HILLARY CLINTON'S INTERVIEW WITH NPR ON MIDDLE EASTERN REGION

The following excerpt is from the U.S. State Department website:

“Interview With Michele Kelemen of NPR
Interview Hillary Rodham Clinton
Secretary of StateSofitel Hotel
Rabat, Morocco
February 26, 2012

QUESTION: You got a busy day here and there’s a lot to talk about. (Laughter.) I’d like, first of all, to ask you what did you tell the Egyptian foreign minister about these cases against democracy promoters? Would you ever let these Americans appear in a courtroom in Cairo?

SECRETARY CLINTON: Well, Michele, obviously we’ve been working on this ever since December, when we learned of the actions against not only American NGOs but NGOs from other countries as well. And we have been engaging at the highest levels of the Egyptian Government.

Our two concerns were, number one, to try to understand what the issues were, since both we and the Egyptian Government believed that our NGOs had been invited to help assist in ensuring that the elections were done in a credible way, which they were. But then also, we know that, ever since the Mubarak regime, there are a wealth of laws that are difficult to follow, even if you are intending to do so, which, of course, we were. And our NGOs kept trying to register so they could be viewed as legally entitled to operate within Egypt. So there was a lot of confusion, and the confusion was at all levels of the Egyptian Government as to what this all meant. So we have been engaging persistently and we hope that this matter will be resolved.

QUESTION: And how many Americans are now sheltering at the Embassy
?
SECRETARY CLINTON: I – the exact account, maybe, I think, 16, 17.

QUESTION: Turning to Syria, Syrian tanks have been battering Homs. There’s no sign of aid getting in. What do you and the Friends of Syria do now?

SECRETARY CLINTON: Well, I think, as I’ve said, we have to continue to consult with those who truly are Friends of the Syrian People, which of course, includes the United States and the many governments and organizations that gathered in Tunis on Friday. We are doing everything we can to facilitate humanitarian aid. It was distressing to hear that the Syrian Red Crescent and the ICRC, after many hours of negotiation just yesterday, were not permitted to go back into Homs. We are looking to set up and stage areas for getting humanitarian aid in. Secondly, we continue to ratchet up the pressure. It is an increasingly isolated regime. And third, we push for a democratic transition by working with and trying to build up the opposition so they can be an alternative.

QUESTION: But activists say you need, really, humanitarian corridors. You need to get aid in and people out. How do you do that without some sort of outside intervention?

SECRETARY CLINTON: Well, as you know, Michele, many of the people in the Syrian opposition have been quite vocal in their objection to any outside interference. And many of the countries that gathered on Friday are also quite vocal. What we tried to do in the Security Council was to get international support and legitimacy for the Arab League peace plan in order to have some leverage with the Assad regime. And unfortunately, Russia and China vetoed it.
So it’s a distressing and difficult situation. It’s not the first that the world has seen, unfortunately, but we remain engaged at every possible opening to accomplish our three objectives.

QUESTION: But there’s – there was a lot of talk about – and controversy about whether you arm the opposition, help them get arms. Is there anything the U.S. can do short of that, I mean, logistical support for the Free Syrian Army, satellite images to help them set up these humanitarian corridors?

SECRETARY CLINTON: Well, they don’t have tanks and they don’t have artillery. So I know there’s a lot of frustration, and I share it. This is a deeply, deeply distressing set of events. But you have one of the most highly militarized, best-defended countries on earth, because, of course, they spent an enormous amount of money with their Iranian and Russian friends so equipping themselves. And even if you were to somehow smuggle in automatic weapons of some kind, you’re not going to be very successful against tanks. And so the dilemma is how do we try to help people defend themselves? How do we push the Russians, Chinese, and others, who are, in effect, defending and deflecting for the Assad regime, to realize that this is undermining not only Assad’s legitimacy but theirs as well?

QUESTION: You, in fact, called the Russians despicable on this trip.

SECRETARY CLINTON: Well, not personally, but in terms of actions, I think continuing to arm a government that is turning its heavy weapons against their own citizens – I mean, there are a lot of words to describe that.

QUESTION: I want you to take a step back a bit and just to look at this political earthquake in the Arab world, as your Turkish counterpart likes to call it. How have you been adjusting to this new environment, and particularly the rise of political Islam, Islamist groups?

SECRETARY CLINTON: Well, look, I believe in freedom, and I believe in democracy, and I believe in self-determination, and I also believe in human rights and freedom and speech and freedom of religion. And so what we are supporting are – in countries that have every right to have self-determination and to set up their own democracies – the path that they’re on, and at the same time reminding Egyptians and Libyans and Tunisians and others that democracy is not one election one time. It is building institutions. It is carefully nurturing and tending the attitudes, what we call the habits of the heart, from our own early experience, a phrase of de Tocqueville.

And that’s difficult. It’s difficult for any political party or leadership. Everybody wants to believe that they’re best for their country and their people. But it’s important that the United States, which supports the aspirations of all people everywhere, also stand up for the values and principles that make democracy workable over the long term.

QUESTION: You spoke in Tunisia and Algeria about the need for moderate voices. And I wonder if you worry – if you’re worried that they’re being drowned out, that this – these changes across the region are becoming particularly violent. And what does that mean for U.S. interests?

SECRETARY CLINTON: Actually, I am not worried about where we are speaking today, here in the Maghreb. I mean, we’re in Morocco, which has had a very good election that led to new leadership taking place. I’m looking forward to working with them. I was just in Algeria, where they are planning for elections in May. And of course, you were with me in Tunis, where an Islamic-based party was elected but is in government in a coalition with parties representing other parts of view. That’s the way it should be in a democracy, because no matter who you are or where you live, there’s not unanimity of thought or feeling or political philosophy.

So I’m not expressing concern so much as speaking out about what we hope to see, because we’re judging these new governments no only what they say but what they do. And certainly in Tunisia, they are saying all the rights things. They are saying that they will protect women’s rights, that – they are saying that they will protect human rights. And now we want to see that actually take place.

But there is one element, which I am concerned about, and that is how people who were oppressed for so long – and particularly those who are of Islamic persuasion – are so well organized, because they had to be, it was a matter of survival, whereas many other voices in the society, the voices of business leaders, the voices of academia, the voices of young people are not politically organized. So wherever I go, I encourage those who are also hoping to reap the benefits of freedom and democracy to get involved in politics. I mean, politics is no easy game, as I know as well as anyone. But if you’re not at the table, then how can you blame people for pursuing certain programs that you may not agree with?

QUESTION: And you said you’re getting off the high wire of American politics after this job – (laughter) – so is there one thing that you really want to get done in this region before you leave office? You have a few months left. (Laughter.) Or is it just going to be putting out fires?

SECRETARY CLINTON: Well, I’ve always said from the very beginning that we do the emergencies, which are the responding to the fires right now; we do the important, which are trying to make sure that the fires don’t get out of control; and then we are looking at the long term. So it’s a constant panoply of all of these challenges.

But in particular, with respect to the Arab Spring, the coming of democracy of the Arab world, I want to see it take root. And, of course, I want to see it understand that elections are not the end, they’re the beginning, that you have to build institutions, you have to have an independent judiciary, you have to have a free press, you have to protect the rights of all minorities, religious, ethnic, you have to certainly empower and protect the rights of women. And this is at the beginning. We’re watching something unfold that is probably a generational enterprise.

So I’m encouraged in many regards by what I’ve seen in Tunisia, what I see in Morocco. The jury is out on Egypt. We’re waiting to see how that will actually be implemented. But the United States will help those who are truly invested in democracy that is not based on elevating some voices over others, imposing philosophical or religious beliefs on others, but truly having the free flow of ideas within a political culture that takes hold in these countries.

QUESTION: Madam Secretary, thank you very much for your time.
SECRETARY CLINTON: Thank you, Michele.”

PRESIDENT AND FIRST LADY PAY TRIBUTE TO IRAQI WAR VETERANS AND THEIR FAMILIES

The following excerpt is from the Department of Defense American Forces Press Service:

White House Pays Tribute to Iraq War Veterans, Families

By Army Sgt. 1st Class Tyrone C. Marshall Jr.
American Forces Press Service

"WASHINGTON, March 1, 2012 - President Barack Obama and First Lady Michelle Obama hosted a White House tribute to Iraq War veterans and their families last night to honor them for their service, sacrifice and commitment to nation.

Vice President Joe Biden and his wife, Dr. Jill Biden, and Defense Secretary Leon E. Panetta, Army Gen. Martin E. Dempsey, chairman of the Joint Chiefs of Staff, along with senior officials from all branches of service joined the president and the first lady at an event dubbed "A Nation's Gratitude: Honoring Those Who Served in Operation Iraqi Freedom and Operation New Dawn."

"In one of our nation's longest wars, you wrote one of the most extraordinary chapters in American military history," Obama told the more than five dozen Iraq veterans and their guests. "Now, the Iraqi people have a chance to forge their own destiny, and every one of you who served there can take pride in knowing you gave the Iraqis that opportunity -- that you succeeded in your mission."

The vice president lauded service members for their ability to adapt to challenges, the capture of former Iraqi dictator Saddam Hussein and the opportunity they gave the people of Iraq to have a self-governing, self-sufficient nation.

"You're incredible. You adapted, you succeeded and you defeated," Biden said. "You defeated a tyrant, [and] you beat back violent extremists. And the most remarkable thing you did, because of the breadth of your capability, you enabled a country that had not been governed in any reasonable way for over four decades, you actually helped them set up institutions and train a military and a civilian corps that gives them a real fighting chance."

