Friday, January 17, 2014

PRESIDENT'S CLIMATE ACTION PLAN REVIEWED BY GSA

FROM:  GENERAL SERVICES ADMINISTRATION
President's Climate Action Plan R
Review of the President's Climate Action Plan
Senate Committee on Environment and Public Works
“Review of the President’s Climate Action Plan”

January 16, 2014

Good morning Chairman Boxer, Ranking Member Vitter, and Members of the Committee. I appreciate being invited here today to testify on this important topic.

Last year, the U.S. Government Accountability Office added climate change to its High Risk List, citing that it presents “a significant financial risk to the federal government.” According to the National Climatic Data Center, in 2012 weather and climate disaster events caused over $110 billion in damages, making it the second costliest year on record.

This Administration is committed to reducing the damage caused by climate change, and to preparing for its impacts, both in the long term as well as those we are already experiencing. In June 2013, the President reaffirmed this commitment with a Climate Action Plan that directs agencies to: cut carbon pollution; prepare for the impacts of climate change; and lead international efforts to address global climate change.

The U.S. General Services Administration (GSA) is one of the many Federal agencies doing its part to assist in this effort. As the landlord and caretaker of federal properties, GSA owns or leases 9,624 assets, which includes maintaining an inventory of more than 370 million rentable square feet of workspace, and preserving more than 481 historic properties. This large and diverse portfolio presents many opportunities for GSA to increase energy efficiency, reduce our contribution to climate change, save millions of dollars in energy costs and to plan and implement risk management.

As part of the President’s Climate Action Plan, GSA is improving the efficiency of our Federal buildings, identifying and preparing for climate risks, and working to ensure that we share lessons learned with our partner agencies.

Reducing Impact on Climate Change –

GSA reduces energy consumption across its portfolio through a variety of means. GSA leverages technology such as advanced metering, remote building analytics and smart building systems to uncover deeper energy savings opportunities. Advanced meters, which provide real time energy use information, have been installed in 450 buildings, representing 80% of GSA’s total electricity consumption metered. Continuous enhancements to the system, ongoing training of users, use of detailed historical data and expert modeling are all proven methods which are increasing energy efficiency at lesser cost.

GSA uses rapid building assessments to perform sophisticated energy audits that require no onsite work or new device installations. Such remote analytics have resulted in significant cost savings over traditional audits and have identified additional energy savings opportunities.

The President’s Climate Action Plan also highlights other important tools we can use to improve the efficiency of our buildings, including continued use of Energy Savings Performance Contracts (ESPCs). An ESPC engages the private sector in an agency’s efforts to achieve energy efficiency improvements. The private sector provides the upfront capital to make energy efficiency upgrades in a facility, and is paid by the Federal agency from the guaranteed energy savings under the contract. Once the contract ends, the agency continues to benefit from the reduced energy costs. In December 2011, the President challenged Federal agencies to enter into a combined $2 billion worth of ESPCs by December 31, 2013. GSA exceeded its own target of $175 million with $191 million in contracts awarded. These contracts, which range from 12 to 23 years in duration, are projected to reduce GSA’s annual energy consumption by 365 billion Btus, or about the amount of energy used in 3,380 single family homes per year, resulting in direct savings (lower utility payments) of $10.6 million per year.

The President’s Climate Action Plan sets new goals on the Federal use of Renewable Energy, increasing the current goal from 7.5 percent to 20 percent by 2020. In FY 2013, 46.1 percent of electricity procured or generated by GSA came from renewable sources (nearly 1,200 GWh). Over 24 GWh of this renewable electricity was generated at our own facilities. GSA expects to generate nearly 29 GWh per year once on-site renewable projects currently underway are fully operational. This amount of on-site renewable energy is enough to power nearly 2,600 homes.

Through the use of Green Button data, the President’s Climate Action Plan also highlights the importance of collecting data to promote better energy management. Green Button is an industry-led effort, in response to the Administration’s call-to-action, that looks to meet the challenge of providing electricity consumers with secure, easy to understand information on their energy usage. As directed in the December 2013 Presidential Memorandum on Federal Leadership in Energy Management, GSA will partner with the Department of Energy and Environmental Protection Agency to prepare and initiate a pilot Green Button initiative at Federal facilities. Following the pilot, DOE, in coordination with EPA, is required to issue guidance on use of the Green Button standard at Federal facilities. GSA will leverage the Green Button standard within its federal facilities to increase the ability to manage energy consumption, reduce greenhouse gas emissions, and meet sustainability goals.

Taken together, these efforts have led to a significant reduction in GSA’s energy use intensity and greenhouse gas emissions. In FY 2013, GSA achieved a cumulative reduction in energy usage per square foot of 24.8 percent,1 ahead of statutory targets. Since Fiscal Year 2011, these reductions have saved $192.7 million in avoided direct energy costs.2 Also, in FY 2013, GSA achieved an approximately 50 percent reduction in greenhouse gas emissions, exceeding our FY 2020 target.3 That is the equivalent of more than 60,000 homes powered for one year.

Preparing for the Impacts of Climate Change –

GSA is also preparing for the potential impacts of climate change as part of the President’s Climate Action Plan. While it is impossible to predict the precise occurrence and costs of each and every climate risk, it is imperative to develop a robust risk management approach.

One such area of focus has been preparing for future floods. GSA is actively coordinating with the U.S. Army Corps of Engineers (USACE), U.S. Global Change Research Program (USGCRP), Federal Emergency Management Agency (FEMA), National Oceanic and Atmospheric Administration (NOAA), and Federal Interagency Floodplain Management Task Force to incorporate the most recent and relevant flood-risk reduction strategies into GSA’s operations. We are in the process of updating GSA’s internal floodplain management guidance and are taking into consideration updated FEMA floodplain maps and additional guidance on using climate projections.

GSA is also working to boost the resilience of buildings and infrastructure. We are in the process of prioritizing our most mission critical and vulnerable facilities, looking into cost-effective climate-resilient investments, and investigating solutions that reduce both climate change risks and greenhouse gas emissions. A pilot project is currently in place to incorporate climate risk reduction factors into a new land port of entry facility. GSA will take lessons learned from this pilot and share with other agencies.

We believe these efforts will ensure GSA, and the Federal government broadly, is more prepared to address the long-term consequences of climate change.

Conclusion –

The President’s Climate Action Plan represents a commitment to reduce and respond to the impacts of climate change. As a major landholding agency of the Federal government, GSA plays an important role in mitigating and preparing for these adverse effects. Through improved energy efficiency and risk planning, we hope to continue to make progress on both of these critical efforts.

I am pleased to be here today, and I am happy to answer any questions you may have. Thank you.

"SHELL PACKING" CO. & CEO AGREE TO SETTLE FRAUD CASE REGARDING BOGUS SECURITIES SALES

FROM:  SECURITIES AND EXCHANGE COMMISSION 

The Securities and Exchange Commission today announced nearly $300,000 in settlements against a Virginia-based “shell packaging” company and its CEO who were charged with facilitating a penny stock scheme as well as a Bronx, N.Y.-based stock promoter who received proceeds from the fraud.

Virginia-based Belmont Partners LLC and its CEO Joseph Meuse are in the business of identifying and selling public shell companies for use in reverse mergers.  In an enforcement action in late 2011, the SEC alleged that Meuse and his firm aided and abetted a New York-based company that fraudulently issued and sold unregistered shares of its common stock.  The SEC separately named Thomas Russo as a relief defendant in the case for the purposes of recovering ill-gotten gains in his possession as a result of his business partner’s participation in the scheme.  According to the SEC’s complaint, Russo co-owned a stock promotion service called TheStockProphet.com.

In a final judgment ordered late yesterday by the Honorable Shira A. Scheindlin of the U.S. District Court for the Southern District of New York, Belmont Partners and Meuse agreed to pay $224,500.  Meuse additionally has agreed to be barred from the penny stock business or from serving as an officer or director of a public company for at least five years.  In a separate judgment entered last week, Russo agreed to pay $70,075.

“The SEC will continue to pursue and punish gatekeepers whose misconduct enables penny stock frauds to occur,” said Sanjay Wadhwa, senior associate director for enforcement in the SEC’s New York Regional Office.  “Meuse and his firm not only sold the shell company but they fabricated the documents necessary to dupe the transfer agent into issuing shares that should never have been sold to the public.  Russo received proceeds from the subsequent sale of the illicit stock.”

Belmont Partners and Meuse agreed to be permanently enjoined from violating Section 5 of the Securities Act of 1933 and Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5.  They neither admitted nor denied the SEC’s allegations.

The SEC previously entered into a bifurcated settlement with the Long Island-based issuer at the center of the scheme – Alternative Green Technologies (AGTI) – as well as its CEO Mitchell Segal, who agreed to be barred from the penny stock business or from serving as a corporate officer or director for at least five years.  Financial penalties against Segal will be determined at a later date.

The SEC’s investigation was conducted by Steven G. Rawlings and Megan R. Genet, and the litigation has been led by Todd Brody and Ms. Genet.  The SEC appreciates the assistance of the Financial Industry Regulatory Authority.


NEW BIONIC ARM SHOWCASED BY DEFENSE ADVANCED RESEARCH PROJECTS AGENCY

Right:  A military-funded advanced mechanical arm is controlled by a volunteer with paralysis via his brain signals recorded by electrocorticography in September 2011. It was the first time ever a prosthetic arm was controlled this way by a paralyzed person. DARPA photo.

FROM:  MILITARY HEALTH SYSTEM
Military’s Bionic Arm Enhances Life for Amputees
Amaani Lyle  |  American Forces Press Service
January 15, 2014

WASHINGTON– It’s metal, sleek and precise. It pivots and flexes like a real hand, or at least one from a science-fiction movie.

But with no Hollywood special effects involved, brain research experts at last week’s Defense Advanced Research Projects Agency Congressional Tech Showcase here demonstrated an artificial arm and hand that can do everything from picking up cups to playing the piano, powered by the user’s brain.

