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Saturday, October 19, 2013

PRESIDENT OBAMA'S WEEKLY ADDRESS FOR OCTOBER 19, 2013

FROM:  THE WHITE HOUSE 
WEEKLY ADDRESS: Working Together on Behalf of the American People
Remarks of President Barack Obama
Weekly Address
The White House
October 19, 2013

Hi everybody. This week, because Democrats and responsible Republicans came together, the government was reopened, and the threat of default was removed from our economy.

There’s been a lot of discussion lately of the politics of this shutdown. But the truth is, there were no winners in this. At a time when our economy needs more growth and more jobs, the manufactured crises of these last few weeks actually harmed jobs and growth. And it’s understandable that your frustration with what goes on in Washington has never been higher.

The way business is done in Washington has to change. Now that these clouds of crisis and uncertainty have lifted, we need to focus on what the majority of Americans sent us here to do – grow the economy, create good jobs, strengthen the middle class, lay the foundation for broad-based prosperity, and get our fiscal house in order for the long haul.

It won’t be easy. But we can make progress. Specifically, there are three places where I believe that Democrats and Republicans can work together right away.

First, we should sit down and pursue a balanced approach to a responsible budget, one that grows our economy faster and shrinks our long-term deficits further. There is no choice between growth and fiscal responsibility – we need both. So we’re making a serious mistake if a budget doesn’t focus on what you’re focused on: creating more good jobs that pay better wages. If we’re going to free up resources for the things that help us grow – education, infrastructure, research – we should cut what we don’t need, and close corporate tax loopholes that don’t help create jobs. This shouldn’t be as difficult as it has been in past years. Remember, our deficits are shrinking – not growing.

Second, we should finish the job of fixing our broken immigration system. There’s already a broad coalition across America that’s behind this effort, from business leaders to faith leaders to law enforcement. It would grow our economy. It would secure our borders. The Senate has already passed a bill with strong bipartisan support. Now the House should, too. The majority of Americans thinks this is the right thing to do. It can and should get done by the end of this year.

Third, we should pass a farm bill – one that America’s farmers and ranchers can depend on, one that protects vulnerable children and adults in times of need, and one that gives rural communities opportunities to grow and the longer-term certainty they deserve.

We won’t suddenly agree on everything now that the cloud of crisis has passed. But we shouldn’t hold back on places where we do agree, just because we don’t think it’s good politics, or just because the extremes in our parties don’t like compromise. I’ll look for willing partners from either party to get important work done. There’s no good reason why we can’t govern responsibly, without lurching from manufactured crisis to manufactured crisis. Because that isn’t governing – it’s just hurting the people we were sent here to serve.

Those of us who have the privilege to serve this country have an obligation to do our job the best we can. We come from different parties, but we’re Americans first. And our obligations to you must compel all of us, Democrats and Republicans, to cooperate, and compromise, and act in the best interests of this country we love.

Thanks everybody, and have a great weekend.

U.S. AND ROMANIA REACH AGREEMENTS THAT ENHANCE PARTNERSHIP

FROM:  U.S. DEFENSE DEPARTMENT 
Hagel, Romania's Defense Chief Reach Significant Agreements
American Forces Press Service

WASHINGTON, Oct. 18, 2013 - Defense Secretary Chuck Hagel met with Romania's Minister of Defense Mircea Dusa today at the Pentagon, a meeting that produced a number of significant agreements, which Pentagon Spokesman George Little said will enhance the strong and productive partnership the U.S. enjoys with Romania.

Among the agreements reached Little said, is for Romania to support logistics in and out of Afghanistan, including both personnel and cargo movement.   "Secretary Hagel praised this agreement, which is particularly important as the U.S. prepares to wind down transit center operations at Manas, Kyrgystan next year," Little said in a statement issued after the meeting. "Secretary Hagel highlighted this agreement as a further testament to Romania's steadfast commitment to the ISAF mission and its commitment to regional and international security," he added.

In addition, Little said Hagel thanked Romania for its decision to host the Aegis Ashore missile defense system, emphasizing that the agreement reaffirms and strengthens the collective defense upon which NATO was founded.  "This system represents an important component of the larger European Phased Adaptive Approach and is expected to be operational in 2015."  At Hagel's direction, Undersecretary of Defense for Policy Dr. James N. Miller will attend the groundbreaking ceremony for the Aegis Ashore system at Deveselu later this month.

Little said Hagel further praised Romania's decision to purchase 12 F-16 aircraft from Portugal. He added that this significant investment in air superiority capabilities will open the door for greater regional collaboration and will be valuable to future NATO and coalition operations.

"Secretary Hagel reaffirmed that Romania is one of the United States' staunchest allies. The two leaders also agreed to look for ways to expand our strong military cooperation as well as to support Romania's efforts to become a leader in the region and in NATO."

FDA ANNOUNCES RARE EROSION EVENTS ASSOCIATED WITH CARDIAC IMPLANT DEVICE

FROM:  U.S. FOOD AND DRUG ADMINISTRATION 
Rare Serious Erosion Events Associated with St. Jude Amplatzer Atrial Septal Occluder (ASO)
Date Issued: October 17, 2013

Audience: Pediatric and Adult Interventional Cardiologists; Cardiothoracic Surgeons; Non-Invasive Cardiologists; Referring and follow-up physicians including Pediatricians; and Patients implanted with the device

Medical Specialty: Pediatric and Adult Interventional Cardiology and Cardiothoracic Surgery; and Non-Invasive Cardiology
Device:
The St. Jude Amplatzer Atrial Septal Occluder (ASO) (Figure 1) is a cardiac implant device used in children and adults to treat an abnormal hole between the upper left and right chambers (atria) of the heart, known as an atrial septal defect (ASD). The metal device is put into place through a thin tube (catheter) inserted into a vein. This is considered a minimally invasive method for ASD closure, and is an alternative to open heart surgery.

Purpose: The Food and Drug Administration (FDA) is alerting health care providers and patients that in very rare instances, tissue surrounding the Amplatzer ASO can break down (erode) and result in life-threatening emergencies that require immediate surgery. According to published estimates, these events occur in approximately 1 to 3 of every 1,000 patients implanted with the Amplatzer ASO. As of March 31, 2013, there have been 234,103 Amplatzer ASO devices sold worldwide.

Summary of Problem and Scope:
Tissue erosion caused by the Amplatzer ASO is rare, but can be life-threatening. Between 2002 and 2011, the FDA received more than 100 reports of erosions associated with the St. Jude Amplatzer ASO. During the same period, several medical journals contained articles reporting tissue erosion among patients implanted with this device.

The device rubbing against the wall of the heart can erode the tissue and create a hole. It can also lead to further scraping or erosion through tissue in the upper chambers (atria) of the heart, primarily in the top of the atria near the aorta. This scraping may also cause separate or simultaneous holes in the aortic root, potentially leading to blood building up in the sac surrounding the heart (cardiac tamponade). If too much blood builds up in this sac, the heart will not be able to work properly.

Immediate open heart surgery may then be necessary to remove the device, close the holes or other defects caused by erosion, and close the original defect the device was meant to treat less invasively. Tissue erosion can also cause fistulas - abnormal scar tissue that connects parts of the heart that were not previously connected. Fistulas are not life-threatening, but do require surgery for treatment and could result in congestive heart failure.

The FDA has not yet identified risk factors related to the occurrence of erosion. Articles in professional medical journals have discussed the possibility that patients with a lack of tissue in the retro-aortic rim might be at higher risk of erosion events; however, this relationship has not been determined. This type of device failure has not been seen in similar devices used to treat this condition.

Recommendations for Physicians:

Review the updated Instructions For Use disclaimer icon  (IFU) for the Amplatzer ASO before implanting the device.
Consider the potential for erosion when talking to patients about long- and short-term benefits and risks of treatment options, including implantation with the Amplatzer ASO.
Inform patients that most people implanted with the Amplatzer ASO experience good outcomes and that erosion is a very rare event.
Educate patients implanted with the Amplatzer ASO to seek immediate medical attention if they develop symptoms such as chest pain, numbness, sudden weakness, dizziness, fainting, shortness of breath, or rapid heartbeat.
The FDA does NOT recommend device removal for patients who have the Amplatzer ASO unless physicians determine it is appropriate for their particular patient(s). The risks associated with device removal surgery may be equal to or greater than the risk of erosion.
If erosion is suspected in one of your patients, immediately report this event to St. Jude Medical and the FDA via the established adverse event reporting process in your facilities. Please provide all necessary records, including implant and event images, surgical records, and catheterization reports, so that the FDA has the most complete assessment of the event.
Recommendations for Patients:

Talk to your doctor about the long- and short-term benefits and risks of treatment options, including implantation with the Amplatzer ASO, to determine which treatment option is best for you.
If you have an ASD occluder implant and experience ANY symptoms of erosion you should immediately contact your doctor and go to the emergency room for an echocardiogram (ultrasound of the heart). Symptoms of erosion may include chest pain, numbness, sudden weakness, dizziness, fainting, shortness of breath, or rapid heartbeat.
Current recommendations for follow-up with a cardiologist after Amplatzer ASO implantation include the following:
You should have an ultrasound of your heart (echocardiogram) at the following timeframes:
implantation,
one day after implantation,
before hospital discharge, and
one week after implantation.
You should follow-up with your cardiologist at the following timeframes after implantation:
one month,
six months, and
one year.
After the first 12 months, you should follow up with your cardiologist once each year (unless your have symptoms or concerns).
FDA Activities:
To better understand how erosion impacts the performance of the Amplatzer ASO and assess potential risk factors related to the occurrence of erosion, the FDA is requiring St. Jude to conduct a study of patients who have been recently implanted with the device. The study is designed to estimate the incidence of erosion events within seven days, one month, six months, and 12 months after the implantation of the Amplatzer ASO. The study will also compare patients who experience an erosion event to those who do not, and will identify differences in demographic, clinical, and device characteristics.

