tv U.S. House of Representatives CSPAN December 30, 2010 1:00pm-5:00pm EST
some people find it not good to concede this. but half of mandela's committee were member of the communist party until quite recently including mandela himself. there's no doubt about it. there was real heroism and dignity to it. but we opposed it. we said it won't work. why won't it work? it's not worth the sacrifice of the freedom it implies? it implies it can only be done if done under infoulible litch. one who has once made the decision, you are bound by it. you may notice where i'm going here. it's why many of the people, the britain intellectuals who did leave it, left it for as such principals as they left to join. the best is called the god that failed. precisely because it was such an attempt at a boeing gus form
of religion. but let no one say and when the history comes to be written, no one will say it didn't represent some high points in human history. but i repeat it wasn't worth it at the sacrifice of mental and intellectual and moral freedom. and that was the purpose of my original set of questions on the met physical side. . .
>> are you willing to estimate that you and beans can be the interpreters. you will have to follow someone is your religious leader. you will have to follow his vicker at birth, pope benedict. the vicker of christ of earth. you have to say that this person has the by the authority. that is part of the mental and intellectual freedom that is essential to us. he gave everything by repudiating that and stand up to your full height. you gain much more than you will
by pretending that you are a member -- a member of a flock that you were by pretending you were a cheap. thank you. [applause] >> when christopher was talking about the times and the labor party together, i was recalling after we suffered our fourth election defeat in the labor party. and at a party member after the fourth defeat. he said to be, the people have a voted against us -- he said to me, the people have voted against us that much times.
what is wrong with them? [laughter] [applause] i would say that the example of communism shows that those who want to suppress freedom and those who have a fanatical view of the way the world should work are not confined religious faith. it is there in many different walks of life. the question is, for me, this is not about my belief as a christian in jesus christ and not how that makes me subject to oppression and servitude. but on the contrary, how that helps meet to express the best of the human spirit.
it was albert einstein who was not an atheist -- he believed in a supreme being. he did not necessarily subscribe to organized religion. he said religion without science is blind. he also went on to say science without religion is claimed. -- is lame. i would say that faith is not about certainty. it is part of a reflection of my own awareness of my own ignorance. though life can be explained by science, the meaning and purpose of life cannot be. in that space, for me, lies not certainty in the scientific sense, but a belief that is clear and consistent and rational, which is that there is
a higher power in human power. that power is a better life in accordance to a will better than our own. not that we should be imprisoned by that superior will. on the contrary, so that we can use our own will in furtherance of the things that represent the best in human beings and the best in humanity. i think this debate this evening has been a fascinating and deeply important debate about the single most important issue in the 21st century. i do not think the 21st century will be about fundamentalist political ideology. i accept it could be about
religious or cultural ideology. the way that we avoid fact is for those people of faith to be prepared to stand up and debate those people who are of nine and four -- of none and for those people who believe in a world of peace folkloric distance -- peaceful cladistics -- peaceful join those people who are not. in the name of religion, there are things that are bad and contrary to faith.
i do not stand before you tonight and say those of us with religious faith -- i do say that they're out human history there have been examples of people who have been -- through out human history there have been examples of people who have contributed to liberation. it is those people that i stand up for here with you tonight. thank you. [applause] >> ladies and gentlemen, let me reiterate something that was set at the beginning of this talk. it is one thing to get up and
give a speech on a subject you are intimately familiar with. it is something quite entirely different to appear at a public event, a global effect such as this and to have your ideas contested by someone who is every inch your peer and to do so with the eloquence and convention -- and conviction of our two debaters. [applause] stay here just one second. i want to tell them about the vote.
ladies and gentlemen, this debate is not over yet. because of the huge size of this audience, it is going to take some minutes to tally a second audience look -- audience vote on just who won. i will ask the audience members to proceed next door. let's just briefly see where the state of public opinion started in this room tonight. 22% of you in favor of the motion. 56% opposed and 21% undecided. a large number indicating they could change their vote also.
you have your ballots with you. we will announce these results in the public reception to follow. ladies and gentlemen, start voting. we will see you at the reception. >> the 111th congress and it earlier this month. all this week we are talking to departing members and some new faces coming to replace them. we will start at 6:30 p.m. eastern time with congrressman kanjorski. he lost his bid for a fourth term. we will also talk with mike castle of delaware. at 8:00 p.m. eastern, the future of investigative and listen.
there will be a panel discussion. at 9:30 p.m., "q & a" from london with a documentary filmmaker dan reed. all on c-span. >> now a discussion on pakistan-based military operations. and the afghan security director on dealing with the taliban. this is about two hours. >> thank you. i help everybody has their tea or beverageir of their toys. we will be talking about lashka- e-taiba.
i am joined by two panelists. i will do their introductions before we bring them up to speak. i am going to try to provide a broad overview of l.e.t. we will talk about their ideology, their training, and the type of people who joined the group. sebastian will talk about the evolving threats to the west, particularly their terrorist attacks against the west. briefly, about to meet, i am at the carnegie endowment for international peace. i am finishing up a ph.d.. one of my case studies in which i gather too much information
for my own good --as we heard this morning, pakistan has yet to move significantly against . l.e.t. l.e.t. as an organization is not attacking the pakistani state. it is one of the few groups not to do so. there is a significant fear of further drawing attention to the insurgency raging in the country. the other reason that was left out was bad lashkar-e-taiba provide resources to be used against india.
it was born in 1986. it was formed when said, the head of the organization, mertz the organization with another organization. from the outset, you get two different concentrations coming together. that helps to explain why it not only has a potent military apparatus, but also a robust social welfare infrastructure in pakistan, which it has used to try to spread its interpretation of the state. it had little impact against the soviets in the 1980's. in the early 1990's, it began fighting on multiple fronts.
its militants are found in tajikistan and also inka - also in kashmir. i want to point out that kashmir is the most legitimate front force of our reasons. it is a place for a ratio of security forces to population is the highest in the world. this is one of the worst occupations in the muslim world. this is not just about a territorial dispute. leaders seeiba's this as a wider struggle that goes back to the time of the profit muhammed. they began receiving state support in the early 1990's.
they are not the only group being supported by the army. because they enjoy a small support structure in pakistan and lashkar-e-taiba is alienated from the wider movement, the isi believe they will be a more controllable prophecy because they do not have the allies that the other to pass. with the help -- allies that the other group has. during the 1990's it was building that works for use in terms of executing our supporting terrorist attacks against india. the first public sign of this was the attack against the red fort by several militant.
they had been building networks in india to support attacks since as early as 1992 or 1993. this was before they began receiving robust report from the isi. it was also building transnational networks. it has strong ties to saudi arabia and the gulf. several of its leaders received their education in saudi arabia. it continues to build on these ties as well as the presence of pakistanis in the gulf to build up its network there. it is also building up networks in europe, particularly the united kingdom where there is a large british-pakistani passport. -- british-pakistani diaspora.
there is a group that is technically separate from lashkar-e-taiba now. they want to help protect lashkar-e-taiba's assets. lashkar-e-taiba is banned, but they have a legitimate above- ground network that can operate in pakistan. after 9/11, people will be familiar with the term, the double game, which is when the regime began dividing its military assets into what many have called to be good jihadists and the bad jihadist. s. lashkar-e-taiba is seen as the
smallest threat to the state. l.e.t. shows itself to be deserving of that assessment. it does not share the same fate of the taliban and like all the major jihadist groups in pakistan. they are not anchored by the decision to support the u.s. invasion into afghanistan. lashkar-e-taiba also continues to write -- prioritize india. it is fair to say that one of the reasons the pakistani government saw u.s. help was that by doing so, they would -- sought help from the u.s. with that they could avoid the wider war on terror. it continues to focus primarily
on the kashmir jihad. it continues to build up its social welfare infrastructure. it is fair to say that it puts a lot more emphasis on its social welfare apparatus and infrastructure that it did in the 1990's. one reason for this is that it is taking a long-term approach to insinuate itself into pakistani society. a second reason is that they are allowed to remain legal. there were a host of groups that renamed themselves. they escape sanctions. one of the reasons they did because lashkar-e-taiba agrees to adhere to the bush are of --
agendato the regime's and keep its supply lines open. as i said, it does and here to the government's agenda. gainss pakistan's double have proved unsustainable, lashkar-e-taiba's attempts to play a double game proved to be unsustainable over time. the global jihad, the war against the u.s. and its allies, is impossible to ignore. it becomes involved in providing support, solicitation, training to a host of different militant actors during the early part of this decade, al qaeda included. it also becomes involved in at least one, if not two, attacks against the west. sebastian will speak on that so
i will not go into detail on that now. it pulls off this dual approach for the first several years. several events within pakistan make lashkar-e-taiba's strategic environment more difficult. the first is that the pakistani state begins to try to restrict the jihad in kashmir after the burgeoning peace process with india. the other was the attacks in london in 2005. they did even more to crackdown on militant sikh within its borders, particularly on lashkar-e-taiba like -- particularly on groups like lashkar-e-taiba.
by 2006, that jihad is a shell of what it once had been. it has been seriously restricted. at the same time, the insurgency in afghanistan is escalating. that front is becoming impossible for lashkar-e-taiba to ignore. it opens up a presence there. it is a much smaller player at this point. its members are flying under the banner of other organizations to provide a plausible deniability for itself and for the army i beens -- for the army and the isi. lashkar-e-taiba is one of a number of players. you get much greater integration between lashkar-e-taiba and the
other outfit based in the tribal areas and fighting in afghanistan at this time. many will be familiar at this point. a lot of these militant outfits were in pakistani states. this accelerates the process. when you get in is lashkar-e- taiba increasingly integrated with a host of groups viewed as more extreme and much more committed to jihad than is the core lashkar-e-taiba, which remains in close relationship with the army and the isi. it would be wrong to say it completely splits or fragments. what i suggest is that you are getting an increasing amount of factionalization. lashkar-e-taiba has never been
ideologically opposed to war with the u.s. or expand a beyond kashmir. they are forced to move beyond the line that they would necessarily want to to keep pace. mumbai come out of this process. as we see from the interrogation of david headley, a pakistani american who did the majority of the reconnaissance -- we will talk about this later. what i want to know about him is that we have an operation that starts with what our two people and then they escape from the country. it grows over time to what might by -- what mumbai became, a terrorist spectacular that included targets where you are
guaranteed to be able to kill westerners and jews. that was appealing to people motivated by al qaeda's ideology. it appeared that the leadership felt the need to show major results. as i said, it does not splinter into 1 million pieces. it is trying to hold onto its people and keep command and control. there were no major cause the questions or lashkar-e-taiba -- for lashkar-e-taiba after the mumbai attacks. they have been restricted according to u.n. sanctions. the restrictions are questionable at best. lashkar-e-taiba continues to operate. they still run training camps in areas of pakistan that are under government control and has
expanded activities in afghanistan and has expanded integration in the other actors there. the result that we get from this is a jihad that has expanded where beyond kashmir and india, even though india remains the primary in a me of -- primary enemy of lashkar-e-taiba's leadership. simultaneously, we have threats from individuals and factions within the organization because of this increasing integration. they are able to move beyond lashkar-e-taiba leadership sanctions if they wanted. what i want to lead us with is the threat from an organization as well as elements within it. with that, i would like to turn
it over to our first speaker who will speak about the ideology, the training that have lashkar- e-taiba made --trading that has made lashkar-e-taiba such a capable organization. a little bit of a background on him. in addition to being a dad less in pakistan who has worked -- been a journalist in pakistan who has worked there since 1996, he has written articles in english focusing on politics in kashmir, he is the author of "shadow war." it is an excellent book, which i highly encouraged to everyone here. he has been based in the u.s. for the last several years where he has worked with new york
center ony's international corp. -- international cooperation. he was incredibly helpful to me during my research. it is fair to say that he had forgot and more about lashkar-e- taiba that i could ever hope to know. some of my understanding about the group comes from conversations with him. it is a great pleasure to invite him to speak to you about lashkar-e-taiba here today. [applause] >> thank you for the excellent introduction. i never had such a good introduction before. i am going to focus on the
internal dynamic of lashkar-e- taiba. i think a lot of people knew about the international agenda. after mumbai, lashkar-e-taiba is talked about a lot in the western media. it is best to talk about the mumbai tax and how - mumbai attacks and how lashkar-e-taiba is planning the global jihad. as stephen talked about, lashkar-e-taiba is the armed
e-taiba had started ati. jihad. there was a teacher at the university of technology who taught islamic studies. they chose him to head the small group. it became known as lashkar-e- taiba. in afghanistan, when you read the in-house propaganda and publications, you do not find these people fighting the
soviets. they are fighting fellow muslims. when the afghan jihad was coming to an end, the group took a more formal form. that philosophy was to convert to pakistani babies . jihad was part of their philosophy. a lot of people in the west talk about the high as a peaceful struggle. i do not really agree with that
concept. d. hawaii, as i understand, all with--been -- jihad has always been an attempt to establish an islamic state. jihad is an easy word to use in english in the west. that is why it has become more known. in jihadi propaganda, they do not use the word g.i. only. -- they do not use the word jihad only. in the beginning of the kashmir jihad, they discovered that
there will be a time when they will fight a jihad against india. and the profit of islam will come down and fight amongst themselves. they think fighting against india could destroy india and demolish india. it is behind the profit of islam talked about. jihadists in pakistan used another word instead of jihad.