Mike McLoughlin, chief engineer for research and exploratory development at Johns Hopkins University’s applied physics laboratory, said the defense agency’s Revolutionizing Prosthetics Program developed the device over about five years to improve the quality of life for service members who have suffered the loss of an upper extremity.

“Five, six years ago [an amputee’s] option was essentially a hook,” McLoughlin said. “We want to give them a much greater level of functionality, because what they really want to do is go back and contribute to society.”

The demo also featured an excerpt from a 60 Minutes episode that aired in 2013 showing Jan, a patient suffering from a neurological condition, with two electrode chips, each about the size of a fingernail, in her brain.

Even simple tasks such as picking up a cup of coffee are the result of a complex series of commands and information “behind the scenes” in the brain, McLoughlin explained. “We’re able to take those complex things and reduce them down to simple thoughts.”

With the help of the arm and hand, Jan moved, interacted and grasped objects in a more natural way, McLoughlin said, adding that the arm also can function with information gleaned from a computer script.

He described the arm’s future and range of potential applications as “exciting” for service members and civilians alike.

“Think about the elderly,” he said. “If somebody has trouble getting around, and we can provide assistance through exoskeleton devices, that has huge impact, not only to the individual in terms of quality of life and being independent, but it also has huge financial implications, possibly saving them hospice care expenses.”

Thursday, January 16, 2014

U.S. DEFENSE DEPARTMENT CONTRACTS FOR JANUARY 16, 2014

FROM:  DEFENSE DEPARTMENT DEFENSE 
CONTRACTS

ARMY
CDM Constructors Inc., Bellevue, Wash., was awarded a $77,476,628 firm-fixed price contract to design and build a ‘Class A’ waste water treatment plant with nutrient removal and redundant process equipment to support the population of Joint Base Lewis-McChord. Fiscal 2013 military construction funds in the amount of $77,476,628 were obligated at the time of the award. Estimated completion date is March 1, 2016. Bids were solicited, via the Internet with 12 received. Work will be performed at Joint Base Lewis-McChord, Wash. Army Corps of Engineers, Seattle, Wash., is the contracting activity (W912DW-14-C-0002).

DEFENSE LOGISTICS AGENCY

KPMG LLP, McLean, Va., has been awarded a maximum $36,243,243 firm-fixed-price contract to provide all necessary management services, personnel and documentation required to support DLA’s financial audit. This contract is a competitive acquisition, and there were six offers received. Location of performance is Virginia with a Jan. 15, 2015 performance completion date. Using military services are federal civilian agencies. Type of appropriation is fiscal 2014 defense working capital funds. The contracting activity is the Defense Logistics Agency Contracting Services, Richmond, Va., (SP4703-11-A-0017-0037).

Brit Systems*, Dallas, Texas, has been awarded a maximum $20,297,132 modification (P00007) exercising the first option year on a two-year base contract (SPM2D1-12-D-8309) with one two-year option and one one-year periods for digital imaging network-picture archive communication system. This is a fixed-price with economic-price-adjustment contract. Location of performance is Texas with a Jan. 19, 2016 performance completion date. Using military services are Army, Navy, Air Force, Marine Corps, and federal civilian agencies. Type of appropriation is fiscal 2014 through fiscal 2016 defense working capital funds. The contracting activity is the Defense Logistics Agency Troop Support, Philadelphia, Pa.

Safety Kleen, Richardson, Texas, has been awarded a maximum $12,930,214 fixed-price with economic-price-adjustment contract for re-refined motor oil program parts. This contract is a competitive acquisition and there was one offer received. Location of performance is Texas with a Jan. 15, 2015 performance completion date. Using military services are Army, Navy, Air Force, Marine Corps, and federal civilian agencies. Type of appropriation is fiscal 2014 defense working capital funds. The contracting activity is the Defense Logistics Agency Aviation, Richmond, Va., (SPE4A6-14-D-0076).

St. Michaels Inc.**, Woodbridge, Va., has been awarded a maximum $10,490,323 firm-fixed-price contract to provide necessary support of management services, personnel and documentation required to support DLA’s financial audit. This contract is a competitive acquisition and there were six offers received. Location of performance is Virginia with a Jan. 15, 2015 performance completion date. Using military services are federal civilian agencies. Type of appropriation is fiscal 2014 defense working capital funds. The contracting activity is the Defense Logistics Agency Contracting Services, Richmond, Va., (SP4703-14-A-0001-0007).

NAVY

General Dynamics Electric Boat Corp., Groton, Conn., is being awarded a $29,848,059 modification to a previously awarded contract (N00024-11-C-2109) to exercise an option for engineering and technical design services to support research and development (R&D) of advanced submarine technologies for current and future submarine platforms. Advanced submarine R&D includes studies to support the manufacturability, maintainability, producibility, reliability, manning, survivability, hull integrity, performance, structural, weight/margin, stability, arrangements, machinery systems, acoustics, hydrodynamics, ship control, logistics, human factors, materials, weapons handling and stowage, submarine safety, and affordability. Work will be performed in Groton, Conn., and is expected to be completed by October 2014. Fiscal 2014 research, development, test and evaluation funding in the amount of $625,000 will be obligated at time of award. Contract funds will not expire at the end of the fiscal year. The Naval Sea Systems Command, Washington, D.C., is the contracting activity.

AIR FORCE

General Dynamics C4 Systems, Scottsdale, Ariz., has been awarded a $6,886,969 cost-plus-fixed-fee modification (P00051) to an existing contract (FA8307-06-C-0010) for design and development of a CAROUSEL Applicable Specific Integrated Circuit solution. This modification adds the design, development, and testing of CAROUSEL crypto engines. Work will be performed at Scottsdale, Ariz., and is expected to be completed by March 21, 2016. Fiscal 2013 research and development funds in the amount of $831,000 are being obligated at time of award. Air Force Life Cycle Management Center, Cryptologic Systems Contracting Division, Lackland Air Force Base, Texas, is the contracting activity.

*Small Business

**Veteran Owned Small Business

STRONG RELATIONS STRESSED BETWEEN U.S.-ISRAEL

FROM:  DEFENSE DEPARTMENT 
Senior U.S., Israeli Defense Officials Meet, Stress Strong Relations
American Forces Press Service

WASHINGTON, Jan. 15, 2014 – Acting Deputy Defense Secretary Christine H. Fox and the director general of Israel's Defense Ministry reaffirmed the strength of the U.S.-Israeli defense relationship in a meeting at the Pentagon today.

This was retired Maj. Gen. Dan Harel's first visit to the United States in his current capacity, and Fox's first official foreign delegation meeting since she took office last month, said James Swartout, a spokesman for the acting deputy secretary, in a statement issued after the meeting.

The defense leaders committed to working closely to ensure Israel has the capabilities it needs to maintain its qualitative military edge, Swartout said, noting Israel's acquisition of several advanced capabilities from the United States, including the V-22 Osprey, which the United States has not released to any other nation.

“This decision underscores that military-to-military cooperation between the United States and Israel is stronger than ever,” he added.

TECHNICAL UNDERSTANDINGS SUMMARY ON IRAN'S NUCLEAR PROGRAM

FROM:  THE WHITE HOUSE

Summary of Technical Understandings Related to the Implementation of the Joint Plan of Action on the Islamic Republic of Iran’s Nuclear Program

On January 12, 2014, the P5+1 (the United States, United Kingdom, Germany, France, Russia, and China, coordinated by EU High Representative Catherine Ashton) and Iran arrived at technical understandings for the Joint Plan of Action, which will be implemented beginning on January 20, 2014.

The Joint Plan of Action marks the first time in nearly a decade that the Islamic Republic of Iran has agreed to specific actions that stop the advance of its nuclear program, roll back key aspects of the program, and include unprecedented access for international inspectors.  The technical understandings set forth how the provisions of the Joint Plan of Action will be implemented and verified, and the timing of implementation of its provisions.  Specifically, the technical understandings specify the actions that Iran will take to limit its enrichment capacity at Natanz and Fordow, as well as the limits on safeguarded research and development (R&D); the actions Iran will take to implement its commitments not to fuel the Arak reactor or install remaining components at the reactor; and the actions Iran will take to facilitate International Atomic Energy Agency (IAEA) verification and confirmation that Iran is fully implementing these commitments.  The understandings also clarify the reciprocal actions that the P5+1 and the EU will take.

Between now and January 20th, Iran, the IAEA, the United States, and our international partners, will take the remaining required steps to begin implementing the Joint Plan of Action on that date.

What Iran Has Committed To Do

On January 20th, the IAEA will report on the current status of Iran’s nuclear program, and particularly on its uranium enrichment program and the Arak reactor.  The IAEA will also report on several specific steps that Iran has committed to take by or on the first day of implementation, including:

Halting production of near-20% enriched uranium and disabling the configuration of the centrifuge cascades Iran has been using to produce it.
Starting to dilute half of the near-20% enriched uranium stockpile that is in hexafluoride form, and continuing to convert the rest to oxide form not suitable for further enrichment.
In addition, over the course of the Joint Plan of Action, the IAEA will verify that Iran is:

Not enriching uranium in roughly half of installed centrifuges at Natanz and three-quarters of installed centrifuges at Fordow, including all next generation centrifuges.
Limiting its centrifuge production to those needed to replace damaged machines, so Iran cannot use the six-month period to stockpile centrifuges.
Not constructing additional enrichment facilities.
Not going beyond its current enrichment R&D practices.
Not commissioning or fueling the Arak reactor.
Halting the production and additional testing of fuel for the Arak reactor.
Not installing any additional reactor components at Arak.
Not transferring fuel and heavy water to the Arak reactor site.
Not constructing a facility capable of reprocessing.  Without reprocessing, Iran cannot separate plutonium from spent fuel.
Iran has also committed to a schedule for taking certain actions during the six-month period.  This includes:

Completion of dilution of half of its stockpile of near-20% uranium hexafluoride in three months, and completion of conversion of the rest of that material to oxide in six months.
A cap on the permitted size of Iran’s up to 5% enriched uranium stockpile at the end of the six-month period.
Verification Mechanisms

To ensure Iran is fulfilling its commitments, the IAEA will be solely responsible for verifying and confirming all nuclear-related measures, consistent with its ongoing inspection role in Iran.  In addition, the EU, P5+1 and Iran will establish a Joint Commission to work with the IAEA to monitor implementation of the Joint Plan of Action.  The Joint Commission will also work with the IAEA to facilitate resolution of past and present concerns with respect to Iran’s nuclear program.

