significant new story and sensitive. ap went to the administration and talk to them about it. the ministration asked us to hold the story because of national security concerns and we did. the myth -- the associated press does not want to endanger anyone's life or national security. we tried to act responsibly and we did. after we had heard from the government that the national security risk had passed, then we ran the story. asked uswhite house to hold the story one more day. not for national security reasons. they were going to announce the plot the next day.

we did not feel that we should hold the story for that reason. so we released the story. not feel that national security was compromised. we did not get pushed back from them for running the story. we do not anything until a year later. we found out that our records and gotten scooped up as part of an investigation. we did not hear pushback at that time. not stay inid detail why they did not want the story published, why didn't the ap include that? we didn tell you that' ar that it could jeopardize safety and national security.

.hat seems right we did not want to jeopardize that. we waited. we waited until we got reassurances that the operation was no longer under way. there was no security risk in running the story. ofo not know the details those conversations. those were the judgments that were made. it was not criticized by the government or the administration. that they would have liked for us to hold one more day. they were going to announce it. we did not do that. story, the ap ran the did they have an inkling that the alleged bomber was a double agent? >> now we are getting into sensitive details.

that there was a double agent involved. we did not report that. , because it could be a safety issue. after we released the story, the white house was very aggressive in talking about this story. john brennan talk to the media. -- talked to the media. that the cia had internal control of the situation. that implication allowed others to draw the conclusion that there was a spy/double agent.

there was a followed by the ap that there was a double agent. the fact that internal control only came from the administration and was reported other news by organizations. >> if this was about when the story was published, why do you think that eric holder has said that he considers this to be one of the most dangerous leaks ever? >> that is a good question. . do not know the answer i have that same question. maybe he will come here and answer that question for you. >> the invitation is pending. itsap changed newsgathering message --

methods as a result of the department of justice? >> the short answer is no. ourre looking at -- at contract very carefully with phone service providers. we want to have as much knowledge about how we can protect our records as we can. andre looking at encryption security that we can build into our internet and online activity. we're doing it because of hackers. we are looking, very visually, -- vigilantly, at secrecy protection and anonymity of sources. than everg that more before. that is an arms race that will continue for ever. we are having to deal with

searches differently. about havingxious their phone number associated with the ap. that could be going on in your news organization. you don't know it. you'll find out 90 days later. you will get a surprise in the mail. that goes on. there is reluctance on sources. we also know that department of justice could follow reporters. .hey could do that on fox -- foot. journalism goes on. we will do our best to make sure that we protect our sources and still get the stories by every means possible. >> you talked about the

integrity of your service providers. have you asked your service providers to pushback on the government when they violate your privacy rights? >> the phone service providers, when they get subpoenaed from comply andent, they are required to. also notifies them not to notify us. they are not put in a comfortable position. in answer to this is not trying to -- and they have to thee by the government -- answer to this is not in trying to get a better contract with verizon. that is not the answer. the answer is getting better guidelines from the department of justice.

>> what you think about the public's reaction to all this. ? does the general public, outside of the media community, understand what all this means? >> i think the reaction has been very gratifying. i did not expect this story to be that big a story. i knew it would be a new story. it was the third scandal, with benghazi and the irs. it got more attention than i thought it would. i was pleased that the american public saw it as a broader issue. does this affect us? does this violate the first amendment? that is a good debate to have. that is a good issue. i was pleased that a connected with people. i think the justice department was surprised by the reaction.

that may be the biggest reduction that we have. that we have. they do not want that back class again. -- backlash again. we were pleased with the reaction. it was worldwide. were surprised that this could go on in the united states. the ap is known around the world. , butove local newspapers the associated press is worldwide. press agencies around the world heard that the united states government was doing this to the ap and they were shocked and surprised. we received it in enormous outpouring of support. there were surprised at united

states government could do this. , a littlerised surprised, that it became such a major story. i am pleased that it did. i hope it will act as a preventative for future actions from the justice department. next question is about how to better engage and mobilize the public? you say that they are engaged. how do you keep the story at the forefront of public attention? i know some of the polls show that this is not resonate with the public at the irs scandal the irs will resonate with everyone in a different way. i think it is important for the

media to point out how this affects the people. not just the media. holding the government accountable. the government has never been more powerful. knowledge gives the government power that it could never dream of. the press needs to be stronger. we are the surrogate of the people. this is the only way the public will be informed. with the count arguments and are positions in terms of the people. why it is important for them. when people sense of the government is overreaching, they rise up. that happened here.

i was wrong. i thought this would be insignificant. boy, i was wrong. it was great. this will have an impact. will resonate further. let's of the silver lining from this is that we get better updated and improved guidelines from the justice department. want a recognition that reporters activities are not criminal act. we will, therefore, have a freer society. should reporters be objective and impartial when it comes to covering press freedom. should we be doing more to pushback against this type of surveillance? we are a nonprofit news organization. editorialt have positions and it does not express positions.

the news, as objectively as possible, day in and day out. we should do that on every topic. if we don't, we lose credibility. is clear. on the opinion page or an editorial page, that is different. that is a place for opinions. it is a marketplace of ideas that argue every which way. the justice department deserves their say. they disagreed. great. that is ok. we think they are wrong. we will state it clearly. needs to speakia up for itself. we need to push for a law. we need to push for a protection -- for new regulations. we need to not lose that.

that will of road our credibility. erode our credibility. >> a follow-up from before. if the justice department violated so many of its rules, why did they bother to tell ap in the first place? >> they had to. the law required them to notify .s after they did this they can spy on a secretly. they can wait up to 90 days to tell us about it. we do not know when they captured the xfone records. we are not certain. we know that it should have been within 90 days of when we got the notice. we got in may 10 -- on may 10. they had to do it. they knew it would be public eventually. after theyic

obtained the records. we want to narrow the focus of the subpoena or get a core involved to sort out what the proper scope of the subpoena would be. we would love that opportunity. we got notice. >> a washington post column argued that the story was a national security risk and should not have been published. what do you think of this take? a i respect walter pincus as reporter. i think he is wrong. very concerned about national security. we were not criticized by the administration in releasing and running the story.

do i think they were happy that we got the story? no. do they criticize us for jeopardizing national security? no. , think it that comes up now over a year later, that is more suspicious to me -- suspicious, to me. i think we acted responsibly. the whitenow when house was going to announce this, absent the ap story. i just do not know. why shouldn't it be a crime for reporters to publish classified information? person has an elusive grasp of the first amendment. -- itvernment employees

is a crime for government employees to reveal leak information. this is a complicated issue. we all know that the government over classifies information. way too much information is classified. a lot of it is classified that should not be. some of it is embarrassing. there's a lot of overclassification that goes on on. the government acknowledges this. one of the criticisms was that our intelligence information was sideload -- siloed. we needed to connect the dots. we did. maybe that helped to prevent

terrorism? it could well be. millions of documents are classified document -- information. have access toe confidential information. privates in the military can leak information to wiki leaks. government contractors that drop in high school can release massive amounts of information. 3is will happen when you have million people with classified clearance. you are going to have leaders. it is going to keep happening. it is inevitable. like i said, we do not challenge the government's right to pursue these investigations. they have that right. it is a complicated issue. we are not taking a position on that.

administration, the justice department, they make their own determinations as to what leak investigations they will pursue. our complaint was how they conducted the investigation. that is what we want to keep the focus on. it is a free press issue for us. arm a journalist does his her job, thator should not be a crime. we agree with president obama when he says that. we agree with the attorney general when he says that. we think it should be clear in these guidelines and rules. this should be something that we do not have to ask for. we think this is embedded in the first amendment. we think that they should not be a crime.

-- that this should not be a crime. we need an informed public so that we can have a robust marketplacee of a of ideas. the united states is not afraid of that. we should not become afraid of that. we should welcome those debates. the president says that he welcomes this debate. ok. we you too. let's have that debate. you cannot have that debate if you do not have information. we need journalists to do that. they have to do their job without fear of being prosecuted for doing their jobs. not only will sources be intimidated, but journalists will be intimidated. i do not want to live in that country. >> do you know if any of the sources have been punished by the government? >> i'm sorry?

i do not know who the source was for our story. i have no idea of their status. the investigation is ongoing. i know that there has not been any punishment or formal charges brought. when andwe will know if they are. did yourr follow-up, reporting do any harm to the double agent and do you care? >> of course we care. todo not want our porting jeopardize people security or national security. we were careful, in this case, to make sure that we did not. we do not publish the story until two parts of the government told us that national

.ecurity issues had passed only then did we release a story. we do not reveal that a double agent was involved. we did not hear from the administration or the intelligence community. risk, we woulden have heard about it. they would have told us. that was probably the reason that they want us to hold it, and we did. mentioned a similar situation at fox news. how do you compare that to what happened with ap? >> i think they are similar. in some ways, ours is worse. in some ways, that situation is worse. i think our situation is

broader. ours was a very broad and overreaching suite and gathering of news information in secret. i think what the justice department did was more offensive, they put in a warrant for a search saying that he was a co- conspirator under the espionage act. in other words, he may have been violating the espionage act and be a criminal. he was acting as a journalist. do not think people should be prosecuted for committing journalism. of what theyree went after and how they tracked him, i think there was more and a deeper

investigation into his particular activities. in that sense, it was more troubling. both cases raise substantial issues. >> you're pointing to the importance of a free press and the role of it. the economics of the news business are going in the other direction. there are fewer bureaus and less money. >> it has become more difficult ofause the economics newsgathering have become strained. traditional media has less resources to devote to import newsgathering. that is the reality. i can tell you that the work remains excellent. there are still thousands of journalists doing high quality work.

many are here in washington. while i think that is a concern, i think the greater concern is local. local newspapers and tv stations have fewer resources available to cover local news and local issues. that is the bigger issue. there's is still a strong going on in the nations capital -- nation's capital. itsitional media builds revenue based on what it can sustain. isestigative reporting essential to the country. . am hopeful of that

we'll have to see how it goes. it is something that is a concern. foree resources newsgathering declining. >> lots of people would like to know your take on edwards noted. do you consider him a whistleblower? uighur? where do you stand on that? >> i am not going to speak to that. , that becomes what gets reported. isopinion of edwards noted not important. it is not relevant to the topic that i am speaking on today. avoidrying to having this type of investigation happen again.