they could not do anything that was not permitted by the saudi arabia's. for one year or so, they had a lot of discussions. finally, they decided to set up their own group. unfortunately, the madrassas were controlled by someone who banned the group. they had to look for recruit elsewhere. a few years ago, i counted 700 members. my conclusion was that 96% of the recruits came from
elementary and middle school dropouts. they did not have any history of madrassa training. those who were formerly taliban had more than 77% who came frommadrassa -- from madrassa training. the method to recruit was to send them out into society. they were sent out to recruit the wise in their religious and neighborhoods. -- villages and neighborhoods.
training only. it is a whole lifestyle you have to adopt. what to eat. how to dress. it is a lifestyle for them. in the beginning, if they became a member, they underwent a 21- day training. that is mostly islamic training. why you should follow the fate. , they convert. the faith is the believe that muslims should only follow the
court's nine -- follow the koran. all members of lashkar-e-taiba have to go to the 21-day training. when they are selected to wage jihad in kashmir, they undergo a special training for three months or six months. that is intensive training. for example, one part of the training is that you have to live in the jungle for 72 hours.
in that part, there is nothing to eat. you have to survive on grass and leaves. you are allowed to come back to the kitchens, attack them and snatch food. that is part of the training. unless you succeed in that, you are not allowed to go and wage jihad. during this training, the emphasis is on your knowledge of islam. most people describe jihadists as killers.
i would not describe them as killers. that is not the primary motive of jihadists. the primary motive is to become a martyr. on the way to become a martyr, they kill a lot of people. that is the collateral damage. they carry explosives. they are going to die in those attacks. lashkar-e-taiba have not carried out suicide attacks.
in the attacks they carried out, there was always a chance of their survival. in the mumbai attacks, there is a chance of surviving. it is every effort made during those operations to survive. at the end, i will talk about the possible cooperation between the leader and al qaeda. i have read that there is some sort of organizational link between al qaeda and lashkar-e- taiba.
laden. i do not see them could operating internationally. my time is up. if you have some questions, i will answer. [applause] >> i would like to bring up sebastian. he is with an organization that does investigations with major media. he is an international security correspondent in washington. he has served as a foreign correspondent. his book was an ain't -- was named a "new york times" notable
book in 2008. he does an enormous amount about lashkar-e-taiba's western operations and its involvement in the attacks. it is a pleasure to have him here to speak about that today. >> thank you. it is a pleasure to be here. as was mentioned, during a month-long. in october and november, i wrote a series of articles about thekar-e-taiba's threat to west. i will summarize my findings. the series centered on two figures, david headley and a lashkar chief.
the story's concluded that the u.s. intelligence community was slow to focus on lashkar-e- taiba as a threat. headley became a prize scout. u.s. law enforcement had look into sixth warnings - 6 warming -- 6 warnings. there were deficiencies in the system for tracking direct at 8 hillyer to see -- for tracking direct threats from lashkar-e-
taiba. thereheadley's arrest, was troubling evidence that officials supported and directed the group. there was a suspected isi officer who remained at large. this intensified doubts about the ability of pakistan to crack down on powerful interest groups that intentionally kill americans. u.s. officials told me they cannot push too hard for just as in the mumbai case because of the potential damage to al qaeda and its allies. i was a foreign correspondent
for many years and a national security correspondent. i covered many of the major attacks by al qaeda, september 11 and i found myself covering lashkar-e-taiba directly and indirectly. i found the headley case interesting because it broke from a narrative. it was about the decline of al qaeda. there was an al qaeda leadership that was weakened by missile strikes. what had the impression that lashkar-e-taiba was on the rise. there was the impression that it had money and had political cloud and close ties to security forces. it had pulled off one of the most spectacular and sophisticated and devastating
terror attacks since 9/11. earlier this year, i got the opportunity to give the topic be attention it deserved. we do in-depth stories that go beyond the headlines. i thought this project fit the bill in a number of ways. there were questions about the role of the pakistani government. there were political obstacles to the pursuit of justice and the murder of americans. there were questions about what the u.s. had done about the lashkar-e-taiba. they had gotten away in a spectacular matter with mass murder. many of you may have seen the hbo documentary about mumbai. it was one of the best
documentaries i have seen. one of the things i thought of was what were the main faces behind the voices. for those reasons, i thought it was a story that should go public. the article had to be clear. the readers did not know much about lashkar-e-taiba. the characters make good stories. i focused on headley. the choice was easy. he was american. he had pleaded guilty. he was one of the most interesting character as i have come across in a terrorism case for a number of years. he has been a globe-trotting business man who had a knack for acquiring girlfriends and enduring them to the point they would report him to authorities.
he was a lashkar-e-taiba and a pakistani-american. he was more interesting and more dangerous than many western militant we have seen in past cases. he opens a rare an extraordinary window into a secret world. [captions copyright national cable satellite corp. 2010] [captioning performed by national captioning institute] there was another figure who was dean number 3. he was an up-and-coming jr. chief. he had popped up in a number of
cases, including one in france. i was told that he was the dominant voice in some of those intercepted recordings. handlerbeen headley's after the mumbai attacks. ability to act with impunity. he was remarkably mysterious. basic facts about him remain unclear. there was debate about his military affiliation. most of the top u.s. and european anti-terrorist officials i talked to thought he had been a high-ranking officer in the military your isi. several officers disagreed. the reporter closed classic problems. it was hard to find a subset of people willing to talk.
it seemed everyone had reasons not to talk about mumbai because of the court cases, the diplomatic sensitivity, and hardly anyone wanted to talk about david coleman headley. nonetheless, the report involved conversations with several dozen intelligence officials from the u.s. come into a pout, pakistan, britain, australia, india, and other countries. it involved looking at court records, some of which had not been disclosed before. there was a lot in the material. some of it had to be expanded on. mir sometimes appeared in court cases as an alias and sometimes as a conspirator. we needed multiple confirmations. the recording showed that mir had been in the forefront of an effort to expand the proposal
reach, assist al qaeda, and strike western targets dating back to 2001. most sources agreed that lashkar had been underestimated as viewing it as a threat to only india. there was a vital role of trainers and handlers with military. the cases showed the doubled game that was talked about earlier. one anecdote that came out in court cases was that after the 9/11 attacks, the cia took interest in the lashkar camps and seddons intelligence into the camp looking for foreign jihadis. there were french, arabs, turks, but the pakistani security forces alert to the military trainers in those camps ahead of time. before the inspections, the foreign trainees were evacuated
from the camps and hidden in the mountains. they returned once the american terrorist hunters had finished searching the camps. the cases showed a recurring pattern in which achieves were grooming trainees for overseas operations in the past decade. weapons procurement, targets surveillance, including testimony about surveillance on a plant in maryland, fund- raising and logistics, and a bomb plot that was foiled by authorities in australia in 2003, in which mir had directives. that left little doubt about lashkar's determination to strike a westerly in the decade. mir had to have approval from higher-ups'. what was remarkable was that france issued an arrest warrant
for him in 2006 and convicted him in 2007. nothing was done on the pakistani side. he could have been behind bars in 2008 rather than serving as the project manager of the mumbai attacks. i use the word "project manager" in front -- instead of " mastermind" to emphasize that he was one of half a dozen masterminds of the mumbai attacks. he played a central role because of his international experience, his skill as a handler, and his relationship with headley. headley had an unusual profile. he was older than most. he was a businessman with a u.s. passport. he had trained extensively with lashkar. the testimony showed he then trained separately with the isi in class of intelligent
training. he was essential to the plot. pakistani intelligence helped direct and fund that reconnaissance. he was assisted by mir and an isi director. they provided by thant tactical issues. he was kept apprised of selection. lashkar went out of its way to select five target to ensure that americans and westerners killed. the major was informed and was happy to hear that a jewish center would be one of the targets. halfway into the five or six months of reporting, there was a pivotal moment. i came across information that seemed to be a big deal and a bona fides secret. in 2005, three years before the mumbai attacks, four years before is the rest -- his
arrest, his ex-wife had warned investigators about his ties and he had been arrested in a domestic dispute. this raised questions about the official version and it narrowed the focus of reporting on to headley and into the counter- terrorism apparatus. the reporting showed that federal investigators had interviewed headley's wife three times in 2005. she detailed his involvement with le -- with lashkar. the investigators decided he was not a threat. he kept traveling. the exact nature and duration of his work as an informant remain unclear. the revelation was important because of the allegation that he had become a trained agent of pakistani intelligence. it raises the specter that he was a double it. officials were convinced that u.s. agencies monitored headley
intermittently into 2008. that information might have played a role in the urgent and specific warnings from the u.s. to the indians before the mumbai attacks. that has not been proven. what was known about headley and when remains a mystery. the review launched by the dni after the first couple article showed a more troubling time line. there had been a total of half a dozen warnings about headley from spouses and associates over seven years. i have done this for a long time. i know a lot of investigators and officials. i appreciate the difficulty of their work. i know how easy it can be for journalists to second-guess after the fact. i tried to point out that advanced warnings like this are part of the landscape of counter-terrorism, about the september 11 attacks, the madrid attacks, in those cases, there was this information about some of the people blended of being involved ahead of time.
but, i do think that as time went on, the warnings accumulated and became more serious. there was a breakdown in the system. soon afterward, we published a series in "the washington post" about lashkar and the mumbai case. i described the essential findings. i will highlight a few points. the conclusion was the u.s. government was slow to focus on lashkar. that is a nuance issue. it is not that the entire counter-terrorism community ignored lashkar. there were warning signs. the overall consensus was among investigators and experts i talked to, there was not enough effort directed at lashkar before 2008. an example of that was experienced by investigators who rushed to mumbai after the attacks. the agents ran into a problem.
they found there was a basic lack of intelligence on lashkar, photos, profiles, charts, analysis, that you would have expected the counter-terrorism community to have collected seven years after the september 11 attacks. that leads to a second issue, the role of the isi and pakistani security forces. the investigation is still going. reflect the spectrum of the debate. one extreme, you have officials to continue to insist there was no official link whatsoever to the attacks or to lashkar. in the middle, the most common u.s. assessment is that mid- level pakistani officials were likely involve more aware of the plot, but there was no high level institutional decision to attack mumbai. at the other end of the spectrum, many indian investigators and some western ones feel there was extensive official involvement.
i want to be circumspect. i will say this. the lack of progress in the case does worsen suspicions and deepen the mystery in that trial going on in pakistan. there are two important figures among the seven suspects. the prosecution seems to have stalled hopelessly. in contrast, the sources say there is stronger evidence against the alleged masterminds who -- who remain at large. they include mir, the major, and in some cases, their faces, addresses, phone numbers, voices are known to the authority. they are thought to be in pakistan doing business as usual. authorities say they cannot catch them. account, if it is to be believed, and he is a slippery character, work has been done to corroborate his statements, there could be a demonstrate
between the isi and lashkar. he said there included training, funding, and technically buys from several sources. it will be legitimate to ask whether involvement was limited to one or two rogue officials. i think the mumbai case and what happens is a test of the rule of law and a test of the indian- pakistani relationship and the u.s.-pakistan relationship. repercussions continue. the threat from al qaeda and pakistan can be traced partly to mumbai and to the follow up plot that headley embarked on against denmark, which evolved from a lashkar project to one ventured by al qaeda. most western investigators described him as the merging operations chief of al qaeda. headley used as training from lashkar to scout scores of u.s., british, and indiana targets around the world.
rise shows that people are operating across the lines of groups. he has done that with former operatives of lashkar and other groups. lashkar remains a source of threats. by the number of veterans or defect into al qaeda and its allies amid increasing tensions within lashkar. these threats of attacks in europe show the influence of al qaeda and lashkar and with the groups are blurring together in pakistan today. thank you very much. [applause]
>> thank you. we have time for a least one round of questions. i think we will take two or three questions, and then have them respond, in the interest of time, if that is all right with everybody. >> hi. my question is actually more for arif. if a core component is training, to discredit that which has promoted pluralism, one could argue that pakistan is at risk of losing its identity. how do you believe the u.s. can power mainstream movements at institutions -- get institutions to work against groups like lashkar-e-taiba?
