Transcript of Confirmation Hearing for Hillary Clinton for Secretary of State - January 13, 2008

Transcript of the January 13, 2008 Senate confirmation hearing of Senator Hillary Clinton as nominee for Secretary of State. [Clinton's prepared statement]
KERRY: Well, good morning, everyone. We welcome you all here. We're delighted to welcome Senator Clinton, secretary of state designate. I think every member of the committee believes very strongly that in Senator Clinton we have a nominee who is extraordinarily capable and smart, an individual with the global stature and influence to help shape events.

She will take office on a first-name basis with numerous heads of state, but also with billions of people in every corner of the globe, those billions of people that the Obama administration hopes to reach, inspire, and influence. Her presence overseas will send a strong signal immediately that America is back.

This morning, we look forward to a good, healthy dialogue, and, over the coming years, we particularly look forward to a strong, close, cooperative, working relationship.
This is an historic moment for this committee. For the first time in American history, one of our members will be sworn in as president and another one as vice president. Before any of the newer members of our committee get too excited about future prospects, let Dick Lugar, Chris Dodd, and myself -- and perhaps even Hillary will join in this -- in saying trust us, it ain't automatic.

(LAUGHTER)

For me, it is a particularly special and personal privilege to be sitting here, having testified before Chairman Fulbright in 1971 and having worked closely with the chairmen since who have set a strong example for this committee's ability to contribute to our security.

And this morning, we should remember one chairman in particular. Last week, Dick Chris, Sheldon, and I attended memorial services for Claiborne Pell in Rhode Island. President Clinton, who first met Chairman Pell when he was a college student interning on this committee, spoke movingly at the funeral. And today, I know we all join together in expressing our gratitude for Chairman Pell's exemplary service. His commitment to bipartisanship and multilateralism remains the guidepost by which this committee will continue its efforts.

I'm privileged also to follow in the more recent footsteps of two respected chairmen and good friends. Vice President-elect Biden and I first ran for office together in 1972, and we grew up together in politics. I know Joe and his family well, as many of the members of this committee do. I value his friendship, and the country will come to value the wisdom and strength which he brings to the vice presidency. The committee is grateful for his leadership.

I also have the good fortune as chairman to have beside me as ranking member the senior-most Republican in the Senate, a Noble Peace Prize nominee for his groundbreaking nonproliferation work and a trusted, thoughtful voice in our national security dialogue.

Senator Lugar, I look forward to working with you in the same cooperative way that Senator Biden did and others have in the past, and I know that that will characterize the work of this committee as we go forward, and I could not have a better partner, and I thank you for that.

If we do our job correctly, as we begin a new presidency and a new Congress, we stand on the brink of a new era of American diplomacy with great potential for significant, if not transformational, steps forward across the globe, and I look forward to working with Secretary Clinton to seize that potential.

In the last seven years, we have spent the treasure of our nation -- young American soldiers, first and foremost, and billions of dollars -- to fight terrorism, and yet grave questions remain as to whether or not we have chosen our battles correctly, pursued the right strategy, defined the right goals.

That we are engaged in fighting a global insurgency is beyond doubt, but our task is to define the method and means of our response more effectively, and no challenge will be greater in the days ahead than to get this right.

Pakistan and Afghanistan are definitively the front line of our global counterterrorism efforts. Having visited several times recently, it is clear that no amount of additional troops will succeed absent the effective instruments of a functioning state. We face a gargantuan task, and to be successful, I believe we must fundamentally redefine our approach.

We went into Afghanistan to deny Al Qaida sanctuary. Our goals must be defined by our original mission, by the regional security context, and by the tribal decentralized nature of Afghan society. I'm eager to hear Senator Clinton's thoughts on the road ahead in Afghanistan.

Nor should anyone believe that Iraq is a completed task. Despite the Status of Forces Agreement that sets out a schedule for reduction of U.S. forces, Sunni and Shia tensions, the unresolved status of Kirkuk, the distribution of oil revenues, and setbacks to political reconciliation each threaten to upend our fragile progress, and they will require active diplomatic engagement by Secretary of State Clinton and the rest of the Obama administration with Iraq's government and particularly with its neighbors.

Iraq, as well as Iran, Syria, the West Bank, and Gaza, all require an approach that recognizes the interconnectedness of each of these challenges. We look forward to working with the administration and the Secretary Clinton on a significantly expanded and vigorous diplomatic effort.

In the age of catastrophic terrorism, it is also urgent -- and I know Senator Lugar joins me in expressing this -- urgent that we restore America's leadership on nonproliferation. Whatever our differences, we must reengage with Russia on nuclear security, specifically the START Treaty.

It is my hope that we will embrace deep reciprocal cuts in our nuclear arsenals, and I'm eager to hear Senator Clinton's thoughts on this matter. Consistent with our security needs, I believe we should set a goal of no more than 1,000 deployed warheads, and that goal should be just the beginning. We should also lay the groundwork for ratification of the Comprehensive Test Ban Treaty.

The last eight years have resulted in increased suspicion of our motives abroad, especially in the Muslim world where we must do much more to reduce the prevalent and costly perception of an assault on Islam. It is vital that we redouble our efforts to find common ground, including through interfaith dialogue.

KERRY: We must integrate all of the disparate elements of our national power into a single unified effort, and I agree with Secretary Gates that we need a State Department with more resources and greater capacity to deal with 21st-century challenges in conflict zones and in weak and failing states.

I was heartened to hear Senator Clinton signal her desire to radically improve our diplomatic capacity and finally give the State Department the tools it needs to put civilian functions back in civilian hands, and she can count on our support in that effort.

She can also count on our support in efforts to reengage with Latin America and recognize how crucial renewed and expanded relationships with Russia and China are to our overall goals. I believe, Madam Secretary-designate, that China offers us extremely important opportunities for a more productive partnership, and we need to approach that relationship with greater respect for and understanding of our common interests.

Before turning to Senator Lugar, let me just say one thing about global climate change. Many today do not see global climate change as a national security threat, but it is profoundly so. And the consequences of our inaction grow more serious by the day.

In Copenhagen this December, we have a chance to forge a treaty that will profoundly affect the conditions of life on our planet itself. A resounding message from the recent Climate Change Conference in Poland was that the global community is looking overwhelmingly to our leadership. This committee will be deeply involved in crafting a solution that the world can agree to and that the Senate can ratify, and, as we proceed, the lesson of Kyoto must remain clear in our minds: All countries must be part of the solution.

Each of these challenges present major opportunities for a new administration and for a new secretary of state. After the polarization of the last eight years, diplomacy must be directed domestically as well. Senator Clinton's record in the Senate shows her to be an alliance builder in the finest traditions of this body. She has repeatedly sought out the best people, the best ideas, and the common ground upon which solutions could be found.

KERRY: While the committee still has some questions with respect to the fund-raising activities of the Clinton Foundation, I'm pleased that Senator Clinton will have an opportunity today to address them beyond the ways in depth that they have already been addressed.

I understand that Senator Lugar will be speaking to this issue in greater detail, and we look forward to hearing the senator's responses.

Let me just say personally that in the year 2000, I had the privilege of joining the then first lady and her husband on the first visit by an American president to Viet Nam after the normalization of relations.

I've seen Senator Clinton's diplomatic acumen up close. I saw her immense curiosity, her quick and impressive grasp of detail, and her authoritative approach, all of which will serve her will in this new undertaking.

Hillary Clinton has shown the intelligence to navigate the complex issues that we face, the toughness and the tireless work ethic that this job will require, the stature to project America's world leadership, and the alliance building -- at home and abroad -- that will be vital to our success in the years ahead.

As senator, Hillary has earned the respect of her colleagues, Democrat and Republican alike, and we are honored to welcome her here today to our committee for confirmation as America's next secretary of state.

Senator Lugar?

LUGAR: Mr. Chairman, I congratulate you on taking the gavel and wish you every success. And we appreciate the very gracious comments you have made about previous chairmen. And I join you especially in your tribute to our former colleague Senator Pell, whose life we celebrated together last week.

It's a great pleasure to welcome Senator Hillary Clinton to the Foreign Relations Committee. Those of you who have served with her during the past eight years can attest to her impressive skills, her compassion, her collegiality. I've enjoyed the opportunity to work with her in the Senate. I look forward to the prospect of much more frequent collaboration when she is secretary of state.

I also want to congratulate Senator Kerry on the assumption of chairmanship of this committee. My first hearing as chairman of the committee in 1985 was one of the proudest moments of my career. And I'm sure Senator Kerry is feeling the gravity as well as the joy of this historic occasion.

And I want to thank him and his staff for their graciousness during the last several weeks. It's been a pleasure to work with them. And I look forward to all that we can achieve together under Senator Kerry's chairmanship.

I've frequently said the foremost criteria for selecting a national security cabinet official should be whether the nominee is a big leaguer who has achieved extraordinary accomplishments, is well known to the world, understands both process and policy, and can command global respect.

In Senator Clinton, President-elect Obama has boldly chosen the epitome of a big leaguer. Her qualifications for the post are remarkable. Her presence at the helm of the State Department could open unique opportunities for United States diplomacy and could bolster efforts to improve foreign attitudes toward the United States. She has a long-standing relationship with many world leaders that could be put to great use in the service of our country.

Her time in the Senate has given her a deep understanding of how United States foreign policy can be enriched by establishing a closer relationship between the executive and legislative branches. She is fully prepared to engage the world on a myriad of issues that urgently require attention.

During the last six years, this committee has held more hearings than any other committee in the Senate, and we have tried to come to grips with issues involving Iraq, Afghanistan, Iran, North Korea, Russia, the Middle East peace process, Africa, the Western Hemisphere, the NATO Alliance, non-proliferation, foreign assistance reform, the State Department budget, and numerous other priorities.

All of these challenges will continue to occupy Senator Clinton as secretary of state. I would highlight several other points to which I hope the secretary will very high priority in addition to the ongoing crises that will press for her attention.

First, it is vital that the START Treaty with Russia be renewed. When the Senate gave its consent to ratification to the Moscow Treaty in 2002, it did so knowing that the United States could rely on START Treaty's verification regime. It provides important assurances to both sides.

At the time, this committee was assured that extension of START was a very high priority. Unfortunately, little progress has been made, and the treaty will expire in 11 months.

In other words, the conceptual underpinning of our strategic relationship with Russia depends upon something that is about to expire. Such an outcome will be seen as weakening the international nonproliferation regime. Second, energy security must be given a much higher priority in our diplomacy. Earlier this month, Russian Prime Minister Vladimir Putin ordered a cutoff in natural gas supplies that struck allies across Europe. And this dispute is only the most recent example of how energy vulnerability constrains our foreign policy options around the world, limiting effectiveness in some cases and forcing our hand in others.

I look forward to supporting President-elect Obama in taking the necessary steps to dramatically reduce our domestic dependence on oil. Yet domestic reform alone will not be sufficient to meet the global threats to our national security, our economic health or climate change.

In my judgment, energy security must be at the top of our agenda with nearly every country. Progress will require personal engagement by the secretary of state.
Third, eradicating global hunger must be embraced as both a humanitarian and national security imperative. Precipitous food price increases that occurred in 2007 and 2008 created havoc in many parts of the world, causing riots in some 19 countries and plunging an additional 75 million people into poverty and increased vulnerability to malnourishment.

Nearly 1 billion people are presently food insecure. It is predicted the world's population will grow to such an extent that by 2050 current food production will need to double in order to meet demand. There is no reason why people should be hungry when we have the knowledge, the technology and the resources to make everyone food secure.

The United States is uniquely situated to help the world feed itself and has the opportunities to recast its image by making the eradication of hunger a centerpiece of United States foreign policy.

LUGAR: And with these issues in mind, it's especially important we move forward with Senator Clinton's nomination. President-elect Obama has expressed his confidence in her, and he deserves to have his secretary of state in place at the earliest opportunity.

The main issue related to Senator Clinton's nomination that has occupied the committee has been the review of how her service as secretary of state can be reconciled with the sweeping global activities of President Bill Clinton and the Clinton Foundation.

To this end, the Obama transition and the Clinton Foundation completed a memorandum of understanding outlining steps designed to minimize potential conflicts of interest.

I share the president-elect's view that the activities of the Clinton Foundation and President Clinton himself should not be a barrier to Senator Clinton's service. But I also share the view implicitly recognized by the memorandum of understanding that the work of the Clinton Foundation is a unique complication that will have to be managed with great care and transparency.

The core of the problem is that foreign governments and entities may perceive the Clinton Foundation as a means to gain favor with the secretary of state. Although neither Senator Clinton nor President Clinton has a personal financial stake in the foundation, obviously its work benefits their legacy and their public service priorities.

There is nothing wrong with this, and President Clinton is deservedly proud of the Clinton Foundation's good work in addressing HIV/AIDS, global poverty, climate change, and other pressing problems.

But the Clinton Foundation exists as a temptation for any foreign entity or government that believes it could curry favor through a donation. It also sets up potential perception problems with any action taken by the secretary of state in relation to foreign givers or their countries.

The nature of the secretary of state post makes recusal from specific policy decisions almost impossible, since even localized U.S. foreign policy activities can ripple across countries and continents. Every new foreign donation that is accepted by the foundation comes with the risk it will be connected in the global media to a proximate State Department policy or decision.

Foreign perceptions are incredibly important to United States foreign policy, and mistaken impressions or suspicions can deeply affect the actions of foreign governments toward the United States. Moreover, we do not want our own government's deliberations distracted by avoidable controversies played out in the media.

The bottom line is that even well-intentioned foreign donations carry risks for United States foreign policy. The only certain way to eliminate this risk going forward is for the Clinton foundation to forswear new foreign contributions when Senator Clinton becomes secretary of state.

I recommend this straightforward approach as the course most likely to avoid pitfalls that could disrupt United States foreign policy or inhibit Senator Clinton's own activities as secretary of state.

Alternatively, the Clinton Foundation and the Obama transition have worked in good faith to construct a more complex approach based on disclosure and ethics reviews that would allow the foundation the prospect of continuing to accept foreign donations deemed not to have the appearance of a conflict of interest.

The agreement requires, among other measures, the disclosure of all the foundation donors up to this point and annual disclosure of donations going forward and a State Department ethics review process that would evaluate proposed donations from foreign governments and governmental entities.

All of these are positive steps. But we should be clear that this agreement is a beginning and not an end. It is not a guarantee against conflict of interest or its appearance. And for the agreement to succeed, the parties must make the integrity of United States foreign policy their first principle of implementation.

For this reason, the requirements for transparency in the memorandum of understanding should be considered a minimum standard. I'm hopeful the Clinton Foundation and the Obama administration will go further to ensure that the vital business of United States foreign policy upon which the security of our country rests is not encumbered by perceptions arising from donations to the foundation.

If there is a slightest doubt about the appearance that a donation might create, the foundation should not take that donation. If there are issues about how a donation should be disclosed, the issue should be resolved by disclosing the donation sooner and with as much specificity as possible.

Operational inconveniences for the foundation or a reduction in some types of donations that have been accepted in the past are small prices to pay when balanced against the serious business of United States foreign policy that affects the security of every American.

With this in mind, I have suggested several additional transparency measures that could be embraced by the Clinton Foundation and the Obama administration going forward. Because time is limited I will not discuss each one explicitly now, but I have provided a background sheet -- Attachment A -- that outlines these measures. And my understanding is the Clinton Foundation has already accepted the fourth item listed. The willingness of all parties to voluntarily implement these additions would strengthen the commitment to transparency and at least partially mitigate the risk inherent in foreign contributions.

I believe that every member of this committee will seek ways to support Senator Clinton's work as secretary of state. I am certain every member wants her to succeed. We have the opportunity through the leadership of President-elect Obama and Senator Clinton to establish a new foreign policy path that will greatly benefit the security and prosperity of the United States.

And I look forward to our discussion with our esteemed colleague today. I applaud her willingness to take on the role of secretary of state at a very difficult moment in history.

And I thank you, Mr. Chairman.

KERRY: Well, I thank you, Senator Lugar.

And let me just say that, for the record, first of all the attachment will be made part of the record with the statement.

And secondly, I think it's fair to say that Senator Lugar is not speaking from a partisan's perspective, but I think he is really expressing a view of the committee as a whole. And we look forward to having a good discussion about this.

If I could just say to my colleagues that what we're going to do is I'm about -- I want to take a personal privilege to let Senator Dodd say something because he has to go chair a hearing. But we're going to have a 10-minute round. We have not yet, obviously, been able to have our organizational meeting, so we'll have a chance to talk about procedures going forward.

KERRY: But today we will go, as we have in the past, as a matter of seniority. My hope is we can get a full round, maybe plus, before we break.

We will take a break at about 12:45 until 2 o'clock, thereabouts, and that's by agreement with Senator Clinton and some other needs that we have to attend to.

We also intend to try to do the business meeting in order to try to expedite this nomination Thursday morning, when we have another hearing on another nominee. So we look forward to trying to have the cooperation of everybody to be able to do that.

I think Senator Lugar, again, spoke to the committee and expressing our desire to have a secretary of state in place and ready to go as rapidly as possible and, obviously, on Tuesday of next week.

That said, let me turn to Senator Dodd. I know, Senator Schumer, you've being very patient and we appreciate it.

Senator Dodd?

DODD: Well, thank you very much, Mr. Chairman. I apologize to my colleagues, but as we're in the midst of all of this, it's sort of a New York day. I'll leave here and Shaun Donovan is the nominee to be the new secretary of HUD and I have to chair that hearing as chairman of the Banking Committee.

Mr. Duncan is the designee to be the new secretary of education. I'm the ranking Democrat on that committee, as well. So we have a busy day in front of us. I'm going to be very, very brief and ask consent, Mr. Chairman, that a longer statement be included in the record.

But I wanted to, first of all, commend you, Mr. Chairman. This is a -- you are so well suited to this job as chairman of this committee, your background and experience, your knowledge of these issues, and I'm very excited about your leadership of this committee.

And let me, as well, underscore the point you made about Claiborne Pell and Dick Lugar, as well, Joe Biden. We've been blessed in this committee over the years with some remarkable people to chair this committee and you're going to carry on in that tradition.

Let me also welcome and congratulate my wonderful friend from New York, the nominee, Senator Clinton. I've worked with her over the years and I am very excited, as all of us are, about your nomination and look forward to having a very strong and healthy relationship between the State Department and this committee.

I don't think it's overstating the case to say that you will be inheriting some of the largest and most difficult international challenges the United States has faced in over half a century and, as has been said by Senator Kerry and Senator Lugar, the threat of terrorism, proliferation of weapons of mass destruction still loom large and our own prestige, influence and elements of our soft power have been questioned, and as our commitment to the rule of law.

And while these issue and others, including the crisis in Gaza and our relationships with China and Russia, are very much at the forefront of our minds, I want to just raise one issue briefly before departing and hopefully getting back later in the day to discuss this with you further.

But as I mentioned, I'm chairman of the Banking Committee and the one issue that overlaps almost all of this, in many ways, is the global economic crisis. While we're very much aware of it here in our own country, with the problems we're grappling with every single day, I think most are aware today this is not just a localized problem in the sense that every other issue we are dealing with will be affected by our ability to grapple effectively with the economic crisis we face.

This crisis has inflicted seriously and wide-reaching damage to which no nation is immune. As important as our domestic response is to this crisis, I think it is particularly critical that we developed a well coordinated international strategy to deal with what, in many ways, as fundamental to our own well being as our physical security, our economic security.

Both the Senate Committee on Foreign Relations, as well as the Senate Committee on Banking, maintain jurisdiction over a wide array of international economic issues and my intent is, along with Senator Kerry and Senator Lugar, to work together on these issues.

We have jurisdiction in the Banking Committee over many of the international institutions and, yet, obviously, it's a matter of deep concern to this committee, as well.

So we need to coordinate our activities and I raise that because the jurisdictional overlap is similar to the jurisdictional overlap that currently exists within the executive branch, the State Department and the Treasury Department.

Senator Clinton, you and I have discussed this issue briefly and had a chance to talk about it, but in order to implement an effective international policy response to the economic crisis, we first must ensure that there's a coordinated leadership on this issue.

And so I raise that point before leaving. You may address it in your statement. I'm not sure if you're going to or not, but it's tremendously important. And I certainly look forward to working with Senator Kerry and you and others on these issues and how we can coordinate our activities.

But again, I welcome you. I'm excited about your leadership role as the new secretary of state. I commend you and Senator -- President-elect Obama for doing this. There's been a lot of speculation about having two candidates who sought the presidency taking on these responsibilities.

I think it says volumes about both of you. The idea that this president-elect is not in any way threatened by a significant challenger to ask her to be a part of his team and your willingness to step up and accept that challenge, as well, is, I think, what makes this country so unique in the eyes of the world.
So I wish you the very best.

KERRY: Thank you, Senator Dodd, for those arm and generous comments and we appreciate it, and we very much look forward, obviously, to working very closely with you on that.

The international and global economic linkages nowadays have really transformed foreign policy and we're already looking within our staff structure on the committee for ways to try to address that more effectively.

Senator Schumer and Senator Clinton, you've both been very patient and we appreciate it enormously.

Let me, as I introduce you, Senator Schumer, also welcome Chelsea. We are delighted to have you here. Your mother said, as we were walking across the dais, that she wished you weren't sitting behind her, but she could look at you up here.

So since your father served as an intern on this committee, maybe we can make you an intern for a day, chairman's prerogative. So if you want to come up here later and look out, we're happy to welcome you.

So, Senator Schumer, thanks so much for joining here. Happy to have you.

(APPLAUSE)

Is that for Senator Schumer or for Chelsea?

SCHUMER: Chelsea, for sure.

Thank you, Mr. Chairman, and it is a true honor to be here. I want to thank you and Ranking Member Lugar, all the members of the committee for the opportunity for the honor, the true honor of introducing my friend and colleague, Senator Clinton.

Before I do, I want to congratulate you, Mr. Chairman, on your ascension to the chairmanship and I share the confidence of many that you'll be a truly great chairman of this committee and look forward to watching the committee work.

Now, colleagues, I've known Hillary a long time and I'm confident that there is no one -- no one -- who would better serve our country and the world as the next secretary of state.

We're in a new era. The world is yearning for strong, but consultative American leadership and foreign policy. Hillary Rodham Clinton, as secretary of state, is exactly the right person at the right time.

Hillary has spent more time under the national political spotlight than almost anyone, first as first lady, then in her race for the New York Senate seat, her subsequent eight years at Senate, and then her historic victories in her campaign for the democratic presidential nomination, and now, finally, as President-elect Obama's choice for secretary of state.

