Transcripts For CSPAN3 Key Capitol Hill Hearings 20140604

Thank you all so much. I am Andrea Mitchell from nbc news and from msnbc, and you know tom donelan and steve. We are so happy to have two former National Security advisers who have had long experience in Public Policy and before and since their roles in government. I, of course, knew tom all the way back when i was first going to the state department and you were working with warren christopher, and steve from all the years in the white house, and of course, with National Security adviser role when secretary rice was secretary of state. So, thank you all so much. Weve had a great kickoff to this from jack lew. First, lets talk about, since he raised the questions of sanctions, and it is so top of mind right now with russia and with ukraine, steve, first to you. How effective have we been in mobilizing europe against russia . Weve seen the effects, the economic effects with the ruble, but how is ha translated into effecting Vladimir Putins behavior . Well, you dont know. One of the Great Questions is what makes Vladimir Putin tick, and i think its really hard to say. He on these kinds of issues runs that system, you know, out of his hip pocket. I mean, its really what is in his mind really is what matters. I think the administration was able to put together International Support for a sanctions regime. It has been limited. It is focused on individuals and institutions that have been associated with the regime and associated with this effort. Asset freezes, visa bans, those kinds of things. Threatened more institutional sanctions that would go after elements of the russian economy in the event russia would have intervened to upset the upcoming election, would have moved across the border with their own forces, rather than with money and personnel and weapons, which is what theyre doing every day. So, i think its been a useful element, but i think one of the problems is these sanctions are so visible and so public that they become sort of, in some sense the thing you reach for. And they are a useful tool, but they are only one of a series of tools, and that can be more useful in some context and in others. And i think in ukraine, one of the risks is if we focus only on the sanctions and dont look at other things we could be doing to over time reduce russias leverage on europe and to move forward with our vision of a europe whole and free. I think those things over the long term are going to be more important in deterring activity by putin. So, one of the risks you know, sanctions in some sense are a prisoner of their own success. Theyve been so visible, theyve been effective. People seem to turn what is a tactic into a strategy and not realize they work more effectively when theyre part of a whole series of u. S. Tools, including, quite frankly, backed up by the use of force. One of the things that got the sanctions together against iran was that both the Bush Administration and the Obama Administration said to countries, help us with sanctions on iran because the alternative to sanctions, bringing iran to the negotiating table, is the use of force, and nobody was enthusiastic for that. So, i think we have to not get seduced by sanctions and their visibility and their effectiveness and embed them in an overall strategy using all elements of power in order to achieve our objectives. Well, and to that point, tom donil donilon, youre the National Security adviser, or the secretary of state, and every the effective tool of sanctions, theyve been tried and tested. But in this instance with ukraine, there is no military threat, because i dont think anyone would suggest the use of force. There have been various criticisms that perhaps we should have done more in terms of military backup for the nato allies. But nobody has suggested that we would go up against the Russian Military over ukraine. No, well, i think i agree with stephen. First of all, its great to be here for the tenth anniversary of the terrorism and Financial Intelligence group at this Treasury Department. This, by the way, and well get back to this, i think this discussion underscores the fact that the name is currently inadequate, because you do a lot more than what is in your name, and i think this is an example of that. I agree with steve that the sanctions effort to impose a cost on putin and russia for their conduct here is one element of the strategy, and the other element to the strategy we do need to include, a number of things that weve been doing, which is the support to the ukraine government politically, to support the ukrainians in terms of getting their economic footing through the imf, through european support and our own support, absolutely critical going forward, reassuring our nato allies, especially those frontline states and nato, taking concrete steps to indicate our support through our Nato Alliance for those countri countri countries, and the president will be underscoring that in europe this week, but also imposing a cost here through sanctions. So, its one element of a comprehensive strategy here to address russias aggression and illegal activity in europe. In addition, i think there are a number of longterm things we need too do, including focusing with europe on diversifying their Energy Supply and having strategies for insuring theyre not as dependent on russian gas as they are today, and i also think its part of also moving forward, frankly, with our economic negotiations and getting the tea tip agreement done with europe. That said, with respect to the sanctions, i actually think theyve had an effect. If you look at the facts, as secretary lew laid out, in fact, most of the assessments right now with respect to the Growth Prospects for russia for this year and next year have been dropped substantially, probably into a contraction. Youve had capital flow. Secretary lew indicated that the estimates would be maybe 100 billion of outflow this year. I think it may be higher than that. We had 60 billion of outflow just in the first quarter. And the former finance minister said maybe as much as 150 billion. You had lots of investments in russia, so i think its had an effect. I think its had an effect on some decisionmaking and its been a deterrent from some of the worst kinds of conduct that putin might have engaged in. Last in respect with putin. My judgment is the same as steves. It would be inaccurate to describe this as a system decision because it really is an autocratic system with putin making the decisions. Thats certainly my observation from spending part of my time with him and in that system. So, hard to know which pressures get which results, but my own judgment is that, in fact, russias actually more and its not a simple calculation because there are costs as well but i think russias actually quite vulnerable to a target of sanctions. Last thing ill say on this is that putin can say that i think i said that three times, but thats okay. No, no, its all good. Youre doing fine. That you know, the Foreign Policy that president putin seems to be pursuing right now is a turn away from integration of russia into, with the west politically and the security, which is something, two administrations have been many administrations, the Clinton Administration had been pursuing. Hes turned away from that, right, and has a Foreign Policy now defined i think, steve, youd agree by negative opposition to the west and in counterdistinction to the west at this point with russia taking the unique stance, pull back, well, in terms of political cooperation. That said, you cant pull back economically. He can stand defiantly politically, but at the end of the day, the russian economy cant stand defiantly in the economic realm, and they really are vulnerable, i think, to this, and i think its made a difference, frankly, in terms of his decision. I think the decision hes trying to make is balance his conduct versus causing the west to put the most aggressive secretatori sanctions on him. I want to follow up with the west, but steve, if his option is to make, pardon the phrase, a pivot to asia, can russia counterbalance his losses in europe by what weve seen recently in his negotiations in china . He can help, certainly on the energy side, to have additional sources of export for his oil and gas. My understanding, though, is that the expectation is that the oil and gas that will go to china is largely from the western part of russia. So, he will continue to be dependent on having supply sorry in the eastern part of russia, he will continue to need to have supply to europe and beyond, the western part. You know, putins interesting, and i think one of the ways to think about putin, and we saw this when he went into georgia in 2005 hes very he has a longterm strategic view. He believes in russian greatness. He believes that he has a historical role to restore russian greatness, not the soviet empire, but a russian empire, if you will, through this Eurasian Union that is contradistinction to europe and to the west and to china and asia. And i think he will go as far as he can in pursuing that agenda, depending on how much he succeeds and how much resistance he gets. When he went into georgia, we were concerned that today georgia, tomorrow the crimea, and the day after the baltic states. Well, putins twothirds of the way there. And if he were to try against the baltic states, particularly latvia, for example, what hes doing against ukraine, and call into question the article 5 guarantee of nato, that is really an effort to split nato. And its very interesting that he has been currying favor with the extremist parties in europe of both the right and the left that did so well in the European Parliamentary election. Those parties are all unified by one thing and one thing only, they dont like the eu. So, in some sense, if youre putin, youre playing an interesting hand, you know. You can take advantage of these opportunities, disarray, as occurred in kiev. And how far he goes depends on how well he does and how much resistance he gets. But the stakes are very high. The stakes really are about the kind of europe were going to have in the future, whether its going to be a europe whole, free and at peace, based on our values, or is it going to be a russiancentric europe with a kind of regime that putin is imposing in russia . Because its interesting, and ill stop, its interesting that his activities in ukraine have been paralleled by even greater crackdown internally on political and civil rights. That hasnt gotten, by the way, i think, the kind of attention in the west that it deserves. The internal level of repression and activity against opponents inside russia is at a level we havent seen. And through the propaganda efforts that we havent seen and against the media. Absolutely. We havent seen really since the fall of since the crack of the soviet union, and this is all a piece, i think, with respect to china. Putin was clearly trying to indicate that he has alternatives through trying to negotiate this longterm gas deal in china. You know, but in kind of an irrelevant time frame here, remember that, i think the total trade relationship, economic relationship between russia and china right now is about 80 billion, which is a small portion of trade relations with the United States, particularly with europe. So, its and i think a lot of competition historically, a lot of competition in central asia. So, well have to see how this ultimately develops, but i do believe in medium term here, theres a lot of pressure that can be put on russia. You know, here treasury has these enormous tools with sanctions. And as have been described to me, the targeted sanctions you refer to are to try to not make any of our european allies bear the full brunt of the pressure. So, we know frances vulnerability on arms exports and the uk on finance and germany, obviously, on energy, but the attempt to try to spread the pain . The leaders have been remarkably supportive, given how hard it was to bring them around. But as we see in the european elections and as we hear anecdotally, i was just in italy and was speaking to the people in the media there, leading figures in italy, from france, speaking to people from germany. The populations are not really where we are regarding putin. People were questioning me, why are you americans so