Panetta expressed his gratitude to all in attendance as well as the million-plus service members they represented for fulfilling their duties, for their dedication and for their service to the nation.

"To all who fought in Iraq, we thank you for your service," he said. "You've earned our nation's everlasting gratitude. We are indebted to you for your willingness to fight [and] your willingness to sacrifice for your country.

"We are [also] indebted to your families and your loved ones for the sacrifices that they made so that their loved ones could help defend this nation," Panetta said.

The chairman, who was first to speak, thanked the president and first lady for paying tribute to veterans and families of the Iraq War.

"Mr. President, Mrs. Obama, thank you for recognizing the service and sacrifice of the military family in this very special way," he said. "We really appreciate the support that you, the vice president and Dr. Biden, and those that they bound together in the 'Joining Forces' initiative and the nation provide us."

The first lady and Dr. Biden have championed the Joining Forces effort, which seeks to mobilize tangible support for service members and their families in all sectors of American society.

Just before dinner began, the president emphasized how proud he is of the U.S. military for working together to achieve success in Iraq.

"As your commander in chief, I could not be more proud of you," Obama said. "As an American, as a husband and father of two daughters, I could not be more grateful for your example [of] the kind of country we can be, [and] for what we can achieve when we stick together."

Obama paid tribute to "courageous" troops who served despite the likelihood of being sent into harm's way and to fallen service members and their families.

"You taught us about sacrifice -- a love of country so deep, so profound, you're willing to give your life for it," he said. "Tonight, we pay solemn tribute to all who did."

Obama recalled five service members who were the first casualties of the Iraq War, and the last U.S. casualty there, who was killed Nov. 14.

"Separated by nearly nine years, they are bound for all time among the nearly 4,500 American patriots who gave all that they had to give," the president said. "To their families, including the Gold Star families here tonight, know that we will never forget their sacrifice, and that your loved ones live on in the soul of our nation, now and forever."
 

NORTH KOREA AGREES TO HALT ACTIVITIES AT MAIN NUCLEAR PRODUCTION AND TESTING PLANT

The following excerpt is from the Department of Defense American Forces Press Service:

"North Korea Takes 'Positive First Step' on Nukes, Official Says

By Lisa Daniel
American Forces Press Service

WASHINGTON, Feb. 29, 2012 - The North Korean government has agreed to stop all nuclear activities at its main production and testing plant and to allow the return of inspectors, in a move a Defense Department official described as a positive step toward denuclearization of the communist state.

The North Korean leadership's decision "is a positive first step toward complete and verifiable denuclearization of the Korean Peninsula in a peaceful manner, which remains our core goal," Pentagon spokeswoman Navy Cmdr. Leslie Hull-Ryde said in a written statement. "The only way to achieve that goal is through a deliberate process that requires engagement."

The State Department made the announcement today as a U.S. delegation returned from bilateral talks with North Korean officials in Beijing. It was the third such round of talks between the two nations.

"To improve the atmosphere for dialogue and demonstrate its commitment to denuclearization, [North Korea] has agreed to implement a moratorium on long-range missile launches, nuclear tests and nuclear activities at Yongbyon, including uranium enrichment activities," according to a State Department statement.

The North Korean delegation also agreed to the return of International Atomic Energy Agency inspectors to verify and monitor the moratorium on uranium enrichment activities at Yongbyon, and to confirm the disablement of the 5-MW reactor and associated facilities, the statement says.

State Department officials said U.S. officials "still have profound concerns regarding North Korean behavior across a wide range of areas, but today's announcement reflects important, if limited, progress in addressing some of these."

They went on to say that U.S. officials agreed to meet with the North Koreans to finalize administrative details for delivery of 240,000 metric tons of food aid, "along with the intensive monitoring required" for the delivery of such assistance.

Navy Adm. Robert F. Willard, commander of U.S. Pacific Command, told the Senate Armed Services Committee yesterday that he would be skeptical of any overtures from North Korea, and that he would not expect major changes in North Korea under the leadership of Kim Jong Un, who came to power in the fall after the death of his father, Kim Jong Il.

In a call with reporters today, a senior administration official who spoke on background said President Barack Obama "has been consistent in signaling that we will respond positively if North Korea chooses the path of negotiation, cooperation and denuclearization."

North Korea's agreement this week "begins the process of walking back" provocations that led to the breakdown of six-party talks, the official said. "This agreement opens the door to serious negotiations to achieve irreversible steps" toward denuclearization, she said.

U.S. officials will continue to emphasize the need for North Korea to pursue reconciliation with South Korea, the official said. About 30,000 U.S. troops are based in South Korea, a legacy of the 1950-53 war between the North and South.

As part of the bilateral talks, State Department officials said, U.S. officials:

-- Reaffirmed that the United States "does not have hostile intent toward [North Korea] and is prepared to take steps to improve our bilateral relationship in the spirit of mutual respect for sovereignty and equality";

-- Said the United States recognizes the 1953 armistice agreement as the "cornerstone of peace and stability" on the Korean peninsula;

-- Said the United States is prepared to take steps to increase people-to-people exchanges, including in the areas of culture, education, and sports; and

-- Said U.S. sanctions are not targeted against the livelihood of the North Korean people."
 

SECRETARY OF DEFENSE PANETTA MET WITH PORTUGUESE DEFENSE MINISTER

The following excerpt is from a Department of Defense American Forces Press Service e-mail:

"Panetta, Portuguese Defense Minister Discuss Common Challenges

American Forces Press Service

WASHINGTON, Feb. 27, 2012 - Defense Secretary Leon E. Panetta met with Portuguese Defense Minister Jose Pedro Aguiar-Branco here today to discuss a range of common challenges, Pentagon Press Secretary George Little said.

"Secretary Panetta thanked Minister Aguiar-Branco for Portugal's steadfast support in Afghanistan and other NATO missions," Little added. "He also stressed Portugal's indispensible role as a strategic ally."

The military leaders discussed enhancing and deepening the U.S.-Portuguese defense relationship, and Panetta confirmed that the United States will remain at Lajes Field in the Azores. The secretary said the United States will consult with Portugal on the modalities of the continued U.S. force posture at Lajes, the Little said.

"Secretary Panetta thanked Minister Aguiar-Branco for the warm hospitality U.S. troops have enjoyed and will continue to enjoy on Portuguese soil," he added.

Looking forward, he said, Panetta and Aguiar-Branco will work together with other alliance defense leaders to prepare for the NATO Chicago summit in May, building on what was accomplished at the 2010 summit in the Portuguese capital of Lisbon.

Panetta and Aguiar-Branco directed their staffs to develop options for enhancing the U.S.-Portuguese defense relationship, Little said, and will follow up in April at a NATO meeting in Brussels. The defense leaders also agreed to have their staffs meet at bilateral political-military talks scheduled here for June, he said."

SENIOR ADMINISTRATION OFFICIAL HAS BRIEFING ON PEOPLES REPUBLIC OF KOREA

The following excerpt is from a U.S. State Department e-mail

"Background Briefing on the Democratic People's Republic of Korea

Special Briefing

Senior Administration Official, Office of the Spokesperson

Washington, DC

February 29, 2012

---

MODERATOR: Well, thank you all for joining us today. I hope you all have a copy of the statement that we released at about 9:15 this morning on the recent U.S.-DPRK bilateral discussions. Here to give you a little bit more background on where we are in those conversations and on the statement that we released, and also on the statement that was released by the North Koreans at about the same time, we have two senior Administration officials. For your records, the Senior Administration Official Number One is [Senior Administration Official One], who is [position withheld]. Senior Administration Official Number Two is [Senior Administration Official Two] who is [position withheld].

[Senior Administration Official One], our Senior Official Number One, is going to make a relatively full opening statement, and then we’ll go to your questions, and both officials will be available to answer the questions.
Why don’t we go ahead to Senior Official Number One?