The Joint Commission will be composed of experts of the EU, P5+1 and Iran, and it will convene at least monthly to consider the implementation of the Joint Plan of Action and any issues that may arise.  Any decisions that are required on the basis of these discussions will be referred to the Political Directors of the EU, the P5+1, and Iran.

Transparency and Monitoring

Iran committed in the Joint Plan of Action to provide increased and unprecedented transparency into its nuclear program, including through more frequent and intrusive inspections as well as expanded provision of information to the IAEA.

The Iranian enrichment facilities at Natanz and Fordow will now be subject to daily IAEA inspector access as set out in the Joint Plan of Action (as opposed to every few weeks).  The IAEA and Iran are working to update procedures, which will permit IAEA inspectors to review surveillance information on a daily basis to shorten detection time for any Iranian non-compliance.  In addition, these facilities will continue to be subjected to a variety of other physical inspections, including scheduled and unannounced inspections.

The Arak reactor and associated facilities will be subject to at least monthly IAEA inspections – an increase from the current inspection schedule permitting IAEA access approximately once every three months or longer.

Iran has also agreed to provide for the first time:

Long-sought design information on the Arak reactor;
Figures to verify that centrifuge production will be dedicated to the replacement of damaged machines; and
Information to enable managed access at centrifuge assembly workshops, centrifuge rotor production workshops and storage facilities, and uranium mines and mills.
These enhanced monitoring measures will enable the IAEA to provide monthly updates to the Joint Commission on the status of Iran’s implementation of its commitments and enable the international community to more quickly detect breakout or the diversion of materials to a secret program.

What the P5+1 and EU Have Committed To Do

As part of this initial step, the P5+1 and EU will provide limited, temporary, and targeted relief to Iran.  The total value of the relief is between $6 and $7 billion – a small fraction of the $100 billion in Iranian foreign exchange holdings that will continue to be blocked or restricted.  Some relief will be provided from the first day; most will be provided in installments over the span of the entire six-month period.  The relief is structured so that the overwhelming majority of the sanctions regime, including the key oil, banking, and financial sanctions architecture, remains in place – and sanctions will continue to be vigorously implemented throughout the six-month period.

Once the IAEA has confirmed Iran is implementing its commitments, in return the P5+1 and EU have committed to do the following on the first day of implementation:

Suspend the implementation of sanctions on Iran’s petrochemical exports and Iran’s imports of goods and services for its automotive manufacturing sector.
Suspend sanctions on Iran’s import and export of gold and other precious metals, with significant limitations that prevent Iran from using its restricted assets overseas to pay for these purchases.
License expeditiously the supply of spare parts and services, including inspection services, for the safety of flight of Iran’s civil aviation sector.
Pause efforts to further reduce purchases of crude oil from Iran by the six economies still purchasing oil from Iran.
Facilitate the establishment of a financial channel intended to support humanitarian trade that is already permitted with Iran and facilitate payments for UN obligations and tuition payments for students studying abroad.
Modify the thresholds for EU internal procedures for the authorization of financial transactions.
The P5+1 and EU have also committed to take certain actions to facilitate Iran’s access to $4.2 billion in restricted Iranian funds on a set schedule at regular intervals throughout the six months.  Access to a small portion of these funds will be linked to Iran’s progress in completing the dilution process for near-20% enriched uranium.  Iran will not have access to the final installment of the $4.2 billion until the last day of the six-month period.

The installments will be released on the schedule below, contingent on the IAEA confirming that Iran is fulfilling its commitments.

February 1st - $550 million (installment #1)

March 1st - $450million (contingent on the IAEA confirming that Iran has completed dilution of half of the stockpile of near-20% enriched uranium it is required to dilute)

March 7th - $550 million (installment #2)

April 10th - $550 million (installment #3)

April 15th - $450 million (contingent on the IAEA confirming that Iran has completed dilution of its entire stockpile of near-20% enriched uranium it is required to dilute)

May 14th - $550 million (installment #4)

June 17th - $550 million (installment #5)

July 20th - $550million (installment #6 is on day 180) (contingent on the IAEA confirming that Iran has fulfilled all of its commitments)

A Comprehensive Solution

With this implementation plan, we have made concrete progress.  We will now focus on the critical work of pursuing a comprehensive resolution that addresses our concerns over Iran’s nuclear program.  Shortly after the Joint Plan of Action takes effect on January 20th, the United States will determine with our P5+1 partners our approach to the comprehensive solution.  Discussions with Iran will follow that coordination process.

With respect to the comprehensive solution, nothing is agreed to until everything is agreed to.  We have no illusions about how hard it will be to achieve this objective, but for the sake of our national security and the peace and security of the world, now is the time to give diplomacy a chance to succeed.

GENEVA II PROGRESS REMARKS BY SECRETARY OF STATE KERRY

FROM:  STATE DEPARTMENT 
Remarks to the Press
Remarks
John Kerry
Secretary of State
Briefing Room
Washington, DC
January 16, 2014

Good morning, everybody. Good afternoon. And let me just say that I know you’d like to ask some questions, and unfortunately I have to go straight from here over to the White House for a meeting, but I will have an availability tomorrow in the morning when we have our friends from Mexico here, and I’ll take a couple of extra questions to make up for not being able to answer some here now.
I know that many of you have been asking about some of the recent revisionism as to why the international community will be gathering in Montreux next week, so let me make it clear here today.

From the very moment that we announced the goal of holding the Geneva conference on Syria, we all agreed that the purpose was specifically and solely to implement the 2012 Geneva I communique. That purpose, that sole purpose, could not have been more clear at the time this was announced and it could not be more clear today. It has been reiterated in international statement after international statement that the parties have signed up to, and venue after venue, in resolution after resolution, including most recently in Paris last weekend when both the London 11 and the Russian Federation reaffirmed their commitment to that objective, the implementation of Geneva I.

So for anyone seeking to rewrite this history or to muddy the waters, let me state one more time what Geneva II is about: It is about establishing a process essential to the formation of a transition government body – governing body with full executive powers established by mutual consent. That process – it is the only way to bring about an end to the civil war that has triggered one of the planet’s most severe humanitarian disasters and which has created the seeding grounds for extremism.

The Syrian people need to be able to determine the future of their country. Their voice must be heard. And any names put forward for leadership of Syria’s transition must, according to the terms of Geneva I and every one of the reiterations of that being the heart and soul of Geneva II, those names must be agreed to by both the opposition and the regime. That is the very definition of mutual consent.

This means that any figure that is deemed unacceptable by either side, whether President Assad or a member of the opposition, cannot be a part of the future. The United Nations, the United States, Russia, and all the countries attending know what this conference is about. After all, that was the basis of the UN invitation send individually to each country, a restatement of the purpose of implementing Geneva I. And attendance by both sides and the parties can come only with their acceptance of the goals of the conference.

We too are deeply concerned about the rise of extremism. The world needs no reminder that Syria has become the magnet for jihadists and extremists. It is the strongest magnet for terror of any place today. So it defies logic to imagine that those whose brutality created this magnet, how they could ever lead Syria away from extremism and towards a better future is beyond any kind of logic or common sense.

And so on the eve of the Syrian Opposition Coalition general assembly meeting tomorrow to decide whether to participate in Geneva in the peace conference, the United States, for these reasons, urges a positive vote. We do so knowing that the Geneva peace conference is not the end but rather the beginning, the launch of a process, a process that is the best opportunity for the opposition to achieve the goals of the Syrian people and the revolution, and a political solution to this terrible conflict that has taken many, many, many, too many lives.

We will continue to push in the meantime for vital access for humanitarian assistance. I talked yesterday with Russian Federation Foreign Minister Lavrov in an effort to push still harder for access to some areas where the regime played games with the convoys, taking them around a circuitous route instead of directly in the way that the opposition had arranged for and was willing to protect them in. It is important that there be no games played with this process.

We will also continue to fight for ceasefires where we could achieve them, and we will continue to fight for the exchange or release of captive journalists and aid workers and others in order to try to improve the climate for negotiations.

Now, obviously, none of this will be easy. Ending a war and stopping a slaughter never is easy. We believe, though, this is the only road that can lead to the place where the civilized world has joined together in an effort to lead the parties to a better outcome. And to the Syrian people, let me reiterate: The United States and the international community will continue to provide help and support, as we did yesterday in Kuwait, where we pledged $380 million of additional assistance in order to try to relieve the pain and suffering of the refugees.

We will continue to stand with the people of Syria writ large, all the people, in an effort to provide them with the dignity and the new Syria which they are fighting for. Thank you. And as I said, I’d be happy to answer questions tomorrow. Thanks.