>> i think your question was, given the manner in which l.e.t. has tried to discredit muslims in pakistan, this endangers the moderate islam that has helped to stabilize practice on at various points. how can the u.s. empower the muslims in the face of the threat from l.e.t.? theou don't mind coming in interest of time, do we have any other questions? we will bundle them. we will take two more. >> good morning. my name is monaco robins. i work for the lockheed martin
center for security analysis. i read an interesting assertion. lashkar as maybe begun to extend its hand to another group that operates in india. i was wondering if anybody could corroborate that, and what you thought the long-term implications for the region would be. >> should we take one more, if anybody has one? ok. sorry. we will take two more. we have one year. do we have time for that? ok. >> thank you. i am a professor at george mason school of public policy and director of the terrorism transnational crimes and corruption center. this is a question for sebastian. you talked about headley and his roles in drug trafficking. did you find other crime connections in this attack?
they were very profound in the previous mumbai attack in the 1990's. did you find any links in this latest attack to that? thank you. do want tot we -- take that? we will take these three. arif can go ahead with the degree to which l.e.t. is threatening muslims in pakistan today and what the u.s. can do to empower muslims in pakistan as a counterbalance. isi think lashkar's threat to india. it is threatening india. they want to break up the india -- break up the india -- break up india.
lashkar is not aiming for global jihad in the immediate future. the lashkar leadership is rick clever. they are very pragmatic. they have kept their relations with the establishment intact. they have not gone against the pakistani state. i am sure everybody must have noticed in the morning how angry the general was when somebody asked him -- mentioned lashkar. lashkar remains the most favored and favorite group in pakistan for the military establishment.
i don't see established pakistani military establishment going against lashkar in the immediate future for several reasons. the military is not trying to amend the policy of using jihad as an instrument of its defense policy. there is no threat, as such, to the world from lashkar in the foreseeable future. however, i think it could be different in five to ten years. >> if i could ask a follow-up question, given the threat of lashkar's violence is directed externally, and there is always a threat that this could
boomerang back and threaten pakistan, leaving that aside, to what degree do you sense that l.e.t. is having success in terms of drawing people to its interpretation of islam, in terms of converting people to its interpretation of islam, which embraces jihad? is this something that we should be concerned about in terms of stability within pakistan? is there anything we might be able to do about that? >> i think they have had a rather successful impact. lashkar has committed violence only in india, not in pakistan, very little in afghanistan. the people are being attracted to lashkar very much. the last thing i counted, the number of members, it was more
than 300,000. armed and trained. that is very, very threatening. it is growing. i was still counting when i did 300,000. my sense is that the pakistani military is seeing lashkar. lashkar agrees with the strategy. replace the taliban in afghanistan. the pakistani military is very india-centric. they have lost -- after the fall of the taliban, they go to the pakistani military. i think in 10 to 15 years, there
would like to see lashkar in kabul. >> thank you very much. do you want to take the question about the of the criminal connections? i am happy to weigh in on crime as well. >> i did not see a lot of connections to crime in the attacks themselves, particularly compared to the previous attacks in mumbai. there were connections to crime. there was a moment when headley, showing a the level connections he had, actually introduces lashkar people to smugglers for smuggling weapons across the border into india. i think one of the reasons was the conception of the mumbai attacks is different. you have this excellent, undercover reconnaissance operative, was american, and there's great reliance on him, and he does a lot of the work, projected in from the outside,
to maintain a breach of secrecy. there were other people revoke -- involved in reconnaissance. we don't know all of them, i am told. there could have been peripheral roles. i am not aware of anything as you mentioned. >> i don't know if you have seen anything on the connections to the -- this is something that -- to the question, i have seen -- this has been reported for a year or year and a half now. some elements might be trying to assist the mauists in india as a means of destabilizing other parts of india or perhaps getting a foothold. it is something that i personally have been seeking to verify the. i have not been able to do so. i don't know if others on the panel have dug into that. i can attest that that has been knocking around for a while. i think it is of interest. it would speak to the degree to which l.e.t.'s tactics have
shifted in india to expand even further and be the degree to which the group is willing to make alliances outside of its surplus in terms of accomplishing its objectives in india. i wanted to second sebastian's point 1 criminality. in terms of the mumbai attacks in 2008, there was a belief that the criminal underworld would come to light that some point. no evidence suggests that has been the case. criminal networks in india were intrinsic to lashkar's ability to build its own presence there. there is a lashkar-support a network that came together in large part through the involvement of members of the criminal underworld.
to come to arif's point and the question about the threat within pakistan, my sense is that to a large degree, lashkar's appeal in pakistan is threefold. it fights against india, the main enemy. it has not turned its guns on the state. it is providing a host of services that in many other parts of the state, they're not. education, welfare, health care, ambulance service, and to the degree to which the u.s. can pressure pakistan is to actually take over this infrastructure and run it themselves, and that we can support that, both of those will be important. the case remains that, even
though it has been banned within -- within the u.n., it has not been banned in pakistan. something needs to change in that regard. i think there will need -- there will need to be fixes. i think we will have to leave it there, unfortunately. thank you all very much. >> we are going to take a brief break for lunch. there are lunchboxes outside. immediate to -- immediately to your left, grab your lunch. bring your food back in. we will resume with our keynote speaker, amrullah saleh. thank you.
[captioning performed by national captioning institute] [captions copyright national cable satellite corp. 2010] >> phase one, there was one assumption that pakistan is an ally, so when we push the taliban out of the afghan border, they will be taken care of a from the other side of the border. they will start phase two. phase two is a state building. during the phase two, the afghans did their homework. the democratic process was launched. things were going very well. pakistan was keeping the taliban in hibernation. they were not unleashed. re-unleashed. that continued until late 2005. an institution-building starts
in afghanistan. i call it phase three. a mistake was made. every donor nation took their responsibility to build capacity. the united states take response -- takes responsibility for taking the army. germany, the afghan national police, united kingdom takes responsibility for narcotics eradication, italy takes the responsibility for judiciary reform. they soon find out, after a year or so, that this stovepipes strategy is not going to lead to the creation of a cohesive state. now, ever buddy regrets why we wasted so many years in that approach because the result was
not the result we all desire and liked. it is during the launch of this approach that taliban re- emerged. they have already come back. they had concentrated in the remote parts of the country come in the privileges, exploiting the lack and presents -- presence of the government. they were able to establish small bases in areas of which were not significant. by being there, taliban does not pose any significant threat to the afghan state or the process, or the international forces. everyone thought there were gone, there were defeated, if they're in villages, they will not be able to become a
strategic threat. it is still the time when people believe musharraf is not a double-game player. they all thought he was an honest, strategic ally of the state. a lot of the things i wanted to say, a distinguished journalists spoke for me. it is 2006. the attention of the united states -- i would not say it is divert it. it's a split between iraq and afghanistan. iraq takes the bulk of the attention. as aan reemerge s
strategic threat. what do i mean by that? they are able to make the highways unsecure. they're able to attack district centers. they are able to attack -- intimidate people in cities. the intelligence sector becomes more clear that they have established bases in a chemist and. at the point of time, the commander of nato in a chemist and was general richards -- in afghanistan was general richards. he launched his famous operation medusa. that was to uproot the taliban from their known bases in southern kandahar. there were uprooted from a few districts, but general richards did not have sufficient resources or manpower to pursue them further.
because he did not happen up soldiers, he came to the afghan government and said, let us have a change in strategy. let us have afghan development zones. he said because we have this number of groups, we only developed certain parts of afghanistan. by doing that, we created model areas so men outside, they see better life with us. they will volunteer. afghan government, right away, they objected to that approach. by then, the taliban had become a strategic threat. before i want to elaborate further as to where we are now, i have to say, in 2001-2002,
taliban were not entirely defeated. they were pushed out of afghanistan. they have lost territory. they have lost command and control. they have lost their fighting machine. the leadership of the taliban were concerned they had gone to pakistan. in pakistan, they were protected by the pakistani military in the tribal areas. now, we all realized in 2007- 2008 at the taliban have emerged again. the attention is not in afghanistan. we see signs of the blame game. diplomas to start. afghans complain about lack of resources. international community complaints about lack of competence and lack of a strong political will on the side of
the afghans to do something meaningful. there is no prescription as to how do you deal with this problem. a series of reviews start in washington. it is for me to say that you can see some of these reviews talked about in the book "obama's war." then comes the most fresh and latest prescription as to what do you do with the enemy who has emerged. more u.s. troops. why more u.s. troops? they have, for such a long time, and neglected to create a viable afghan force. now that the taliban has come in such big numbers, and development of the afghan
national security forces will take more time, the easiest way to counter them as more u.s. troops. in addition, parallel to bring in more u.s. troops in afghanistan, then they say, we have to enlarge the size of the afghan national forces as well. that is the phase where we are. what are the problems of this phase? there are a number of problems with the current strategy. in the current strategy, united states still believes pakistan isonest. or, more than 50% honest. you hear words, "rogue elements" in pakistan. not for a confident about whether we remain in that part of the region.
therefore, they have to keep their voice for a rainy day. this is for the second thing. you do not remain in that part of the world forever. does that justify pakistan to grow and create these militant groups? i think not. the other problem with the current strategy is this. let me, before elaborating the problems with the current strategy, i have to say, every single u.s. soldier in afghanistan is fighting with dignity and honor. i am not saying this because i am here in the united states. my views are very well known. the fight for the u.s. national interest. in the meantime, for protection of the afghan dignity and honor. without them, we will face
massacre and disaster, and god knows what types of a future afghanistan will have. now, that said, what i explained as problem is in no way disrespect for the very honorable and dignified mission they are doing in my country. general petraeus is trying to solve the problem by going to the villages, expanding and spreading the threat of the afghan government. but, there is a fundamental problem in kabul. i call it the problem of political kabul. the kabul is detached from reality. they're not part during fully with the military mission. so, you have political kabul
not completely buying and support of the mission. you have the soldiers going out to the villages. the question is this. which one is the priority? special forces doing operations, or a consistent policy to solve some of the outstanding issues with kabul and make it a viable partner? we have to have a common and unified narrative. without that narrative, without that strategic messaging, we will not be able to carry on the public in afghanistan or in the united states with us. sometimes back, i gave the interview in afghanistan to national public radio.
by coincidence, i opened the website of npr and read the opinion of the americans about what i had said. i saw the merit of about this war has blurred. it is not as clear as it was on september 12, 2001, or in 2005, or in 2008. some of the americans who commented on my interview, they said, the comments of this guy does not make sense. he talks about history, value, why should we go all the way to the other end of the world, and in those mountains, and fight for him? what does he mean when he says, whether americans are here or not, we will defend our values? what do i mean? before 9/11, we were fighting the taliban. we were fighting for a
pluralistic afghanistan. we were fighting for a vision, not for empowerment of a faction. we were fighting for a day where afghan women be treated as human beings, and not as animals put in cages. what i meant, i said, if united states leaves us, abandons us prematurely, through creating excuses that this is no longer winnable, political kabul is very corrupt, it does not mean we will give up. we will continue because we have not reached a stage where the enemy is defeated. you, united states, came to our country for very distinct, three objectives. defeat al qaeda. make the taliban irrelevant. create a viable government. the question is, which one of
those three have been achieved? in my opinion, we have managed or achieved the third objective, but not in perfect manner. there are flaws and problems with that. al qaeda is not defeated. taliban are not defeat. what bothers everybody in afghanistan that what has blurred the narrative for the war is the talk of reconciliation. we could reconcile with the taliban on saddam to 14, september 15, 2001. what was the need for the billions and billions of dollars to be spent? it is the same enemy. of course, if we reverse the time we hear the speeches of major western politicians saying, failure is not an option -- now it seems as if
failure is an option. my key message coming to washington is this. it is a winnable war. the nature of our enemy has not changed. the fundamentals are the same. people tell me, after the surge, things have improved. i say, yes, things have improved. there are no bombs in kabul. i hope there will be no bombs in kabul. has the surge brought a fundamental change? has something changed in pakistan? no. have recaptured, killed, or brought to the negotiations table the taliban leadership? no. have we defeated al qaeda? no.