The FDA, medical device industry and echocardiography societies are collaborating to develop standardized echocardiographic imaging techniques and guidelines for ASD procedures. These techniques and guidelines will provide needed information toward understanding pre-, peri-, and post-procedural anatomical characteristics of patients with atrial septal defects and the operation of the device in use.

Reporting Problems to the FDA:
Prompt reporting of adverse events can help the FDA identify and better understand the risks associated with medical devices. If you suspect a problem with an atrial septal defect occluder, we encourage you to file a voluntary report through MedWatch, the FDA Safety Information and Adverse Event Reporting Program. Health care personnel employed by facilities that are subject to FDA's user facility reporting requirements should follow the reporting procedures established by their facilities.

To help the FDA learn as much as possible about the adverse events associated with atrial septal occluders, please include the following information in your reports, if available:

Manufacturer’s Name
Device Name (Brand Name)
Date Device was Manufactured
Implant Duration by providing Date of Implant, Date of Event and/or Date of Explant
Distributor’s Name
Details of Adverse Event and Medical and/or Surgical Interventions (if required)
Contact Information:
If you have questions about this communication, please contact the Division of Small Manufacturers, International and Consumer Assistance (DSMICA) at, industry.devices@fda.hhs.gov, 1-800-638-2041, or 301-796-7100.


PENTAGON SAYS SHUTDOWN OST $600 MILLION IN LOST PRODUCTIVITY

FROM: U.S. DEFENSE DEPARTMENT 
Comptroller: Shutdown Cost DOD $600 Million in Productivity
By Claudette Roulo
American Forces Press Service

WASHINGTON, Oct. 17, 2013 - Furloughs of civilian employees as a result of the government shutdown cost the Defense Department at least $600 million in productivity, the Pentagon's top financial officer said today.

During a Pentagon news conference, DOD Comptroller Robert F. Hale said that in addition to the lost productivity, the shutdown generated a number of other costs that have yet to be calculated.

"We built up interest payments, because we were forced to pay vendors late," Hale said. "We had to cancel training classes, so we had to bring the people home on orders and then send them right back again."

The short-term deal signed by President Barack Obama late yesterday doesn't put the department on firm budgetary ground, Hale noted. With no flexibility to move funds between accounts, and accounts frozen at 2012 levels, he said, the department will have to be as fiscally watchful as it can.

"If that's a vague answer, it's because things are kind of vague," he said. "It's not a good way to run a railroad."

The temporary funding measure that allowed the government to reopen prevents DOD from starting new projects, Hale said. And one of the biggest problems, he added, is that it requires the department to buy the same ships it bought last year, because Congress appropriates by ship.

"It's a 'Groundhog Day' approach to budgeting," the comptroller said.

The budget uncertainty will have an impact on staffing levels and morale, he added. If the budget stays at the level authorized under the Budget Control Act of 2011, he said, "we're going to have to get smaller." Hale added that the department will try to meet the staffing goals through attrition, but that either way, it will mean fewer civilian employees.

"I'm a lot more worried about the morale effects," Hale said. "We need some stability, and we need to keep telling [employees] they're important, and then we need to show it through things like pay raises and no more furloughs, etc."

Without a change to the budget, there will also be military force reductions, Hale said.

"I think all of us are aware that it will be a somewhat different, smaller military if we have to go through with those cuts," he added. "We will be as prepared as we can, within the limits of time that we have, to be ready for a wide range of contingencies, because we know that's what we face."

Friday, October 18, 2013

PRESIDENT'S REMARKS ON NOMINATION OF JEH JOHNSON TO HEAD HOMELAND SECURITY

FROM:  THE WHITE HOUSE 
Remarks by the President at Nomination of Jeh Johnson to be Secretary of Homeland Security
REMARKS BY THE PRESIDENT
AT NOMINATION OF JEH JOHNSON
TO BE SECRETARY OF HOMELAND SECURITY
Rose Garden
2:06 P.M. EDT

THE PRESIDENT:  Good afternoon, everybody.  Please have a seat.  As President, my most solemn responsibility is the safety and security of the American people.  And we've got an outstanding team here of folks who work every single day to make sure that we're doing everything we can to fulfill that responsibility.  And that means that our entire government -- our law enforcement and homeland security professionals, our troops, our diplomats, our intelligence personnel -- are all working together.  It means working with state and local partners to disrupt terrorist attacks, to make our borders more secure, respond to natural disasters, and make our immigration system more effective and fair.

Addressing any one of these challenges is a tall order.  Addressing all of them at once is a monumental task.  But that’s what the dedicated men and women of the Department of Homeland Security do every day.  And today I’m proud to announce my choice to lead them -- an outstanding public servant who I’ve known and trusted for years -- Mr. Jeh Johnson.

We are, of course, enormously grateful to Secretary Janet Napolitano.  Janet couldn’t be here today -- she’s already made her move to her new position in sunny California, overseeing the higher education system in that great state.  And I know that she’s going to do an outstanding job there with the incredible young people that are in our largest state.  But we all deeply appreciate the terrific job that she did over the last four-and-a-half years.  I want to thank Rand Beers for his service and for stepping in as Acting Secretary after Janet left.

Thanks in no small part to Janet’s leadership, her team, we’ve done more to protect our homeland against those who wish to do us harm.  We’ve strengthened our borders.  We've taken steps to make sure our immigration system better reflects our values.  We’ve helped thousands of Americans recover from hurricanes and tornados, floods and wildfires.  And we’ve worked to clean up a massive oil spill in the Gulf as well as address a flu pandemic.

In Jeh Johnson, we have the right person to continue this important work.  From the moment I took office, Jeh was an absolutely critical member of my national security team, and he demonstrated again and again the qualities that will make him a strong Secretary of Homeland Security.

Jeh has a deep understanding of the threats and challenges facing the United States.  As the Pentagon’s top lawyer, he helped design and implement many of the policies that have kept our country safe, including our success in dismantling the core of al Qaeda and in the FATA.

When I directed my national security team to be more open and transparent about how our policies work and how we make decisions, especially when it comes to preventing terrorist attacks, Jeh was one of the leaders who spoke eloquently about how we meet today's threats in a way that are consistent with our values, including the rule of law.

Jeh also knows that meeting these threats demands cooperation and coordination across our government.  He's been there in the Situation Room at the table in moments of decision, working with leaders from a host of agencies to make sure everyone is rowing in the same direction.  And he's respected across our government as a team player, somebody who knows how to get folks who don’t always agree to work towards a common goal.

Jeh has experience leading large complex organizations.  As a member of the Pentagon's senior management team, first under Bob Gates and then under Leon Panetta, he helped oversee the work of more than 3 million military and civilian personnel across the country and around the world.  And I think it's fair to say that both former secretaries Gates and Panetta will attest to the incredible professionalism that Jeh brings to the job, and the bipartisan approach that, appropriately, he takes when it comes to national security.

He's also earned a reputation as a cool and calm leader.  Jeh appreciates that any organization's greatest asset is its people, and at the Pentagon he guided the report explaining why allowing our men and women in uniform to serve their country openly would not weaken our military.  Congress ended up using that report that Jeh helped to craft to justify repealing "don't ask, don't tell."  And America and our military are stronger because we did, in part because of Jeh's determined leadership.  I know he will bring that same commitment to our hardworking folks at DHS.

And finally, Jeh believes, in a deep and personal way, that keeping America safe requires us also upholding the values and civil liberties that make America great.  Jeh tells the story of his uncle who was a member of the legendary Tuskegee Airmen during World War II.  And he and his fellow airmen served with honor, even when their country didn’t treat them with the dignity and the respect that they deserved.  And it was a lesson that Jeh never forgot.  “We must adopt legal positions that comport with common sense,” Jeh says, “consistent with who we are as Americans.”  Jeh is a pretty good lawyer, so he knows what that means.

And Jeh understands that this country is worth protecting –- not because of what we build or what we own, but because of who we are.  And that’s what sets us apart.  That’s why, as a nation, we have to keep adapting to changing threats, whether natural or man-made.  We have to stay ready when disaster strikes and help Americans recover in the aftermath.  We’ve got to fix our broken immigration system in a way that strengthens our borders, and modernizes legal immigration, and makes sure everybody is playing by the same rules.

And I’m confident that I could not make a better choice in Jeh, somebody who I’m confident is going to be moving not just the agency forward, but helping to move the country forward.

So, Jeh, thank you so much for agreeing to take on this very difficult and extraordinary mission.  You’ve got a great team over at DHS, and I know that they're looking forward to having you over there.  I urge the Senate to confirm Jeh as soon as possible.  And I thank you, as well as your family, to agreeing to serve.  Your wife, Susan, and your daughter, Natalie, couldn’t be here because they're visiting Jeh Jr. out at Occidental College, which, by the way, I went to for two years when I was young.  It’s a fine college.  I’m sorry I couldn’t be there to say hi to him.  But your son chose well.

So, ladies and gentlemen, I’d like to invite Jeh Johnson to say a few words, hopefully our next Secretary of the Department of Homeland Security.  (Applause.)

MR. JOHNSON:  Thank you very much, Mr. President.

As you noted, my wife and two kids are not here because it’s parents’ weekend at Occidental, and thanks to the cost of a non-refundable airline ticket -- (laughter) -- they could not be in two places at once.  They wish they could be here.

Thank you for the tremendous honor of this nomination and the trust you have placed in me to carry out this large and important responsibility as Secretary of Homeland Security.  I was not looking for this opportunity -- I had left government at the end of last year and was settling back into private life and private law practice.  But when I received the call, I could not refuse it.