UNEMPLOYMENT INSURANCE WEEKLY CLAIMS REPORT FOR WEEK ENDING JANUARY 11, 2014

FROM:  LABOR DEPARTMENT
UNEMPLOYMENT INSURANCE WEEKLY CLAIMS REPORT 

          SEASONALLY ADJUSTED DATA

In the week ending January 11, the advance figure for seasonally adjusted initial claims was 326,000, a decrease of 2,000 from the previous week's revised figure of 328,000. The 4-week moving average was 335,000, a decrease of 13,500 from the previous week's revised average of 348,500.
The advance seasonally adjusted insured unemployment rate was 2.3 percent for the week ending January 4, an increase of 0.1 percentage point from the prior week's unrevised rate. The advance number for seasonally adjusted insured unemployment during the week ending January 4 was 3,030,000, an increase of 174,000 from the preceding week's revised level of 2,856,000. The 4-week moving average was 2,908,750, an increase of 38,250 from the preceding week's revised average of 2,870,500.
UNADJUSTED DATA
The advance number of actual initial claims under state programs, unadjusted, totaled 534,431 in the week ending January 11, an increase of 51,190 from the previous week. There were 556,621 initial claims in the comparable week in 2013.
The advance unadjusted insured unemployment rate was 2.8 percent during the week ending January 4, an increase of 0.3 percentage point from the prior week. The advance unadjusted number for persons claiming UI benefits in state programs totaled 3,638,564, an increase of 354,387 from the preceding week. A year earlier, the rate was 3.0 percent and the volume was 3,867,784.
The total number of people claiming benefits in all programs for the week ending December 28 was 4,703,499, an increase of 508,309 from the previous week. There were 5,873,824 persons claiming benefits in all programs in the comparable week in 2012.
No state was triggered "on" the Extended Benefits program during the week ending December 28.
Initial claims for UI benefits filed by former Federal civilian employees totaled 1,569 in the week ending January 4, an increase of 372 from the prior week. There were 1,741 initial claims filed by newly discharged veterans, an increase of 533 from the preceding week.
There were 22,811 former Federal civilian employees claiming UI benefits for the week ending December 28, an increase of 2,103 from the previous week. Newly discharged veterans claiming benefits totaled 30,676, an increase of 2,111 from the prior week.
States reported 1,350,663 persons claiming Emergency Unemployment Compensation (EUC) benefits for the week ending December 28, an increase of 63,626 from the prior week. There were 2,059,438 persons claiming EUC in the comparable week in 2012. EUC weekly claims include first, second, third, and fourth tier activity.
The highest insured unemployment rates in the week ending December 28 were in Alaska (6.2), New Jersey (4.0), Connecticut (3.8), Pennsylvania (3.6), Montana (3.5), Wisconsin (3.5), Oregon (3.4), California (3.2), Illinois (3.2), Idaho (3.1), Massachusetts (3.1), Michigan (3.1), Minnesota (3.1), New York (3.1), and Rhode Island (3.1).
The largest increases in initial claims for the week ending January 4 were in New York (+28,314), Georgia (+18,734), South Carolina (+9,632), Alabama (+6,782), and Texas (+6,638), while the largest decreases were in Michigan (-17,635), New Jersey (-6,882), Massachusetts (-5,485), Ohio (-5,482), and Iowa (-4,212).

COUNTERNARCOTICS IN AFGHANISTAN

FROM:  STATE DEPARTMENT 
Future U.S. Counternarcotics Efforts in Afghanistan
Remarks
William R. Brownfield
Assistant Secretary, Bureau of International Narcotics and Law Enforcement Affairs
Senate Caucus on International Narcotics Control
Washington, DC
January 15, 2014

Chairman Feinstein, Co-Chairman Grassley, and other distinguished Senators, thank you for the opportunity to appear before you today to discuss counternarcotics efforts in Afghanistan. The State Department’s Bureau of International Narcotics and Law Enforcement Affairs (INL), which I have the honor to lead, works alongside our Afghan partners to help them develop and sustain programs to minimize all stages of the drug trade, including cultivation, production, trafficking, and use; to better protect vulnerable populations from the scourge of drugs; and to bring to justice major traffickers. These programs are works in progress. There is no silver bullet to eliminate drug cultivation or production in Afghanistan or address the epidemic of substance use disorders that plagues many poor Afghans. But we are successfully building Afghan capacity to implement and lead counternarcotics efforts.

Afghanistan today produces well over 80 percent of the world’s illicit opium, undermining good governance and public health, subverting the legal economy, fueling corruption and insecurity, and putting money in the hands of the Taliban. The narcotics trade has been a windfall for the insurgency. The United Nations (UN) estimates that the Afghan Taliban received at least $155 million annually from narcotics-related activities including taxation, protection, and extortion.

Equally worrisome is the impact of the narcotics trade on Afghanistan’s democratic institutions and human development, which the United States has supported through heavy investment. At every level of the illicit narcotics market – from cultivation to production to trafficking and consumption – the narcotics trade undermines good governance and saps the capacity of the Afghan people. It is noteworthy that Afghanistan now has one of the highest opiate usage rates in the world.

According to the UN World Drug Report, Afghan opium fuels a global trade that generates over $60 billion in profits for corrupt officials, drug traffickers, organized criminal groups, and insurgents. And while the Drug Enforcement Administration (DEA) estimates that only a small portion of the heroin in the United States currently originates in Afghanistan, there is clear potential for transnational criminal networks to adapt and for this amount to increase in the years ahead.

Afghan poppy cultivation increased significantly in 2013. While cultivation is only one indicator of counternarcotics progress, it was disappointing news, as was the reported decline in poppy eradication by provincial authorities. With the vast majority of opium poppy cultivated in the least secure areas, poppy farming is inextricably linked to security. Illicit actors, including insurgents, profit from narcotic sales. And in 2014, preparations for the critical spring elections will create competing demands on Afghan security forces who assumed the security lead from international forces only six months ago and continue to build their capacities.

Despite these tough realities, we have seen encouraging progress in the Afghan government’s counternarcotics capacity. In particular, there have been positive developments in areas such as interdiction, prosecutions, treatment services for substance use disorders, and alternative livelihoods for Afghan farmers. We have also seen that farmers are less likely to grow poppy in communities where the government has established a strong foothold and where basic development facilities, such as electricity, medical clinics, and schools, are available.

Together with the United Kingdom, we have helped the Afghan government stand up skilled Afghan interdiction units with specialized intelligence capabilities. Over the past several years, we have seen a steady increase in the amount of illicit narcotics seized by the Counter Narcotics Police of Afghanistan (CNPA) and its vetted units, which have been trained through U.S. programs. The growing and self-sustaining capacity of these vetted units is the direct result of the mentoring, training, and assistance of U.S. programs, which INL implements with our partners at the DEA and Department of Defense. INL successfully transitioned the Kunduz Regional Law Enforcement Center to the Afghan Ministry of the Interior (MOI) in September. The MOI now manages this center and it continues to be used by the CNPA vetted units for sensitive interdiction missions.

The Counter Narcotics Justice Center (CNJC), a fully Afghan facility with jurisdiction for the investigation, detention, prosecution, and trial of major narcotics cases is another important development. INL, in partnership with the U.S. Department of Justice and the United Kingdom, provides advisory and facility operations assistance to the CNJC. During the most recent Afghan calendar year (March 2012-March 2013), the CNJC’s Primary and Appellate Courts each heard the cases of over 700 accused. The CNJC Investigation and Laboratory Department processed cases involving more than 233 metric tons of illegal drugs – a 26 percent increase over the previous year. The CNJC is often cited as one of the premier judicial institutions in Afghanistan and is where U.S.-designated drug kingpin Haji Lal Jan was tried last year and ultimately received a 15-year prison sentence. Recently, Afghan prosecutors at the court secured three convictions based on conspiracy statutes rather than seizures, demonstrating their use of additional provisions of Afghan law.

Drug treatment is another area where the Afghan government and civil society are making significant progress. The U.S. and other donors have provided substantial support to enable the Afghans to establish a network of over 100 facilities across the country offering evidence-based treatment services. We are now in the process of transitioning responsibility for all drug treatment services to the Government of Afghanistan. As a first step, the Ministry of Public Health has committed to hiring the clinical staff at all drug treatment centers as government employees, which is critical to ensuring that these programs will be sustained under Afghan ownership in the years ahead.

Supporting economic alternatives to poppy cultivation is also critical. While alternative development programs are best addressed by my colleagues at the U.S. Agency for International Development, last month we joined the Afghan government in launching a new Food Zone in Kandahar. Building on the successes and lessons learned from the Helmand Food Zone, which I know that this Caucus is very familiar with, the Kandahar Food Zone (KFZ) will provide comprehensive counternarcotics support: alternative livelihoods, law enforcement, public information, and demand reduction – in key districts in Kandahar province. I must thank the Caucus for its support of the expansion of this program, which has been a positive tool for the Afghan government.

Our work with the Afghan Ministry of Counter Narcotics (MCN) cuts across all of these efforts. In recent years, the leadership and staff of the MCN have demonstrated increased effectiveness in designing counternarcotics policies across the relevant Afghan ministries and in implementing counternarcotics programs nationwide.

Each of these positive developments has matured in spite of a difficult security environment, entrenched corruption, and criminal groups that have worked to undermine progress. But while the challenges are many, let us also keep them in perspective. The estimated value of opium to the Afghan economy has remained relatively stable over the last decade. Yet Afghanistan’s legal economy has grown steadily. As a result, the potential net export value of opiates now make up a much smaller fraction of Afghanistan’s economy – from 60 percent of the GDP in 2003 to 14 percent in 2013. Today, poppy is grown on less than three percent of Afghanistan’s farmable land – roughly the same amount of land devoted to rice and one tenth as much as is devoted to wheat production. In short, Afghanistan’s drug challenge may be formidable, but it is not insurmountable.

As our government’s policy makers define the scope and shape of our engagement in Afghanistan post-2014, we will be ready to tailor our security assistance programs to meet them. We are reviewing our INL counternarcotics programs to assess how to enhance their impact and to ensure we can maintain robust oversight even with anticipated reductions in staff mobility. Several principles will guide our efforts:

It will be essential that we help our Afghan partners preserve the capacities they have developed with our support. The Afghan government that emerges from next year’s elections will need to possess the capabilities – and the political will – to make further progress in the post-2014 period.

Counternarcotics efforts within Afghanistan are fundamentally the responsibility of the Afghan government and people. This is why, across the board, we will focus even more intensively on building the Afghan government’s capacity to successfully and sustainably take responsibility for future efforts. The Afghan opiate trade extends, however, far beyond Afghanistan. For this reason, we also stress and encourage bilateral and multilateral assistance from the international community, as agreed to in the Tokyo Mutual Accountability Framework, to support counternarcotics efforts in Afghanistan.