Through all of this time, Hillary has demonstrated the equanimity, prudence, the fortitude that have made her an exceptional leader and public servant.

SCHUMER: In her years as first lady, Senator Clinton was one of the country's most important and best loved ambassadors. She traveled to over 80 countries, meeting with heads of state from the Czech Republic to Nepal.

She served as a representative to the United Nations, addressing forums around the world. She has negotiated aid packages in Asia, pushed democratic reforms in the former Soviet Bloc, and promoted peace plans in northern Ireland and Serbia.

But Hillary didn't just meet with world leaders. She has met with private citizens around the world whose lives are shaped by international decisions.

She has met survivors of the Rwandan genocide. She has met with advocates for social justice and women's rights in Pakistan and with the families of children kidnapped in Uganda.

And after serving her country eight years as first lady, when most people would retire, Hillary stepped up and has served as a vital and powerful advocate on behalf of the people of New York, going from the White House to White Plains.

Hillary has continued to show just as much acumen as in her dealings with national and global leaders as she shows empathy and interest in the needs of private individuals around New York.

In all of her many roles as a public servant, Hillary has always shown the insight to see the heart of a problem, the courage to tackle it, and the talent to solve it.
What could be a better description of what we need as secretary of state?

And no matter how abstract the problem, no matter how esoteric the question, Hillary has never once forgotten the peoples whose lives and happiness depend on her work.

Hillary, you've dedicated your career to improving the lives of the least fortunate. Since your work 30 years ago with the Children's Defense Fund, you've come a long way, but you've always retained your tireless efforts to better the world.

For me, it's been a pleasure and a privilege serving with you in the Senate and I will sorely miss you. But I wish you the best of luck and I know that you will be a brilliant secretary of state. KENNEDY: Thank you very much, Senator Schumer.

And I know we need to excuse you post cog to go about other duties and I know that our Republican colleagues are thrilled that those duties no longer include being chairman of the Campaign Committee.

SCHUMER: Mr. Chairman, it is, as Chris Dodd mentioned, a New York day and I have to go introduce Shaun Donovan at the Banking Committee.

KENNEDY: We understand that. Thank you so much.

SCHUMER: Thank you, colleagues. I appreciate it very much.

KENNEDY: Well, Madam Secretary-designate, we are, again, really delighted to welcome you here and we look forward to your testimony and have a chance to get some questions in. Thanks so much.

CLINTON: Thank you very much, Mr. Chairman. And as he's leaving, I want to thank Senator Schumer for that generous introduction and even more for his support and our partnership over so many years.

He's been a valued and trusted colleague, a friend and a tribute to the people of New York whom he has served with such distinction.

Mr. Chairman, I join in offering my congratulations as you take on this new role. You've traveled quite a distance from that day back in 1971 when you testified here as a young Vietnam veteran.

You have never faltered in your care and concern for our nation, its foreign policy and its future, and America is in good hands with you leading this committee.

And, Senator Lugar, I look forward to working with you on a wide range of issues, especially those of greatest concern to you, including the Nunn-Lugar initiative.

And let me say a word to Senator Voinovich because of his announcement yesterday. I want to commend you for your service to the people of Ohio and I ask for your help in the next two years on the management issues that you have long championed.

It is an honor and a privilege to be here this morning as President-elect Obama's nominee for secretary of state. I am deeply grateful for the trust and keenly aware of the responsibility that the president-elect has placed in me to serve our country and to serve our people at a time of such grave dangers and great possibilities.

If confirmed, I will accept the duties of the office with gratitude, humility and firm determination to represent the United States as energetically and faithfully as I can.

At the same time, I must confess that sitting across the table from so many colleagues brings me sadness, too. I love the Senate and if you confirm me for this new role, it will be hard to say goodbye to so many members, Republicans and Democrats, whom I have come to know, admire and respect deeply, and to this institution where I have been so proud to serve on behalf of the people of New York through some very difficult days over the past eight years.

But I assure you I will be in frequent consultation and conversation with the members of this committee, the House Foreign Affairs Committee, the Appropriations Committees, and with Congress as a whole, and I look forward to working with my good friend, Vice President-elect Biden, who has been a valued colleague and a very valued chairman of this committee.

For me, consultation is not a catch word. It is a commitment. The president-elect and I believe that we must return to the time honored principle of bipartisanship in our foreign policy, an approach that has served our nation well.

I look forward to working with all of you to renew America's leadership through diplomacy that enhances our security, advances our interests, and reflects our values.

Today, our nation and our world face great peril from ongoing wars in Iraq and Afghanistan to the continuing threats posed by terrorist extremists, the spread of weapons of mass destruction, from the dangers of climate change to pandemic disease, from financial meltdowns to worldwide poverty.

The 70 days since the presidential election offer fresh evidence of these challenges, new conflict in Gaza, terrorist attacks in Mumbai, mass killings and rapes in the Congo, cholera in Zimbabwe, record high greenhouse gases and rapidly melting glaciers, and even an ancient form of terror -- piracy -- asserting itself in modern form off the Horn of Africa.

CLINTON: Always and especially in the crucible of these global challenges, our overriding duty is to protect and advance America's security, interests and values, to keep our people, our nation and our allies secure, to promote economic growth and shared prosperity at home and abroad, and to strengthen America's position of global leadership so we remain a positive force in the world, whether in working to preserve the health of our planet or expanding opportunity for people on the margins whose progress and prosperity will add to our own.

Our world has undergone an extraordinary transformation in the last two decades. In 1989, a wall fell and old barriers began to crumble after 40 years of a Cold War that had influenced every aspect of our foreign policy. By 1999, the rise of more democratic and open societies, the expanding reach of world markets, and the explosion of information technology had made globalization the word of the day.

For most people, it had primarily an economic connotation, but, in fact, we were already living in a profoundly interdependent world in which old rules and boundaries no longer held fast, a world in which both the promise and the peril of the 21st century could not be contained by national borders or vast distances.

Economic growth lifted more people out of poverty faster than at any time in our history, but economic crises can sweep across the globe even more quickly. A coalition of nations stopped ethnic cleansing in the Balkans, but the conflict in the Middle East continues to inflame tensions from Africa to Asia. Non-state actors fight poverty, improve health, and expand education in the poorest parts of the world, while other non-state actors traffic in drugs, children, and women and kill innocent civilians across the globe.

Now, in 2009, the clear lesson of the last 20 years is that we must both combat the threats and seize the opportunities of our interdependence, and to be effective in doing so, we must build a world with more partners and fewer adversaries. America cannot solve the most pressing problems on our own, and the world cannot solve them without America.

The best way to advance America's interests in reducing global threats and seizing global opportunities is to design and implement global solutions. That isn't a philosophical point. This is our reality.

The president-elect and I believe that foreign policy must be based on a marriage of principles and pragmatism, not rigid ideology, on facts and evidence, not emotion or prejudice. Our security, our vitality, and our ability to lead in today's world oblige us to recognize the overwhelming facts of our interdependence.

I believe that American leadership has been wanting, but is still wanted. We must use what has been called smart power, the full range of tools at our disposal -- diplomatic, economic, military, political, legal, and cultural -- picking the right tool or combination of tools for each situation. With smart power, diplomacy will be the vanguard of our foreign policy. This is not a radical idea. The Ancient Roman poet Terence declared that "In every endeavor, the seemly course for wise men is to try persuasion first." The same truth binds wise women as well.

I assure you that if I am confirmed, the State Department will be firing on all cylinders to provide forward-thinking, sustained diplomacy in every part of the world, applying pressure wherever it may be needed, but also looking for opportunities: exerting leverage; cooperating with our military and other agencies of government; partnering with non-governmental organizations, the private sector, and international organizations; using modern technologies for public outreach; empowering negotiators who can protect our interests while understanding those of our negotiating partners. Diplomacy is hard work, but when we work hard, diplomacy can work, not just to defuse tensions, but to achieve results that advance our security interests and values.

Secretary Gates, as the chairman said, has been particularly eloquent in articulating the importance of diplomacy. As he notes, it's not often that a secretary of defense makes the case for adding resources to the State Department and elevating the role of the diplomatic corps. Thankfully Secretary Gates is more concerned about having a unified, agile, and effective U.S. strategy than in spending precious time and energy on petty turf wars. As he has stated, "Our civilian institutions of diplomacy and development have been chronically undermanned and underfunded for far too long." That is a statement that I can only heartily say amen to.

President-elect Obama has emphasized that the State Department must be fully empowered and funded to confront multidimensional challenges from thwarting terrorism to spreading health and prosperity in places of human suffering, and I will speak in greater detail about that in a moment.

We should also use the United Nations and other institutions whenever possible and appropriate. Both Democratic and Republican presidents have understood that these institutions, when they work well, enhance our influence, and when they don't work well, as in the cases of Darfur and the farce of Sudan's election to the former U.N. Commission on Human Rights, we should work with like-minded friends to make them more effective.

We will lead with diplomacy because that's the smart approach, but we also know that military force will sometimes be necessary, and we will rely on it to protect our people and our interests when and where needed as a last resort. All the while, we must remember that to promote our interests around the world, America must be an exemplar of our values.

Senator Isakson made the point to me the other day that our nation must lead by example rather than edict. Our history has shown that we are most effective when we see the harmony between our interests abroad and our values at home. Our first secretary of state, Thomas Jefferson, subscribed to that view, reminding us across the centuries, "The interests of a nation when well understood will be found to coincide with their moral duties."

Senator Lugar, I'm going to borrow your words here, too. As you said, "The United States cannot feed every person, lift every person out of poverty, cure every disease, or stop every conflict, but our power and status have conferred upon us a tremendous responsibility to humanity."

Of course, we must be realistic. Even under the best of circumstances, our nation cannot solve every problem or meet every global need. We don't have unlimited time, treasure, or manpower, especially with our own economy faltering and our budget deficits growing. So, to fulfill our responsibility to our children, to protect and defend our nation, while honoring our values, we have to establish priorities.

I'm not trying to mince words here. As my colleagues in the Senate know, establishing priorities means making tough choices. Because these choices are so important to the American people, we must be disciplined in evaluating them, weighing the costs and consequences of action or inaction, gauging the probability of success, and insisting on measurable results.

Right after I was nominated, a friend told me, "The world has so many problems. You've got your work cut out for you." Well, I agree, but I don't get up every morning thinking only about the threats and dangers we face. In spite of all the adversity and complexity, there are so many opportunities for America out there, calling forth the optimism and can-do spirit that has marked our progress for more than two centuries.
Too often, we see the ills that plague us more clearly than the possibilities in front of us, but it is the real possibility of progress, of that better life free from fear and want and discord, that offers our most compelling message to the rest of the world.
I've had the chance to lay out and submit my views on a broad array of issues and written responses to questions from the committee. So this statement will only outline some of the major challenges we face and the major opportunities we see as well.
First, President-elect Obama is committed to responsibly ending the war in Iraq and employing a broad strategy in Afghanistan that reduces threats to our safety and enhances the prospects of stability and peace. Right now, our men and women in uniform, our diplomats, and our aid workers are risking their lives in these two countries. They have done everything we have asked of them and more.

But, over time, our larger interests will be best served by safely and responsibly withdrawing our troops from Iraq, supporting a transition to full Iraqi responsibility for their sovereign nation, rebuilding our overtaxed military, and reaching out to other nations to help stabilize the region and employ a broader arsenal of tools to fight terrorism. We will use all the elements of our power -- diplomacy, development, and defense -- to work with those in Afghanistan and Pakistan who want to root out Al Qaida, the Taliban, and other violent extremists who threaten them as well as us in what President-elect Obama has called the central front in the fight against terrorism.

As we focus on Iraq, Pakistan, and Afghanistan, we must also actively pursue a strategy of smart power in the Middle East that addresses the security needs of Israel and the legitimate political and economic aspirations of the Palestinians; that effectively challenges Iran to end its nuclear weapons program and its sponsorship of terror; and persuade both Iran and Syria to abandon their dangerous behavior and become constructive regional actors; and that also strengthens our relationship with Egypt, Jordan, Saudi Arabia, other Arab states, along with Turkey and our partners in the Gulf, to involve them in securing a lasting peace in the region.

As intractable as the Middle East problems may seem -- and many presidents, including my husband, have spent years trying to work out a resolution -- we cannot give up on peace. The president-elect and I understand and are deeply sympathetic to Israel's desire to defend itself under the current conditions and to be free of shelling by Hamas rockets.
However, we have also been reminded of the tragic humanitarian cost of conflict in the Middle East and pained by the suffering of Palestinian and Israeli civilians. This must only increase our determination to seek a just and lasting peace agreement that brings real security to Israel; normal and positive relations with its neighbors; independence, economic progress, and security to the Palestinians in their own states.

We will exert every effort to support the work of Israelis and Palestinians who seek that result. It is critical not only to the parties involved, but to undermining the forces of alienation and violent extremism around the world.

For terrorism, we must have a comprehensive strategy, levering intelligence, diplomacy, and military assets to defeat Al Qaida and other terrorist groups by rooting out their networks and drying up their support for violent and nihilistic extremism.

The gravest threat that America faces is the danger that weapons of mass destruction will fall into the hands of terrorists. We must curb the spread and use of these weapons -- nuclear, biological, chemical, or cyber -- and prevent the development and use of dangerous new weapons. Therefore, while defending against the threat of terrorism, we will also seize the parallel opportunity to get America back in the business of engaging other nations to reduce nuclear stockpiles.

The Nonproliferation Treaty is the cornerstone of the nonproliferation regime, and the United States must exercise leadership needed to shore it up. So we will seek agreements with Russia to secure further reductions in weapons under START, we will work with this committee and the Senate toward ratification of the Comprehensive Test Ban Treaty, and we will dedicate efforts to revive negotiations on a verifiable Fissile Material Cutoff Treaty.

At the same time, we will continue to work to prevent proliferation in North Korea and Iran, to secure loose nuclear weapons and materials, and to shut down the market for selling them, as Senator Lugar has pushed for so many years.

These threats, however, cannot be addressed in isolation. Smart power requires reaching out to both friends and adversaries to bolster old alliances and to forge new ones. That means strengthening the alliances that have stood the test of time, especially with our NATO partners and our allies in Asia. Our alliance with Japan is a cornerstone of American policy in Asia, essential to maintaining peace and prosperity in the Asia Pacific region, and based on shared values and mutual interests.

We also have crucial economic and security partnerships with South Korea, Australia, and other friends in ASEAN. We will build on our economic and political partnership with India, the world's most populous democracy and a nation with growing influence in the world. Our traditional relationships of confidence and trust with Europe will be deepened. Disagreements are inevitable, but on most global issues, we have no more trusted allies.

The new administration will reach out across the Atlantic to leaders in France, Germany, the United Kingdom, and others, including and especially the new democracies.
President-elect Obama and I seek a future of cooperative engagement with the Russian government on matters of strategic importance while standing strongly for American values and international norms.

China is critically important as an actor who will be changing the global landscape. We want a positive and cooperative relationship with China, one (TSXV:IND) where we deepen and strengthen our ties on a number of issues and candidly address differences where they persist. But this is not a one-way effort. Much of what we will do depends on the choices China makes about its future at home and abroad.

CLINTON: With both Russia and China we should work together on vital security and economic issues like terrorism, proliferation, climate change, and reforming financial markets.

The world is now, as Senator Dodd said, in the crosscurrents of the most severe global economic contraction since the Great Depression. The history of that crisis teaches us the consequences of diplomatic failures and uncoordinated reactions.

We have already seen this crisis extend beyond the housing and banking sectors, and our solutions will have to be as wide in scope as the causes themselves, taking into account the complexities of the global economy, the geopolitics, and the continued political and economic repercussions from the damage already done.

But here again, as we work to repair the damage we can find new ways of working together. For too long we've merely talked about the need to engage emerging powers in global economic governance. The time to take action is upon us.

The recent G-20 meeting that President Bush hosted was a first step. But developing patterns of sustained engagement will take hard work and careful negotiation. We know that emerging markets like China and India, Brazil and South Africa and Indonesia are feeling the effects of the current crisis. And we all stand to benefit, in both the short and long term, if they are part of the solution and become partners in maintaining global economic stability.

In our efforts to return to economic growth here in the United States, we have an especially critical need to work more closely with Canada, our largest trading partner, and Mexico, our third largest.

Canada and Mexico are also our biggest suppliers of imported energy. More broadly, we must build a deeper partnership with Mexico to address the shared dangers arising from drug trafficking and the challenges along our border, an effort begun this week with the meeting between President-elect Obama and President Calderon.

Throughout our hemisphere, we have opportunities to enhance our relationships that will benefit all of us. We will return to a policy of vigorous involvement, partnership even, with Latin America, from the Caribbean to Central America to South America. We share common political, economic, and strategic interests with our friends to the south, as well as many of our citizens who share ancestral and cultural legacies. We're looking forward to working on many issues during the Summit of the Americas in April and taking up the president-elect's call for a new energy partnership around shared technology and new investments in renewable energy.

And in Africa the foreign policy objectives of the Obama administration are rooted in security, political, economic and humanitarian interests, including combating Al Qaida's efforts to seek save havens in failed states in the Horn of Africa, helping African nations conserve their natural resources and reaping fair benefits from them, stopping war in the Congo, ending autocracy in Zimbabwe and human devastation in Darfur.

But we also intend to support the African democracies like South Africa and Ghana, which just had its second peaceful change of power in a democratic election. We must work hard with our African friends to reach the millennium development goals in health education and economic opportunity.

Many significant problems we face will challenge us not only on a bilateral basis but all nations.

You, Mr. Chairman, were among the very first in a growing chorus from both parties to recognize that climate change is an unambiguous security threat. At the extreme, it threatens our very existence. But well before that point, it could well incite new wars of an old kind over basic resources like food, water, and arable land.

President-elect Obama has said America must be a leader in developing and implementing a global and coordinated effort to climate change. We will participate in the upcoming UN Copenhagen climate conference and a global energy forum and will pursue an energy policy that reduces our carbon emissions while reducing our dependence on foreign oil and gas, fighting climate change and enhancing our economic and energy security.

George Marshall noted that our gravest enemies are often not nations or doctrines but hunger, poverty, desperation, and chaos. So to create more friends and fewer enemies, we must find common ground and common purpose with other peoples and nations to overcome hatred, violence, lawlessness, and despair.

The Obama administration recognizes that even when we cannot fully agree with some governments we share a bond of humanity with their people. By investing in that common humanity, we advance our common security.

Mr. Chairman, you were one of the first, again, to underscore the importance of our involvement in the global AIDS fight. Now, thanks to a variety of efforts, including President Bush's Emergency Plan for AIDS Relief, as well as the work of NGOs and foundations, the United States enjoys widespread support in public opinion polls in many African countries. Even among Muslim populations in Tanzania and Kenya, America is seen as a leader in the fight against AIDS, malaria, and TB. We have an opportunity to build on this success by partnering with NGOs to help expand health clinics in Africa so more people can have access to lifesaving drugs, fewer mothers transmit HIV to their children, and fewer lives are lost.

We can generate more goodwill through other kinds of social investments, again partnering with international organizations and NGOs, to build schools and train teachers. The president-elect supports a global education fund to bolster secular education around the world.

I want to emphasize the importance to us of this bottoms-up approach. The president-elect and I believe in this so strongly: Investing in our common humanity through social development is not marginal to our foreign policy but essential to the realization of our goals.
More than two billion people worldwide live on less than $2 a day. They're facing rising food prices and widespread hunger. We have to expand civil and political rights in countries that are plagued by poverty, hunger, and disease. But our pleas will fall on deaf ears unless democracy actually improves people's lives while weeding out the corruption that too often stands in the way of progress.

Our foreign policy must reflect our deep commitment to help millions of oppressed people around the world. And of particular concern to me is the plight of women and girls, who comprise the majority of the world's unhealthy, unschooled, unfed, and unpaid. If half the world's population remains vulnerable to economic, political, legal and social marginalization, our hope of advancing democracy and prosperity is in serious jeopardy. The United States must be an unequivocal and unwavering voice in support of women's rights in every country on every continent.

As a personal aside, I want to mention that President-elect Obama's mother, Ann Dunham, was a pioneer in microfinance in Indonesia. In my own work on microfinance around the world, from Bangladesh to Chile to Viet Nam to South Africa and many other countries, I've seen firsthand how small loans given to poor women to start businesses can raise standards of living and transform local economies.

The president-elect's mother had planned to attend a microfinance forum at the Beijing Women's Conference in 1995 that I participated in. Unfortunately, she was very ill and couldn't travel and, sadly, passed away a few months later. But I think it's fair to say that her work in international development, the care and concern she showed for women and for poor people around the world, mattered greatly to her son, our president-elect. And I believe that it has certainly informed his views and his vision. We will be honored to carry on Ann Dunham's work in the years ahead.

Mr. Chairman, I know we'll address many issues in the question and answer session. But I want to underscore a final point. Ensuring that our State Department is functioning at its best is absolutely essential to America's success. The president-elect and I believe strongly that we need to invest in our capacity to conduct vigorous American diplomacy, provide the kind of foreign assistance that I've mentioned, reach out to the world, and operate effectively alongside our military.

Now, the entire State Department bureaucracy in Thomas Jefferson's day consisted of a chief clerk, three regular clerks and a messenger. And its entire budget was $56,000 a year.

But over the past 219 years, the world has certainly changed. Now the department consists of Foreign Service officers, the civil services, and our locally engaged staff, working not only at Foggy Bottom but in offices across our country and in some 260 posts around the world. And USAID carries out its critical development missions in some of the most difficult places on our earth.

These public servants are too often the unsung heroes. They are in the trenches putting our policies and values to work in a complicated and dangerous world. Many risk their lives, and some have lost their lives in service to our nation. They need and deserve the resources, training and support to succeed.

I know this committee, and I hope the American public, understands that Foreign Service officers and civil service professionals and development experts are doing invaluable work. And it is the work of the American people, whether helping American businesses make inroads in new markets or being on the other end of the phone when someone gets in trouble beyond our shores, needs a passport, needs advice at an embassy, or doing the delicate work of diplomacy and development with foreign governments that leads to arms control and trade agreements, peace treaties and post-conflict reconstruction, standing up for greater human rights and empowerment, broader cultural understanding and building alliances.

State Department is a large, multidimensional organization but not the placid, idle bureaucracy that some have suggested. It is an outpost for American values that protects our citizens and safeguards our democratic institutions in times both turbulent and tame. State Department employees offer a lifeline of hope and help, often the only lifeline for people in foreign lands who are oppressed, silenced and marginalized. We must not shortchange them or ourselves.