I am a New Yorker, and I was present in Manhattan on 9/11, which happens to be my birthday, when that bright and beautiful day was -- a day something like this -- was shattered by the largest terrorist attack on our homeland in history.  I wandered the streets of New York that day and wondered and asked, what can I do?  Since then, I have tried to devote myself to answering that question.  I love this country.  I care about the safety of our people.  I believe in public service.  And I remain loyal to you, Mr. President.

If confirmed by the Senate, I promise all of my energy, focus, and ability toward the task of safeguarding our nation’s national and homeland security.

Thank you again, sir.  (Applause.)

 END              

USS SAN ANTONIO AIDS RESCUE OF 128 MEN AFTER CALL FOR HELP FROM MALTESE GOVERNMENT

FROM:  U.S. DEFENSE DEPARTMENT 
USS San Antonio Aids in Rescue of 128 From Raft
Navy News Service

NAPLES, Italy, Oct. 17, 2013 - The amphibious transport dock ship USS San Antonio transferred 128 men to a Maltese offshore patrol vessel today after responding yesterday to a call for help from the Maltese government.

A Maltese patrol aircraft spotted a raft being rocked by winds and seas yesterday in the Mediterranean Sea. The Maltese government contacted several ships in the area and the U.S. 6th Fleet, headquartered here, and requested help in rescuing the 128 men aboard the raft.

The San Antonio was a little more than 60 nautical miles away when directed to assist, and the ship's sailors transferred the men from their raft, using two 11-man, rigid-hull inflatable boats. The crew then provided them with food, water, medical attention and shelter until they were transferred to the Maltese vessel.

ROSE GOTTEMOELLER'S REMARKS AT 68TH FIRST COMMITTEE GENERAL DEBATE

FROM:  U.S. STATE DEPARTMENT 
Statement by Rose E. Gottemoeller, Acting Under Secretary of State for Arms Control and International Security
Remarks
Rose Gottemoeller
Acting Under Secretary for Arms Control and International Security 
68th UNGA First Committee General Debate
New York, NY
October 9, 2013

As Delivered

Thank you, Mr. Chairman. Congratulations, Ambassador Ibrahim Dabbashi, on your election as Chair of the First Committee during its 68th session. We pledge to support your leadership and the work of this committee. We look forward to a productive session.

This is the fourth year in a row that I have spoken to the UNGA First Committee on behalf of the United States. I look back to 2009 and I am proud of all we have accomplished. That said, we have a long path in front of us.

The conditions for a world free of nuclear weapons do not yet exist, but together we are completely capable of creating these conditions. I am sure of this, because of the examples of our predecessors.

As you all may know, tomorrow is the 50th anniversary of the entry into force of the Limited Test Ban Treaty (LTBT). This groundbreaking Treaty went from a seemingly unattainable goal on the horizon to an international law on the books within a year of the Cuban Missile Crisis. Perhaps it was those dark days that helped solidify U.S. President Kennedy’s view that it was possible – in fact, imperative – that we work to address nuclear dangers through multilateral diplomacy.

“Peace need not be impracticable,” he said, “and war need not be inevitable. By defining our goal more clearly -- by making it seem more manageable and less remote -- we can help all people to see it, to draw hope from it and to move irresistibly towards it.”

Mr. Chairman, that idea should be our touchstone as we move forward with the Committee’s work. If our predecessors could accomplish a Treaty like the LTBT in the midst of the Cold War, surely we can find ways to work on further arms reductions, increased transparency, banning the production of fissile material for use in nuclear weapons and more.

Over the last fifty years, we have had many unprecedented successes. We have gone from the brink of nuclear war to successful strategic reduction treaties – the latest of which will bring us by 2018 to the lowest number of deployed strategic nuclear weapons since the 1950s.

We have continued to limit nuclear explosive testing over the years through treaties, including the Threshold Test Ban Treaty (TTBT) that prohibited the United States and the Soviet Union from conducting a nuclear explosive test in excess of 150 kilotons. Before the TTBT entered into force, some voiced concerns that the parties had different ways to measure explosive yields. To deal with this problem, the United States and the Soviet Union undertook an unprecedented step in transparency and confidence-building. They invited each other to their respective nuclear test sites to observe a nuclear test and use their preferred methods for measuring explosive yields as they applied to the TTBT. That event, known as the Joint Verification Experiment, happened 25 years ago and it paved the way for subsequent negotiations of new verification protocols for both the TTBT and the Peaceful Nuclear Explosions Treaty (PNET). Our joint work would ultimately help the international community negotiate a total ban on nuclear explosive testing, the Comprehensive Nuclear Test-Ban Treaty (CTBT).

This year also marks a significant nonproliferation accomplishment: the 1993 United States-Russian Federation Highly Enriched Uranium (HEU) Purchase Agreement will reach a major milestone with the final delivery of low enriched uranium (LEU) derived from downblending 500 metric tons of Russian weapons origin HEU. The LEU that results from this downblending process is delivered to the United States, fabricated into nuclear fuel, and used by nearly all U.S. nuclear power plants to generate approximately half of the nuclear energy in the United States. Approximately 20,000 nuclear warheads have been eliminated under this unique government-industry partnership. Over the past 15 years, nuclear fuel from this source has accounted for approximately 10% of all electricity produced in the United States.

We expect to meet with our Russian partners this November to observe the loading in St. Petersburg of the final containers of LEU downblended under the Agreement, and we will meet again in the United States when that ship delivers this important cargo in December. We look forward to jointly celebrating this historic achievement.

Another success that flies under the radar is the Open Skies Treaty. It just marked its 1000th completed mission in August. It is a great example of a Euro-Atlantic transparency and confidence building measure, and it has proven itself as a valuable arms control monitoring tool, for both strategic and conventional purposes.

As I said at the beginning of my remarks, the Obama Administration, working with international partners, has made many of its own significant achievements in nonproliferation and disarmament: entry into force of the New START Treaty, the launching of the Nuclear Security Summit process, an agreement between the United States and the Russian Federation to each verifiably dispose of 34 tons of weapons grade plutonium, and more recently, signature of an agreement between the United States and Russia on threat reduction that reinforces our longstanding partnership on nonproliferation.

But it is not enough: the United States and Russian Federation still possess over ninety percent of the nuclear weapons in the world, and it is time we move beyond Cold War postures.

That is why in June, the President announced in Berlin that we would pursue further reductions of deployed strategic nuclear weapons. This decision flowed from the Administration’s extensive analysis of the current strategic environment and deterrence requirements. That analysis confirmed that the United States can ensure its security and that of our allies, and maintain a strong and credible strategic deterrent, while reducing our deployed strategic nuclear weapons by up to one-third below the level established by the New START Treaty. The President said on that occasion, “I intend to seek negotiated cuts with Russia to move beyond Cold War postures.” Toward that end, we will pursue a treaty with the Russian Federation.

We are also making sure our lines of communication on strategic issues are solid. On Monday in Bali, U.S. Secretary of State Kerry and Russian Foreign Minister Lavrov signed a new agreement to strengthen the connection between our Nuclear Risk Reduction Centers (NRRCs). Today’s NRRC-to-NRRC relationship and communications link continue to provide vital transparency in strategic and conventional forces, facilitate verification of arms control treaties and agreements, and support strategic stability. Actually, we just passed a significant milestone -- the two Centers have now exchanged over five thousand New START Treaty notifications since its entry into force, which provide us day-to-day updates on the status of each others' nuclear forces. These are joined by the 97 on-site inspections that we have now conducted under New START, which give us even more insights into each others' nuclear forces, thus enhancing predictability for both countries.

We are also working with the other Nuclear Weapons States (P5) on disarmament-related issues to support implementation of the NPT and the 2010 NPT Action Plan. The P5 have now had four official conferences, with China hosting the fifth meeting next year. But we are not just meeting; through dialogue at the political level and concrete work at the expert level, our engagement has moved from concepts to concrete actions.

For example, P5 experts are meeting to address issues related to the CTBT, especially those relating to the On-Site Inspection (OSI) element of the CTBT’s verification regime and to the OSI Integrated Field Exercise to be conducted in Jordan in 2014. The objective of this effort is to define and engage in technical collaborative work based on our unique expertise with past nuclear explosive tests.

In the broader multilateral context, the United States continues to hold to its long-standing position calling for the immediate commencement of long delayed negotiations on a Fissile Material Cutoff Treaty (FMCT) in the Conference on Disarmament (CD). This treaty is the obvious next step in multilateral disarmament and it is time to get to the table. We hope that the upcoming UN Group of Governmental Experts on FMCT will provide useful impetus. Another priority for the United States is to continue to build support for the ratification of the CTBT, as affirmed by President Obama this past June. We encourage all Annex 2 nations to join us in this pursuit.

Mr. Chairman, we will have a lot of things to discuss and debate this session, from cyber and space security to conventional arms control, from humanitarian consequences of nuclear weapons to a Middle East free of weapons of mass destruction. It is critical that we continue our work together. Two weeks ago, the international community reached a landmark with UN Security Council Resolution 2118 and the Executive Council decision of the Organization for the Prohibition of Chemical Weapons. Together, they enable a strong international partnership to eliminate chemical weapons from Syria and end this threat to the Syrian people.

And elsewhere, we should be cautious, but cognizant of potentially historic opportunities. We must continue our push to bring Iran back into line with its international nuclear obligations. We will also continue to make clear to the Democratic People’s Republic of Korea (DPRK) that should it meet its own denuclearization commitments, it too can have an opportunity to reintegrate into the international community. The United States is ready to talk, we are ready to listen, we are ready to work hard, and we hope that every country in this room is ready to join us.