you do an of what person is. i would say that i agree with that int obama in welcome the debate. i think it could be a healthy debate for the country. issuesue today is the for ap. we're used to covering the news. we are not used to the new story. comfortabletirely for us. we are doing our best to cover it objectively. it is up to me to speak and articulate aps position. i will do that. our position to mouth off on every issue. do you think major media

outlets have sufficiently scrutinized the obama administrations targeting of whistleblowers? >> i'm not sure. the ap issued and the fox news issue created greater awareness and more focus on the obama administrations aggressive stance towards leakers. i think that that is more well known. it is gotten more scrutiny. , it may not have gotten much attention before. it will get more now. >> we're almost out out of time.

before i ask the last question, i have a couple of matters to take care of. i want to remind you of our upcoming speakers. we have carly the arena. -- fiorina. we have jim rogers. second, i would like to present traditionalth a coffee mug. >> great. thank you. thank you very much. >> we have had a serious our. -- hour. yousources tell us that like to use rock lyrics in your speeches. could you find lyrics that would describe what has happened with the ap in doj? .> let me thank

-- thank -- think. do you have another question? gimme shelter. and, another rolling stones song, this could be the last time. thank you very much. >> thank you. >> thank you. thank you all for coming. i would like to thank the staff. finally, here is a reminder that you can find more information on our website. if you'd like to get a copy of today's program, you can find it there. thank you. we're adjourned. >> on the next washington journal, members of congress.

the immigration debate in congress and the economy. jammer -- tim murphy talking about how obamacare is behind schedule. >> in a lot of ways, this is a challenge. we have a liberal democratic presidents who is not only been elected but reelected. yes projects i think are very wrongheaded. time.a challenging it is also an exciting time. trying to modernize conservatism to bring it in- line with the challenges that

the country faces now. we want to help conservatives in the country think about how to confront the challenges of the 21st century. neither side is doing a good job of that. there's a lot of thinking about what the 21st century requires, in terms of change, to get back to economic growth and prosperity. to get back to a cultural revival that we need. is challenging challenging and exciting. >> more with national affairs editor on sunday. [captioning performed bynational captioning institute][captions copyright nationalcable satellite corp. 2013]>> at his poorly briefing, ben bernanke said that the fed might ease up on its federal stimulus plan this year. he also discussed financial regulations on employment in the housing market and the japanese economy. this is an hour.

the federal open market committee (fomc) concluded a two-day meeting earlier today. based on its review of recent economic and financial developments, the committee sees the economy continuing to grow at a moderate pace, notwithstanding the strong headwinds created by current federal fiscal policies. the labor market has continued to improve, with gains in private payroll employment averaging about 200,000 jobs per month over the past six months. job gains, along with the strengthening housing market, have in turn contributed to increases in consumer confidence and supported household spending. however, at 7.6 percent, the unemployment rate remains elevated, as do rates of underemployment and long-term unemployment. overall, the committee believes the downside risks to the outlook for the economy and the

labor market have diminished since the fall, but we will continue to evaluate economic conditions and risks as they evolve. inflation has been running below the committee?s longer-run objective of 2 percent for some time and has been a bit softer recently. the committee believes that the recent softness partly reflects transitory factors; and, with longer-term inflation expectations remaining stable, the committee expects inflation to move back toward its 2 percent longer-term objective over time. we will, however, be closely monitoring these developments as well. in conjunction with this meeting, the 19 participants in our policy discussions?the 7 board members and 12 reserve bank presidents?submitted individual economic projections. as always, each participant?s projections are conditioned on his or her own view of appropriate monetary policy. generally, the projections of individual participants show they expect moderate growth, picking up over time, and gradual progress toward levels of unemployment and inflation consistent with the federal

reserve?s statutory mandate to foster maximumemployment and price stability. in brief, participants? projections for economic growth have a central tendency of 2.3 to 2.6 percent for 2013, rising to 2.9 to 3.6 percent in 2015. the central tendency of their projections of the unemployment rate for the fourth quarter of this year is 7.2 to 7.3 percent, declining to 5.8 to 6.2 percent in the final quarter of 2015. most participants see inflation gradually increasing from its current low level toward the the central tendency of their projections for inflation is 0.8% to 1.2% for this year, and 1.6% to 2.0% for 2015. before turning to today's policy decision, let me say a few words about the federal reserve strategy normalizing policy in the long run. in the minutes of the gene 2011

reading, the committee set forth principles it intended to follow when the time came to normalize policy and the size and structure of the federal reserve balance sheet. , weart of prudent planning have been reviewing these principles in recent meetings. we expect those discussions to provide, and expect to appropriate information add -- further at an appropriate time. the rock and bowl set out in the june 2011 remain applicable. one difference is worth mentioning. participants continue to think that in the long run the federal reserve's portfolio should be predominantly treasury securities, a strong majority suspects the committee will not in the process of normalizing monetary policy. although in the longer run sales could reduce or the maiden holdings. given the outlook of the committee policy guidance, these factors are unlikely to be relevant to actual all see for quite a while.

let me turn to current policy issues. with unemployment still elevated and inflation below the committee longer run objective, the committee is continuing its highly accommodative policies. as you know, in normal times the committee eases monetary policy by lowering the target for the short-term policy interest rate, the federal funds rate. however, the target range for the federal funds rate cannot meaningfully be reduced further. policye're providing accommodations through two alternative methods. first by communicating to the public the committee's plans for setting the federal funds rate target over the medium- term, and second by purchasing and holding treasury securities and agency mortgage-backed securities. let me discuss a few key points regarding each of these policy tools. first, the committee reaffirmed its expectation that the current exceptionally low range for the funds rate will be appropriate

at least as long as the unemployment rate remains above six .5%, so long as inflation and inflation expectations remain well behaved as described in the fomc statement. as i've noted frequently, the phrase "at least as long" in the guidance is important. the economic conditions we have set out as proceeding any future rate increase our thresholds, not triggers. assuming inflation is near our objective at that time, as expected, a decline in the unemployment rate to 6.5% would not lead automatically to an increase in the federal funds rate target, but rather indicate only it was appropriate for the committee to consider whether the broader economic outlook justified such an increase. all else equal, the more subdued the outlook for inflation at the time, the more patient the committee would like to be in making that assessment. in the projections submitted for this meeting, 14 of 19 fomc participants indicated they expect the first increase in the

target for the federal funds .ate to occur in 2015 one expected the first increase in 2016. moreover, so long as the economy remains short of maximum employment, inflation is a longer run objective. inflation expectations are well anchored. increases in the federal funds rate are likely to be gradual. consistent with the committee's balanced approach to meeting price stability objectives. the purpose of the forward guidance is to assure households and businesses that monetary policy will continue to support the recovery even as the pace of economic growth and job creation picks up. as our statement notes, the committee expects a considerable interval of time to pass between when the committee will cease adding accommodation throughout the purchases and the time when the committee will begin to reduce accommodation by moving the federal funds toward normal levels. the second policy tool is asset

purchases. the committee has been purchasing $40 billion a month in mortgage backed securities month -- $45 billion a in treasury securities. when our program was initiated last september the committee stated a goal of promoting a substantial improvement of the outlook for the labor market in the context of price stability. it would be taking appropriate account of the efficacy and cost of the program. the committee made no changes today to the purchase program. although the committee lefty pace of purchases unchanged at today's meeting, it is stated it may very the case of purchases as economic conditions of all. .ny such change -- evil any such change would reflect data and implications for the outlook, as well as the curative progress made toward the committee's objectives since the program began in september. going forward, the economic outcomes the committee sees as most likely involve continuing gains in labor markets supported by moderate growth

that picks up over the next several quarters as the near- term restraint from fiscal policy and other headwinds diminishes. we also see inflation moving back toward our 2% objective overtime. if the incoming data are broadly consistent with this forecast, the committee currently anticipates it would be appropriate to moderate the monthly pace of purchases later this year. if the subsequent data remains broadly aligned without current x -- with current expectations for the economy, we would continue to reduce the pace of purchases in measured steps to the next half -- first half of next year, ending purchases around midyear. in this scenario, when asset purchases come to a end, the unintended rate would likely be in the divinity of -- for cindy -- the vicinity of 7%. a substantial improvement from that.1% employment rate prevailed when the committee announced the program. i would like to emphasize that our policy is in no way predetermined and will depend on incoming data and the

abolition of the outlook, as well as punitive -- kenya later process toward objectives. if conditions improve faster than expected, the pace of purchases could be reduced more quickly. if the outlook becomes less favorable or financial conditions are judged to be inconsistent with further progress, reductions in the pace of purchases could be delayed. should it be needed, the committee would be prepared to employ all its tools, including an increase in the pace of purchases or a time, to promote a return to maximum employment in the context of price stability. it is worth noting here that even if a modest reduction in the pace of purchases occurs, we would not shrink the federal slowingportfolio, only the pace at which we are adding to the portfolio well continuing to reinvest proceeds for maturing holdings. these large and growing holdings will continue to put downward pressure on longer-term interest rates. to use the analogy of driving

an automobile, any slowing in the pace of purchases would be akin to letting go on the gas pedal as the car picks up speed, not to begin applying the brakes. i will close by drying the important distinction between the committee's decisions about adjusting the pace of asset purchases and the forward guidance regarding the total funds rate. the current level of the federal funds rate target is likely to remain appropriate for a considerable time after asset purchases are concluded. to return to the driving analogy, if the incoming data supports the view that the economy is able to sustain a reasonable cruising speed, we will ease the pressure on the accelerator by gradually reducing the pace of purchases. however, any need to consider applying the brakes by raising short-term rates is still far the future. in any case, no matter how conditions may have all, the federal reserve remains committed to fostering substantial improvement in the outlook for the labor market in a context of price ability. thank you. i will be glad to take your questions.