One of my first priorities is to make sure that the State Department and USAID have the resources they need, and I will be back to make the case to the committee for full funding of the president's budget requests. But I will work just as hard to make sure we manage those resources prudently, efficiently and effectively.

You know, like most Americans, when I was growing up I never had the chance to travel widely. Most of my early professional career was as a lawyer and an advocate for children and the poor who found themselves disadvantaged here at home.

But during the eight years of my husband's presidency and now eight years as the senator from New York, I have been privileged to travel on behalf of our country. And I've had the opportunity to get to know many world leaders.

As a member of the Senate Armed Services Committee, I've spent time with our military commanders as well as our brave troops. I've immersed myself in a number of military issues. And I've spent many hours with American and non-American aid workers, business men and women, religious leaders, teachers, doctors, nurses, students, volunteers, all who have made it their mission to help other people across the world. And I've seen countless ordinary people in foreign capitals, small towns and rural villages who live in a world far removed from our experiences.

In recent years, as other nations have risen to compete for military, economic, and political influence, some have argued that we have reached the end of the American moment in world history. Well, I disagree.

Yes, the conventional paradigms have shifted. But America's success has never been solely a function of our power. It has always been rooted in and inspired by our values.

With so many troubles here at home and around the world, millions of people are still trying to come to this country, legally and illegally. Why? Because we are guided by unchanging truths: that all people are created equal, that each person has the right to life, liberty and the pursuit of happiness.

And in these truths we will find, as we have for more than two centuries, the courage, the discipline and the creativity to meet the challenges of this ever-changing world.

I am humbled to be a public servant and honored by the responsibility placed on me should I be confirmed by our president- elect who embodies the American dream, not only here at home but far beyond our shores.

No matter how daunting the challenges may be, I have a steadfast faith in this country and in our people. And I am proud to be an American at the dawning of this new American moment.

Thank you, Mr. Chairman, and members of this committee for granting me your time and attention today. I know there's a lot more territory to cover, and I'd be delighted to answer your questions.

KERRY: Well, thank you very much, senator, for a very comprehensive and thoughtful statement.

And I can tell you, from certainly this senator's perspective, it's wonderful to hear so many of these issues set out as priorities for the new administration. And we're excited about the prospect of working with you in order to implement the policies in greater detail that will support the agenda that you've set out.

KERRY: I'd just say to all my colleagues, I think we all know this, that this committee and the Congress, in its role in foreign policy, has been at its strongest when we've been bipartisan and I think the old adage about politics ending at the water's edge with respect to diplomacy and our national security interest is something that would serve us well as a guidepost as we think about the enormity of the choices that we're going to face in the days ahead.

We will begin now a ten-minute question round. And in deference to Senator Corker, who has the same obligations as Senator Dodd, since we let Senator Dodd go, we're going to let him go after.

Senator Lugar, is that amenable to you? And then we'll go through this.

So we'll start the clock running on a ten-minute series of questions.

I think, Senator, that in your opening, you've wonderfully covered a broad array of the challenges and the task, obviously, before all of us is really now to try to hone in a little bit, see how these are really going to play out with specific regions and specific countries and challenges.

Obviously, one of the most pressing issues we face, and it was underscored in the "New York Times" on Sunday, is a question of Iran's nuclear program and the entire relationship with Iran, which was, needless to say, a subject of discussion throughout the campaign.

The time when Iran is going to be capable of producing enough weapons grade uranium to build a bomb, if they choose to, is very fast approaching. The clock is ticking and yet Iran continues to defy the U.N. resolutions, enriching more uranium to reactor grade levels, installing and operating more and more centrifuges, failing to address the concerns of inspectors and so forth. And recent efforts to get though, as you know, failed with respect to the U.N. Security Council.

So I would ask you, during the campaign, President-elect Obama said that he would employ, quote, "big carrots and big sticks" to deal with Iran's nuclear program.

We do know that there's a significant package of incentives already on the table from the P-5-plus-1 and the prospect of increased Security Council sanctions may be questionable, at best.

So could you share with us the thinking at this stage? I know it's early. But can you share with us what additional carrots the administration might have in mind? Why do you believe those might be enough to change Iran's calculations?

Are tougher sanctions achievable and how are you and the administration viewing this at this point?

CLINTON: Well, thank you, Mr. Chairman. Obviously, the incoming administration views with great concern the role that Iran is playing in the world, its sponsorship of terrorism, its continuing interference with the functioning of other governments and its pursuit of nuclear weapons.

There is an ongoing policy review that the Obama administration has undertaken, but I think, as the president-elect said just this past weekend, our goal will be to do everything we can to pursue, through diplomacy, through the use of sanctions, through creating better coalitions with countries that we believe also have a big stake in preventing Iran from becoming a nuclear weapon power, to try to prevent this from occurring.

We are not taking any option off the table at all, but we will pursue a new, perhaps different approach that will become a cornerstone of what the Obama administration believes is an attitude toward engagement that might bear fruit.
We have no illusions, Mr. Chairman, that even with a new administration, looking to try to engage Iran in a way that might influence its behavior, that we can predict the results.

But the president-elect is committed to that course and we will pursue it.

KERRY: Do you believe that tougher U.N. sanctions are available from which to choose and, secondly, are they achievable?

CLINTON: You know, it's kind of like the experimenter's bias, in a way. We won't know what we're capable of achieving until we're actually there working on it.

We have a commitment to engaging with international organizations in a very intense and ongoing way. We are going to be working with our friends and our adversaries in the United Nations. We're going to be making the case to members of the Security Council who have been either dubious or unwilling to cooperate up until now that a nuclear armed Iran is in no one's interest under any circumstances.

So, Mr. Chairman, it's hard to predict how successful we will be, but I promise you our very best efforts in doing all that we can to try to achieve greater international support for sanctions and action that could actually influence the behavior of the Iranian government, the supreme leader and the religious council and the revolutionary guard the Quds Force, because, as you know so well, all these are players.

And so our task will be to try to figure out the appropriate and effective pressure that will perhaps lead to us dissuading Iran from going forward.

KERRY: Well, I happen to agree with you that it is, in fact, legitimately impossible to be able to determine exactly what options are available until you begin to get into a conversation and begin to see what the play is.

But as a matter of fundamental American policy, let me ask you a question.

Is it the policy of the incoming administration, as a bottom line of our security interests and our policy, that it is unacceptable that Iran has a weapon under any circumstances and that we will take any steps necessary to prevent that or is it simply not desirable? I think, as you said, it's in no one's interest, which is less than the formation of the prohibition.

CLINTON: Well, Mr. President -- the president-elect, Mr. Chairman...

KERRY: I'll take that.

CLINTON: It was a Freudian slip. The president-elect...

KERRY: We're both subject to those, I want you to know.

CLINTON: Yes, indeed, indeed, on this subject, especially.

The president-elect has said repeatedly it is unacceptable. It is going to be United States policy to pursue diplomacy with all of its multitudinous tools to do everything we can to prevent Iran from becoming a nuclear weapons state.
As I also said, no option is off the table. So the president- elect has been very clear that it is unacceptable and that is our premise and that is what we are going to be basing our actions on.

KERRY: The Bush administration sent Undersecretary Burns to the last round of those talks, essentially as an observer. Do you plan to send a U.S. representative to engage directly in those kinds of discussions almost immediately?

CLINTON: Mr. Chairman, we are looking at a range of possibilities. One very important aspect of the decisions we make is that we engage in consultation with our friends in the region and beyond.

We don't want anything I say today or anything the president- elect says to take our friends and allies by surprise. So we cannot tell you with specificity exactly the steps we will take.

But I think it's fair to say that the president-elect, as recently as this weekend, has said that we're going to be trying new approaches, because what we've tried has not worked. They are closer to nuclear weapons capacity today than they were.

So we're going to be looking broadly, but in consultation. And I want to underscore that, because it's very important that those who have to live in the region, many of whom are allies, Israel and others who have a legitimate set of concerns about Iran's growing power and its use of that power, should know that the Obama administration will be consulting broadly and deeply.

So that when we move, we will move in concert insofar as possible.

KERRY: Do you plan personally to engage in personal diplomacy with Iranian officials at a high level in the near term?

CLINTON: Well, again, Mr. Chairman, I want to wait to determine the exact contours of how we proceed until we're actually in office and have a chance to consult with others, because it is very clear to me that we have not as full a brief as we need on the feelings of many of the important players.

We have carefully hued to the president-elect's position. There's one president at a time. We have not spoken with foreign leaders. We have not, in many instances, taken their calls because we want to be very respectful of the ongoing work of the Bush administration.

As soon as we are in a position to do so, we will be consulting and we will be setting forth a series of actions and we will be consulting and informing this committee.

KERRY: Well, I know you've been very careful about that and I think it's been appropriate and I think a wise course, and I look forward to you being able to get deeply engaged.

Last question, just quickly. Last year, six colleagues and I, including Senator Levin, wrote to Secretary Rice urging her to establish an interests section in Tehran. It just seems counterproductive and almost incomprehensible that we're not on the ground in some of these places.

We don't have an ambassador in Syria, for instance. We should've.

So I would ask you if you have made a decision and will there be -- will you proceed forward to create an interests section in Tehran and immediately put an ambassador back in Syria?

CLINTON: Again, Mr. Chairman, these are matters that are part of our policy review and we will turn to them with great diligence and attention as soon as we are able to.

KERRY: Well, I hope the question establishes some sense of priority.

CLINTON: I think I got your drift, Mr. Chairman.

KERRY: Senator Lugar?

LUGAR: Mr. Chairman, could you recognize Senator Corker... KERRY: Yes, absolutely.

LUGAR: ... then Senator Feingold? You'll do that?

KERRY: Yes. Thank you very much. I'd be delighted to do that.

LUGAR: It would expedite his work.

KERRY: Thank you so much.

Senator Corker?

CORKER: Thank you, Senator Lugar, I appreciate that. And, Chairman Kerry, I'm glad you're going to be leading this year. I think you're the right person to be doing it at this time and I thank you for your leadership.

Madam Secretary-designate, we welcome you. We're always glad to see when one of our own does well and has a real job and certainly welcome your daughter.

Along the comments of -- and I think you have tremendous opportunities. You laid out in your opening comment sort of a travelogue of opportunities and I know that many of the opportunities that exist you didn't mention. You mentioned those certainly in Q&A back to us.

So the opportunities that you have as secretary of state are just huge and I think you will succeed in that role, I really do.

I want to piggyback and not dwell on the comments that Senator Lugar made early on regarding the Clinton Foundation. And I'm just a junior Senator from Tennessee, but it seems to me that everything has seasons and this is your season and I look at the opportunities that you have to influence the world and our place in the world.

I look at the resources that our government can bring to that under your leadership and then I look at the foundation and regardless of who's running it and how great it is, it's a speck in relation to the huge magnitude of efforts that you can put forth on behalf of our government.

And so without dwelling on the details, I would encourage the steps that Senator Lugar requested to be taken. There's just no need to sully or dampen or anything the tremendous opportunities that you have and I do hope that sometime over the next two weeks, you'll educate us all as to how that's going to be done.

But the potential is so vast in the role that you have and so small in the other role, it just seems to me there's no reason whatsoever to have continual press comments and other kinds of things that might take away from, I think, what might be extraordinary efforts on your part.

So thank you so much for your service. You know, I noticed, as I've traveled the world in my short tenure here, the State Department, as you mentioned towards the end of your comments, is vast and we have people in tough parts of the world that are carrying out tough duties.

CORKER: It's my sense that when Secretary Powell -- Powell was secretary that he really built the department. He understood, being a military person, what it meant to have a culture and for people to have the tools and training and those kinds of things necessary to really exceed in their jobs or to excel in their jobs.

I think that's been a little bit lesser the case recently, and -- and I'm not in any way criticizing. It seems to me the secretary of state really has two major responsibilities. One is to be our chief dealmaker, and that's how you get recorded in history, and I know that there'll be many things that you're recorded that way -- that you'll be recorded in that way. But then there's the whole issue of running the department.

My sense is that's not probably your -- your basic strength, that you're probably going to see to the other responsibilities, and I wonder if you might educate us as to how you're going to ensure that the department really does have the support, the tools, the culture, the morale necessary to be successful while we're working on the more major accomplishments.

CLINTON: Well, Senator Corker, this is to me one of the most important questions because we can talk about all of the good work we'd like to do and how grateful we are to those people who are out there doing it, but if we don't enhance our diplomatic and development efforts and move toward more equilibrium, as Secretary Gates even has said, we will not be as successful as we need to be in promoting our foreign policy.

So, to that end, in consultation with the president-elect and the vice president-elect, as well as the leaders of this committee, I decided to fill a position that had not been filled, although it had been created 10 years ago, and that was the deputy for resources and management. And I concluded that that was important because what happens in every government agency, but certainly in the State Department is you get consumed by the crisis of the moment. You have the best intentions to deal with the management challenges, the resource shortages, but the secretary's time and the, you know, top diplomat's time are spent, you know, on Gaza or on Iran or on Russia and the Ukraine pipeline issue.

So it seemed to me that in order to really fulfill my responsibility to you and the American people, we needed to have someone whose total job focus was to manage the department, along with the career professionals, to work to manage USAID to be more effective, and to represent the interests of the department as well as the president -- presidential budget here on the Hill when it came to these resource matters.

I feel very fortunate that you will be seeing before you for confirmation two extraordinary deputies. The principal deputy filling the role that has been there historically will be Jim Steinberg, a very accomplished foreign policy expert. He's leaving the deanship of the LBJ School at the University of Texas to take on this responsibility. And filling the second deputy position for resources and management will be Jack Lew, a former director of the Office of Management and Budget, someone with deep experience here on Capitol Hill, who is diving into work already, because I want you as well as me to have someone who is accountable and the point person.

You know, the argument kind of stops when you say, "Well, what about more training for our -- our Foreign Service officers? What about, you know, more funding for all of the responsibilities from reconstruction and stabilization efforts, the Office on Trafficking, and so much else? How do we do that? How do we do more with less?" We've got to have somebody who will take charge of all those issues, and I really believe, Senator, that this will be a significant step on the way toward putting the State Department on a sounder financial and management footing.

CORKER: We have a maze of aid efforts that are underway. Every senator that travels and sees some need authorizes another aid program. I wonder if you would consider, during the first six months you're there, rationalizing that for us and reporting back as to some of those things that need to be done away with. Again, it's -- all are in good intentions, but they seem to water each other down and not have the focus that they might otherwise have. Wondering if you might commit to doing that during some short period of time after you're there.

CLINTON: Well, in fact, Senator, that's going to be one of the responsibilities that will given to this second deputy under my direction, to take a look at our existing authorities, to determine what works, what doesn't work, to try to eliminate redundancies, to fill gaps, because, you know, we do have some of those as well, obviously.

You know, it -- it matters greatly to me, as it does to the president-elect. These development efforts, these humanitarian commitments by the United States government are often the way we are perceived and frequently to our advantage if they are done correctly.

But I think it's fair to say that USAID, our premier aid agency, has been decimated. You know, it has half the staff it used to have. It's turned into more of a contracting agency than an operational agency with the ability to deliver. Yet at the same time, whether I'm talking to Secretary Gates or I'm -- I'm talking to people in the non- governmental organizational world, very often, they will say the same thing, "Well, they've turned to USAID to determine how to implement these programs."

So we're going to take a hard look at all of our aid and development effort. Additionally, the Congress has given the State Department a very important responsibility with reconstruction and stabilization. If we're going to move authorities and resources back from the Defense Department to the State Department, we have to be able to function effectively and demonstrate our efficiency. We're at a great disadvantage.

I'll give you just a quick example. There's a program that I learned about, of course, on my Senate Foreign -- my Senate Armed Services Committee work called CERP, the Commanders Emergency Resources Program. I remember the first time I went to Iraq in 2003, and I met young captains and majors and -- and lieutenant colonels who were literally handed thousands of dollars of cash and told, "Go get that school open. Go get that road built. Go fix that, you know, sewer problem." And they were doing an incredible job with great flexibility and very little accountability.

I came back a believer in the CERP program and advocated for it to continue, but when I contrast that with a development officer or a State Department expert who knows the culture, knows the language, unlike, you know, this very well-meaning and well-trained warrior, and that person can't get $500 to fulfill a development mission that is in service of American security and our national interests, there's a big disconnect.
So, you know, Secretary Gates understands it. So we're going to try to better organize and rationalize what we do and build confidence with you and the rest of Congress that we can take on these responsibilities.

KERRY: Thanks.

Thank you very much, Senator Corker.

Senator Feingold?

FEINGOLD: Thank you, Mr. Chairman. And, of course, my warm congratulations to you on your new position. I look forward to working closely with you and this committee and the incoming Obama administration to reverse much of the foreign policies of the last eight years and to restore America's leadership abroad and security at home, and I would just ask that my full statement be placed in the record.

KERRY: Without objection.

FEINGOLD: I am very pleased Senator Hillary Rodham Clinton has been nominated to be secretary of state. She's an excellent choice for our most senior diplomat, has a demonstrated record of thinking creatively about the challenges our country faces, and I want to say that she's already shown not only the indication, but, in fact, has shown a willingness on a regular basis to consult with Congress that is refreshing and very welcome as she sets up the operation she's going to have as secretary of state. I'm very, very pleased with that process. And I'd just note before I get into my questions that some of my colleagues have asked about the Clinton Foundation, and I have some questions on that topic, Mr. Chairman, that I will simply submit for the record.

But what I'd like to do is -- is to start off with what I think we agree on, and that is that our top national security priority is the global fight against Al Qaida and its affiliates. I was pleased with your reference in your opening statement to its efforts of Al Qaida in places like Africa, how we allocate our resources, the tools used, in this struggle is key to winning this fight, and without a more global and comprehensive approach, we will be unable to make our country or the world a safer place.

Now the current administration's decision to focus so many of our resources on Iraq at the expense of other areas has, I think, been a tragic mistake in this regard. So I would ask you -- and I know you mentioned this issue first -- to please share your vision of how you will follow up on President-elect Obama's pledge to redeploy the bulk of our troops from Iraq in 16 months. What steps do you expect the State Department will take to ensure that this transition occurs as safely and smoothly as possible?

CLINTON: Well, Senator, thank you very much.

And, you know, this is a primary priority, as you know, of the incoming administration. The president-elect, Secretary Gates, and others are working assiduously to try to be able to begin the process of withdrawal safely and responsibly as soon as possible.

It is being done within the context of the Status of Forces Agreement, which has now clearly set forth the path that both the Iraqi government and the United States government intend to follow. There is some differences in timing, but the important aspect of the so-called SOFA is that the United States government under President Obama will be withdrawing troops and the Iraqi government not only accepts that, but wishes to facilitate it.

So we look to begin moving our combat brigades out of cities and towns and villages hopefully by June, and then proceed with the withdrawal and, in some instances, redeployment of some of those troops to Afghanistan.

Now the military details of this are, obviously, not within the province of the State Department, but there is a companion document that was signed by the United States government and the government of Iraq which was an agreement of friendship and cooperation, and in it are listed a number of areas that we intend to be very active in pursuing on rule of law, on education and health care, technical assistance for the energy industry and the like.

It is -- it is my intention that we will very quickly, in consultation with the Iraqi government and other agencies within our own government, put together the teams and activities that we will be offering that will support the withdrawal of our troops and also fulfill the agreement that we have with the government of Iraq. The details are, you know, still to be worked out, as you know.
Our current ambassador will be leaving after a very distinguished and courageous tour in Iraq for personal and health reasons, as I'm told, but he deserves a great deal of gratitude for the leadership he's provided on the civilian side, and we will look to move that nomination as quickly as possible, once we can make it, so that we have an ambassador on the ground and we have the assets deployed so that we are able to fulfill our part of the agreement as set forth.
FEINGOLD: Thank you, Senator.
Let me turn to another topic that we covered. You've been an outspoken advocate of U.S. action to stop genocide in Darfur and to protect the -- the fragile peace between the North and the South in Sudan. President-elect Obama, Vice President-elect Biden, and Dr. Susan Rice also have strong records of support for U.S. action to stop the ongoing violence in Sudan.

Senator, I believe it's crucial that the new administration signal a commitment from day one to this effort. There's been a lot of talk of bold action that the United Sates can take, such as expanding sanctions, imposing a no-fly zone over Sudan, bombing aircraft, airfields and perhaps even the regime's military and intelligence assets. Can you give me your sense at this point of how viable are these options? What steps will the new administration take to demonstrate a new and bold and comprehensive approach to Sudan?

CLINTON: Senator, again, this is an area of great concern to me, as it is to the president-elect. We are putting together the options that we think are available and workable. It is done in conjunction, as you would assume, with the Department of Defense. There is a great need for us to sound the alarm again about Darfur. It is a terrible humanitarian crisis compounded by a corrupt and, you know, very cruel regime in Khartoum, and it's important that the world know that we intend to address this in the most effective way possible once we have completed our review and that we intend to bring along as many people as we can to fulfill the mission of the U.N. A.U. force, which is not yet up to speed and fully deployed, as a very first measure. That's a preexisting policy we agree with.

We are going to work to try to effectuate it and then, as you rightly point out, the president-elect, the vice president-elect, I and others have spoken about other options, no fly zones, other sanctions and sanctuaries, looking to deploy the U.N. A.U. force to try to protect the refugees, but also to repel the militias.

So there is a lot that is under consideration and I know of your interest in this, along with other colleagues, and we will keep you advised as we move forward.

FEINGOLD: Thank you very much. Obviously, you and the president-elect recognize the importance of our efforts in Afghanistan. And given the serious national security concerns in that part of the world, we have to address the growing instability there.
But keeping in mind the lessons to be learned from Iraq, we need to address Afghanistan comprehensively, which I know you realize includes looking more broadly at Pakistan and India and Iran and the larger region, and we need to think clearly rather than assuming that more troops is somehow sufficient to turn the tide.

Now, you and I discussed the fact that there is a significant military review underway. But will there also be a policy review to ensure we define the full scope of our mission in Afghanistan and explain to the American people how sending more American troops actually fits into a comprehensive regional strategy?

CLINTON: There will certainly be such a policy review. It is the highest priority of the president-elect. He has put forth what he calls the "more for more" strategy. That's if there are to be more troops from the United States, there also needs to be more support for that mission from NATO. There needs to be more work done by the government of Afghanistan and the people. And I would add that the "more for more" strategy is not just on the military side, it's on the civilian and development side, as well.

