We learned this is certainly the preparation that boston undertook in november on a terrorist exercise of planning it has saved lives. That is the point that should be made. The Emergency Response thereafter is about as good as it possibly could be ian been restorer confidence. A terrorist attack is traumatized. I was in london for the bombing in 2005 and they missed all the signs of that bombing which is pretty startling but from the moment it took place the ridges to response was firstrate and terrific and restore Public Confidence within 24 hours. When i talk to First Responders in boston the way the would treat irish using Grant Funding from vhs to london 60 wounded they could have easily blood out in the street in they saved everyone and it is truly remarkable. With that i recognize the gentleman from pennsylvania. I feel compelled to respond to the comments to the gentleman from california. It is hypocritical he would extolled the virtues of the Current Administration continuation of president bushs programs specifically bond begins those deriding them without a acknowledging at least the fact that those programs are due to the success of Counterterrorism Operations regarding the Current Administration but with that i will start with mr. Meier. The key for your patience today i want to read an excerpt parker u. S. Officials describe the plot as a lone wolf attack to downplay the next to the palace pakistan the taliban said despite the tape that was released the day before things to david as workplace violence. Kim you tell me what the upside is . Why would we choose to characterize the enemy this way . What are we gaining from that . Do you know, . It is not you but i am trying to strategizing at. The only thing i feel very uncomfortable to give this explanation because it is my hypothetical psychobabble analysis of somebody elses thinking but i believe the thought is if youve engaged in direct combination or logical conclusions you will offend the size of which will lead to further attacks. Civic is there any evidence . I am not arguing i and saying it is a general mistake i think it is just the opposite because my a knowledge of islamic terrorism goes back to 1973 for 74. Win the attacks with the palestinian attacks and was the assistant u. S. Attorney that i was put on the condition to study islamic terrorism. I investigated islamic terrorism as u. S. Attorney in dealt with it as a mayor. The reality is i believe this firmly for the more euphemistic we are the weaker they think we are. There is no evidence to support that. And a stronger we are in the more honest we are the less likely they are to attack us. Anyway the more direct we are in the tougher we are there is a greater chance we will not get your way out of this with finesse. I concur. In your opening dialogue you reference the attacks in the western world and we hear about Political Correctness over and over but is there any reason to believe those attacks are similar to those enumerated in this committee on this day with the law as being similar to christian organizations is there in the correlations . I think there is significant its. With the violent extremism you have an individual who is disconnected from society and what makes them feel a part of something larger. So in that sense lot of these psychological effort with the process is moonset something quite similar. Civic and will restate the question with actualization from radicalization to carry out the attack is there any similarity with the statistics of islamic radicalism through domestic terrorism those that grew up in home town america and then carry out the attacks . The number of americans killed by a domestic extremist remains greater than it extremist inspired by ideology. That more are killed by the extremist over the past 10 years i think the numbers come i dont know but the ones that with the Holocaust Museum but that is not dissimilar. But there are some similarities in these cases. But the difference is in the case of al qaeda it is the global ideology with a global it responds. I just want to fax. I know when to be confrontational i dont see it that way but we have priorities with limited resources. If the majority of the attacks come from one organization, ideology, if that is the case we should prioritize. The overwhelming priority is inspired terrorism. But given the consequences of a tax online 11 with homegrown extremism is not out of whack but the overwhelming focus today is the al qaeda terrorist. The key mr. Chairman. I just want to announce a member of the audience is father presided of the worst examples in the country because of that. So mark, tell your father he owes me one. [laughter] let me close by saying they get to the witnesses and has been extremely valuable they give for taking the time to show what. Of july 18, 2012 the fbi released a statement saying they were implementing the recommendations for the Webster Commission which investigated which todays earlier from the chechen region and they kept to the case ] the center of the efforts on the homeland in this committees responsibility to find out. It is unfortunate with this committees oversight with events leading up to the attacker country we have specific questions related to the investigation about the Boston Marathon bombing in the fbi refuses to answer those. So they dont have jurisdiction of the helmet of the United States it is a disservice to the american people. And will not stop until the investigation is complete. It ask unanimous consent of the International Association in chief of police and also the assistant director of the fbi before reading this committee it refuses to provide a witness for the hearing be included in the record. Without objection so ordered. Finca to the witnesses. Did to the american people. Im sorry. Were in recess. The central bank will likely keep the seed money policies in place for the foreseeable future. [applause] that bibliography, i am still working on it. [laughter] but to previous speakers have of late to think the National Bureau of Economic Research to wreckage organizing this conference we dont know when it is that we know what is happening around now and we are happy to be here to have the opportunity to participate in this congress. In keeping with the spirit of the conference my comments will not be a policy but will address that in the question and answer period and i have the pleasure to testify before congress. [laughter] and intel have another opportunity. [laughter] today in my remarks id like to discuss the evolution of the zero past 100 years of key policymaking. The goals, the policy framework and accountability and communication. The changes over time provide a perspective on how the role has changed since its founding in 1913 from the future and paying particular attention all of which is with the modifier rate with the founding, the Great Depression, the great moderation in the great recession. In the words of the Federal Reserve act that was established to provide the means which shapes the republic and only with enormous injury should we stop. The original goal was the great experiment was the preservation of stability. At the time that the standards were triggered with the needs of business when it outstripped the available supply. And panics were further exacerbated during those times. As has been discussed it was intended to release extremes with the elastic currency to provide liquidity at the discount window in the commercial banks could accommodate their customers. Interestingly over the creation of the fed could help prevent future panic they could embrace the idea they should end the ongoing panic. To serve as a lender of last resort as recommended by the british economist. Legislators to the Federal Reserves ability by denying dawn member banks by restricting the collateral. They could set. The framework in the early years from officials stability also that you did states was on the Gold Standard when they sought its function to be business for liquidity with the idea of a deal to the role with Financial Stability. They will hope to accommodate the need for credit to supply the liquidity bakes and the fed would reduce liquidity in the system. But with the Gold Standard the equaled 40 of the a outstanding notes. But with the Gold Standard the fed often took action to prevent the inflow and all flow of cold to be translated of the domestic money supply. With the economy this gave there reserve considerable autonomy and in particular. It has been much criticized in retrospect. With the Monetary Policy subjected research has highlighted the extent that the international Gold Standard mobilize the economy in the late twenties interleaf 30s. Like my vase likewise historians appointed out the fed increased if Business Activity was the strongest and Monetary Policy. Thus the feds actions tended to increase rather than decrease volatility. During the year earlier period the central bank did make an addition to the tools. Initially it would lend through the discount window in the interestrate node as the discount rate. Early on to generate earnings the fed begin to purchase coverage securities on the open market which was known as open Market Operations in the early twenties these operations affected the size and cost a Bank Reserves and under the extended credit to customers. Subsequently operations begin a tool that allows the fed to interact in not only with the banks. To discuss the original mandate of the policy framework about its accountability, when the Federal Reserve was established to give a public or private institution the compromise was headed by a board that lifted the currency but the toll bakes under mixture in private of oversight and public oversight would pull from the private sector and they were given to the scope to make decisions that applied to their own districts. For example, reserve banks would set their own discount rates. Of all the founders said found this new institution had stability the policy framework and the structure goes to the challenges they would face. That was the most difficult test. Tragically they failed to meet the mandate. So following the 1929 stock market crash with the economic source of the downturn. In the face of panic with the Federal Reserve that era. With a number of instances in the early 30s when officials with a major upheaval either chose inaction over Monetary Policy. Some of those from the bay get your kid 1928 that left the centralized system without an effective leader. The hypophysis raises the interesting question what framework in defective leader would do to justify a more Monetary Policy. The degree during the early thirties is debated but the Gold Standard philosophy did not encourage the expansion very policies needed. The same could be said that lead policymakers to conclude with a nominal Interest Rates that Monetary Policy with a further action. Another productive with the necessary cleansing process. The fed suffered less the shift in the 30s than a lack of free rent to a dish to go was happening and what needed to be done. The feds inadequate policy framework collapsed under new ideas. The international Gold Standard was abandoned. Also after the disaster of the 30s for example, of the banking act with consideration of the general credit situation of the country and not to focus on shortterm liquidity. Also to provide credit for the discount window the experience of the Great Depression of aspects of what i am discussing here. With its accountability to the remark with the fear that it would return after world war ii elevated full employment. The employment act of 1846 made it a federal objective of the federal government. O the the fed did not have a federal employment of 1977 as part of it but it led the central bank in that direction with early legislation. Foreseeable they describe the intent as follows. To increase the baking system and promote stability in so far as is possible with military action within the administration. The