It is no secret there are issues on which we disagree. This does not mean that we stop trying to move ahead in a step-by-step fashion. Even in the darkest days of the Cold War, the United States and the Soviet Union found it in our mutual interest to work together on reducing the nuclear threat. Of course, today, this is not just the responsibility of the United States and Russia. All states can and must contribute to the conditions for disarmament, as well as nonproliferation; they are two sides of the same coin.

Mr. Chairman, the road toward the next steps might not be familiar and it will require difficult negotiations and complicated diplomacy. Nevertheless, armed with patience and persistence, we can keep our compasses pointed at the one reason we are here: to pursue disarmament in ways that promote mutual security, because it is in our mutual interest.

The United States asks that we all commit ourselves to the hard work ahead.

Thank you, Mr. Chairman.

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PRESIDENT OBAMA THANKS FEDERAL WORKERS FOR SACRIFICES

FROM:  U.S. DEPARTMENT OF DEFENSE 
President Obama Welcomes Back, Thanks Federal Workers
By Jim Garamone
American Forces Press Service

WASHINGTON, Oct. 17, 2013 - President Barack Obama today thanked federal employees for their service, sacrifices and dedication.

In a White House speech today to mark the end of a government shutdown that sidelined hundreds of thousands of federal workers, the president said their service matters.

"Thanks for your service," Obama said to federal workers. "Welcome back. What you do is important -- it matters. You defend our country overseas. You deliver benefits to our troops who have earned them when they come home. You guard our borders. You protect our civil rights. You help businesses grow and gain footholds in overseas markets. You protect the air we breathe and the water our children drink. And you push the boundaries of science and space. And you guide hundreds of thousands of people each day through the glories of this country."

Federal service is important, the president said. "Don't let anybody else tell you differently," he added.

Addressing to the political differences that spawned the shutdown, the president called for cooperation going forward.

"Those of us who have the privilege to serve this country have an obligation to do our job as best we can," he said. "We come from different parties, but we are Americans first. And that's why disagreement cannot mean dysfunction. It can't degenerate into hatred."

Federal workers serve America and Americans, Obama said. "The American people's hopes and dreams are what matters, not ours," he added. "Our obligations are to them. Our regard for them compels us all, Democrats and Republicans, to cooperate and compromise and act in the best interests of our nation."

FUNDING BIODEFENSE INFRASTRUCTURE

Photo:  Navy Petty Officer 2nd Class Eric M. Garneau prepares to administer an H1N1 flu vaccine aboard the amphibious assault ship USS Bataan while the ship is underway in the Atlantic Ocean, Dec. 5, 2009. U.S. Navy photo by Chief Petty Officer Anthony Sisti 

FROM:  U.S. DEFENSE DEPARTMENT 
DOD Funding Contributes to U.S. Biodefense Infrastructure
By Cheryl Pellerin
American Forces Press Service

WASHINGTON, Oct. 16, 2013 - The Defense Department has contributed core capabilities to a national center funded as a public-private partnership by the Department of Health and Human Services to enhance the U.S. response to infectious diseases and biological, chemical, radiological and nuclear threats.
The HHS Texas A&M Center for Innovation in Advanced Development and Manufacturing is a response in part to pandemics such as the 2009-2010 H1N1 flu -- for which traditional biomanufacturing methods took 26 weeks to produce initial vaccine doses – and the future threat of biological attacks and other public health emergencies.

According to expert witnesses testifying here Oct. 11 before the House Armed Services Committee's subcommittee on intelligence, emerging threats and capabilities, some kinds of advances in biomanufacturing processes and DNA technologies have lowered the bar for states, and even individuals, who seek to produce biological weapons.

One of the witnesses was Dr. Brett P. Giroir, principal investigator at the Texas A&M Center for Innovation, and interim vice president and chief executive officer of the Texas A&M Health Sciences Center.

"Literally, what once took weeks during medical school to produce in a multimillion-dollar laboratory can be done [today] in an afternoon on a benchtop by someone with a relatively less degree of scientific training," he told the panel. "So the barriers to entry have decreased."

Giroir's work at the Texas A&M Center for Innovation began in 2008 after nine years at the Defense Advanced Research Projects Agency.

During his first five years at DARPA, Giroir was a member of the Defense Sciences Research Council, for which he chaired or co-chaired intensive studies on chemical, biological, radiological and nuclear security and countermeasures, decontamination and warfighter performance under extreme conditions, he said in written testimony.

Then, as deputy director and later director of the DARPA Defense Sciences Office, he and a team of scientists, physicians and engineers developed a platform of research initiatives called Accelerating Critical Therapeutics, or ACT, he said.

ACT was designed to provide new, highly effective medical countermeasures and an unprecedented, flexible and rapid response to address the growing threat of genetically modified or chimeric organisms -- single organisms with two or more sets of genetically distinct cells -- for which no vaccines or countermeasures existed.

One aspect of the DARPA portfolio that was extremely challenging, even for DARPA, he said, was the ability to develop low-cost, highly flexible and adaptable biomanufacturing technologies that could provide tens of millions of doses of vaccines or medical countermeasures such as chemical-weapon antidotes within weeks of notification.

Such a capability didn't exist in the civilian or military experience, Giroir said, and profound technical and financial barriers kept the problem unsolved for several years.

"In 2008, when my assignment at DARPA was completed, I joined the Texas A&M system [and] secured a $50 million investment from the state of Texas to demonstrate those flexible manufacturing capabilities originally envisioned at DARPA," Giroir told the panel.

"Beginning in 2009," he added, "Texas A&M designed, developed, constructed and is now operating a revolutionary first-in-class, 150,000-square-foot facility that has pioneered highly flexible, adaptable and even mobile manufacturing platforms at a capital cost of about 80 percent less than the current state of the art."

The facility is called the National Center for Therapeutics, or NCTM, and a key feature there is the use of modular and mobile stand-alone biopharmaceutical clean rooms, called modular clear rooms, or MCRs. The initial MCR concept was funded by DOD through DARPA and the Army Research Office, Giroir said.

NCTM is the core facility and main site for developing and manufacturing medical countermeasures and vaccines against chemical, biological, radiological and nuclear threats for the Texas A&M Center for Innovation, he added.

Another part of the Center for Innovation's biomanufacturing infrastructure is the Caliber Biotherapeutics Facility, Giroir said. Caliber was developed and built through Texas A&M and G-CON Manufacturing, with funding from the DARPA Blue Angel Program.

According to a 2012 DARPA news release, the Blue Angel Program demonstrated a flexible and agile capability for DOD to rapidly react to and neutralize any natural or intentional pandemic disease.

Building on a previous DARPA program, Blue Angel targeted new ways to produce large amounts of high-quality, vaccine-grade protein in less than three months in response to emerging and novel biological threats. One of the research avenues explored plant-made proteins for producing a candidate vaccine.

In a milestone development under the program, researchers at Medicago Inc. in North Carolina produced in one month more than 10 million doses of an animal-model H1N1 flu-vaccine candidate based on virus-like particles, the DARPA statement said.

The work was part of a rapid-fire test that ran from March 25, 2012, to April 24, 2012, and showed that a single dose of the H1N1 vaccine candidate induced protective antibody levels in an animal model when combined with a standard immunological additive, according to DARPA.

The Texas A&M Center for Innovation has partnered with Caliber Biotherapeutics to make Caliber's plant-made pharmaceutical facility available for HHS task orders, including vaccines, Giroir told the panel.

"The facility has the capability to produce up to 20 kilograms of purified protein per month through its highly automated, Nicotiana benthamiana, a close relative of tobacco, plant-based production system," Giroir said.

"We consider this program to be the most responsive, secure and capable plant-made vaccine program currently available worldwide," he added.

Giroir said the Center for Innovation's high-level objectives are:

-- To provide a national vaccine response against pandemic flu, defined as 50 million doses delivered in 4 months, with initial doses available to the federal government in 12 weeks;

-- To perform what's called advanced development -- the final steps -- in manufacturing vaccines and medical countermeasures against chemical, biological, radiological and nuclear threats as tasked by HHS; and

-- To train the future domestic U.S. workforce.

To achieve these objectives, Texas A&M leads a multidisciplinary team with expertise that spans research to clinical trials, including GlaxoSmithKline, or GSK Vaccines, the world's largest vaccine developer, Giroir said.

The center also is expanding domestic U.S. infrastructure, he added, building a new, dedicated pandemic flu vaccine facility to meet its 50-million-dose requirements, and building a new live-virus vaccine facility at biosafety level 3, designed specifically for research with hazardous biological agents.

Giroir said Texas A&M is highly motivated to continue its history of service to the nation by supporting DOD and supplying improved vaccines and countermeasures to the warfighter.

"Of particular interest would be DOD partnerships to develop and manufacture products for their stockpile and special immunizations programs," he added, "and perhaps more importantly, to be the cornerstone for an emergency response to genetically modified or chimeric organisms [and] other unexpected agents that we believe are a growing, real threat to our national security and public health."

Because the center's contract with HHS indicates that 50 percent of its capabilities are available for non-HHS projects, there is an immediate opportunity for DOD to use center capacity and expertise already funded by HHS, Giroir said.

"We believe such collaborations would not only reduce DOD operational risks," he added, "but would reduce DOD expenditures, potentially by hundreds of millions of dollars, that could then be reallocated to provide additional vaccines, countermeasures and capabilities to our warfighters."


Thursday, October 17, 2013

BRIEFING BY SECRETARY OF DEFENSE HAGEL,UNDER SECRETARY HALE

FROM:  U.S. DEFENSE DEPARTMENT 
Presenter: Secretary of Defense Chuck Hagel October 17, 2013
Department of Defense Press Briefing by Secretary Hagel and Under Secretary Hale in the Pentagon Briefing Room


SECRETARY OF DEFENSE CHUCK HAGEL: Good afternoon. I wanted to make some brief comments this afternoon regarding the reopening of government. I'm going to take -- after I make a statement, a couple of questions, and then I'm going to ask Bob Hale, our comptroller, to take some questions regarding the specifics of the reopening.