We have to look at Afghanistan and Pakistan together, particularly the border region. As you were telling me when we met, you personally have traveled along that border. You have seen with your own eyes the element of resistance and extremism that have taken root there.

And it is imperative that we work with our friends in both Pakistan and Afghanistan, because this is not only about denying Al Qaida and other extremist groups safe haven, this is about persuading those two countries that their security and their future is also at risk.

And I am encouraged that the democratically-elected government of Pakistan seems to be much more aware of how this is their fight, not just ours. The government of Afghanistan, as you know, the vice president-elect was just in both countries, is going to be presented with alternatives from the Obama administration that we think are not only in the interest of our overall mission, but in their interest, as well.
So this will be a collaboration and the other countries you mentioned are also players, to some extent, that have to be brought in.

So I anticipate, Senator, having a civilian review and a civilian presence that will be the counterpart of the military review and the military presence.

FEINGOLD: Thank you, Senator. Thank you, Mr. Chairman.

KERRY: Thank you, Senator Feingold.

Senator Lugar?

LUGAR: Thank you very much, Mr. Chairman.

Senator Clinton, when the Albanians informed the United States in the summer of 2004 that they saw some suspicious drums above Tirana and some of us went over there and found nerve gas and MANPAD missiles in sheds and what have you, and we're grateful to the Albanians seeking that assistance, this was the first opportunity for the Nunn- Lugar Act to go outside of Russia and the former states that comprised the former Soviet Union.

I mention this because it created quite a problem bureaucratically. I had to get Secretary Powell's signature on a piece of paper and take another piece to the president himself to eradicate the situation.

But when Senator Obama first came to the committee, we traveled to Russia and Ukraine, saw additional MANPAD missiles and, in fact, a whole acreage of weapons that were very dangerous, although not weapons of mass destruction, and we secured Senate assistance in passing the proliferation security initiative and other bills.

I bring all this to your attention because despite all this legislative effort, there has been no translation of this into increased financial or leadership commitment in the State Department.

Admittedly, budget constraints, problems of organization in the department, but nevertheless, all this became almost individual diplomacy rather than a concerted effort by our country.

And the problem now is that we have found that there are dangerous pathogens and disease repositories in other countries in need of WMD proliferation prevention assistance.

Can you describe, even in these early days of your study of this, what sort of an effort, under your leadership, the State Department may be able to offer to begin to do those things which are clearly diplomatic? That is, to open up conversations with other countries, to work with the Defense Department, of course, the Department of Energy, others who have interest in this, but which thus far the State Department has been either a reluctant or almost nonexistent partner.

CLINTON: Well, Senator Lugar, I don't think there is a more important issue that confronts the incoming administration and your leadership and inspiration with respect to arms control and especially nonproliferation and the effort to contain and destroy loose nukes and other material and now moving into the pathogen area, which is particularly dangerous, is a great example to me of what we should be doing.
It won't surprise you to know that in my transition review of the department, it became clear that the arms control and nonproliferation functions had been significantly degraded.

There was a difference of opinion within this current administration as to whether such an effort is worthwhile, whether it pays off, whether it's just spinning wheels.
I heard someone in the administration previously say, "Well, you know, we don't need this agreements because good people don't need them and bad people won't follow them."
And so the infrastructure for being able to back you up when you went to Albania was severely undermined.

We intend to build it even more robustly. I am seeking arms control and nonproliferation experts to come back into the department. This is one of the passionate concerns of the president-elect, who, I think, under your tutelage, understands very much the threats that we face.

So I believe, Senator, that you will find a very willing and active partner in these efforts.

I remember, when I met with you, looking at the pictures that you have displayed in your conference room of all of the various trips you've made, looking for this material, seeing it finally destroyed, and you know better than I how much more work lies ahead and, unfortunately, the bad guys are always at it. They're always going to be testing us.

So to that end, we will have a very strong commitment to the START treaty negotiation. We want to get out of the box early. We want Russia to know that we are serious.

I take to heart what the chairman said about trying to reduce our numbers even lower. This incoming president, like all presidents, has been committed to the end of nuclear weapons, as long as we can be assured that we have adequate deterrents and that we are protected going forward.

So we're going to enter it with that frame of mind, which is quite a change.

In the nonproliferation area, I want to do everything I can, working with you, working with former Senator Nunn, to see what authorities we need, how we can better beef them up, how we can better fund them, use this occasion even to invite some of the technical experts and others who have left the government over the last eight years to reenlist, because it is true that you could make the case that bad actors won't follow agreements.

You can look at North Korea, you can look at Iran, but I think those should be the exception and not the rule. There should be a rules-based framework for arms control and nonproliferation; that if the United States once again leads and constructs that architecture, we will be in a stronger position to isolate the bad actors.

So I hope, Senator, that you will take my remarks as the invitation they're meant to be for collaboration, not just consultation, as we rebuild this function, staff it, and fund it appropriately.

LUGAR: This is very good news. In a visit that I had with Foreign Minister Lavrov of Russia and Mr. Kiriyenko of Rosatom in mid- December, I know they would welcome your words today, because there have certainly been some doubts on the Russian side as to where we were and the time is wasting. And so your leadership will be very much appreciated.

Let me pursue a second line of questioning. At the Riga NATO summit in 2006, I gave a speech suggesting that Article 5 of NATO was violated just as severely when someone cut off natural gas and that's plunged a country either into the cold in the middle of the winter, where people would die and industry would founder, as when tanks and aircraft and what have you come across the border.

Behind the scenes, the foreign minister said, "Of course, you're right, but we don't talk about this publicly. We try to deal behind the barn as best we can with an intractable situation."

And now we are still in the process of coming out of another crisis of this variety. The United States has fostered the Nabucco Pipeline as a prospect of helping either our NATO partners or our EU partners, if Europeans prefer to deal with the EU in this problem.

But the fact is Europeans have not dealt with it very positively. The prospects for some grid underneath Europe in which natural gas or other power might be spread has been very halting because of nationalistic boundaries, and, on occasion, you have a feeling we are more worried about the Europeans' energy problems than some of them are.

I ask you this because this is a major diplomatic problem, our working with the NATO allies, with the EU, with the energy community in general, but I also come to ask if you agree that if we do not solve this problem at some point, our NATO allies are going to be rendered, if not impotent, at least in a position in which the NATO alliances weaken severely and perhaps the EU likewise, with the new members especially seeing acute pain and watching Georgia feeling a real problem in terms of their physical existence.

Would you make a comment on this proposition?

CLINTON: Well, Senator Lugar, I think, once again, you're demonstrating your farsighted realistic understanding of security threats, because I agree with. I think we have learned the hard way that the OPEC cartel is not just a commercial enterprise, but a security, geopolitical, strategic effort that we have had to contend with now for 36 years.

As you know, Russia is attempting to create a gas equivalent of OPEC that would give it, in addition to the bilateral powers it has, a much greater multilateral international reach on gas.

So this whole question of energy security, I think, has enormous implications for our country, for Europe, but, indeed, for the entire world.

I'm also aware that you authored a provision in the last energy bill to have a coordinator on these energy security issues in the State Department. I intend to fulfill that.

We've had individual envoys on specific pipeline issues, but we haven't brought it all together in a way that I think reflects the elevated seriousness of the challenges that are being posed.

Specifically with respect to Russia and its interactions with Ukraine, Georgia, other European countries, its recent purchase of the Serbian gas utility, I hope we can make progress with our friends in NATO and the EU to understand that we do need a broader framework in which we can talk about energy security issues.

It may or may not be Article 5, but I think it certainly is a significant security challenge that we ignore at our peril.

So I will look, again, for advice and consultation, ideas you might have. We will be going to Europe in the due course on foreign ministers meetings, on the NATO anniversary meeting.

CLINTON: This should be on the agenda and I hope that we can find willing partners to make it so.

LUGAR: Thank you very much.

KERRY: Thanks very much, Senator Lugar.

Senator Boxer?

BOXER: Thank you, Mr. Chairman.

Senator Clinton, I'm so excited to see you here today. As you know, I was very much in favor of your saying yes to this opportunity.

You're a dedicated public servant, and I think by nominating you President-elect Obama has sent a message that world peace and stability trumps politics and ego. And I think by accepting this position, Senator Clinton, you are sending the same message, because you are working with your toughest rival, and you've set your ego aside for world peace, world stability and for the good of the country. I mean that sincerely. You know I do.

I wanted to pick off a few of the issues that I care about. I'm going to do it very quickly because there are so many -- just to make my voice heard on those -- and then ask you a question on a topic you raised, and we've discussed it before, the status of women in the world -- in particular, violence against women in the world. And Nicholas Kristof has written a series of articles on this, and I've spoken with our great new chairman, and I think his concern certainly lies in this direction along with yours.

So let me just say you face unbelievable challenges, you and the president-elect. Six years later, we still have 140,000 troops in Iraq. Seven years later, after the brutal attack of 9/11, we're fighting a resurgent Taliban in Afghanistan. Al Qaida poses a great threat to us on that safe haven border of the Afghan-Pakistan border. The outrageous terrorist attack in Mumbai significantly heightened tensions between India and Pakistan.

And the outbreak of violence in Gaza reminds us that Israel continues to face grave threats to its very existence from never- ending rocket attacks. Our leadership is sorely needed there to protect the innocent, not just in the short term but in the long term where we hope to seek a very good solution for all sides.

In Iran we face defiance, in North Korea the same. And due to our own inaction, we continue to be dependent on oil and gas whose revenues line the pockets of hostile regimes. And this dependence has slowed our fight against global warming.

And I'm so proud that you mentioned global warming in your talk and that Senator Kerry, our chairman, is going to be so dedicated to helping you lead the charge in terms of a solution internationally. And as chairman of the Environment Committee, I will be by his side in that international treaty issue.

HIV, AIDS, tuberculosis -- Africa, Asia, Latin America need our attention.

So that's the list, and now I want to get to my questions.

I have a few pictures to share with all of us. And they're brutal pictures. And I'm not showing them for shock value. I want to show them because I don't think we can look away from the plight in women in the world.

And as I said, Nicholas Kristof confronts these issues in a series of compelling articles. In one, he tells us about the recent acid attack against young girls in Afghanistan, where they're going to school with their teachers. And we have a photo of one of the victims to show you on that. I'm just going to do these very quickly. OK.

He profiles a story in a second picture, I'll show that, of a Pakistani woman who was viciously burned by her husband with acid because she dared to divorce him. This is what we're talking about. This is Ms. Azar. OK.

Thousands of women have suffered similar attacks throughout Asia, and no prosecutions, senator. Kristof tells us the story of a Vietnamese girl named Sina Vann who was kidnapped at age 13; she was sold into sex slavery in Cambodia. When she refused to see customers, she was tortured brutally with electric shocks and locked in a coffin full of insects.

And Kristof illustrates an act of horrific brutality in a piece called "If This Isn't Slavery, What Is?" in which a young Cambodian girl had her eye gouged out by her brothel owner after taking time off to recover from a forced abortion. This is a picture of that, just very beautiful, young woman.

So I'm introducing some legislation. One is a companion piece of Representative Carolyn Maloney. Another one is the Afghan Women Empowerment Act, which many on this committee have worked with us on. And that's just the beginning. No woman or girl should ever have to live in fear or face persecution for being born female.

And, senator, I know how deeply you feel about this. And so I wanted you to take a little more time to talk about your commitment to this particular issue. And, obviously, I would be so pleased if you would commit to help us work on a legislation to fight this immorality.

CLINTON: Well, senator, you have been such a leader. And I have been honored to be your colleague and your partner in a number of these efforts that have been undertaken on behalf of women around the world.

And I want to pledge to you that as secretary of state I view these issues as central to our foreign policy, not as adjunct or auxiliary or in any way lesser than all of the other issues that we have to confront.

I, too, have followed the stories that are exemplified by the pictures that you held up. I mean, it is heartbreaking beyond works that, you know, young girls are attacked on their way to school by Taliban sympathizers and members who do not want young women to be educated. It's not complicated: They want to maintain an attitude that keeps women, as I said in my testimony, unhealthy, unfed, uneducated.

And this is something that results all too often in violence against these young women, both within their families and from the outside. This is not culture. This is not custom. This is criminal. And it will be my hope to persuade more governments, as I have attempted to do since I spoke at Beijing on these issues, you know, 13 and some years ago, that we cannot have a free, prosperous, peaceful, progressive world if women are treated in such a discriminatory and violent way.

I have also read closely Nick Kristof's articles over the last many months, but in particular the last weeks, on the young women that he has both rescued from prostitution and met who have been enslaved and abused, tortured in every way: physically, emotionally, morally.

And I take very seriously the function of the State Department to lead our government through the Office on Human Trafficking to do all that we can to end this modern form of slavery. We have sex slavery, we have wage slavery, and it is primarily a slavery of girls and women.

So I look also forward, senator, to reviewing your legislation and working with you as a continuing partnership on behalf of these issues we care so much about.

And finally, the work that the women of the Senate did in connection with First Lady Laura Bush on behalf of the women of Afghanistan has been extremely important. That program was started in the State Department. It was midwifed by a group that I helped to start back in the Clinton administration called Vital Voices. Mrs. Bush has been outspoken on behalf of the plight of Afghan women, on behalf of Aung San Suu Kyi in Burma, and other women facing oppression around the world. And I'm very pleased that that project will be spun off to Georgetown where it will continue under Mrs. Bush's sponsorship.

So we're going to have a very active women's office, a very active office on trafficking. We're going to be speaking out consistently and strongly against discrimination and oppression of women and slavery in particular, because I think that is in keeping not only with American values, as we all recognize, but American national security interests as well.

BOXER: Well, I couldn't have asked for a better answer.

I wanted to note, Mr. Chairman, that even the most conservative historians have said that if women in the world could be allowed to live up to their potential it would bring the whole world forward. A lot of the problems we face really come from this mindset that half of the population doesn't matter and can be abused. And they're ignored or hurt and can't contribute. So I think it's a key matter.

So I'll stop there and just say how much I appreciate your comments, not only on this subject but everything you've spoken about. It shows your breadth of understanding, in the same way with my chairman, who -- I mean, I think we have a team that's just extraordinary. And I'm proud. I hope to play a small role in that team.

Thank you.

CLINTON: Thank you.

KERRY: Senator Boxer, thank you. Thanks for that important line of inquiry.

And let me just say that Senator Boxer has talked to me personally about how the committee might focus on this. And I'm determined that the committee will. We obviously have, with Lisa Murkowski and Jeanne Shaheen, who will be joining the committee, an important nucleus. But I think that all of the other members of the committee share a concern and passion about this. So we will find a way to appropriately work with the secretary and see if we can't augment our international efforts on this.

Let me just say as I introduce Senator Voinovich -- speaking for the members of the committee and myself, I know -- we are saddened by your decision. We're going to work the hell out of you over the course of the next two years to get the most we can. We're delighted that you are a member of this committee, and we appreciate enormously the many contributions that you make. So prepare for -- you're not going to cruise these last few years.

Senator Voinovich?

VOINOVICH: You know, one of the reasons why I'm not running is that I want to devote my full time to these...

KERRY: There you go.

VOINOVICH: ... historic problems that we have. And how we handle them during the next two years will have a great impact on the future of our country and the world.

First of all, I want to thank you for the time we spent on the telephone and also for your receiving a very lengthy letter from me. And for the record, I'd like to just give the categories: management of the State Department; visa waiver; fighting global anti-Semitism; Israel; United Nations management; Security Council, their anti-Israel bias; enforcement of 1701, which we're both familiar with; stability and security in Europe; U.S.-Serbia relationships; Kosovo; NATO expansion; Russia; Canada and U.S. relations.

The thing I'd like to spend some time on is management. And I think Senator Corker did a pretty good job of outlining his concern about management of the department. But I think from a big picture point of view we have, if we can all work together on a bipartisan basis, an absolutely wonderful opportunity to really change the image of the United States of America.

And we all know that our public diplomacy is at a low ebb. I think Secretary Rice has tried to do a good job in the last couple of years in terms of multilateralism. But, you know, once the water goes over the dam, it's hard to bring it back up.

And I think that the Obama policy, "smart power" -- I was in Europe this last month, and they're all excited about our new president. And I think we all ought to be excited about the new national security team. Jim Jones, I had him wax about what he thinks we should do a couple years ago in Brussels at the German Marshall Fund meeting that they had. And I said, "Why can't we get this guy into this administration? He's got the right idea." And then you've got Gates, who's got the right idea. You have the idea.

And so this smart power is something that we really need to focus on. I would be interested in your reaction to the recommendations of Joe Nye and Dick Armitage in terms of smart power.

The other issue, of course, is when you get into the management of the department, I think you're getting Jack Lew in there and Steinberg doing the policy. And the fact that you recognize that you're going to putting out a lot of fires, and somebody's going to have to be working on this stuff from a day-to-day basis, it's important. But I think your recognition also of priorities -- prioritizing your time, where you're going to spend your time, who's going to do that -- the management here is extremely important.

And I sent to you -- and I don't know whether you read it or not -- but the American Academy of Public Diplomacy has come out with a foreign affairs budget for the future. And for the record, it finds that the secretary lacks the tools, people, competencies, authorities, programs and funding to meet U.S. foreign policy demands effectively. And it talks about hiring another 4,000 people from 2010 to 2014.

VOINOVICH: Again, I'd be interested either hearing from you about if you've read it or what you think about it. I haven't met personally yet with Jack Lew, but I definitely intend to do it. And I want the chairman to know that, whether I'm on this committee or not, I'm going to stay on this management thing as a ranking member of the oversight of government management and the federal workforce. And I may be on appropriations and foreign policy.

It's a big deal that I think really need to get done. So what are your thoughts on that?

CLINTON: Well, first, Senator, I thank you for your emphasis on workforce issues, management issues, better utilization of resource issues. That's been a hallmark of your service first in Ohio and now, of course, in the Senate. And so I welcome your involvement and your ideas as we go forward.

I want to say a word about your reference to smart power because, clearly, that is what the Obama administration and I will try to do. It is a recognition that it shouldn't be an either-or debate. Either we use military force and all of the strength and power that we have or we use diplomacy and development.

We want to marry those because we think that will give us a more effective foreign policy for your country. And, you know, General Jones is a perfect example. You know that he was asked by President Bush and Secretary Rice to work in the Middle East. And starting in December 2007, that's exactly what he did working with the Palestinian Authority and the Israeli Defense Force to build up security in the West Bank.

And I think the results were very promising with sustained bottoms-up effort day in and day out working to bridge gaps of understanding and trust, there was a turnover of security from the Israelis to the Palestinians which is, you know, still, as of this moment, holding. And that is the work that General Jones and General Dayton and others that he was involved with have been done. And we're going to continue that kind of approach.

VOINOVICH: One of the...

CLINTON: So smart power is the combined tools we have.

VOINOVICH: Yes. One of the things that I'm concerned about is the turf. And you've got Susan Rice going to the United Nations. She's going to become a part of the Cabinet. And I hope that there's a lot of discussion given about whose responsible for what and a recognition that there will be times where you'll all be stepping on each other's toes but that you're doing it for the best interests of the team.

I think that that's very, very important. The worst thing that we can have would be that something come out and say that we've got a conflict there.

I'd like to switch to another issue that I'm very interested in. And that is -- and you haven't really mentioned it. It's the issue of energy independence and its impact on our foreign policy. And as you know, for years, we were on the Environment and Public Works Committee and I talked about harmonizing the environment, our energy, our economy, and national security.

And on this trip to Europe, I was frightened when I found out the influence that Russia is having in terms of natural gas, including, Great Britain. And I thought to myself this threat of being cut off is going to have an influence on their decision making. And it's extreme the important that we not be, you know, in the hands of somebody else in terms of our energy.

And I'm wondering have you thought about that aspect of it? Now, climate change is very much a part of this.

CLINTON: Right.

VOINOVICH: But it seems to me that we ought to really raise the issue of energy independence in terms of our national security and also being able to make the right decisions in the world when some of our allies may not be able to because they're frightened that somebody's going to shut off their gas.

CLINTON: Well, Senator, the president-elect and I could not agree more with your point of view. It's one of the reasons why the president-elect has talked about an energy partnership for Latin America, looking to find ways through technology and other activities we can work together to become more energy independent in this hemisphere.

And, of course, we have problems in our own hemisphere with some of the providers of energy, like Hugo Chavez. So -- and, you know, President Morales. We have problems even in this hemisphere with countries feeling, you know, somewhat worried about what will happen with their energy supplies.

As you and Senator Lugar have pointed out, that becomes even more acute in Europe. So I think this deserves a lot of attention. It is part of the climate change agenda, but it also deserves separate attention.

And to that end, I will follow the recommendation of the legislation that Senator Lugar passed which says we should have someone coordinating energy security issues in the State Department to work with the Europeans, to work with others to try to come up with ways that we can both promote energy independence so they're not so vulnerable but also try to help equip them with ways of dealing with their current vulnerabilities, particularly to Russia.

Because I see this as a big security challenge. And, you know, I know of your longstanding interest in Serbia. And, you know, with the purchase of the gas company in Serbia by Gazprom, it -- there is some concern on the part of the Serbians. Well, what's going to happen to their gas supply? Are they going to be kind of a pawn in whatever the larger Russian ambitions are about energy?

So this is a very timely issue, and it should go hand in hand with our climate change work.

VOINOVICH: Well, I hope that because the cost of gasoline has gone down that we're all going to just sit back like we did in 1973 and just say everything's going to be fine. Because it's not going to be fine. And I would really hope that you and your team would give a great deal of consideration to how do we become energy independent, meaning, I'd like to say, find more, use less, and then the international dimension of this that -- in terms of public diplomacy to get the other folks in the world that are emitting greenhouse gases to come together in a unique way to say we're going to do this as a team rather than us coming up with the technology and then forcing it down their throat.

CLINTON: Well, I think the chairman, who's had a longstanding interest in this, knows that, as we move toward Copenhagen and attempt to craft a climate change agreement, all the major nations must be part of it. You know, China, India, Russia, and others, they have to be part of whatever agreement we put forth.

And I think, as I say, this can be both included in but also independently given attention to by emphasizing energy security which I intend to do.

VOINOVICH: Thank you.

KERRY: Thank you very much, Senator.

Senator Nelson?

NELSON: Senator Clinton, I have just a couple of questions. But I want to say at the outset that this senator thinks that your husband's Clinton Global Initiative is an extremely positive thing to haven in a relationship with the future secretary of state.