i hate to use my question to use a car question. when you say gradually reduce purchases beginning this year what isng next year, that? is that a decision by the fomc? is that -- we had a good discussion of that issue today. we have not had, obviously there is no change in policy involved here. simply a clarification helping people to think about where policy will evolve. so it was thought it might be best to explain that to the group and answer questions. future policy statements may include elements of this, but it is not a policy change. i am trying to explain how we are making the substantial improvement in the labor market

concrete, and how we are thinking about the potential future of the program given alternative policy and economic developments. >> there is no consensus on this? it is not a vote of the opponents he or a plan written down -- of the fomc, or a plan written? >> it represents the consensus of the fomc. >> could you give us information nonsubstantive improvement? is that the unemployment rate coming down by itself to 7%, or other factors? is it substantial compared to the fall? >> many factors we look at when trying to judge the labor market. we look at participation and payrolls and a variety of other data. is 7% unemployment rate indicative of the kind of progress we would like to make in order to be able to say we have reached substantial progress. mr. chairman, there is an

undercurrent of optimism in your forecast and statement. the policy statement today, the on implement rate forecast, 6.8% next year. it is the case that the fed is overestimating the economy's growth rate very often in the past during this recovery. through a time in the first half of the year with pretty subdued growth. i would like you to explain where this optimism comes from, and how confident you are that these expectations are going to be met. >> the fundamentals look a little better to us, in particular the housing sector, which has been a drag on growth since the crisis, is now obviously a support to growth. not only creating construction jobs, but as house prices rise,

increasing household wealth. supporting consumption spending, consumer sentiment. state and local governments, who have been a major drag, are coming to a position where they no longer have to lay off large numbers of workers. financial conditions generally speaking are improving. the main drag, the main headwind to growth this year is, as you know, the federal fiscal policy, which the cbo estimates is something on the order of 1.5% of growth. our judgment is that given that very heavy headwind, the fact that the economy is still moving had at least a moderate pace is indicative that the underlying factors are improving. so we will see how that evolves. obviously we have not seen the full effect yet of the fiscal policy changes. we want to see how that evolves as we get through that fiscal impact. but we are hopeful, as you can see from the individual projections. these are individual

projections, not the official forecast of the committee. we will be interested to see if the economy picks up a bit and continues to reduce unemployment. one thing that is very important for me to say is that if you draw the conclusion that i have just said, that our policies, that our purchases will end in the middle of next year, you draw the wrong conclusion. our purchases are tied to what happens to the economy. if the federal reserve makes the same error and we overestimate what is happening, our policies will adjust to that. we have no deterministic or fixed plan. rather, our policies are going to depend on this scenario to be true. if it does not come true, we will adjust our policies. thank you, mr. chairman. financial conditions have tightened in the past few weeks. bond yields have gone up and gone up again today. why do you think that is?

why don't you talk a little about whether that rise in longer-term interest rates could affect your economic outlook? particularly given that mortgage rates are now above 4%. >> good question. yes, we have come up some. that is in part due to more optimism, i think, about the economy. it is in part due to perceptions of the federal reserve. the forecast, the projections that are -- that our participants submitted to the meeting, were done in the last few days. they were done with full knowledge of what happened with financial conditions. rates have tightened some, but other factors have been more positive. increasing house prices, for example. as far as the housing market is concerned, you want to watch that. but one important difference now is that people are more optimistic about housing. they expect house prices to continue to rise. he see that, for example, in the

michigan survey. somecompensates, to extent, for a slightly higher mortgage rate. in fact, in terms of monthly payments on an average house the change of mortgage rates we have seen so far is all that dramatic. so yes, our forecast, our projections to factor that in. forif interest rates go up the right reasons, that is, both optimism about the economy and accurate assessment of monetary policy, that is a good thing. not a bad thing. >> robin harding from the financial times. you have always argued that it is the stock of assets the federal reserve holds that affects long-term interest rates. how do you reconcile that with the very sharp rise in real interest rates we have seen in recent weeks? do you think the market is

correctly interpreting what you thek is most likely to be future federal reserve stock of assets? >> well, we were a little puzzled by that. it was bigger than can be explained, i think, by changes in the ultimate stock of asset purchases within reasonable ranges. so i think we have to conclude there are other factors at work as well. abouting some optimism the economy, maybe some uncertainty arising. so i am agreeing with you that it seems larger than can be explained by a changing view of monetary policy. it is difficult to judge whether the markets are in sync or not. generally speaking, though, i seen from i've analysts and market participants is they are not wildly different from what the committee is thinking. what i tried today to

communicate. the most important thing that i want to convey again is that it is important not to say this state, that date, this time. it is important to understand that our policies are economic dependent. in particular, if financial conditions move in a way that makes this economic scenario unlikely -- for example, that would be a reason for us to adjust policy. >> washington post. on monday, president obama said in an interview that he believed you had stayed in your position as chairman for longer than you wanted to and maybe longer than you were supposed to. do you agree with that assessment of your term, and can you update us on any conversations you have had him about your future? >> we just spent two days working on monetary policy issues and i would like to keep the questions here on policy.

i do not have anything for you on my personal plans. >> greetings, mr. chairman. craig torres from bloomberg. we would like to push for a deeper explanation on thresholds and triggers. the forecast and mysterious dots do not map into the unemployment forecast. we see more gradual rate rises. people moving to the right on when they expect the rate to increase. and yet unemployment is going to 2014.o 6.5% in also, labor force participation is not in great shape. you, in fact, have been a big believer in a lot of the exit from from the workforce related to weak demand, not structural factors. so here's my question. can you explain a little bit maybe is the threshold too

high? i will point out that the vice two other people who have worked here have done significant research that maybe you need to let the unemployment rate fall much lower to pull these people back into the labor force. i am wondering if you can expand on that. >> great question. what you pointed out, the difference between the dots and the forecast illustrates the point. her member, the 6.5% is the threshold -- remember, the 6.5% is the threshold, not the trigger. we will look at at that point whether an increase in rates is appropriate. among the things we will take into account, first of all is inflation. inflation is obviously very low and expected to stay low. secondly, we would be taking into account, does the unemployed and rate fairly represent the state of labor market? as you pointed out, we have

underemployment, part-time work among people leaving the labor force, reduced participation, long-term unemployment, and number of factors suggesting the 6.5% is a little -- not exactly representative of the state of the labor market at that point. first of all, since it is a threshold and not a trigger, we are free to take all that into account before we begin the process of raising rates. that is what the diagram success best suggests. -- suggests. people believe it will be 6.5% in late 2014 or early 2015, but increases in rates may not follow for several quarters after that. in terms of adjusting the threshold, that is something that might happen. if it did happen, it would be to lower it, not to raise it. new york times. i understand the 6.5% is a threshold, what you just talked about a 7% line for asset

purchases. at that level you will stop with the asset purchases mid next year. you talked about wanting to see substantial improvement in the labor market before suspending the purchases. it is easy to imagine us getting to 7% without visitation increasing. has something changed in your thinking about the value of asset purchases? why are you cutting them off before you see that potential -- substantial? >> substantial is in the eye of the beholder. one from 8.1% and a stagnant rate of improvement to seven percent and stronger economic growth is a substantial increase. it is important to explain that we have two tools. one of the miss rate policy, setting the -- one of them is rate policy, setting the rate. that is what central-banks have used forever.

asset purchases are different. they are unconventional policy and, with certain risks and uncertainties that are not necessarily associated with rate policy. so our intent from the beginning is very clear -- use asset purchases as a way to achieve some near-term momentum to get the economy moving forward into a sustainable recovery. then essentially to allow a low interest rate policy to carry us through. let me make two things -- points. 7%,first, our target is not not 6.5%, it is maximum employment, which according to our projections most people think is between 5% and 6% unemployment. , they are5% guideposts to tell how we will shift our mix of tools as we try to land the ship in a smooth way on the aircraft carrier. other thing i wanted to say

was that stopping asset purchases, when that happens, and i think we are still some distance from that happening, but when that happens it will not involve ending the stimulus from asset purchases. we will hold on to that portfolio. thehe stock theory of portfolio is correct, as we believe it is, holding all the securities off of the market and reinvesting, rolling over securities, will still continue to put down pressure on interest rates. commitments to a low federal funds rate and a large portfolio, we will still be reducing a very -- producing a large meadow stimulus, an f to bring the economy smoothly toward full employment without incurring unnecessary costs or risks. dow jones newswire.

you in your statement before the press conference and in a policy statement acknowledged that inflation readings have been low. but you maintain the inflation -- longer-term inflation --ectation raised expectations have remain stable. but certain measurements have fallen in recent weeks. is that of any concern? if not, why? what would you need to see for the committee to be more concerned that longer-term inflation expectations are following? >> this is something we watch very carefully. there are, as i mentioned, a number of transitory factors that may be contributing to the very low inflation rate. for example, the effects of the sequester on medical' payments. that bond market prices are low right now. these are things we expect to reverse and see inflation come

up a bit. first, on inflation expectations, it is true that s from inflation- indexed bonds have come down. we remain within the historical range we have seen over the past few years. moreover, other measures of inflation expectations, be it forecast by professional forecasters, whether it is survey measures from firms or households, those are all still pretty much in the same faces they were. that being said, as i said in my opening remarks, we do not take anything for granted. one of the preconditions of thaty that i described, inflation begin at least gradually to return toward a 2% objective, is that we will obviously have to take measures to address that if it does not happen. we are certainly determined to keep inflation not only -- not

isy avoiding inflation that too high, but also inflation that is too low. >> peter cook, bloomberg television. given the volatility we have seen in the market since your comments on may 22, the lengths to which you are stressing the forward guidance here today, it does suggest there are some -- you are somewhat worried you are not getting your message up. i am wondering, to what extent do you think your exit strategy will be that much more challenging because even in the small time where you have not been all that much you have seen this reaction? >> it is important for us to communicate. it is particularly important when we have an unusual economic situation where, i think, the standard relationships are not aligning the way they have. using unconventional tolls and

forward guidance. thatss i agree with you our communication will be very important. , the keyhat, again point i have tried to make today is that our policies are tied to how the outlook vaults. evolves.es -- that should provide some comfort to markets, because they will understand that we will be providing whatever support is necessary. if the economy does not improve along the lines we expect, we will provide additional support. if financial conditions of albany way that is inconsistent with economic recovery, we will provide support -- if financial conditions evolve in a way that is inconsistent with economic recovery, we will provide support. your point is well taken that we are in a position simple adjustment by 25 basis points to be federal