policy framework of the macroeconomic theory is Dennis Roberts said in John Maynard Keynes laid the foundation to understanding Monetary Policy in employment to reduce cyclical fluctuations. At the same time the fed became less focused on the mandate for Financial Stability because it superseded by the creation of the thirties of the fdic by the sec along with other reform. In the area of governance and accountability policy makers recognize the need to improve the structure and the banking act of 1935 talks about the legal independence of the fed and stronger controls by the fed board. In particular it created the modern and figuration of the fomc kidding the majority of the votes but giving the secretary of the treasury removing the currency responsibility from the board but they continue to have this way over Monetary Policy to discourage the fed as in the backseat. During rule were to use the tools but even after the war the policy was subject to influence. Not until the 1951 accord they begin to recover genuine independence for policy. Once the fed keen to the policy leader of the employment act of 1946. They use the open market discount for the Interest Rates and the fed funds rate has the operating target. Inflation was achieved through the 60s but beginning in the 60s it began to climb upwards because there were too optimistic about the economys ability to sustain rapid growth. Of to mechanisms, first a stronger policy response from the 1950s would have helped. Second, the fed policy makers could have reacted by having a more realistic assessment. Instead policymakers chose to have structural factors that saw a wage and price is that sensitive. This perspective that contrasted sharply that is a monetary phenomenon with the price controls rather than a solution to address completion. The further obstacle the gains from low inflation does not justify the cost. The consequences of the framework of the 70s had double digit inflation. More over by the end of the decade with Inflation Expectations with high estimates of trent low Interest Rates. As you know, under the leadership of chairman volcker and the reserves in 1979 in shares price stability. This involves thinking on the part of policy makers. By the end of the 70s fed officials accepted that you that inflation was a monetary phenomenon in the medium and long term and they became more alert about the economys potential outlook in place renewed emphasis between real inflationadjusted nominal rates. The stage of the policy framework was initially tied to operating procedures to focus on the Bank Reserves but the critical change is the willingness to respond to inflation and toured after they assumed a the fed funds rate. As the improved importance to secure with the credibility of the central bank for the expectation. Finally also would change of view about the mandates with the price stability for sustained maximum. That that set the stage for moderation. Brendon angeles is responsibility responded with a Financial System was upset such as the stock market crash in the terrorist attacks of 2001. And with other banking agencies. Nevertheless for the most part with decisions but in retrospect it is clear economists both inside and outside central bank relied too heavily on that period but the implication of the structure of the fed to system can be ignored when analyzing the brodeur behavior of the economy. But increasing access with transparency economist and policy makers reached a communication to achieve Monetary Policy objectives. Federal reserve officials of other Central Banks were highly guarded with their public pronouncements and they believe the ability to take the market by surprise was important for for the initial conditions. So in the late 80s and early 90s they were more explicit about objectives and strategy with the same degree of transparency was not forthcoming and Monetary Policy decisions are operations. Oppose meeting statement in 1984 was there. But over time it was expanded to include more detailed information in the indication of the balance of risk. But in addition to these developments of communications and accountability of the Federal Reserve that is the central. During this time they found considerable evidence in pursuit of the mandated objectives. And without asking of sustained economic stability somehow promoted the excessive risktaking. The idea of investments in Financial Firms and regulators paid sufficient attention to build risk. There we should not achieve economic stability. [laughter] but rather but Monetary Policy makers should be safeguarding stability of the importance and necessary progressiveness to maintain economic stability. They will continue to debate the sources during the great moderation. With the improvements of Monetary Policy including the better management with expectations and were four reasons. That there were will manage Monetary Policy necessary although it is sufficient for self. So now it has been six years of the first sign of the financial crisis appeared in the United States and were still working to achieve a full recovery. Particularly in the context of Federal Reserve history. The footage a crisis and the recession reminded us of the lesson we learned in the 19th century and during the depression but had forgotten. That severe sticker instability can do damage. The implication it could take into account that it could achieve economic performance. But as but not to the minister of Monetary Policy. And to take changes in recognitions and then we have come full circle of the fed to prevent a financial panic. It does it by assuming the lender of last resort option devised with did 40 years ago that the central bank use the powers Cheese Market conditions during panic. But to contain the crisis by putting all the fire is not enough. But to expand the financial stock. Those with the Oversight Council is actively engaged to work if to strengthen the markets. And then with the reform liquor Reform Efforts go further the work to identify all the firms but the Financial System as a whole. It is also linked to Monetary Policy. Hear the fed the evolving strategy makes it the first line of defense to the extent that this could be made the of the lives he strives to incorporate a costbenefit analysis to of Monetary Policy. What about the framework . In general it inherits the elements put in place. These features include the of the service of the credibility which is critical. And also with the mandate in the medium term. Also increase the one is jerry policy. Victory vacation prework now includes a statement. It has indicated as measured from the price index over the long run but they provide estimates and they have a tendency of 5. Two to 6. O . This transparency gives the Federal Reserve greater transparency. But the discipline provided has been described but the minutes of the fomc meeting in the press conferences by the chairman. Leaded highest default further but with advances and exchange of the policy environment they have moved the framework were directly to the economic outlook. But they have released more detailed statements to Economic Developments with the fed funds rate. With additional integration policy plans deal with the constraint of the shortterm Interest Rates. And how policy could respond to Economic Development it can increase policy accommodation even with the shortterm Interest Rate is near zero. Fate also does Interest Rates the securities purchases. Another central bank also with shortterm Interest Rates and taken similar measures. Ensure the recent crisis was underscored the need to underscore the Monetary Policy and the framework to better integrate. We have made progress on both counts in particular crown supervisory policies and the lender of last resort policies and standard Monetary Policy both the research and experience needs to develop a comprehensive framework to develop the framework. But the central banking doctorate, we will have to continue to work hard in the changes of the environment. Thank you. [applause] let be behind the audience there are half index cards available we have already collected some of we will try to bring some of those of to answer what weekend. Chairman, you indicate youre really in this of it to talk about the Current Situation as well as the 100 year history. So i would like to ask about the last six weeks. [laughter] last month you laid out a contingent plan but the number of pundits had criticized and said it was in richer for you to discuss the future contingencies with the benefit of hindsight would you do anything differently . I will take the other question. [laughter] as i said in my remarks they are a big believer in a transparency and communication. You have to be consistent. If you think about the recent developments in the duration be provided, i would ask you to consider the counterfactual. The information we provided are contingent players for the Asset Purchase Program were close to our understanding of what markets expected. But the perception is that drifted away from our own thinking all our expectations. During that time it is very likely a more highly leveraged risktaking could build up with and expectation with the infinite Asset Purchase Program. With the volatility of the last six weeks to explain all youre doing. Continuing on that theme the markets reacted sharply to your remarks in the release of the minutes last month. The market seems to have interpreted those two pieces as hawkish news is that the right interpretation . [laughter] let me start with the basics. [laughter] the fed not withstanding because everybody likes it, i think it is too long dash good but the dual mandate is to go maximum employment with price stability we have the Unemployment Rate of 7. 6 which i think overstates the help of the labor market given the purse dissipation rate with long term of employment. Participation rate that we are not there. But on price stability inflation is 1 . So both sides of the mandate our saying that we need to be more accommodating. The other portion is quite restrictive budget subject to a 1. Five percentage points. But to put it all together you can only conclude hug you accommodate Monetary Policy for the foreseeable future . How does that relate to communication . I think the issue has to do not with the overall accommodation but rather a mix of instruments. The fed has to instruments they have been using with Interest Rates close to zero. But in the other words we have said we are trying to 81 negative achieve substantial improvement in the context of stability we progress but we have further to go. But that is the objective of the asset purchase to provide the economy moving forward more quickly. The second tool is a shortterm Interest Rates and associated with that is our expectations when rates might change and you may not raise Interest Rates at least until unemployment hits 6. 5. But as i said before it is a threshold not a trigger. But to look at the situation and do with the weakness in the labor work it understates the weakness so i would suspect it would be after 6. 