A number of our partners, including the United Kingdom, Canada, and Japan, already provide significant assistance to build the Afghan government’s capacity. We are re-doubling our efforts to bring additional countries to the table, particularly those which are most affected by Afghan opiates. For example, last month in Bangkok, we joined key regional countries – including Afghanistan, Pakistan, India, and China – to address precursor chemicals by identifying best practices, tools for tracking chemicals, and next steps to combat illicit trafficking of precursors.

Our counternarcotics efforts do not take place in a vacuum – they are an integral part of the broader U.S. strategy for Afghanistan. We will continue to ensure our CN programs are well integrated with broader U.S. efforts, including assistance programs aimed at supporting a vibrant legal economy. Regardless of the shape or scope of our future counternarcotics efforts in Afghanistan, rigorous monitoring, evaluation, and oversight are necessary to ensure that our assistance has an impact and that our programs are safeguarded from waste and abuse. As the U.S. footprint shrinks, we are regularly reviewing our multilayered oversight approach that includes U.S. direct hires having eyes-on wherever possible, supplemented by locally employed staff, independent third party audits, and reporting from implementing program partners and intergovernmental organizations.

As we look to the end of 2014, Afghan capacity to weaken narcotics production and trafficking will only become more important. To be successful, Afghan political will is critical, but we must also sustain assistance with programmatic support and advice. Our experience elsewhere in the world demonstrates that counternarcotics is a long-term effort, hand in glove with the equally long-term challenges of good governance and sustainable economic growth. Success generally requires sustained, long term efforts, so that our partners can develop the necessary capabilities to deliver real results. A diverse, well-coordinated set of programs to support Afghan counter-narcotics capacity, with support from across the interagency and our partners here on the Hill, will be necessary.

Thank you Chairman Feinstein, Co-Chairman Grassley, and members of the Caucus, for your time. I will do my best to address your questions.

DEFENSE DEPARTMENT OFFICIALS TAKING STEPS TO COMBAT HUMAN TRAFFICKING

FROM:  DEFENSE DEPARTMENT 
DOD Raises Awareness of Human Trafficking
By Terri Moon Cronk
American Forces Press Service

WASHINGTON, Jan. 15, 2014 – Defense Department officials have a zero-tolerance level for human trafficking and have stepped up awareness and education efforts to curb the crime overseas.

In an interview with American Forces Press Service and the Pentagon Channel, Brian Chin -- a program manager for the department’s effort to combat human trafficking, said DOD is broadening its training for those who work in contracting, acquisition and law enforcement, and that a yearly general course on how to recognize human trafficking has been mandatory for DOD civilians since 2005.
Chin works out of Qatar and oversees the program in Southwest Asia and the U.S. Central Command area of operations.

DOD defines human trafficking as the use of force, fraud or coercion to recruit, harbor, transport or obtain a person for commercial sex or labor services, Chin explained.

Combating human trafficking is not a war waged alone within DOD, he noted.
“The response to human trafficking requires a collaborative approach within all of DOD’s components and services,” Chin said, as well as working with agencies, such as the departments of State and Homeland Security to put a stop to the crimes of slavery and prostitution.

“A lot of our training is designed to sensitize our folks to realize that [a victim] is not just someone who’s serving our food, cleaning the barracks or picking up refuse around the bases that could be someone who’s there against their will and is being held in circumstances that fit [DOD’s] criteria for human slavery,” he said.
Victims of human trafficking can be difficult to identify, Chin said, because usually no physical indicators of coercion exist, and human traffickers are adept at influencing their victims to hide their victimization.

Commanders, other military leaders and all DOD components at all levels are “striving very hard to implement changes to federal laws and DOD-wide policies to push requirements for awareness programs, training for targeted audiences and reporting [cases] to the DOD [inspector general],” he said.

Chin called overseas human trafficking “widespread,” but acknowledged that the number of victims is difficult to quantify. Victims usually are lured from rural areas with promises of working in good-paying jobs, he said.

“A classic sign of human trafficking is indentured servitude, where the victims pay large fees in a very competitive arena to secure jobs,” he said, adding that the high pay they’re promised is just a lure.

The fees to secure jobs become loans, and victims find themselves working as indentured servants to work off what they owe, and they can’t return home because their passports are taken away, Chin said. Victims’ homes often are held as collateral for their employment, he added.

In many instances, victims are misled about where they’re going, he noted.
“One of the classic cases you see is beauticians and barbers [who are] told they’re going to a Gulf nation to work in a salon for a very good salary, and [when] they get off a plane, they’re actually in Afghanistan, working on a forward-operating base under completely different circumstances,” Chin said.

DOD’s efforts to train its personnel to recognize and report human trafficking are paying off, he said.

“Our awareness programs are having a tremendous effect on sensitizing all of our [personnel], and everybody understands what human trafficking is,” he said. “They’re starting to understand it’s not just a sex crime off our bases, especially in Afghanistan. … It’s also a labor crime.”

CAPITAL REQUIREMENT PHILOSOPHIES BY SEC COMMISSIONER GALLAGHER

FROM:  SECURITIES AND EXCHANGE COMMISSION 
The Philosophies of Capital Requirements
 Commissioner Daniel M. Gallagher
Washington, DC
Jan. 15, 2014

Thank you, Sarah [Kelsey, Exchequer Club Secretary], for that introduction.  I’m very pleased to be here this afternoon.

Today, I’d like to talk about regulatory capital.  Given the usual reaction I get when I raise this subject, just to be safe, I’ve barred the exits!

In all seriousness, though, there’s been a great deal of attention paid to regulatory capital recently, including new Dodd-Frank requirements, Basel III implementation (or non-implementation) issues, and even bipartisan Congressional efforts to raise capital requirements for large banks.[1]  Almost all of that attention has naturally centered on the question of how much capital a financial institution should be required to hold.  What’s missing from the conversation, however – and what I’d like to focus on today – is a proper understanding of the theories behind capital requirements, both for banks and for non-bank financial institutions.

You may have noticed my reference to the theories behind capital requirements, rather than a single theory.  If so, you’re one step ahead of many policymakers both here and abroad, who often implicitly or explicitly advance a single, one-size-fits-all approach to capital.  As I’ll explain, this is a mistaken view that has the potential to impact the U.S. economy.

Understanding capital requirements begins with addressing the fundamental question of why financial institutions need minimum capital levels.  In the banking sector, where the regulated entities operate in a principal capacity and are leveraged institutions, capital requirements are rightly designed with the paramount goal of enhancing safety and soundness, both for individual banks and for the banking system as a whole.  Bank capital requirements serve as an important cushion against unexpected losses.  They incentivize banks to operate in a prudent manner by placing the bank owners’ equity at risk in the event of a failure.  They serve, in short, to reduce risk and protect against failure, and they reduce the potential that taxpayers would be required to backstop the bank in a time of stress.

Capital requirements for broker-dealers, however, serve a different purpose.  In the capital markets, we want investors and institutions to take risks – informed risks that they freely choose in pursuit of a return on their investments.  Eliminate the risk of an investment, and you eliminate the opportunity for a return as well.  Capital markets, in short, are predicated on risk.

Whereas bank capital requirements are based on the avoidance of failure, broker-dealer capital requirements are designed to manage failure by providing enough of a cushion to ensure that a failed broker-dealer can liquidate in an orderly manner, allowing for the orderly transfer of customer assets to another broker-dealer.

These two models of capital requirements, in other words, differ in fundamental ways - it’s certainly not a matter of comparing apples to apples.  Applying bank-based capital requirements to non-bank financial entities, in fact, is rather like trying to manage an orange grove using apple orchard techniques – it’s the equivalent of trying to determine how best to grow oranges to be used in orange pie, orangesauce, and, as a special treat, delicious caramel oranges on a stick.  If you think that metaphor is a bit strained, well, it is – but nowhere near as strained as imposing a bank capital regime on broker-dealers.

In order to fully understand the danger of imposing bank capital requirements on non-bank institutions, it’s helpful to take a bit of a detour to review the actions of the Federal Reserve during the height of the financial crisis, which leads us to that dreaded word: bailouts.

The word “bailout,” of course, has come to stand for everything wrong with the federal government’s response to the financial crisis.  As with, I imagine, everyone except for bailout recipients themselves, I find the idea of using taxpayer money to prop up insolvent financial institutions repugnant.  There’s a basic ant-and-grasshopper dynamic to bailouts: we naturally recoil from the idea of using the resources of prudent taxpayers to rescue institutions felled by their lack of prudence.  So let’s be absolutely clear: I hate bailouts.  We should all hate bailouts.  Case closed.

But…what, exactly, is a bailout?  Notwithstanding the risk of being misunderstood on an incredibly sensitive topic, I believe it is critically important to understand what is, and what is not, a bailout.  And here we come to the concept of the Federal Reserve as the lender of last resort and the crucial difference between insolvency and illiquidity for financial institutions.

The Federal Reserve Act of 1913 established the Fed, through its use of the discount window, as the nation’s lender of last resort.  The best starting point for understanding the concept of a lender of last resort remains Walter Bagehot’s seminal work Lombard Street.  Writing in 1873, Bagehot, who may be familiar to you from his work as editor-in-chief of The Economist or his treatise on the English constitution, set forth what is sometimes referred to as “Bagehot’s Dictum.”  My friend Paul Tucker, former Deputy Governor of the Bank of England, succinctly summarized Bagehot’s Dictum as follows: “to avert panic, central banks should lend early and freely…to solvent firms, against good collateral, and at ‘high rates.’”[2]

As you may recall me noting, I’m starkly against bailouts.  But offering access to the discount window to illiquid, but not insolvent, banks against good collateral comports with the traditional role of a central bank as the lender of last resort and falls outside even an expansive definition of the dreaded concept of a bailout.  Indeed, it falls squarely within the traditional understanding of a central bank’s paramount purpose.