funds rate seems like a long ago experience. we are in a more complex type of situation. but we are determined to be as clear as we can and we hope that you and your listeners and the markets will be able to follow what we are saying. >> american banker. next month will be the three- year anniversary of the dodd frank act. as you know, there are a number of significant rulemakings yet to be finalized. the volcker rule, section 165, section 166, to name a few. can you provide us with an withe on where we stand the rulemaking? are you still optimistic we will see the rules completed by the end of this year? >> it is certainly true it has taken time to do these regulations. a number of reasons for that. first is that they are

inherently, many of them, quite complicated. the volcker rule involves very subtle distinctions between hedging and market-making and proprietary trading. the second reason is many of them involve multiple agencies, which have to coordinate and cooperate and agreed on language. , six agencies are involved in making that rule. the third issue is we have to do our homework. we have to get these right. that means having extended comments, getting lots of information from the public, and reviewing those comments and doing all we can to make sure we are responsive to those many concerns and suggestions. it does take time. i think it is a little unfair to say only 30% of the rules have been completed. most of the rules, even if they are not completed, are very far danced. that is true. we are close to completing basek

l 3. we have made good progress on the volcker rule, and i anticipate that being done this year. we are making additional progress on the capital surcharges. these are all things that will be coming relatively soon. at least in the current year. once they are out there, that it will still take some time to be implemented for financial institutions to change their practices and so on. i would emphasize is this is going on that we are not ignoring the health and safety of the banking system, for example. we have been doing these very rigorous stress test that are part of the dodd frank rules. the amount of capital u.s. banks hold has roughly doubled, the largest banks, since 2009. indeed, the largest banks now 3ppear to be basel-

compliant or pretty close to compliant. we are working with banks to move in directions they know they will have to be going. even as the rules themselves are being finalized. i is an ongoing process, but expect to see more rapid completion going forward in the next two quarters. >> peter, then steve. >> peter barnes, fox business. one of the highlights of the conference in jackson hole every year are remarks by the chairman, you. you are not going this year. we have heard it is because you have a conflict in your personal schedule. but some have taken that as a sign that you may not be staying on the job for another term. could you comment on that, and could you give us a bit more explanation as to why you will

not be at jackson hole for the first time? >> as i said, i will not comment on my personal plans, but i will say this. there is a perception that the jackson hole conference is a federal reserve system wide conference. it is not. it is sponsored by one of the 12 reserve banks. every one of the 12 reserve banks has conferences and meetings. this is the one i have gone to the most of any reserve banks. i think it is not inappropriate to go to different conferences and different meetings, and to essentially meet all the constituents i have indifferent reserve banks. that is one reason, certainly. >> mr. chairman, a number of your colleagues expect the unemployment rate to get down to 6.5% next year. which is your threshold for considering raising the funds rate.

yet the fomc has also said that it expects to keep rates very accommodative for a considerable ,ime after asset purchases end after the recovery has strengthened. yet here we are in the middle of 2013. you have not even begun to scale back asset purchases. so you partially addressed this, but could there be a conflict between on the one hand the asset purchase program and of the other hand the funds rate guidance policy? could they conflict? could you perhaps elaborate? >> i certainly hope the unemployment rate comes down so fast that this becomes a problem. i would point out a couple things. one is that there is a range of estimates. they are all based on each individual's idea of optimal policy. policy assumptions may not be the same. it is true that some are as low

as 6.5%. as i said in my earlier answer, that is a threshold, not a trigger. evidently, if you look at the policy expectations given in ae diagram, you will see that fomcstrong majority of participants still expect rates to be quite low at the end of 2015. that is not inconsistent. that is just saying people are looking at a variety of factors tom a including inflation, which is predicted to be quite low. and other labor market factors, thinking when it will be appropriate to start increasing rates. >> cnn money. i should tell you first of all that your analogy to landing the economy on an aircraft carrier worried me a little that from personal experience. i find it is always a bit jarring to land on an aircraft

carrier. but i want to talk about mortgage backed securities. you mentioned during your understoodre, if i correctly, you are not going to dispose of mortgage backed securities that you have on the books during this normalization. i have heard many people on wall street and elsewhere say that right now the federal reserve is the market for mortgage-backed securities. , it is kind of a warped market right now. i am just wondering, how focused are you on mortgage backed securities and this larger market for mortgage-backed securities? i guess what i'm saying, has the ground shifted from under us in terms of mortgage-backed security world on a permanent basis, or it leased a long-term basis, because of the devastating nature of what

happened a few years ago? >> we are still only a fraction of the total holdings of mortgage backed securities. but more relevant, as part of -- our ongoingof assessment of the potential cost of various asset purchase programs, we pay very close attention to market functioning. our assessment is the mbs market is still a very healthy market in terms of spreads and execution times and the number of people on both sides of the market. banks building up mbs portfolios. many investors holding mbs. if the market was breaking down in some way, that would be a factor we have to take into account. but our assessment -- and we are in that market quite a bit -- our assessment is that the market is still working quite well.

our purchases are not disrupting the normal price discovery and liquidity functions of the market. i think the events of five years ago obviously do have a long-term effect. there are bills in congress that gse'schange, reform the and change the market for mortgage-backed securities. or have increasing the amount of private placements or changing the institutional structure of the market. we may end up holding some securities which are in some sense left over from a previous point.-- era at some nevertheless, for the time being, they are the mortgage- backed security market. fannie and freddie are basically it. we are legally allowed to buy and own the securities, so we have found it useful to do that. we believe it has contributed to

mortgage rates -- lower mortgage rates and a stronger housing market. that has been a rationale. to come back to your question, we do not see any significant deterioration in market functioning. >> let me follow-up. in terms of government backing of mortgage backed securities, is there a concern, a legitimate concern, that without government backing of this market in some that, because the private market seems to move with much more rapidity then government moving thethat government out of this backup role on mortgage backed securities would be a real problem or change the nature of getting a mortgage in america? some people say if the

government was not behind it it would be the end of the 30-year mortgage as we know it. >> these issues are being debated. a number of bills in congress gse's,ould change the eliminate them or replace them with backstop government support as opposed to 100% government credit guarantees. these are the debates we are all having about the future of the u.s. mortgage market. i think it is entirely possible that there is major change in the government's role in the mortgage market that we might see a different structure in mortgages. other countries have different structures. they have in many cases the same or similar homeownership rates as we do. it is possible we may find with a different structure it is better for some people. >> thank you, mr. chairman. marketwatch.com.

i am wondering if you could go over your plans about tapering later this year. and why isn't tapering tightening? many people in the markets as soon as you talk about tapering, it will push forward when they think the first rate hike will come. >> as i tried to explain in my opening remarks, our plans depends on the economic scenario and how it revolves -- you've all -- evolves. i have tried to explain how our purchases would evolve if the most likely forecast would likely take place. it will not exactly take place. something else will likely happen. ,ut our basic forecast is one as we pointed out earlier, a moderately optimistic forecast were growth picks up as we passed through this period of

fiscal restraint and unemployment continues to follow the gradual pace it has since last september. and inflation rises slowly toward 2%. those are the conditions that define this baseline forecast. in that case, as i described, we orld expect to slow moderate purchases later this year. through the middle, the early part of next year and ending in that scenario somewhere in the middle of the year. again, it is very important to understand that if we do that that would basically say that we have had a relatively decent economic outcome in terms of sustained improvement in growth and unemployment. if things are worse we will do more. if things are better, we will do less. to answer your other question, i would draw the analogy of 50 federal reserve in normal times lowers the federal funds rate by

25 basis points but some traders think we are expecting 50 basis points, there might be a sense that the financial conditions have tightened somewhat. but nevertheless i think you would say that the fed cut the funds rate by 25 basis points, that was an easing of policy. at the same token, as long as we are adding assets we are -- buying assets we are adding to her holdings. room forieve there is debate. the primary effect of our purchases is to the stock we hold. that stock is withdrawn from markets and the prices of those assets have to adjust to balance supply and demand. we have taken out some of the supply, so prices go up, yields go down. be consistent with the idea that we are still adding liquidity, still adding accommodation to the system.

>> the economist. mr. chairman, i am trying to sort of understand the view with relation to these inflation figures. i am a little surprised at how blasé the committee seems, with the exception of president bullard. .nflation looks remarkably low your projections have it rising at most 2% in 2015. you say inflation expectations have remained within the range the fed has traditionally been comfortable with. they have fallen by a good 0.5%. when interest rates are stuck at zero or lower bound, a decline in inflation expectations would translate to an increase in real rates. why is the fed not more concerned about this? it seems earlier they were more concerned in declines like this. wouldn't you say that even if you are happy with the pace of

labor market recovery, things being equal, this performance is something you should be pushing harder on the accelerator? >> i do not disagree with anything you said. inflation that is too low is a problem. it raises real interest rates, it means that deleveraging takes place more slowly. now, there are always issues about why is it low. aree are a few reasons that probably not that meaningful economically. for example, the temporary movement in medical prices, the temporary movement in non-market prices, things of that sort. we expect inflation to come back up. that is our forecast. but i think it is entirely wrong to say we are not concerned about it. we are concerned about it. we would like inflation up to our target. that will be a factor in our thinking about the thresholds.

it will be a factor in our thinking about asset purchases. and we have to do a mandate. maximum employment and price stability. there is a reason why we define price stability as a positive inflation rate, not zero. we need to have enough inflation so there is some room for real interest rates to move. i do not disagree with your basic argument. since you have referred -- is he the real power behind the throne? you mentioned on several occasions now quantitative easing is designed to spur economic growth and drive down the yield and force more risk- taking in the economy. whethers a debate about

or not it was inflating commodity prices. ,nflation as a whole is subdued but oil prices are around $99. we were told when we had domestic production that would be a single to bring prices down. it has not happened. result has people on the streets because of inflation. to what degree do you think quantitative easing is inflating commodity prices? have you been able to filter that out? and he thought on wage growth why that has been so flat when everything else seems to be doing good in the economy? >> as i recall, i believe when we introduced the second round qe2 in november 2010, there was a lot of increasing commodity prices at the time. a lot of complaining that the fed is pumping up commodity prices. that is a negative for people around the world. we argued at the time that the

effects of the federal reserve policy on global commodity prices was probably pretty small, and that it operated to the extent it did have an effect, mostly through growth expectations. that is, a stronger global economy tends to drive up commodity prices. this time around we have purchased and are in the process of purchasing a lot more than we did in so-called qe2. we have not really seen much increasing commodity prices. commodity prices are way off the peaks of last year. it was a little different from others. many other commodity prices have fallen further. the reason i would give is that the emerging markets -- china, the rest of asia, other parts of the world -- and europe, of course, are softer. global commodity demand is weaker. that explains the bulk of why

commodity prices have not risen so much. i think that is consistent with assety that the fact of purchases on commodity prices, i am not saying zero, but i do not think it is nearly as big as some folks have suggested. i think thatages, is mostly consistent with our 7.6%that unemployment at is still pretty far from where we should be satisfied. maximum employment is between 5% and 6%, although these are very different numbers -- difficult numbers to estimate. we have not seen wage growth except in a few narrow occupations. that is indicative of a labor market that remains quite flat, and where that justifies why we are maintaining a highly accommodative policy.