5 cut the accommodation and become a there is some perspective a gradual change but that should be confused with the overall thrust that is highly accommodative. You commented on the feds outlook and is optimistic at this point compared to the private sector. We are somewhat optimistic. The with the private sector forecasters the fair viewing of the country would suggest there are positive teachers out there and positive developments that we have to continue to pay close attention to. Of the positive side, but to start with the housing sector that has been a major drag now for the last few years only has recently begun to turn around to show strength but its implications for related office 3f fed effect of the household Balance Sheet and that Monetary Policy is working with two of the main channels that it affects the economy. The second positive factor is the state of the American Household it has the leverage to quite a bit with debt and interest burdens and asset prices have been increased and asset gains be more income so we have a strong upper house will sector Going Forward. Finally come i would note the fact our economy has continued to grow and produce jobs in the face of strong fiscal headwinds is encouraging and there are other factors as well with restrictions that the state and local level and a strong baking system that gives more credit and there are items that make you look more positive but there are some risks that are important important to look at. First, is still early to say we have weathered the fiscal restraint it is difficult to know between congressional decisions so we will continue to watch and see if growth is Going Forward the rest of the year end projections are there will be a pickup in growth but it does depend on overcoming the remainder of the fiscal head wind. The second point worth stressing is the low inflation rate. We all very much committed to hit the target from below as well as the above. It is hard to explain i know but the very low inflation increases the risk of deflationary that causes the economy to stagnate. A raises the real cost of investing, and the of it is is falling low inflation can be get it be bad for the economy so they are keeping close at 2 and there are transitory factors at work that is fundamentally the case but if that is not the case we have to say that would be a good reason of to evade accommodative with that objective than the final thing i would say is we have seen some tightening of financial conditions that if, as i said in my press conference and other places if it would tighten to the extent that they jeopardize the achievement of the objectives we would have to push back. There is some risk to Pay Attention to but i think it is the case there are positive factors with luck we have continued improvement to the remainder of this year and next year. And over the course of the ted your so then is there a communications strategy. To reflect the extraordinary time . In to make changes to the projections. Just but that could happen so with the definition of price stability i am hopeful that is a long lasting innovation. The communication in specifically related are from lower guidance. We tried to provide not targets or objectives but a guidepost to help the market understand linda expect it to change. But that guidance may not be necessary any more. If you look at the behavior of the fed and extrapolate the behavior to what the fed is likely to do, that being said there may be circumstances where the skeletons is helpful where this guidance is helpful and the fed was not the first the bank of japan and canada have experimented with these ideas as well. It is becoming an International Practice but we suspect we will see the use but it is not necessarily enough federal part because were moving away from the balance and a reasonable period of time. You talk about regulation and Monetary Policy so to look around the globe that is done by an organization that is not the central bag. To use see that being a strong case for inside the central banker are there circumstances to look it that with a distinct organization . Different countries have different kinds of financial structures. The european and u. S. Are different in many ways but if you looked around the world, the trend now is financial regulatory activities and oversight. That is happening in europe and in the u. K. And in the United States. There is good reason for that. They have the expertise in the Financial Markets that gives them comparative advantage of some of the issues. There is the fact the central bank is the lender of last resort with the supervision with the individual firms but generally there is innovation that there is much more attention being paid to the broader Financial System as opposed to the individual institutions along. Alone. But we think about the stability as a whole but to have that decision to seek about how that stability relates to the other functions as mentioned as a lender of last resort and Monetary Policy. There is a good case, there are arrangements that can be worked out in the United States the fed has authority over Bank Holding Companies that we have a good insight into the system make firms but in both banking and Financial Markets with a range of other agencies and of course, we were collaboratively with those agencies developing the comparative a vintage that it is assigned. Number of years ago he referred to savings in anything today there is a shortage of assets in the Global Economy is that if you you agree with . Is this something the fed board should do anything about . Of the plate to mention there were a number of speakers today who talked about the current accounts and the role to precipitate a crisis. This was a theme of my commentary before the crisis with the idea that capital inflows we were seeing related to the trade deficit but also International Demand for dollar reserve was the destabilizing factor in making conditions easier than they otherwise would have been but to look at the european relationship but again it was a demand for safe assets which at the time the insufficiency of safe assets. This is our total purchases, which are pretty small share. Woodenly by this, we will pay for this with Bank Reserves. I do not think their asset purchases are significantly affecting us. Especially when it comes to liquidity policy. Women ask about the creative policies over the last few years. We are taking actions that are at the edge of traditional independent challenges it comes on the macro credentials side. Well, thats kind of a political question that im not sure i can do justice. And there are good reasons to have Monetary Policymaking. We all understand those reasons having to do with avoiding short run political intervention in Monetary Policy. But in many of the other activities, for example, is a bank regulator, while we believe that that they should be independents, i dont think that the fed can presume to be any other part of this. So i think it depends very much on the aspect of that particular activity that we are worried about independence, the place where all Central Banks were, mostly on the Monetary Policy side, there i think the best that we can do is to just to do our very best to meet the mandates that congress has given us. If we dont meet that mandate than they would have this we cant show why we didnt need it, they would have reasons and reasonable basis to ask why. So i think in the long run, the best we can do to maintain Monetary Policy independence is to show that we will take all reasonable measures to meet the objectives that congress had intended for us to do. Some have argued in the last few years, that we have viewed this as an inappropriate argument like there was something wrong. It was a consequence of what the fed was trying to achieve. Ik summer marks at a london event for mervyn kings retirement. And they had a temporary trade advantage for that. It was kind of as they started from. There was a global monetary expansion that was desperately needed at that time in the 1930s. So that was really a special kind of thing in a situation where everyone gains, the benefits of growth and domestic policy that spilled over into other economies and as the activity, the payback continues and it is actually part of global trade pattern. And it was very costly to everybody. So what does this have to do with suppression. I am sure that you are wondering. And there other kinds of interventions to divert and weaken the currency exports to your own producers at the expense of other countries. That is a very different thing for situations where countries are using Monetary Policy appropriately to achieve domestic inflation. The Exchange Rate and the currency effects are really secondary. What is important is that each country provides monetary accommodation were fiscal accommodation to achieve the potential output it as a way of thinking about policy in Different Countries. Especially in doing Monetary Policy in the United States i do not think that we are trying to export this beyond words. Especially using the tools that we have. We will take you back. When it comes to regulation and financials stability, the second part of the question is looking over this. Now, there tends to be a focus on the Great Depression and looking at the early years. The fed, of course, was founded for the purpose of Financial Stability. It had some success early on. And of course, the Great Depression came. For various reasons it was mentioned. Obviously the most egregious example. It is understandable. Because of structural changes and regulatory changes, that was a very calm time in the u. S. Financial markets. Attention and Financial Stability became less over time. As chairman paul volcker reminded us earlier, its not as recently that we have had stability issues the wall street stock market crash and other events and it was reminded that Financial Stability remains a concern and fortunately between 1934 and 2007 it can have negative implications for the economy. Now that we have seen i, it is a very important lesson. And the Central Banks have accordingly elevated the resources into helping preserve Financial Stability and increase the emphasis. So i think there was a long period of time where we did have a calm Global Financial environment over a long time. I suspect we wont forget that lesson for quite a while. The passage of the Federal Reserve act was a essential political achievement. Given the political tone in washington today, if the Federal Reserve act had been a victim how do you think it would differ from the existing legislation and could it be passed. Well, it would be more than one Federal Reserve bank. That is my answer. [laughter] okay. On that know, my question is a legacy question. At some point, and im not going to ask you when you think this might be, but your time as chair will conclude there is an interchange on i95 which is named the ben bernanke interchange. [laughter] i will challenge anyone even in the matter. [laughter] and would you like to see people focusing on the contribution . Well, that is going to be yet to be determined. In the last eight or nine years, the Federal Reserve has made significant strides in that area. As i mentioned the press conference of a numerical objective with inflation we have the future again that will judge a response to that. The Federal Reserve is an institution has changed sharply in terms of its structure and the resources being devoted to questions. This relates both to the actions that we took at the height of the crisis, which i viewed back into the modern context, but also the work were we are doing now to try to reduce the risk of another financial crisis would be part of sunday. That includes stress test and a development in financial regulation. And the macro prudential approach to Financial Stability, and we also try to identify risks and vulnerabilities. As we try to lay out in more detail how we will react to changing economic traditions. There are changes in Monetary Policy. But finally i think the Federal Reserve is a remarkable institution that has a superb staff, a great deal of expertise, and i i hope that we have succeeded in preserving those strengths and adding those strengths and increasing the Financial Stability areas. We were talking about the Federal Reserve and it is a Central Institution in the United States it has a very Important Role in the economy and it is critical that it be a strong well staffed institution. These issues are pretty invisible. They are factors that determine how strong it should be for the next 100 years. Senator, thank you so much for joining us. [applause] [applause] [applause] [applause] coming up on cspan2, former president george w. Bush talks about the need for Immigration Reform. And how democrats hold a briefing of Border Security. And the proposed takeover of this Chinese Company. We