In 2008, however, the Fed went well beyond offering access to the discount window to depository institutions in its capacity as the lender of last resort.  Instead, what happened in 2008 was that the Fed became the investor of last resort, a tremendously different concept which does indeed lend itself to the terrible title of “bailout.”  The acquisition of almost 80 percent of AIG in exchange for an $85 billion loan, for example, as well as the ownership of $29 billion in former Bear Stearns assets, marked a fundamental departure from the Fed’s traditional role.  As explained by Professor Allan Meltzer, author of a history of the Federal Reserve, “This is unique, and the Fed has never done something like this before.  If you go all the way back to 1921, when farms were failing and Congress was leaning on the Fed to bail them out, the Fed always said, ‘It's not our business.’ It never regarded itself as an all-purpose agency.” [3] One reporter aptly deemed the Fed’s actions in the financial crisis as a transformation into “The Fed Inc.”[4]

As the Fed explains on its web page detailing its “Mission,”[5] in an amusingly understated manner, “Over the years, its role in banking and the economy has expanded.”[6]  The Fed describes its current duties as conducting the nation's monetary policy, supervising and regulating banking institutions, maintaining the stability of the financial system and providing financial services to depository institutions, the U.S. government, and foreign official institutions.[7]  Notwithstanding the breadth of this mandate and the full plate of work you’d expect it to engender, the Fed has also taken steps to extend its regulatory paradigm – designed, once again, to prevent bank failures - to non-bank institutions as well.  Such institutions include broker-dealers, which, as I noted earlier, have their own regulatory capital regime that is designed to manage, rather than prevent, failure in order to ensure the return of customer assets. In addition, Title II of Dodd-Frank was explicitly designed not to prevent failure, but instead to manage the liquidation of large, complex financial institutions close to failure – indeed, the very name of the Title is “Orderly Liquidation Authority.”

In light of this, a more cynical person might suggest that the Fed’s efforts to extend the failure-prevention paradigm of bank capital regulation to financial entities that are already subject to failure-management regulatory schemes implies an institutionalization of the concept of too-big-to-fail.  Good thing I’m not a cynical guy.

I digress, but it is important to remember that the Fed’s lender of last resort activity during the financial crisis came after its intervention in the Bear failure as well as its bailout of AIG.  To be fair, once the Fed resumed its traditional role as the lender, rather than investor, of last resort, it did so robustly.  By March 2009, the Fed had lent a staggering $7.7 trillion dollars to beleaguered financial institutions, including $1.2 trillion on one day alone on December 5, 2008.[8]  And you thought your holiday spending was high!

So what does all of this have to do with capital?  To answer that question requires a better understanding of the recent and disturbing fascination with imposing bank-theory capital requirements on non-bank institutions.  Here, the recent FSOC intervention in the money market mutual fund space is quite instructive.

In August 2012, a lack of consensus among the Commission on the best way to proceed with proposing reforms to our money market fund rules led to an ill-advised abdication of the issue to FSOC, which enthusiastically took up the cause, leading to an unprecedented -- albeit invited -- incursion into the regulatory purview of an independent regulator.  The result was the issuance, in November 2012, of a report entitled “Proposed Recommendations Regarding Money Market Mutual Fund Reform,” in which FSOC floated – pun intended – the concept of a “NAV buffer,” that is, a capital requirement for money market funds.[9]

As I delved into the issue of money market fund reform following my return to the SEC as a Commissioner, it quickly became apparent to me that, perhaps in the hopes of staving off more stringent regulation, the industry was coalescing behind a capital buffer requirement of approximately 50 basis points, to be phased in over a several year period.  For the largest money market funds, this would have resulted in an approximately 1 to 200 ratio – a $500 million buffer to support $100 billion in investments.  This would amount to chicken feed in any serious capital adequacy determinations.

The ostensible reasoning behind a capital buffer for money market funds is that it would serve to mitigate the risk of investor panic leading to a run on a fund.  Common sense, however, belies this notion.  Do we really believe that investor panic would be assuaged by the comforting knowledge that for every one dollar they had on deposit, the money market fund had set aside half a penny?

Common sense also leads to the conclusion that there is no reason to assume that this view of capital requirements as a panacea to mitigate run risk is limited to money market funds.  Indeed, the now notorious “Asset Management and Financial Stability” report issued by Treasury’s Office of Financial Research last September featured similar reasoning, as reflected in its implied support for “liquidity buffers” for asset managers.[10]

As I noted in my statement at last June’s open meeting at which the Commission voted to propose reforms to our money market fund rules, which by the way thankfully did not include a capital buffer, “It became clear to me early on in this process that the only real purpose for the proposed buffer was to serve as the price of entry into an emergency lending facility that the Federal Reserve could construct during any future crisis – in short, the “buffer” would provide additional collateral to facilitate a Fed bailout for troubled MMFs.”[11]

Indeed, some Fed officials and academics[12] have suggested as much.  In a speech delivered last February, New York Fed President Bill Dudley, while expressing support for the FSOC-proposed money market fund reform mechanisms of a NAV buffer and a “minimum balance at risk,” explained his concern that “even after such reforms, we would still have a system in which a very significant share of financial intermediation activity vital to the economy takes place in markets and through institutions that have no direct access to an effective lender of last resort backstop.”[13]  He went on to raise the possibility of expanding access to the lender of last resort to additional entities in exchange for “the right quid pro quo—the commensurate expansion in the scope of prudential oversight.” Arguing that “[s]ubstantial prudential regulation of entities—such as broker-dealers —that might gain access to an expanded lender of last resort would be required to mitigate moral hazard problems,” he concluded, “Extension of discount window-type access to a set of nonbank institutions would therefore have to go hand-in-hand with prudential regulation of these institutions.”[14]

Fed Governor Daniel Tarullo, on the other hand, indicated his discomfort with extending access to the discount window to non-bank entities in a speech last November, noting that he was “wary of any such extension of the government safety net.”  In the context of addressing the “vulnerabilities” of short-term wholesale funding, he stated that he “would prefer a regulatory approach that requires market actors using or extending short-term wholesale funding to internalize the social costs of those forms of funding”[15] – that is, an increased capital charge. In a different speech earlier last year, he cited the risk of “regulatory arbitrage” if increased capital charges were applied “only to some types of wholesale funding, or only to that used by prudentially regulated entities”[16] and concluded, “Ideally, the regulatory charge should apply whether the borrower is a commercial bank, broker-dealer, agency Real Estate Investment Trust (REIT), or hedge fund.”[17]

All of this adds up to a terribly muddled situation.  Is the Fed seeking to impose bank-based capital charges on non-bank entities in conjunction with granting them access to the discount window at the cost of submitting to prudential regulation, as Mr. Dudley suggests?  Or is the situation just the opposite, as Governor Tarullo implies – would those additional capital charges be intended to prevent non-prudentially regulated financial entities from ever relying upon, as Governor Tarullo puts it, an extension of the “government safety net” the discount window provides?

Put another way, is the goal to expand the Fed’s role by making it the lender of last resort to non-bank entities such as money market funds and broker dealers, or is it to use its Bank Holding Company Act authority and its role in FSOC to dictate capital requirements to non-bank entities in order to prevent those entities from ever gaining access to the discount window?

These are more than purely semantic questions, although semantics play a role: one man’s expansion of the Fed’s role as the lender of last resort is another man’s institutionalization of bailouts for failing financial institutions.

In my opinion, both Governor Tarullo and Mr. Dudley raise very good points that warrant a healthy debate.  The issues they raise, however, as well as the more general issue of how much capital is enough in the banking and capital markets, create a degree of confusion about the Fed’s role as the lender of last resort.  Should the Fed still perform that role?  If so, when and for what entities?  Does such lending, in fact, constitute a bailout?

All of these questions require answers as we debate questions of capital adequacy.  If we are to assume that the Fed will not, or cannot, expand its role as the lender of last resort to non-bank entities, including non-bank subsidiaries of bank holding companies, would it ever be possible to set capital requirements at a level that would guarantee avoidance of 2008-type scenarios?  I think not, even if we were to impose capital requirements of 100%.  To me, therefore, capital markets regulators simply cannot stray from the theory of capital as a tool to facilitate the unwinding of a failed firm with the goal of returning customer assets.

I certainly don’t want to leave the impression that I disregard the Fed’s concerns about capital requirements for bank affiliated non-bank financial institutions.  Indeed, it is my hope in the coming year to work with Commission staff and FINRA to begin an in-depth review of whether it would be appropriate to establish separate capital rules for bank-affiliated broker-dealers.  If we determine that such a bifurcated broker-dealer capital regime would be appropriate, however, any such regime would be based on the principles of our current program for broker-dealer net capital, and it would be crafted to stand on its own, without any reference to the discount window.  On this and related issues, it is far past time that the SEC play an active role in the policy debate in order to ensure the ongoing vibrancy of our capital markets.

Before I conclude, I’d like to make one final point that is obvious but still needs to be reiterated: the judgment calls regulators make in establishing capital rules incentivize regulated entities in a manner that inevitably results in unforeseen (although often quite foreseeable) externalities.  A classic example is the beneficial capital treatment provided to certain asset-back securities under what’s known as the “Recourse Rule.”[18]  The Recourse Rule, issued by the Fed, the FDIC, the OCC and OTS as a supplement to their implementation of Basel I, hugely privileged highly rated ABS as well as ABS issued or guaranteed by a GSE.  How hugely? Well, for every $100 of highly rated or GSE sponsored ABS, well-capitalized banks had to set aside $2.  This compared to a $5 set-aside for unsecuritized mortgage loans and a $10 charge for commercial loans or corporate bonds.  In other words, by holding ABS from these favored categories, banks could reduce their capital requirements by 60% compared to holding an equivalent amount of mortgage loans and by 80% compared to holding corporate loans or bonds.