>> the money market fund proposal is far less comprehensive than the plan you and the financial stability oversight council endorsed. should they differ to the sec or press for more to be done ?leared > >> i am glad to see the sec has taken up money market reform. it is by far the best outcome for the sec to do it. it is the area where they have the expertise and experience. in terms of the actual proposal they put out, it is just a proposal for comment. one of the two proposals, the floating net asset value, is of course qualitatively similar to one of the proposals that was in the fsoc suggestions. we have not yet reviewed this in

enough detail to give a view. but i hope that -- i know for sure that by putting out floating nav proposal, they are moving in the right direction. i hope it comes out with something that is sufficient to meet the very important need of stabilizing money market funds. nikkei newspaper. mr. chairman, we have seen greater volatility recently in japanese markets. jgb, ands, foreign exchange. some say this is due to uncertainty in the federal reserve monetary direction. others say it is lack of confidence in the bank of japan monetary policy. the bank ofiew

japan's efforts? do you still support bank of japan policy? the other question, how much do you pay attention to the spillover effect to international markets when you consider exit strategy? >> i think the volatility is mostly linked to the bank of japan's efforts. which seems logical, since in earlier episodes when the fed was doing asset purchases and the doj was not doing anything, there was no volatility. it seems logical that the change here is the change in boj policy. boj is fighting against entrenched deflation. deflation has been a problem in japan for many years. expectations, public expectations are for continuing deflation. it takes very aggressive policies to rake those expectations and get inflation target the bank of

japan has assessed. that is why it is difficult. to be -- they have had aggressive. the aggressiveness in the early stages, where investors were still learning about the reaction function, it is not all that surprising there is volatility. also, the jgb markets are less liquid than the treasury markets, for example. i think it is something they need to pay close attention to. but on the whole i think it is important for japan to attack deflation. arrows,with the three the idea that besides breaking deflation, it is important to address structural issues. i am supportive of my colleague, japan isa, and what doing, even though it is college -- effects on our economy as well. there are a lot of reasons why emerging markets and other countries experience capital

inflows and volatility. some of them have to do with changes in growth expectations. we of seen a lot of changes in growth patterns in the emerging markets recently. some of it has to do with risk on the, risk off behavior. some of it probably does have to do with monetary policy in advanced economies, which includes the united states. we do pay attention to that. frequently meet with colleagues from emerging markets at the g-20 and we discussed these issues. i think the right way to think g-7 and is that as the what u.s.noted, monetary policy, like that of japan, is trying to do is trying to help the economy grow. a global recovery, a strong global growth depends very much on the u.s. growing at a reasonable rate. , but is some effect

think the net effect, including a stronger u.s. economy, is positive. i think most of my colleagues in emerging markets recognize that. that being said, anything we can do through communication or other needs that minimize any overflow affects or side effects we will certainly do. ?> mark we will come to you for the last question. you have talked about being in uncharted territory with policy. we can remember the news conferences just began two years ago as well. ofre is that mix communication and policy. as far as the fomc decided not to include information about adjusting asset purchases today, how do you walk that fine line? why did the excellency decide to eventually leave it to you to describe that, as opposed to putting it down in its own words? thank you. >> we do not think of this as a

change in policy. deputized to do, if you will, was trying to make it somewhat clearer the imprecations of our existing policy and to try to explain better how the policy would evolve in various economic scenarios. that is a little bit difficult to put into a very terse fomc statement. that being said, going forward i , wek some of these elements can make them useful, will begin to appear in the fomc statement. that is entirely possible. it seems like the right tactic theses case to explain fairly subtle contingencies in a context where i can answer questions and respond to any misunderstandings that might occur. >> thank you.

[captioning performed bynational captioning institute] [captions copyright nationalcable satellite corp. 2013] >> go to gettysburg, and to carnage there, lives lost, the great battles before at wilderness and chancellor phil. talk about antietam, shiloh, manassas. all these battles, people what they think of a way of life, slavery, what have you. all that to settle this contradiction. on.want

we have our country. i like to go to gettysburg to say to my clerks, to we deserve this? do we deserve the sacrifice for the country that we have? are we living up to that? >> the 150th anniversary of the battle of gettysburg. live all-day coverage from the site,al military 9:30 a.m. eastern on american history tv. >> former fed chairman alan greenspan recently talked about the u.s. economy and his tenure in charge of the federal reserve. he was the featured speaker at the wall street journal cfo network conference on monday. this is a half-hour. surewanted to make somebody was out there. >> they are out there. we have half an hour. a lot of ground cover. i would like to talk to you about the present, the past,

and the future in 30 minutes. talking about how you size up the economy today, how we got into such a bad place in 2008, and what economic policy makers need to do next. i would like to start talking about the present. how do you assess the global economy and the u.s. economy, is the extent to which there any momentum or possibility for faster growth? >> basically, i would describe both the united states and the rest of the world as being in a sluggish environment where effective demand, if we can use that old-fashioned term, is inadequate to galvanize the system in the growth. yet there is not enough downside weakness to create any significant short-term changes that i can see.

there are very huge imbalances out there. what i find startling is there are so many things -- which nothing is happening. for example, the european central bank had this huge trillion-euro rise a couple years ago of the assets in their balance sheet. then it came down a little bit. and for the last several months it has been absolutely flat. in other words, the extent to which nothing is happening. it is just not credible with the in central of assets been spelling seats -- central bank balance sheets. there is very little of that spilling over into the marketplace. , money supply,e

for example, is growing very modestly. but the overall issue here is why. why is it a situation in which the central banks have essentially blown up their balance sheet and there is no inflation? the fact of the matter is that all the reserve balances created as double entry bookkeeping against the fed assets and ecb assets, they are essentially immobile. you will have a large depositor, for example, the federal reserve bank of new york, 25 basis points. remember, there are $2 trillion of their -- out of their. the interesting issue is the

fact that they are not lending except in a very slow pace. the reason, essentially, is they are holding this big block of short-term assets which central banks are forcing into the depository institutions'hands. , 25 basisted states points on those reserves. there is no risk. they are holding sovereign assets, basically. and the question is, why aren't they lending? they are not lending. look at commercial and industrial loans. they are just barely back. not even back to what they were. hashe federal reserve these quantitative easing policies, expanding the balance sheets. the ecb, the bank of england -- you sound pretty skeptical. like you do not think these policies are doing much good. >> they do several things. obviously if you are expanding

the central bank balance, the anticipation of what might happen in the future. it is to affect exchange rates very quickly. but it is not affecting inflation. the reason is not affecting inflation is that you need to get these reserve balances re- lent. you need jpmorgan, for example, the re-land its reserve balances to ibm or york fed general motors or somebody of that nature. that puts in the play real money. it is only one that happens that what central banks do to create -- creates activity. as far as i can see, at this particular stage if i am sitting here with these huge numbers but very little of it is leaking out of the system, it just as

well can be zero. so the critical question is, we have never had a situation historically when so-called reserve money, central-bank money, has gone up to this extent. it has never happened to this extent. a bloated balance sheet in the old terms would invariably create some inflation. mainly because reserves would be re-lent. they are not being re-lent now. >> the fed is meeting tomorrow. thesel banks have policies, including the bank of japan, entertaining the idea of how far to push them. the big question in markets now is when did the central banks -- when do the central banks start pulling this back? when should the central bank start pulling back these bond buying policies that are creating all these reserves? >> they have a problem that i think we saw in the united states a week or so ago.

the first rumor that there was going to be a tapering off of the rate of increase, markets reacted very negatively. bond market specifically. which raises a very interesting question. what happens when a turnaround? a major economic implication, but also significant political implications. from my experience, as soon as the fed or the ecb turns around, the bank of japan turns around, there is very negative reaction. .ow, central bankers are tough we get beat upon consistently and after a while you brush it off. but this is going to be very interesting to see what happens.

,s a very interested observer i cannot really forecast how it is going to come out. i know what has to happen. what has to happen is eventually these reserves begin to leak into the system. and it shows up in a number of different ways.