This morning, I announced that the Department of Defense is resuming operations now that Congress has restored funding for DOD and the rest of the federal government. While all of us across the department welcome the fact that the shutdown is now behind us, I know that its impact will continue to be felt by all of our people. All of them, in different ways, had their lives affected and disrupted during this period of tremendous uncertainty. In particular, I am deeply aware of the harm that this shutdown inflicted on so many of our civilian personnel.



All of our leaders, civilian and military alike, deeply regret what this shutdown has done to our people, and we'll work to repair the damage beginning today. Echoing what President Obama said earlier today, I want all of our civilian personnel to know that the work they do is critically important to this department and this country. It matters to this department, and it matters for the country.



The military simply cannot succeed without our civilian employees, and the president and I appreciate their professionalism and their patience throughout this very trying period. Now that this latest budget crisis has become history, and we have come to an end, we have an opportunity to return to refocusing on our critical work.



But it's important to note that Congress did not remove the shadow of uncertainty that has been cast over this department and our government much of this year. Like much of the rest of the government, DOD is now operating on a short-term continuing resolution which limits our ability to start new programs, and the damaging cuts of sequestration remain the law of the land.



In the months ahead, Congress will have an opportunity to remove this shadow of uncertainty as they work to craft a balanced long-term spending bill. If this fiscal uncertainty continues, it will have an impact on our economy, our national security, and America's standing in the world. And if the sequester level continues, there will also be consequences.



Earlier this year, in our Strategy Choices and Management Review, DOD explained how the continuation of these abrupt cuts put us at risk of fielding a force that is unprepared due to a lack of training, maintenance, and the latest equipment. DOD has a responsibility to give America's elected leaders and the American people a clear-eyed assessment of what our military can and cannot do after years of sequester-level cuts. In the months ahead, we will continue to provide our best and most honest assessment as Congress works to establish the nation's long-term spending priorities.



That is my statement, and I'd be happy to respond to a couple questions. Thank you.



Lita?



Q: Mr. Secretary, you mentioned consequences. As you look down the road -- I think Mr. Hale addressed this at one of his briefings -- there already are some reviews of how many civilians and how much force reduction overall there will have to be, reductions in force. Can you talk a little bit about, as you look ahead, what are you warning Congress and the country about in terms of the number of forces that you're going to have to cut in order to meet these lower budget levels, the number of civilians you may have to lay off? And what does that do to U.S. readiness and morale of your workforce?



SEC. HAGEL: Well, I'll -- I'll leave the specific numbers to Bob Hale, but let me respond in a general way to your -- your questions.



Let's start with the impact on morale. I don't think anyone questions that the uncertainty that shutting down the government and closing down people's jobs has brought a great amount of not only disruption to our government, to our country, but to their lives, to the civilian personnel whose lives have been disrupted by this particular shutdown.



Then you add further to that the uncertainty of no authorizations, no appropriations, and living in a world of continuing resolutions, of continuing sequestration, the uncertainty of planning, not just in an agency or a department, or certainly all the elements of the Department of Defense, but in personal lives. I mean, people have to have some confidence that they have a job that they can rely on. I know there are no guarantees in life, but we can't continue to do this to our people, having them live under this cloud of uncertainty.



So morale is a huge part of this. We won't be able to recruit good people. Good people will leave the government. They're not going to put up with this. Good people have many options. So that's one part of it.



I have said many times, the chiefs have said, General Dempsey has said over the last few months that as we have had to close down training facilities, and our training, we've had to stand down wings, and not allow many of our -- our wings to fly, the steaming of our ships. We've had to pull back the longer-term investments that are required to keep the technological edge that this country has always had.



I mean, these are all dimensions of sequestrations, of uncertainty, of not knowing or not being able to plan what's coming. Sure, that adds to impact on our readiness, and, sure, that eventually will present capability issues for us.



So these are not new issues. I've talked about them, General Dempsey, all of our leaders; all of our chiefs have talked about them. That's part of the point the president has made, I have made continually through this process over the last few months.



I noted again in a statement that we've got to have some certainty here of being able to go forward. We've got a QDR that you all are -- are familiar with, that we're going through that review. We've got a budget resolution that we are preparing within this institution and within the White House budget that we will present a budget to Congress, as we do each year. To try to plan for a budget with this kind of uncertainty alone, how are we going to fulfill our strategic commitments? What impact is this having overseas with our allies?



I've been to, as many of you know -- some of you have been with me on these trips -- to the Asia Pacific area three times since I've been secretary of defense. Secretary Kerry was there recently. The president pulled his trip down last week because of the shutdown.



Our allies are asking questions, can we rely on our partnership with America? Will America fulfill its commitments and its promises? These are huge issues for all of us, and they do impact our national security and our relationships and our standing in the world.



So these are the broad general areas of consequences of not being able to plan and prepare because of that uncertainty that we're living under. The specific numbers, Lita, I'll leave for Bob Hale.



Thom?



Q: Thank you, sir. On the sequester moving ahead, you know, you spent a lot of time in the Senate, you know how -- how the Hill works. You have a good sense of the American people. So in your current position, Mr. Secretary, is it your sense that the sequester-level cuts, those are the new reality, and rather than uncertainty, isn't that what you should be planning against, given Congress's will, the will of the people?



SEC. HAGEL: As you know, Thom, everyone in this room knows that the so-called sequester, which is a product of the Budget Control Act of 2011, is the law of the land. And we have to plan and prepare, to your point, with the facts as they are and the realities as they are.



If you recall, when I implemented and directed the strategic management review and choices, which I noted in my comments here, it was to prepare this institution for different scenarios of different numbers, and certainly the numbers that we know are there that we have been living with this year reflected under sequestration are numbers that we've got to prepare for. We plan also for the continuing resolution numbers. And we plan also for our budget numbers.



Now, I don't know -- you started your question to me, Thom, about my service in the Senate -- I don't know if a compromise can be reached, if some kind of an agreement can be reached to deal with these issues. That's part of the uncertainty.



So we have to plan for every eventuality here. And you can't take an institution like this, as you all know, because you've been around here a long time, and turn these things around in a month, in a week. This is the national security of America we're talking about. And so it does take thought and it does take planning -- we're talking about people's lives -- as we bring down and draw down by law our force structure.



We know that, and we're planning for that. And you've heard me say many times, you've heard General Dempsey say many times that the abruptness and the steepness of those cuts give us no flexibility to glide it down in a responsible way to make sure that our resources match our mission, our -- our mission matches our resources, and that we are able to fulfill the strategic interest of this country.



GEORGE LITTLE: One final question.



Q: Mr. Secretary, you spoke a minute ago about morale of the civilian workers at the department. Are you at the point yet where you have -- you or General Dempsey have concern about troop morale, given all of this? What indicators might concern you? And how are you watching that, given what you said about they're not being allowed to train and to fly and all of that? Are you now worried about the troops?



SEC. HAGEL: We are always worried about the troops. The reason I noted the civilian personnel specifically is because the civilian personnel were the ones affected by the furloughs and the shutdown. As you know, our uniformed military was protected in that.



But the same uncertainty, certainly, resides in the uniformed military community, different dimension of it, of course, but questions I get all the time from our junior enlisted, from our officer corps, from our senior officer corps, future, I get -- what is the future for me as an E-5, starting a family, for example? And I got these questions two weeks ago when I had my monthly luncheon with junior enlisted members of our services.



I get these questions all the time. Mr. Secretary, can you give me an honest answer -- in one case last week, two weeks ago, I had one service member say, my wife asked me to ask you, do I have a future? Do we have a future?



And these are young men and women who are very proud to be in the military, want to stay in the military. They have a purpose to their lives serving in the military. But they also have to ask the question, when you're 25 or 30 years old, if you have a family, you want to start a family, can I support that family? I mean, what kind of a future am I giving my family if I'm not sure where all this is going?



So, yes, it affects our uniformed military. Yes, we are vitally concerned about the morale of our military. But the civilian workforce are the ones that have been obviously touched directly by the shutdown and, of course, the furloughs that we've seen this year.



Thank you. And Bob Hale will respond to more specific questions you've got. Bob.



UNDER SECRETARY OF DEFENSE ROBERT F. HALE: Well, good afternoon. Let me just start by joining the secretary in thanking our civilian workforce, all of our workers, but especially our civilians for their patience through this. And I'd add the senior commanders and managers have helped me a great deal as I work to help the department get through this.



So when I read the OMB message about 2:30 this morning saying government was reopened, I felt like I could stop beating my head against a wall, but I got to say it would have felt a lot better never to have started beating my head against a wall. So with that, I'll stop and -- if you have questions.



Q: I wonder if there is any estimate of what costs the Department of Defense incurred as a result of the shutdown, including the -- you know, the workers at the beginning who were not working and that -- that money was wasted. Is there any cost estimate?



UNDER SEC. HALE: Well, we know at a minimum there are about $600 million of lost productivity, if you will, from at that point almost 400,000 civilians that we had on furlough for four days. There were a number of other costs where I can't put a number on them. We built up interest payments because we were forced to pay vendors late. We had to cancel training classes, so we had to bring the people home on -- on orders and then send them right back again. So there were a lot of costs of those sort.



I can't quantify those, but it's at least the $600 million to start with in essentially lost productivity.



Q: Can you just take a stab at the layoff and attrition...



UNDER SEC. HALE: The layoffs?



Q: The layoffs -- layoffs that are coming down the road and reductions in force?



UNDER SEC. HALE: Well, you know, he said he'd defer to Bob Hale. Bob Hale is going to defer to the future, because we haven't decided.