I’m reminded of the ubiquitous TV commercials featuring children’s responses to simple questions: what’s better, bigger or smaller, faster or slower, more or less?  As the ads say, it’s not complicated.  Concluding that setting aside less capital was better than setting aside more capital, banks loaded up their balance sheets accordingly, and by 2008, a staggering 93 percent of all the mortgage-backed securities held by American banks were either GSE-issued or rated AAA.[19]  As noted in a 2010 report issued by the American Enterprise Institute, “If not for the recourse rule's privileging of mortgage-backed bonds, the burst housing bubble almost certainly would not have caused a banking crisis. The banking crisis, in turn, froze lending and caused the Great Recession.”[20]

As the Recourse Rule illustrates, regulatory capital requirements play a tremendous role in incentivizing financial institutions’ holdings.  All the more important, therefore, that regulators use the right tool for the right job.  We rightly take great pride in our capital markets, the deepest and safest in the world.  We’re an entrepreneurial nation, and taking risks, whether with respect to investments or otherwise, is as American as apple pie.  Superimposing upon those markets a capital regime based on the safety-and-soundness banking paradigm, on the other hand, would be as sensible as orange pie.

Thank you all for your attention this afternoon.  I’d be happy to take questions.


[1] Terminating Bailouts for Taxpayer Fairness Act of 2013, S. 798, 113th Cong. (2013).

[2] Paul Tucker, Deputy Governor, Financial Stability, Bank of England, The Repertoire of Official Sector Interventions in the Financial System: Last Resort Lending, Market-Making, and Capital (May 28, 2009), available at http://www.bankofengland.co.uk/archive/Documents/historicpubs/speeches/2009/speech390.pdf.

[3] Edmund L. Andrews, A New Role for the Fed: Investor of Last Resort, N.Y. Times, September 18, 2008, available at http://www.nytimes.com/2008/09/18/business/18fed.html?pagewanted=print.

[4] Id.

[5] http://www.federalreserve.gov/aboutthefed/mission.htm

[6] Id.

[7] Id.

[8] Bob Ivry, Bradley Keoun and Phil Kuntz, Secret Fed Loans Gave Banks $13 Billion Undisclosed to Congress, Bloomberg, November 27, 2011, available at

http://www.bloomberg.com/news/2011-11-28/secret-fed-loans-undisclosed-to-congress-gave-banks-13-billion-in-income.html. By comparison, Treasury’s much better-known TARP program entailed a mere $700 billion.

[9] Financial Stability Oversight Council, “Proposed Recommendations Regarding Money Market Mutual Fund Reform” (November 2012), available at http://www.treasury.gov/initiatives/fsoc/Documents/Proposed%20Recommendations%20Regarding%20Money%20Market%20Mutual%20Fund%20Reform%20-%20November%2013,%202012.pdf.

[10] U.S. Department of Treasury, Office of Financial Research, “Asset Management and Financial Stability,” (September 2013), available at http://www.treasury.gov/initiatives/ofr/research/Documents/OFR_AMFS_FINAL.pdf.

[11] Daniel M. Gallagher, Commissioner, Sec. & Exch. Comm’n, Statement at SEC Open Meeting – Proposed Rules Regarding Money Market Funds (June 5, 2013), available at

 http://www.sec.gov/News/Speech/Detail/Speech/1365171575594#.UsneCvRDvqN.

[12] See, e.g., Comment Letter of Jeffrey N. Gordon (File No. FSOC-2012-0003) (Feb. 28, 2013), available at http://www.regulations.gov/#!documentDetail;D=FSOC-2012-0003-0131).

[13] William C. Dudley, President and Chief Executive Officer, Federal Reserve Bank of New York, Fixing Wholesale Funding to Build a More Stable Financial System (February 1, 2013), available at      http://www.newyorkfed.org/newsevents/speeches/2013/dud130201.html.

[14] Id.

[15] Daniel K. Tarullo, Governor, Board of Governors of the Federal Reserve System, Shadow Banking and Systemic Risk Redgulation (November 22, 2013), available at http://www.federalreserve.gov/newsevents/speech/tarullo20131122a.htm.

[16] Daniel K. Tarullo, Governor, Board of Governors of the Federal Reserve System, Evaluating Progress in Regulatory Reforms to Promote Financial Stability (May 3, 2013), available at http://www.federalreserve.gov/newsevents/speech/tarullo20130503a.htm.

[17] Id.

[18] Risk-Based Capital Guidelines; Capital Adequacy Guidelines; Capital Maintenance: Capital Treatment of Recourse, Direct Credit Substitutes and Residual Interests in Asset Securitizations, 66 Fed. Reg. 59613 (November 29, 2001).

[19] Jeffrey Friedman and Wladimir Kraus, “A Silver Lining to the Financial Crisis,” American Enterprise Institute for Public Policy Research Regulation Outlook at 3 (January 2010), available at http://www.aei.org/files/2010/01/19/01-2010-Regulation-g.pdf (citing Viral V. Acharya and Matthew Richardson, “Causes of the Financial Crisis,” Critical Review 21 no. 2–3 at 195–210, table 1 (2009), available at http://pages.stern.nyu.edu/~sternfin/vacharya/public_html/acharya_richardson_critical.pdf)). See also Jeffrey Friedman, “A Perfect Storm of Ignorance,” Cato Policy Report (January/February 2010), available at http://www.cato.org/policy-report/januaryfebruary-2010/perfect-storm-ignorance.  Note that this figure would be even higher if it included Recourse Rule-friendly AA-rated securitizations.

[20] Friedman and Kraus at 4.

FDA RECOMMENDED MAXIMUM AMOUNT OF ACETAMINOPHEN PER TABLET

FROM:  FOOD AND DRUG ADMINISTRATION 

The Division of Drug Information (DDI) is CDER's focal point for public inquiries. We serve the public by providing information on human drug products and drug product regulation by FDA.

On January 14, 2014, FDA is recommending health care professionals discontinue prescribing and dispensing prescription combination drug products that contain more than 325 milligrams (mg) of acetaminophen per tablet, capsule, or other dosage unit. There are no available data to show that taking more than 325 mg of acetaminophen per dosage unit provides additional benefit that outweighs the added risks for liver injury. Further, limiting the amount of acetaminophen per dosage unit will reduce the risk of severe liver injury from inadvertent acetaminophen overdose, which can lead to liver failure, liver transplant, and death.

We recommend that health care providers consider prescribing combination drug products that contain 325 mg or less of acetaminophen. We also recommend that when a pharmacist receives a prescription for a combination product with more than 325 mg of acetaminophen per dosage unit that they contact the prescriber to discuss a product with a lower dose of acetaminophen. A two tablet or two capsule dose may still be prescribed, if appropriate. In that case, the total dose of acetaminophen would be 650 mg (the amount in two 325 mg dosage units). When making individual dosing determinations, health care providers should always consider the amounts of both the acetaminophen and the opioid components in the prescription combination drug product.

In January 2011 we asked manufacturers of prescription combination drug products containing acetaminophen to limit the amount of acetaminophen to no more than 325 mg in each tablet or capsule by January 14, 2014. We requested this action to protect consumers from the risk of severe liver damage which can result from taking too much acetaminophen. This category of prescription drugs combines acetaminophen with another ingredient intended to treat pain (most often an opioid), and these products are commonly prescribed to consumers for pain, such as pain from acute injuries, post-operative pain, or pain following dental procedures.

PRESS SECRETARY'S PRESS GAGGLE ABOARD AIR FORCE ONE

FROM:  THE WHITE HOUSE 
Press Gaggle by Press Secretary Jay Carney Aboard AF1 en route Raleigh, NC, 1/15/2014
Aboard Air Force One
En Route Raleigh, North Carolina

10:25 A.M. EST

MR. CARNEY:  Good morning, ladies and gentlemen.  Welcome aboard Air Force One for the first outing of the New Year.  I hope you look forward to it as I do.  I just wanted to say a couple of things about where we’re going and the event the President will participate in.

Today the President will visit Vacon, a company that manufactures AC drives, which are used to control the speed of electric motors to maximize energy efficiency.  At 11:35 a.m. the President will tour the R&D facility, accompanied by Dan Isaksson, Vacon vice president, and Secretary Moniz.  At 1:00 p.m. at North Carolina State University, the President will announce new steps with the private sector to strengthen the manufacturing sector, boost advanced manufacturing, and attract good jobs with good wages that a growing middle class requires.

The President will announce the selection of a North Carolina headquartered consortium of businesses and universities led by North Carolina State University to lead a manufacturing innovation institute for next generation power electronics.

President Obama has declared the year 2014 a “Year of Action.”  And while he will continue to work with Congress on new measures to create jobs and grow the economy, he will also use his executive authority to get things done.  After shedding jobs for a decade, our manufacturers have added 568,000 jobs over the past nearly four years, including 80,000 over the past five months.  Manufacturing production has grown since the end of the recession at its fastest pace in over a decade.  The President is committed to building on that progress.

With that, I’ll take your questions.

Q:    Could you respond to some of the criticisms that Judge Bates made of recommendations regarding surveillance?  He objects, for example, to the appointment of a special advocate to a rigorous procedure for national security letters, and so on.

MR. CARNEY:  Mark, as you know, we are in the final stages of wrapping up the administration’s review of our signals intelligence programs.  As we’ve been saying, we’re not going to discuss decisions and outcomes while the review is ongoing, and we wouldn’t discuss observations or assessments by others about recommendations that the President himself is considering as he makes final decisions prior to his remarks at the Justice Department on Friday.

Q:    What about the New York Times story today that the NSA is using radio waves to tap into computers around the world and monitor them?

MR. CARNEY:  As you know, I won’t discuss specific tools or processes.  But the NSA operates under heavy oversight and is focused on discovering and developing intelligence about valid and foreign intelligence targets, such as terrorists, human traffickers, and drug smugglers.  They are not interested in the personal information about ordinary Americans, nor do they use foreign intelligence capabilities to steal the trade secrets of foreign companies on behalf of, or give intelligence that we collect to U.S. companies to enhance their international competitiveness or increase their bottom line.