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>> i called this morning and it so happens he was discussing with a lawyer and they said they have been talking to other so-called potential victims and none of them have been interviewed, none of them have been contacted about an interview, even an appointment set up. i think that is pretty slow. i think the first thing you do from my experience is interview people and find out what conversations they had and documents they have, what the basic parameters of the problems are and get busy on it. seems that you are running behind. what would you say about that? >> i'm not familiar with the day in and day out details of the

investigation. i will go see where that is. but in these investigations one of the first things you do as a prosecutor is have the record so when you do the interviews you have the requisite materials so you can don't know effective interview. i'm hypothesizing because i don't know what is happening at the level of who in particular is being interviewed. >> i think you need to get that level. i think it is too slow. i think you can always have agents we are getting our records together and reviewing something. somebody needs to finds out what the problem is. talk to the people and see what the problem is first. >> there is a sense of urgency with the investigation. >> i would share with senator grassley deep concern that this immigration bill would say for

passports, which you should be aware of and need to be on top of, only those who produce, issue or distribute three or more passports have committed a crime. under the bill only those who forge, alter and possess three or more passports will have committed a crime. and only those who use any official material to mick 10 or more passports will have committed a crime. i hope you will look at that. we would like the f.b.i.'s advice if this makes it more difficult to produce integrity in the post port processing business. would you look at that? >> yes, we will do. >> thank you. >> thank you very much, mr. chairman. thank you, director mueller for your wonderful service and work you have done in minnesota. i think that the nation was riveted to the work you did and your agents did with boston. i also notice there were a.t.f.

agent there is so i will start with that. we had a hearing for the president's nominee more the head of the a.t.f. do you think it would help to have a permanent head of the a.t.f.? >> thank is always beneficial to have a permanent head. >> were you aware since it became confirmable this congress hasn't ever confirmed anyone for the job? >> i understand that. >> one of the ideas put out there if they are not going to or are unable to get bipartisan support for a nominee at least to put us over the top so we get a confirmed nominee is to put the a.t.f. under the f.b.i. if for a number of years it goes without getting a confirmed director. what pld you think of that idea? >> that is something that would require a great deal of study and -- before one wanted to embark on a merger. >> i understand.

i think we are at the point with 2,400 acts who deserve a permanent head and i'm hopeful we can get this done this year. but i wanted to put that out there to think about because we are sort of left with, we hope, confirmation but if that doesn't happen we have to think of other ways to get this done. the other question, there were several questions on the n.s.a. issue and i appreciated your comments to chairman leahy about supporting declassifying working to do this some of the fisa opinions. is that correct? >> i have not been asked about the guys -- fisa opinions. it was whether 215 or 702 had been used. my understanding is they are looking at declassification possibility with regard to the fisa court orders. >> that's what i meant. do you think that could work?

>> i leave that -- there was testimony yesterday before the house with regard to that process. i would have to defer to the od and i on that. >> i appreciate the information on the number of terrorist attacks averted. i think it is important to understand that and get the facts right about the numbers. can you talk about and maybe you want to defer this to another time but the collection for data checks and analysis that people would understand would protect privacy? >> certainly if you look at 215, the significant figures you do have a data base, it just has metadata, numbers, doesn't have any information with regard to who has those particular numbers, no content. you have just 22 persons who have access to this to run the

name -- not the names, but run the numbers against the data base. 20 analysts and two supervisors. last year there were only 300 inquiries approximately made in that data base. you then have overlapping and the overlay of oversight from the department of justice, i.t.'s office, fisa court that renews 215 every 90 days and oversight from congress. each of three branches have a role in assuring privacy interests are protected here. at the other end you have the strong possibility and actuality that in some cases this has been instrumental in contributing to preservation of terrorist attacks. >> another thing is synthetic drugs. we have had deaths in minnesota as other states, increase in calls to the poison control line and others and we passed legislation targeting certain of

these synthetic drugs but i believe there is still more work to be done and working on the so-called analog drug provision where i think we could do more with that. could you update us on the general state of synthetic drug use in the u.s. and how provisions we passed are helpful and what more we can do. >> i'm familiar with that. i'm not familiar with the last part of the question as to what more we could do. it is really not our bailiwick. it is more d.e.a. and particularly in the time of budget constraints where we have to prioritize and unfortunately drops down further on our list. >> we have been working with d.e.a. and i continue to see that hasn't gone away and you contribute and i want to put it on your radar screen. we are working on a bill on metal theft. we have seen that throughout the

country with building an issues. you talked about high tech stalking and cyber crime issues. you said you believe the f.b.u. must change to better address threats. what is the f.b.i. doing to keep up with changes in technology? >> well, internally we understand we have to have the basic knowledge of technology to conduct investigations in this a age. to the extent you need to be refreshed on where we are to do our job is getting greater training. our specialists, we have more than 1,000 personnel around the country that are specialists in this particular area. but i think the key for us is the ncijtf, following the pattern of what we did after

september 11 is understanding that we can't do it alone, having a task force concept with all the major players in the cyber arena participating so if there is a substantial intrusion we immediately have those who would be involved, d.h.s., n.s.a., d.o.d., there trying to determine how to address it is critically important. the other thing we have done and put a great deal of focus on the last six to eight months is work with private industry providing information to private industry based on what we have found so they can protect their networks and growing internally, growing the ncijtf and building capacity with the private sector have been the three areas we have focused on. >> thank you very much and thank you again for your service. >> thank you, ma'am. >> senator cruz. >> thank you, madam chairman. director mueller, it is good to see you.

thank you for tefpg. -- testifying. we have known each other a long time. a dozen years ago you were my pwoz at department of justice although let me say any mistakes i make you will be fully held harmless. >> you were clean, not to worry. >> let me echo the comments of cheeks of mine on both sides of the aisle thanking you for your service and integrity. you spent many decades in public service focused on law enforcement and i recall when we were working together at the department of justice almost every day in the morning staff meeting the question you would ask is essentially are we locking up bad guys. and i appreciate that focus to protecting the innocent and to going after bad guys. thank you for a lifetime of service. >> thank you, sir. >> i want to talk about two topics that are both of significant importance.

first is the i.r.s. i want to echo some of the concerns that senator sessions raised about the groups that we know were targeted by the i.r. is that are reporting that they are yet to be contacted or interviewed by the f. pwfpb.i. as you know well in any investigation that is in a highly politicized climate, that involves potentially corruption and political interference from the white house, the investigation is a perilous endeavor, an undid he ever -- endeavor of significant importance to the populace. what level of priority would you characterize the i.r.s. investigation at the f.b.i.? >> it is a high priority investigation in that there are -- it needs to be handled with

care but it also needs to be pushed aggressively because it is a very important case. as i think you are aware, we worked together, i will pull no punches in terms of where that investigation with lead. we would go down any path that would lead to evidence on individuals, organizations or otherwise. and we are in the process of doing that. we have substantial, i think, numbers in terms of those who are working day in and day out on the investigation both internally in the f.b.i. and support from the department of justice where away need legal process. i will have to get back to you in terms and as i said to senator sessions, in terms of the pace and progress of interviews. but i'm aware of some of ongoing

investigation and i do believe that we have moved it expeditiously during the period of time we have had it open which is about a month now. >> how many agents or personnel are involved? >> we have approximately 12 agents in d.c. working on it but agents designated around the country because of the breadth of the investigation who will be working on it. depending on where the investigation takes us. >> i want to ask additionally if the scope of the investigation includes looking into whether individuals have been politically targeted. i can tell you we are hearing more and more anecdotal reports not just of tea party or conservative groups that were delayed or targeted in c-4 applications but donors who supported governor romney in the campaign, who supported republicans who found within

weeks or months of their support becoming public suddenly they were targeted for audits. those are very difficult questions to answer if there is a pattern of doing so because those audits are not generally public. but do you know if the scope has included whether there was targeting of individuals for political activity by the i.r.s.? >> i think you can understand because it is an ongoing investigation i'm leery about delving into much more of what is happening in the investigation. all i can say is i will push it wherever it goes. >> i would certainly urge the f.b.i. not to narrowly circumscribe the scope because the last time there was an instance of an administration trying to use the i.r.s. to target political enemies it was the nixon administration and it led to grave consequences and i think that the f.b.i. is well

situated to pursue a seurious impartial, fair and yet vigorous investigation of whatever the scope of conduct and illegal conduct may have been. >> ok. >> i want to talk about a second topic briefly, which is i'm concerned this administration's priorities in the war on terror have been misallocated. that on the one hand the administration has been less than vigorous in protecting the civil liberties and constitutional rights law abiding citizens, yet on the other hand it has been less than effective in investigating and going after real live terrorists. a concern in particular i have is that your efforts and those of the f.b.i. have been unduly constrained and handcuffed.

i would point to two instances. one, the fort hood shooting, where we had with major hassan considerable evidence including his e-mails with others talking about killing other service members. the f.b.i. was aware of that and yet we failed to stop that terrorist attack. with the boston bombing we had considerable evidence with the czar knife brothers and we had reports from russia and yet we failed to stop that attack. in your views, why is it that law enforcement was not able to connect the dots with fort hood and boston and prevent those attacks backha attacks beforehand and what policies have changed under the obama administration concerning the investigation of radical

islamic terrorism >> prior to the time of fort hood awlawki was seen as a radical imam but was not known to have been involved in operational activities. consequently, when we looked at had we done so, perhaps other steps would have been taken. there were judgment calls made in the course of that as for instance whether you interview hassan that in retrospect could have gone the other way. but i do not think there were any constraints statutory or otherwise that disabled us from doing the job. in the case of boston, yes, we

were alerted by the russians to tamerlan's movement toward radicalization with the expectation was that he was being radicalize d and would be going back it russia to fight with perhaps the chechens. they alerted to us and wanted us to do whatever investigation we could and alert tamerlan -- or alert the russians when tamerlan went back to russia. we did an investigation based on what the russians gave us and that required going through all of the data bases and interviewed his parents, interviewed him, did, i think, a very rational, responsible and thorough investigation given the information we had. he then goes back it russia and when he comes back what we did not do, which we are going to do

n to do in the future are the text alerts have to be identified to a particular person as opposed to just coming in to a task force. in any event, there's nothing that constrained our investigation at the outset in 20 2011, and in my mind even if we had done the one or two things that in retrospect we could have done better i do not think we would have been able to stop that particular attack. but i do not believe that we were in constrained from doing the investigation that we thought necessary once we had the information. >> thank you. >> your timing is perfect. you are next in order. >> thank you. i apologize for being late. i was at a health committee hearing and i'm sorry i missed some and i hope i don't ask

things that were asked before. but my staff tells me my questions are still relevant. first of all i want to thank you for your service, mr. director. i believe our country is a safer place because of your steady leadership and i will be missed. >> thank you. >> i would like to turn to the subject of the surveillance program programs that my other colleagues have been discussing. i believe the government must give proper weight to both keeping americans safe from trysts and protecting -- terrorists and protecting americans' privacy. part of that is making sure there is enough transparency so that americans understand the protections that are in miplace.