But, look, if we face budgets at the BCA cap level, roughly $50 billion less in '14, we're going to have to get smaller. I can't tell you exactly how much. Yes, that will mean fewer civilians. We will try to avoid reductions in force. We'll keep them at an absolute minimum. We would look to do this, if we have to, through attrition, but, yeah, we're going to get smaller. I just can't tell you exactly how much.


Q: Mr. Hale, you've had an entire couple of hours to pull your numbers together. Do you have any idea yet of the impact of this on programs and the -- whether, you know, some testing's been delayed, that sort of thing, and also just the friction costs to both you and to the companies?



UNDER SEC. HALE: Well, we -- we were relatively fortunate in the government. We had a partial appropriation. The Pay Our Military Act was in appropriation, so we kept -- except for that first four days, most of our civilians working, all of our military.



I think that limited the disruption, but it was there. I'm sure we delayed testing, though I can't quantify it for you. My guess is that we will be able to catch up reasonably quickly for those kinds of delays, backlogs of vouchers we haven't paid.



I'm a lot more worried about the morale effects on all of the -- of all of our people, but especially our civilians. And you've heard that story, but I think we all are concerned. I mean, it's not just this event. I mean, we've had three years of pay freezes, although I noted the CR did not prohibit the -- or either the military or civilian pay raise, so -- so far, it's still in place. We've had three years of pay freezes. We had the sequester furloughs, now the shutdown furloughs.



I mean, my own people are kind of looking at me and asking the question -- most of them are seniors, so they'll probably stick around, but you wonder what the folks out in the field are saying. "I'm not so sure I want to work for this government." So we need some stability, and we need to keep telling them they're important, and then we need to show it, through things like pay raises and no more furloughs, et cetera. That's the bigger -- that's the bigger concern to me.



Q: Do you know of any new starts that are being delayed because of the CR?



UNDER SEC. HALE: Oh, yes. I mean, the CR will delay -- well, now you're going to test my memory. I can see the sheet. I can't remember. So I'm going to have to get back to you. I don't want to name something that's wrong.



There are no huge ones, but there are a number of smaller programs that under the continuing resolution we are not allowed to do new starts, rate increases, no military -- new military construction projects.



Perhaps one of the biggest problems is -- is the fact that we essentially required under the CR to buy the same ships this year as last year, because Congress appropriates by ship, and we have to repeat last year. It's a Groundhog Day approach to budgeting.



So there are lots of disruptions. I can't remember -- I can't remember the specifics. They're not in my head. I'm sorry.



Q: Mr. Hale, is the likelihood of sequestration informing your recruitment numbers now, either for civilian or for uniformed members? And wouldn't the responsible thing be to be slowing down in that recruitment so that you don't have to let people go who will only just...




UNDER SEC. HALE: Right. We're going to -- we're going to start executing at the continuing resolution level or a little lower, because of the enormous uncertainty and the possibility that sequestration in January, if it occurs, could take us down to the BCA cap level.



And, yes, I think that will cause us to begin to reduce or think in terms of reduced size and reduced recruiting. You're exactly right. I mean, we don't want to -- on one hand, we don't want to commit ourselves in this period too much in a period of enormous uncertainty in case -- in case we are able to do things we think that are important, but we do need to slow down. And we will slow down our execution, at least to the CR level, and probably a little bit south of that, just because there's so much uncertainty.



We're only three weeks into the fiscal year, and we're still kind of plus or minus $50 billion in what we're going to spend this fiscal year. That's not a comfortable position, particularly for our comptroller. So it's a challenge.



Q: Excuse me. So have there been orders issued to the components and the services to spend at the BCA level? And, secondly, with the CR, is there the kind of flexibility in moving money around in accounts that you -- that you need to -- to cope with sequestration.



UNDER SEC. HALE: I mean, we haven't issued any formal orders. We've discussed with the services to execute at the continuing resolution level and maybe somewhat south of it. And we'll have to work with them on specifics as -- as time develops. And -- what was your second question again? I got...



Q: About flexibility.



UNDER SEC. HALE: Yeah, flexibility. No, I mean, we have very little flexibility under continuing resolution. It gives us money in budget accounts, like Air Force procurement and Army active O&M. It just gives us a dollar figure and says that you can't do new starts, no -- no rate increases, no new military construction projects, and you get then a little more than 25 percent of it to cover October 1st through January 15th.



Beyond that, though, we've got to kind of be looking at the fact eventually we'll get some kind of appropriations, so we -- we need to be careful on where we spend that money, and we can't move between those accounts at all. And generally we aren't allowed to reprogram when we're under continuing resolution. So for a while, we kind of have to hold our breath and -- and try to look to the future and be as conservative as you can. If that's a vague answer, it's because things are kind of vague. It's not a good way to run a railroad.



Q: Going back to the secretary's comments regarding his doubts on Congress reaching some sort of compromise, is there anything that -- that can be said that hasn't been said already by the department to convince lawmakers that, you know, this cliff is coming? Or is it just a matter of continuing to sort of beat the drum on -- on the dangers of sequestration?



UNDER SEC. HALE: You mean that can be said to sort of help the process along? I mean, we'll be helpful in any way we can. We'll work through the administration. The president has a plan. He enunciated -- announced it with a budget, in terms of a plan to reduce the deficit and -- and to provide for discretionary spending, which is the level we submitted the budget at.



We certainly support that plan. We understand there's going to be negotiations, and we'll help them in any way we can. I don't think there's any one thing we can do, but we stand ready to assist through OMB and the administration to help the negotiators any way we can. We want them to succeed.



Q: Tuition assistance, G.I. Bill, what happens with that going forward? What's the situation now?



UNDER SEC. HALE: I mean, I assume -- we will -- we will, I think, pay tuition assistance. G.I. Bill is funded in another agency, but the tuition assistance we will pay, I think more or less at the levels that were programmed. I mean, we're not planning to cut it back substantially.



Now, we continue to look at it in the context of overall budget reductions. And there may be some -- some trims, but we know it's an important program, and we won't stop it, and we will continue to fund it.



There may have been some temporary interruptions during the shutdown, but -- but we'll continue to support the program. We know it's important to our people.



Q: Mr. Hale, you've had a chance to look, I think, at all the services' initial 15 proposals and their alternate proposals with sequestration. How much of -- I guess, of an "oh, wow" factor is there in the alternate proposals, in your opinion, sir?



UNDER SEC. HALE: Well, I mean, there are far-reaching changes. It shouldn't be surprising when you take about $50 billion in fiscal 2015. And there were some funds that were taken out right at the end game by the president. The president proposed some cuts in discretionary spending, as well, in that budget package that we didn't fully accommodate, so pretty good-sized reductions.



There are force cuts. I mean, I'm not going to give you specifics, because I don't feel I should, but I'm not surprised. And you saw the SCMR, and it's often usually in those ranges, within the ranges of the SCMR. I'm not surprised. But I think all of us are aware that it will be a somewhat different, smaller military if -- if we have to go through with those cuts.



But we are looking at them actively. And -- and we will be as prepared as we can, within the limits of time that we have, to be ready for a wide range of contingencies, because we know that's what we face.



STAFF: Last question from Thom Shanker.



Q: Thanks. In past years, it's been the business practice of this department, as you approach the end of the fiscal year, to hold some money back. You obviously don't want to overspend your budget accidentally. I'm just curious how many tens of millions or hundreds did you end the year with? And can you now apply that money in some way to mitigate the strain?



UNDER SEC. HALE: Well, there are several kinds of money we get. A number of the operating dollars, military personnel and operations and maintenance, expire, those you can't spend them after September 30th. It will tell you something about the real-time nature of our accounting systems that I don't know yet for sure what we obligated. But I think that we will have obligated the great majority of those funds. We usually try to.



Other funds that -- investment ones, we get two years for RTD&E, three years for procurement. And there I think you would see our obligation rates fairly low right now for a couple reasons, uncertainty, but also, frankly, I mean, our contracting officers were concentrating heavily on the one-year money in those last days. And we had had to cut back on -- on them because of sequestration.



So my guess is, we've pretty well obligated, though I don't know for sure on the operating accounts. I think that's not true on the investment accounts. And there are some -- we'll try to pick up the pace as best we can. And let's hope there's no further disruption that occurs in January.



STAFF: Thank you very much.



Q: Thank you, sir.

UNEMPLOYMENT INSURANCE WEEKLY CLAIMS REPORT FOR WEEK ENDING OCTOBER 12, 2013

FROM:  U.S. DEPARTMENT OF LABOR

SEASONALLY ADJUSTED DATA

In the week ending October 12, the advance figure for seasonally adjusted initial claims was 358,000, a decrease of 15,000 from the previous week's revised figure of 373,000. The 4-week moving average was 336,500, an increase of 11,750 from the previous week's revised average of 324,750.

The advance seasonally adjusted insured unemployment rate was 2.2 percent for the week ending October 5, unchanged from the prior week's unrevised rate. The advance number for seasonally adjusted insured unemployment during the week ending October 5 was 2,859,000, a decrease of 43,000 from the preceding week's revised level of 2,902,000. The 4-week moving average was 2,875,750, an increase of 17,750 from the preceding week's revised average of 2,858,000.

UNADJUSTED DATA

The advance number of actual initial claims under state programs, unadjusted, totaled 357,041 in the week ending October 12, an increase of 20,902 from the previous week. There were 362,730 initial claims in the comparable week in 2012.

The advance unadjusted insured unemployment rate was 1.9 percent during the week ending October 5, unchanged from the prior week. The advance unadjusted number for persons claiming UI benefits in state programs totaled 2,418,329, a decrease of 56,979 from the preceding week. A year earlier, the rate was 2.2 percent and the volume was 2,753,759.