will have the next. Wildlife and Forest Management officials testified morning. Last week striking firefighters were killed and the subcommittee hearing begins at 10 00 a. M. Eastern on cspan3. Later on the day, a member of state department nominees will testify at a confirmation hearing. Victorian england be among the individuals speaking. Plus, live coverage from the Senate Foreign Relations Committee starting at 2 15 p. M. Eastern. Former president george w. Bush weighed in on the immigration debate, saying the nations immigration laws need to be fixed. There was a naturalization ceremony at the Bush Institute in dallas. Thank you very much and welcome to freedom hall. I am incredibly grateful to to be able to witness this joyous and uplifting ceremony. It will be inspiring to see people of different ages and Different Countries raise their right hands and take the oath to become citizens of the United States. All who swear the oath of citizenship are doing more than completing a legal process. Youre making a lifetime pledge to support the values of america. The pledge comes with great privilegeprivilege s and also with great responsibilities. For all of you, this is a defining moment in their lives. America is your country and it is more than a home. I welcome you and congratulate you and your families and it is an honor to call your fellow an honor to call your fellow americans. Our immigrant heritage has enriched americas history. It continues to shape our society and each generation of americans brings a renewal to our National Character and adds vitality to our culture when they seize opportunities, our whole nation benefits. In the 1790s, an immigrant from ireland designed the white house. Im familiar with the place. [laughter] and he did a fine job. He also helped build the capital. In the 1990s, 200 years later, an immigrant from russia helped to create the internet Search Engine google. In between citizens have made contributions in virtually every professional field. Millions of newcomers have strengthened their communities through their hard work and love of family and through their fate. We are a nation of immigrants, and we must uphold the tradition to strengthen our country in so many ways. Were also a nation of laws and we must enforce our laws. America can be a Lawful Society and a welcoming society at the same time. The can of older traditions of assimilating immigrants and honoring our heritage of a nation built on the rule of la. But we have a problem. The laws governing the immigration system are not working. It is a system that is broken. We are now in an important debate and that is good. I do not intend to get involved in the politics or the specifics of policy. But i do hope that there is a positive resolution to the debate. I hope during the debate that we keep a benevolent spirit in mind and we understand the contributions of immigrants make to our communities. We must remember that the vast majority of americans are decent people that work hard to support their families and practice their faith and lead responsible lives. Some willingly defend the flag, including two that are about to take the oath here today. It is the sign of a confident and successful nation. It says something about our country, but people all around the world are going to leave their homes and families and risk everything to come to our country. Their hard work and love of freedom have helped us to become the leader of the world. Our generation must ensure that america remains a beacon of liberty and most hopeful society the world has ever known. We must be proud to welcome people as fellow americans. Willing to risk everything for the dream of freedom. America remains what she has always been on the horizon, a lasting promise land. We are the heritage of all who come here no matter where they come from. As we trusted our countrys genius for making us all americans. One nation under god. It is a joyful day for you all. It is one you will always remember. So will live. In a few moments we will share the same title, a title that has meant more to me than any other. I have had a lot. I would be citizen of the United States. I congratulate you and ask gods blessings on you. [applause] [applause] nancy pelosi praised president bushs remarks on immigration. She spoke to reporters for about 20 minutes. She is joined by members of the congressional order copies. [inaudible conversations] [inaudible conversations] good afternoon. Thank you for being here. I am so honored to be here today with my colleagues and the cochairs and the congressman from arizona and the congressman from texas. And the congressman from texas as well. First, i just wanted to acknowledge that president george w. Bush urged a positive resolution to the debate on immigration and expressed hope that we keep a benevolent spirit in mind as we understand the contributions of immigrants make to our country. Two weeks ago the Senate Passed a bipartisan bill and we hope now that the house will act in a bipartisan way. In that spirit, i sent a letter to Speaker Boehner today urging bipartisan action to pass comprehensive Immigration Reform, highlighting the work of the Bipartisan Task force. We have always moved forward on the principles of a Congressional Hispanic Caucus secure our borders and protect our workers and unite our families and provide a pathway to citizenship. Each element of this has bipartisan support. A republican and democrat, they both have unanimous support. Economic security and sustainability, we will talk about that and it is about Border Security and also about Economic Security as well at the border. It is the senate bill with bipartisan support. Just about every element you can name it something that already has bipartisan support who or has been initiated by the path to comprehensive Immigration Reform. I am honored to be here as individuals and they suggest what they believe would be better ideas. Lets hear from them, i am pleased to yield to the very distinguished chair of the border caucus, the gentleman from arizona. Thank you we are talking about what theyre going to do or not do and what their priorities are going to be. It is reordered by the pathway to citizenship that has to do with Economic Security on our borders, ports of entry that are functional, and has to do with the staffing of customs. We will talk more in detail about that i represent 350 miles along the arizona border and 2700 have died in that area. Again, there is a spike in the number of deaths and we are asking part of the consideration needs to be humanitarian support. Search and rescue and how to educate and prevent those deaths, targeting human trafficking, they ought to be part of Border Security. The definition of Border Security has been hijacked and it comes to how many, technology, it feels that the definition is expansive and includes economics and the humanitarian support and we feel that as we move forward, the speaker and his caucus have an immense responsibility, not only to the bipartisan bill forward, but many elements are indeed bipartisan. Also more importantly to have the temperament and the courage put something together that will solve this issue for the longterm. Not a quick political fix, but a longterm resolution. Part of it is the agenda. Sir . Good afternoon. Thank you. I represent 550,000 people on the southern border of texas. My position is well stated. One of the reasons is because it doesnt make economic sense. We have a valuable trading partner in mexico. In 1993 to 2012, trade in mexico skyrocketed 336 billion in 2012, which is a new record. Mexico has become the United States Third Largest trading partner after canada and china. Mexico is her second largest market in the world. If you evaluate the Economic Impact of our trade with mexico on a statebystate basis, what you see is that in Speaker Boehner state of ohio, the total volume of their trade with the country of mexico is 4. 3 billion. With the state of virginia, 1. 36 billion. Finally, the state of california, a whopping 59. 68 billion. All other arguments aside. Along the border of a country with whom we have such great business relationships. It doesnt make any sense. The fact that i introduce the congressman from our sister city of el paso. Thank you. Im very grateful for the leadership that we have here in the wood weeder nancy pelosi and leadership that we saw so that we finally have after decades to comprehensive immigration bill with a pathway to citizenship that we can talk about and hopefully include. That is why we are here. How to improve this bill. I come from el paso, texas. It is one half of one of the largest financial communities anywhere in the world. It is an incredibly beautiful place. It is economically vital and amazingly safe. It is the safest city in the United States today, is the safest city in the the year before that. San diego, another Border Committee is the second safest. It is really important to view the border as an opportunity and not a threat. And you wouldnt know that in the current offering and their comprehensive immigration. I would like to work cooperatively with those in the congress and house and those in the senate, to improve this bill so that we make the most out of opportunities at the border. We have depended on trade with mexico on the billions of dollars of economic activity. If we diverted even a fraction of the 40 billion that moisturizes the u. S. And mexico border to facilitating trade and economic growth, we can create millions of more jobs in the United States and in economic activity. At the end of the day, we are creating jobs and opportunities to create economic growth. So i look forward to working with the leadership and working with members from both sides of the aisle to improve this and ensure that we have a bill that is humane and rational and fiscally responsible and creates jobs and opportunities along with the pathway to citizenship. We look forward to answering questions that you all might have. With akamai want your introduce the congressman, one of the great representatives of Border Security. Thank you for the leadership. I want to thank nancy pelosi who has traveled the borders and also she understands and we thank you for taking the time to go up there. They are always the ones that come up with solutions to the border. I think that economics is important. I just got back from mexico about a week ago. I spent about three days in mexico. I got to sit down with senators and Business People in mexico city. And the first thing that they said was what are you all up to in the United States, what are you trying to work towards. We are a big trading partner. As folks have mentioned, think about this, 40 , all of the exports go to mexico and a lan and america, 40 of what we do. Everyday there is 1. 