SENIOR ADMINISTRATION OFFICIAL ONE: Thank you very much, [Moderator], and hello to everybody. I want to go a little long initially, not least because this topic is a bit complex, but also I think I can get at and anticipate some of your questions. But then I’m happy to take on whatever you want to throw at us.
And it’s a bit scripted, but I want to get this right, so let me just launch into it by saying that since taking office, the President has been consistent in signaling that we will respond positively if North Korea chooses the path of negotiation, cooperation, and denuclearization. After the really tough sanctions that were put in place by the UN Security Council and the North Koreans announced that they wanted to return to Six-Party Talks, talks that they had previously abandoned, we and our allies made clear that North Korea needed to take a number of steps that would demonstrate their seriousness of purpose. We were firm that we were only interested in credible negotiations leading to the denuclearization of the Korean Peninsula. The North couldn’t be allowed to walk away from their Six-Party commitments, to launch missiles, to further their ICBM program, to conduct a nuclear test, roll out a uranium enrichment program, to attack the ROK, and then simply expect us to come back to Six-Party Talks on their terms.
The pre-steps, as we’ve called them, that we insisted on and to which they have now agreed in their unilateral statement begin the process of walking back these provocative actions. This agreement opens the door to serious negotiations to achieve irreversible steps by North Korea toward denuclearization and to meeting their other commitments and international obligations.
Now, the President and the Secretary of State also have long made clear America’s clear concern for the welfare of the North Korean people. Following an assessment last summer of humanitarian needs in North Korea, the U.S. put forward a proposal designed to feed babies, to feed mothers, to feed the elderly - which is to say the most at-risk marginalized population of North Koreans. These are people whom the regime either cannot or has chosen not to feed. And the plan to provide nutritional assistance included monitoring requirements designed to ensure that the right type of food gets to the right people.
Until our meeting last week in Beijing, the North Koreans had declined to allow the program to go forward. They demanded large quantities of rice and grain that could be, in our view, diverted to elites or to the military. They’ve now dropped those demands and agreed to allow our program to move forward as proposed, with an understanding, as always would be the case, that further assistance would be based on verified need. This progress today is a direct result of close coordination with our key partners. Close coordination with the Republic of Korea deprived the North of the chance to drive a wedge between us or to weaken our strong alliance. As we move forward with the DPRK, we will continue to place great emphasis on the need for the North to pursue rapprochement and reconciliation with the South through sustained and substantive inter-Korean contacts.
The same is true of Japan. We have – which, of course, is North Korea’s other neighbor – we have stayed in very close touch with the Government of Japan and, as always, have forcefully raised with the North Koreans, and we did so in Beijing, the abductions issue with the North Koreans.
Now finally, kind of a note of caution about all this stuff because I really don’t want to oversell this. As positive as these very modest steps are, what they do is they merely unlock the door to the resumption, eventually, of Six-Party talks. We’ve consistently said - we’ve made clear - that we’re not interested in talks just for the sake and for the forum of talks. The next step on this process going forward from today is to work with each and every one of our Six-Party partners in order to set the stage for real and lasting progress in the multilateral phase. We have – we believe that it’s important to translate this initial sign of Pyongyang’s seriousness of purpose into substantive and meaningful negotiations on denuclearization that get at the entirety of the North’s nuclear program and secures steady progress toward complete and verifiable dismantlement of the North’s entire program. And that’s my paid political announcement at the top.
I do want to just add one quick word on a couple of topics to anticipate, and that is that I haven’t mentioned the Chinese and Russians. They’re vital here. We have now twice - in just the couple of months that the Special Representative for North Korea Policy has been in this job - been to Beijing to consult with Wu Dawei, Ambassador Wu Dawei, who is the longstanding chairman of the Six-Party process, and others including the foreign minister of the PRC, on how best to deal with the challenges we face. And Special Representative for North Korea Policy also been to Moscow to discuss these matters with Deputy Foreign Minister Morgulov and indeed have spoken with him just in recent hours.
Secondly, quickly, on the IAEA and next steps, it will be up to the North Koreans – and we were quite explicit in our understandings at Beijing – up to the North Koreans to get in touch with the IAEA to discuss next steps. We will see how long that process takes. We hope it happens relatively quickly. We’ve already alerted Director General Yukiya Amano and his staff to the steps that we are taking. And we look forward – and I think this is a very important part of the announcements made today in particular by the North – a very important part of how we will ensure that going forward North Korea abides by the unilateral undertakings that they’ve made.
Anyway, I apologize for being longwinded, but there are a lot of moving parts here. I wanted to get it all out there. I know you’ve got a lot of questions. So, [Moderator], back to you.

MODERATOR: Thank you, [Senior Administration Official One]. Operator, let’s go to the first question, please.

OPERATOR: Thank you. To ask your question over the phone, please press * then 1. You will be announced prior to asking your question. To withdraw any question, press *2. Also, please limit to one follow-up question. Again, please press * then 1 for your question.
Our first question is from Elise Labott with CNN. Your line is open.

QUESTION: Hi, [Senior Administration Official One]. Thanks for doing this. I was wondering if you can talk about the kind of sequencing of this. Like, is it – are they going to get all the food assistance at once? Do they have to take – let some inspectors in first, stop a certain amount of uranium enrichment? Is it going to be a step-by-step thing?

And then also maybe your colleague from USAID can talk about the monitoring and how you make sure it gets to the right people, how much food do they get, where it is shipped, those type of – is it going to be warehoused anywhere? How do you – the monitoring and all that. Thank you.

SENIOR ADMINISTRATION OFFICIAL ONE: Okay, sure. Thanks, Elise. On sequencing, there are details that remain to be worked out. You can see that these are fairly spare unilateral statements that we’ve put forward, and the main overall point going forward is that we will be, as I think the Secretary said on the Hill today, sort of watching very carefully and measuring how North Korea comports itself in carrying forward its commitments.
On the specific issue, we, of course, would like to see IAEA monitors get back in country to Yongbyon to get eyes on both the uranium and plutonium aspects of the program at Yongbyon as soon as possible. It’s up to the North to do the first reach-out to Director General Amano and the safeguards folks in Vienna. I have no doubt that there will be some tough negotiations going forward in terms of precise sequencing. No doubt there will likely be an insistence on the North Koreans’ part on a certain amount of – let’s call it simultaneity in some of this.
So I wouldn’t look for people to be in motion right away here. I think it’s going to take a little bit of time to get straight on these modalities for the IAEA to work out with the North some of these issues of which – whether it’s the right foot or the left foot that goes forward first. But again, the broader point, we’ll be watching and we’ll be measuring and we’ll be, of course, working with the North Koreans and working with the IAEA to make sure that that’s all set up properly and that that goes forward as soon as possible.
Let me turn it over to Senior Official Number Two to address the nutritional assistance bit.

SENIOR ADMINISTRATION OFFICIAL TWO: Thanks. Elise, the plan that we’ve put in front of the North Koreans is – I can just outline as follows. What we’ve proposed is the regular delivery of about 20,000 tons a month over the course of 12 months. And we’re talking about foods that would be appropriate for young children, in particular those under five or six years old, pregnant woman as well because we want to make sure we address the sort of the first 1,000 days as the Administration has wanted to focus on.

QUESTION: This is the Plumpy – this is that Nut’Plumpy stuff, right, in the bars and stuff?

SENIOR ADMINISTRATION OFFICIAL TWO: We’re going to have things like corn-soy blend, we will have vegetable oil, some pulses, and then there will be probably a modest amount of the ready-to-use therapeutic foods depending upon the number of children that we see with acute malnutrition. So that will be there is necessary or be available if necessary.
But you had asked whether monitoring would come first. And in the case of the nutrition program, we have said that our partner organizations will have to be fully operational – meaning fully in place on the ground with their offices functioning – before the food will begin to arrive and will begin to be distributed, because it’s very important that we maintain – or that we can demonstrate that the program is well managed because that’s critical to maintaining the support for the program.
But if – just to be clear, if we are successful in finalizing the details that I’ve just laid out, this will be the most comprehensively monitored and managed program since the U.S. began assistance to the DPRK in the mid 1990s.

QUESTION: Thank you.

MODERATOR: Operator, let’s go to the next question, please.

OPERATOR: Thank you. The next question is from Matthew Pennington with Associated Press
.
QUESTION: Hello, [Senior Administration Officials One and Two]. Thanks a lot for doing this. My first question
was: In the North Korean statement, they specify that they’ve agreed to a moratorium on the uranium enrichment, but they don’t seem to allude to the plutonium program at all, which you say will also be open to monitoring. I’m just wondering why there’s – why there is that difference, and if there is any doubt at all in your mind that they’ve agreed to both aspects of that.
And also, what further hurdles need to be sort of breached before the Six-Party Talks can resume now, because it appears that they’ve met the pre-steps. So what further needs to be done? Thanks.
SENIOR ADMINISTRATION OFFICIAL ONE: Thanks a lot, Matt. But anyway, two quick things: One is, on the – on their omission in their own unilateral statement of what we’ve said about the – their undertaking to confirm the disablement of the 5 megawatt reactor and the associated facilities, that is our understanding. The negotiating record’s clear on that. We did talk about that. We expect that the IAEA will also confirm the disablement of that reactor and associated facilities. I can’t speak to why they didn’t include it; these were, after all, unilateral statements that each side made, and that is an issue that we will clearly have to come back on. But there’s no doubt in our mind that they’ve agreed to that, and we will expect that that will be addressed, though I have to say that job one here is this new uranium enrichment facility that’s been revealed to the world. So that, first and foremost, is what we want to get at.

In terms of hurdles going forward to Six-Party, or why can’t we just rush right back to Beijing and sit down together and lights, cameras, action on Six-Party - look, a couple of things. One is we need to see how this goes forward. We’re going to be watching, we’re going to be measuring, we’re going to be working with the North Koreans, but it’s going to take some time for these particular unilateral undertakings – let’s call it the Leap Day Deal here – to play out and to pan out. And I think that’s important. And measuring how they implement this will be important, I think, to helping us gauge whether they and we are ready to go back to Six-Party, number one.
Number two, the truth is we’ve been around the Six-Party block before. It has a history of ups and downs, sometimes more downs than ups. You all – many of you know the history of it. We’re determined to properly prepare any Six-Party round. We’ve made no commitment, at this stage, to going back to Six-Party. And that’s because we will need any number of consultations with the other parties in the Six-Party geometry. Why? Because we need to make sure that we have a winning strategy for not simply sitting down at the table at the Diaoyutai Guesthouse in Beijing, but being able to stand up from the table with something meaningful and something lasting, a process that can deal with the concerns that all of us have with regard to North Korea. That’s going to take some time.

A final thing is we will need to be able to signal to the North Koreans in a solid fashion, an undivided fashion, what will be on the table at Six-Party, and what can’t be on the table at Six-Party. We can’t allow the same patterns of the past repeat themselves. We can’t allow wasting arguments on topics that are irrelevant to the main challenges we face. And that’s simply going to take a long time to work out.

QUESTION: Okay, thanks.
MODERATOR: Okay, operator, let’s go to the next question.