The total number of people claiming benefits in all programs for the week ending September 28 was 3,928,697, a decrease of 82,725 from the previous week. There were 5,001,985 persons claiming benefits in all programs in the comparable week in 2012.

No state was triggered "on" the Extended Benefits program during the week ending September 28.

As a result of the lapse in federal appropriations, initial claims for UI benefits filed by former Federal civilian employees (UCFE) totaled 70,068 in the week ending October 5, an increase of 68,677 from the prior week. The states with the highest number of UCFE claims were Maryland (17,368), Texas (7,191), Pennsylvania (4,416), Utah (3,978) and Washington (3,380). There were 3,382 initial claims filed by newly discharged veterans, an increase of 1,285 from the preceding week.

There were 19,586 former Federal civilian employees claiming UI benefits for the week ending September 28, a decrease of 334 from the previous week. Newly discharged veterans claiming benefits totaled 34,934, an increase of 3,293 from the prior week.

States reported 1,379,118 persons claiming Emergency Unemployment Compensation (EUC) benefits for the week ending September 28, a decrease of 46,366 from the prior week. There were 2,098,793 persons claiming EUC in the comparable week in 2012. EUC weekly claims include first, second, third, and fourth tier activity.

The highest insured unemployment rates in the week ending October 5 were in Puerto Rico (3.9), Alaska (3.5), Virgin Islands (3.4), New Jersey (3.0), California (2.9), Connecticut (2.7), Pennsylvania (2.6), Illinois (2.3), Nevada (2.3), New York (2.3), and Oregon (2.3).

The largest increases in initial claims for the week ending October 5 were in California (+33,654), Maryland (+4,609), Ohio (+4,122), Michigan (+4,066), and Virginia (+3,927), while the largest decreases were in Oregon (-149), Puerto Rico (-77), Missouri (-50) and Nebraska (-26).


UNEMPLOYMENT INSURANCE WEEKLY CLAIMS REPORT FOR WEEK ENDING OCTOBER 5, 2013

FROM:  U.S. DEPARTMENT OF LABOR
          SEASONALLY ADJUSTED DATA

In the week ending October 5, the advance figure for seasonally adjusted initial claims was 374,000, an increase of 66,000 from the previous week's unrevised figure of 308,000. The 4-week moving average was 325,000, an increase of 20,000 from the previous week's unrevised average of 305,000.
The advance seasonally adjusted insured unemployment rate was 2.2 percent for the week ending September 28, unchanged from the prior week's revised rate. The advance number for seasonally adjusted insured unemployment during the week ending September 28 was 2,905,000, a decrease of 16,000 from the preceding week's revised level of 2,921,000. The 4-week moving average was 2,858,750, an increase of 22,500 from the preceding week's revised average of 2,836,250.

UNADJUSTED DATA

The advance number of actual initial claims under state programs, unadjusted, totaled 336,849 in the week ending October 5, an increase of 84,616 from the previous week. There were 329,919 initial claims in the comparable week in 2012.

The advance unadjusted insured unemployment rate was 1.9 percent during the week ending September 28, unchanged from the prior week. The advance unadjusted number for persons claiming UI benefits in state programs totaled 2,478,333, a decrease of 36,220 from the preceding week. A year earlier, the rate was 2.2 percent and the volume was 2,785,230.

The total number of people claiming benefits in all programs for the week ending September 21 was 4,028,411, an increase of 25,956 from the previous week. There were 5,044,649 persons claiming benefits in all programs in the comparable week in 2012.

No state was triggered "on" the Extended Benefits program during the week ending September 21.

Initial claims for UI benefits filed by former Federal civilian employees totaled 1,391 in the week ending September 28, an increase of 359 from the prior week. There were 2,098 initial claims filed by newly discharged veterans, a decrease of 52 from the preceding week.

There were 19,918 former Federal civilian employees claiming UI benefits for the week ending September 21, a decrease of 81 from the previous week. Newly discharged veterans claiming benefits totaled 31,643, a decrease of 62 from the prior week.

States reported 1,442,484 persons claiming Emergency Unemployment Compensation (EUC) benefits for the week ending September 21, a decrease of 27,543 from the prior week. There were 2,106,072 persons claiming EUC in the comparable week in 2012. EUC weekly claims include first, second, third, and fourth tier activity.

The highest insured unemployment rates in the week ending September 28 were in Puerto Rico (4.0), Alaska (3.4), New Jersey (3.1), Virgin Islands (3.1), California (3.0), Connecticut (2.7), Pennsylvania (2.6), Illinois (2.4), Nevada (2.4), District of Columbia (2.3), and New York (2.3).

The largest increases in initial claims for the week ending September 28 were in Puerto Rico (+1,105), Oregon (+1,104), California (+1,045), Pennsylvania (+736), and Missouri (+561), while the largest decreases were in Michigan (-2,061), New York (-1,694), Florida (-1,349), Texas (-1,255), and labama (-1,008).

MILITARY RECRUITING DURING THE SHUTDOWN

FROM:  U.S. DEFENSE DEPARTMENT 
Relationships Sustain Recruiting Through Shutdown
By Donna Miles
American Forces Press Service

WASHINGTON, Oct. 16, 2013 - During the first week of the partial government shutdown, recruiters at the Jacksonville Recruiting Battalion in Florida enlisted 88 new soldiers onto active duty and six others into the Army Reserve. The Air Force shipped 856 new airmen off to basic military training. The Navy enlisted 242 future sailors into the delayed entry program.

As of yesterday, the Marine Corps had already contracted with 2,732 new members – almost 97 percent of its goal for the entire month.

Military recruiters report that despite a long list of potential detractors – force reductions, budget cuts, sequestration and now, a partial government shutdown – the close community ties they have built have enabled recruiting to continue relatively unaffected.

As the Defense Department began identifying what operations could be curtailed during the shutdown, its recruiting operations remained almost sacrosanct.

That's because the effort to recruit the best and brightest into the military can't take a proverbial "time out," even in the face of government furloughs, several recruiters explained during interviews with American Forces Press Service.

Falling short of recruiting goals for just one month simply isn't an option because it can spill over into an entire recruiting year, they said. That can leave vacancies within designated training cycles and ultimately, manpower and capability gaps within the ranks.

"Simply put, the success of today's recruiting efforts will have a direct impact on the future force and fleet," said Navy Cdr. Wendy Snyder, public affairs officer for Navy Recruiting Command.

Regardless of how the military is sized in the future, every service branch needs to continue attracting new, high-quality members to remain strong and capable, she said. "The individuals we recruit today are tomorrow's leaders, so the mission of recruiting is paramount to our fleet readiness."

Air Force Commander Master Chief William Cavanaugh , the senior non-commissioned officer for Air Force Recruiting Service, called new recruits vital to ensuring the U.S. military remains the world's best.

"You can't sustain greatness without innovation, and innovation is nurtured by bringing new members onto your team, members from diverse backgrounds with different thought processes and experiences," he said.

That makes the recruiting mission important, even during a period of downsizing that typically follows the end of a conflict, said Army Col. Fred Johnson, recruiting operations director for Army Recruiting Command.

Regardless of how the military ultimately is sized, "we have to recruit and build the experience base with soldiers who will eventually lead our Army in the future," he said. "Our ranks must remain filled with qualified men and women with leadership skills, values and competence to face future challenges."

Similarly with the Marine Corps, which despite drawing down its end strength, needs to maintain a strong recruiting effort because 67 percent of the Corps consists of first-termers, reported Marine Capt. James Stanley, operations officer for Martine Corps Recruiting Command's plans and research section.

Falling short of recruiting goals in terms of quantity or quality could have a negative impact on the Marines' ability to fulfill combatant commanders' requirements, he said. But after the Corps exceeded its fiscal 2013 recruiting mission, Stanley said he is optimistic that it "is well positioned" to do so again this year.

Despite broad recognition of the importance of recruiting, some recruiters admit that the current impasse in Washington has sent the public a mixed message.

"When you look at the government shutdown and the different things that are happening in Washington, D.C., the immediate effect on recruiting opportunities is obviously a concern," said Army Lt. Col. Stephen Grabski, commander of the Jacksonville Recruiting Battalion that was among the Army's most successful in 2013. "We get a lot of questions from parents and the high school students that are really our primary customers about the impact of all this."

Budget constraints have added another wrinkle by forcing the services to cut many of their more visible outreach activities. "You are not going to see any large-scale photos of massive events happening anywhere in recruiting, but that is not the foundation of success," said Grabski.

"Our success is really based on the relationships that we have with the community and the interaction and support that we have with the members of the community," he said. "And because it is a relationship-based success, the shutdown and the national discussions are not having a tremendous effect."

Recruiters across the board say they are weathering what could be a very challenging recruiting environment thanks to close relationships they have built not just with potential applicants, but also their parents, teachers, coaches and community leaders who influence their decisions to join the military.

It's an effort that has continued throughout the shutdown – through social media and face-to-face interaction in local communities.

Air Force recruiters, for example, are frequently seen in their communities taking part in Habitat for Humanity projects and other volunteer programs, Cavanaugh reported.

"Our basic philosophical approach to recruiting is that if you meld into and become part of the community and show your involvement in that community, you will become an accepted member of that community and the folks in that community are going to see what you offer their children as a viable option," he said.

Similarly, the Army regularly sends recruiters to help fill needs community leaders identify, whether it's a conditioning coach for a local athletic team or a teacher's assistant in a classroom.

"I have combat medics stepping in and assisting with biology labs," Grabski said. "I have mechanics who have time in Baghdad fixing tanks, now sitting in a high school automotive classes."

Snyder called regular interactions between Navy recruiters and community and civic leaders and educators vital to the strong relationships that support recruiting efforts. "The daily engagements and conversations our recruiters have with young adults and influencers are critical to our mission of finding high-quality young men and women to join our Navy," she said.