upset about Vladimir Putin . Now we see hollande inviting him to normandy. What would you as National Security adviser, either, both of you, what would you advise the president of the United States to do going to europe this week and having what will obviously be some sidebar conversations with putin. How do you try to hold the coalition together when they are under such pressure from their business interests and their populations . Well, one of the problems europe has, and tom and i were talking just before, and he can pile on to this because hes just been back to europe, but europe is in a bit of a crisis. Theyve now had close to a third of the voters in the European Parliament elections opt for people that are antieu. They are in some sense a crisis of leadership. Its still the question of who speaks for europe. And they will now have a head of the eu council, a new Foreign Policy spokesman. Who are those people going to be and how much are european leaders willing to let them actually speak for europe and take decisions for europe, which the individual countries will back up and support . So, there is a problem. The eu project has always been an elite product. It never has really been sold to the european people. Youve seen that in the referendums over europe in the last four, five, six years. And now there is a question of is europe going to move forward to have speaking more with a single voice in Foreign Policy or is it going to continue to be the voices of the many . So, one of the problems is that the president doesnt really have a solid partner, and it has a solid partner that is internally focused and in crisis. I think its good that hes going. I think its very good that hes going to poland, and i think his speech there will be very important, because he is going to have to show the vision of the future and to try to, in some sense over the heads of the leaders, rekindle some excitement in europe for the vision of a europe whole and free and at peace, something that we kind of stopped doing in 2008 when the expansion of nato stopped, the expansion of the eu stopped, and we kind of left countries like ukraine in the middle between the west on one side and russia on the other. Thats a bad place to be. And i hope the message he will send is its time for us to get back into our vision of what a europe should be and not by default leave space for putin to pursue his. I couldnt agree more. I think its well, whats happened, of course, is in the recent parliamentary elections you had a strong indication that a segment of the european population thinks that theyre not delivering for them, and there really is a lot of effort thats going to have to take place here in order to bring leadership more in line with the expectations of the people and actually deliver. I think the president s role will be to underscore the stakes, andrea, here, and to underscore the importance of solidarity and in the u. S. europe relationship, to underscore the obligations that we have to our partners here. And by the way, i know theres some debate about the wisdom of nato expansion, and theres been some commentary that, somehow, that the United States pursue the nato expansion through the Clinton Administration and into the Bush Administration was somehow responsible for the direction russia had gone in here. Well, i dont think you can really make an argument that, in fact, the direction in which Vladimir Putins taken russia internally has much to do with nato expansion. And number two, through those years, the United States repeatedly reached out to try to work on integration efforts with russia. And number three, i think as we sit here today and you look at the conduct of russia since 2008 and again now in 2014, we should be very happy we engaged in nato expansion. If you sit in a baltic state or you sit in poland today, you are very happy that youre a member of nato, and it makes a huge difference with respect to what putin can consider, what russia can consider that it might do and what is off the table. So, i do think this has been a very important strategic initiati initiative, and i think it needs to be underscored and embraced during the course of the president s trip. And its been pursued by three administrations, because there has been an enlargement of nato under clinton, bush and the Obama Administrations. This has been a bipartisan policy, and its served our country well, and it served europe well. And the argument that somehow this is forced russia to take the direction it has domestically or in terms of its Foreign Policy i dont think holds water. If you are at treasury and you are negotiating and working with the allies on sanctions, how much is your leverage undercut by the snowden leaks and the postsnowden era and its effect, if not personally on Angela Merkel she can get over it but on the Political Sentiment in europe against the United States . Steve . Well, its difficult. And i want to make a plug here for my colleague, juan zerade, who has written a wonderful book that tells the story, and its a great tale about how treasury got into this business and really developed these new tools. Certainly and one of the things thats very important, and tom will talk about this, is the importance of treasury as a source of intelligence and information about what the bad guys are doing and how theyre moving their money around in addition to a way of trying to disrupt them. But it has been the snowden leaks, the discussions of the involvement of u. S. Social media in helping the government on areas of dealing with terrorism proliferation have given us sort of two crises. One is the crisis with government leaders. How come we didnt know, and concerns about spying on leaders and the like. And my guess is that piece we will repair over time through dialogue and conversations. There are some reforms going about how we do some of these things in terms of bulk storage of data and the like that i think will help with the leaders. The problem, i think, is in some sense the european publics, and theres a breach of trust there. And i think there has to be a broader conversation about this balance between what we need to do to defend our people against terrorism proliferation and how to do that in a way that safeguards civil liberties, and i dont think we really have that conversation. I think europe today does not feel under threat from terrorism, does not feel the way we do the risk of proliferation and the risk of Nuclear Weapons in the hands of terrorists. So, i think we need to have a more adult debate. Its a tradeoff, and its a balance. And i think if we could have that debate in europe, the way we are having it in this country now, we can come up with an understanding of what governments can do and what they need to do and what are the constraints on which governments operate. The key, i think, of this will be two things. Lets have the debate, and lets have it in an adult way, not in a stick figure way. And secondly, in any event, theres got to be a lot more transparency, which, again, comes to the debate. People have to understand and know what is being done and not done in their name and be comfortable with it over time. So, we have a lot of work to do in terms of the debate and discussion with our publics here at home and with publics in europe. The snowden revelations have been exceedingly damaging, obviously, and its been damaging on a number of dimensions, including in terms of statetostate relations. I agree with steve. I think that over time, because the relationships are mutually beneficial and they are deep and they have been exceedingly productive over time, i think that those will be repaired and are on the road to being repaired, frankly. Theres other aspects of this in terms of damage that we can discuss, not directly irrelevant here, which is to the commercial damage to American Companies and the trust in our companies with respect to our internet and cloud and hardware products around the world, which is something that is going to be something were going to have to work on i think very hard, and theres a real threat to the bulkization of the internet. So, that damage i think is for real and will need to be addressed, but i agree with steve. I think with respect to the intelligence relationships that we have, they are mutually beneficial and i think we can work those i think well work those through in a productive way. Steve hadley, one of the arguments for negotiating with iran that was made privately to many of us was that the sanction regime was teetering. It was very, very effective, as secretary lew was suggesting, but that europe was not going to stick with it forever, that we had to negotiate with iran. I dont know where you come down on that in terms of secret negotiations. You know, theres always a problem when you use sanctions and diplomatic pressure and other things to put pressure on a regime. Its pressure for what purpose . And the purpose in this case was try to get the iranians either to unilaterally give up their program or come into a negotiation and negotiate constraints that would reassure that its not a route to a bomb, so do you have any doubt, let me just ask should we stipulate that there was no way they were going to come to the table without the sanctions, that the sanctions worked to that i think the sanctions were one of a series of tools in terms of diplomatic isolation, in terms of things directed at their program which we cant talk about. I think its been a very successful, coordinated policy of pressure. I think it did bring them to the table. I think having come to the table, we have an obligation to test and see if we can get a negotiated solution that gives assurance that this is not going to be a path to a Nuclear Weapon. The tricky part is going to be, you know, if the sanctions succeed, the challenge will be how do you gradually unwind them in such a way that we still have options in the event that the iranians cheat. If someone said to me whos been following this, if iran does not now have a covert Nuclear Facility going in iran someplace, it will be the first time in 20 years that it hasnt. So, there is a cheating issue. And one of the challenges of the agreement is not just whats the agreement, but what are the things that surround the agreement in terms of snapback sanctions and preauthorized actions that will give iran an incentive not to cheat. So, i think, you know, there are issues of sanctions if the agreement if they succeed in reaching agreement. There are harder issues of sanctions if there isnt an agreement. And the question there will depend, how did the negotiations break down. If the iranians walk out in a huff and say we dont trust the americans, were now going to go get a Nuclear Weapon, then it will be pretty easy to get sanctions back on the table and maybe even some other things like military action. But if it is a muddier outcome and the iranians basically go public and say weve made a reasonable offer to the americans, the americans didnt accept it and we cant accept it because it does not meet our thresholds, thats going to be the question. Can we then get the world at that point to agree that we need more sanctions to make iran more reasonable, or do you have a Vladimir Putin, decides to put himself once again center stage and announce that he thinks the iranians have given far enough and the problem for the breakdown in the talks is all in the americans head . And at that point, the International Consensus that has made sanctions so effective breaks down. Thats a problem. Yeah. Is there a third option also . Is there a third outcome where both sides say weve made a lot of progress, there is a lot of technical challenges remaining, were going to extend beyond july, and then youre Bibi Netanyahu and you say this is a very dangerous window, because this is when iran might start well, the interim agreement provides for that expressly. The interim agreement based on which were not negotiating provides for a sixmonth rollover if both the parties agree to do that, by mutual consent, number one. Number two, the basis on which were doing these negotiations, the interim agreement, is a sound based on which to do a negotiation. Essentially, you have frozen the key aspects of the program. With respect to the medium uranium at 20 , youve actually rolled it back. But are you