2 billion in trade between u. S. And mexico. But the most important thing is to show you how connected we are and if can import comes in from china, it will come in from mexico and then he will have 40 and it tells you how connected we are. The problem that we have to be very careful with is that the border is a very dynamic situation. As mentioned, if you come up with a single dimension we say all you need is Border Control and that will solve the problem, you are missing the dynamics of the border. The federal judges are the ones that create or cases. Youre forgetting about the federal judges and adding more prosecutors and public defenders, you are adding more dimensions. The other thing is they are thinking about the men and women in green, which is Border Control. And what about those in blue, which are 80 plus of all the goods and people that come through this area. We have to think not single dimension, but multidimension. Again, defense is a false sense of security. If you look at it, it is a solution to a 21st century problem. I can see that there is a provision that we have to talk about. Of the southern border they want to put more fences. When a mexican president jose, mr. President , tear down this wall. So we have to make sure that when we talk about Border Security, but it is sensible and strong Border Security. This is why we are here together as members from the border where we live. We breathe the water and the air and we understand it better than other folks. Thank you so much. It is very interesting to hear the volume of hanging that goes forth. It is inducing. The more time that people have to wait to get in, the more the product is not competitive. But it is all connected. So if you want to do some things , have it be infrastructure that facilitates commerce and trade and families and unification rather than make it more expensive. Could any of you speak to the senate bill as it exists today . Well, why do we hold that for when it comes out of the house. We have been very bipartisan in saying that we want to see what the speaker comes up with and how he wants to bring it to the floor. At the end of the day there will be a choice to be made. But maybe they wanted to be put on the spot. But i would like to keep all options open. Okay. Is that part of the amendment . I would call it excessive, but i still believe that is the case that we. We have a difficult situation here in the house, what will be the ramifications of anything from here. As we go forward, it is probably for me the wisest step. But like i said, we all have opinions about that. That is part of the process. I want the house to have a bill that goes want the house a bill that goes with the debate will take place. I think the Senate Passing the bill gives leverage to those whod like a bill in the house because of pressure is on them to do something if you want to exercise the prerogatives of the house. So we viewed as a positive step in that it has passed and will be an instrument, but hopefully will help us get the best possible bill to go to conference with it. Could you elaborate on the House Democratic position on the path to citizenship . Does that mean you would go against individual bills that dont have a path to citizenship or publicans are meeting today at 3 00 oclock. So we are going to have to vote. I hope that they will be hearing from the Bipartisan Group that has been meeting. It is my understanding, but it is my understanding, but i have no firsthand knowledge of it. But they worked into the night, that they have a proposal that perhaps they will be presenting in whole and in part there. I take this one step at a time and a we want a comprehensive immigration bill if he wants to bring it in part and that is his prerogative. We wont comprehensive Immigration Reform at the end of the day to go to the table. Senator Schumer Alister conference and said that this was a nonstarter if this were to come out. A lot of them seem to be saying that it is is something that they think could possibly pass through. Is that something that we think the Democratic Caucus could actually support, considering its not technically a pathway to citizenship . I think the comments reflect the enthusiasm that he saw for a pathway to permanent legal status. How would you react if the bill were to come to the floored and be a pathway to the stated and be a pathway to the status. At some point a bill has to pass, whatever it might be. And can they even passed a bill without a path to citizenship. Can they pass that bill. So again, we are in a legislative process now and the question is do you guys the house. When it comes to some of the demographics, we found three fourths of the districts are white and on average they are just 10 hispanic and even a handful of gop district. Is there the same incentive in the house to pass Immigration Reform and why should House Republicans do this . Well, they had an epiphany when they said 70 voted for democrats for congress. So they realize that they had to address the issue. Because if you want to win statewide, you have to make as many friends as possible. I think that they have cloaked their language with respect to contributions were country, which is who we are from a nation of immigrants. I would hope that the values are shared by our colleagues in the house. Many of us vote on issues of the figure for the good of the country that has absolutely nothing to do with this. So again, we are a country and we come here to represent our district and also recognizing that we are part of the house of representatives. Im also glad that we have a democratic president in the white house and here she will have to carry both states that are heavily immigrant newcomers, whether from mexico or asia or africa but lets hope everybody is doing what they believe is for the good of our country. We believe that regardless of the fact there may be a low percentage, many support conference of Immigration Reform. You know, i think that the struggle going on in seeing it play out, shortterm versus longterm. Is there a shortterm political advantage with the same rhetoric that we have had over the last 10 years . Probably. In the longterm, actually there is a loss. Thank you all very much. A house subcommittee held a hearing on the obama administrations decision to delay the implementation of the employer mandate provision in the health care law. Heres part of the hearing with texas congressman sam johnson. I will tell you that i hate to see a dictatorship come into this country, and it seems like that is what is happening with health care. He made many concerns with the federal government and our budget. The criticism was that there was over 1. 8 billion in spending and many were budget gimmicks that claim that the class that would raise 80 billion and it was fiscally unsustainable and congress repealed it. 1099 reporting requirement is 22 billion in congress repealed out that both the house and senate have voted to repeal the medical device tax because it is costing jobs and hurting medical innovation. That raised over 30 million. Now the employer mandate is delayed at least 10 million in 2014 alone in penalties. As you point out, this never goes into effect. That is another 140 billion. There will be more arrows in subsidies to the cost of obamacare is just going up and up. His obamacare now officially a fiscal time bomb and can it be considered a drain on our economy . Just. The short answer is yes. It has been made more so by the fact that the administration is implementing something that was not passed. So as you indicated and youve in your enumerated instances. There is a Health Insurance act that was enacted as part of the law. It is pushing a lot of people towards the would hope that you would ask. Another bad idea as it probably wont survive long term. You mentioned the employer mandate which looks to be in question. Individual mandate is type in a lot of ways. They are thinking they are going to collect about 45 billion from the individual mandate payments, at least in the first year, i question whether they can collect the 2 billion. You now have a system or target figure out if people have an affordable offer from their employer. A lot of people presumably in exchanges getting subsidies that actually got an affordable offer of coverage. Finally they cut about 700 billion out of the Medicare Program is part of us and that is essentially spending money in this new program is not fiscally sustainable and this is one more adult content element that shows devotionals on financing. I remember when i was stationed in the air force, as you know, they have that system over there. Then i walked into the Doctors Office with my son and they said are you paying, and they said yes, come on then, at of about 100 people that were waiting out there. That is the leading a culture work. Them under the water programs at cspan. Org. Wednesday at the white house, jay carney also weighed in on the employer mandate provision. Heres what he said. What authority did the white house decide to implement . I highly recommend any issue of this and finding in the examples of rules and levers and that sort of thing. This is not an unusual process. The calamitous hollering that you hear is reflective of political and partisan efforts. Youre talking about the republican effort to complain about listening to business and postponing a deadline that affects 4 of businesses and theyve done have done everything to undermine the law from day one. You know, this is not about tom harkin. The fact is this is, we have demonstrated since the passage of the Affordable Care act the we will make improvements where they make sense. And we will be flexible in the implementation where this will make sense. Everybody has written about this and noted the comparison here with the passage of Medicare Part d, which is part of the top priority of president george w. Bush. They pass from a lot of democrats opposed it. Democrats did not want to pass in an effort to undermine them it every step of the way. Instead they want to engage in an effort to make sure that the american people, the people they represent enjoy the benefits of the law. I expect that most constituents who potentially could get insurance for the first times in their lives they would expect that their senators would help them in a process rather than doing everything they can to prevent the constituents from joining the Affordable Care act. When it comes to the white house delaying the bills that should pass well, people that suggest that there is anything unusual about the delaying of the deadline of the conference of law are deliberately sticking their heads in the stand or willfully ignorant. It is just not it is not serious. And we are going about the business of this in maximizing the benefits available to the american people. It minimizes difficulties in implementation process for business as well as individuals and were going to keep at it. On the next washington journal, congressman kevin brady, chairman of the house ways and means subcommittee talked about doing the employer mandate it comes to health care. Also we were taught to eliot engel on Edward Snowdens attempts to get overseas. Washington journal begins live at 7 00 a. M. Eastern on cspan. Or collection begins with the beginning of cinema. The earliest comes from 1891 and this is a camera test that was produced by the Thomas Edison company. Part of a series of experiments. The collection really begins in 1893 what he did is expose the negative on strips and photographs of contact paper and affix them to a cardboard backing and send them to the library to be registered as a photograph. Now, you have to think about this for a moment. Because we do this all the time. The paper print collection, in that sense really was a historical accident. The name has been lost in the midst of time. We are grateful for whatever library bureaucrat decided that it would be okay to register this is a photograph. Seymour on sunday at 7 00 p. M. Eastern and pacific, part of American History tv every weekend on cspan3. A senate panel looks into the purchase of Smithfield Foods by a Chinese Company. The ceo to questions about intellectual property and product safety and Foreign Ownership of u. S. Food companies. The Senate Agriculture Committee Meeting is about an hour and 30 minutes. Good afternoon. The Senate Committee on agriculture and nutrition and forestry will now come to order. Before we begin hearing, i just want to take a moment for Committee Members to say again how proud i am of this committee and working together in a bipartisan way to pass the farm bill. Not once but twice. Two different distinguished ranking members. We know there are some challenges in the other body, but i am confident that the leadership and the role model that we have set in working together will ultimately prevail. So i just want to thank everyone again for working hard, listening to each other, being willing to make compromises in the interest of passing this bill. Making agreements and sticking to them and working so hard. Senator, i want to thank you also for your leadership and in doing that, i am so proud that we have been