the surge has brought a temporary effect. is the afghan security forces capable of holding the ground that the u.s. troops cleared for us? no. why? many reasons, but the one reason i emphasize time and again, the narrative of this mission is not as it was six years ago, four years ago. people try to create a reductionist agenda. it is the same al qaeda, same taliban, pakistan, the same global agenda for the jihadist group's. people may ask, will the taliban be able to threaten our key and national interests by positioning ak-47?
remember, when they did help al qaeda 2 9/11, they had the same weapons. think of it from another perspective. a group defeating 40 countries are creating a perception of defeat. they're converting fertilizer to ied's. you can bring nato down. now, this is a narrative for continuation of war. what is the solution? after resignation, a lot of people called me and anti- reconciliation. that is not true. i see my dignity and honor protected in peace.
my family's in afghanistan. my daughters go to school in kabul. i do not have family outside afghanistan. i am purely local. so, what is the alternative if we don't want reconciliation from a position of weakness? we have a narrative for the continuation of the mission. political kabul is not fully partnering with nato, for whatever reasons. u.s. media is more aware of it. institutions are dealing with afghanistan. they have been that knowledge of what those reasons are. i put it in simple terms. let us demobilize them, disarm them, take their headquarters out of the pakistani
intelligence basement, let them get to kabul, push the taliban according to the script of democracy. allow them a chance to govern. they will die in democracy. they will die in a country without ied's and the spread of intimidation. the resistance in afghanistan, which is named the no. alliance, these things happen. they did not surrender to a faction. they surrendered themselves to the democratic process. a lot of them were marginalized politically. they gave up their weapons. ngo's are there. civil societies are active.
i have been warning, and i want to reissue that warning. without doing this to the taliban, without pushing them to declare who their commanders are, a deal would be a disaster both for afghanistan and for the united states. i want to briefly, very briefly, say what i mean. let's say tomorrow we have to deal with them. that gives of -- gives us a time of fake and deceptive stability. that is an excuse to reduce the number of troops significantly without seeing whether we have changed the basics or not. the enemy remains as mysterious and as unknown as today without
as going to their roots. then, the fighting starts again. it will be very easy for the western media to say, this is the habit of afghan tribes. they fight. we will be, once again, dropped from the attention of the work until you face another disaster and come back, and say, ok. we did not know the enemy was not defeated. let's redo it. a deal may bring deceptive stability. it will not bring a -- lasting stability where afghans or foreigners will have confidence to invest and convert afghanistan into a viable economy. the state will receive some resources for subsidizing, but
not a totally subsidized state. that is an alternative. we are proposing it, not from the position that i was, i am out of the government, but as a political activist. you may say, nobody is talking about a deal. am i talking pretty much early, before something has happened? no. a grocer comes and we are so desperate for a deal, they take him to the president of the country and say, he is the taliban operative. he is flown by nato airplane. this desperation for the deal,
why he come in his third meeting, brought to the presidential palace of afghanistan? everybody is desperate for a deal. why some support in its brass to do the task of negotiation -- some subordinates were asked to do the task of negotiation? both were very lengthy processes. not by bogus characters, but the real ones. i asked some of the organizers of this conference, what is the expectation for me to talk? remember, i am not used a lot to speak. i'm trained to listen. that is why i told you, if you
find it boring, bear with me. thank you. [applause] >> thank you very much. we will open for a couple questions here. let's see. where's the microphone? ok. first question. we will call on someone who has not ask the question today. is there anyone on this side of the room? in the back on the left. >> thank you. kimberly with the associated press. are you saying that you can see a time in the foreseeable future where it is right to open up peace talks with the taliban? what conditions on the ground to you need to see before you're part of the country believes they could have success?
>> this is a very good question and a fundamental matter. just to quote three speakers who came before me, because without quoting, sometimes i will be accused of carrying my no. alliance sentiment for the rest of my life. i want to quote these gentlemen. three of them said lashkar was the creator pakistani military establishments. lashkar-e-taiba is working with all tied up -- al qaeda. they're becoming a very important operative or master of operations for al qaeda. so, we talk about all these proxies', but not the master of
proxies, which is the pakistan army. what does the pakistan army want to achieve by saying to washington, we are going back to being the masters of of these proxy operations? they want to gain influence in the region. now, they may tell you, look at the suffering of our people. there are people who do suffer in tribal areas, in the expendable part of pakistan. you continue to hear the news about the suffering of people in tribal areas, and the establishment is not shocked. that is what they take very serious. pakistan believes that by promoting these proxy groups,
even if there is a leakage, even if there is a spillover, it will be like fire in the servants' quarters. it will not burn the main palace. that is their theory. tribal areas are like servants' quarters. even if it continues to burn forever. now, what we don't see clearly is the u.s. strategy a consistent policy towards the fundamental issue, pakistan. it is a country which, despite the threat of sanctions, and despite the one time sanction, they do not stand the pressure. it is a country that has promised to you, 9/11 has changed us. they said we have not changed.
we are the same pakistan. you believed in them. now, united states believes that by giving more money, more resources, to pakistan, you can convert their behavior from bad to good. it is bad behavior which keeps them continuing to have that bad behavior. now, i say, let's start negotiations today. have we changed some of the very basics for which nato went to afghanistan? if not, you sit with the enemy around the negotiation table. we are demanding them of what? they are not under pressure? who is under pressure? the u.s. military and the afghan villages, they go and they kill
the outer circle of the taliban, the middle circle of the taliban, but not the inner circle of the taliban. the outer circle are the opportunists. the middle circle are those commanders who go to pakistan, receive training and resources, come back, and lead small groups. the inner circle is so well- protected, a grocer can claim to be one of them and start negotiations. that is where we need to put pressure. put pressure on the inner circle, on the leadership, so they see the heat, and come to talks and to terms. demographically, in the next 20, 30 years, afghanistan will be around 70, 80 million people.
pakistan will be over 300 million people. there segmenting in energy production, in education -- they are stagnating in energy production, in education, in the economy. for them to be creating these proxy groups and create a literature of religious war, and keep sending them to afghanistan either to promote your agenda or get killed there, in either case, it is a win-win situation for pakistan. so, i am not anti-negotiations or anti-peace. i say, we have not done the basics to call for a desperate talk with the enemy. ?f we do, what is plan b what if we keep asking for
reconciliation, and it is july, 2014, and the american public opinion is exhausted with this very long tunnel with no light at the end, and then we say, what? i do not see plan b period -- plan b. because we do not see it, people like me see afghanistan hanging on a cliff. we are preparing for plan b. we say we have no influence over nato, no influence over taliban. if nato decides to leave, if taliban want to continue the fight, who will be the victim? the majority is silent. the civil society, those who wish to live in a pluralistic time. you may say, why are they not
mobilized, organized enough to do part of the job themselves? very simple. as i said, political kabul has to partner withyo you for the sake of afghanistan and strategic messaging in creating a narrative that can carry the afghan and american public the same pace toward the victory. >> question in the back. we will go to the back of the room. >> yes. good afternoon. i'm a news correspondent with voice of america. my question for you would be that we know that the strategic review on afghanistan is coming up next week. we presume it will be released by the white house.
we heard relatively positive remarks from secretary gates yesterday with president karzai and earlier in the week from general petraeus regarding how progress is going. we are hearing a different message from you. if you had an opportunity to make one or two points in that strategic review that all americans, all afghans, would see, what with those. be? >> a very good question. let us constructed for the afghan government and let us revolutionize the speed of the development of the afghan security strategic security forces and relevant institutions involved in good government. those are three points. there is no test. pakistan, from 12 september,
2011, you have not earned a wholesale cooperation from that country. this individual, that individual, this guy or that guy. pakistan has not provided you with wholesale cooperation. and the tribal areas, seems today located in march. this is not located in march. you should say to the pakistan knees, either by july, 2007 we will do the job for you. this ungovernable part of
pakistan, from where you have suffered, from where you claim your great leader was killed, we will clean it for you. those would be my three points. a way forward where everybody will measure progress as it suits their interests will not change the fundamentals. i am saying, change the fundamentals. the fundamentals have not changed. we should not adjust ourselves based on the mood of the enemy. we should adjust ourselves based
on the intention of the enemy. the intention of the enemy is as serious and vicious as it was the 10th of september, 2001. one day they managed to do a bombing. one day they cannot. they are giving a perception that things are improving. americans, you are right. get your troops out of afghanistan. >> you describe yourself as a politician/activist. but my question would be, you did not talk about the ideology of the mujahedin. they have an ideology.
they want to fight to go to paradise. from the last sentence that you said, that is why local people do not stand up and fight to the taliban, if they truly think they are as horrible as you described them. [unintelligible] has been declared for all of the al-qaeda branches in somalia and yemen. so now, in somalia itself, somalis did not fight, for example. in yemen, the yemeni resisted.
why is that? is the jihad ideology not a factor? >> my brother, there is no versed in the koran about getting to have been -- getting to heaven through afghanistan. so i am wondering why everyone is trying to get there through my country. [laughter] again not find that verse. then, there is a greater jihad that is pious this, being good. why do we always opt for the second it jihad, the lethal jihad? that is a very complicated, very
deep discussion and debate beyond the limits of this conference. but, coming back to your point, i am sure if he ever agreed to come here, they would not tell him to remove his turban. he has no message. there is no narrative except killing. i find it truly insulting to say that the messages of true muslims is only killing. there is no moderation. there is no room in this world. this world is only for christians, jews, and non- muslims, and we wait. we wait until the next world. that is not a the sort of
message i get from islam. the taliban are a group. they do not represent a majority of us. i was fighting the taliban before the intervention of the united states because of our beliefs. we will fight again. it is our cause. >> question here in the front. >> thank you. i am from fox news, and i am honored to be one of the directors of the jamestown foundation. you talk about the fact that political kabul and the united states are on a different page. what would be your plan to replace of the political kabul with a couple that might be on kabul same -- with a coup
that might beyond the same page as the united states? >> i do not have a plan or a proposal that would involve another front or international humanity. this is not a political front to create a headache for the mission. i say we should bring in meaningful reform to make the political kabul part of the mission. they should become accountable. they should become responsive. they should become accessible. they should respect to the, narrative. what is that, narrative? as i said, from september 12th, 2001, until today, have the basics changed? you still have extremist groups. they were based in tribal areas. they were based in afghanistan.
did they were pushed out of afghanistan. there in tribal areas and attacking us on an everyday basis. so, what is at stake to make political, will respect the narrative? a and there are plenty of ways. we should not wait -- i totally disagree with the literature is that the afghans well start taking -- with the literature that the afghans will start taking responsibility by 2014. the afghans should start taking responsibility from yesterday. my message is, afghan police, afghan national army should not be a protected forest. they should be allowed to do operations by themselves.
again, this is a cause for us, and the political leaders must promote that cause. we should not be motivated because of an op-ed in the and the new york time or washington post or fox news. we have our own media. now, meaningful reform, a strategic messaging, and handing over responsibility not from today, as i said, it should have started yesterday. what do i mean by handing over responsibility quickly? if you watch one of the pbs documentaries on afghanistan which was made two years ago, there is an episode in that documentary that says, now, nato
is connecting political kabul with the masses. there is a nato helicopter flying to the villages. why should nato fly to the villages? they should say to the minister, tomorrow i'm going to be in that village and i want you to be there. at the road is dangerous, but you need to secure that road. it should not be purely a nato mission. i just give you one test. there can be numerous tests that will shake up political kabul and say, this is our mission, and if we felt, this failure will mean something. you should not dealt afghan officials because they speak english or because -- help
afghan officials because they speak english or because they like americans. this should help the villages. >> one more in the back of the room. please wait for the microphone. >> thank you very much. i have a quick questions. in what you call theatre kabul, what is the purpose of that? what is the purpose of political theater? what is the benefit, if you could elaborate? and regarding the reconciliation efforts, are there any ethical issues or any influence or pressure from islamabad that led to your resignation?