OPERATOR: Thank you. Our next question is from Ai Awaji with Jiji Press. Your line is open.

QUESTION: Hi. Thanks for doing this. North Koreans said in their own statement that they would implement moratorium as long as the talks continue. Is that your understanding, and if not, is that acceptable?

SENIOR ADMINISTRATION OFFICIAL ONE: Yes. Another good question. The – listen, I think that that particular statement that’s included in their unilateral statement out of Pyongyang is simply a recognition of a fact. These steps – this gives me a chance to say something important about what these steps are and aren’t. These are reversible steps that they’ve committed to. There shouldn’t be any kind of doubt about that or debate about that. And the point of these steps is to show – is for the North Koreans to show that they’re serious in making good on their undertakings.

So that’s what’s – so I think when we say that – when they say that the moratorium will only be in place as long as we’re engaged in these meaningful talks, I think that that’s true of how North Korea acts and behaves under any circumstances anyway. Because these are reversible steps, they can always come around to side – to sort of, let’s say, flip a switch and go in a different direction. And that would be a missed opportunity for them, and that would obviously make it impossible to go back to Six-Party. And that would be too bad because there is a different future available to the North Koreans. We’ve made it clear to them, if they go down that path of peace, engagement, and meeting the concerns of the international community, they can have a very different future. They can be lashed up with the international community in a positive way that can be of benefit to them. And so I think that language is simply a somewhat explicit statement of what would be the case under any circumstances.
MODERATOR: Good. Operator, let’s go to the next one. Thank you.

OPERATOR: Thank you. Our next question is from Kaho Iguminiti with NHK.

QUESTION: Hi, [Senior Administration Official One], thanks for doing this. Two questions. You mentioned that the North Koreans dropped their demands to want rice and grains. Can you confirm when this happened? Was this after the meeting in Beijing or during the meeting? And my second question is something about your schedule to meet with the North about the nutritional aid.

SENIOR ADMINISTRATION OFFICIAL ONE: Sure.

QUESTION: Do you have any dates? Yeah, thank you.

SENIOR ADMINISTRATION OFFICIAL ONE: Sure, sure, sure. Yeah, Kaho, I’m glad you’re on the call. Look, here’s what I’m not going to do, and I hope you all will give me a little slack here. I don’t want to get into the tick-tock of these negotiations and when particular sides said certain things, when particular sides fell off of certain things or dropped particular demands. I don’t think that’s useful. I think – I want to look forward. Rather than dissect what happened in Beijing or before, and talk about who faced down whom here, that’s sort of not the issue.
The point is we have this modest but important, as I call it, Leap Day Deal, and we now need to go forward with it. And frankly, one must give the North some credit for, so soon after the transition, reaching out to do this. So I apologize for not giving you some of that color about the negotiations and when they dropped their demands, but I’m just going to kind of steer clear of that.
Now, in terms of the schedule for the next little bit of this, which will be when Senior Official Number Two reengages with the North Koreans to finalize the nutritional assistance agreement, maybe – I guess maybe the best thing is if I could buck it over to Senior Official Number Two, and you want to say a word about that?

SENIOR ADMINISTRATION OFFICIAL TWO: Yeah. Thanks, [Senior Administration Official One]. We’re ready to meet as soon as we can iron out the timing and the location for that next meeting. And that is not finalized at this moment, but there are no plans to delay. We’re ready to go.

MODERATOR: Good. Operator, let’s go to the next question. Thank you.

OPERATOR: Thank you. Our next question from Shaun Tandon with AFP.

QUESTION: Yeah, thanks for doing this call. A bit of a broader question: This obviously comes just a couple of months after the death of Kim Jong-il. Just wanted to see what sign, if any, you saw on continuity on the North Korean side, what this – what if anything this says about the transition and how it’s going in Pyongyang.

SENIOR ADMINISTRATION OFFICIAL ONE: Sure. We spoke to this a little bit, actually, on the days we were discussing this in Beijing. I think this – well, a couple of things. One is we were sitting across from essentially the same North Korean negotiators who have been at this in some cases, for – well, for decades. In particular, First Vice Foreign Minister Kim Kye Gwan, who is a veteran North Korean negotiator and has seen lots of guys like us come and go, and many of his team are familiar faces. So the people were the same.

The way that they presented the issues was quite familiar to us. The basic arguments they used, the requests they were making of us, the rationale that they were employing – and here is the point. I think that’s important because I think it shows that the new, call it, administration in Pyongyang is picking up where the previous one left off. And that’s great; that’s good. And they’re doing it within the 100-day mourning period that’s self-declared in North Korea. So it shows that they’re interested with some alacrity to reach out, to get back to the table, and begin to try to make diplomatic progress, and I think that’s a positive sign.

So I think overall, you – what we are seeing is a sign of continuity. I think overall, the early stages of this transition have been relatively uneventful as soon as near as we can divine what’s happening inside North Korea. So that’s about as far as we could go, not being in Pyongyang, but rather being in Beijing and talking to, as I say, a fairly familiar cast of North Korean negotiators.

QUESTION: Thanks.

MODERATOR: Good. Operator, we’ll take two more. Can you cue up the next one, please?

OPERATOR: Certainly. Our next question is from William Wan with Washington Post.

QUESTION: Hi. Thanks so much for doing this, [Senior Administration Official One]. Shaun actually asked my main question just a – Un. I don’t know if you have anything to add in terms of what the – if you – if there was any talk of Un or if you got any sense of how much of the decision was made by him and how much was of this collective leadership.

And then the other question I had was just how much of this was a surprise. It seemed like there was a lot of waiting for a while, knowing you – how long it would take to get back to the table. How much of this move is a surprise in the nine weeks since the death of Kim Jong-il?

SENIOR ADMINISTRATION OFFICIAL ONE: Right. Yeah. Was it a surprise? Well, in terms of to what extent was Kim Kye Gwan improvising, that’s not typically the way North Korean negotiators operate. I mean, they’re a disciplined bunch. He’s an experienced guy. He would have come with a set of redlines and instructions, actually not so much unlike us, I have to say. So our kind of working assumption is that what he brought to the table with us and where we ended up were all very much sanctioned by the center in Pyongyang.
I mean, I think they regard this – they take this stuff seriously, and at senior levels these decisions are made. I can’t tell you what their intramural decision-making process is. I don’t think anybody knows. But I would imagine that the leadership, whether collective or a regency or Kim Jong-un acting alone, not sure was very much informed, involved, engaged, and calling the shots, though Kim, I’m sure, had some tactical running room.
And remember that we went into extra innings. The thing was – we thought it would probably take just a day, the Thursday, and then…

And remember that we went into extra innings. The thing was – we thought it would probably take just a day, the Thursday, and then followed by a very substantive dinner, so sort of three sessions on the Thursday of something on the order of six and a half hours. It went over – it bled over into the Friday. We – for a couple of hours, so they had time to go back to Pyongyang and to seek further guidance, and I’m certain they would have done that.
Now, give me again your second question, the surprise question?

QUESTION: Oh, just whether – how – just that it seemed like everyone was waiting for a while, not knowing how long it would be.

SENIOR ADMINISTRATION OFFICIAL ONE: (Inaudible) yeah, yeah, yeah. Well, I don’t – I wouldn’t call it a surprise, and I’ll tell you why. Because we have been in touch with the North through – episodically through the New York channel since, quite literally, 24 hours after the announcement of the death of King Jong-il back in mid-December, and we were beginning to pick up signals from them in these fairly frequent communications that there was a continuity in their approach.

Obviously, there was a bit of a dramatic moment for those of us working this for the United States Government where we were signaling to them that we were available and we’ll need to get back and hoping that – and that our positions hadn’t changed, hoping we could find a way to do that. And as is always the case, one moment it was something that seemed absolutely impossible and out of the question, and then literally a day or two later, a switch had been flicked, and they were ready to go, and that was some weeks ago. So – and some were surprised, because it’s a guessing game with North Korea. Some were thinking that their transition would last a long time as the last one did 17-some years ago and that it would take a while. But as it happened, they were quite quick to make a decision to get back to the table with us.

MODERATOR: Great. Operator.

OPERATOR: Thank you. We have time for one final question from Andrew Quinn with Reuters.

QUESTION: Hi, [Senior Administration Official One]. It’s Andy Quinn here. I have one for you and then a quick one for [Senior Administration Official Two], if I may. For you, I’m just wondering if you could talk a little bit about the South Korean side of this equation. One of the preconditions that seems to have dropped off is the notion of a North Korean apology for the corvette and the island. Is that no longer a requirement, or do you feel that they’ve sort of, by their actions, made clear that they are not going to do that sort of thing anymore?
And for [Senior Administration Official Two], I was wondering, your – the needs assessment mission was almost about nine months ago, and we’ve never seen the results of what they found there. Can you tell us what their assessment was of North Korea’s food needs then and what’s the possibility or probability that those needs had changed in the intervening time since that mission went? Thank you.