able to get that done. From the beginning of human history, we have had civilizations rise and fall based on the ability to feed people. That is why Food Security is absolute essential to National Security and why food and agriculture such an important part of our american economy. Not a day goes by when everyone is reminded of a safe and affordable food supply. It is easy for americans to forget that food does not just show up in the grocery store. It is part of sound Business Practices and a lot of hard work from the 16 Million People whose jobs rely on agriculture. That is why the news has proposed purchase of Smithfield Foods, the largest purchase by chinese firm raises so many questions. They might be the first but i doubt it will be the last. That is why we must take a longterm view of what is happening. Wed be having this conversation and evaluating what is in the best interest of American Families and our american economy. The importance of our food supply and security and safety cannot be underestimated. First is the approval process, is it adequate to handle issues unique to Food Security and safety. Thats an important question. This is a precedent setting case and we owe it to producers and workers to ensure that we are asking the right questions and evaluating the longterm implications are so important. Senator cochran anaya, along with a number of members of this Committee Last week urged the secretary of treasury to include the usda and the fda in the review process of this transaction. By the committee on Foreign Investment in the United States. That is why we will be meeting later today with officials from the department of treasury in conjunction with the Banking Committee so that senators can get briefed on this process. We also asked for operations involving the food supply. I believe this is part of her National Security and should be considered when our government reviews Foreign Investment into the United States. Unlike other countries, the United States does not currently undertake such a review. And i believe that that needs to needs to change. Second, we need to evaluate how foreign purchases of the food supply will affect our economy broadly and frankly whether there is a level Playing Field when it comes to business acquisitions would happen the other way around . Could they purchase oneway based on what we have heard from many experts already, it sounds like the answer is no. And i hope we can get clarification on this point panelist today. We need to be evaluating this for American Workers and poor producers and farmers who grow grain and feed ingredients. Despite the strength of americas pork sector, smithfield has been struggling to make a profit and this includes a 30 premium for the company. That raises questions about economic motivations of the purchase. As with all of our companies we have benefited from years of public investments, including food rations and Living Conditions and environmental impact, food safety and efficiency. Can we expect increase report products in china . It produces five times as many hearts as we do and uses barriers to keep u. S. Pork out of the country. Expect that after they have adopted the Excellent Technology and practices that they will increase exports to japan, our largest export market. And most importantly, will we see volatility in prices and other longterm Economic Impacts. In the shortterm i know this deal looks good for producers. This also needs to be a good deal in the long term. And it is our responsibility to ask the right questions to make sure that we are thinking longterm about these issues and that is why we are here one Company Might not be enough to affect National Security. But it is our job to be thinking about the pig picture. And the longterm for american Food Security and Economic Security. We have also sometimes Miss Committee that Food Security is a part of our National Security. I would now like to turn my friend, senator cochran and i appreciate very much your leadership and the committee today. Madam chairman, thank you for holding this hearing areas we are anxious to learn more about the facts respect to the reposed transaction or the committee would be considering today and we want to thank you for your impressive leadership and example you have set the size is beaming with pride over the success of that undertaking. We likewise think it is important for us to follow your leadership again. Proposed transaction between Smithfield Foods and the purchaser. It is one of the most widespread in terms of possible Economic Impact. Transaction or acquisition of a u. S. Company by Chinese Company in history. That is what we are being advised. But questions the plover not bring us to this point and we are interested witnesses to touch on. Things that we should also we will appreciate the economic consequences we have long benefited from the Investments Overseas and we hope to be able to make some assurances or draw some conclusions about the consequences in advance of this transaction today. We are proud of our american agriculture producers on our Food Processors and distributors. We have the best the world and we want to keep it that way. Thank you for your cooperation today. Thank you we appreciate your time today. Let me introduce each of you. Senator brown is going to introduce one of our witnesses and then we will ask each of you to speak for five minutes. We welcome the witness testimony that youd like to give us as well in any other followup testimony after today that you would like to give us. We welcome that as well. So i would ask everyone to get together. The first witness on the panel. President and ceo of Smithfield Foods. He has served as president and chief executive officer of the Company Since 2006. He previously served as president and chief officer from 2001 until 2006 and Vice President and chief Financial Officer from 2000 until 2001. In a 30 year career at the company and spans a variety of Senior Management roles and responsibilities which provide indepth knowledge of the company and operational finance matters. We welcome you today. Per second witness is the associate dean at dartmouth college. He joined the faculty in 1994 and focused his research on the economics of globalization. This is something that we welcome. We have the center for Global Business and this includes over 200 articles and presentations that explores business environments in china and mexico. Research on chinese subsidies has also supported trade regulations and in the United States and the european union. On akamai would like to turn to senator brown. Thank you, madam chair. This has a particularly good understanding as youll see from the testimony and hear from this. Seeing this as a threat and opportunity that it can be to our country in terms of economics and National Security and i think that he has a particularly acute understanding and i look forward to hearing about it. Also as former member of the house and football season, basketball season, thank you. Uneconomic green and white on today. Mr. Poe, welcome. Good afternoon to members of the committee. My name is larry poe. Im the president and chief officer of Smithfield Foods, the Global Food Company from smithfield, virginia. I appreciate this opportunity to offer testimony today and i would like to summarize my written testimony transmitted for the record. We are very excited about our new partnership. Majority owner is chinas largest pork processor. It is a partnership we are exporting highquality pork products in the United States in this needs increased capacity for u. S. Producers. More jobs in processing and more exports for the u. S. Economy in the same time, we will continue to supply our same highquality renown products to the u. S. Consumer as well as other markets around the world. Ensure this partnership is good for our business and for the producers with whom we work. The reaction from the Agricultural Community has been overwhelmingly positive from michigan, north carolina, the north American Meat Association Industry leaders and numerous individual producers have expressed support for this transaction. Growth is also very good for our employees and communities and we have a saying that it will be the same, only better. Let me be clear that we intend to keep our Management Team and employees. We recognize the operations and outstanding food Safety Practices and a 46,000 hardworking employees and there should be no noticeable impact how we do business operationally in america and around the world as a result of this position, except that we plan to do more. We hope with the Union Represented employees, as well as existing benefit package arrangements tour nonrepresentative employees, these commitments combined with the opportunities for growth created have elicited this support of us in the employees. With respect to agriculture, we expect the transaction to drive growth and expansion not only for growers but for the entire industry. We dont hog farms and have contracts around the country. We hope to maintain our contracts and arrangements and this transaction creates a terrific opportunity for growth and exports for the u. S. Hog farmers to expand to meet the growing chinese demand. Integrity of programs and a record of safety and the recognized effectiveness of u. S. Food Safety Standards are key drivers of value on smithfield. Our brands are recognized as the highest quality and save as the most desired products are of the world, including china. Our combined Company Presents every incentive to ensure safety and excellence of our products and brands and this is about exporting highquality meat from the u. S. To china to meet their growing demands. This will not result in any u. S. Imports of food from china curb moreover, many are subject to rigorous inspections and controls by americas regulators to it and sure safety and wholesomeness and we are the best and the most efficient in the world. We are voluntarily part of this review from the committee of Foreign Investment in the United States for the transaction is undergoing a thorough review and i appreciate this opportunity to address the committee and i certainly welcome your questions. The generation in 1987 through 2006 the United States received 2 trillion that 80 percent was accounted for Foreign Companies by american companies. U. S. Affiliates said Global Companies accounted for far less impressive debut as businesses have performed the larger shares of productivity hit the activities that lead to jobs in America Needs in the slow recovery from the great recession. In 2010 u. S. Subsidiary produced a 6 percent of all privatesector output that it took over 14 percent of nonresidential private sector investment. It accounted for most 18 in and they did this while purchasing 2 trillion from other u. S. Companies. All these activities contribute to a highpaying jobs in america. In 2011 5. 