The fact that the Global Initiative has done such good things all over the world, the anti-viral drugs and the dispensing, the working on poverty and hunger, the fact of promoting development in the third world, I think, is a significant accomplishment and that can only lend additional credibility to your coming to the table as the foreign policy representative of the United States government.

I want that on the record.

Now, I want to pick up on something that Senator Boxer had said. I had the privilege of our subcommittee on this committee of chairing the hearings about rapes of American contractor women in Iraq and Afghanistan. And what we found in dramatic testimony from very courageous women that came forth and testified to the committee was that there was always an attempt among State Department contractor personnel -- and that, of course, was the jurisdictional hook through our Foreign Relations Committee. But the same applied to contractor personnel in the Department of Defense.

Always, the attempt to sweep it under the rug, not have it conveyed to the U.S. attorneys for the proper prosecution. When we got this out in the open, we have tried to encourage the cooperation and collaboration between those three departments -- Justice, Defense, and State.

I bring it out for your consideration. Now, let me just raise just a couple of questions.

Because of the beneficence of this committee in allowing me to travel a good part of the third world of this planet, there's such poverty and disease, but we come right back to this hemisphere. And the poorest nation in this hemisphere is Haiti. Please keep your eye on Haiti.

Senator Clinton, you've already been briefed on this, but one of the things that you're going to face is there is an American that is missing in Iran. Because that is a Floridian and because he has left behind a wife and seven children, I have gone to the Iranian ambassador at the United Nations who will see me even though his government will not allow him to talk to our UN ambassador.

He operates under the fiction that he will see me because I'm a representative of the people of the state of Florida. But the door has been closed at every turn. What I have said to him -- and I speak through the lens of this committee hearing -- that out of human compassion this is a great opportunity for the country of Iran to crack the door because we think he is being held by the government of Iran in a secret prison in Iran. And if we want to have some renewed relations, this is a good first opportunity.

Then I would just ask you -- we've basically had a lack of a vigorous policy toward Latin America. And what a great opportunity for the Obama administration. In the memory of President Kennedy's vigorous Latin American policy, the Alliance For Progress, do you have any thoughts on that?

CLINTON: Well, Senator Nelson, you've covered a number of important issues. And let me start with your question about Latin America.

I have a lot of thoughts about that. And I think you're right. It is a tremendous opportunity, and I look forward, on behalf of the president-elect and working with members of Congress who have a particular concern and interest in Latin America, to making it abundantly clear that the Obama administration is seeking partnerships and friendships across Latin America. We're looking forward with great anticipation to the Summit of the Americas that will be held in April. We want to, you know, not only respond to the issues that are in the headlines, as the president-elect did yesterday with President Calderon -- issues of security, issues of criminality and narco- trafficking and the like. But we want to seize the opportunities in Latin America, which is why the energy partnership that the president- elect has suggested that's so much potential.

The countries of Latin America are really our closest allies. If you look at trade, if you look at familial relationships, you can see all of these connections. And I think that we're going to put a new face on American diplomacy as we reach out to Latin America.

That is particularly a mission of mine, and I share your concern about Haiti. It is, as you say, one of the poorest nations in the world -- the poorest in our hemisphere. I hope that we can have a comprehensive approach that could alleviate the suffering the people of Haiti. And I look forward to working with you on that.

CLINTON: With respect to the Floridian who is in prison, it would be an extraordinary opportunity for the government of Iran to make such a gesture to permit contact, to release him, to make it clear that there is a new attitude in Iran, as we believe there will be with the Obama administration toward engagement, carefully constructed, and with very clear outcomes attempted.

NELSON: His name is Bob Levinson.

CLINTON: That's right.

And, you know, Senator, on contractors, this is going to be a big issue for this committee. We have seen the abuses by contractors, but even when there are not headline-grabbing abuses, there has been a steady transfer of authority and resources from government employees and a chain of accountability to contractors, and we have reaped the very difficult consequences of that. We -- we know, obviously, of the security contractors and some of the difficulties that they have presented, but it's been contractors across the board.

We have used so many of them, particularly in Iraq, but not exclusively, and I think we have to take a hard look at whether we want the U.S. government to turn into a contracting agency or whether we're going to be smart about using our resources because, in most instances, contracting out a job costs more than keeping it in-house and building up expertise and experience and imposing accountability. So I look forward to working with you and your subcommittee to try to determine what we can do about contractors.

But I would just end on this cautionary note. The chairman asked me about the role of the State Department in Iraq. We're going to try to fulfill any of the pledges we've made in the agreement of friendship and cooperation. Our civilian employees need to be protected. As we withdraw our troops, we have to be absolutely assured that they will be protected by the Iraqis, or we have to use contracts, or we have to wonder whether we can send them out to the countryside if there is still the threat of violence.
So this has a direct effect on how we're going to perform our diplomatic responsibilities inside Iraq and other countries.

KERRY: Thank you, Senator Nelson.

Senator Murkowski?

MURKOWSKI: Thank you, Mr. Chairman. And welcome to you, Senator Clinton. Thank you for your leadership, for your willingness to -- to step forward and assume this very, very important position for our country, for the nation. I truly appreciate all that you are poised to do and what you have done in the past.

We had an opportunity in my office last week to -- to discuss an issue that is, I think, vitally important to this country, and that is our role as an Arctic nation, and I know oftentimes my colleagues don't view the United States as an Arctic nation, but we are by virtue of Alaska, and we have opportunities, when it comes to a leadership role, in collaboration on research, on environmental issues, on issues as they relate to commerce, and we're seeing more of those issues present themselves as we see a world out there that is more and more free of sea ice.

The loss of summer sea ice from climate change is having a truly dramatic effect on the Arctic, and the Bush administration saw this unfolding. We've been working with them for -- for about the past 18 months to advance a new Arctic policy. Our Arctic policy is about 15 years stale. That was just released on Friday. I don't know if you've had an opportunity to fully review it.

But I'd like your comments here this morning on the evolving role of the Arctic, on the role that we can play as an Arctic nation in dealing with our neighbors. We discussed the issue of Russia, and at some -- oftentimes, we've got some very difficult relationships with their -- them, but the opportunity that -- on -- on issues as they relate to research and an evolving world up north, how that might play out, and if you could just speak to that issue this morning.

I -- I have missed most of your comments this morning, and I apologize for that. I've been in two other confirmation hearings, but I'm pretty certain that you haven't fielded yet a question on the Arctic.

CLINTON: And, Senator, it's very timely that one has been raised because, as I -- as I had said to you before and -- and even when you and your husband hosted Senator McCain's CODEL when we were in Alaska and saw for ourselves some of the changes that are going on in the Arctic, both on land and in the sea, you have been a leader on this issue, and I hope your time has come, Senator, because I believe that the issues of the Arctic are one of those long-term matters that will dramatically effect our commercial, our environmental, our energy futures that we have got to start attending to now.

So, to that end, I agree with you completely that the issues that are posed by the recent Bush administration report that did come out just a few days ago, the work of the Arctic Council that has been an attempt to try to summon the best thinking of the government and outside experts will find a very receptive ear in the State Department. I think President-elect Obama and I see that this is one of those areas that offers a chance for cooperation that might lead not only to positive actions with respect to the Arctic, but deepen our partnerships with Russia and others across the board. So, to that end, we will be working to try to sort through the recommendations and the ideas in the recent reports to see how we fit that in to already existing frameworks and consider what additional actions and positions might be necessary, but I agree with you completely. You know, maybe because the change has been relatively rapid with the melting of the sea ice, people haven't kept up with what is going on in the Arctic, and I -- when I was in your office and you were telling me about how cruise ships now are going to Point Barrow, I was shocked.

MURKOWSKI: So were the people at Point Barrow. So were the people at Point Barrow! I mean, look on the map. It's the northernmost place in the United States, and it's not a place that one would have thought previously was on the tour for cruise ships.

CLINTON: We know that there's going to be a necessity to map out our continental shelf. We know that there will be disputes over energy resources and minerals and other natural resources in the Arctic. To go along with that, I -- I know that hand in hand with concerns about the Arctic is, you know, the Oceans Convention, the Law of the Sea, which would clarify a lot of the problems that you're going to face in Alaska if we don't have a national Arctic policy that also includes what our international position is on the oceans, and I think...

MURKOWSKI: Will ratification of the Law of the Sea Treaty be a priority for you?

CLINTON: Yes, it will be, and it will be because it is long overdue, Senator. The Law of the Sea Treaty is supported by the Joint Chiefs of Staff, environmental, energy, and business interests. I have spoken with some of our -- our naval leaders, and they consider themselves to be somewhat disadvantaged by our not having become a party to the Law of the Sea.

Our industrial interests, particularly with seabed mining, just shut up. I mean, there's nothing that they can do because there's no protocol that they can feel comfortable that gives them the opportunity to pursue commercial interests. So, for all of those reasons -- and I mention it in conjunction with the Arctic because I think they go hand in hand -- we've got to figure out where our boundaries are. You know, if people start drilling in areas that are now ice free most of the year, and we don't know where they can and can't drill or whether we can, we're going to be disadvantaged. So I think that you will have a very receptive audience in our State Department and in our administration.

MURKOWSKI: Well, I'm -- I'm very pleased, very encouraged to hear that and truly look forward to the opportunity to be working with you to advance these -- these very important issues, and -- and as we look to some of the basics that we're lacking up in the Arctic, whether it's the -- the capacity for search or rescue, you know, what -- what -- what we need to be prepared for in this -- in this ever- evolving world without borders, it's quite a concept to think.

One -- one more question, another that Alaskans look to with great interest because of our proximity to North Korea: As we look to the hot spots in the world, we certainly appreciate all of the other threats that you will be dealing with as secretary of state, but you kind of get most nervous about those that are more proximate to you, and North Korea is certainly to us.

In that vein, what do you see the future of the six-party talks under -- under your tenure -- how do you anticipate that you'll be able to -- whether it's jumpstart the process or -- how do you see that moving forward?

CLINTON: Senator, I've had several lengthy conversations with Secretary Rice who has brought me up to date on the status of the six- party talks. It is a framework that the president-elect and I believe has merit, but it also provides an opportunity, as Secretary Rice has testified before this committee, for bilateral contacts as well between North Korea and the United States.

Again, this is under review. We're looking at all of the record of the negotiation up to this date. Our goal is to end the North Korean nuclear program, both the plutonium reprocessing program and the highly enriched uranium program which there is reason to believe exists, although never quite verified, and it is our strong belief that the six-party talks, particularly the role that China is currently playing, along with our close allies South Korea and Japan, is a vehicle for us to exert pressure on North Korea in a way that is more likely to alter their behavior.

Again, I have no illusions about that. I think it takes tough reality-based diplomacy to determine what is doable. We have got to end North Korea as a proliferator. There is certainly reason to believe that North Korea has been involved with Syrian efforts. We know that it was involved with Libyan efforts. So it's not only preventing the threat from North Korea, which is of particular interest to Hawaii, Alaska, and the West Coast of the United States, but it is their role as a proliferator.
So we will -- we will embark upon a very aggressive effort to try to determine the best way forward to achieve our objectives with them.

MURKOWSKI: Thank you.

Thank you, Mr. Chairman. And thank you for your, again, willingness and -- and your great capacity (inaudible) effort. Appreciate it.

KERRY: Thank you, Senator Murkowski.

Let me just say to you and to others interested that we are already -- I have talked to Senator Lugar about this, and I've talked to Senator Clinton about it. We will be -- we are now laying the groundwork for and expect to try to take up the Law of the Sea Treaty. So that will be one of the priorities of -- of the committee, and the key here is just timing, how we proceed.

Senator Cardin? CARDIN: Well, first, Senator Kerry, let me -- let me tell you how proud all of us are to serve on this committee, particularly with you as our chairman. We're -- we're looking forward to this time and know the challenges are great, and we thank you for stepping forward as chairman of the committee.

KERRY: Pleasure.

CARDIN: And to Senator Clinton, thank you. Thank you for being willing to do this, your entire family. I -- I know it was a difficult decision. I know how much you love being a senator from New York, and we just thank you for stepping forward. The issues are so difficult in this country, and it couldn't be a better person to represent our nation, and we thank you for doing that.

We had a chance to talk about several issues when you were in my office over the weekend, and your opening statement and your responses to questions have covered much of the area. Particularly I want to just underscore the challenge you're going to have in the Middle East between the Israelis and the Palestinians, and I think you have covered that in your statement and in your response.

I want to deal first with another void that you've created in the United States Senate because of your selection as secretary of state. Now, obviously, it's going to be a void for the people of New York as you leave that Senate seat, but also the Helsinki Commission which you serve as an active member and you've been a very valuable member of the commission. I will have the honor of chairing the commission during these next two years.

And, as you know, it was established as the U.S. arm to the Organization for Security and Cooperation in Europe, created in 1975 with President Ford, as a way to engage Europe on security issues, on economic issues, and on human rights. It's perhaps best known for its work in the former Soviet Union when it spoke up to the human rights violations and led to changes within the Soviet Union. In recent years, it's been very helpful on creating a strategy in Europe to deal with anti-Semitism and other forms of discrimination.

CARDIN: It has been actively involved on the human trafficking issues, and we've had discussions here today about necessities to monitor not only the activities from those countries that -- where the women -- and they're usually women and children -- come from, but also the receiving countries and to deal with the problems.

And we now have a reporting issue within the State Department to see how well countries are doing on trafficking and a lot of that work came out of the Helsinki Commission. And the list goes on and on and on.

My point or request to you is that I that the OSCE and the U.S. involvement through the Helsinki Commission can be a valuable tool in your game plan on dealing with the policy objectives of the United States, whether it's engaging Russia, and Russia, as you know, is an active member of OSCE, or whether it's dealing with global climate change or whether it's dealing with refugee issues.

And I would just urge you to challenge us as to how the OSCE can be more effective in dealing with your game plan for foreign policy of this country.

CLINTON: Well, Senator Cardin, it's been an honor to serve on the Helsinki Commission and I know you have not only a longstanding interest, but involvement, going back to your days in the House, with respect to OSCE and the Helsinki accords.

And when you and I were talking, we briefly discussed how history sometimes plays out, because at the time of the Helsinki accords, then President Ford was urged by both the right and the left not to go and negotiate those, that they would not be a good idea, and he very courageously said that he was going to go forward, because any opportunity to negotiate, to try to set up a framework for human rights was in America's interest.
And we now can look back and see how President Ford's vision which led to the Helsinki accords, which, obviously, the former Soviet Union was a party to, actually contributed to the eventual breakup of the Soviet Union, because it gave legitimacy and voice to people who were dissidents and had human rights complaints.

So I think this work must continue. I look forward to figuring out ways that we can work together. And I also would appreciate any advice you would have about how the framework of OSCE and the Helsinki accords could be perhaps modernized and transported into the 21st century, with some of the problems that we see around the world today, because the problems are certainly different, but human nature isn't, and how we take advantage of diplomacy and agreement and setting goals on human rights will be a priority and doing that in service of outcomes, like what we saw with the Helsinki accords is what I'm interested in.

CARDIN: And that's one of the highest priorities for us to evaluate how we can modernize the Helsinki Commission and the OSCE process.

And we are fortunate to have representatives from the executive branch that serve on the commission with us. So we will do this in conjunction with your own views as to how you think we can best serve the objectives of this country.

Let me mention one or two issues that are relevant to the human rights issues, but also relevant to the broader issues.

The refugee problem, particularly as it relates to Iraq, I mean, we hear a lot about how we're going to ultimately resolve the circumstances in Iraq.

When you have five million displaced individuals, many of which are in other countries, it makes it extremely challenging to see a lasting solution in that region.

Several Senators have sent a letter to President-elect Obama urging a White House office on refugee issues just so we can get the type of visibility we think on refugees.

Clearly, this is a high area of concern within the foreign policy in the State Department. I would welcome your involvement as to how we come to grips with the refugee crisis in that region.

CLINTON: Well, Senator, as you know, there is an office in the State Department -- population, migration and refugees. It's our intention to staff that with effective and creative professionals, because we agree that the refugee problem is growing worse in many places around the world.

You reference Iraq. One of the challenges of the Iraqi government and, insofar as we are involved, our government, in sort of balancing how we're going to support the stability of the Iraqi government and help them deal with the repatriation and return, both externally and internally, of Iraqis is a big challenge to the Iraqi government that we're conscious of.

But we have refugee populations, some of decades longstanding and some of a few days standing, in so many places. I will do my very best to elevate this issue, to give you the kind of expertise within the State Department that will give you comfort that we're going to make this a high priority, and to come up with solutions to some of our longstanding refugee challenges.

This is a very complex issue, because everywhere we look in the world, conflict, famine, disease, the economy, we have refugees. And so our hope is that we can get a more comprehensive strategy to deal with refugees, come to the Congress to get the funding for refugees, a problem which is compounded by the point that Senator Lugar made at the beginning of the hearing about the food crisis.

So I would welcome working with you and those who are concerned, as you are, to come up with an effective strategy for the United States to deploy with respect to refugees.

CARDIN: Well, thank you very much for that answer.

Many of us have been asking you questions on energy. Energy is a huge issue internationally and the State Department is going to have to play a critical role.

We've talked about the global climate change issues. We've talked about some of the conduct of other countries trying to stop energy from flowing between different countries.

I want to talk about one other issue. We have a lot of mineral rich countries in which its citizens are very poor. We think that many of those revenues are going against U.S. security interests, funding activities that are against our country.

There is an effort made for transparency and extraction, so that we set up the model system for how a nation should handle how its mineral wealth is used for the benefit of the people of their own country.

The United States is participating in that discussion. I think we could be more aggressive in trying to move forward.

We've talked about foreign assistance and many of these countries that have mineral wealth are receiving foreign aid from the United States and we don't know where their mineral wealth is going.

So I just want to bring that to your attention and I think this is an area that we can make much further advancements in trying to help deal with the poverty around the world.

CLINTON: Very creative suggestion, Senator, and we should look at the models of countries that have handled their mineral wealth to the advantage of their people. Botswana comes to mind. They've been very good stewards of their diamonds and have invested in roads and schools and infrastructure in Botswana.

So we should be looking for best practices and see if there is a way to create a regulatory framework that would give both protection and incentives to mineral rich countries so that they would be able to stand up for their rights and then use the revenues in a very positive way to enhance the well being of their people.

CARDIN: Thank you very much, look forward to working with you.

CLINTON: Thank you.

KERRY: Thanks a lot, Senator Cardin. Let me just say that given the time here, we're going to have two more rounds, do two more questioners, before we do the mandatory break at quarter of.

And just for the knowledge of the press and others, and many of them are already aware of this, we have a very extensive questioning process that takes place prior even to our convening here, called "questions for the record."

And the committee has already submitted, just through the chair, over 138 questions and there were additional questions by other Senators, all of which have been answered by Senator Clinton, and we're very appreciative for the in-depth answers.

We know it's an enormous task and a lot of people have ground away on it, but we're very, very appreciative.

What it does do is facilitate the hearings considerably and help us to sort of narrow the areas of inquiry that we need to do here now.

With that said, let me turn now to Senator DeMint.

DEMINT: Thank you, Mr. Chairman, Senator Lugar.

And, Mr. Chairman, I would like to submit for the record a longer list of questions that I will not have time to ask today.

KERRY: Fine, but we are going to try to proceed forward. So we'll try to get those answered in the next 24 hours for you, Senator.

DEMINT: Thank you very much.

KERRY: Because we do have a business meeting scheduled for Thursday.

DEMINT: Thank you.

Senator Clinton, congratulations on your nomination. I appreciate your call. It's amazing what a little communication can do. So I feel a lot better about you already.

I am optimistic and hopeful about your role as secretary of state and despite the news accounts that say that I'm the one that's going to ask you the hard questions about potential conflicts of interest, I have no questions about your integrity.

I would support Senator Corker and others who support your nomination in appealing to you to do whatever is necessary to silence any critics before you take office. Enough said, as far as I'm concerned.

The State Department, over several administrations, has a mixed reputation, at best. In private, talking to military leaders, business people, international adoption agencies, independent aid workers, even foreign officials, I often hear the State Department is more of an obstacle than a help or mixed reviews, again, at best. We even have foreign governments calling our office and coming in to meet with us to want to bypass the State Department to develop better relations with our country, and I'm sure other members have experienced the same thing.

So the challenge is tremendous. You mentioned in your opening statement the many challenges all around the world, economic, human rights, and there is so much to do that it's mind-boggling.

And with our economy and our debt and the domestic needs that we have and incredible levels of spending that we're experiencing now, it's very difficult to see an expanded role for America around the world, certainly one that has to be prioritized.

And I would join with Senator Isakson and I'll paraphrase, but we need to be that city on the hill. I'm not sure that we can afford to build cities on the hill all around the country, although I hope we can play a role.

With so much to do, I just wanted to ask you to comment about other ways that we might can accomplish our goals.

I've seen, as I've traveled and talked to people from around the world, that very often, business, trade, commerce is our best ambassador and even in difficult political times, when Germany and France are squabbling with the U.S., I have a Michelin headquarters and BMW headquarters in my district, business goes on and everybody gets along just fine despite the political wrangling.

And we also see private charities, aid workers, missionaries doing so much good.

How do you see the role of the State Department in facilitating the good private sector things that are there without trying to replace them and maybe without trying to manage them?

CLINTON: Well, Senator, I appreciate very much your posing this question, because I think it's a real opportunity for us if we can figure out how best to better coordinate and facilitate the private sector and the not-for-profit and religious community of the United States on behalf of humanitarian and commercial efforts.

I think that the State Department has been reviewed in a mixed way for a number of years. In part, it's because the work of the State Department, both in diplomacy and development, is not as well understood and sometimes appears to be frustrating.

I mean, trying to argue over where a comma goes or what the appropriate language would be and how to actually get to that treaty, it does raise, in the eyes of the American people, questions about, well, what is it we do.

And I think we have a bigger job, which I will assume, of trying to explain to the American people why our national security depends on defense, diplomacy and development. Now, defense is primarily a government mission, as we know, and thank goodness for these young men and women and their commanders who wear the uniform of our country.

Diplomacy is primarily a government mission, but there are lots of ways that nongovernment actors, like corporations, like religious organizations, like charities and foundations, are actually building relationships with foreign governments and foreign people all the time, which, if done in the right way, are really value added to who we are as a nation and what we can achieve.

Right now, in Rwanda, a number of foundations, a number of churches, a number of private sectors actors are all working to try to build that country back up.

So I would hope that when we look at the State Department, we think of the role of foreign policy, diplomacy and development as involving not just those who are the foreign service officers and the civil service professionals and the development experts, but really it's all hands on deck.