SENIOR ADMINISTRATION OFFICIAL ONE: Okie doke. Let me, Andy, take your question on South Korea, and I just do want to take the occasion to reiterate how knit up we have been. The South Koreans were co-architects of this whole pre-steps approach and plan. And I think I’ve said it already, but that we went directly from Beijing to Seoul to report, and I would point you in the direction of their statement welcoming this result as indications of how closely coordinated we are with South Korea. I think, to be totally fair to them, it’s – that’s the sort of question that you need to put to them, but I would – about the – I guess the preconditions, as you put it, though I don’t think I would accept the premise that that – it was necessarily always a precondition. But the point is South Korea has been steady, solid, and sure on the point that job one is denuclearization overall, getting at that existential threat on the peninsula, starting a process toward denuclearization, and we hope eventually a complete and irreversible dismantlement, disablement of the North Korean nuclear program. And they’ve been with us, and we’ve been joined together on that. And as far as the – your question on the sinking of the Cheonan and the shelling of Yongpyong and so forth, I really do think that’s a question that you need to put to them.
We – the final thing I’ll say is we’ve told the North – we said it more than once in Beijing, that it’s vital, it’s essential that the North takes steps to improve North-South relations. That’s got to happen before there’s any fundamental change in certainly the U.S.-DPRK relationship, and we fully expect that those steps will be taken in a context of any return to Six-Party talks.

MODERATOR: That concludes this background briefing. I’m sorry, Andy, did you have a follow-up?

QUESTION: There was the second half.

MODERATOR: I’m sorry. [Senior Administration Official Two], I apologize. I’m jumping right in on you.

SENIOR ADMINISTRATION OFFICIAL TWO: That’s not a problem. Andy, you’re right. The original assessments that were done by the UN and by the NGOs and then by the U.S. Government were done last year, and so there is an issue of whether or not the information is old. But let me just say when we – when our team looked at the situation in the summer of last year, early summer of last year, we concluded that our focus should be on chronic malnutrition that’s contributing to sort of widespread stunting among the population, in particular the young children. And so that makes up the sort of the foundation of our new program. It’s a distinctly new program in that we’re looking at a nutritional focus on those populations – kids and pregnant women – who benefit the most by having an appropriate diet. So that’s where we settled on the need to do a 240,000-ton program. We felt that was the right size.

In the meantime, we’ve had the WFP/FAO crop assessment in November that’s continued to talk about chronic malnutrition, extensive chronic malnutrition among those populations I just described. And in January of this year, UNICEF did a survey along four of the provinces in North Korea and identified that over 80 percent of the children were malnourished. So I’m not saying those are definitive, but to us they are consistent with what we see as a chronic problem that we’re going to be trying to address with this nutrition program, and so we’ll continue to validate that if and when we get the program started. But we think that the foundation for our plan is pretty strong.

SENIOR ADMINISTRATION OFFICIAL ONE: Thanks very much, [Senior Administration Official Two]. Can I just jump on that while we’re still on food? Because I just want to hammer home sort of one point here. Whenever I see these headlines that this is a food-for-nukes deal, I wince, because it’s really important to be clear that the United States doesn’t link the provision of humanitarian assistance, in this case nutritional assistance, to essentially political questions, this issue of, in this case, these nuclear pre-steps. What we have – we haven’t done it, but the North has, because they, I think, take a very transactional approach to this stuff. And the one and only statement that they issued after the death of Kim Jong-Il on the U.S.-North Korea relationship, made pretty crystal clear that they saw this as a transaction and that for that for their own reasons, their own purposes, they needed to have this linkage to be able to say, I think, that they had received something for taking the steps that they’re taking. But our position on this remains clear that we don’t link the two at all.
And I don’t know, [Senior Administration Official Two], do you want to say anything else finally about that? Because that seems to be a subject that is on many minds, and I know – I just want us to be clear on it.

SENIOR ADMINISTRATION OFFICIAL TWO: Yeah, [Senior Administration Official One]. All I think I would say is that I’ve been working on the program, humanitarian assistance to North Korea, for basically the 15 years that we’ve – the U.S. has been engaged in this. And in this case, we have – we’ve made a very concerted effort to keep the negotiations very separate. Bob King and I have always engaged independently of any other discussions, and we’ve always focused on what terms we need to ensure that the program addresses the needs of the targeted groups and is something that we can justify and defend here in the United States.

MODERATOR: Very good. I think that concludes this background briefing."

STATE DEPARTMENT REBUKES SYRIA'S DENIAL OF VISIT BY UN UNDERSECRETARY-GENERAL VALERIE AMOS

The following excerpt is from a U.S. State Department e-mail:

"Statement by Ambassador Susan E. Rice, U.S. Permanent Representative to the United Nations, on the Syrian Government's Denial of Travel by the UN Under-Secretary-General for Humanitarian Affairs and Emergency Relief Coordinator

Susan E. Rice
U.S. Permanent Representative to the United Nations
U.S. Mission to the United Nations 

New York, NY

February 29, 2012

FOR IMMEDIATE RELEASE

It is shameful that the Syrian government has denied UN Under-Secretary-General Valerie Amos admission to Syria, as promised.

The Under-Secretary-General should have been able to negotiate urgently needed humanitarian access for relief organizations to operate safely in the midst of desperate shortages of food, medical care and basic necessities. Rather than meeting the needs of its people, the barbaric the Syrian government is preparing its final assault on the city of Homs. Meanwhile, food shortages are reported to be so severe that people, especially children, will soon start dying of hunger. Water and electricity have been cut. Doctors, aid workers and journalists continue to be targeted. Even the Syrian Red Crescent has been prevented by Syrian forces from evacuating the injured. The Assad regime's callous disregard for the needs of its people is not surprising, but it is reprehensible."

SEC MAKES REMARKS AT CREDIT SUISSE GLOBAL EQUITY TRADING FORUM

The following excerpt is from the SEC website:

“Remarks at the Credit Suisse Global Equity Trading Forum
Commissioner Daniel M. Gallagher
Miami Beach, FL
February 17, 2012
Thank you, John [Anderson], for that very kind introduction. I am pleased to be here today.
Before I continue, I need to provide the standard disclaimer that my comments today are my own, and do not necessarily represent the positions of the Commission or my fellow Commissioners.

The broad topic of this conference is “Seeing Beyond,” and this theme is particularly relevant given the focus of my discussion this morning--Dodd-Frank, with a special emphasis on the Volcker Rule. Indeed, for the financial services industry, not just in the U.S. but worldwide, it is very difficult to “see beyond” Dodd-Frank. The largest financial reform law in 70 years has and will continue to impose massive costs on market participants, and will reconfigure the financial services industry worldwide, but the amount of these costs and the scope of this reconfiguration are still highly uncertain.

18 months on, regulators are still working to implement Dodd-Frank, and most, if not all, of the new regulatory undertakings are very much works in progress. Regulators are therefore in a difficult position, because the markets and the public need regulatory guidance and certainty, but that certainty can and should not come at the cost of hasty and ill-considered regulatory initiatives that will damage the real economy that Dodd-Frank ostensibly is designed to protect.

At the SEC, we face this tension every day. Dodd-Frank requires more than 100 rulemakings and studies from the agency. Among these rulemakings, Dodd-Frank mandates that the agency build regulatory infrastructures from scratch in several areas, including the OTC derivatives market, in conjunction with the CFTC; the registration and oversight of municipal advisors; and the registration and oversight of hedge funds and private equity funds. The sheer breadth of rulemaking for the agency argues for a general approach that is systematic yet incremental: particularly in areas where we are creating new regulatory paradigms, we should strive to build a solid foundation, and develop the regulatory regime over time as the markets and our expertise in those markets develop.

It is also important to remember, as we implement Dodd-Frank, what the law did and didn’t do, particularly as it relates to the SEC. Critically, it did notchange the fundamental mission of the agency. Our mission was and still is to protect investors, maintain fair and efficient markets, and promote capital formation. Dodd-Frank did not make us a banking or safety and soundness regulator. We still regulate markets that are risky, and where the taking of risk is critical to capital allocation and the healthy functioning of these markets and the broader economy. Moreover, in terms of the additional responsibilities given to the SEC, both in those areas we traditionally oversee and those that we don’t, Dodd-Frank reinforced Congress’s nearly 80-year commitment to a strong, vibrant, expert and independent equity markets regulator.

Which brings me to the Volcker Rule. I can think of no better topic to address today. It is not only timely--the comment period to the proposal closed this week, to great fanfare in the press--but it may, perhaps more than any other rule regulators are promulgating under Dodd-Frank, have a dramatic impact on world markets and U.S. competitiveness. Moreover, the heart of the Volcker Rule deals with a topic about which the SEC traditionally has--among all the regulators writing rules in this space--the most experience and expertise in regulating. For those reasons--because it is potentially so significant and because it implicates areas of the SEC’s core competence, it is a perfect case study for how to think about approaching Dodd-Frank rulemaking and the SEC’s role in that rulemaking. Indeed, Volcker is especially important to the major U.S. investment banks which until the financial crisis were subject primarily to SEC oversight. Now, as a result of the financial crisis, the survivors are all within bank holding companies.
I want to begin by talking a bit about the statute and the proposed rules. Section 619 of the Dodd-Frank Act,1 commonly known as the “Volcker Rule” even though it is a statutory provision, imposes two significant prohibitions on banking entities and their affiliates. First, the Rule generally prohibits banking entities that benefit from federal insurance on customer deposits or access to the discount window, as well as their affiliates, from engaging in proprietary trading. Second, the Rule prohibits those entities from sponsoring or investing in hedge funds or private equity funds. The Rule identifies certain specified “permitted activities,” including underwriting, market making, and trading in certain government obligations, that are excepted from these prohibitions but also establishes limitations on those excepted activities. The Volcker Rule defines--in expansive terms--key terms such as “proprietary trading” and “trading account” and grants the Federal Reserve Board, the FDIC, the OCC, the SEC, and the CFTC the rulemaking authority to further add to those definitions.