as confident how would you respond to steves suggestion that iran has never not had a covert hidden facility that we couldnt detect. Well, but this is part of the ultimate deal, right right. That wed make with respect to the size of whatever program is there, the distance that they would be from being able to achieve a Nuclear Weapon if they decided to break out, and quite critically, the importance and the intrusiveness of the inspections regime, which you might have, and the ability to kind of, as steve was saying, to go back to sanctions in the event that you see cheating on that side. So, the details in this will matter. I disagree, by the way, with the premise of your question, that somehow, that the sanctions regime was breaking down, thats the reason that the United States and iran got to negotiations. Okay. I dont think thats true. I think what happened is that, as steve indicated, if you do an assessment of each time that the iranian government has made a strategic reversal, a strategic decision to go in a different direction, it has only been under extreme pressure, and we can go through each of those instances since 1979. We determined after, the United States determined, after a bona fide effort to do outreach to the iranian government in 2009 and to offer a negotiation at the highest level with the iranian government, and we got nowhere. They were either unable or unwilling to respond with respect to that. Our understanding with our allies and friends and partners around the world, including the russians and the chinese, was that, in fact, after this bona fide offer of negotiation, if the iranians were not able to do this or unwilling to do this, and thats what happened, that we would join in a Pressure Campaign. And as steve indicated it was a multidimensional, simultaneous, multielement Pressure Campaign that was put on the iranians, ultimately that resulted in the election of rowhani, who then came to the table. Essentially, he ran on the prospect, or on the proposition that he would undertake to relieve the economic pressure on iranian society. The only way to do that was to engage in a negotiation on the nuclear side with the west. I didnt see really any breakdown in the sanctions regime. I saw, on the other hand here, rowhani being elected on the promise of getting some Economic Relief for iran and knowing the only way to do that was to come to the table with the United States and the rest of the international community. That, by the way, leads me to another point here, which is that i think all of the leverage is with the west right here right now. Because the sanctions, the bulk of the sanctions, remain in place. I dont think the iranians have gotten any sort of real kind of maximus boost here out of the interim agreement, and the United States and the west should come to those negotiations with that attitude, andrea, that, in fact, that sanctions remain, that rowhani will not be able to make good on his promise to the iranian people, and that we have quite a bit of leverage here in these negotiations. Will that leverage persist, steve . We saw the french and the germans and other interests lined up in davos trying to meet with rowhani, then sending delegations to tehran. How long can we maintain the coalition . Its a problem. You know, weve seen this movie before, and there are differences, and we can talk about those. But you know, weve been to the table with the iranians before and weve had a Nuclear Agreement with them before. This was in the 20032004 time frame, where it was pretty clear that the iranians thought, as Moammar Gadhafi thought, that after afghanistan and iraq, the United States was willing to use military force against iran over its nuclear program, and this suspended the program, the covert aspects of the program. They engaged with negotiations with eu3 and we reached the paris agreement, which suspended enrichment, pending negotiation of the ultimate resolution of the issue. And then, quite frankly, we got bogged down in iraq. They had an election. A mannie nijad is president. He campaigns on the platform that those who entered into the deal with eu3 were traitors and ought to go to prison, and he rolls the whole thing back. So, theres getting a deal, and then theres keeping a deal. And i think the administration, i hope, has in some sense three task forces going. One is the task force thats trying to get the deal with iran, one is the task force thinking about what are the things outside the agreement that will actually keep the iranians compliant with it, and then third is a task force thinking about how to reassure the rest of the countries in the region, our friends and allies, that if there is an agreement with iran, we are not now sort of packing our trunk, thinking our job is done and leaving the region free to an iran which will have even more money to back the kinds of things its doing to support terror, to support assad in syria, to disrupt iraq, to disrupt afghanistan. This is a real challenge. And you know, getting the agreement is only the first step of a very challenging road. I agree with that, but with respect to companies and others being anxious to do business with iran, the details matter he here. And the nature of the sanctions in place right now would continue to force companies to choose between doing business in iran and doing business in the United States. And weve seen the force of that. One of the really, i think, important aspects of the sanctions approach thats been put together by the u. S. Treasury department has been to take advantage of the centrality of the United States Financial System and to work with governments, obviously, but also with private entities who have to make these kinds of choices. And thats what the sanctions do. The sanctions both put together by the administration and implementing congressional legislation really do force a company to decide, a bank to decide between doing business with iran and doing business with the United States. It is exceedingly powerful, and i am not in the government today, but i think i would have a pretty good guess that the Treasury Department would tell you that while these are in place, they intend to enforce them. As we look at the arc of treasurys role in making Foreign Policy, taking the 30,000foot view. Steve, when you first became first deputy National Security adviser, then National Security adviser, was treasury always at the table as big a role . Or how did it involve under juan and stew and now david into becoming, or what is it now in terms of the relative positioning . My view was that treasury should be at the table because what we did in Foreign Policy had implications on things treasury did and because it was a clear head of someone who is actually not engaged in the daytoday. It was not the treasury there was because they had an arsenal to contribute to solving the problem, and thats really the terrific story that juan tells and others have told, that it was a real case of people in the government being free to innovate. And it starts 11 days after 9 11 with executive order 13224, which is an effort to target terrorist financing and those companies and banks that were laundering terrorists funds. It then expanded, having been fairly successful in using it as a tool on the war on terror. Someone comes in and says why dont we use it for proliferation . And the first test is actually not iran, its north korea in 2005 and where we actually got some hands around kim jongils personal funds. Let me just tell you, i was in pyongyang in 2006, and when they told me it goes back to i had to pay Something Like 75,000 in cash for the satellite time we had used or they wouldnt let me leave the country. And i discovered there was no way to make a transaction because of exactly what you had done. Right. We had to go to another diplomatic resource and we cut north korea out of the Financial System. A bridge loan or whatever you would call it. And ultimately, it led them to come in 2007 to negotiate a followon agreement, which at the end of the day was never implemented. So, then the question was, it works on north korea, lets try it on iran. And one thing that i think needs to be said is there are several arrows in this financial sanctions quiver. One is the direct one, which is, you know, freezing peoples assets and listing institutions that are laundering funds for terrorists, proliferators. But the other one that stewart levy and hank paulson used so effectively is the indirect reputational risk. You go around stewart went around, and hank, to maybe three dozen, four dozen banks and Financial Institutions in europe and said, you know, you dont really want to be dealing with these iranians banks and dont want to be dealing with the irgc, because they are actually funding terrorist activity, proliferation activity, its going to become public, and your people and your depositors arent going like it. So, theyre a wonderful tool, because they both have direct, indirect and reputational effects. And this was a whole this was a new frontier, and it made treasury a real player. And as i said earlier, my risk, my concern now is, its become so good and they become so effective, people think its a silver bullet, rather than just one element of a comprehensive strategy. I agree with that. A couple things on the office. First of all, it really is a truly nonpartisan set of tools that have been used, a bipartisan set of tools. I think thats been indicated. And one of the first personnel calls that i made during the transition in 2008 was to track down stewart levy at an event with his kids, right . And talk him in to stay get him to stay in the Obama Administration and he did. And i think to steves point, it resulted in continuity in building on the tools and insights that had been developed in the Bush Administration that we built on and enhanced, i think, going forward, so, it really is a bipartisan effort. Treasury is at the table and has been at the table addressing some of our most important security issues, National Security issues, whether it be the terrorist threat or it be the north korea challenge or the nonproliferation challenge in iran. I think the point that steve pointed to, which is a really important point that goes to the point of the strength of being at the center of the world Financial System here in terms of our ability to do these things. In many ways, even our unilateral steps become multilateral steps, because as steve was pointing out, if you sit down with a bank and you say, all right, do you have assets and transactions in the United States, theyre subject to the treasury designations. But you also have to think, and were designating this bank in iran, for example, because of bad conduct, and we can underscore to you and show you the bad conduct. Private sector banks around the world, theyre not going to take that risk of dealing with those entities after theyve been designated, with cause, and you will have this ripple effect, and it really has been this has been one of the great insights, i think, that the two administrations have had with respect to the effect of sanctions. It is way beyond, as the treasury secretary says, way beyond trade limitations, trade embargoes, quite targeted and exceedingly effective. Have we lost any leverage post 2008 as many in europe and elsewhere blamed us and our Banking System being undercapitalized and our mortgage, the spreading of the mortgage crisis to europe . Did we lose any leverage as china has risen relative to our strength . You know, im not a financial type, ruben jeffrey, there are others here that you can ask for that. My sense is, look, we took a hit, but we have recovered. It is true that i think one of the things that is the consequence of the financial and economic challenges of 2008 is that almost for the first time, it was developing nations rather than the developed nations that actually led us, in some sense, out of that financial and economic struggle. But a lot of reforms have been put in place in the Financial System in the United States and globally, and i dont think anybody thinks that there is any substitute in the short run for the dollar as the reserve currency. China has a lot of things it needs to do to make its currency truly convertible. And you know, europe has its own challenges and questions. You know, not two years