CLINTON: We have a lot of work to, in my view, kind of repair damage and get out there and -- and present America as we know we are.

But I don't think in this complex and dangerous world there is any substitute for the role of the State Department and USAID professionals. So it will be my undertaking to make this department as efficient as possible, so that you know you're getting your money's worth; to streamline it as much as possible.

I mean, I will be frustrated, as you will be, if all we do is pile up paper. I want strategies. I want specific ideas. I want more partnerships. That's how I see the role of the State Department in the 21st century. That's how I hope that USAID will, you know, be revitalized to perform that role as well.

But the disparity of resources is such that when you've got more than 10 times the resources going to the Defense Department than you have going to the State Department and foreign aid, the Defense Department has been, in effect, recreating mini-State Departments.

You know, they're out doing development assistance and rule of law and other things. Why? Because, as I said earlier, they have a presumption of being able to move much more quickly. The money we give them is, in many respects, more flexible.

So I think we have to see how do we get what we want and what we're paying for out of our State Department and USAID. And I want to work closely with you and others on this committee. I want new ideas. I want best practices.

But I don't think there's any substitute for having seasoned, experienced professionals and experts sort of leading our efforts on diplomacy and development, and working, where possible, in partnership and coordination with the private sector and the not-for-profit sector.

DEMINT: Thank you. I can see I'm not going to get to too many of my questions, but I'm -- I'll -- just a couple of concerns and one last question.

Just as you're concerned about the disadvantage, difficulty, of women and children around the world, much the same can be said for religious persecution. Even in countries like Iraq that we're doing so much to -- so much sacrifice to free, Iraqi Christians can't come home. I would hope you would be sensitive to that. And also, we have spoken about Israel, and I think there's widespread agreement of our support there, but it appears to be naive and illogical to continue to -- diplomacy and calls for peace with governments that are publicly opposed to the existence of Israel. How we reconcile that is -- is very difficult.

One last concern, I think, and one difficulty that you will have is balancing protecting our sovereignty as a nation with international cooperation. I've seen with some of our agreements with the United Nations, the United States is going to bear the brunt of the expense and often the execution of -- of -- of what is -- the U.N. promises.

They don't back up their own resolutions, as in Iraq or now in Iran, North Korea. We submit and we -- and we complied and yield in many ways our decision-making to organizations like the United Nations, but then we're left holding the bag with what they don't do.

And maybe in just a minute or so that I have left -- how can we do a better job of being cooperative, at the same time protecting our sovereignty?

CLINTON: Well, I think the absolute bottom line for any agreement or undertaking by the United States government is that it has to be, in our view, in the best interest of the United States...

DEMINT: Right.

CLINTON: ... that it furthers our national security, advances our interests, and both protects and reflects our values. That's how I see my responsibility.

I think there are ways that we can cooperate more than we have without in any way impinging upon our sovereignty, our identity or our security interests or values.
But I will remain very conscious of that, Senator, because two issues that you -- you mentioned -- religious persecution -- that's a -- you know, that -- that is anathema to Americans. I mean, we believe in the freedom to worship. And there is a -- an office in the State Department that is committed to religious freedom.

But I -- I believe that that is an area that we want to talk more about, that we want to raise, because of the significance.

You point out rightly that, you know, we've given a lot of aid and we've -- we've given a lot of blood on behalf of certain countries that -- that persecute not just Christians but people of other religious beliefs, even interfaith beliefs within the same denomination or particular view of religion.

I think on Israel, you cannot negotiate with Hamas until it renounces violence, recognizes Israel and agrees to abide by past agreements. That is just, for me, a -- you know, an absolute. You know, that is the United States government's position. That is the president-elect's position. And finally, on the questions, we will turn those around in the next 24 hours, Senator. I know that the chairman and Senator Lugar submitted very thoughtful, extensive questions, and we responded to those, more than 300 of them.

We will take whatever other questions for the record any member has and turn those around within 24 hours, because I -- I want you to have as -- as comprehensive a record as possible for you to consider my nomination.

DEMINT: Thank you very much.

Thank you, Mr. Chairman.

KERRY: Let me just shock your troops by telling you that, unfortunately, we have to, in order to move forward, close the record by 12 noon tomorrow, so...
CLINTON: OK.

KERRY: We'll get the Starbucks (NASDAQ:SBUX) out tonight.
(LAUGHTER)

Look at those smiles over there.

CLINTON: Don't look too closely, because they haven't had a lot of sleep. They're not...

KERRY: I'm confident...

CLINTON: ... not looking too alert today.

KERRY: Anyway. What we're going to do is Senator Menendez will close out the morning questioning, and then we'll come back.

Senator Isakson, you'll lead off as close to 2 o'clock as possible. It's slightly dependent on someone else's schedule, but we'll -- we'll figure that out.

We'll go through the rest of the questioning, and then we'll have another round. We'll probably shorten the second round. But I think -- Senator Clinton and I have discussed this -- we are both prepared to stay here as late as necessary to try to get through it.

There are other areas of inquiry that I know a lot of us have, and there are some important subjects that we haven't yet touched on, so we need to expedite that if we can.

Senator Menendez?

MENENDEZ: Thank you, Mr. Chairman.

I want to start off by saying, Senator Clinton, I -- I appreciate the significant voluntary steps that go above and beyond the requirements of the law and ethics regulations that you have been willing to put forth.

I think that they are exemplary and should answer a lot of people's concerns. And as I said, they're above and beyond the law and the ethics requirements, and I appreciate that.

Particularly, I appreciate that even pledges and proposed contributions to the Clinton Foundation will be eligible for review by the deputy legal adviser and designated agency ethics official at the State Department. That, again, is above and beyond.
And I think that that's the type of tone and tenor to set, and I want to salute you for -- for doing that.

You and I have had the conversation to talk about something I care about a great deal, which is foreign assistance. We've held -- been privileged in the last Congress to chair the Subcommittee on Foreign Assistance, and we've held a series of hearings on it.

You know, it's interesting to note that nearly a half a century ago, President Kennedy sent a letter to the Congress in which he said something that if we were to hear today would largely be the same.

He said the economic collapse of those free but less-developed nations which now stand poised between sustained growth and economic chaos would be disastrous to our national security, harmful to our comparative prosperity, and offensive to our conscience.

He said no objective supporter of foreign aid can be satisfied with the existing program. Actually, a multiplicity of programs -- bureaucratically fragmented, awkward, slow. Administration is diffused over a haphazard and irrational structure covering at least four departments and several other agencies.

And he went to talk about the morale of those employees trying to pursue that. That was nearly a half a century ago, and in some respects I could say that that is a large degree of what we face today.

So as one of the most powerful tools of soft diplomacy, I'd like to hear -- you know, some of us are concerned. I -- I've heard about the designation of Mr. Lew as the deputy secretary of state for resources and management -- that he will be the advocate. You know, that's a broad title, lot of resources, lot of management.

Question is, you know, how do we ensure that we elevate foreign assistance?

How do we ensure that we appoint a high-profile manager to lead that agency, a strong, independent voice for foreign assistance, building up the staff at AID, making sure that a lot of what's gone to the Defense Department by -- by -- simply by -- the lack of having an appropriate structure and effort at State comes back to State, where it really should be done, in cooperation with the Defense Department.

Give us -- give me a -- a sense of confidence that under your leadership this is something that we're going to see pursued vigorously.

CLINTON: Well, you have, you know, my commitment that it will be pursued vigorously. It is an area that I care deeply about. It is where much of my, you know, early public voluntary efforts were directed.

And I am hopeful, Senator, that we're going to put in place a system that will, number one, rationalize what we have there now, and not only within the State Department and USAID, but as you know, there are pockets of foreign aid programs across the government that are technically under the coordination of the secretary, but are not really working together as they should.

And -- and when we look at USAID, we've got to get a handle on the contracting out of functions and personnel. It leaves us without the capacity to respond to the many needs that we know are there.

When we look at what's called the G function in the State Department, that's where you see population, migration and refugees and, you know, having served very happily in this body, I know how -- how it seems that if an issue of such importance as refugees is not getting attention, then let's put a coordinator in the White House, and maybe that'll get people's attention.

But of course, what we ought to be doing is making the existing State Department programs work effectively. We have PEPFAR, which has been very successful and is a great tribute to the Bush administration.

But it is within the State Department but not within USAID, but it utilizes many of the development and health experts in USAID both on the government payroll and on contracts to actually do the work.

We have the Millennium Challenge Corporation, which is a very creative and innovative approach to foreign aid, which is an independent entity, which again looks to USAID for advice and expertise.

So we've got to get our arms around what you could think of as traditional foreign aid -- health, education, economic empowerment and the like -- plus what is now becoming increasingly important -- that's the reconstruction, stability, conflict resolution, peacekeeping challenge that we face.

And, Senator, I am determined that we're going to present to you a plan and a system that will try to maximize coordination, minimize redundancy and make the case for the increased resources that are so desperately needed if we intend to meet the missions that we've been given.

And that is why I think Jack Lew, who will fill the deputy position on budget and resources, is the point of accountability, because so much of what we're going to have to straighten out and fix are resource decisions.

And we've got to make the case -- I think Secretary Gates is open to the case. I know the president-elect is very committed. He wants a -- actually an increase in foreign aid because he believes so strongly in its efficacy as part of our foreign policy.

They're committed to transferring assets and functions back to the State Department, but we have to prove that we're ready to take them on, that we're going to handle them, that we can instill confidence in you and Senator Cardin and others about these core functions and, you know, answer Senator DeMint's concerns about, you know, are we really doing what we need to do here.

So that is my pledge to you, and I'm going to work as hard as I know how to make it happen.

MENENDEZ: We'd look forward to working with you on that.

Let me just touch on specific areas, and then I hope not to give you any questions at the end of the day so you can move through the process -- written questions.

But in 100 days, the new administration will inherit the Summit of the Americas, and it will be either the president-elect's imprint or it will be that which existed before.

We have challenge in Latin America, and our challenges are lack of engagement in a way that makes a difference. We need to care less about what Chavez says and more about what we do at the end of the day.

And so I hope that we can work with you and that the administration will focus very quickly on what that summit is going to look like. And I hope that we have an Americas Initiative soon -- obviously, not by the summit, but at least talking about the outlines of what that will be.

The hemisphere is incredibly important. It is in turmoil and challenge in many parts of it. And I hope that that is something that we will look at very quickly.

MENENDEZ: I know you have supported the legislation we had that came to the committee in a bipartisan, unanimous on creating a social and economic development fund for the Americas. We'll call it to your attention.

Two last areas of the world. There are many, but I hope that the support that you gave while you were a senator to the question of the Armenian genocide that the president-elect has, himself, supported, the recognition of that. You know, if we are to say never again, part of that is ultimately the recognition of what has happened so that we can move forward.

And I hope that you will be an advocate of having us get off of where we have been and move forward to a recognition of that part of history that is universally recognized so that we can move forward in that respect.

And I also hope, in a part of the world that's very important to me, on the question of the reunification of Cypress, that we have honest brokers at the State Department at the end of the day. One that recognizes that if Greek and Turkish Cypriotes could work for each other, they would seek a bi-zonal, bi-communal federation that could move forward and reunify the island and end up the incredible militarization of the island -- the most militarized part of the world per capita.

So I hope that you will look at those issues. I know the positions you've taken as a senator, and I applaud them. I hope that they won't change drastically as you move to the secretary of state.

CLINTON: Senator, we will be looking very closely at those and other challenging issues with the eye of moving forward and being effective in responding to these very legitimate concerns.

MENENDEZ: I look forward to supporting your administration.

KERRY: Thank you, Senator Menendez.

Thank you, Senator Clinton for a good morning of testimony. You've displayed one of the assets necessary for the job. You sat there for three hours and 15 minutes. And we look forward to the afternoon session.

And I should say that to everybody here. It's been a remarkably attentive and quiet audience. So we appreciate that very much.

KERRY: So we will recess until no sooner than 2 o'clock, and we'll try it make it as absolutely close to 2 as possible. We stand in recess. Thank you.

(RECESS)

KERRY: The hearing will come back into order, and I apologize to everybody, particularly to our colleagues who were here on time.

Senator Isakson, I'm sorry about that.

We had the president-elect meeting with us at our caucus on the minor topic of the monster of TARP and also the stimulus. So I'm sure you can all understand it was spirited and important and that's why we are late. And I apologize for that.

I said that we would pick up -- we're going to complete the first round of ten-minute questions. And I think for the second round, we'll probably going with seven minutes and see how we proceed.

But, Senator Isakson, you're up next, and we appreciate your patience.

ISAKSON: Thank you very much, Mr. Chairman.

And, Chelsea -- Chelsea, you should know that your mother and I had a conversation in my office. She's very proud of you and very proud of the support you give to her. And I got to show her all my grandchildren, so she'll have plans for you in the future, I can guarantee you.

(LAUGHTER)

Senator Clinton, it's a pleasure. I want to commend you -- this is not really a question; just a statement. But I have the highest regard for Senator Lugar. I think the remarks -- the pre-hearing questions he sent to you with regard to the Clinton Foundation were very important, and I think his insights are very important because, in your answers to those questions, on a couple of occasions, you made the statement the goal was to protect against even the appearance of a conflict of interest between his work, meaning the foundation's, and the duties of secretary of state.

And we all know that in this world of politics, perception becomes reality. So appearance is everything. And I commend Senator Lugar's recommendations to you. Also, twice in your opening remarks which were extensive and, really, appreciated because you really covered some very important topics, you referred to what I call the three D's -- diplomacy, development, and defense -- on two different occasions. Once, vis-a- vis Al Qaida and then other just based on overall policy.

I believe that the better your diplomacy, the better your ability to defend yourself. And a strong military is a great foundation for good diplomacy. And then if you add the development -- which I think is soft power or smart power -- you have a great trilogy. Do you agree with that?

CLINTON: Senator Isakson, I couldn't say it any better. I certainly do agree.

In order to protect and defend the United States of America, to advance our interests, and to further our values, we have to have all three of those elements of our power working in concert. But, clearly, as I said, as you pointed out in my opening statement, a strong military is essential for the ultimate protection of our country and our interests.

It is my hope that through more vigorous and effective diplomacy we would be able to resolve both problems that we have with individual countries and the transnational problems like proliferation that threaten out of us.

And so I think that the State Department has a very big responsibility to improve its capacity with respect to both diplomacy and development because, without those two elements of our power projection and our policy being as effective as they can be, we're not going to have the agile, comprehensive foreign policy we should look forward to.

ISAKSON: In the presidential debate, I watched both sides -- ours and yours. There was a significant debate over foreign policy and over the issue of precondition. I was -- really appreciated your responses throughout, and I think you added a great deal of strength to that debate.

And now that we're looking at suggestions of talking to Hamas or maybe Hezbollah or maybe Iran, preconditions are absolutely essential, I think, to good, strong diplomacy. I hope you still feel that way.

CLINTON: Well, I certainly do, as does the president-elect. I think that his commitment to vigorous and effective diplomacy is in context of his understanding that there are different ways for us to engage.

When it comes to non-state actors like Hamas, as I said at the very end of the morning session, there are conditions. Hamas must renounce violence. They must recognize Israel, and they must agree to abide by all previous agreements.

There are conditions that are usually part of the preliminary discussion that would lead to any kind of negotiation. The president- elect believes that he has the right to claim the opportunity to speak with anybody at any time if it's in furtherance of our country's national interests and security. But he fully appreciates the preliminary work that has to be done in order to tee up any such discussions.

So I think we're in vigorous agreement, Senator, that we want to be smart about how we engage in diplomacy. We want to make sure that when the president of the United States or the secretary of state is engaged in any diplomatic effort that all of the necessary preliminary work, including conditions, if appropriate, have been met before doing so.

ISAKSON: You quoted George Marshal at the end of your remarks in saying that sometimes our enemies are not the nations or doctrines but they are, in fact, hunger, poverty, desperation and chaos. I'm ranking member on the Africa Subcommittee. And if you talk about desperation, chaos, hunger, and poverty, certainly, you can talk about the continent of Africa and, in particular, North Africa and the Horn of Africa where Al Qaida is attempting to do what it did in Afghanistan, effectively, a decade and a half ago.

And you talked about smart power. I think AFRICOM was a smart move on behalf of our country. And although a lot of people don't realize what AFRICOM is doing, they are military personnel doing a lot of soft power. They're drilling wells. They're building bridges. They're doing the things -- I hate to say this -- but Hamas and Hezbollah figured it out. They got political strength by giving people housing and clothing.

A lot of times that use of soft power can win over people's attitudes towards you. So I hope, as the couple of years go by, or the next four years go by, we can work together on the continent of Africa and on those issues because I think it's the next place we are vulnerable if we aren't proactive in dealing with the governments, the people, the poverty, and, obviously, also, continuing the Bush PEPFAR program which has been so successful -- that and the malaria eradication.

CLINTON: Well, Senator, I appreciate it when I spoke with you, your commitment to Africa and your making it a priority of the service you've performed here on the committee. And I look forward to working with you.

It is a serious concern that we could see safe havens created again. The chaos that flows from failed states like Somalia, at this moment, the aftermath of autocratic regimes that have so mistreated their people, like Zimbabwe; the anarchy and terrible violence in Eastern Congo. I mean, those are breeding grounds not only for the worst abuses of human beings, from mass murders to rapes to indifference toward disease and other terrible calamities, but they are invitations to terrorists to find refuge amidst the chaos.

And anyone who thinks that our interest in Africa is only humanitarian, I think, misses the strategic import of the comments you made. And I do look forward to working with you.

ISAKSON: My last question. If you ask the average Georgia what's the one thing they have the most consternation about, it's how much money we spend in foreign aid. And although as a percentage of the budget, it's a small number, a lot of the stories that get published raise questions about it.

Talking about preconditions for a second, I am one that feels like foreign aid invested, especially with preconditions for results is beneficial to the United States of America. And I shared with you the issue on women's education in Muslim countries Africa who, prior to 2001, we weren't really aware that we had money going to NGOs than going to education. It was only teaching Muslim men, not Muslim women.

And we put a precondition post-9/11 and built schools for women in Egypt and Ethiopia and other places. And the payback has been a renaissance in those countries, at least, in raising the educational level of all.

I'd appreciate your comments on the extent to which preconditions can be used in foreign aid -- not preconditions to agree with us but preconditions to see that the result brings about a benefit like, in this case, the education of women.

CLINTON: Well, I think that has been an important contribution to the foreign aid debate by this administration, you know, most manifest with the Millennium Challenge Corporation. I think we're still finding our way trying it figure out the best practices to use to encourage governments to act in certain ways, conditioning our aid.

But I really believe this holds tremendous promise. And, again, it's an area that I would like to work with this committee on because there's a lot of expertise here. When you look at foreign aid, we want to be able to justify the investment to the American people and we want to get measurable results.

CLINTON: Those are two goals that really go hand in hand. And so I believe strongly that as we try to shore up foreign aid, as we try to make the case for more development assistance, as we try to, you know, get back some of the authority and the resources that have drifted to the Defense Department, that we have to be ready to make that case.

And I think the, you know, conditional aid approach in certain countries and situations is one we have to look at more closely.

ISAKSON: Well, I appreciate your willingness to serve, and I wish you the best of luck in your tenure. Thank you.

CLINTON: Thank you.

KERRY: Thank you very much, Senator Isakson.

Senator Casey?

CASEY: Mr. Chairman, thank you very much. And I want to commend you on the new leadership position that you take, and we're grateful for your service.

Senator Clinton, thank you very much for putting yourself forward to do a difficult job at a difficult time in our nation's history and for the time you're spending today. You're getting close to the end here.

When you get down to this end to the table, it's -- we're kind of rounding the corner. And I want to stay within my time limits, because my friend here needs his time -- Jim Webb.

I wanted to read you a statement that you're -- I think you're familiar with, but I think it -- it bears some emphasis today in light of what you said in your statement, in light of a lot of our concerns about the way foreign policy has been conduct, especially over the last eight years.

The person who made this statement first made reference to our institutions of diplomacy and development being undermanned and underfunded.

And then I'll pick up with a quotation, and it starts this way, "When it comes to America's engagement with the rest of the world, it's important that the military is in a supporting role" -- supporting role -- "to civilian agencies. Our diplomatic leaders must have the resources and political support needed to fully exercise their statutory responsibilities in leading American foreign policy. To truly harness the full strength of America requires having civilian institutions of diplomacy and development that are adequately staffed and properly funded," unquote.

The person who made that statement was Secretary Gates this past July. And I wanted, in light of the discussion here today -- and I'm grateful for the -- the time you spent in your statement on this -- but also in light of what you and I have talked about in our meeting and in other conversations -- tell us how you're going to be working with Secretary Gates to make sure that we can give meaning and integrity to that -- to that observation that he made in that speech in July.

CLINTON: Well, Senator Casey, it's a tremendous honor for me to be working with Secretary Gates. He has a very long history of service in our country and has worked with I don't know how many presidents -- six, maybe seven.

But he has a broad, comprehensive view about what works for America and what doesn't. And he was in the, you know, real vanguard in the CIA and the National Security Council at the height of the Cold War.

So his experience is especially valuable, and I know the president-elect believes that and, as you know, asked him to stay on. I've had several conversations with him already, and what you read is exactly what he believes, that we are going to be stronger if we are better able to promote diplomacy and development, not just rely on our military power.

There's a lot of work to be done between that belief, which he and I and the president-elect share, and actually realizing its promise. We have work to do at the State Department.

You know, part of the reason functions and resources have migrated is because there's just a presumption that the -- you know, the military can move much quicker and with greater effort, impose development or negotiate agreements -- whatever it might be -- than the State Department.

And it's going to be our job to prove that, you know, the -- the State Department is not only substantively strong -- which, indeed, it is -- not only experienced in diplomacy and development -- which, indeed, it is -- but can, in this 21st century, move with dispatch, be results-oriented, create an atmosphere of collegiality and cooperation across the State Department and USAID and across the United States government.

So I am taking this very seriously. I'm working with Secretary Gates. He's very open to cooperative efforts. But we have to prove that we can shoulder this responsibility, like stabilization and reconstruction and the new civilian corps, like, you know, really, outcomes-oriented development aid that can be done quickly without enormous bureaucracy. So we're going to take that challenge on, because I don't think we have a choice. I think that our foreign policy has gotten way out of balance. Secretary Gates knows it. The president-elect certainly knows it.

So it's going to be up to us to try to get back into more equilibrium, which will be good for our government and for the image of our country around the world.