based on the briefings i have received i believe these programs include reasonable safeguar safeguards. but i believe the government needs to be more transparent with the american people about these programs. and i think that the paoeeople e the right to know what is going o on. and to the extent it is consistent with national security. and i believe that the government can and should provide that information in a way that doesn't compromise our security. do you think that the government could be more transparent to the american public about these surveillance programs in a way that is consistent with national security? >> well, there are two levels of transparency. first is transparency throughout the government and transparency to certainly the fisa court.

and transparency to congress. given the briefings i think there was transparency to those. when you talk about to the american public you are going to give up something. you are going to give signals to our adversaries as to what our capabilities are. the more specific you get about the program, the more specific you get about oversight, the more specific you get about the capabilities and successes, to t can be done with our numbers in yemen and united states and consequently i will find another way to communicate and i will keep that in mind. so there is a price to be paid for that transparency. where that line is drawn in terms of identifying our capability is out of our hands. you tell us to do it one day we will do it but there is a price for that transparency. >> and that is the question then. in order to do these programs you need the trust of the people. and, of course, this all changes

when there is a disclosure like there has been. that is why we have obviously seen n.s. afpa. be more forthco with that kind of transparency that i have been asking for. i want to ask you specifically about section 215, the authority in the patriot act that authorized the collection of telephone metadata. importantly by statute only the f.b.i. has the authority to request business records under section 215. it is not the director of national intelligence or attorney general, it is the director of the f.b.i. last week director clapper declassified the fact that the telephone metadata collected can be queried only when there is a reasonable suspicion based on specific facts that the

particular basis for the query is associated with a foreign terrorist organization. he also declassified the fact that in 2012 the data base was searched only 300 times. this is the kind of information that i think the american public benefits from knowing and can build further trust between the public and government. do you think that that kind of information would be compromising before the disclosure? >> i certainly think it would be educating oured adversaries what our capabilities are. the specificity that -- you have to with the leak because the leak was just a small silver of information on a particular program. it doesn't talk about all the oversight or all the legal constraints in terms of how a program operates. one has to respond.

so there has to be responsive transparency in this particular -- at this particular point in time. but generally, no, it educates the person about our capability and makes it that much harder to prevent the next terrorist attack. i will tell you that inevitably the communications are the soft underbelly of the terrorists. they have to communicate. and to the extent we can intercept those communications, to that extent we can prevent terrorist attacks. if that goes dark on us, we are going to be sitting, waiting for the next one without the tools to prevent that attack. >> i understand your view on that. let me ask a similar question. i co-sponsored bipartisan legislation to release consistent with national security -- and i'm asking you

your judgment on that -- the corporate opinion interpreting key provisions in the patriot act and fisa intelligence surveillance act. i think what is hard here is that it is hard for persons to debate the merits of a law when the law is kind of secret. do you believe that the american people would gain trust and benefit from perhaps a redacted version of these decisions and opinions by the fisa court on some of them? >> i understand the frustration. you are right. american people are frustrated. you may be frustrated not having access to the particular legal theories espoused in those

opinions. i do know that the odni is looking at the possibility of releasing redacted copies. the lawyer spoke yesterday at the hearing and indicated they are reviewing at least the key opinion or opinions with regard to 215 and 702 to see whether that can be accomplished. so, i have to defer to them on that.er to them on that. >> and again that is in the context of them already being disclosed. >> well, i don't think the opinions -- >> the opinions haven't been disclosed but the programs being disclosed. >> yes, yes. >> ok. thank you again. since this may be the last time you testify before us, again i want to thank you for your service. >> thank you. >> thank you. >> senator lee. >> thank you, mr. chairman. thank you for joining us and for

your service. with respect to section 215 of the patriot act, is it the bureau's practice to request records or other tangible things related to americans that themselves are not relevant to an investigation to obtain foreign intelligence information or protect against international terrorism before a clandestine intelligence activity? >> i'm not certain i understand the question. are you talking about 215? where are the applicants on 215 orders. >> when you make the application is it your practice to request things that themselves are not relevant to the investigation? in other words, do you confine your requests to those things that are related to an investigation or are they broader than that? >> well, in the 215 context the application to the court and the

court's finding defines relevance in that particular context. as we talked about and we have discussed the last two weeks, so i would have to direct you to the orders and the -- i know that they are not published but the fact that the fisa court has ruled that gathering of the metadata satisfies the relevance definition in the fisa statute. >> right. under that, or with that understanding that you necessarily do cover a lot of data that is itself not closely tied to an investigation, you can understand why a lot of people would be concerned and they would have additional concerns about the fact that we have not only secret data gathering activities going on but that they are undertaken

pursuant to secret orders that the american people can't have access to. . >> does the department of justice or the fbi have a view on the constitutionality of

-- icans click second i understand the broader question. i would say the justice department believes that the program in place, the 215 program that has been upheld by the fisa court is constitutional. i would limit it to that set of facts because the discrete set of facts with the attendant that thes on privacy department of justice and the fisa court believe absolutely is constitutional. at some point -- >> at some point he you sympathize with those who say that though this is metadata, the fact you could collect that quantity and it could later be searched, causes, brings about a certain intrusion on privacy? even if it is a privacy intrusion not cognizable in

court? >> as you know better than most, it is not protected by the fourth amendment. question there are privacy concerns, but they are minimus privacy concerns as you get more predication in investigation. i think it would be concerning for people to know there is this database, absolutely. which is why i do believe it is important that this is upheld by not just the department of justice, not necessarily just by the inspectors general, but also by the fisa court and congress. >> ok. i think it is important to remember that the precedent you cited is decades old and did not deal with sheer volume of metadata we are now talking about. the technologies that are at issue now did not exist then. certainly were not even

contemplated then. the more you aggregate large quantities of metadata, potentially on every single american citizen, you give someone within the executive branch of government power to search all of that, you do give them a pretty broad view into the lives of the american people. the more data you get, the more you add to the metadata, even if any one of those data points might be itself constitutionally insignificant, don't you think you start to approximate a point at which you start to breach a reasonable expectation of privacy? >> i certainly believe there quite probably is a scale, yes. 20-the same dialogue we had 30 years ago about telephone toll records that triggered the case. it is the same debate, albeit with metadata as opposed to telephone toll records. you have pretty much the same piece of data in both cases. i would argue that even though

it is not exactly the same as a telephone call record, the proposition that was established by the supreme court in smith versus maryland is applicable today. >> do we have comparable data? do we have the capacity to gather, analyze, and store in perpetuity that kind of metadata on every single american citizen at that point? >> it would have been tremendously burdensome to do so at that point. you could do it, but it would be totally ineffective. one of the differences today compared to 20 years ago is it was in the telephone company's interests to maintain telephone toll data because building was based on telephone toll data. today that is no longer the case. today, telephone companies see ands a burden to store this consequently that information that was there 20 years ago may well not be there today, absent

215. >> ok. thank you very much, director mueller. i see my time has expired. >> senator herrera now. >> -- senator hirono. >> i extend my a low how to you and your future endeavors. aloha to you in your future endeavors. i understand this data could be helpful in connecting the dots. it is hard to figure out which. might be the critical. that helps you to be -- to foil the plot. to the best of your knowledge, what are the costs of collecting and storing data gathered under sections 215 and 702? to your agency and nsa? >> you would have to turn to nsa to respond to that. i'm not familiar with what it cost. >> what about your department?

>> we do not do the storage. an essay the 215 data. -- data. >> what about the collecting part? >> the data go to nsa. >> you are the applicant for the collection of the data, but nsa i should ask about the costs attendant to the data collection? do you know how long the data collected under 215 is kept? >> five years. >> to you think it should be longer? >> no. i also do not think it should be shorter. 's part of your department purview is prosecutions in indian country. you talked about that briefly in your testimony. the department of justice recently issued a report on investigations and prosecutions in indian country during 2011 and 2012. this is a report mandated by

the tribal law and order act of 2010. it seems that while there has been a noticeable increase in the number of violent crimes prosecuted, those figures do not reflect that. one third of all reported indian country crimes were closed administrative leave by the fbi before they ever reached the formal referral stage. moreover, 80% of those investigations that were administratively closed where violent crime related. can you shed some light on the reasons why so many fbi indian country investigations are ,losed before referral to doj and specifically ways in which your department can better address and investigate violent crime in indian country? which is still a very big problem. .> it is a very big problem i know the department of justice, in particular the deputy attorney general and attorney general, this is one

of their substantial priorities, which is why you see an increase of prosecutions and indian country. i will have to get back to you on the figures relating to administrative closures. i am not certain there has been an uptick in the number of administrative closures, why that is there. it may be consistent with the fact we have done additional prosecutions. with additional prosecutions there is additional scrutiny of the underlying case, the result of administrative closures. i might be just speculating. i have to get back to you after looking at the issue. >> considering that this is a major issue in indian country and to realize that in this report so many of these cases are closed, i'm curious to know why. so -- could you provide that information to our committee? senator feinstein has a concern about the use of drones and particularly with regard to the use of drones by the private

sector. do we have any official or specific legislation governing the use of drones by the private sector? >> i am not aware of any. >> do you think we should be considering federal legislation to protect individual privacy with regard to the use of drones by the private sector? >> there are a number of issues related to drones that will have to be debated in the future as they become more on the present. not least of which, the drones in aerospace. the concerns you have on that, .ut also the threat on privacy we arty have to a certain extent a body of law that relates to aerial surveillance and privacy, relating the helicopters and small aircraft. i think that could well be adapted to the use of drones. but it is still in its nascent state. ands worthy of debate

legislation down the road. >> especially the hearing we had in one of our committees, i think it was this one. the drones can be very tiny but store a lot of data and there could be cameras on it and -- i think this is a burgeoning concern for many of us. the datard to collected under section 205, in particular the millions of pieces of information selected, the nsa indicated there were 300 queries made with regard to this data. they have to forward the most queries to you. cases are referred to you? >> they refer them to us when they have a u.s. number that comes out of the query. >> having some difficulty understanding what the process is, what nsa does with all this