ago, we were thinking about whether there was a crisis of the euro and whether the euro was going to survive. So, at this point, the United States Financial System is still the beacon of stability in the international community, and i think thats, my sense is its going to be that way for a good while. I agree with that. Number one, we obviously took a hit, reputationally in terms of authority, power and prestige in the world after the financial crisis, number one. Number two, though, the policy response in the United States, both at the end of the Bush Administration, into the Obama Administration, i think has actually been quite a success. And indeed, if you look at our Banking System as compared to Banking Systems, for example, in europe and elsewhere in the world, you see a much stronger system here, right . And thats reflected in the fact with respect to capital flows and where money has gone in the world, has come into the United States, obviously. With respect to the specific things were talking about here, andrea, i havent see any diminution in respect to the ability to work with the Financial System in a cooperative way multilaterally to affect our regime. And indeed since the financial crisis, weve had most of our success with respect to working in the Financial System. But the point steve made i want to get back to is very important. Because treasury can do things, and they can do things quickly and theyre identifiable and theyre concrete, its very important that they be part of overall strategies and that we remember that not every case is iran, for example. The iranian case where we had been exceedingly effective, as i argued to you earlier with respect to bringing the iranians to the table is the unique set of circumstances. It is horrible conduct. It is clear violations of international law. Its a policy goal in terms of preventing iran from acquiring Nuclear Weapons in which there is broad agreement around the world, including, by the way, by the russians and the chinese. Absolutely. They were particularly vulnerable with respect to oil and the banking sector. So, it was a unique but even with all that, it also took tremendous resources, tremendous resources, both to work the governments multilaterally and also to work, as we were referring to here, work with private entities around the world. So, its important that each of these challenges be taken on in their own context and you not assume that we can do an Iran Campaign in every case, because thats not going to be the case. Additionally in the iranian case, we also had the important collateral circumstance that we were able to do this at a time when the saudis were willing to increase their Oil Production and where the United States had had its Energy Future go in a completely different direction, right, with respect to us now being on track to become the largest producer of oil in the world, and indeed, the increased production of oil in the United States during this critical period in conjunction with the increased production by the saudis is one of the reasons why the costs were actually bearable here in terms of our cutting off and reducing by more than half the export of oil, crude oil from iran. Absent those productions, we would have had real cost issues with respect to the impact of the sanctions that we were putting on, in other words, negative impact on americans and on the west from our sanctions. And we were able to manage that because of our energy, the change in our Energy Futures and saudi actions. Let me drill down on china for a moment, in terms of their increasing leverage and the cyber war and their they have no reluctance to use these tools, and we are, i would argue, more vulnerable in that the snowden leaks occurred only days before the summit in sunnylands, when were told the president was planning to make that a big part of his first big meeting with president xi. So, how has china evolved in terms of its economic and cyber tools against what we can leverage, steve . Well, and again, im dealing with whats in the newspapers. But we have to you know, this is a case where we have to make some distinctions here and we have to have a conversation. It is one thing to use cyber tools to get information to counter terrorism, to counter proliferation, to deal with threats against the country. It is another thing to use cyber tools to steal private Corporate Information for competitive economic advantage. We, clearly, do the first. We are not alone. There are a lot of other countries that are doing the same, some of whom are very outraged by the disclosures of snowden and probably know more about what we do than what their own home countries are doing, but that is something countries do. What china is doing in this what some people call the greatest theft of intellectual property in history is really something we dont do and most other countries, not all other countries, do not do. But china is doing. And one of the things we have to do is get the chinese to understand in their heart of hearts, though they will not admit it publicly, that there is a difference. But secondly, the chinese will not stop this activity, in my view, unless there is a penalty. Now, this effort of indicting, you know, five pla people is an effort to try to impose a penalty. It has a lot of problems, because one of the problems is it one of the unfortunate things about u. S. china relations is when we hit a political hiccup, one of the first things either one country or the other does is cut off militarytomilitary ties. And in fact, having militarytomilitary interaction is a very important thing. And unfortunately, arresting the five pla threatens that. I think we need, and Keith Alexander is here, and you can ask him about this. I think we need to impose a penalty for cyber crime in cyberspace, and to be able to have a way and there are difficult legal and policy issues here to take away the capacity of cyber criminals to conduct cyber threats. And until the day that we can pose, in some sense, asymmetric penalties for this kind of thing, i think its not going to stop. I think just, you know, diplomatic interactions are not going to get us there. There has to be some real costs. And i would hope that theres a task force looking at what those costs could be, because i think, you know, i understand why they arrested the pla folks. I think thats not going to turn out to be the best or the most useful tool. Not arrested sorry. Indicted them. Yeah. I apologize. I get the first public speech with respect to this. In the spring of 2013, with respect to calling on china directly. And i have a spent a lot of time with the chinese leadership and i think they were a bit surprised this came from me. As steve said we have massive, and had massive state enabled cyber theft. From the United States. And indeed we have been engaged with the chinese on this. And i think i talk a little more broadly about it. I do think there has to be a khost. The chinese didnt perceive any cost to this up until the point that it was raised. They certainly used the snowden revelation, as you pointed out, as a pushback with respect to the dialogue that weve had with them. But very important to get back to the dialogue, and its very important to reject the equivalent argument that the chinese might make between espionage, all right, and and criminal cyber activity and cyber enabled economic theft. Theyre very different things. And the conversation that takes place with the chain hes has to go broadly beyond cyber thieves to say this is going to affect the overall quality of the relationship between the United States and china. That this is going to be something thats going to be raised repeatedly and directly with the leadership of china by the highest levels in the United States. And its going to affect the overall quality of the relationship. It cant have the circumstances. The conversation i think we have to have with the chinese directly, you cant have a circumstance where you have a 500 billion a Year Economic relationship between the United States and china and where you have this scale of outright theft. That die log needs to take place. There needs to be a cost associated with it. It needs to affect the overall quality of the relationship. And it needs to be kind of a very direct set of conversations about what is allowable, whats on and whats off in terms of cyber activities. So rejecting the equivalents argument is a very, very important what leverage do we have . We have a 500 billion relationship with the chinese, right . An economic relationship. And there are a lot of elements to the relationship that we have with the chinese. What i would be looking for and what tom would be looking for is, you know, a smart sanctions too or financial sanctions, too. What is something that will happen to the chinese system. We dont have to talk about it. It will just happen. They will know it, we will know it and the argument is if this continues more of this stuff is going to happen. The question is, what is that . I would rather have it id rather not have to put it in the standpoint of the overall public trade relations. I think just raising it high level meetings is fine. But i think weve got to look for some new tools that they will see that will hurt them in this cyber realm and they will know if they dont change their ways more bad will happen. I dont know what it is. Im not in that world anymore. But thats what i hope were looking for. I have to ask you because jack lew started this off by talking about 9 11 and the evolution of the treasury tool. In response. And there is a big debate today about whether releasing five very highlevel taliban prisoners is the right response to get back a prisoner of war. Steve . I dont do this stuff anymore. Look its very hard and the right questions are being raise. Did we negotiate with terrorists . We dont, and for good reason. Problem is, if you swap or pay to get your hostages back, you incentivize hostage taking. Thats a problem. There were congressional statutes requiring consultation with congress. If we could consult on the operation against Osama Bin Laden, why couldnt we consult on this . So there are a whole series of questions that need to be raised. You know, again, my guess is that the dilemma the administration had was the following. Weve turned over a lot of prisoners in afghanistan to afghan authorities, and regrettably they are released a lot of them over the objection of our military people who are now been released in afghanistan who killed americans. And thats a very troubling thing to happen. But that is what happened. In afghanistan in disclose of those prisoners. Our troop levels are coming down. And i think the administration probably was in a very difficult choice of, look, we have an opportunity to get this guy back. The president said i think, regrettably, that all of our combat troops will basically be out by the end of 2016. I think thats unfortunate. To have that kind of arbitrary cutoff. Id much rather have it condition space. But in any event if thats the policy, the question is, if were not going to get this guy back, when . And i think that was the dilemma. And they basically said look, weve lost control of all these prisoners in afghanistan. These are five guys, bad guys, but at least we have a chance by giving them to the qataris that we can keep them off the battlefield for a period of time. And this may be the only way we can get our guy back. I think thats probably the decision that came before the administration. You can have arguments about whether how it was handled, whether they should have notified congress and all the rest. But my guess is, thats the dilemma they faced. Its a hard one. We did not we didnt do a preconsultation with the congress on the Osama Bin Laden raid. But with respect to this, one, theres a big difference between getting a p. O. W. Back in a war zone and negotiating with terrorists. Its an entirely different context here. And thats what this is. This is essentially getting a prisoner of war back through a swap. Its a unique undertaking, because you know, the qataris were mediating this, and will take some steps to restrict the activities of these guys. They are difficult decisions, though. With respect to incentivizing the taliban and others who we are at war with in the in afghanistan, from