The statute also charges the three Federal banking agencies, the SEC, and the CFTC with adopting rules to carry out the provisions of the Volcker Rule. It requires the Federal banking agencies to issue their rules with respect to insured depositary institutions jointly and mandates that all of the affected agencies, including the Commission, “consult and coordinate” with each other in the rulemaking process. In doing so, the agencies are required to ensure that the regulations are “comparable,” that they “provide for consistent application and implementation” in order to avoid providing advantages or imposing disadvantages to affected companies, and that they protect the “safety and soundness” of banking entities and nonbank financial companies supervised by the Fed.

In October of last year, the Commission jointly proposed with the Federal banking agencies a set of implementing regulations for the Volcker Rule,2with the CFTC issuing a substantively identical set of proposals last month. The proposed rules, which were issued prior to the beginning of my tenure as a Commissioner, are designed to clarify the scope of the Volcker Rule’s prohibitions as well as certain exceptions and limitations to those exceptions as provided for in the statutory text. The proposing release includes extensive commentary designed to assist entities in distinguishing permitted trading activities from prohibited proprietary trading activities as well as in identifying permitted activities with respect to hedge funds and private equity funds. In addition, the release includes over 1,300 questions on nearly 400 topics--you can see why I and my colleague Commissioner Troy Paredes thought that commenters needed 30 extra days when the comment period extension was granted in December.

The proposed implementing rules are designed to clarify the scope of the Volcker Rule’s prohibitions on proprietary trading and hedge fund or private equity fund ownership and identify transactions and activities excepted from those prohibitions, as well as the limitations on those exceptions. For example, the proposed rules would except from the prohibition on proprietary trading transactions in certain instruments--such as U.S. government obligations--as well as certain activities, such as market making, underwriting, risk-mitigating hedging, or acting as an agent, broker, or custodian for an unaffiliated third party. The proposed rules would also establish a three-pronged definition of “trading accounts” which would include exceptions from that definition such as repurchase and reverse repurchase agreements and securities lending transactions, liquidity management positions, and certain positions of derivatives clearing organizations and clearing agencies.
The proposed rules would require a banking entity to establish an internal compliance program designed to ensure and monitor compliance with the prohibitions and restrictions of the Volcker Rule. The rules would require firms with significant trading operations to report certain quantitative measurements designed to aid regulators and the firms themselves in determining whether an activity constitutes prohibited proprietary trading or falls under an exception to that prohibition, such as the exception for market-making transactions. Finally, the proposed rules would set forth activities exempt from the general prohibition on investments in hedge funds and private equity funds: for example, organizing and offering a hedge fund or private equity fund with investments in such funds limited to a de minimis amount, making risk-mitigating hedging investments, and making investments in certain non-U.S. funds.

As I mentioned earlier, the Volcker Rule comment period ended earlier this week.
Although it would of course be premature to share my thoughts on the proposed rules today, based on just a quick review of many substantial comment letters--more than 100 of which were filed just this week--it appears that many of my fears about the effect of the proposed rules on the proper functioning of global markets and the competitiveness of the U.S. financial industry might be well-founded.
Here are a few lines from comment letters:

From a major investment bank: “The list of undesirable consequences is long and troublesome. We share the view, already noted by others, that the Proposal would reduce market liquidity, increase market volatility, impede capital formation, harm U.S. individual investors, pension funds, endowments, asset managers, corporations, governments, and other market participants, impinge on the safety and soundness of the U.S. banking system, and constrain U.S. economic growth and job creation.”3
From a major coalition of financial services trade groups: “Many commenters, including customers, buy-side market participants, industrial and manufacturing businesses, treasurers of public companies and foreign regulators--constituencies with different goals and interests--have agreed that the Proposal would significantly harm financial markets. They point to the negative impacts of decreased liquidity, higher costs for issuers, reduced returns on investments and increased risk to corporations wishing to hedge their commercial activities.”4
From a Fortune 50 corporation: “Although we appreciate the Agencies' efforts to strike the correct balance in the Proposed Rule, we are concerned that the sweeping effects of the Proposed Rule and the narrowness of the exceptions to it would have a substantial and negative impact not only on banks and the broader financial services industry, but also on industrial and other non-financial businesses, and ultimately the real economy.”5
From a large foreign bank: ”We are concerned that certain key aspects of the Proposed Rule are deficient and will lead to a significant negative impact on the efficient functioning of the U.S. and international financial systems, with a particularly disruptive effect on the capital markets.”6
And we have also received very interesting comment from our foreign regulatory counterparts from around the world. In a comment letter filed in December, the Japanese FSA and the Bank of Japan discuss “the importance of taking due account of the cross-border effect of financial regulations and the need to collaborate with the affected countries” and express their concerns over “the potentially serious negative impact on the Japanese markets and associated significant rise in the cost of related transactions for Japanese banks” that they believe would arise from the extraterritorial application of the Volcker Rule. They specifically cite the adverse impact they believe the Rule would have on Japanese Government Bonds, adding, “We could also see the same picture in sovereign bond markets worldwide at this critical juncture.” 7

Last month, British Chancellor of the Exchequer George Osborne wrote to Fed Chairman Bernanke to express his belief that the proposed rules would result in the withdrawal of market making services for non-U.S. debt, making it “more difficult and costlier” for banks to trade non-U.S. sovereign bonds on behalf of clients. Citing the harm that would arise from the potential reduction of liquidity in sovereign markets, he proposed that the U.S. and the U.K. “launch a more active dialogue” on the Rule and its potential impact on markets outside the U.S. 8

Bank of Canada Governor Mark Carney--who was recently named Chairman of the G-20’s Financial Stability Board--has stated that he and other Canadian officials have “obvious concerns” about the proposed rules. He cited the lack of clarity in the proposed rules’ definitions of “market making” versus “proprietary trade,” and the effect the rules would have on non-U.S. government bond markets. In addition, he criticized what he viewed as the Rule’s “presumption” that trades are proprietary, stating that any such presumption “should go in reverse.”9

Lastly, Michel Barnier, the European Commissioner for Internal Markets and Services, has written to Fed Chairman Bernanke and Treasury Secretary Geithner that “[t]here is a real risk that banks impacted by the rule would also significantly reduce their market-making activities, reducing liquidity in many markets both within and outside the United States.”10
To be fair, these are just a few select quotes from commenters who have provided significant and detailed comments on a variety of issues, and there is broad comment generally on the range of issues presented by the rule proposal. However, these comments are very different from the garden variety comments we usually see in our rulemaking. Those usually go something like: “We applaud the Commission’s efforts to do X. . .” I am not hearing any clapping in these quotes. And that’s because the consequences to world markets of getting it wrong are so significant.

This brings me back to thinking about the role of the SEC in this rulemaking, our role generally as a markets regulator, and how, if we at the SEC play our role properly, we can and should ensure that the Volcker Rule meets the aims of Congress without destroying critically important market activity explicitly contemplated by the statute.

In particular, although commenters have raised many concerns about the proposal, including significant issues surrounding extraterritoriality, I want to focus on the skills that the SEC can bring to bear in sorting through the difficult questions posed by distinguishing between permitted trading activities and prohibited proprietary trading activities.

In her Opening Statement introducing the joint rule proposals at an SEC Open Meeting last October, Chairman Schapiro praised the collaborative effort among the five agencies involved in the drafting process, noting that it involved “more than a year of weekly, if not more frequent, interagency staff conference calls, interagency meetings, and shared drafting.”11 It is telling, however, that in his recent testimony before a House Financial Services Subcommittee, CFTC Chairman Gensler, noting his agency’s role as a “supporting member” in the rulemaking process, stated, “The bank regulators have the lead role.”12

I think, however, that both the statute and our expertise compel the SEC to play a strong and vigorous role in the rulemaking. The Volcker Rule applies to “banking entities” and their affiliates, affecting a wide range of financial institutions regulated by the five different agencies. Regardless of the nature of the regulated activities, however, the Rule addresses a set of activities--the trading and investment practices of those entities--that fall within the core competencies of the SEC. Indeed, the Rule expressly envisions that quintessential market-making activity continue within these firms.

By taking a leadership role, the SEC can also ensure that the final rule is consistent with our core mission of protecting investors, maintaining fair and efficient markets and promoting capital formation. These considerations, coupled with the expertise that the SEC brings to the table, should ensure that the bank regulators’ focus on safety and soundness and Dodd-Frank’s overarching focus on managing systemic risk (although many have argued whether the statute will in the end reduce such risk), are balanced by legitimate considerations of investor protection and the maintenance of robust markets.
Senator Jeff Merkley, cosponsor of the Volcker Rule, wrote this week: “Put simply, the Volcker rule takes deposit-taking, loan-making banks out of the business of high-risk, conflict-ridden trading.” 13 In essence, a main goal of the Volcker Rule is a return to the Glass-Steagall division between commercial and investment banking. But, it bears mentioning that the major investment banks that became part of bank holding companies during the 2008 crisis don’t meet this profile: they are not buying lottery tickets with their depositors’ money, because their business models are not premised on taking deposits. They provide services to clients and the objective should be for them to provide the services that they have traditionally provided, that market participants count on, while fulfilling the statutory imperative to ban proprietary trading.