information, where you come in. there is some next this between ,he nsa looking at this data 300 queries, and forwarding to you 10 to 12 cases where they see some further investigation. what happens to all these other cases that, other numbers that were queried by nsa? >> these are cases where the identification of a number led to a terrorist case or corroborated other information we had in a terrorist case. on a number in yemen, for instance, and they want to know who from the united states is in contact with that number, you have that number and they run it against the database of numbers to see

whether there is any number in the united dates that has contacted that number in yemen. when that number comes out, we mention a couple examples, to san diego, they referred to us and say there is a number in san diego that is in contact with this number in yet -- yemen that is terrorist-related. we then get a national security letter to determine who has that number. who is the subscriber to that number? when we get the subscriber, we will build the investigation. that is the simplified form of what the process is about. absent that capability, we would never identify that person in san diego who is in contact with the terrorist group in yemen. that is what we did not pick up in 2001. and -- the intelligence community was on a number in yemen and the individual ended up being in the united states and, had we had that program in

place we might well have picked up on it. >> so in your view, in spite of the fact that there are literally billions of pieces of information collected, in your dot connecting possibilities justify this kind collection?f data >> given all the precautions, all the constraints on the program, given the oversight of the program, yes. but it is the program as a whole, not just the fact of the chelation of the records. how it is handled and what kind of information comes from it. i was asked earlier today, why did we miss boston? why did we miss ford hood? there can be one piece of information that comes out of it that would prevent the attack. people will say we were not e-ficiently attentive to the

mail traffic. had we been, we would have stopped fort hood. to the extent that this provides dots for us to connect it is very useful. you never know which dot is going to be the one that breaks the case. to the extent you remove the dots me playing field, we do not have the dots to connect. >> i certainly understand that. thank you, mr. chairman. >> senator flake. >> thank you. i once act of the sentiments of my colleagues and thanking you for your long, dedicated service area and i was fortunate to be on the judiciary committee of the house and we had interactions there. i enjoyed the associations we have had. i appreciate that. i feel kind of like i grew up with 10 brothers and sisters. when the dessert plate was passed around and you're the last one and all the dessert is gone. in this case, all the questions have been asked. and, to your credit, answered.

i have questions with regard to the information held in how long, but you pretty much answered those. there was one thing i still wanted to ask with regard to -- this 215 has been around since 2000 one in some fashion? >> probably 2002. in its fashion since 2007. has the legal interpretation, internal interpretation you rely on in your own memos to produce and interpret 215, what you are able to ask and what standard applies, has that changed over time since 2007? am not certain what year it happened, but it was placed within the pfizer court -- fisa court beginning in 2007. the justice department has made applications and -- to the

pfizer court. the pfizer court -- fisa court has interpreted 2152 interpret this program. it is not just what they think 215 means. the fisa court has issued opinions saying this is the appropriate interpretation of 215. >> one question. you hold data for five years. if it has not been queried or period,d during that you get rid of it. but the nsa holds it. that which has been queried and duly minimzed where appropriate, that can be queried again and again. it is the same information, ,asically, the same database the same metadata queried again

and again. >> but the database is refreshed each day. that which is five years old is a race. >> a rolling five-year period. >> it enables us to go back. you may have a number called, for instance, out of san diego made the call to yemen in i think earlier in 2000. so you needed that number in that database from a year before in order to tie in that particular number to the terrorist number in yemen. so it gives us that database for period of time that has the relevant information in us. if you go to one of the providers, they may keep the data for 12 months, 18 months, something along those lines.

you would not be able to get the same data from the telephone carriers because they have no data retention possibilities, as you would get when we have that database. >> thank you. in conclusion, your service will end sometime in september? >> yes. >> what advice would you give to this body in terms of what changes are needed moving forward and how we handle situations like this. -- this cameis is as a shock to most of the country that this data was being collected. in terms, you have concerns, and i share them, about too much information being out there. but what is the proper balance keephis body to inform or citizens aware enough that their rights and their civil

liberties are protected but they are also giving the appropriate federal agencies the tools they need to thwart attacks? any advice you would give that you have not given before? >> the only thing i would say is that there are levels of transparency in a particular case. it is not always the case -- not only the department of justice and inspector generals, we had inspector general reports on these programs. andthe pfizer -- fisa court congress. to the extent that each of those entities are brought in the loop and understand or are able to question to a certain extent, assuring these entities have coverage, the american public can put faith in these institutions. you are always going to have those areas of classified areas where it does not make any

difference whether it is the cyber arena or the military arena or the intelligence arena like this. where disclosing our secrets will make us that much more vulnerable. there will always be a level of frustration. the only other thing i say is that there will be additional terrorist attacks. one of the most debilitating things for those of us in this try youris to darndest to prevent there being an attack, and then when you are immediately attacked, why didn't you do more? we'll is believed, regardless of the attack, that it is incumbent upon us and others to come back and do a scrub and see what we have done better. but the way that you do it would whoelpful to those of us worry about this day and night. >> thank you. thank you for your service.

senator durbin. >> thank you. thank you so much for your service. i enjoyed working with you over the years. i recall in particular when you arrived at the fbi after 9/11, and i took note of the fact that the computer system at the premier investigative agency for law enforcement in united's dates of america -- united states of america on 9/11 was as archaic as anything anyone could imagine. the computer system you inherited at cfb i had no access to the internet, had no word search capability, and was unable to transmit materials and documents. the photographs of success did -- suspected terrorists were sent to fbi offices by overnight mail because they could not be sent by the computer system you inherited. we had many conversations, some

missteps. tommy today, where are we 12 years later in terms of the computer system of your agency? in terms of the computer systems -- we have a computer system that has been operative the last two years. it is cutting edge in terms of case management. , we of our other programs have not only upgraded but are now incorporating in a much more effective network. i will tell you, it was one of the most frustrating aspects of this job, trying to adapt new technology in institution that has the unique business practices, and to try to modify those business practices at the same time and upgrade the business practices at the same time you are trying to adopt new technology. theicularly with

contracting mechanisms within the federal government where if you have a five-year can't will -- contract, things change, new technologies will come along. there is little room in those contracts for any ability to change and adapt to the times. as you have seen, i remember aing what we call intelligence operations room on september 11 with the papers stacked up. in boston, we were in the same room and there was not a piece of paper to be seen. to the credit of the bureau, the ability to identify those two individuals in boston within 48 hours after it occurred utilizing the various technologies and laboratory, as well as testimony to the fact -- is testament to the fact we have come a long way. still a long ways to go, but we

have come a long ways. >> let me say for the record, in addition to bringing integrity to the position you have, keeping america safe with an extraordinary degree of success, i think your legacy is going to include this, the information technology available in your department is now meeting 21st-century standards. when you inherited it, it was, as you say, a creation of unique business practices. you are being very kind and that characterization. >> can i add one thing? we are ok today, but as you well know technology costs money. , it is anstration issue that all too often gets overlooked and perhaps cut, and should not be because you cannot run an institution like ours lets you stay current with the latest technology. >> sequestration, the way it has been characterized and and demented, is a pervasive problem. i met yesterday with director

clapper and he talked about the impact of sequestration on doing checks on employees for security clearances. -- have had to retreat's reduce the number of checks of employees when it comes to security. now we are dealing with one former contractual employee who has disclosed things which were very important to our national security. speaking of that issue, section 215, which you have talked about quite a bit. i offered an amendment over the years to try and limit metadata collection in terms of specific suspicion. that was the original standard. it was eventually changed to the fisa act reauthorization. yesterday, the department of justice released publicly according to reports we have, the standards for searching databases of phone records when there is "reasonable suspicion

based upon specific and articulated facts that the information sought is associated with a specific foreign terrorist organization." the standard district or the me standard i have been proposing over the years for limitations on 215. can section 21 five the revised to require connection to a suspected terrorist without affecting the ability to obtain useful information? what we call the selector, the telephone number run against the database has to -- meetified as being the reasonable suspicion standard with regard to terrorist attacks. that particular phone number.

you cannot pick a phone number out of the blue. you have to have it tied into terrorism. then it is put against the database. i do not know if your standard as you were supporting it is a standard applied to correction -- collection of the records or applied to identifying the selector against the data, which you will put against the database. >> our standard is on the collection of records. >> that is a little bit different. the standard we are talking about here is the identification of the selector you are going to run against that database of records. >> if the provider, the telephone provider, for example, were to retain the records for five years and you have access access those records for government purposes if there is a suspicion tom a would've that meet the needs of collecting the information to keep us safe? >> not in the same way the

program does now for several reasons. first of all, you have to go to a number of telephone companies and get legal process and go to a number of telephone companies. then you have to hope the telephone companies have some records for -- records retention capability. i can assure you it will not be five years. >> not today. it could be required. >> it could be. i am not saying it could not be done, but you're asking me if there is a distinction between the program run today and how to perhapsposing amended. there are some downsides. the balance is for congress to decide, but there are downsides in terms of the time it would take to serve it, the time it would take for them to get it, and in every one of these cases time is of the essence. you do not want time to go by to get the information to prevent the next terrorist attack. >> i thank you for your service. i wish you the best. >> on the next "washington journal," to members of

congress, first hakeem jeffries on the immigration debate in congress and the economy. then, pennsylvania republican tim murphy on a report finding healthcare implementation is behind schedule. live on c-span every day at 7:00 a.m. eastern. >> it was essential to remove france from canada for the united states to have the opportunity to achieve its independence. , led by franklin, recognized the possibilities for america to become a great country. let me put it in different words from what i said a moment ago. ae american achievement, people of 2.5 million free people and half a million slaves, for them to in effect did the british to evict the french from their borders and

then the french to help them of the british, to manipulate the two biggest powers in the world, is an astonishing achievement. >> conrad black on the emergence of the united states as a world power. saturday at 7:00 p.m. eastern. part of book tv on c-span 2. to think about pickett's charge, to think about the carnage, the lives lost, the great battles before at fredericksburg and the wilderness, you talk about atietam and shiloh and manassas -- all these battles, people defending either what they think was a way of life or slavery or what have you -- all