taking prisoners, they dont need a lot of incentive, right . Weve been in a weve been there for over a decade. And this they know the value, frankly, of being able to of being able to take an american, american soldier, a captive, and i dont think that this i dont think they need any incentive to do that. I dont find that argument persuasive. We have that risk every single day in afghanistan. And we deal with that risk. There are others on the panel, michele knows, who can talk about this. I dont know its an incentive problem. It was an opportunity as steve said to get back home. The only prisoner of war in the conflict, and there were constraints put on the activities of the guys who were going there. And its a different context. Its essentially getting back a p. O. W. In a war zone context. And i take toms correction, its interesting, because i read the press coming out of the sunday shows, which said that we had consulted on the obama the Osama Bin Laden laraid, whi was not my understanding. I thought thats interesting. It is a point if we did consult on that, why not here. I think its important that that record be connected publicly. Because that argument is being im willing to make that correction. I know something about this. Yes, indeed. Im willing to make that im willing to take the opportunity to make that correction, make that correction public. Are you making a distinction between consultation on the months leading up to and or and no consultation during the week or days leading up left, talk about places where you dont think sanctions work. We talked about iran, and youve talked about the unique set of circumstances with iran. And to a certain extent, with russia and ukraine that targeted sanctions, you think, have already affected russias economy, and potentially this behavior. Where doesnt it work . Steve . Syria . Well, a couple things. And im others can correct me on the numbers, but one of the issues that came, surfaced in connections with sanctions against russia on ukraine is people, you know, the United States generally has to lead on these things, and encourage the europeans to come around. But i think germany is, i think, russias number two trading partner, if you take the eu together its far and away the number one trading partner for russia. Were way down that list. So one of the problems in sanctions is, you know, they need to be multilateral many times because the folks with the money, with the economic and financial relations, may not be the United States of america. This is why it was so important to bring the europeans along, which actually started in the Clinton Administration, to bring the europeans along to see around the way we did, because we were sanctioned out, in many respects, at least initially on iran. Now the administrations two administrations moved that goalpost further. So one is the question, you got to look at whos got the leverage. And if youre really going to make these things work, then the folks with the leverage have to be at the table, and have to be willing to sanction. Because otherwise, theyre not going to be effective. Secondly, you know, it is tools can are cumulative in their effect. And if you can have a military element in addition to your diplomatic and all the rest, if you can have the threat of a military element, it is going to make sanctions more effective. This is the argument that we made on iran. We cannot make bring the table with the sanctions well have to contemplate military force and nobody really likes that. It is true, nobody when russia went into georgia, when russia went into ukraine, no one suggested the u. S. Would engage russia militarily. But the fact that we have reinforced our presence in nato countries, the fact that hopefully the nato countries will begin to pay more attention to defense, and to increase their own defense spending, this again is something that i think gives added leverage so a sanctions context. Finally, theyre at the question for how many things are you willing to threaten sanctions. Weve now been on terrorism, weve been on organized crime, and drug trafficking, weve been on proliferation, theres now discussions sort of using it as a tool for human rights. You know one of the things you have to really decide is, because you can overuse these things, what are the National Interests and National Values which are so important to us as a country that were willing to use this tool . And what are issues on which, you know, the advocates for this particular perspective will watch you use the tool but in some sense we ought to say you know, weve got to save this for the things where that matter most to us, and where they can be most effective. So i think thats its got to be an issue of priority in terms of values and interests, and in considerations of effectiveness, because you know, these things will become a wasting asset at some point. I think thats all correct. One is that, with respect to where it hasnt worked, i think overuse is an important is very important concept to think hard about here. As i said earlier, not every case is going to be an iran case and you have to think very clearly about what your objectives are. And it cant just be a reflex to go through this because, again, its something that the treasury can do in a week, and military action it seems to me the two or three context, andrea, where theyre difficult, right, is where a country is unplugged from the world economy. Like north korea. Now as the Bush Administration successfully was able to find a seam there and a connection that was effective. But thats one of a few. So if a country is willing to live like north korea, and tragedy, and where their citizens are completely unplugged from the world, and suffer, you know, thats a more difficult circumstance in terms of you know, you can make it more difficult for north korea and we have, frankly, to engage in plow live ration efforts and we can make it more difficult for them to get the kinds of things that can advance their program. But you have a more limited effect when theyre unplugged from the world economy. And the second is, i think, as steve said where you dont have multilateral support. You know, for example, theres not an economic relationship between the United States and iran, there hasnt been since, i dont know what the relationship was, but basically since 1979 or the early 80s there really hasnt been an economic relationship and it was absolutely essential that we have a multilateral setting there, and where you dont have an economic direct economic relationship of any consequence if you dont have multilateral support youre not going to have an effective sanctions. I think our time with you is has expired. But i wanted to thank both of you for your collective wisdom, and judgment, and experience, and for sharing with us today. Its been a great privilege for you. Thank you for being here. Thank you so much. [ applause ]r tom done lan and hadley and a forum on the role of the Treasury Department in National Security. Cspans new book sundays at eight includes journalist Michael Lewis. We are living through a really traumatic period of time, and it is not over. Were sort of at the beginning does not the end. There are real structural problems. I mean, yes, were going to be living im not an economic forecaster, but everything i read suggests were going to be living with unusually high levels of unemployment, a lot of pain from over indebtedness. A quarter of the country is on food stamps i saw on tv. Its its not a great depression. Were not reprizing exactly what happened in the 1930s, but its a version. Read more of our conversation with Michael Lewis and other featured interviews from our book notes and q and a programs and cspan sunday at eight from Public Affairs book. Now available for a fathers day gift at your Favorite Book seller. Sfwlimplgts up next a hearing on transportation funding and safety. Senators heard from the heads of the federal railroad administration, the federal Motor Carrier Safety Administration, and the agency that oversees the safety of pipelines and Hazardous Materials. This is two hours. Good morning. Welcome, everyone. We were were just waiting for senator blunt, and im going to begin with an opening statement, and when he gets here, he can make his. I welcome senator and thank her for her leadership on these issues. Were here at a moment of tremendous promise and peril for our nations Transportation System. Literally the funding for that system expires at the end of september, and theres a need to reauthorize the nations surface transportation law known as the mac 21, which expires at the end of september. Even before then the Highway Trust Fund will go broke in july just next month, and, fortunately, the appropriate Senate Committee is moving ahead with those funding proposals. The transited funding must include rail and must include safety, and that brings us today to these issues and to hearing from the representatives of some of our most important federal oversight and scrutiny agencies when it comes to safety and reliability. Were here at enormous peril and promise. Promise because we have an opportunity to invest in the future of our Transportation System, grow the economy, expand job creation, and achieve a larger vision for our nations Transportation System. At the same time theres tremendous peril. In the decaying and crumbling infrastructure that faces us every day on our roads, bridges, railroads, and other public facilities. So were here to examine how well the agencies are doing as well as our Transportation Systems. Wee immediate to look at what our agencies are doing in their watchdog and oversight as well as what our Public Transportation systems are doing to protect safety and reliability. For the pipeline and Hazardous Material Safety Administration, protecting safety and reliability means insuring that transportation of many products are done in a way that insures protection of the people who live in their environs. It means insuring the Safety Movement of freight on our nations massive railroad system. The ability to properly insure this mission requires resources as well as rules, and thats really true of all of your agencies. Resources and rules and effective enforcement of those rules is a prerecollect quiz it to safety and reliability. There are indications that some of these agencies have very simply been absent from what they should be doing, not on the job. I want to make sure that we are as rigorous and vigilant as immediate be to protect people who use our railroads, as well as other Transportation System. There are red flags. For example, have been red flags with metro north, had is a railroad much in need of attention as well as investment, and i want to make sure that both metro north and the fra have learned from the incidents that have occurred there and, of course, the agencies include the federal Motor Carrier Safety Administration which is essential to insuring the safety commercial driving work force that drives our economy as well as the individuals who ride it. Irjob is to insure really the rules only have mean if anything theyre enforced and only scrutiny and oversight work for people that rely those rules, and part of our job in addition to making the rules and the laws, the rules of the road, and the laws that govern those rules is to assure that theyre realistic and practical, but also that theyre properly funded. I want to hear from all of you and i look forward to hearing from our colleagues on these issues and turn now to the Ranking Member. Well, thank you, chairman. I want to say, chairman new york the brief time youve been chairman of this committee, you have really brought focus on a number of issues. Weve had a number of hearings, lug the one were going to have today that i think are very important and your leadership here has made a difference. The Commerce Committee does work on all modes of transportation. Not just highways, railroads, waterways, even pipelines, and from a state like mine, this is critical work. If you look at a railroad map of america or highway map of america or river map of america, as i told the General Assembly in missouri the other day and begin to focus on where all three of those things come together, were right in the middle of that. All these things matter dramatically to our future, to