>> the definition of political kabul is the segment of the society which is involved, who are occupying big positions, big businesses, big media, and are very active in the civil society, and if they are benefiting from the security umbrella of nato, but they have a different nanarrative. that is my definition of kabul theater. and kabul theater must be aligned with the mission. your second question is about the reconciliation. sometimes it is being said that the taliban are pashtun and the stronghold is in kandahar.
it kandahar is the homeland and a strong base of a the taliban, then people should know that the taliban is against music. and they know. four weeks ago one of our rock stars gave a concert. it 30,000 people came. they knew it could be more. there could be a suicide bombers. there could be taliban snipers. there could be every other type of threat. when i watched the concert, live on our national tv, i have heard the songs so many times in my life, and i was truly crying for half an hour. trying to see how desperate people are for a normal life. 30,000 people took the rest to come to a concert.
-- risk to come to a concert. people will say no to the taliban, but if political kabul keeps saying, taliban are the protectors, where are they? do they go to the palace for negotiations? people get confused. taliban are pashtun but pashtun are not the taliban. that is my message. now, whatever is behind my resignation, i do not want to live in the history. it is gone. i have a new live. >> on that note, we are going to end our discussion today. thank you very much for the wonderful insight. [applause]
we are going to have a short 10- minute break while the next panel comes up. the stretch your legs and we will come right back. >> and now, an oversight hearing on the financial stability on the federal body -- of the federal body that guarantees pension plans. this was established in 1974 to protect retirees with defined benefit plans that run out of money. after the director testifies, we will hear from overseers about their findings. this is two hours.
>> i often talk to people who are struggling just to make ends meet. they often wonder if they will even have what they need to retire. 44 million american workers and their families rely on this agency. we are responsible for making sure that four hundred $67 million in benefits get to 800,000 retirees every single month. that responsibility is growing. last year alone, we assumed responsibility for the pensions of 109,000 people. but for us, these are
individuals and families that would have been left with next to nothing. unfortunately, the future of this agency is at risk. the deficit rose again this year. there is a very real chance that some large plants could become insolvent in the near future. -- large plans could become insolvent in the near future. in light of these challenges, strong and effective leadership is crucial. the inspector general recently released a report that raises serious concerns about whether pbgc would be able to cope with an influx in pensions brought on by a crisis. we have had scandals, such as those under former director charles miller. his inappropriate contacts with vendors and bad decisions
jeopardized the security of this agency during one of the worst economic crises in our nation's history. worse yet, mr. miller eroded public trust in the agency and the pension system as a whole. we are starting to see some positive changes under new leadership, but we need to examine whether the agency has structural problems that a new director alone cannot solve. for example, the board of directors has often been little more than a rubber stamp. even during the height of the recent economic crisis when the agency was most at risk, the board barely even met. i think we should take a look at the construction of the board and the number of board members. it is high time we took a look at that. one senator has put some ideas on the table.
i commend him for that. this is a matter on which i hope we can put aside partisanship. there are problems, but i do not think they are insurmountable. i thank all of you for being here today to discuss this important matter. i now yield to my colleague. >> thank you. few people realize that we send nearly half a billion dollars each month to companies whose retirees' pensions have gone away. the magnitude underscores the importance of the operation to today's and tomorrow's retirees. single employer pension plans were nearly 100% funded in 2000, but because of the economic downturn, a greater number have been taken over by this agency.
in addition, the government accountability offices states that approximately four hundred of the 1500 multi-employer pension plans are less than 80% funded. we are facing rough waters and will continue to face them in the future. the corporate structure of this agency is unlike any in the federal government. there are three cabinet secretaries on the board of directors. elaine chao recognized the need for greater corporate governance and implemented reforms including updating and revising the agency's bylaws. today we will hear from our witnesses to see whether further improvements are necessary, and recommendations on how to improve communication between the agency and its board of directors. enlarging it can be a very difficult task, but not as difficult as if it was in the private sector. with the shape it is then, it could be difficult to get
people to participate. i am open to reforms similar to ones that congress sought in private companies through the sarbanes oxley act. however, we must take steps to reform the pbgc and stay away from reforms that might limit the agency's ability to do its job. as we all know, our retirement benefit system is built upon a voluntary partnership between employees and their companies. in order to strengthen the system, we must be able to respond to and work with the business community, otherwise the business community will decline to participate. thank you for holding this hearing. i look forward to the testimony of the witnesses.
>> just to respond, looking at the board, you are right, there are three cabinet secretaries. they probably do not have much time to go to meetings. some boards have seven members, nine members. one has 15 members, and they set up subcommittees'. like any board in the private sector would do. they take a part of the agency and they are responsible for it. i would like to discuss that with you. i am sure we are going to have some talk about that today from ?0our witnesses. we have two panels. on the first panel is the director of the pension and benefit guarantee program. prior to his appointment,,tys an operating partner at global capital where he managed and advised public and private
institutions. on our second panel, we have the director for education work force at the u.s. government accountability office. also, the inspectors general at the pbgc, and an international benefits consultant. that will be our second panel. welcome to the committee. if i am not mistaken, i think this may be your first appearance before this committee. >> it absolutely is. >> welcome. i read your testimony last evening. your testimony will be made a part of the record in its entirety. i would ask if you could sum it up in several minutes so that we will have more chance for interchange with the senators. i appreciated very much. please proceed. >> members of the committee, i want to start, frankly, by in
thanking you for supporting my nomination. in understand -- idñd understad very well the consequences of a presidential appointment subject to senate confirmation. it changes the job. i hope that you'll conclude that having done so facilitates the very management and oversight that are the subjects of this hearing. i also, frankly, want to thank you for holding this, which is my first oversight hearing. i believe an oversight. i think it is an important part of the process. i hope you continue to give me a chance to come back and provide my impressions. we have just turned out our annual report, copies of which have been provided to you and your staff. i cannot cut chapter and verse over everything that gets done. frankly, after only four9ñé mo, i cannot pretend to be an expert
on everything that we did. but i would like to record my first impressions and make four points. , in light of the complex tasks thatly have been given the agency, we performance surprisingly well. we haveú paid benefits reliably for 36 years. and, despite the incredibly complex rules that have to be followed, surprisingly accurately. when the plan fails, our first priority is to make sure the benefits continue without interruption. last year, a newly terminated plans covered 40,000 people. 40,000 people were getting checks every month from a plan ñithat was terminated. every one of those people was transferred to our system without a hitch. i brought thesey0ñ8 charts, of h
i admit are hard to read, and put them in testimony, as a reminder of how complicated the determination process is. we start by paying an estimate of what benefits are, and then follow the many steps necessary to figure out the legal benefit. the good news is, despite this incredibly complicated process, 90% of the estimated payments are within 10% of the number that is finally determined to comply. the bad news is that following this complicated process can take years. and during that period of time, people are uncertain. second point, for pbgc, preserving plant is just as important as replacing that --
preserving plans is just as important as replacing them when they fail. ifirst, we try to keep the pension processes in the hands of the employers that make them. our view is that every plan that is kept in the hands of the employer and not terminated is better for the employees and better for us. last year, our staff negotiated with dozens of companies both in bankruptcy not to preserve their plans. last year, companies kept their plans when they came out of bankruptcy. included in those plans were a quarter of a million people. as a result of those efforts, a quarter of a million people have their companies go through bankruptcy but came out and kept their plans. third, the staff here is
knowledgeable, compassionate and committed. i think that is very important because they have to mean very high standards of stewardship and accountability. iour performance is measured by how quickly the benefits are determined and by independent surveys. we compare ourselves with private sector benchmarks. we need financial reporting standards by having, for almost two decades, and received a clean opinion. that does not mean that there is not a heck of a lot more to be done. like too many institutionsqñyr i t systems are not up to snuff. and, like many other government agencies, we rely on contractors without having enough
sufficiently skilled contract managers in place to manage them as well as we should. this is a challenge for us and for other agencies. it is one we think is important and that we are working on. my fourth point is about pension and retiree security generally. there are broad challenges to the insurance program and to the defined benefits system itself. in one sense, we have been fortunate. despite the greatest financial turmoil in decades, fewer plans were terminated ban anybody had expected. nonetheless, the fact is that many sponsors remain weak. many plants remain underfunded. and, i would have to say that the multi-employer system in particular is especially worrisome. that there are challenges is undeniable. but whatñi i believe is also
yundeniable is that time and again, the congress and the executive branch have worked together to deal with these challenges. more than a dozen times in our history, congress has modifiedy things to enable this agency to meet its challenges. congress has also undertaken other actions that affect the pension insurance system, such as changes in funding requirements. we are chargedy with being an advocate in discussions about retirement security. given that the history of non- partisan cooperation to meet these challenges, we hope that that active partnership will continue. i want to thank the committee for its patience and support. i look forward to hearing your the is and answering your questions.
>> thank you for your very forthright statement. i will start off. we will do five minute rounds. on page 8 of your testimony, you said that neither program has funding to continue in the long run. what is "a long rung$"? i read that a couple of times in your testimony. is that two years? five years? >> let's start by talking 20 years. >> ok. >> the pbgc shas reported a
financial deficit for 30 of its 36 years. what does that mean? it means that when you compare the cash we have on hand with the obligations we are going to pay over the next 30 years, discounting the present value, the obligations are bigger than the cash we have. that is a deficit. ÷time and again, what has happened is that congress has stepped in in some way, shape, or form. as a result, we have continued to pay benefits for all of those 36 years on time and reliably. as our obligations get ylarger, the deficit gets largr ticket. ywe have a very talented groupf forecasters.
they are making something they call simulations. i would call them well-educated guesses about the future. i say to them, let's take the program as we have now, the law as we have now, the practices we have now, and run your simulations for the next 20 years. with different economic scenario isn't so on and so forth. then tell me,ya over the next0 years, in how many percentages of them do we run out of money? they said it depends in part on what your investment practice is going to be, but if you look to our historical investment practice end project forward 20 years, if congress does nothing, maybe there is a less than 5% chance that the agency runs out
of money 20 years from now. but the factseçi is, congresss never done nothing. there has always been an engagement and interaction to make sure we have the resources we need. my viewy is, this is not to diminish that there are real challenges in the system. there absolutely are and we want to take them seriously, but i do not thinking -- but i do not think we should act because we think we're going to run out of money. >> you said your risk of exposure increased significantly to $20 billion in 2010. is that a typo? >> no, sir. one of the things that the pbgc
does is what the pension system. the tools we have are not ÷iperfect, but i think they're pretty good, and the people that do it are very committed. one of the things they do time after time is make estimates as to which plans they think are likely over the next decade to get into trouble. and to get into trouble enough to become our business. they make several kinds of gases. one is, which plans we think are likely to get into trouble, and those we put on the books. in other words, we say, that is something we think is going to be liable. the history is, and when we say something is likely, there is about an 80% chance that we have to deal with it directly. we also keep track of things where it is possible, not likely, but possible. as i mentioned in my testimony,
and as this committee knows i know very well, when you look at the multi-employer world, the multi-employer systems worked very well for a long time, but in recent years, the combination of the economics and other things, they are now in more serious condition. we are watching them. as a result, because we keep account of the ones that might get into trouble, not that we think it is likely, but might get into trouble, that is why we say our potential exposure has gone up by a lot. does that make sense? >> sort of. i think i got it. senator. >> thank you for serving. thank you for your passion. i know you have only been there four months and that you had a
long way because my colleagues across the aisle put a hold on your confirmation for a long time. none of you have been there for a few months, with its debt -- now that you have been there for a few months, what steps will you take regarding at the board and improving communications between the agency and the board of directors? >> very good question. i have worked in a lot of institutions both in government and outside. i ran a charity for the september 11th fund that had 27 board members. when i ran hawaiian airlines, i have a board member of one, the bankruptcy court judge. so, i have worked with a range. what i find is that what matters more than structure is engagement and communication. and i will tell you that this board is -- they take their job
very seriously. i cannot speak for previous a ministrations or previous boards. i am very well aware of this fact that in the past the board barely met at all. i have been on board for four months. we've already had two meetings and we have another one next week. the board has a set of senior officials who are very actively engaged. i meet with them or talk with them at least monthly. we communicate by telephone or sit down of more often than that. i actually think there is now very extensive communication, very extensive communication. and i am very well aware of the fact that in the past that has not been the case, but i do
think it is important for the committee to know what is going on right now. >> several months ago, we sent the pbgc a letter regarding a misunderstanding between companies and the pbgc where the did not checked and appropriate box and you took a very hard line. i am glad you result this in a common-sense manner, but it did show that your relationship with the business community is not healthy. as i said in my opening statement, companies could drop defined benefit plans in favor of 401k plans. i would like to know what you're doing to improve the relationship with the business community to make sure
there are not more of these misunderstandings. >> as a person who has been in the business community myself, recognizing that the defined benefit insurance system is a partnership, i take that very seriously. i cannot speak for previous directors. i can tell you what i have done. i have met repeatedly with a the business organizations that affect pensions. the u.s. industry committee, councils and others. i have made sure that the very professional staff understands of that part of our job is to interact and communicate, whether we can do something or not. it is important that we communicate. you mentioned the issue regarding the mistake, and i
think that is a good example. as i mentioned in my opening statement, what we do is complicated. that is in the nature of pensions. it turned out to be the case that there were a number of companies who, not intending to play fast and lose, just made a mistake. and as it happened in those incidences, there was sufficient other evidence we had that it really was an honest mistake. what we said was, in that case, let's recognize that it is an honest mistake and allow them to correct it. that is what we did. that is the sort of thing that i'd think we need to keep doing. >> thank you. my time is expired. i have additional questions. if we do not go a second round i will submit them in writing. >> in other you do not get any general tax revenues, but i do
feel obligated to make sure that stewardship and accountability over contract workers, who are about two-thirds of your agency, are met. a lot of contract workers are under investigation today. what is your agency doing to address the issues that the gao found in their 2008 report that your workforce management lacked a strategic approach to determining the meritsiy9ñq5 contract and federal workers? >> and this is, as i mentioned in my testimony, one of the challenges that we face. having worked in other government agencies and in private business, it is a schallenge everybody faces. how do you choose to be ought to be a government employee? wendy rely on contractors?