Q:    Do you have anything to add to your statement last night about the unemployment insurance?  Who is to blame for this?

MR. CARNEY:  I think if you look at my statement, we’re very disappointed that Republicans blocked a common-sense, compromise solution that would have extended unemployment insurance benefits to the 1.3 million Americans and their families who have been cut off from this emergency assistance.

It’s very frustrating when, again, the previous President, a Republican, signed similar extensions five times without offsets.  And Majority Leader Senator Reid has gone quite a distance to try to accommodate the concerns of Republicans who have shown a desire and an interest in extending these benefits when it comes to offsets and when it comes to offering amendments.

So we’re going to continue to work with congressional leaders, with Senate leaders to move this forward.  The need is urgent.  It should not be tied up in ideological or partisan debate.  The Americans who need this assistance are Republicans, they're Democrats, they're independents, they're unaffiliated -- they're Americans.  And Congress should act.

Q:   Will the President address the vote or the lack of votes in the Senate in his remarks today?

MR. CARNEY:  He might bring it up in his remarks, but it’s certainly not the focus of his remarks.

Q:    Agenda for his meeting with Senate Democrats?  What’s at the top of the agenda?

MR. CARNEY:  Well, it’s basically to sync our watches on the policy agenda that the President has been putting forward and will add to in his State of the Union address.  So there will be a broad array of topics, including -- as you heard him say yesterday at the Cabinet meeting -- efforts we’re undertaking to work with Congress legislatively to move the country forward and efforts that he can undertake using the unique authorities and powers that a President has to make advances on behalf of the middle class and the American economy.  And today’s event in North Carolina is a perfect example of the President using that power and that authority.

Q:    Jay, speaking of today’s event, these manufacturing institutes, as you know, were an initiative announced at the State of the Union last year, and here we are two weeks before this year’s State of the Union.  Is there any frustration that it’s taken him close to a year to announce the establishment of the first one of what’s supposed to eventually be 45 of these institutes?

MR. CARNEY:  Not at all.  I mean, I think if we had announced everything in a week, you would have said it wasn’t serious, it wasn’t real, and the assessments made about where to launch these initiatives weren’t vigorous and substantive.

I think that we have seen extremely positive growth in our manufacturing sector.  We’ve seen areas with huge potential for further growth, especially in advanced manufacturing, in technologies and businesses that the United States can dominate, and by doing so can create high-paying jobs that support middle-class families here at home.

This is something the President is very committed to, and he’s very excited about today’s event.

Q:    “Year of Action” -- his economic issues can we see -- expect action on more health care actions, immigration, other issues on the President’s domestic agenda?

MR. CARNEY:  The answer is, yes.  I think the point that the President has been making and others have made on his behalf is that in many ways the American economy, as it has emerged from the recovery, has grown steadily and created 8.2 million jobs, is on a precipice of even greater strides forward.  And we want to do everything we can, using our authorities, the President's authorities to take action through the executive and through the power of the pen and the power of the phone, as well as take action through and with Congress legislatively on immigration reform and so many other issues that we can work together on.

It bears notice that, despite all of our differences, despite our disappointment and frustration with the decision by Republicans to block UI benefits thus far, that there has also been steady progress on the omnibus legislation that is the product of a bipartisan compromise on a budget deal.  And that omnibus legislation, that funding bill protects some of the President's key priorities, including in manufacturing, SelectUSA, including in early childhood education and others.

So there's a lot of positive things that can happen and are happening on behalf of the economy and the middle class and the American people, and we just need to keep moving forward.  So the President is going to talk a lot about, in the days ahead and in the State of the Union address, ways that we can use all the tools available to us to grow the economy and create jobs that middle-class families can depend on.

Q:    Can you talk about the significance of the phrase “Year of Action” compared to previous years, which seemed were also years of action?  Why are you pointing out that this year is a year of action?

MR. CARNEY:  Well, that’s a profound question, Zack.  The fact of the matter is this President has throughout his time in office utilized the tools available to him.  But we're going to reinvigorate that process.  We're going to continue to look for creative and innovative ideas to do things like advance the cause of developing high-tech and other advanced manufacturing centers across the country; to expand access to early childhood education; to move forward with rebuilding our infrastructure.

One other positive outcome of the omnibus legislation that’s moving through the Congress now is that it provides significant funds for TIGER investments -- for TIGER grants.  And that goes right to the infrastructure needs that we have in this country.  And as you know, investment in infrastructure, as had been recognized by both Democrats and Republicans over the years, provide an immediate jolt to the economy, immediate job creation, as well as long-term positive benefits because of improved infrastructure.

Q:    Jay, can I ask about Iran?  As you know and have reacted to, Iran's foreign minister laid a wreath at the grave of a Hezbollah leader who was involved in a terrorist attack against Americans.  And we spoke yesterday about these reports of a Russian-Iran oil-for-goods deal.  You’ve made the case repeatedly of why you think Congress should wait and give diplomacy a chance.  Are you concerned that events like these, which you can't control, could have a negative effect and sort of weaken the argument that you're making with folks on the Hill that, look, you need to give us a window of time to try to get a deal done?

MR. CARNEY:  Well, I’d say a couple things.  On the matter of the Iranian foreign minister honoring Imad Mugniyah, the United States condemns the decision taken by the Iranian foreign minister to place a wreath at the grave of a former leader of the Lebanese Hezbollah responsible for heinous acts of terrorism that killed hundreds of innocent people, including Americans.  The inhumane violence that Mugniyah perpetrated and that Lebanese Hezbollah continues to perpetrate in a region with Iran’s financial and materiel support has had profoundly destabilizing and deadly effects for Lebanon and the region.

The decision to commemorate an individual who has participated in such vicious acts and whose organization continues to actively support terrorism worldwide sends the wrong message and will only exacerbate tensions in the region.

Now, I think this speaks to the fact that through the P5-plus-1 and the agreements that have been negotiated, and the process moving forward, we are addressing with our international partners the profound and important challenge of ensuring that Iran does not develop and obtain a nuclear weapon.  There are a host of vital national security interests at stake here, as well as the national security interests of our allies and friends.

Even as we pursue that and do it in a way that demands transparency and verifiability from the Iranians, we do not let up in our views and our positions when it comes to other activities, including the support of terrorist organizations that Iran engages in.

On the matter of the reports about the oil-for-goods deal with Iran that Russia may be engaged in, we've been very clear that we're concerned about that.  When we saw those reports, press reports, it was immediately raised at the highest levels by Secretary Kerry, with Foreign Minister Lavrov.  And I can tell you that if that deal moves forward it would raise serious concerns as it would be inconsistent with the terms of the P5-plus-1 agreement with Iran and could potentially trigger U.S. sanctions against the entities and individuals involved in any such transactions.

So our disposition has not changed on these matters.  And that's why it’s so important to be clear that the actions that Iran takes, the steps it takes to either comply with or not comply with commitments it makes are what we judge Iran by -- not by statements meant for a domestic audience or by promises rather than action.  So we’re going to press forward.

When it comes to the need to implement the Joint Plan of Action and engage in negotiations through the P5-plus-1 with the Iranians, it is absolutely the right thing to do to test whether or not we can resolve the challenge posed by Iran’s nuclear program peacefully.

The President retains all options, including military options, to fulfill his policy goal.  But it is absolutely preferable to him, to the American people, and to all those who demand that Iran forsake nuclear weapons that this be resolved peacefully.

Q:    The Senate Intelligence Committee has released a declassified report on Benghazi that found that -- or concluded that the attacks there were preventable and based on known security shortfalls, and the explanations for what caused the attack were -- inaccurately referred to the protests without sufficient eyewitness accounts or intelligence to base that on.  Is there any response to those findings today?

MR. CARNEY:  Well, you know the administration has made extraordinary efforts to work with seven different congressional committees investigating what happened before, during, and after the Benghazi attacks, including testifying at 13 congressional hearings, participating in 50 staff briefings, and providing over 25,000 pages of documents.

Today’s report largely reaffirms the findings reached by the independent Benghazi Accountability Review Board, and a number of the recommendations are consistent with the work the State Department has taken to improve diplomatic security, including upgrading security cameras, improving fire-protective equipment, and increasing Marine security guard presence.

I’d refer you to the State Department for the status on implementing each of those recommendations.  But as you know, the administration is focused on two pieces:  bringing to justice those responsible for the deaths of four Americans; and making sure that we take the steps necessary to improve the security at vulnerable facilities so that our men and women serving overseas in diplomatic positions are -- rather, to improve their security, as I said.

So I think this reinforces what other investigations have found, which is that there was not enough security to protect the four Americans who lost their lives and that there are things that we must do and that we are doing to ensure that we do everything we can to protect the security of Americans serving overseas, often in difficult circumstances and dangerous circumstances.

Q:    Jay, any details on the First Lady's 50th birthday party?

MR. CARNEY:  No, I don’t have anything on that.  I’d refer you to the East Wing.

Q:    No Jay-Z, Beyoncé dance party?  (Laughter.)

Q:    Are you going?

MR. CARNEY:  Again, I'd refer you to the East Wing.

Q:    Have you been invited?

MR. CARNEY:  I'd refer you to the East Wing.  (Laughter.)

Q:    Do you dance?

MR. CARNEY:  I do.  Anybody else?

Q:    One other thing.  Can you confirm that the President is going to nominate Maria Contreras-Sweet to head the SBA?

MR. CARNEY:  I can.  The President will do that this afternoon --

Q:    In his remarks?

MR. CARNEY:  No, upon return to the White House.  And I think if you look at her remarkable career, you will see that she is an excellent candidate for this position.  And the President is grateful that he will be able to nominate her today.

Q:    One more for you.  What do the lobbying efforts look like from the White House on the fast-track TPA bill?

MR. CARNEY:  It’s a priority of the President’s, his entire trade agenda, and we’re working with Congress to move that forward.

Q:    Thank you.

MR. CARNEY:  Thanks.

END

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