6 million workers in the United States with 5 of total employment with a per Worker Compensation of 77,000 and at higher rates the the u. S. Companies. The third main point is all public permission about the transaction and a is the stakeholders to maintain a high innovation and enterprise. But to access a and learn from the expertise in areas including strong Management Team, its brand image vertically integrated business model. This motivation is consistent with this historical pattern in post acquisition smithfield will operate largely as it does today. Of new richmond teams will remain in place all collective bargaining agreements will be in place in new facilities will be closed. Debt the inherently an unusual of the chinese aspect. What about the risk for Stateowned Enterprises . They remain, in china but in fact, stakeholders include goldman sachs. What about the risk to the smithfield intellectual property . In china that is with the greatest threats to use the system to the workers here at home but in this context it is important to see the smithfield transaction offers exhibit a to a solution with the American Company paid by it tidies company billions of ideas billions of dollars for its ideas. That will use the aryans in china with exports to china with rising pork demand with the rising income growth. There well help readers reduce the bilateral trade imbalance. There also appear to be nothing worse of the food aspect but as with many other industries with food the fracturing Global Companies have played a role in the economy. They already employ over 200,000 American Workers. Let me close by putting the smithfield transaction in the context of america confronts too little growth but ameritech he and have thousands of the jobs if it goes through with the purchase it will send a signal to china in the world that the United States signals investment at a time when it is needed. Think again for your time and alex for to be answering any questions you may have. Thank you very much. Dr. Paley. I have submitted my full statement to the committee which i asked to be made part of the record for chiropractor of the Global Business strategy. I Research Trainees business in global strategy lowes 15 years the point of my testimony is this takeover provide longterm benefits to china with the shuanghui and shortterm befits tuesday shareholders but the medium term benefits are questionable and the risks outweighed the benefits. Shuanghui is opaque we manage private company at highly subsidized. This takeover will double the jobs of charities direct investment. For australia and africa and experience show problems arise. After the acquisition smithfield will not trade publicly and interesting comes from chinese reports this will affect food safety cover how we do business and compatibility with our policies. In china no free market exists for the Food Products in Global Logistics fall short with subsidies and externality such as pollution exist as they do hear the market can no longer set prices. As a consolidated industry with the economies of scale but as the strategic the labor cost was under 7 percent but scale economies matter paillettes in five years tried to move from net importer but to largest exporter we found they give china the headed a vintage in the light and a and acquisition support. Shuanghui get subsidies to assess its competitor had profits of 36 . A strategic industry for china with the largest employer these policies also subsidize research and a Stateowned Bank with the smithfield takeover of another with exporting it is the lowest rung of the commodity supply chain some jobs and move to try believing lowtech pork production here. It could we export processed food back to trade campbell backed u. S. The the smithfield period. And also has a new horizon funded by the former Prime Minister but they never tell the full story. The chairman is a member that formalizes the measures incomplete information could impact a stark moc a stock market and other competitive positions. There have been outrageous food safety violations shuanghui the bad company albuterol in selling toxic milks 16,000 dead smithfield recently settled with the refrigerator door and looked inside the thing and there is made from china because american becker cultures the most competitive in the world. He was wrong they ship 4 billion pounds of food to the u. S. Last year more then 10 percent of frozen spinach. The u. S. Has backed boarded chinese foods. Also processed imported food requires no labeling. Increase counterfeit Food Products will lead to brain dilution. With record subsidies china encourages those farms and smithfield is the first as a matter of national interest. For china benefits even to the shareholders are unclear. The managing director said the what the business to be better but it neither explains how would be better either elaborated and better for whom . Something that this committee should be asking the behalf of the american people. Thank you for the opportunity today and i will be happy to answer any questions. The key very much. Members of the committee thank you for the opportunity to appear today. Prior to serving on u. S. China commission i owned and operated three plywood factories in china. Of u. S. China Economic Review Commission on which i served hasnt taken the position on the proposed transaction and has not made any Public Statement on it. The views i present to their my own. Shuanghui purchase of it smithfield as part of the program for investment to gain much control as much of the supply as possible but i remain concerned many of the largest Chinese Enterprises including shuanghui maintain strategic ties to the government whether through direct ownership or control with massive government subsidies or links to the Chinese Communist party it is important to understand the Chinese Government is behind the Global Economic expansion. 21 of the population they only have 7 percent of the form with and they suffer from severe water shortages here pollution with you have a growing demand for me you can understand the dermatologist faced by chinas leadership and industry. They do not have sufficient for me and to grow the feedstock required to produce the amount of meat and dairy demanded by their citizens theyre on track to spend a record amount on the purchase of food assets the drive for agricultural assets africa and other locations serves law makers around the world and it might a period this is the first of what i expect many forays into rural america. The purchase is driven by two major factors. Tried once controlled over the commodity price of pork with the pork industry they could have some impact on prices. Number two they won it the technology in the also have seven did most maneuver management techniques to help Foster Industrial scale and it is interesting to note but now like to turn to the potential impact. It will exacerbate a pattern of trade relations that have taken over the past 10 years whereby valueadded production has shifted to the detriment of u. S. Workers and businesses and raises a question the following a Chinese Company to dominate our industry is in the best interest of the United States. If this deal is approved it will open the deal for u. S. Food companies and our agriculture and food sector is concentrated that it is a few Companies Dominating the market. Another risk is to have overall access in china is unlikely to abandon the policy of selfsufficiency the production and were likely result is a closed market Inter Company trade between shuanghui and smithfield given the massive output it alone could hit the limited quota of u. S. Pork. This has been promoted as a way to facilitate exports to china but it old movie they could export it back to us. With the Processing Technology will dramatically improve hog production in china also with the pork products you begin the export of pork to the u. S. It is lateen to expect to get approval even ship the hogs raised and tied a. Also have the access to the technology it is expected to adopt the lines that could weaken the pork and opportunity it has extensive supply chains in the Distribution System with operations in japan and south korea. The merger would approve the Mainland China processing plants to allow shuanghui to undercut u. S. Pork exports. It will limit the ability of other u. S. Exports to get a foothold. I think it is reasonable to expect a wave of chinese investments into the industry as they become a Global Player and a fierce competitor the political system and ideology pose a threat. With that in mind the commission will report to congress with the following recommendation it has for direct investment to assess if a kid use a mandatory review of all transactions by a chinese stateowned or controlled Companies Investing in the United States never to comment a new economic benefits test to the current test and prohibit investment in u. S. Industry by a Foreign Company whose government prohibits Foreign Investment in the same industry. Thank you for allowing me to testify. Let me start the questioning with something simple yes or no. We will start with mr. Pope if this transaction would happen in the rivers which i allowed smithfield to buy shuanghui . I am not sure. I am not an expert of reverse mergers into china so i would yield to mothers but i do know there are other acquisitions i could not answer the question. When you deny that we talked originally about buying a portion of their company in they would buy a portion of your ears. What happened . We had a discussion five years ago about shuanghui buying 20 percent of smithfield and vice versa but that did not occur. I dont remember any involvement of the Chinese Government approving or disapproving i am not sure there we even aware of the conversation so i dont think it was a regulatory barrier but more business issues. Area had conversations even since then. Thank you. Could that happen in reverse . I dont know. I know as amazing growth and has been getting at of the business to run a business but they had a complete commandandcontrol economy for decades which is a work to process. It would not happen in the same question was raised in a chinese block with a big debate and Everybody Knows there as well it is a strategically important industry and the power of the state has been increasing through private interest in china. No. Absolutely not. I do like to say that one of the things that you said was concerning to me that we all have issues of intellectual property theft from china is not a secret from manufacturing and other industries but the ideal solution to the problem is this situation. Does that mean the ideal solution is for china to buy all the companies then they have all of our property . No. We know right now hundreds of thousands of 9 million american jobs are lost to china. But why is having a Chinese Company buying American Company the solution to the it theft . There are a lot of industries with an active market for the exchange of ideas they create ideas with innovation efforts in they deploy those assets but a lot of times the motivation into a of a transaction is to gain ideas of others so that is far preferable to theft. Absolutely following the rules is preferable to theft. We have been told that shuanghui wants to buy smithfield because they want more pork to sourced through the United States but if that were true, american producers would be happy to do that today. Right now right now the pork producers in michigan would be happy to sell into china which they are not. Smithfield is a unique situation within integrated business but we spend 23 million to promote beef exports but we cannot open the chinese market. They use illegal and scientific food Safety Standards to block forth ian fee for crowfoot i am all about exports silent us to export products but it seems to be removing the unfair barrier would be quicker and more efficient than just saying the only way to get in is if they on our company. That doesnt make sense to me. Commissioner, from your perspective . This is really all about control. The chinese could easily by the part the pork on the market but they subject themselves to the increase and they realized it is better to buy the mine so they have found multinational vertical integrated reprocessing companies have a price advantage. So they have told their industries to find the companies and acquire them. This is all about the price of pork at the same time they get the value added benefit to purchase miss feel. I am over my time. With my reaction to the testimony of the last witness, if there are any more negative factors that should be considered positive is that accurate . I think the end game is to ultimately dominate the pork market there will integrate they need the technology for handling handling, genetics common meat cutting and that sort of thing. The history is, once they digest and get the industry up to export the pork to us they think the end game is to dominate in the long term. [inaudible conversations] would you consider this to be in the Public Interest