I want to turn to another point I made at the beginning of my remarks, but which I think is an appropriate guiding principle as we undertake not only our consideration of the Volcker Rule but also other significant rulemaking mandated under Dodd-Frank. The aggregate impact of the rulemakings we and our fellow regulators are promulgating is massive, the costs are enormous, and we are doing so at a time when our economy is still hopefully limping towards recovery. These factors all argue for an approach that is careful, systematic, but most importantly regulatorily incremental. It is important to remember that regulators’ authority and oversight responsibilities do not end when final rules are promulgated, and that continued oversight will ensure that regulators can refine and improve the rules as markets organize and develop in response to the rules we write. Importantly, we can and should recalibrate the rules as markets develop and regulators learn more and gather and analyze relevant data. We must avoid regulatory hubris and should not regulate--particularly where the changes are so novel or comprehensive--with the belief that we completely understand the consequences of the regulations we may impose. In many of these areas, including Volcker, missing the mark could have dire and perhaps irreversibly negative consequences.

Before I end, I also wanted to touch on one last regulatory issue, which is surprisingly not a Dodd-Frank rulemaking but which has received quite a bit of attention recently, and that is the possibility of a new proposal to regulate money market funds.

I say “surprisingly not in Dodd-Frank” because, in a 2350-page lawostensibly devoted to solving for systemic risk, Congress did not address money market funds and they are, according to various speeches and news articles, considered a continuing systemic risk notwithstanding significant money market reforms approved by the SEC in 2010.

Any effort to reconsider the SEC’s oversight of money market funds should be guided by the same principles outlined above. First, we should ensure that any prospective reforms in this are consistent with the core missions of the agency to protect investors, maintain fair and efficient markets and promote capital formation. Second, we should consider such proposals carefully, but ultimately we need to let empiricism and not guesswork guide our decision-making.

Last year I posed two questions: “First, for what specific problems or risks are we trying to solve? And second, do we have the necessary data that will allow us to regulate in a meaningful and effective way?” Indeed, I have further refined these simple queries to be even more straightforward: What data do we have that clearly demonstrates the need for reform above and beyond that imposed in 2010? This question has yet to be answered for me, although I understand the Staff is working on it. I anticipate working closely with the economists in the Division of Risk, Strategy and Financial Innovation as they analyze the available data. Only by continuing such a data-driven analysis can we determine if money market fund investors are exposed to unnecessary risk. We also, of course, need to fully understand the impact of any action we could take on the capital formation process and the fair and the efficient functioning of the markets.
Thank you for your patience and for having me here today. I would be happy to answer any questions you may have.”

CHURCH PASTOR GOES TO PRISON FOR MEDICARE FRAUD

Monday, February 27, 2012
“Los Angeles Church Pastor Sentenced to Serve 36 Months in Prison for $14.2 Million Medicare Fraud Scheme
WASHINGTON – A former Los Angeles church pastor, who owned and operated several fraudulent durable medical equipment (DME) supply companies with her husband, was sentenced today to serve 36 months in prison for her role in a $14.2 million Medicare fraud scheme, the Department of Justice, FBI and Department of Health and Human Services (HHS) announced.

Connie Ikpoh, 49, also was sentenced today by U.S. District Judge Terry J. Hatter for the Central District of California to three years of supervised release and ordered to pay $6.7 million in restitution jointly and severally with her co-conspirators.

In August 2011, a jury found Ikpoh, a nurse who also worked at two Los Angeles-area hospitals, and her husband, Christopher Iruke, 61, and one of their employees, Aura Marroquin, guilty of conspiracy and health care fraud offenses following a two-week trial in Los Angeles.

According to evidence presented at trial, Ikpoh and Iruke were pastors at Arms of Grace Christian Center, a Los Angeles church where Ikpoh and Iruke also operated Pascon Medical Supply, a fraudulent DME supply company.   Ikpoh and Iruke hired several church members at Arms of Grace to assist them with running Pascon and three other fraudulent DME supply companies, Horizon Medical Equipment and Supply Inc., Contempo Medical Equipment Inc. and Ladera Medical Equipment Inc.   The trial evidence showed that Ikpoh owned and operated Horizon.   Ikpoh and Iruke used Iruke’s sister Jummal Joy Ibrahim as a straw owner of Contempo and Ladera.

According to the trial evidence, Ikpoh, Iruke, Marroquin and their co-conspirators used fraudulent prescriptions and documents that Ikpoh and Iruke purchased from a number of illicit sources to bill Medicare for expensive, high-end power wheelchairs and orthotics that were medically unnecessary or never provided.   Each power wheelchairs cost approximately $900 per wholesale, but were billed to Medicare at a rate of approximately $6,000 per wheelchair.  Witness testimony established that Ikpoh and Iruke hid the money they used to pay for these fraudulent prescriptions by writing checks to a company called “Direct Supply,” a fictitious company that Iruke created in the name of an Arms of Grace church member.   Iruke cashed the checks that he and Ikpoh wrote to Direct Supply and used the money to purchase the fraudulent prescriptions.

Witnesses who sold the fraudulent prescriptions and documents that Ikpoh, Iruke  and their co-conspirators used to defraud Medicare testified that they and others paid cash kickbacks to street-level marketers to offer Medicare beneficiaries free power wheelchairs and other DME in exchange for the beneficiaries’ Medicare card numbers and personal information.   These witnesses testified that they and their associates used this information to create fraudulent prescriptions and medical documents, which they sold to Iruke and the operators of other fraudulent DME supply companies for $1,100 to $1,500 per prescription.

After Iruke purchased the prescriptions, the trial evidence showed that Ikpoh used the prescriptions at Horizon to bill Medicare primarily for power wheelchairs.   In fact, the trial evidence showed that approximately 85 percent of Horizon’s business was power wheelchairs, and that Ikpoh submitted more than $3.2 million in claims to Medicare.   Medicare paid Ikpoh more than $1.6 million on these claims.   Witnesses who worked at Horizon testified that if Medicare refused to pay Horizon for a power wheelchair, Ikpoh required the witnesses to take back the power wheelchairs from the Medicare beneficiaries.

The trial evidence showed that Ikpoh was also involved with operating Contempo and Ladera.  Ikpoh represented herself to state inspectors as Contempo’s manager and appeared on Ladera’s corporate filings with the state.   Moreover, witness testimony established that Ikpoh ran the companies when Iruke visited Nigeria and that she and one of her co-defendants, Darawn Vasquez, who was also a church member at Arms of Grace, withdrew money from the Contempo bank account to pay for fraudulent prescriptions.

Witness testimony established that in August 2009, law enforcement agents visited Contempo and Ladera and questioned Marroquin and Vasquez about fraud occurring at the companies.  Within a few weeks of the agents’ visit, Iruke closed Contempo and Ladera, which prompted agents to serve Iruke and his and Ikpoh’s attorneys with subpoenas for the companies’ files.  Instead of producing the files, Iruke directed that the files be brought to an auditorium used by Arms of Grace, where Ikpoh, Iruke, Marroquin and others altered and destroyed documents within the files to remove evidence of the fraud scheme.   Law enforcement agents found Marroquin with these files when they arrested her.

Evidence introduced at trial showed that as a result of this fraud scheme, Ikpoh, Iruke, Marroquin and their co-conspirators submitted more than $14.2 million in fraudulent claims to Medicare and received approximately $6.7 million in reimbursement payments from Medicare.  The evidence showed that Ikpoh and Iruke diverted most of this money from the bank accounts of the supply companies to pay for the fraudulent prescriptions and documents, which Iruke purchased to further the scheme, and to cover the leases on their Mercedes vehicles, home remodeling expenses and other personal expenses.

Vasquez and Ibrahim pleaded guilty to conspiracy and false statement charges in February 2011 and March 2011, respectively, and are awaiting sentencing.   On Dec. 9, 2011, Judge Hatter sentenced Marroquin to time served and three years of supervised release.   On Jan. 9, 2012, Judge Hatter sentenced Iruke to serve 180 months in prison and three years of supervised release.

Today’s sentence was announced by Assistant Attorney General Lanny A. Breuer of the Justice Department’s Criminal Division; U.S. Attorney André Birotte Jr. for the Central District of California; Tony Sidley, Assistant Chief of the California Department of Justice, Bureau of Medi-Cal Fraud and Elder Abuse; Special Agent in Charge Glenn R. Ferry of the Los Angeles Region for the HHS Office of the Inspector General (HHS-OIG); and Assistant Director in Charge Steven Martinez of the FBI’s Los Angeles Field Office.

The case was prosecuted by Trial Attorney Jonathan Baum of the Criminal Division’s Fraud Section and Assistant U.S. Attorney David Kirman of the Central District of California. The case was investigated by the HHS-OIG with assistance from the California Department of Justice.  The case was brought as part of the Medicare Fraud Strike Force, supervised by the Criminal Division’s Fraud Section and the U.S. Attorney’s Office for the Central District of California.”

U.S. AVIATION AND MISSILE COMMAND QUEST TO FIGHT CORROSION

Corrosion engineer Nancy Whitmire goes over the findings of a corrosion test with Steve Carr, the program manager for the Aviation and Missile Command's Corrosion Program. The test involved coating metal coupons with different finishes and then placing them in an accelerated corrosion chamber to determine the amount of corrosion that would develop in a sand and salt environment.

The above picture and following excerpt is from the Department of Defense Armed with Science website:

“REDSTONE ARSENAL, Ala. — Scott Reis is on a mission.
An anti-corrosion mission, that is.
He and fellow Aviation and Missile Research Development and Engineering Center employees carry out the mission of the Aviation and Missile Command’s Corrosion Program Office to promote corrosion prevention programs for a wide range of AMCOM systems. They study the way metals, coatings and finishes develop corrosion; engineer design and materials solutions for corrosion issues in the field; train Soldiers on how to prevent equipment corrosion; and tout the ill effects of corrosion on the Army’s missile and aviation systems.