how do you rely on contractors, etc.? what we do and are doing -- and frankly, the agency started doing this before i came in, is to do several things. one is, you need to have9 in place a process for actually planning and thinking about, in advance, what your contract in is, what your procurement is, etc.. the agency did]ymyy that iy before. we are now putting in place what contracts we arei going to hav, etc. and that is one thing you do. another thing you do is ask yourself, do i have an adequate contractor base? are they going to be around, etc.? that is a process you engage in and that is the process we are starting. at other thing you do is look at your actual contracts -- a third
thing you do is look at your actual contracts and say, do these hold people's feet to the fire the way you need them to? are they paid for performing, not justó showing up? i have to be honest with you, we are just starting that. in other words, we are looking at our contracts and saying -- and some of our contracts, by the way, do that right now. some say, we are a hiring u.s. a contractor in we expect it to me this performancesy standards- hiring you as a contractor and we expect you to meet this performance standard. another thing is that the procurement process, the process by which you do contracts, is different in government and then outside government.
so once in you have to do is make sure that the procurement process -- so one thing you have to do is make sure that the procurement process is up to snuff. powers was not. we are working on net --ys ours was not. we are working on it. we are not there yet. >> i really appreciate that candid response and look forward to your recommendations. i would also like youo summarize what sort of changes, legislatively, you think we need to make as we look at things like the pension benefit guaranty corp. governance act of 2010. >> one of the drawbacks of
having been on the the job for only four months is that i barely have opinions, let alone opinions i can say that the administration agrees with. one thing i will say is that pensions are so complicated that the only progress comes when it is non-partisan, not even bipartisan, non-partisan. there must be consensus that we should do this, it is a good government thing to do. in the past, we have dealt with premiums, benefits, funding requirements, etc. those are clearly things you have implemented that we have undertaken in the past. i cannot have an opinion at this point as to what the right thing is. i do hope that as you are facing them, we obviously want to work
with you and reach that same kind of active partnership that we have had for 36 years. >> i will look forward to hearing your opinion. thank you very much. >> thank you. thank you for being here today. in the last exchange, it was the most important of this hearing so far. it will be critical for you to make recommendations to us in terms of what we need to do in the immediate future in terms of pension legislation. pbgc would have already gone broke if we had not done the pension protection act of 2005 and added amendments earlier this year that changed obligations to these and smooth and the contributions of corporate america. it would have cost more jobs than we are have, but we still are not there yet.
you have a great record and a great history. four months is not a long time, but i hope you will take her question to task and your answer. i will work with you in a bipartisan way, because both of those acts were bipartisan, but we need some good recommendations, and we need them quicker than later, from my standpoint. >> message received. we look forward to doing that. >> we can avoid a catastrophe by looking at reality. the problem we have today is one that none of your forecasters saw coming. nobody made an assumption that we would be in this kind of market. the manages your assets? >> ever since the pbgc 4wstar, the assets i managed -- assets are managed intentionally by
outside professional managers. about a quarter are deposited in treasury. about three-quarters are managed by outside professionals. the reason for that is simple. we think it is important that the pbgc slnot be mucking arod in making choices about investment and making choices about which stocks and bonds to not buy or by. we have an investment policy set by the board, and we implement it by telling investors to do their jobs. >> i think that is important and i appreciate your answer. looking at the chart on page 4 of your report, between 2006 and 2010, your assets have increased
by 3%. i would assume that is because of a decrease of of default and not a growth of assets. >> i cannot say for sure, but i believe that is true. >> i cannot speak for others on your board, but i do think we ought to look seriously at working with you to come up with a board structure that makes sense in the challenging times ahead. we have demonstrated that you can change board structure and outcomes for the batter by giving the person responsible for running the agency thie support they need in terms of professional device. i would love to work with you on that. that is all i have.
thank you. [inaudible] >> it is my great honor to represent the people of west virginia. it is a hard-working state. they do the heavy lifting. they were in the mines and factories and have done so for years. they do not ask for much, just an opportunity to be able to provide for their families. then they hope to have a pension that is rewarding for the work they have given. unfortunately, that has not always happen. i went through a situation a was just devastating. it took a tremendous toll on people's lives.
i have a hard time understanding how it could happen that when a company goes through a bankruptcy but still has value to it, is bought by another company that comes in and leaves clean, and then abandons the people that have contributed to it. and now these people, maybe because of their age, cannot find a job. they put 30 years then, but they were devalued to the point where they had to take a meaningless entry job, if you will. a minimum-wage job just to survive. it is just not fair. with the programs you have in place, i do not know what kind of checks and balances you have. if that would have been foreseen, the collapse of the company, and they wor not in shape to take care of their
employees, why was that not caught? coming as the former government of my state, we know about an unfunded pension liability fund. it is going to wreak havoc on a lot of state. the benefits continue to change. there is no money going into match, and it just does not add up. we really have to come to grips with hard decisions. when the freeze those? and when there is a downturn f the market that was not anticipated, were any adjustments made to keep the benefits solvent? what i am trying to find out is how do we prevent that? so many people were left without. a few people got close to what their pensions would be, but many got very little. cannot be prevented?
do you have checks and balances in place now? >> i do not know if you noticed, senator, but after i left the carter white house, my first job was as an investment banker. i spent a year walking through a steel mill, talking with everyone, and working with then governor rockefeller. the people there are close to me. i talked to them even as recently as a month ago. it is undeniably a tragedy. nobody can sugarcoat that. as i mentioned in my testimony, one of the things that we really try to do is, we try to get companies -- even when they go into bankruptcy, not to terminate their plans.
we do that by saying, if you terminate your plan, we become a creditor. unlike most creditors, our lawyers are very good and very tough. they throw their weight around on behalf of retirees. however, they have within bankruptcy a limited priority. we are mostly general creditors. so it is the case that may be in bankruptcy we could have said, yes, you are in bankruptcy, and maybe you could pass on the ownership -- >> i love-when all of this took place. i was not -- i looked when all of this took place. i was not governor at the time,
but people were left with nothing. there was no liability whatsoever. i do not know enough about our bankruptcy laws or pension laws to prevent that from happening again. i do not want any state or any employer or any employer in the state to go through what our people went through. >> if i can, this is the sort of thing that is not really a question for the record, but with your permission, if some members of the staff could talk with your staff, they could explain better. >> i would love to. we can share this at another time, but i hope you never have to go through this. >> it has occurred to me too that i have seen other places where somebody comes in and buys up of gases and -- buys up all
thew assets, but7go they dot have the liability. >> a in a bankruptcy court allows them to escape. there is still value. but the people in west virginia, othe people that worked their whole lives, caught left with nothing. i will meet with their staff, and i will come back and report what we find. >> i'm sure my staff would like to know. i would like to know personally, too. >> thank you for helping to address this issue vital to 44 million of our country's workers and retirees. pbgc has the adequate structure. you were tasked with preserving
pension plans and benefits when the plans failed, maximizing benefits and being highly accountable to our pensioners. there are some areas in which has truly excelled. everybody should be impressed you have been making uninterrupted payments for decades, with some exceptions. you've made relatively prudent investment decisions and yielded satisfactory returns under difficult conditions, especially over the past few years. but one area that concerns me is the level of accountability to pensioners. when i talk with pensioners in minnesota, especially when i am up on the iron range, i year in their accounts of working with pbgc.
i hear the frustration in their voices when they say their pension benefits have taken years to process. some say it has taken years for them to even hear about their determination. this is extremely painful and disruptive for them and their families. it is impossible for them to plan for their futures, and i think pensioners deserve better than that. i understand that much focus is on a small, select group of people on the board who should be held -- how they should be appointed, what number is ideal. those are all good questions. but we need to keep the focus today on the people that are served, and our nation's pensioners, workers and retirees.
i wanted to ask a question about the board. i am sorry. i had to go to a judiciary committee hearing. but i think i read@@@?>> i waa pbgc during that time, but the gao has a graph that shows the board meetings. there are many times when the board just did not meet. >> that underscores part of the problem i think, which is that obviously, this board can be comprised of cabinet secretaries who may not have enough time to
meet. i have known a number of entities who say we have to have a better board and -- a bigger board and members who are not cabinet secretaries that can dedicate more time to this. is that the intention here? jijj as i mentioned in my testimony, from my perspective, one of the most important changes in the government of the pbgc was one this committee and congress made it was to take the director and say you are running the agency and you'll be appointed by the president and subject to senate confirmation which means you will report to this committee.
i think that is an important change in governance. as i also said it rami testimony in response to the chairman's questions, i cannot speak to what the boards of the past did. i can tell you that this board takes their jobs seriously. they meet more frequently than any pbgc board has since it was founded more than 30 years ago. >> do you think you would be helped by having some board members who are not cabinet secretaries who would have more time to spend on this job? in all sorts of areas, in addressing all the problems you face in addressing preventing pensions from going belly up and
figuring out what to do about the deficits you have, all of the different problems you have, don't you think a few more members who are dedicated -- dedicating more of their time and effort to this would be helpful? >> as i said in response to the chairman's question, i have worked with lots of different board structures and can work with them. i can work with the current structure just fine and have and will. my concern, if you will, is that beyond questions of board restructuring, there are real and central issues that pbgc faces and the pension plans face, etc.. i would especially hope -- you
are the committee, you are the functional board, what i would hope is that there is the attention to those challenges because i think those are the real challenges we face. >> my time is up. thank you very much, mr. chairman. >> thank you for holding this hearing. on an issue that is particularly of concern to folks in any economy, but especially when the economy is in rough shape, the concern people have about retirement security, i have a specific question. i want to step back for a moment and think about the grave concerns people have about their own retirement security. i'm thinking about two
categories -- one category is folks that have put those years as the governor talked about and have an expectation of having that security, but also, we have to be concerned about folks who are still in the workforce, younger workers looking down the road and in some ways, if we're going to strike a bargain with workers to say if you get a good education and work hard and study hard, if you continue to improve your skills over time, our end of the bargain is we will try to do everything we can to help you on health care. that is a promise yet unfulfilled. we'll also provide some retirement security. if that is the deal, you get educated and you keep your skills up, we will help you with health care and retirement security.
that is the goal in the north carolina good bargain for workers and the economy. but to get there, we have to do a lot of basics of fundamentals, what football players would call the blocking and tackling. senator franklin has raised the benefit determination process. i will ask some questions about that at the one question i have is on the investment policy. you say that you are working on one but i wonder if you can do one of two things or both -- either give us a preview of where you think that is headed, what determination's you'll make or can you give us a sense of how -- what are the considerations you are waiting and developing? what is the guidance you are using to develop that investment policy? that rate of return and the
return you will get will be helpful in the meeting, the ultimate goal of giving workers some peace of mind. >> i'm happy to answer questions for the record -- i think that's really important. on investment policy, investment policy, it is important to know that investment policy is something that although the director of the pbgc has always been involved in making recommendations, as always been decided by the pbgc. when i came on in july, the board said we have been thinking about this for awhile, why don't you do your review and come to around reviews and talk with us about what you think and a decision will be made. we have a board meeting next
week and we are planning to have a discussion on that. presage that and it would be inappropriate to prejudge it, but it ought to be pretty clear what are the major considerations that have always been part of the investment policy decision? one is that you need to invest in a way that covers as much as possible, the benefits the pbgc is obligated to pay. so partly, you invest to ogñggg/oow'ogñgggw although they are nonetheless a government agency, you want to make sure they do not take unnecessary or inappropriate risks. there are plenty of people, some
of them i have and take risks but it would be inappropriate for the pbgc to take. we are more conservative and do not do that. the third thing that matters is what ever the policy is, it needs to be something we can't implement in a way that is so clean that our inspector general and that gao and me, because of my ethical standards, i don't think they are lower than in either of theirs, can come to the committee and say we can do this in a matter -- in a manner that is clean. that is what we are looking for. having had some discussions already, i'm confident that is what we will end up with. >> thank you for that answer. thank you, mr. chairman.