of the United States . No. I would not. There are four problems as i see it. Number one, if it is approved how you stop other Chinese Companies to cut into bite our Food Processing companies in the United States . For example, costco is the chinese largest Grain Trading Company in china and they are estate owned entity and have publicly announce they are seeking acquisition of u. S. Companies. So if smithfield is approved i dont know how you start other statecontrolled companies to cut did to buy the companys. The second thing that offends the week cannot buy there companys but they can buy all hours . There is something fundamentally wrong with that. In the end game is to dominate the market. That bothers me. And what were doing here is you are importing it radically different Economic System in which we espouse the free market. That is the potential for conflict and for those reasons i would be opposed. To know anybody who is in favor of the transaction . [laughter] i think dr. Slaughter supports it. I will give him an opportunity to tell us why it is in the Public Interest of the United States and we should recommend approval to be of the power to decide as a political body of the United States . That it should not be permitted . To make senator i hope youre not expecting me to give you the powers of the senate in the legislative body i will leave that to your smart guys i am just a meat processor but i am in favor of this transaction. I do think it is good for america and the opportunity that america has been looking for to import jobs the results of a discussion of the last 20 years of jobs exported out of the country into china and shipped back to the United States. This is the exact reverse of that. Title looking to another market to help feed the growing demand to realize they have a protein shortage and it is scheduled to be for a very long time. They consume 50 percent of all pork production and a judge has a substantial part more it is the area of the world it is the number one protein is number three in the United States. People be substantially more per capita as they and the United States. It is a wonderful opportunity for the west to do what it does best which is to produce Agricultural Products to ship around the world it helps with trade comic creates jobs and opportunities for American Farmers to grow these are all the good things. This is what america is trying to do. Thank you. Senator brown. And i consider his mind of questioning the think usda should be involved in this proposed deal . We have no objection to that. Senator would support that it is one of the weaknesses. One of the weaknesses is you dont expect it to include usda in the process . Were maybe some of the emergencies as well. Especially if it is a food safety issue. We know this is a good deal for shareholders with the longterm benefits for workers and farmers and American Consumers are not so clear bellamy ask you something. What is at stake for you personally in top management at smithfield in the steel . In the ideal. Year on record to me personally and receive your Management Team i am a shareholder of Smithfield Foods and have been with the company over 30 years and have acquired the shares that i have overlooked period time said the company has done well so we do stand civic hoodoo tellus we have shared publicly. I will be glad to make sure you get those exact numbers. Can you give us a range . I can believe the dont have these numbers that will benefit you and other top band richmond with in a range . I am a Significant Shareholder so i would receive 34 per share that every ither shareholders and also equity warrants and finally in order to make sure the new chretien stays in place stare putting the retention to make sure that nothing changes. Those are payable over a threeyear period and the Management Team does not state then theyre not paid it is subject to the Management Team staying in place the spinach you said something mr. Pope that American Business has almost become maybe the first time in history where the Business Plan of a large number of companies in one country is to shut down production in the u. S. And move it to a foreign country then sold back to the regional country and the know if that has happened that i have seen in robe history to any degree but you say you are the flip side . I am not sure that i get that how likely is it the adoption of the smithfield Processing Technology would allow shuanghui to export pork to the United States . What i am concerned is what can happen with the technology really of jobs going the other way. That is the concern that so many have post that some would consider to be a lesser standard would be imported back but this is all about exports it exacted chinese product cannot be imported but they have no application in place and i have the highest respect for what u. S. Department of agriculture does in this country. All product would be subject to standards just as they are today. I would suspect would have the same level of scrutiny but i want to be clear there is a huge protein deficit in the part of the world so this is not about exporting products from china but exporting u. S. Stuff food to china. A different issue but we have cf pharmaceuticals contaminated, ingredients coming from china, the United States with death as a result in an just not the same respect for food aid and drug safety, the toys, lead based paint, the backandforth sales that have not observed. Kid you, but . In the short term he will not see any imports put the longterm end game here is to dramatically increase production in china and the overriding principle is viewed Food Security is through selfsufficiency. The dow would to be dependent for their food but the end game is to get it up but then the cat toy days or paper they will. Smithfield poillon tear of the agreed it by the committee of Foreign Investment co and the United States, at the time the expectations of the review it and i would urge you to respond with a very rigorous interagency review to affect our National Security. What was your expectation . We feel we have a fully transparent process did we are open. The we voluntarily did make the suspicion into the shared there was not. But that would to in a confidential way there share with the with their thinking did you expect it said it would hold a hearing on the deposition of Smithfield Foods . Would you expect that . Did you expect that this committee was. To talk about the victim of the communist chinese plot . [laughter] to this moment i dont understand. But the role of your company to control the pork industry . Are you aware of that . Senator i am not aware of that. Will they owed our debt so we have to be careful. So to have the pork products what is the impact for the acquisition of american in the specifics to back out to others benefit . That is the cornerstone of the rationale for this transaction for america. It is the feeding the population but the u. S. Producer it is an opportunity to grow. We have struggled with growth in this country and americans reading less pork today than 15 years ago so without the opportunity to grow alongside the United States there is no opportunity for the pork producer to expand so the farmer doesnt have an opportunity to grow this business but this is it to the largest market in the world. Tied it cannot buy mayor can pork through this acquisition brother means were will they beat there. They could look to other countries. Brazil, although pork production is very is a place we have the enormous respect. What about the consumer to the prices that the restore with the pork products . To make u. S. Consumers . I dont expect there to be a Significant Impact because they have to expand the business to meet the need to. I have a question for 39 cover will come back moving beyond smithfield with the overall landscape, there has been a lot of talk to have an avalanche of Foreign Investment. Are there other iconic creance . The get of automobiles coming from asia and technology they have had a tremendous amount of investment in companies ought to take that out word. Bb fiat in michigan . Think of my apple life space. Assembled in china but made in america. The industry of the flow of ideas. What about agriculture . That as well. Great globally engage company that has helped around the world. Just an observation or to , one of the things that the american agriculture faces is that 95 percent of the population doesnt live here. If you look at a market like china it is dramatically you growing. Not only a lot of people but as the standard of living continues to increase one of the first things they will look at is a better food supply. The of the thing about china is if there is a trade imbalance relative to agriculture it is in our favor. We sell to them more than they sell to us because of some of the things that were mentioned today. I looked at this transaction could theyve moved production to china . They have a very serious water problem. If they can get water they cannot carry will raise corn. I think the problems of news feed moving production is too great to overcome over the long term. So i dont see a possibility there. Could debut of processing to china . They certainly have the labor force but the product is year and if they cannot raise the product in china makes more sense to come here where it can be grown here in the United States. But here is the problem that were struggling with in the reality is, to be very candid, there really isnt a Legal Mechanism in place the reviews this or can likely stop it. Quite honestly the standard is such there is not much that can be done here. I suppose congress could act with our experience reform bills are any indication that probably will not act workout to go. The senate could do something the would happen with the house or with the senate. Heres the problem to deal with this transaction for us and the people we represent. There is something really offensive about the reality that they can do this year but a very Aggressive Company like smithfield that has redesigned pork production could lead to this in china. That is not a hard question. You know, for fact you could not do in china what theyre doing here with smithfield. Chinese regulators would laugh you if you said i will just by shuanghui and to less it is very difficult. So how do we do something that is realistic that gets to the essence of what our people are concerned about is the food supply going to be protected . At the end of the day will china pick the chinese over america . Because they will control of very large percentage. So how do we insure our people back home pork will be available and affordable we will still have the kind of controls that they hope that we have . It is a hard question for you by how do i go home to tell the people in nebraska that this is a good transaction for you . Senator, you are right i know it is troubling with u. S. Marketplace that they do have a different approval process. So i would just be speculative and i think there is an important thing. We have a strong Food Safety Program under the usda the integrity of the brain and in the sophistication of the Management Team. We will protect these france in this business and if we dont the u. S. Inspectors will do with any way. It is a highly regulated industry the u. S. Kevin in ty inspection protocols from every plant in those on the Agricultural Committee you know, that. Then as white people of a role take comfort and they will continue to have that assurance regardless of the ownership fed country has to operate under the law of the United States not operating a lender the laws of china and the usda in the food inspection process with the programs beyond that so i think your constituents back home is the same old smithfield. We will continue to operate and protect these brands. This is one of the things they tried to buy. Shuanghui wants to help protect their food supply
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