our economic future, and our ability to compete. Obviously theres a lot of discussion going on about the highway bill for a couple of reasons. One is the one we are currently under expires in september and another one is that that fund runs dry even before that. What our committee can do and what this subcommittee can do to get ready for our part of that bill is important. The things we can do to draw attention to sustainable funding and to additional and innovative funding sources, i think, can make a difference here. Were now examining how we maintain this system. Im going to be interested today to hear from the federal Rail Administration and the pipeline and Hazardous Materials Safety Administration on how things are going in the crude by rail discussion. Theres been a lot of testing data shared recently involving bachen crude and how were reacting to that. Ill also be interested to hear how this is being utilized as we line up the collection that fisma is doing and how were going to be ready for that. Also, ongoing concerns regarding regulations and enforcement programs with federal Motor Carrier Safety Administration, our topics that i hope we hear discussed today and ill have some questions on that. Ive heard from Motor Carriers of all sizes that the agency really isnt adequately considering the impact of its rules and programs. I asked the secretary at a hearing we had not too long ago for a response on a couple of specific questions that i havent gotten yet and hopefully well get those covered today. I finally look forward to hearing from the office of research and technology on how Research Funding might be accessible to local communities for trying to come up with innovative and locally driven solutions to their transportation problems. Hell close by stressing the need for the longterm transportation planning, which includes a Stable Funding source, something that every member of the senate and the congress should be interested in. Great opportunities are out there with the expansion of the panama canal with how we collect all of our transportation modes together, how we connect them together in the best possible way, and im pleased were having this hearing today, and thanks for your leadership, chairman. Thank you, senator. Thank you for your leadership and for your being here today. Im not going to provide lengthy backgrounds as to each of your credentials in the interest of time. I think well just turn to the testimony, but were very pleased to have today individuals who not only lead significant agencies, but also had extraordinary backgrounds and expertise in the areas of transportation, so we thank you for your Public Service as well as for your being here today. Perhaps we can begin with joseph sabo, the administrator of the federal railway association. S. Thank you. I appreciate the opportunity to testify today. By 2050 our surface Transportation System must be ready to move an additional 100 million more people, which equals the combined population of our four most populous states california, texas, new york, and florida. Our freight system, meanwhile, will have to annually move an additional four billion tons of freight. The weight roughly of 10,000 empire state buildings. So imagine if we fail to move all these people and all that freight safely, reliably, and efficiently. Imagine the negative impact that that could have on business growth, on commute times, not quality of life. If we return to a decades long pattern of under investing in our rail system, there will be negative consequences. Just look at the classic highway and airport congestion. More than 140 billion in 2012, and this was driven by current demand, not future. We have an opportunity through the grow america act to chart a more sustainable course. We have an opportunity as the title implies to grow our rail network and grow americas Transportation Capacity to meet future challenges. In the grow america act will enable us to do this while driving Continuous Improvement in safety. Since fiscal year 2004 our Rail Safety Program has reduced train accidents by nearly 50 to record low numbers, but we also know from our data that the most vulnerable safety area is human error. Today it accounts for nearly 40 of train accidents. Grow america in several ways supports our efforts to drive continuous safety improvement. For one, the 19 billion it would invest in rail safety and Rail Development programs includes 2. 3 billion to support Commuter Rail lines in their efforts to install positive train control. The technology that is designed to reduce human error accidents. It would provide us the tools to manage the implementation process effectively, including the authority for provisional certifications. Grow america would also fwif us the authority to establish new hours of Service Regulations based on sound fatigue science, a key step towards reducing accidents caused by fatigue. It calls for a nationwide rollout, a close call reporting systems, allowing us to gather data before an accident occurs and develop Risk Mitigation strategies well in advance. Sustained federal investment and Rail Network Enhancements and in research and development has to also be a part of the mix. On Development Side the fund would fund needed repairs, groove existing services and build new corridors. It would invest in the Rail Passenger connections that Record Number of amtrak riders deserve and would invest in short line rail infrastructure, safety upgrades to bridges, tracks, and signal systems. It would invest in Great Crossing improvements in the sealing off of corridors and network efficiency, reducing the negative impacts of rail operations on communities and enhancing safety transportation of Hazardous Materials. Our proposal really does even more than that and provides for the rail for the first time err for predictable dedicated funding to put it on par for other surface transportation modes. If you go back to 2009 and 2010 when federal funding for our Passenger Rail program was made available, those years we received applications requesting seven times the available funding. Grow america will keep us moving forward and not just for one or two years, but over the longterm. So we look forward to working with all of you to reverse this pattern of federal under investment in our rail system to working together to foster publicprivate partnerships, to incentivize state and local plan and to tackle the backlog of good rail projects all across the country in need of a federal funding partner. Look forward to your questions. Thank you, mr. Chairman. , Ranking Member blunt and the subcommittee wrshz thank you for testifying today on the federal Motor Carrier Safety Administrations progress in implementing both our map 21 requirements as well as the opportunity to lay out the safety provisions in the grow america act. Safety is fmcsas top priority, and, yet, since 2009 with the advent of our continued economic recovery, which is very, very good, the down side is theres been an 18 increase in crashes involving commercial Motor Vehicles and then the number of People Killed in those crashes. We can do better than that, and working together with congress, enforcement, advocates, and our Industry Partners using research, public dialogue, and sensible policies, we can raise the safety bar for truck and bus operations. Map 21 has been part of the strategy, and fmcsa has been moving forward to meet all of the requirements. To date weve completed more than half of the rule making required under map 21. For example, we invented agricultural exemptions and all the security environments for freight foreigners provided under the law. We are well on our way to establish the First National drug and alcohol clearinghouse which will, many of the, help employers determine whether a driver is complying with federal drug and alcohol regulations, including mandatory testing. The notice of rule making and the 90 day period closed just last month. In march we issued a supplemental notice to create an Electronic Logging Device requirement across the industry. This proposal will improve hours of Service Compliance and, hence, the uniform use of those logs will actually improve and mitigate the impacts of fatigue related driving and fatigue related crashes. In fact, the analysis of this proposal shows that it will help prevent approximately 20 deaths, over 400 injuries each year, and have an annual safety benefit of almost 400 million. Comments on that proposal are still able to be made up through the end of this month. Map 21 is helping us reach our safety goal of getting to one level of safety for all passengers regardless of what type of bus company they choose. Fmcsa is training all of our special agents with new enhanced investigation tactics to uncover safety deficiencies and remove dangerous buses and operators from the road. Some Companies Take full advantage of the opportunity we give them to get better, to use the information we provided, use the audits to fix their problems. For those that dont, we will put them and we have put them out of business. In fact, last year we shut down over 100 unsafe bus operations. Looking at the longterm, president obama has laid out a vision in the grow america act that enhances our safety work. Grow america focuses on three key areas to improve commercial Motor Vehicle safety. On motorcoach safety grow america will expand our opportunities to inspect motor coaches at additional sites and it will give fmcsa jurisdiction over passenger ticket brokers, folks who really do defraud customers tooz what kind of company theyre about to use. It takes strong steps to improve our effectiveness under grow america by allowing criminal prosecution of companies that deliberately violent federal out of service requirements. Another provision calls for require companies to pay drivers for uncompensated time. Its not news to know that when drivers are held up in the loading dock, waiting for shipments to be loaded or unloaded, they are often, more often than not, unpaid, uncompensated. As they face pressure to make up that loss uncompensated time by pushing both their physical limits as well as the legal driving limits. This proposal will ease the economic stress on Long Distance drivers by insuring that they receive fair compensation for the hours they work, and, finally, grow america streamlines and consolidates our safety grants program. Hence, improving and providing better efficiencies both for the agency, but more importantly for our state enforcement and licensing partners. Mr. Chairman, thank you for the opportunity to share a bit about what fmcsa is focused on and the opportunity to answer questions today. I look forward to your questions. Thank you very much, and now administrator, huh thank you for being here. Good morning. Chairman blumenthal, members of the subcommittee, thank you for inviting me here today to testify on the pipeline and Hazardous Material administrations progress in implementing the Hazardous Material safety provisions of map 21. Im also delight to discuss the ways that grow america act will further improve upon the efforts of fimsa and the department to enhance the safety of our nations Hazardous Materials Transportation System. Safety is the top priority of secretary fox, the department of transportation, fimsa, and its sister modes. All of us at d. O. T. Appreciate your dedication and leadership in advancing Hazardous Materials Transportation Safety. For a relatively small agency with limited resources, the staff at fimsa works diligently to protect the American Public and the environment from Hazardous Materials transportation incidents and have made Great Strides in implementing the provisions of map 21. Since map 21s enactment in 2012 fimsa has met or will meet more than 90 of the established timelines for the 32 separate provisions assigned to the agency. This is significant given that the many challenges and issues that fimsa was faced over the same time period, including efforts to enhance the safe transportation of crude by rail and continuing to consistently reduce the number of Hazardous Materials incidents over the past 25 years. A significant contributor to fimsas success has been the strategy and action plan we developed and implemented provided to bolster compliance with Hazardous Materials regulation. As the transportation