>> thank you, mr. chairman, and i appreciate hearing today. congratulations on your nomination and a cop. i know that for months and to the job, you have a lot on your plate. in your testimony, you stated that financial position of the pbgc is a result of misfortune that has befallen sponsors and the premiums the agency charges are insufficient to pay for all the benefits that pbgc insures. what does pbgc charge in premiums and when was the last time the premiums were about elated? tell us your thoughts about recalculating that. >> let me summarize add my four
months on the job level of understanding. my staff will enable me to add detail on the record. when the pbgc started out, they had no idea what level of premiums 8 cents. said a guest. >> this is 30 years ago? >> 36 years ago. they said for single employer plans, it will be $1 per participant per year. for multi-employer plans, it would be 50 cents. they did on know, they just needed to start with something. what has happened over the years is that for most of the pbgc's time, there has been a deficit. the premiums we take is less than the obligations. congress has time and again said we will raise premiums and change premiums so there is a basic flat rate premium and a premium that relates to the degree of underfunding.
one of the issues but are not in addition to the underfunding, premiums should be based on the rest the plant terminates. the average premium, and if i get this wrong, i will correct it in the record, but from a $1 per participant per year, in round numbers, it is $80 per participant per year. that gives you an idea of by how much premiums have changed. >> what about recalculating that and evaluating it moving forward? >> that is something that has been on the agenda several times. i'm too new on the job to have an opinion as to what should happen it is precisely the sort of thing that the committee, the
pbgc, the administration has worked to discuss. the last time it was changed was 2006. my hope and expectation would be that as we get there, the discussion can be part of the mix. >> but as director, are you not concerned about wanting to move forward -- when you are looking at these huge deficits you have been talking about? >> mellon has asked the question exactly that way -- no one has asked the question exactly away. what i have learned in life for month of a job watching decision making, pension paul pensions are mind and in complicated.
wedon't make progress unless work it. what is much more important is that we move -- and that we move fast is that we engage enough so that there is a consensus and nobody thinks someone is playing fast and loose. the other thing i mentioned in my response is we have $80 billion in assets. last year, we paid out about $6 billion and took in about $3 billion in premiums and recoveries. we had a negative cash flow of about $3 billion. but we had billion dollars in cash. from my perspective, there is no danger of the pbgc is going to run out of cash. when i say the foreseeable future, my very careful
inspector general and folks who worry about accountings get nervous say when i see the foreseeable future, but we are not going to run out of cash in the foreseeable future. my concern is that in the same way congress always has worked and talked and figured out what is the right solution, that we do that and there is enough time to do it. that is something which we would like to engage in. >> do you have a number of a private industry market that would compare to your $80 premium? >> we do not. one of the things that happens when the government takes over an insurance function is that most folks in private-sector don't do that insurance function, so there is no ready standard. their evidence some premiums, but some lot to be considerably
higher. most academic studies suggest the premium ought to take the risk, what the benefit is into account, and that is stuff we don't do. it's something that has been part of the discussion in the past and i hope will be part of the discussion in the future. you -- >> you use the term of foreseeable future. what is your definition of the foreseeable future? >> its a very important question. my version is 20 years. one of the things we did it -- let me summarize and say i asked the best people i know who every day estimate our cash flow and obligations are, i said assume
congress does nothing and of the pbgc does its job. what are the odds that 20 years from now we run out of money? they set your investment policy where does, maybe less than 5%. a less than one in 20 chance. that's if there is no discussion, no change, no nothing. let's just say i expect not only to retire, but to leave this earth before the pbgc runs out of money. >> what i think about all of the people who are counting on it, i think the foreseeable future needs to have a very short definition so that we can plan appropriately and effectively for these retirees. >> if i misspoke, a what i am trying to say is that people who
get benefits from pbgc ought not to worry about the benefits. they are going to get them. >> you talked a little bit about the governing structure. i talked about the small size of the board, but there is also the oversize -- the oversight function and advisory committee. do you think the advisory committee should have statutory authority to conduct audits and case reviews? tell me about how you utilize the committee. >> that's a very important because the committee, as with boards in the past, advisory committees have done different things, so with your permission, i would like to tell you -- i just -- >> i just realize i'm overtime. >> i will be brief. my view of this is this is a group of knowledgeable people who every eight weeks come to
washington and spend a day walking through with a director of the pbgc and staff and talk about policy issues, questions of politics, and so my view is this is a group of people i can talk to who have a broad range of backgrounds. i think they do a good job and frankly, like working with them. >> thank you. the law gives pbgc three things that have to do -- ensure pensions, collect premiums, and encourage the continuation of the defined benefit plans. ensure pensions, check, you have done that. collect premiums, you have done that. number three, encourage the
continuation of defined benefit plans -- we have been losing them ever since the pbgc has come into being. i assumed you are failing on no. 3. >> i think no one can deny, mr. chairman that there is clearly real challenges and trouble in the defined benefit world. >> why? >> i am sufficiently knew that this that i know what to pretend i'm definitive on this, because i'm not. it is pretty clear to me that part of this is plan sponsors, companies, businesses, etc., have decided they did not want to offer a defined benefits. for whatever reasons, their employees are satisfied with
defined contribution plans, what ever. that is clearly something more than of pbgc can affect for change by its program. >> you are supposed to encourage the continuation of defined benefits. >> i think we are in a couple of senses. >> but we are losing them all the time. >> we are, but it is still a fact that there are some 40 million people protected by defined benefit plan. i think this part is important -- from my perspective, part of the mandate to preserve plans is what we do when we convince companies not to terminate their plans. part of that mandate is one week it to a company and say are you sure you want to terminate your plan, because if you do, you
will have to deal with us. that is part of the way we fulfil that mandate. the other way we can fulfil the mandate is to engage in the broader discussions about how do we make sure that whatever the form of retirement security is, it is adequate, understood, and widely available. >> but what about a company that does not go into bankruptcy and just wants to get rid of their defined benefit plan? >> if a company does that, one of the things that does that is we have tools we can take action on, and. we have an early warning program and we have authorities you have given us to engage with companies that when they take
steps, corporate transactions, shutdowns and sales, we can say to the company, we're nervous about what this does to your pension plan and we think he should do something to shore up. the thing we cannot do is if a company illegally decides it is going to terminate its plan and it terminates according to the law which means it buys annuities for all the participants, the law permits the company to do that and the pbgc has no authority to tell them not to. if they follow the law and decide not to do the plan, that is not something we can do except to make sure, and we do, by the way, when they get a standard plan termination that they do it according to the rules and it is done by the book.
but we cannot stop them from doing it. >> it do you have any opinion that the plan participant should be higher on the pecking order, but a list of creditors that need to be satisfied if a plan goes into bankruptcy? do you have any opinion on that? >> not an informed opinion. with your permission, let me find out the facts and circle back. >> there is some legislation pending to do that. i did know a few had thought on that but think about.
>> i am told i have misremembered the average premium. the average premium works out to be in the $30 range. if you will permit me to send the record, i will give you a full range but the figures actually are. i would be grateful. >> thank you and i appreciate your testimony and look forward to working with you in the future and, to my staff, i may be sending questions down to year and other senators can submit questions. thank you very much. we will turn to our second panel. our second panel is barbara bovbjerg of the gao.
rebecca anne batts is the inspector general of the pbgc, and can porter of the american benefits council. all of your testimony will be made part of the record in their entirety. i would ask again if you does go down the line in the order i introduced people. >> i have to say that my in- laws, proud residents of iowa city, so they are important constituents. >>c" that is a recognizable name in iowa. i should have known better. if we could just sum up in five
or seven minutes, i would appreciate it. welcome. >> thank you, mr. chairman and members. i am grateful to be invited here today to talk about the need for improved government and management at the pbgc. pbgc insures the pensions of 44 million workers, yet it faces an accumulated deficit of $23 billion. with the plans under its membership, the responsibilities have increased significantly since its creation in 1974. its financial portfolio is one of the largest of any government corporations. my testimony today discusses the need for a strong board structure and improved management of its contract and of the determination process these. my statement is based on our prior work on these topics, many for this committee. first, the board. pbgc needs strong policy
direction and oversight in the face of its current financial condition and for the foreseeable structural challenges. our prior work has highlighted a number of limitations with the statutory structure of the board, starting with its size and composition. no other government board is as small which is comprised of three secretaries. it is too small to allow the standing oversight committees used on other boards and other responsibilities are limited. in addition, this structure is vulnerable to disruption it -- too disruptive transition. at each change of presidential and penetration, the entire board and director leaves with the departing administration, not only limiting continuity, but leaving no board level leadership in the event of a media policy challenges. for example, amid the turbulent economic times of february 2008 and february 2010, the board did
not meet at all. the kiev as previously recommended congress expand the board and we suggest it be included to include members that are knowledgeable on the mission and their terms be overlapping to ensure an active board at all times. other federal corporations have boards structured this way and this can improve the structure and strength of the oversight. i am pleased this committee is considering legislation that would bring about such a change. i would like to turn now to some management issues. over the years, the gao has focused regularly on contracting and corp., both in the use of contract staff and management. since the mid-80's, we have had contracts covering a wide range of services. it does come to rely heavily on contractors to supplement its workforce. though pbgc has taken some steps
to optimizes management, -- we continue to focus almost entirely on its own federal workforce rather than the performance of the contractors. our previous work has found weaknesses in the pbgc's overall contract management. we found repeatedly most of the contracts slack performance incentives are methods to hold contractors accountable for results. the corporation has also relied heavily on labor our payment arrangements rather than the fixed price contracts we and others recommend. further, the corporation declined to take our recommendations to elevate plans to -- will making despite the function for operations. we currently have work underway on this topic and will be reporting next year. we have recommendations
determining the pbgc policies which were the top of a meeting last time but i appeared before this committee. when the pbgc takes over a plan, as calculated participants of the plan using the structure in the picture in the testimony. a small number of large and complex plans account for most of the lengthy delays and inaccurate payments to participants. although the corporation has adopted several recommendations for improvement, and has not calculated the performance measurement we think necessary. this could help reduce the benefit determinations are so troubling to beneficiaries and unnecessarily add to their stress. in conclusion, pbgc has become ever more central to american workers and retirees during the recent downturn. yet even with the increased attendance as of the board, the body structure will lead the board of leaderless at times as it did in 2008 and 2009.
an engaging in more strategic management will help better weather the storm, but it cannot overcome the wheat system of governance we have today. that is why the bill you are considering is so important. i have to say even though improving the oversight does not stall that financial problems, it would be helpful managing them as they arrive, which they surely will. i am available for questions. that includes -- that concludes my statement. >> thank you. >> thank you. i am rebecca anne batts from the office of inspector general.