CASEY: Well, we want to support you in that -- in that objective, in meeting that objective.

And I do want to commend you -- we had a discussion the other day about the -- the mechanics of running such a -- a massive agency, and I know we don't have a lot of time today, but I wanted to commend you on appointing Jack Lew as deputy secretary for management.

I think it's important that when someone is assuming the responsibilities you are that you -- you've spent the kind of time you have to -- to put together a team that can help you run the department.

I wanted to move to two -- one or two more issues before my time expires. One is on an issue that I've worked with Senator Lugar on, the ranking member, as well as other members of this committee have worked for years -- Senator Biden worked hard on this as well as others.

And that's the challenge posed by nuclear terrorism. As great as the challenge and the threat is, we know from our history and from our -- from our research that it's a preventable catastrophe, if we take the right steps not just here but around the world.

And I just want to get your thoughts on the steps we need to take, which will involve a number of departments of our federal government, but the State Department under your leadership will play a significant role in working with other countries to identify fissile material and to prevent its -- prevent it from getting in the hands of the wrong people.

CLINTON: Well, Senator Casey, I know you expressed to me your -- your deep concern about this and your desire to get very involved in helping us craft an effective approach to protecting our country and our allies and, indeed, humanity from weapons of mass destruction in the hands of terrorists.

The recent commission on WMD chaired by former Senators Graham and Talent was very sobering. Basically, they concluded that the evidence points to our seeing a terrorist attack using nuclear or biological materials some time in the next four years.

You add to that the growing threat of cyber terrorism, which has the potential of disrupting the networks we rely on for all kinds of things, like traffic signals and electric grids and the like, which would be incredibly disruptive and dangerous -- I mean, this is the number one threat we face, there's no doubt in my mind. So we're going to start calling it such. We're going to reorganize the department to be better prepared to deal with nonproliferation, arms control and these new threats.

I look forward to working closely with this committee to get the best people we can into the State Department, to work with our partners across the United States government, and to send out a message loudly and clearly that the United States wants to be a leader once again, to control arms, particularly with Russia, and that's what the START talks will be aimed at doing, and to be much more aggressive in going after nonproliferation.

So this is our -- our very highest priority, because the consequences are so devastating.

CASEY: And I know it -- one more question. We -- in -- in the time I have. We spoke a little bit the other day about the challenge that Pakistan presents to -- to all of us, to the American people but also to the world, for a lot of reasons, we know, not only because of the -- the threat in the border region between Pakistan and Afghanistan, the concern about the rivalry -- and that's an understatement -- with -- with India, and the question of whether this government will really take a -- make it a priority to root out the -- the extremist elements that are throughout different parts of Pakistan and the region.

And finally, the nuclear -- the concern about the stability of their nuclear command and control -- coming into the office -- and I realize you're just starting, but what's -- how do you think we need to approach it from the State Department's point of view and in meeting those -- or being focused on those various concerns that I just outlined?

CLINTON: Well, as I stated in my opening remarks, Iraq, Afghanistan, Pakistan, the Middle East remain in the forefront of the challenges that the new administration will face.

Pakistan has a particular complexity because of its nuclear weapons capacity. But the democratically elected government has been saying a lot of the right things with respect to the threat posed by the extremists and terrorists, particularly along the border and in the FATA region in Pakistan.

So I'm -- I'm hopeful that we will have a very active, positive relationship with the new Pakistan government. I know that there's a lot of work being done even by the outgoing administration to deepen ties between our country and various institutions in Pakistan.

But this is a tough problem, Senator. I mean, this is a very complicated problem. It has many dimensions to it -- as you pointed out, the relationship with India, the relationship with Afghanistan, the role that Iran and others are playing in that region.

We have to approach this with the same level of attention and comprehensive understanding that our military is attempting to do as it ramps up our troop commitments in Afghanistan and works more closely with the government of Pakistan to protect them from violent extremists as well as to root out Al Qaida and other remnants of the terrorist networks so that they don't find safe haven in Pakistan to plan attacks against us or any other country.

CASEY: Thank you very much.

KERRY: Thank you very much, Senator Casey.

Senator Vitter?

VITTER: Thank you, Mr. Chairman, and congratulations on your new chairmanship.

KERRY: Thank you very much.

VITTER: And thank you, Senator Clinton, for all of your public service, including being open to this very challenging position.

Like a lot of folks, I have some concerns about these conflict issues, particularly with regard to the Clinton Foundation, and so I wanted to spend my first round exploring those concerns.

Let me say a couple things -- first, that I think a lot of folks legitimately share these concerns across the spectrum, from the -- from the New York Times to Senator Lugar, who submitted some questions about it to me. That -- that perhaps defines the entire political spectrum. I'm not sure.

And also, they arise because of very extraordinary circumstances, your husband being a former president, his very unique work in terms of the foundation, and -- and in terms of that work -- I applaud that, but they nevertheless arise because of that, and I think it really requires an extraordinary response.

Obviously, you all have put forward this memorandum of understanding to suggest that such a response -- and so I wanted to go into that and some of the details about it and some of my concerns.

And -- and these posters just sort of briefly outline the situation before the MOU with the foundation, and those -- all those abbreviations are the ones used in the MOU, and then the situation after.

One thing that sort of leaped out at me is with regard to the Clinton Global Initiative, which in many ways is the most public and perhaps significant of these initiatives. Under the MOU, there's no disclosure of contributions, contributors, going forward.

And that seems to be a big -- a big omission, because, again, that's one of the most significant activities here, probably the most widely followed and recognized in terms of the annual conference, et cetera.

Would you support and help produce an amended MOU that would bring the same disclosure to future contributions to the Clinton Global Initiative? VITTER: Well, Senator, I -- I appreciate your concern, and your question, and -- and I recognize that these are unique circumstances, to say the least.

CLINTON: I am very proud to be the president-elect's nominee for secretary of state, and I am very proud of what my husband and the Clinton Foundation and the associated efforts he's undertaken have accomplished, as well.

It is not unique, however, for spouses of government officials to work and there are very well established rules for what is expected when that occurs.

In this particular case, the Office of Government Ethics and the career ethics officials at the State Department have looked at the rules and concluded there is not an inherent conflict of interest in any of my husband's work at all.

However, the foundation and the president-elect decided to go beyond what the law and the ethics rules call for to address even the appearance of conflict and that is why they signed a memorandum of understanding, which outlines the voluntary steps that the foundation is taking to address potential concerns that might come up down the road.

The memorandum of understanding is, as you know, public and the president-elect and the foundation and I have all worked to be very transparent.

My team has stayed in close touch with the committee and we've addressed the committee's questions on these issues in a broad range of written answers which are part of the so-called QFRs, the questions for the record.

But I want to speak for a minute, if I can, about the work that is done, because I think it's important...

VITTER: Mr. Chairman, I have no objection listening to this, but I'd like it not to come out of my time, because I'd like to pursue these questions.

KERRY: Well, I guess it's fair to say that if you ask a question, you deserve an answer and the answer traditionally comes out of the time of the Senator.

VITTER: Well, I'm still waiting for the answer. I'd love an answer. But if there is an answer to my question...

KERRY: Well, I think you need to give the Senator an opportunity to give you the answer and if you need additional time... VITTER: Let me repeat the question, which was would you support and help produce a new MOU that requires the same sort of disclosure for contributions for the Clinton Global Initiative.

Under this, there is no disclosure moving forward for contributions of the Clinton Global Initiative. So it's a yes or no. Would you support expanding that disclosure?

Admittedly, this is voluntary. It's not required by law. But it seems to be a big exception to the rule of the MOU in terms of disclosure.

CLINTON: Well, I think that the MOU and the other undertakings that have been worked out between the president-elect and the transition and the foundation and my husband have looked very broadly at all of the questions that you're raising, and there are answers to many of these questions in the collection of answers that we have provided.

And I will be happy to provide additional material and answers to you in response to that question.

VITTER: OK. Well, if you could consider that suggestion, I think that's a big gap in the MOU that moving forward, the Clinton Global Initiative is separated from the foundation and then there's no disclosure whatsoever about contributors to the Clinton Global Initiative.

The other big gap, it seems to me, is that the disclosure in the MOU is for new contributors. And so old contributors who re-give or who even substantially increase their contributions, if it's to certain initiatives, aren't disclosed.

Would you consider amending that so that all contributions, whether from new contributors or old contributors, would be disclosed?

CLINTON: All contributors will be disclosed and all contributors to the Clinton Global Initiative are disclosed and public as of now anyway.

VITTER: OK, but that changes under the MOU.

CLINTON: No.

KERRY: If I could just interrupt, Senator. I think if you look at the MOU and you look at the subsequent questions that were answered by the Senator to the committee, because we followed up on this issue, I believe that all -- we asked the question, "Will all future contributions to the foundation be disclosed," and...

VITTER: To the foundation?

KERRY: That's the foundation, but in addition, it's my understanding that under the MOU, the CGI additionally, if there are contributions, they would be disclosed at the end of the year.

CLINTON: That's right.

VITTER: OK. I'm very happy to hear that. That's not what's in the MOU. So if I could simply request, before our vote, a document or an amendment from the transition and the foundation that clarify that, because under the MOU, moving forward, the Clinton Global Initiative is separated from the foundation and then there's disclosure under the foundation.

CLINTON: Well, Senator, I believe that all the answers that are relevant to these inquiries are in the record. There is no intention to amend the MOU. It has been worked out between the transition and the foundation.

But the Clinton Global Initiative is a pass-through. The money of any donors to put on the Clinton Global Initiative are public and there is no ongoing -- you know, the foundation is a yearly event. It's unlike the foundation.

So we will clarify it. We will definitely clarify that for you.

VITTER: Well, it would be great if you can clarify it. Again, I don't want to beat a dead horse, but under the MOU, as it stands, there is no required disclosure going forward for Clinton Global Initiative contributions and there is no necessary required disclosure for new contributions of old contributors, just new contributors.

There's also been the suggestion from a lot of folks to disclose the date and amount or at least amount within ranges of new contributions and to do that at least quarterly rather than annually.

Would you be open to that?

CLINTON: Well, again, this is an agreement that has been worked out between all of the parties and the fact is that the concerns that were raised in the discussions between the foundation and the president-elect's team were thoroughly discussed and they believe, and I agree, that the transparency and disclosure that is needed, which, as you said yourself, it goes beyond any kind of legal or ethical consideration.

And not only that, there will be ongoing -- there will be ongoing reviews by anything that is brought to the attention of the career professionals.

But I just have to go back, Senator, and try to set the record straight. CGI is not in the memorandum of understanding because they already have a practice of disclosing all of their contributions. There is no need to require it.

I will certainly state here that they're going to continue the practice which they've already done.

No president has ever disclosed the contributions to his foundation. So when my husband agreed to disclose the contributions to his foundation, that was a very unprecedented event, which he was happy to do. But the Clinton Global Initiative, which is separate from the foundation, has always disclosed the contributions.

VITTER: Well, again, I'd love for that to be embodied in any agreement that's at issue. So I'll look forward to that.

KERRY: Well, Senator, can I just -- this won't come out of your time, but let me make sure the record is clear here.

As I understand it, I think Senator Lugar has raised a couple points and we're going to address them perhaps a little bit later, but I don't think this one, frankly, is on target, for the following reason.

On page four, paragraph two, it specifically says that CGI, President Clinton personally will not solicit funds. President Clinton will continue to send invitation letters to potential entity. However, he will no longer send sponsorship letters which seek contributions. Apart from attendance fees, CGI will not accept contributions from foreign governments.

So there is no solicitation and no acceptance of a foreign government.

VITTER: But, for instance, there could be foreign national contributions, which, within the four corners of this agreement, are not disclosed, not necessarily disclosed.

I mean, my question is, in that same paragraph, why isn't there a disclosure requirement.

KERRY: Well, I think the Senator has appropriately said that they will answer that in the addendum.

VITTER: I'd look forward to that, as well as the old contributor issue, because it just talks about new contributors.

Again, let me back up and underscore the central concern, which is I really do think this poses a lot of real and perceived conflict issues and you just need to look at some of the contributors from the past, particularly from the Middle East, to get a sense of what I'm talking about.

For instance, a lobby foundation supports Iranian causes. Just this past December 19, they made a substantial contribution to the foundation and that same day, the president of the foundation was indicted for obstruction of justice related to terrorist financing. And two days earlier, Treasury had named a partner of the foundation as a, quote, "terrorist entity."

Another partner of the foundation, Bank Melli, has long been thought to be a procurement front for the Iranian nuclear program.

That's the sort of big issue, conflict issue that I think this poses, which could obviously complicate your job and be an impediment to your effectiveness. Another similar example, Issam Fares, former deputy prime minister of Lebanon, he's a big supporter of Hezbollah, says it's not in any way a terrorist organization, doesn't target the U.S.

I'm sure the widows and family members of the victims of the 1983 Beirut bombing that killed 241 Americans were comforted by that. Obviously, they are terrorists, they do target the U.S. This poses serious issues.

So I look forward to following-up and getting that clarification and, also, I think it would round out this agreement immeasurably to include the date and amount of contributions, to pledges made, not simply have disclosures when a payment is made, and to at least do quarterly reports versus annual reports.
Thank you, Mr. Chairman.

KERRY: Thank you very much, Senator Vitter.

Senator Webb?

WEBB: Thank you, Mr. Chairman.

Senator Clinton, I've had the pleasure of having sat through this entire hearing today -- I'm not sure you have found it very pleasurable -- partly because I'm really interested in these issues and partly because I'm so far down the food chain that I had to wait until 3 o'clock this afternoon to ask my questions.

It's nice to have Senator Shahim (ph) on my left, finally have somebody I'm a little -- and I'm very impressed by the range that you have shown here on a wide variety of issues that have been thrown at you.

I've had the pleasure of working with you and discussing these issues over the past years, but I think you've done a marvelous job today.

I guess the phrase of the week is "smart power." I've been doing this a long time, in and out of government. People come up with different phrases.

I think the most important thing that you have said is in your statement, your opening statement, when you mentioned that the goal of this administration is going to be more partners and fewer adversaries and to do so in a realistic way that still protects the interests of the United States, and I think that will be a major demarcation for our government as we relate to the rest of the world.

You and I have had many conversations over the years. This is a time that the context of these conversations are going to be shaped into what I believe will be achievable policies.

I would like to list, very quickly, for the record, six or seven areas where I believe that these conversations will need to continue and, in some cases, there will probably be debates, but I think that it's important to outline these.

The first is the nature of the residual force in Iraq or even whether there should be a residual force in Iraq and how that situation would assist us in increasing stability in the region.

You mentioned the SOFA and the strategic framework agreement as national policy. As you know, I had a great deal of heartburn over the way that those agreements were signed here.

They were approved by the Iraqi parliament. We in the Congress did not even have an opportunity to vote on whether this was the way to proceed forward. I don't anticipate that situation coming up again.

The second is the need for a clearly articulated strategy with respect to Afghanistan and Pakistan. And we don't have a strategy unless we can articulate the endpoint and I look forward to working with you toward not only being able to define that, but being able to define some sort of an achievable endpoint to our presence in Afghanistan.

The third is a reexamination of the way that we have proceeded with NATO expansion. I did a lot of work in NATO when I was assistant secretary of defense and, quite frankly, this isn't the NATO that I was working with and I'm very concerned about the transition from essentially alliances into a number of protectorates in these newer countries and that's a situation that makes our country, I believe, very vulnerable.

The fourth is a need for us to adjust our strategic relationship with China. There have been a lot of...

(AUDIO GAP)

FEINGOLD: ... the State Department policy that make it difficult for the partners and foreign service officers to travel and live at an overseas post. What would you do as secretary of state to address these concerns? Will you support changes to existing personnel policy in order to ensure that LGBT staff at State and USAID receive equal benefits and support?

CLINTON: Senator, this issue was brought to my attention during the transition. I've asked to have more briefing on it because I think that we should take a hard look at the existing policy. As I understand it, but don't hold me to it because I don't have the full briefing material, but my understanding is other nations have moved to extend that partnership benefit. And we will come back to you to inform you of decisions we make going forward.

FEINGOLD: Thank you, Senator.

Thank you, Mr. Chairman.

KERRY: Thank you very much. Thanks, Senator.

Well, we're sort of getting to that point now where I think we can address some loose ends and maybe even, you know, sort of have some fun and dig into things a little bit here in ways that we can't otherwise. But we promise not to prolong it. And we'll try and remain focused on those things that are really salient here.

Let me begin with Afghanistan, if I may. I am deeply concerned that, at least thus far, our policy in Afghanistan has kind of been on automatic. And I made a promise to myself a long time ago that I would not see all of our conflicts, ground operations in the context of Vietnam. I really try hard. I have an automatic check that says, you know, not everything is that.

But I have to tell you, in the several visits I have now made, escape it as I might, the parallels just really keep leaping out in so many different ways.

We are struggling to fight with and for people with a different culture, a different language, different custom, different history, different religion, if any. And all of those similarities exist. We don't live there. We don't live in the community, in a hamlet, in a small town, pocket, whatever you want to call it.

And so we're not there often at night. They are. And the night often rules with insurgencies. The complications are profound in both Pakistan and Afghanistan. And I went to both -- and to India -- immediately after Mumbai and was really struck by the extraordinary distance we have to travel in both places, Senator.

That is the center of the war on -- I've got check myself. I hope this administration and all of us will begin to think differently in this terminology of war on terror and think in terms of the global counterinsurgency and the difference between counterinsurgency and counterterrorism and the challenges that we face in addressing both and understanding them both.

One person made a very interesting comment to me while I was over there and said, you know, Pakistan is a government without a country, and Afghanistan is a country without a government. And if you stop and think about -- so the real application -- and no insult meant to anybody. President Karzai is a friend. We've all met with him. We want his success.

But there are inherent contradictions in the structure that we have been trying to impose in Afghanistan. And more and more, as I travel that part of the world -- I served most recently as chair of the Subcommittee on Mideast, South Asia -- so I was frequently there.

It left -- it kept leaping out at me in ways that, over a number of years here, I really, frankly had not given enough consideration to. But recently read a wonderful book when I commend to you by Rory Stewart, you know, "The Places in Between" and another book, "The Forever War" and a whole host of them that really give you the flavor of this if you really want it -- I mean, "Gertrude Bell, the Desert Queen" is a fascinating study of sort of the region and of tribalism. And that's really what I want to point to.

We have not, I think -- we honored tribalism when we dealt with the Northern Alliance and initially went in to Afghanistan. We really haven't adequately since. And it strikes me that if we just put troops, plunk them down, another 20, 30,000 in Afghanistan, without very limited view of what they can achieve and need to do and a comprehensive view of other things we need to do to build the successful structures of governance -- the police, the judiciary which may be a pipe dream, the construction programs, the ability of Hamid Karzai's government, as well intentioned as he may be and as much as we like him, the ability to even get out of Kabul and be able to do anything in the countryside, I think -- Madam Secretary Designate, we're on the wrong track.

And I think unless we rethink this very, very carefully, we could raise the stakes, invest America's reputation in a greater way as well as our treasure and wind up pursuing a policy that is, frankly, unpursuable, unachievable.

So I'd like to elicit your thoughts on this. I was in Pasharah (ph) a few weeks ago. I learned that -- and some in Pakistan would disagree with this, and I'll probably hear from some of my friend there. But many people believe that it would not be hard for the Taliban to move in there if that's the decision they decided to make.

It was so dangerous that we were not able to move into the downtown and other areas. And we just saw last week 600 Taliban cross the border from Afghanistan and came in and directly attacked a frontier corps military outpost.

I have anybody who has really traveled on the ground, listened in the right ways, and not just accepted the sort of briefing culture will suggest to you respectfully, Madam Secretary, this really has to be rethought very, very carefully.

Our original goal was to go in there and take on Al Qaeda. It was to capture or kill Osama bin Laden. It was not to adopt the 51st state of the United States. It was not to try to impose a form of government, no matter how much we believe in it and support it, but that is -- that is the mission, at least, as it is being defined today.

So I'd like to ask for your thoughts on this as you engage in what will, obviously, be a hasty and important critical review and some judgments that we need to make about our policy.

CLINTON: Well, Mr. Chairman, I think that your cautions are extremely well taken. There is, as you know, a review going on right now under the direction of General Petraeus through CENTCOM. If I understand it, he has approximately 300 people, some of them detailees from the State Department, who are crisscrossing Afghanistan trying to determine, as I understand it, what is and isn't feasible.

We are in close communication with General Petraeus. We intend to, when it's appropriate on January 20th, to begin our own immediate review because I share your concern as I know the president-elect does. You know, his approach toward Afghanistan, which is has been more for more -- you know, more troops would go in but there would have to be more from NATO and there would have to be more from Afghanistan -- you know, presupposes that we have a set of discreet goals that we are trying to achieve.

And that is in the process of being assessed and analyzed right now. As you're aware, President Bush had inside the White House General Lute, who was largely responsible for coordinating policy with respect to both Iraq and Afghanistan.

So the Bush administration has put a lot of assets to work on trying to determine what is the best way forward with Afghanistan and how do we affect the future of Pakistan, the decisions that they make. But I think that asking the hard questions and raising the red flags is exactly what this committee I know will do and should do.

Sitting here today, when I think about my trips to Afghanistan, my flying over that terrain, my awareness of the history going back to Alexander the Great and, certainly, the imperial British military and Rudyard Kipling's memorable poems about Afghanistan, the Soviet Union, which put in more troops than we're thinking about putting in -- I mean, it calls for a large doze of humility about what it is we are trying to accomplish.

Having said that, I think that we will keep you informed as we move forward. And on the civilian side, I hope that we will have the opportunity for more in-depth conversations. I mean, I've been on both sides now of the table here.

And there is so much to discuss, and there is so much expertise on this committee -- people who have traveled widely, thought deeply, know a lot of the players. And I hope that, you know, if I am confirmed, that I'll be able to have you and others literally sitting down and talking with the people that we're going to be tasking to come up with the civilian side of this strategy so that we go in with our eye open, whatever it is we're trying to achieve.

KERRY: Well, I really appreciate that. I don't expect you to be able to lay out that strategy now.

I would say that I think it's important, perhaps, for the administration -- the incoming administration -- to not just have the review process that's been put in place be the only standard for a baseline. And I think we need to make certain that there's a subsequent expectation with regard to that. I think it would be a mistake to just do that.

I think you probably agree with that.

Secondly, with respect to the current military operations, I spent a lot of time in a couple of briefings that we're not allowed to discuss in public here. But trying to really get at this question of the targeting with respect to the Pakistan, the Fatah, and our efforts to take out terrorists in that area.