Those ill effects are staggering in terms of capabilities lost, and the cost of repairing or replacing equipment due to corrosion. At AMCOM, an estimated $1.6 billion a year is spent combating corrosion issues. The U.S. General Accounting Office estimated the cost of corrosion to the Department of Defense at between $9 billion and $20 billion annually.
“Problems with corrosion represent 20 percent of AMCOM’s total annual maintenance program,” Steve Carr, AMCOM’s corrosion program manager, said.
“Corrosion continues whether there is a war or not. It’s an issue of concern because of the need in the field for performance reliability.”

In recent years as corrosion has become a top concern within the Department of Defense and even Congress, AMCOM has focused squarely on corrosion issues, developing new procedures and techniques to combat corrosion, studying how different system designs and materials can encourage or discourage corrosion, and working to make Soldiers aware of corrosion effects. Its Corrosion Program Office, which employs more than 40 civilians, is equipped with laboratories and machinery to study corrosion issues. Recently the program moved into its new offices in building 7631 on Line Road near Gate 3.
For Reis, combating corrosion in one particular missile system — the Patriot — is a personal commitment. He retired in 2009 as a chief warrant officer 3 after a career operating and supporting the missile system.
“I really believe in the Patriot missile system and I want it to be successful and ready to fire when it’s needed,” the senior engineer analyst said.

Reis is a member of a team of corrosion program employees who assess corrosion issues in the field that are affecting the Patriot missile, write corrosion checklists for each piece of equipment related to the Patriot, and then teach Soldiers how to prevent that corrosion.
“We take pictures of corrosion on Patriot equipment, and then we show this in the classroom. If we can train the Soldiers on how to take care of the equipment, and they follow through with that training and work to prevent corrosion, then we can reduce the number of issues we have with corrosion on equipment,” Reis said.

Reis was joined by corrosion program employees Courtney Guasti, Terry Williams and Stephen Coons on a 26-day deployment in 2011 to the Southwest Asia countries of United Arab Emirates, Qatar, Bahrain and Kuwait to conduct corrosion assessments of about 200 pieces of equipment and to train more than 170 Soldiers of the 69th Brigade, Air Defense Artillery, about corrosion prevention at four Patriot missile locations.
“Corrosion affects missiles, aviation and supplies,” he said. “Dehumidification facilities and airtight storage facilities can assist with preventing corrosion. But a lot of the units, especially those deployed, don’t have the facilities and tools to prevent corrosion.
“And that issue is compounded because the shelf life of today’s equipment has to be longer. Equipment that once lasted 10 years now has to last 20 years. The number one thing is mission readiness. In general, Soldiers don’t worry about corrosion. But looking to the future 20 years down the road, minor corrosion now means mission equipment later that can’t perform.”

The teaching team emphasizes to Soldiers that it only takes one day a month to prevent corrosion. Besides instruction, they leave each unit with corrosion prevention/repair kits.
“If they follow the instruction, mission readiness ratings will go up,” Reis said. “Equipment will look better and run better. Preventing corrosion in the Patriot system is especially important because its life has been extended to 2042. There will be no new equipment. So, what can we do to help prolong the life of equipment?”
With that in mind, Reis will continue to be part of a team that pinpoints the 15 Patriot units stationed at Fort Bliss and Fort Hood, Texas; Fort Sill, Okla.; Fort Bragg, N.C.; and in Korea, Germany, Okinawa and Southwest Asia.
Corrosion prevention has been an Army concern ever since the development of ballistic missiles.

“Corrosion prevention was a very serious consideration for missile systems because we wanted high reliability. The systems had to be stored over long periods of time and still have high reliability,” said Carr, who began working on corrosion issues at Redstone as a young materials engineer 30 years ago.

“Corrosion problems can make a system unreliable and not operational. So, we reverse engineered the designs for missile systems so that we could study corrosion and how it affected the system, and so we could develop corrosion prevention and control processes.”

Although most think of corrosion as only affecting metals, it can also affect plastics, polymers, sealants and all materials that go into the manufacturing of any piece of equipment. Besides the Patriot missile, Carr spent the early part of his career studying corrosion on many different missile systems, including Chaparral, Hawk, TOW and Javelin.

“Materials, finishes and design all affect corrosion,” Carr said. “We study corrosion on different kinds of steels and metals, the impact of corrosion on bare metals versus finished metals, and how system designs can prevent water entrapment.”

The Army’s corrosion program was active until about 1990, when budget cuts led to the end of the formal program. Carr and others who studied corrosion prevention issues continued their work through the program management offices at Redstone.
“But in the mid-1990s, there were so many corrosion issues on vehicles in the Pacific Rim. Doors, floorboards, batteries, everything was getting corroded. There was a lot of high level Army attention brought to the issue and, in 1998, the Army restarted its corrosion program with the Tank and Automotive Command taking the lead,” Carr said.
Also, between the ending of Desert Storm in 1991 and the beginning of Operation Iraqi Freedom in 2003, “lots of things were coming back for reset, and corrosion was a major issue. It began getting a lot of attention,” Carr said. “After Desert Storm, missiles had to be de-milled because of corrosion. Desert Storm really affected aviation and missiles. Extensive corrosion required de-mil or repair. It was a major impediment.”
By 2001, AMCOM officially set up its corrosion program with Carr as its program manager. Under then Maj. Gen. Larry Dodgen, AMCOM formed a partnership with Naval Aviation to study corrosion.
“Dodgen’s last action (as commander of AMCOM) was to set up this partnership to look at the aircraft coming back for reset and doing assessments of corrosion issues and coming up with solutions,” Carr said. “In 2004, we spent a lot of time looking at aircraft, and identifying several key corrosion issues and solutions.

“At about the same time, Congress signed the National Defense Appropriations Act with the requirement to start a corrosion program to determine the impact of corrosion throughout the Department of Defense.”

Other AMCOM commanders also gave corrosion a top priority.
During the command of then Maj. Gen. Jim Pillsbury, who consequently gave program funding to corrosion prevention in 2004, AMCOM tackled a major corrosion issue involving deployed aircraft shipped back to the states. Many were in good condition before shipment, but then had corrosion problems once they were back in the U.S.
“All the aircraft coming back were required to be shrink-wrapped, and the CH-47s (Chinook) were shrink-wrapped and stored on the top deck of a ship,” Carr said. “The ship went through a storm and the shrink wrap was torn. Saltwater was trapped inside the shrink wrap, and it created rust.

“Even the Black Hawks, Apaches and Kiowas that were shrink wrapped and shipped below deck had condensation and water entrapment inside the shrink wrap. Gen. Pillsbury asked for the study, and we ended up getting rid of shrink wrap and now all helicopters must ship under deck. We found that even in Kuwait, helicopters that were shrink wrapped would sit in 140 degree weather before getting shipped. The shrink wrap wasn’t well done because in that kind of heat you can’t touch the aircraft while you wrap it. So, water would get inside while the helicopters sat there and mildew would grow.”
Another major corrosion case involved 12 Patriot launchers in Korea that had to be shipped back to the U.S. for corrosion overhaul and repair at a cost of $4 million. In 2005, AMCOM spent $17.4 million in corrosion maintenance costs on Patriot, putting the system in the AMCOM top 10 for average corrosion cost and in the AMCOM top 20 for total corrosion cost.

Since then, corrosion issues have been given high visibility throughout DoD. There have been 30 DoD forums on the subject to develop policies for corrosion prevention, to study the cost of corrosion, and to conduct corrosion technology demonstration projects that show corrosion issues and solutions.

At AMCOM, another direct result of corrosion studies was to develop a conductive antenna gasket for the Chinook and Black Hawk helicopters to prevent corrosion from occurring between the aircraft’s antenna and the body of the aircraft, which caused communication problems. In 2008, AMCOM’s Corrosion Program became a Corrosion Center of Excellence for the Program Executive Office for Aviation.

“Now we have corrosion technology demonstration validation teams, corrosion unit assessment teams and non-destructive testing assessment teams that go out all over the world to study, assess and resolve corrosion issues,” Carr said. “We provide corrosion awareness and prevention training, and corrosion repair kits to Soldiers. We are providing training and technology for Soldiers so they can take care of equipment in the field.”
With existing systems, the corrosion program works to make modifications that reduce corrosion issues. With new systems, the program’s engineers are involved in the design and acquisition process to minimize corrosion issues before a new system is even built. The corrosion program is involved in addressing corrosion issues on three levels — research and development, acquisition and sustainment.
“We are involved in both acquisition and sustainment. We can do better with our processes and our technologies, but we can never totally prevent corrosion. But if it is addressed in sustainment and if equipment is taken care of properly, it can be minimized,” Carr said.

“Helicopters designed 50 years ago didn’t have the technology and knowledge we have today to address corrosion in the design. There is nothing we can do about that but work to sustain and prevent corrosion problems. But in the systems we are designing today, we need to really address corrosion issues because once they are acquired those systems will impact the Army for years.”

And to better help Carr and his employees in the battle against corrosion, Congress passed a law that requires the Department of Defense to have an organized effort to prevent and mitigate corrosion, and to ensure all major acquisitions are designed with a corrosion prevention control plan and a corrosion prevention action team.
“Those two things are in place for the life of the system,” Carr said. “And the team works to revise designs and oversee sustainment so that new technologies can be incorporated to address corrosion issues during the lifetime of the system.”
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