sector continues to evolve and become more interconnected with the international community, fimsa has attempted to adopt smarter strategies to adapt to those changes. As a part of our enforcement strategy and through the authority of map 21, fims raids its maximum Penalty Amount for violations resulting in death, injury, or illness. We believe that clear and appropriate Civil Penalties can improve Transportation Safety by acting as a deterrent for noncompliance. Thats why the grow america act submitted to congress by secretary fox proposes to further increase the maximum amount of fimsa can satisfies for violators of Hazardous Materials regulations. The increased Civil Penalty Authority will allow us to address situations where a higher penalty is warranted, including those events resulting in death, injury, or illness. In addition, the grow america act will further build on map 21s successes and support the departments safety michigan initiatives by improving fimsas ability to oversee the safe transportation of Hazardous Materials. Grow america will give fimsa the authority to issue orders, to industry, to cease activities without prior notice in response to emergency situations. Similar authority is already held by fra and fmcsa and grow america will increase d. O. It. s ability to stop unsafe conditions or practices that may threaten life, personal injury, or harm to property or the environment. Grow america are improve safety by enhancing Registration Requirements and improve the eftiveness of fimsas Hazardous Materials Emergency Preparedness grants program. These are just a few of the many ways map 21 and grow america act can and will provide further safeguards against Hazardous Materials transportation risks for america communities. As ive stated earlier, fimsa is committed to improving Transportation Safety, and i believe our approach is working. A Safety Commission is guided by our mission that no harm results from Hazardous Materials transportation. I truly believe our efforts will continue to prevent and mitigate accidents and move us closer to our goal of zero deaths and injuries. We look forward to continuing to work with this committee and congress to protect people, property, and the environment from Hazardous Materials trpg risks, and i would be happy to answer any questions you may have. Thank you very much, secretary winfrey. Thank you, chairman, for the opportunity to visit with you, Ranking Member blunt, and members of the committee to talk about the departments progress in implementing map 21 and the administrations proposal to reauthorize surface transportation programs, the grow america act. The office of the assistant secretary for research and technology continues to lead the departments Research Coordination and commercialization efforts driving crosscollaboration to meet our challenges. Congress has long rised the value of Transportation Research by Funding Research and data programs through the Highway Trust Fund. In my organization, three programs that you authorized under map 21 have continued to advance departmental goals for american transportation. The intelligence Transportation Systems Research Program, the University Transportation centers program, and the bureau of transportation statistics. In its research some of our teams progress has been attracting public attention most notably through the its funded Community Safety pilot in ann arbor, michigan, which is the largest such test program in the world and conducted in collaboration with the university of michigan Transportation Research institute. The results led to nitsas decision to proceed with vehicle to vehicle, v to v technology for light duty vehicles. This technology will improve safety and has the potential to reduce nonimpaired fatalities by up to 80 . The department continues to work toward connected vehicle applications for heavy duty vehicles and the federal Highway Administration is preparing to issue guidance in 2015 for instaug vehicle to infrastructure, v to i applications, for roadway safety at improved traffic operations. I note that all this success and the standards that support it are based upon the availability of the 5. 9 gigahertz dedicated short range communication spectrum. Our utcs continue bringing invasion to the Transportation System and developing the next generation of transportation leaders. We are extremely pleased with the nationwide conshore that of University Selected under the open competition enabled by map 21. Covering over 120 universities which bring expertise and multiple disciplines, utc has enabled smcht systemic interdisciplinary crossmoto research we need to address increasingly complex challenges. We are seeing exciting work in robotic bridge inspections, ought mated vehicles, wireless monitoring of bridge integrity, and disaster with much more to come. Bts continues to fulfill its role as one of the federal governments 13 independent statistical agencies producing Key Information to illuminate decision making. Bts plays a priority on making data readily available and has improved access to data through such applications as the National Transportation atlas viewer and to all forms of transportation data through the National Transportation library. Products include the Commodity Flow survey and its transporter freight data program which are the foundations of our understanding of freight transportation. The range of btss airline data is widely cited. Bts led to the establishment of continually growing safety data. Com website and supports map 21s Performance Measurement goals. The item with the largest impact on my organization took place under the passage of map 21. Januarys omnibus appropriations bill transferred the powers and authorities of the research and Innovative Technology administration to the office of the assistant secretary for research and technology. This is the culmination of an neshtive begun in the president s fy13 budget request. The elevation to the office of the secretary will bring more leadership in sight into Transportation Research and development and data and statistics and will heighten their influence on policy discussions and decision making. The trust Fund Programs will continue their existing missions and maintain key components of the newly elevated office. In addition, the elevation returns responsibility for positioning navigation and timing and Spectrum Management to the secretarys office appropriate for a critical responsibility which impacts all nonmilitary users of gps. Implementing the results of the second strategic Highway Research program by allowing the allocation of up to 25 million per year from the highway account. Establishing a National Cooperative freight Research Program in support of departmental freight goals, including a targeted focus on Hazardous Materials, creating a priority multimoto Research Program creating crossagency research and invasion in three priority wrarz. Infrastructure systems resilience and recovery, a sfwler emissions Transportation System, and a multimobile Stem Education and Work Force Development program. Thank you for this opportunity to update ow our progress and i look forward to your questions. Thank you, mr. Winfrey. I like to begin my question with mr. Sabo. Really pursue a point that mrs. Quarterman raised, and i emphasized earlier, which is that standards need to be sufficiently high. They need to be enforced rigorously, and that penalties have to provide a deterrent to violation of them. She rightly emphasized the need for increased penalties when they fail to provide a deterrent to violation of safety standards. The experience of metro north, i think, provides a National Poster railroad in culminating years of neglect and systematic and cultural failure in a series of catastrophic incidents costing lives and injuries as well as dollars, and i think that a lot of eyes were opened by a series of reports, most significantly in the connecticut post, that detailed the actions of significant penalties over a period of time, 2004 and 2013 where most of the penalties were in the range of 5,000 or 10,000. The total was around 220,000 for a series of defects in procedures and operations that were one of them, for example, applied to robert luten. A metro north worker killed on the tracks near westhaven with a senseless and needless neglect of safety by metro north. The 5,000 was nowhere near a measure of the kind of message and penalty that should have been imposed. More recently a report about kenneth mcgrath, whose death in 2009 resulting in a penalty of 2,000. These relatively minuscule penalties of 2,000 or 5,000 or 10,000, i think the highest over that period of time was 39,000 plainly, i think, provide an ininadequate what is the small to minuscule penalties. What can be done to increase them . Isnt it in a sense a mark of inadequate scrutiny, and it may be that your Authority Needs to be increased that we have this kind of pattern. Well, thank you for the questions, senator. First, let me say its what i expect of myself. Its what i expect of my agency. Its what i expect from the industry that we regulate. So even though weve been able to drive down accidents, injuries, and fatalities over the past decade to record lows, we always look for the avenues that we can take to improve to insure that we continue to achieve new record lows. How do we get to zero, and then once we get there, how do we stay there . Certainly penalties and fines are one piece of the mix. Its one tool in our toolbox. Its one that we try to use effectively. You know, if you are a carpenter, a hammer is important. You bet, but its not the only tool that you use to build a house. Certainly coming out of the ranks, you know, as a rail worker that has been out there and a union rep thats written up complaints to the agency i now head, theres always been a frustration with the level of penalty. One of the things that i did when i got here was make it a priority to do what i could with the tools that i had. In the five years ive been here, senator, we have, in fact, assessed the highest number, the highest dollar amount of penalties in any fiveyear period in the agencys history. Those penalties in the metro north incidents were extraordinarily low, were they not . Well, there is a penalty schedule that we have to follow, and while certainly we, you know, can and will once again take a look at reviewing that penalty schedule, our authority is somewhat limited, i think, to get to the level of penalties that youre talking about. To provide some other snent he haves to be more rigorous and vigorous, more aggressive and its enforce am because frankly, mr. S sdmr abo, a lot of ride verz lost trust and confidence not only in the railroad, but also in the enforcement authority, the fra, and similar federal watchdogs that are responsible for protecting safety. And we certainly owe the public. We owe the public better. We always owe the public better. We have our work to do as an agency, and certainly metro north is a railroad to regain that trust. I really think that if you take a look at what has been proposed m grow america act, it has the package that we need to achieve the next generation of safety, and while penalties and enforcement are one piece of that puzzle, i would argue its only a piece. You know, what we have learned through metro north is less about the need for more inspection, more enforcement, and, frankly, comes more down to the need to advance pro active riskbased programs that identify and mitigate risk in advance, things like confidential close calls and the system safety rule that will be final later this year that will require all Passenger Railroads to do an analysis and then finally Risk Mitigation plan with us that we review and approve and this gets refreshed on an annual basis. I think there are more tools in the package that we have in, and grow america is the appropriate risk of tools. My time has expired for right now, but well have a second round, and i appreciate your responses to my question. I continue to believe that there has to be attention to the penalty provisions to make sure that they are commensurate with the kind of neglect and failing that we have seen at metro north on occasion to deter that kind of violation of basic standards that the public has a right to expect. Im going to turn to senator