i÷o appreciate the opportunity o testify about the need for strong management and oversightg and the pension benefit. uo the office of inspector general has been working diligently to address the issues mostgig critical and can continue to meet its mission into the future. many of our recent reports have been critical of the corporation and in some cases, years of effort will be needed to correct a persistent problems. despite the many challenges pbgc continues to face, might message is one of good news. othe director and i communicate with each other frequently and i believe affectively. zomy office hold monthly discussion of critical issues with a representative for pbgc board members and we benefit from the support. after meeting withro the board f directors, said in executive session to address areas of particular concern are
sensitivity. i'm happy to pbgc report is taking many of our ports seriously and implementing effective actions. ñolast spring, we reported problems with the privacyño program. theéo corporation has ever -- hs an affirmative responsibility to protect÷o the confidentiality, integrity and availability of personnel at a viable information like names and social security numbers. pbgc took prompt and corrective action, going above and beyond with the goal of becoming agyo model for handling sensitive information. as a result, the corporation is better positioned to÷o protect the person at a viable and affirmation of the workers. while progress has been made, much remains to be done. the corporation has committed to addressing longstanding issues, including witnesses in contracting information
security, and formation never about over and over today. pbgc depends on contractors to protect the pensions of american workers. historically, two of every three people doing the work of pbgc are contractors and the corporation spends about two- thirds of its annual budget through contracts. our work has pbgc shown's -- our work has shown pbgc's does not always the best quality for contractors. it constitutes the pbgc form of waste or abuse, if not outright flop -- outright fraud. pbgc has promised to take specific action with the integrity and effectiveness of its contracting processes. for example, when my office found a pbgc contractor did not exercise professional care, the corporation committed to hiring
a cpalg firm to perform the work related to two of the largest single employer program claims in pbgc history. the corporation is developing a plan from contract work would be monitored, evaluated and accepted in the future. in response to our recommendations in several the from ought pbgcño its, developea standard operating procedure to regard activity and it established control over the contracting process. the corporation has committed to a series of reviews of the staff to provide the day-to-day monitoring and supervision of pbgc contractors with the objective of ensuring compliance with the newly implemented policies and internal control. pbgc also depends on its computers. almost every aspect of pbgc is automated. pbgc pbgc÷o÷oñolg cannot use its
computer, the corporation cannot do its job. ÷omy office has identified issus with the information technology practices we believe pose an increasing and substantial risk pbgc possibility to carry out its mission. the corporation has developed plans to deal with the witnesses and acknowledges it will not be completed for three-five years. pbgc lygaeid is closely monitoring the plans. you may have noticed something about the theme of my testimony. much of my discussion has focused on the future and plans for corrective action and what pbgc promises to do to correct longstanding ills. the leadership and those with oversight responsibility for the corporation should make certain that pbgc is effective in executing the action. that concludes my remarks and i would be happy to take any
questions. >> thank you, mr. chairman. i appreciate the opportunity to be here. my name is ken porter and i'm dead consultant with the american benefits council. i was the finance director responsible for all corporate risk management as well as the financial planning and actuarial responsibility for all employee benefits from the world. there were 160,000 participants in the plan sponsored by a company in the united states and about $18 billion of assets covering those participations. the focus on the comments today are between the relationship between pbgc and a defined
benefit sponsorship community. we are the business partners to the pbgc and we appreciate the longstanding relationship we have had with that pbgc. they have been quite open in hearing our concerns and we openly welcome suggestions on how we can make it even better than it is. i have to issues that want to highlight today. first is a general observation. we have already mentioned one of the missions of the pbgc is encourage voluntary private pensions. as a former corporate risk manager, i spent many hours negotiating with insurance companies of all kinds on all kinds of risks throughout the world.
typically, we would come up with a win/win solution where the insurance company would recognize the business needs of the insured and the risks for the insured would be paid off and the insurance company would maintain its requirements for profitability and reserves. once and awhile, an insurance company would not be able to for one reason or another, recognize the needs of the business and a decision would have to be made either to find a different insurance company or not ensure that particular risk. the risk manager has no choice in the defined benefits plan. if they have a combined benefit plan, the company must use the pbgc and paid what congress ordains from time to time. we are very concerned as sponsors that the actions and policies the pbgc can tend to interfere with normal transactions and discourage the sponsors from maintaining plants
in addition to other factors that have worked against the sponsorship of employee benefits. one example was the rhaetian regulations pbgc proposed. we believe they could have significant impact and have the potential of interfering with normal business transactions even though those transactions pose no material risk to the pbgc. we applaud the directors efforts in recognizing this. he has extended the comment time and we look forward to working with them to help them rethink what these rules could be to achieve their goals and partner with the community so as not to be disruptive to normal business operations. the second example is over the last two years, there is bipartisan support to provide
relief for plans, plan sponsors to to the simultaneous enactment of the pension protection act and the economic downturn. during that time, there is to be bipartisan efforts to provide smoothing to companies and these experience have been very difficult and have sent up red flags. the second issue is regarding the investment policy. we agree with the comments that it needs to be well thought out and concerted and needs to take into account all the constituents for planned sponsor perspective. we look at the deficit as reported and no there are only two ways they can erase the deficit. one is through investment return that exceeds their conservative measure of their liabilities and the second is to rely on congress to raise the premium on
planned sponsors. as the number of sponsors decline and if the policy is too conservative, the premiums will become debilitating. in conclusion, it is our desire to continue working with the pbgc openly. we value the relationship we have with them. we want to be clients as well as business partners and we applaud our shared queue with this committee that the plan that sponsor need to have encouragement to ensure benefit security for all americans covered by the plans. thank you. >> thank you very much. thank you for your testimony. i does want to hit on this one issue of board membership.
looking at the testimony and outlining the different federal departments we have that have boards now, the commodity credit corp., and familiar with that, eight members breech kick the federal crop insurance corp., 10, the fdic 5, opec, 15, the pension guaranty corp., three -- maybe it is odd to me, but in all my years, i do remember having a board that consisted of three appointed secretaries of departments. usually boards are made up of people who have some expertise and background and continue on so as -- so there is not an abrupt change from one administration to the next. i'm going to ask again for the record, your own views from
having looked at this, i want you to think about should these boards be expanded? i don't have in mind, but least get continuity that would go from one administration to the other. this is one area that ought not to be political and ought not to be partisan. we have to get the best people to be on the boards that have these backgrounds where you would have a hold over, some rotational system so that you keep some expertise on these boards from one administration to the next. i want your views on that and how important is it right now for us to pay attention to? >> i cannot dictate or would not want to begin to dictate how large it ought to be, but i agree whatever the size of the
board is, it needs to be a board that longevity and have continuity. the time during the economic turmoil, as was mentioned, where there was effectively no board and no executive director for a time was very troubling to the business community. we would support measures that would provide for continuity. we look back at the investment policy and we see frequent changes to the investment policy that have not always been to the best interest and we don't see corporate plans changing their investment strategies frequently and yet that seems to have happened to the pbgc over time. we would like to see stability and that's what we would be in favor of. >> from the perspective of the office of inspector general, there is an additional problem when we lose continuity of the
board. i might share with you, you refer to the situation', the unfortunate situation with the former director in february of 2009 when my office confirmed the former director's misconduct. the former director was gone from pbgc, but the contracts under question remained. i was able to speak to the acting director once we confirmed misconduct and the acting director was not part of the problem. had the acting director also been part of the problem, pbgc would have had no lead to go to with no board members and no confirmed secretary of commerce or secretary of labor or secretary of treasury. only one conform -- and one confirmed rep.
that represented a additional vulnerability. it did not turn into a problem, but it's something else to think about it terms of ensuring continuity of the board. >> i have already talked about this and i won't take a lot thai -- i will take a lot of time. continuity is important for many of the reasons already mentioned. the original board, which in our work seems unique in the federal government, the original board is there for diversity. labor represents workers, commerce presence of tears, treasury represents finance. that's a good idea, but you need more of that in addition to more members. it would be helpful to have someone on the board was a management expert or risk assessment expert or pension finance person. you would have to be concerned
about conflicts, you apply people might be involved with the industry, but it would be important to continue that tradition of diversity. i want to say the report which followed the with regard to what boards might look like reported in a survey members of corporate boards says they spend an average of 22 hours a month on their board work. i don't see how that possible for cabinet secretaries in the u.s. government. >> thank you. >> thank you, mr. chairman. mr. porter, i was interested/ n your reference to the pbgc's proposed regulations, imposing regulations on companies with the routine transactions that you say pose no threat to the pbgc. can you provide an example of
that? >> certainly. one example, and this is the nature of the game, as plan sponsors, for a variety of reasons, the number of active employees participating in those plans tends to shrink overtime. you can envision many such situations where the number of active participants in a plan may be a fraction of the active participants of an employer. an employer might have 10,000 employees, but perhaps only 1000 are active participants in the plan. under the rules, the rules impose a significant increase in the liability and funding requirements if 20% of the active participants leave the plan sponsors. you could have a situation where as few as 200 employees may be involved in a divestiture and it would only represent 2% of the total workforce. but because it is a 20% of the
plan, the plan is now subject to enormous increases in liability. because it is a legacy plan, there may well be 10 or 12,000 in that plan, not just the active employees. the impact on the sponsor would be enormous for simply having a small divestiture that involved 1% or 2% of the workforce. if that plan is funded and the sponsor is strong, it is not a material brought to the viability of the pbgc. >> thank you. it is very helpful in as does some of the unintended consequences. this -- ms. bovbjerg, when there be an interest in having a board -- that would also provide
oversight to the boards interaction with the pbgc and what could be done to improve the interaction with the advisory committee? >> we did not call for a separate audit board. at the g it -- at the gao, we like to see more auditing capacity. >> as the only accountant, i do too. >> what we did think about is the importance of the standing committees in the board and there needs to be some audit committee to work with the external auditors and pay concentrated attention to the finances of pbgc. we had not thought about a separate board, but we could consider it. i would not be willing to recommend it and get myself in trouble. it also acts to about the advisory board which is seven members appointed by the president and a report to the
director right now. most committees and boards of that nature report directly to the board of directors. that might be something to -- advisory group, it was called an advisory committee in the past. it was at one time the investment -- the investment advisory board. they were looking at investment issues. it has been, as changed over time. it has been subject to wide the director once said to be to a great extent. having a more connected to the board might be something to consider. >> thank you. you testified that pbgc has developed corrective action plans to address weaknesses in information technology security and other areas. however, critical details of those plans have yet to be developed. would that pbgc benefit fromy7
hiring a risk management specialist to better prepare for futurep?u? risks facing the agey and the retirement community? >> that's an interesting question. certainly,9 pbgc has hired external expertise to help with addressing many of the areas of persistent weakness. for example,ssñ! in its inforn technology security work. i am not aware of the needç!ñ3! 9ñssuch a selection, but that't something i thought about. know)don't really -- i1))ç! pbgc has reached out to get the expertise it needs and they have reached out frequently throughc contracts. there is noc hesitation to reah out and get that expertise.
>> thank you. my time has expired. >> i find the reporting on the relation with the contractors will disturbing. i was wondering what percentage of the work force is comprised -- this can go to anybody -- is comprised of contractors? >> it is about two-thirds. rightç! now it's slightly less çsthan two-thirds, but historically it is at about two- thirds. >> has there been any thought -- i know in the military now there is a tendency to stop this dependence on contractors and go back to actually using the military to do the job because they have a loyalty to the country and the military and
people who are contractors have a loyalty to make a profit and to their contractor. is there any thought about increasing the number of people who work for the pbgc and less reliance on contractors? >> back in 2000, we took a look at this issue. there are arguments on both sides and we looked at the ramp up in contractors that pbgc -- contractors -- the bankruptcy at eastern airlines, pan am, they had to get people in place quickly to process those benefits. so they did that, but that structure has stayed in place. when we were reported as in 2000, we said we thought you should review this. do you need locations in these
places where there were all of these eastern airlines employees. maybe if you are a virtual organization, it doesn't matter, but we thought they should consider it. there is an argument for wrapping up with contractors when you need them and then dropping off, which you cannot do with federal employees. there was that are given when they thought their workload -- >> but the workload has not decreased. >> it has not. >> and we are not anticipating it decreasing for a while. >> it could get much bigger. >> so this is like after the cold war ended, there's going to be a peace dividend and we reduce the size of the military and increased contractors as we needed them. then we found we were in a war for nine or 10 years and relying so much on contractors and wasting a tremendous amount of money on contractors. i wonder if we are wasting a tremendous amount of money on
contractors who i am not hearing a report about the kind of job they're doing. >> that is something we think they should look at. they should not keep going because of what they have done before. >> a lot of things are recommendations to look at things, but who is going to look at them if you have a board that doesn't meet and a board comprised of three cabinet secretaries? talking about the constitution -- talking about the board, there is no institutional memory. how are you going to get anything done at their is no institutional memory? this has to be done soon. >> our office has a very recent audit work in thisf area and we have an open recommendation that pbgc take a strategic look and include the contract and it -- and federal employee work force in its7ñ# human capitaly' planning. today, pbgc has provided some
alternatives but it has not agreed to that. it is consistent with the recommendations made by the gao in the past. >> can i ask about the long-term plans and the shape of the work force of the pbgc? i sought in the briefings for this hearing that's there is worry about increased needs in terms of failures and pension accounts. i know that the role of the pbgc is to encourage the defined benefits, but defined benefits are going down, right? in our society? is there a curve that has been projected on the role of the projected on the role of the