She expressed concern that although the partial shutdown hasn't yet hurt recruiting, a sustained one that limits recruiters' long-term engagement opportunities could.

Regular interactions give recruiters an opportunity to demonstrate to potential applicants and their influencers alike what the military represents, and share insight into doors that military service can open up, the recruiters said.

"We are looking for a community's best and brightest so we can put forth the best Air Force we can for our nation," Cavenaugh said. "These relationships allow us to share the Air Force story on a personal level [and] sustain the public interest in serving."

"The impact our recruiters have on perceptions about our Navy is significant, which impacts an individual's decision to join," agreed Snyder. "The conversation the recruiter has may be the very first interaction that individual has ever had with a Navy sailor, so our daily conversations across the country matter."

Grabski said there is no better recruiting tool than proud servicemembers who exemplify the military's best.

"If I can put them into a high school setting and get them to interact with high school students, their leadership shines through in amazing ways," he said. "Students see what true leaders look like and they tend to gravitate toward that and follow it.

"And that is the foundation of recruiting success," Grabski said. "It is a 17-year-old high-school student looking at somebody with chevrons on their uniform, saying, 'You are showing me some great opportunities.'"

SECRETARY OF DEFENSE HAGEL TOUTS VALUE OF WORKFORCE AFTER SHUTDOWN

FROM:  U.S. DEFENSE DEPARTMENT
Hagel Stresses Workforce's Value After 'Manufactured Crisis'
American Forces Press Service

WASHINGTON, Oct. 17, 2013 - Defense Secretary Chuck Hagel issued a message to the Defense Department's workforce today, welcoming back employees furloughed by the 16-day government shutdown and emphasizing their value to the nation.

Here is the text of the secretary's message:

Today the Department of Defense is resuming normal operations across the world, now that Congress has finally restored funding for DoD and the rest of the federal government. This manufactured crisis was an unwelcome and unnecessary distraction from our critical work of keeping the country safe.

I know that each of your lives has been disrupted and affected in different ways. I regret the impact that this shutdown had on so many of our civilian personnel, particularly those who I was previously unable to recall from emergency furlough.

Starting today, we will be welcoming all of our civilians back to their normal duties. To those returning from furlough: know that the work you perform is incredibly valued by your military teammates and by me. I appreciate your professionalism and your patience during this difficult period of time, which came on top of last summer's sequestration-related furloughs. Your managers will have more information about this, but I can assure you that you will be paid in full for the time you were furloughed during the shutdown.

Now that this latest budget crisis has come to an end, we have an opportunity to return to focusing on the critical work of this department. Unfortunately, Congress did not end the budget uncertainty that has cast such a shadow of uncertainty over this department for much of the year. In the months ahead, they will have an opportunity to do so. My hope is that they will realize that these kinds of crises do great damage to our people, our national security, our economy, and America's standing in the world. Congress has a responsibility to govern, and it must fulfill those basic responsibilities in order to keep our country strong.

CFTC SETTLES CHARGES AGAINST JPMORGAN CHASE BANK, N.S., IN MARKET MANIPULATION CASE

FROM:  U.S. COMMODITY FUTURES TRADING COMMISSION 

CFTC Files and Settles Charges Against JPMorgan Chase Bank, N.A., for Violating Prohibition on Manipulative Conduct In Connection with “London Whale” Swaps Trades

JPMorgan Admits to Reckless Conduct in First Case Charging Violation of Dodd Frank’s Prohibition Against Manipulative Conduct and is Ordered to Pay a $100 Million Civil Monetary Penalty

Washington, DC – The U.S. Commodity Futures Trading Commission (CFTC) today issued an Order against JPMorgan Chase Bank, N.A. (JPMorgan or Bank), bringing and settling charges for employing a manipulative device in connection with the Bank’s trading of certain credit default swaps (CDS), in violation of the new Dodd-Frank prohibition against manipulative conduct. As set forth in the CFTC’s Order, by selling a staggering volume of these swaps in a concentrated period, the Bank, acting through its traders, recklessly disregarded the fundamental precept on which market participants rely, that prices are established based on legitimate forces of supply and demand. As a result, after a thorough 17-month investigation, the Commission has found the Bank liable for violating Section 6(c)(1) of the Commodity Exchange Act (the “Act”), 7 U.S.C. §9 (2012), as amended by the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (“Dodd-Frank”), and Commission Regulation 180.1, 17 C.F.R. §180.1 (2012).

JPMorgan, which admits the specified factual findings in the Order including that its traders acted recklessly, is directed, among other things, to pay a $100 million civil monetary penalty.

“In Dodd-Frank, Congress provided a powerful new tool enabling the CFTC for the first time to prohibit reckless manipulative conduct,” said David Meister, the CFTC’s Director of Enforcement. “As this case demonstrates, the Commission is now better armed than ever to protect the market from traders, like those here, who try to ‘defend’ their position by dumping a gargantuan, record-setting, volume of swaps virtually all at once, recklessly ignoring the obvious dangers to legitimate pricing forces.”

Highlights of the CFTC Order

The CDS market comprises globally traded credit derivatives used to speculate on and hedge against credit defaults. Trillions of dollars (notional) of CDS instruments and baskets of CDS called credit default indices, some known as CDX, are used to transfer risk of defaults by companies in the United States and around the world. As such, the CDS market is an important aspect of the global economy.

From approximately 2007 through 2011, JPMorgan’s Chief Investment Office (“CIO”), operating through a trading desk in the Bank’s London branch, traded and held various credit default indices, including CDX, in a Synthetic Credit Portfolio (“SCP”). Each day the SCP traders marked their positions to market, assigning a value to the positions using market prices and other factors. That value was used to calculate the CIO’s profits and losses. At the end of each month an “independent” group at JPMorgan tested the validity of the traders’ month-end marks.

As of the end of 2011, the portfolio held $51 billion net notional of these credit instruments, the outsized amount spurring press reports referring to one CIO trader as the “London Whale.” Although previously quite profitable, the portfolio had taken a serious turn for the worse at least by late January 2012, with year-to-date mark-to-market losses of $100 million. In February 2012, daily losses were large and growing.

The violation charged in the CFTC’s Order concerns the Bank’s trading of one particular credit default index -- “CDX NA.IG9 10 year index” (“IG9 10Y”). As the end of February 2012 approached, the SCP’s net short position in the IG9 10Y grew to a mammoth $65 billion, which meant that relatively small favorable or adverse movements in market prices produced significant mark-to-market profits or losses for the CIO. Because the SCP was short IG9 10Y, the mark-to-market value of the position increased as the market price decreased.

On February 29, just ahead of the month-end testing of their marks, the traders believed the portfolio’s situation was grave. That day, desperate to avoid further losses, the traders developed a resolve, as they put it, to “defend the position.” Recognizing that the sheer size of their position in IG9 10Y had the potential to affect or influence the market, the traders recklessly sold massive amounts of protection on the IG9 10Y. They were short protection and they sold more protection.

Specifically, with the portfolio standing to benefit as the IG9 10Y market price dropped, on February 29 the CIO sold on net more than $7 billion of IG9 10Y, a staggering volume -- far and away the largest amount the CIO ever traded in one day -- $4.6 billion of which was sold during a three-hour period as the day drew to a close.

The Order provides comparative measures that demonstrate just how large and concentrated these February 29 sales of IG9 10Y were. For example, these sales alone accounted for more than 90% of the day’s net volume traded by the entire market, were 15% of the month’s net volume traded by the entire market, and were nearly 11 times the SCP’s average daily volume in February. The February 29 trading followed more than $3 billion in sales of the IG9 10Y during the prior two days. The net volume the CIO sold February 27-29 amounted to roughly one-third of the total volume traded for the entire month of February by all other market participants.

During this same period at month-end, the IG9 10Y market price dropped substantially. While the CIO was selling at generally declining prices, the value of the short position that the CIO held in the SCP benefited on a mark-to-market basis from the declining market prices.

As set forth in the Order, the trading strategy to “defend the position” -- selling $7.17 billion of the IG9 10Y on February 29 in a concentrated period -- constituted a manipulative device employed by the traders in reckless disregard of the possible consequences of their conduct, including obvious dangers to legitimate market forces. That conduct therefore violated section 6(c)(1) of the Act and Rule 180.1.

In addition to paying a $100 million penalty, JPMorgan must continue to implement written enhancements to its supervision and control system in connection with swaps trading activity, including trading and risk management controls reasonably designed to prevent and promptly detect mis-marking of its books, enhanced communications among risk, control and supervisory functions, and the development of additional surveillance tools to assist supervisors with monitoring trading activity in connection with swaps.

In addition to finding the violation, the Order describes aspects of the CFTC’s new business conduct rules applicable to swap dealers. JPMorgan registered with the Commission as a swap dealer as of December 31, 2012, and at that time became subject to the Commission’s new swap dealer regime, including rules that impose supervision and control obligations. Although these rules did not apply to the Bank at the time of the events in question, the Order explains how some of these new rules would have covered the matters set forth in the Order, and concludes that had the regulations been in place, much of the offending conduct at issue (and the significant losses it caused) may well have been detected and remedied internally much more quickly, thereby potentially reducing losses.

The CFTC acknowledges the valuable assistance of the United Kingdom’s Financial Conduct Authority, as well as that of the U.S. Securities and Exchange Commission and the United States Attorney’s Office for the Southern District of New York.

The CFTC also acknowledges JPMorgan’s cooperation with the Division of Enforcement’s investigation.

CFTC Division of Enforcement staff responsible for this action are Saadeh Al-Jurf, Allison Baker Shealy, Traci Rodriguez, Daniel Ullman, Joan Manley, and Paul G. Hayeck.