thome, the Ranking Member of the Commerce Committee. Thank you, mr. Chairman. I want to thank you and senator blunt for hold this hearing. Ive said many times that maintaining and improving our nations infrastructure is absolutely vital to our countrys economic prosperity, and it also essential that we have a reliable and a safe system of transportation in this country. I appreciate all of you. You all represent agencies that are key to that mission, and i appreciate you being here and your willingness to answer questions. I want to direct the first question, if i might, to administrator sable, and that has to do with positive training control, and i was pleased to see that the grow america act for the first time formally acknowledged the need for an extension, but my question has to do with why there wasnt a straight forward extension of the entire deadline as opposed to try and deal with this as has been suggested on a case by case basis knowing full well that none of these railroads are going to be able to meet that 2015 deadline. Senator, we really belief that the package that weve put together under grow america, particularly relative to positive train control, gives us the right tools and provides the right balance to most advance and insure public safety. You have two ebbing streams. Those that are saying that under no certification should you expand the 2015 deadline to those that say there should be a blanket extension. We believe that with the proposal that we have for provisional certification that, by working with each carrier to modify their Implementation Plan and setting up the milestones that fit for the railroads based on the challenges that each one has individually and then being able to provisionally certify a piece of the system that we can best advance the benefit achieve the benefits of as much of ptc as possible as soon as possible. We really think that its the right approach that recognizes the challenges while also having that accountability and giving the public what they deserve. But doesnt it make sense . If you want to uphold the railroads feet to the fire, theres no deadline in what you are talking about. You know, many of us, our colleagues on the committee here, and others have introduced legislation that would provide this blanket extension that i refer to which does have a hard, Firm Deadline in it. We know that no single Railroad Freight or passenger is likely to meet the 2015 deadline, but the proposal that youre suggesting here doesnt have any particular sense of urgency stafld to it either. If you are going to be able to waive this on a case by case basis. It strikes to me that it would make a lot more sense if you want to if you want to treat the railroads and sort of a fair way to give them, you know, push that out there, knowing that theyre not going to be able to meet the 2015, but still keeping the sense of urgency and then feet to the fire. The key, though, senator, its still critically important that you give us the authority that we need for provisional certification because, otherwise, we cant approve an Implementation Plan that doesnt fully meet the deadline. We cant approve partial deployment, and so the Industry Needs its for us to is have the appropriate flexibility to work with them on the challenges that theyre facing while still advancing as much of the system as possible as quickly as possible. It would save lives on metro north. You know, so its critical that we have the tools that we need to properly manage deployment. I think the legislation also has the provisional certification that you talked about as well. I mean, its fwot some flexibility, but it also has the deadline attached to it. It just seems like a better approach. We certainly would be willing to, you know, to work with you on some Technical Assistance to try and strike the right balance here. Quickly, because we have a lot of colleagues that say i want to address this to you. This brings both the dot Inspector General and the gao review the program and you reportedly concurred with the ig6 recommendations, but the two j. O. Recommendations remain open, sf the official fmcsa comments were not provided to the gao. Does the fmcsa plan to take action on those recommendations, and could you provide us an update . If not, explain why. Certainly. The compliance safety accountability program, otherwise known as csa, is at its heart a program to improve our overall enforcement and focus on the highest risk carriers with our limited resources. It really sdl provide carriers as well, an opportunity to look at their own performance and improve before we even need to get there. In fact, theyre showing high risk behavior. That being said. Im sorry you dont have a copy of that. They received our response last month, and there are certainly aspects of the gao analysis that we are making full use of. The core component that we disagreed with really relates to a methodology they propose that isolates the csa analysis to a very small group of carriers, only the largest ones. While a large carrier has a Significant Impact on crash activity across our country, smaller carriers impact about half of those fatalities and crashes. We are utilizing the recommendations of both to improve the csa program, the underlying Data Analysis and accessibility to that data. Thank you. Its received some federal funding in the past, but now 125 people have died in two decades on one highway. Thats a twolane highway in southern minnesota. A lot of it because of freight that should be on a fourlane highway. Some of it because we simply dont have enough rail in this country and its not safe enough, and so in minnesota thanks to the good fortune of our neighbors in north dakota where theyre producing oil and natural gas, it has put a strain on our rail system and a lot of our ag products are having a hard time finding rail and we need to upgrade everything we have as far as im concerned because if were going to actually be this export economy that we want to be, we need to have a Transportation System thats up to the task. Fimsa recently set its proposed rule for railcar standards to omb for review. I know your agency is working diligently to finalize a rule. Its a complex task. Can you tell me when the final rule will be completed . I cannot tell you when the final rule will be completed. I can tell you what the process is. The process that goes over i kind of know the process. Im just wondering the timeline for when it will be done. Senator, were working very hard to get the rule out as soon as humanly possible. Its a First Priority for secretary fox and for me. We are working as hard as we can to get the rule out as soon as possible. There are 28,00011 railcars that are designed to carry a wide range of products, including hazardous and nonHazardous Materials. Roughly 92,000 are used to move Flammable Liquids and yet only about 14,000 of these are built to the latest Industry Safety standards. Considering the large number of the d. O. T. 111s in the fleet is fimsa considering different rules on what product is being shipped and would such an approach enable fimsa and the industry to better apply resources and get the quickest safety improvements . Well, the rule that we discussed earlier includes not just tank cars. Its a comprehensive approach to rail safety, and included in that rule are issues related to the existing and the new tank cars, so i cant go into the details of whats in that rule, but we are taking comprehensive approach to deal both with prevention, mitigation, and response to crude by rail incidents. As you know, weve had one in minnesota, one in north dakota. Last months canada Transportation Safety board announced that all older tank cars used for carrying crude must be phased out by may of 2017. How is fimsa approaching the issue of whether to phase out older tank cars and has canadas action increased pressure to include a phaseout requirement as part of the rule making . I can tell you that were working very closely with canada. We are talking to them on a weekly basis about their action and coordinating to the extent we can. Actions here with them as well. We applaud their movement to remove 111 tank cars in three years time. Secretary fox has already said that those cars should be removed from crude oil service or retro fitted. Canada has the advantage of being able to say in a public forum that they can remove those cars from service in three years because we have a pending rule making under the existing. The requirements here in the United States we cannot say anything comparable on the record until it goes through the rule making process. We know that the landscape of freight rail has changed dramatically. Transportation reauthorizes authorization bill would be an opportunity to update some of the rules and standards that govern the freight rail industry. How has the increase in freight rail traffic over the past few years changed how this committee should view rail safety and what do you think of the most important issues are that we could address in that bill . Well, thank you, senator. I mean, i think its first important to note that by many respects rail is, in fact, the safest means of moving both people and goods. When you compare it to the other transportation modes under most measurements, most circumstances, were the most safe transportation mode. Again, statistically, the industry is at an alltime best. A part of a decades long Continuous Improvement in rail safety to record low numbers of accidents, injuries, fatalities. Theres no question that the change of products being hauled and particularly with these hazardous Flammable Materials that its forcing us to really safety, you know, take a fresh look, a new look at everything we think we have known about safety. Even though we have historically been very, very good and continue to get better. Particularly when it comes to the products. We have to be near perfect. As administrator quarterman, its a matter of taking a look from everything from the tank car, you know, to understanding the product, ensuring proper classification, you know, those things that weve put into place with the industry through the voluntary agreement are the appropriate step to be taken using the routing protocol using the factors through the computer model ensure we are using the most safe and secure route. Hardining the aspects. Additional both by the industry and our inspector resources. Ensuring a higher level of health to the equipment, you know, and continuing on. Thank you very much. Thank you, senator klobuchar. Senator blunt. Thank you, mr. Chairman. I was confused by your answer on positive trade control. Do you have the authority to extend the deadline or not . No, we do not. Only congress can extend the deadline. Thats what i thought. You dont have any authority there are no provisions that you have that allow you to do a provisional certification . Not at all, senator. We believe its critical that we be granted that authority so we can manage this in a rational manner. Does it mean you dont want a deadline . The bill that senator thune and i are sponsoring sets a new deadline of 2018 and gives you provisional abilities to implement between now and then. What more do you . I think the key is ensuring we have the appropriate flexibility that we need with the provisional certification, the ability to effectively manage the Implementation Plans on each railroad. I would have to take a look at how your legislation does or does not address that. So like i say, through Technical Assistance, we would be happy to work with you. Since you dont any in the compliance by 2015 by the commuter lines is possible, do you . I dont believe there is a railroad in this country that will achieve full deployment by 2015. Partial deployment could be possible. The one exception might be metro north in california. Theres a fighting chance they can reach their 2015 deadline. Well see. But there certainly not another railroad in this country that can fully deploy by the 2015 deadline. Since you dont think that anybody can comply with the 2015. I dont think anybody can comply with the 2015 deadline, i like you to look at our legislation and give us advice how you think it can be improved. We dont want to blow by the deadline as if its not there. Surely its not the right thing to do. Ill continue to have