There has been a considerable blow-back and, I think, counterproductivity in the collateral damage that has been occurring there. And I hope that you would also agree to really dig into that and take a look at whether or not all of that, the targeting, is in fact as purported to be and as important as is suggested because I think we're creating some terrorists and losing some ground in the effort to win the hearts and minds as they say.

CLINTON: Yes, sir.

KERRY: On the situation with Pakistan, they not only face the challenge of the insurgency in the country; they have a dire economic crisis also. And in many ways, the economic crisis may be just as challenging.

We, after I went over with Senator Biden and Senator Hagel last year, we came back and propped a tripling of the aid to $1.5 billion a year over the course of a number of years. And I wonder, can you say today that the administration is -- remaining absolutely committed to that because we want to try to move that as rapidly as we can?

CLINTON: Yes. The president-elect does support the regulation that you were part of and Vice President-elect Biden and, I think, Senator Lugar was as well.

KERRY: Correct.

CLINTON: And we want it try to begin, to some extent, to separate our military aid from our non-military aid. The tripling of the non-military aid is intended to provide resources that will both support the Pakistani people but also give some tools to the democratically-elected government to try to start producing results for the people of Pakistan.

The military aid, we want to, you know, really look hard at seeing whether we can condition some of that on the commitment for the counterinsurgency, counterterrorism missions. So we certainly are inclined to support, when appropriate, the legislation that you were referring to.

KERRY: And this is going to take a very significant hands-on effort, as I think you know. We've been, obviously, reading about or hearing about the potential of special envoys, as series of them. Do you want to address that at all today?

CLINTON: Well, no final decisions have been made. That is a tool that I think you will see more use of. I believe that special envoys, particularly, vis a vis military commands, have a lot to recommend in order to make sure that we've got the civilian presence well represented.

(AUDIO GAP)

CLINTON: ... because all of the independent professionals who do this for our government said there was no conflict. So it's a kind of a catch-as-catch-can problem. I mean, when it was all submitted to the Office of Government Ethics, they said there was no inherent conflict.

My husband doesn't take a salary. He has no financial interests in any of this. I don't take a salary. I have no financial interests. So out of that abundance of caution and a desire to avoid even the appearance, the president-elect's transition team began working with the foundation to try to craft an agreement that would avoid the appearance of a conflict but would also ensure that the foundation can continue its work.

You know, I'm very proud of the work that the foundation did. And when you look at why it received, for example, foreign government money, it's because early on there wasn't the support from our government until, frankly, the leadership of President Bush and members of this Congress created PEPFAR.

And there was also a tremendous financial burden on poor states to try to afford the pharmaceuticals, the anti-retro-virals. So my husband's foundation worked with generic drug manufacturers to help improve their systems of manufacturing and get the cost down so that it would be affordable.

So the governments of countries like Canada, Norway, and Ireland and the UN said, well, this is the best deal ever. So this is all passed-through money. None of this goes to or stays in the foundation. This is used for the purchasing contracts in order to buy the drugs to keep, you know, many people alive and, particularly, about 1.4 million people including many children.

So the work of the foundation, the confidence that it has created with donors who know that it has an extremely low percentage that goes to any overhead. It has a very transparent way that it uses the money. We're very persuasive to the transition team that we had to work out something to keep the foundation in business while I did what I needed to do to be as transparent as possible.

So the kinds of concerns that were put forth were very carefully considered. And, you know, I do believe that the agreement provides the kind of transparency under the memorandum of understanding, foreign government pledges will be submitted to the State Department for review. I don't know who will be giving money. That will not influence, it was not be in the atmosphere. When the disclosure occurs, obviously, it was be after the fact. So it would be hard to make an argument that it influenced anybody because we don't know about it.

So I think that, in a way, the president-elect's transition team saw the agreement that has been worked out is actually in the best interests of avoiding the appearance of conflict. Now, I hasten to say that my career in public service is hardly free of conflict, Senator. So I have no illusions about the fact that no matter what we do there will be those who will raise conflicts.

But I can absolutely guarantee you that I will keep a very close look on how this is being implemented. I will certainly do everything in my power to make sure that the good work of the foundation continues without there being any untoward effects on me and my service and be very conscious of any questions that are raised.

But I think that the way that this has been hammered out is probably as close as we can get to doing something that is so unprecedented that there is no formula for it. And we've tried to do the very best we could. LUGAR: Well, my time is concluded. But let me just say that the situation is unprecedented when a first lady and her distinguished husband and a foundation come together with a State Department hearing of this sort.

I am hopeful that, as we go through the history of this, that people will not say, well, Senator Lugar, Senator Kerry, and others were pressing it. They saw the problems. And we'll get full credit, but that will not be helpful to our foreign policy, to you, to your husband, to the foundation.

This is why I plea for you, really, to give even more consideration -- it may not be a decision made today because I appreciate the negotiations have been sizeable. And you are a good negotiator and so is your husband. So are those who have worked for you. I admire that. It's a good things for a State Department official and, particularly, the secretary of state.

But this seems to me to be so important at the outset. This is why I've dwelled upon it, trying your patience and that of the committee, because I think it is very important. And I think you understand that.

CLINTON: I do. And I respect you so much, Senator. And I can, you know, certainly guarantee to you that I will remain very sensitive to this and I will work with you and the chairman as we go forward.

LUGAR: Thank you.

Thank you, Mr. Chairman.

KERRY: Thank you very much, Senator Lugar.

Let me take a moment to welcome Senator Shaheen. This is her first official formal appearance with the committee. We just ratified the assignments at lunch today. And so we're delighted to have you here. I'm personally delighted because you're a great friend and a good neighbor. And we're really happy to have you as a member of this committee.

SHAHEEN: Thank you very much, Mr. Chairman. I am very honored to be able to serve on this prestigious committee with you and Senator Lugar. And as I'm sure you know, I have been a big fan of your public service to the country for a very long time as well as your broad knowledge and expertise in this area.

And just as this country faces unprecedented economic challenges, we also face the most complicated foreign relations and national security challenges since the end of the Cold War. And I know that under your leadership and the leadership of Senator Lugar that this committee will address these vital issues in a bipartisan way. And I'm delighted to be able to serve with you as we do that.

Senator Clinton, congratulations on your terrific nomination. Your testimony this morning, I thought, reinforced the fact that you have a breadth of knowledge and experience to be an outstanding secretary of state. And I commend President-elect Obama for choosing you.

The two of you working in a partnership will truly have the opportunity to change the world. And I have no doubt that you will do that.

On a personal note, I have to say that I am disappointed that I won't be able to serve with you in the Senate but look forward to working with you as a member of this committee.

I have two questions since you have covered many of the issues that I would have asked. One is a broader question and the other is a little more parochial relative to New Hampshire.

The first has to do with the international economy. And I know that you and Senator Dodd discussed this a little bit earlier today. But over one-fifth of the manufacturing workers in my state of New Hampshire depend on exports for their jobs. I was interested to see recent reports that you would like to see the State Department take a more active role on questions of international economics.

And I thought that would certainly be a change from the Bush administration, which has placed the international economic agenda primarily in the Department of Treasury. So a wondered if you could speak a little bit to the role that you see for the State Department in addressing these economic -- international economic issues.

CLINTON: Well, Senator Shaheen, welcome to the Senate and welcome to this committee. I think your joining this body will be an incredible addition and I look forward to working with you in this new capacity.

I, to, regret that we won't serve together as senators, but I'm glad you're on this committee so that we can continue our friendship.

I think that's a really timely question. And it is one of the concerns that I have explored since being asked to take this position. How do we get our economic international agenda better integrated into the State Department? Obviously, Treasury has a huge role to play, but so does the State Department.

And, you know, we're going to be responsible for the climate change negotiations. Well, you know, that has economic, environmental, and energy-related implications. The questions earlier from Senator Lugar about energy security -- huge economic implications.

And then the meltdown of the international economic regulatory system means that our foreign policy is impacted in so many ways in so many parts of the world. So there is a lot that we have to pay attention to. And we have a National Security Council, but we also have a National Economic Council. And it will be part of the Obama administration's plans that the State Department will participate in both, not just one; that we will be very much involved in the crafting of international economic efforts.

The G-20, which will be coming up in April, hosted by Prime Minister Gordon Brown in London, we're going to be playing a role in helping to, you know, design the agenda for that. So on all of these issues, I think it is important to have a broader approach than just, you know, one agency because our economic standing effects everything we're doing.

You know, dealing with Russia on START -- you know, some of that will be influenced by the economic situation that we're confronting. Trying to deal with the modernization of the military in China -- we've got to have a strategic relationship, as Senator Webb said, but we also have to make sure that they continue buying our debt.

I mean, we have a lot of very complicated international economic issues that directly impact our foreign policy. So we're going to be working on those. And I welcome any and all advice that you might have.

SHAHEEN: Thank you. The second question is related somewhat, and it deals with trade. We have a company in New Hampshire -- and forgive me for being parochial -- called Goss International that makes large printing presses.

They had Japan come in and dump imports into the market. They went to court and sued under our trade laws and got a judgment in U.S. district court. And Japan retaliated by passing a recovery or a claw back that allowed the company that was doing the dumping to actually appropriate Goss' investments in Japan. And the State Department has really done very little to address this issue in a way that -- despite the court judgment on behalf of the American company.

So what role do you see the State Department playing as companies like Goss are dealing with this violation of U.S. trade laws?

CLINTON: Well, I don't know anything about that specific case. We will look into that and educate ourselves about it. But more generally, I think this has to be part of our broader trade discussions.

The president-elect is in favor of free and fair trade. He wants to figure out how trade becomes more of a win-win for our manufacturers, our businesses, you know, our citizens. And that's going to be part of what we look at. What are the rules that we want to enforce in our country? And what do we expect through reciprocal relations with other countries?

So I'm well familiar with the general nature of the problem because I faced much of this in New York over the last eight years. But we're going to try to be more creative and substantive in addressing what we can do to create a more favorable, positive atmosphere so that, if there are violations, they can immediately be taken care of within the global trading framework and you don't face retaliation and you don't have to worry about unfair competition.

SHAHEEN: Thank you.

Thank you, Mr. Chairman.

KERRY: Thank you very much, Senator.

Senator Barrasso?

BARRASSO: Thank you very much, Mr. Chairman.

And congratulations, Senator Clinton. We've worked together on the Superfund Committee you chaired and I was the ranking Republican. And I always found you to be very prepared, very thorough, very thoughtful. And I'm sure you're going bring all of those same things to the State Department.

CLINTON: Thank you very much.

BARRASSO: Senator Shaheen was apologizing for being parochial. I will be a little parochial because the people of Wyoming, as a travel around, want to make sure that our -- the foreign aid that we spend, especially in light of the U.S. economy today, is being used so that people are really getting value for their money and that we are safeguarding the U.S. taxpayer dollars.

Could you talk a little bit about how to balance allocating foreign aid and making sure that American taxpayers are getting value for their money?

CLINTON: Well, Senator, I appreciate very much your interest in these issues, and I have enjoyed my relationship with you since you arrived in the Senate. And I look forward to working with you.

I want to be able to go to Wyoming or go to New York or Massachusetts or Indiana or New Hampshire or anywhere in America and explain why the relatively small but important amount of money we do spend on foreign aid is in the best interests of the American people; that it promotes our national security and advances our interests and reflects our values.

To be able to do that, I have to make sure the State Department and I, in particular, tell the story about what we do and why. I mean, you and other members of this committee often travel and see the results of the work, but it's very difficult to convey that to the rest of our country. And I will look for better ways through public diplomacy in telling our story overseas and better ways here at home through my own efforts to explain what we do to our fellow Americans.

But I think it also has to be part of an overall review of how we conduct foreign aid, how we fund it, who's responsible for it, which is why I decided to have the second deputy, Jack Lew, that -- who'll be responsible for resources and management, because I want somebody to be able to come up and talk with you about very specific ideas we have about how to make foreign aid more effective.

It's pretty divided, and I think we have degraded the capacity of USAID over the last years to be our premiere aid development organization. And a lot of what's been drifting toward the Defense Department, as Senator Webb said, is -- is foreign aid in a traditional way. When a young Army captain gets cash to go build a school, that's foreign aid. That's not war fighting. That's something that we always thought of as development assistance.

So we've just got to do a better job of trying to explain and justify and rationalize and make efficient what we do, so that, you know, if I'm fortunate enough to come to Wyoming, and I can go to some town hall or forum with you, in a, you know, year or two, I'll be able to explain what we're doing, why we're doing it, and why it makes a difference to the people who are there.

BARRASSO: Well, consider yourself invited.

CLINTON: Thank you.

BARRASSO: And the second question they'll ask is -- when you come is about management reform at the United Nations and the money that American taxpayers are spending there, and you -- do you have...

CLINTON: Yes.

BARRASSO: ... some thoughts on that?

CLINTON: Well, this is another priority of the president-elect, and I know you'll be speaking with the permanent representative to the U.N.-designee in a day or two.
The U.N. must reform. It -- it has to be more transparent, more efficient, and we are going to press for those kinds of changes.

At the same time, the United States has to be a good partner with the U.N. so that if we use the U.N., as we do, for peacekeeping or other actions that we believe are in the best interests of the United States as well as the United Nations, we're going to have to bear our burden.

So this is really a two-track commitment. We've got to work with our -- our partners at the United Nations as well as the permanent bureaucracy there to do everything we can to try to streamline the operations, modernize the system, make them more transparent, and then we have to be sure we do our part so we don't lose credibility as we push that reform agenda.

BARRASSO: Moving on to Iran -- and I know you've addressed it -- reading your article in Foreign Affairs, you said if Iran is, in fact, willing to end its nuclear program, renounce sponsorship of terrorism, support Middle East peace and play a constructive role in stabilizing Iraq, the United States should be prepared to offer Iran a carefully calibrated package of incentives.

Do you have a clear path in your mind of how to get from where we are today, where Iran appears to be continuing toward the development of nuclear weapons, continues to spew forth hatred of Israel, to get to a point where -- where these things would apply? And how do we do that from -- from here? CLINTON: Well, Senator, there is a policy review that is being undertaken by the incoming administration. We are still being briefed by the outgoing administration. We don't yet have a full picture of all of the information that the current administration has within its control.

So we will be working together across government lines, through the national security team, to devise a new approach.

The president-elect called for such a new approach just over the weekend in some interviews that he did, and we are very open to, you know, looking to find a positive, effective way of engaging Iran.

However, as I said to the chairman, a nuclear-armed Iran is not acceptable to the United States. It is our job to persuade other countries that it should not be acceptable to them either, to consult with our friends and allies in the Gulf who have as much or more at stake than anyone, and certainly with Israel, that views a nuclear- armed Iran as a grave threat, so that as we move forward with any new approach or effort at engagement we are bringing our friends and allies along with us, we're not surprising anybody, because Iran, with its litany of terrorist sponsorship and interference with other countries' internal affairs, and certainly the role that it's played destructively, from our view, in Iraq and so much else, as you know, is a concern not just for the United States and Israel.

It's a deep concern to many other nations. And so we want a broad as base (sic) as possible as we try to devise a way forward.

BARRASSO: Thank you.

Could I shift a little bit to Cuba? As you know, right now we have strict laws and regulations limiting economic transactions with -- with Cuba, with relatives of folks who are here. Any thought on lifting restrictions on families to visit and send -- and send things to Cuba?

CLINTON: Senator, the president-elect is committed to lifting the family travel restrictions and the remittance restrictions. He believes, and I think it's a very wise insight, that Cuban-Americans are the best ambassadors for democracy, freedom and a free market economy.

And as they are able to travel back to see their families, that further makes the case as to the failures of the Castro regime -- the repression, the political denial of freedom, the political prisoners -- all of the very unfortunate actions that have been taken to hold the Cuban people back.

You know, our policy is, first and foremost, about the freedom of the Cuban people and the bringing of democracy to the island of Cuba. We hope that the regime in Cuba, both Fidel and Raul Castro, will see this new administration as an opportunity to change some of their typical approaches.

Let those political prisoners out. Be willing to, you know, open up the economy and lift some of the oppressive strictures on the people of Cuba. And I think they would see that there would be an opportunity that could be perhaps exploited.

But that's in the future, whether or not they decide to make those changes.

BARRASSO: OK.

I appreciated some of the comments you made earlier about the Strategic Arms Reduction Treaty and working with that, and I know you're working Senator Lugar there and others on the committee.

You spoke strongly about verification and ongoing monitoring provisions to make sure that that continues. I wonder in these treaties about differentials in terms of what the United States gives up and others give up for us to agree to get signatures on that.

Could you talk a little bit about that and what standards we will hold other countries and how we make sure that their understanding is the same as our understanding?

CLINTON: Well, I think that's a very good point. You know, the history of arms control with first the Soviet Union and then Russia -- I think it's fair to say -- and of course, Senator Lugar is an expert on this -- has been a history of success, by and large.

Even in the midst of the Cold War, there were negotiations that led to arms control agreements. And certainly, it is our hope that the United States can once again be a leader on reducing the number of warheads and the -- the threat of nuclear war, making sure that we have no remnants of Cold War command and control issues and the like.

We are very serious about negotiating and are willing to go lower so long as the Russians are as well, and that the deterrent that we have we always believe is adequate.

We won't really know, Senator, until we get into these negotiations, but they're going to be on a fast track, because the START agreement, as you know, expires at the end of this year, so we've got to get serious and get involved, and we will have a negotiator named so that we can start almost immediately.

BARRASSO: Thank you, Senator Clinton.
Thank you, Mr. Chairman. My time's expired.

KERRY: Thank you very much, Senator.

I'll take a round now, and then -- I see Senator Feingold is here. I don't know if there are any other folks who are going to look for a second round. If there aren't, then maybe I'll let Senator Feingold go, and then we'll just stay focused and wrap up on sort of a series of questions.

Senator Feingold?

FEINGOLD: Well, thanks much, Mr. Chairman.

Thank you for your patience, Senator Clinton. Just a couple other topics. You and I discussed Somalia, and I've been long concerned about the deepening crisis there, particularly its implications for our national security.

Just this last month, several senior officials, including CIA Director Hayden and Joint Chiefs Chairman Mullen, said that Al Qaida is extending its reach in Somalia and engaging extremists there to revitalize its operations.

As I told you, I met with many leading figures in Somalia during a recent December trip to Djibouti. Those meetings reinforced my belief that while Somalis are a moderate people, the situation is now far worse than it was two years ago, and the current administration's approach to Somalia is at least partly to blame.

What's your view on -- on what's gone wrong with that and how -- how we can fix it? Give me a little sense of what you think some of the key components are, understanding you haven't had a chance to get into all of this at this point.

CLINTON: Senator, as you and I discussed, Somalia is strategically located. I think it was you who asked me if I knew how far Yemen was from Somalia. If it wasn't you, it was some smart person who asked me that.

FEINGOLD: I didn't know. I had to ask my staff and -- quite surprised to learn it was 20 miles.

CLINTON: Twenty miles. And so the idea that Somalia is just a failed state somewhere over there where people are fighting with one another over heaven knows what is a -- a construct that we adopt at our peril.

I -- I don't know the most effective way forward. I have no -- you know, no wisdom on this, Senator. I know you met in Djibouti over a period of a couple of days with a number of the -- the actors.

As you know, the Ethiopian troops are leaving. The African Union commitment is questionable as to whether they will or will not stay and what their mission description would be.

The internal conflict within the groups in Somalia is just as intense as it's ever been, only now we have the added ingredient of Al Qaida and terrorists who are looking to take advantage of the chaos and the failure of Somalia.

There's a lot of history here, and I think we have to be very thoughtful as we look at Somalia. This is obviously a -- an issue that will have to be worked across the national security apparatus.

And I would welcome your advice. You probably have as much firsthand knowledge of the players and what they intend and who they are and -- and what they're really looking for as anyone, you know, in this body. And so we're going to -- we're going to seek your advice and counsel.

I mean, as the chairman well remembers, at the beginning of the last Democratic administration, there was a humanitarian mission in Somalia that was handed off.

And the beginning of this Democratic administration, here we are once again with the remnants of a humanitarian mission, and certainly, the humanitarian crisis growing that is going to put this problem in the lap of the new president.

FEINGOLD: Exactly.

CLINTON: So I -- I think that this is going to require an enormous amount of thought.
Now, complicating it, as you well know, is the piracy issue.

FEINGOLD: Right.

CLINTON: There's been a number of consultations about piracy. The current thinking is that pirates will be intercepted and defended against as a kind of joint responsibility between the private shippers, who have to do more, frankly, for their own -- the security of their own vessels, but also various navies that are, you know, coming together, including China and India, who are -- are willing to patrol the waters.

There is also some talk about going ashore -- this is a problem Thomas Jefferson dealt with along the Barbary Coast, you know, kind of going to prove that the more things change, the more they stay the same. You know, there are some who are advocating going ashore on Somalia.

We have to give a lot of thought to this, and there is an enormous number of bad options that have to be sorted through. So I -- I am not at all able to give you the new administration's policy, because we're sorting it out ourselves.

FEINGOLD: I can tell you're eager and very ready to take this on.

CLINTON: Yes, indeed.

FEINGOLD: So I look forward to working with you.

Let me switch to something completely different. There's widespread recognition of the need to build a more robust and effective diplomatic and development corps.

And as a part of that effort, it, of course, makes sense to consider ways to address challenges faced by the lesbian, gay, bisexual and transgender employees, particularly relating to domestic partner benefits and State Department policies that make it difficult for the partners of foreign service officers to travel and live at overseas posts. What would you do as secretary of state to address these concerns? Will you support changes to existing personnel policy in order to ensure that LGBT staff at State and USAID receive equal benefits and support?

CLINTON: Senator, this issue was brought to my attention during the transition. I've asked to have more briefing on it because I think that we should take a hard look at the existing policy. As I understand it, but don't hold me to it because I don't have the full briefing material, but my understanding is other nations have moved to extend that partnership benefit. And we will come back to you to inform you of decisions we make going forward.

FEINGOLD: Thank you, Senator. Thank you, Mr. Chairman.

KERRY: Thank you very much. Thanks, Senator. Well, we're sort of getting to that point now where I think we can address some loose ends and maybe even, you know, sort of have some fun and dig into things a little bit here in ways that we can't otherwise.But we promise not to prolong it. And we'll try and remain focused on those things that are really salient here. Let me begin with Afghanistan, if I may. I am deeply concerned that, at least thus far, our policy in Afghanistan has kind of been on automatic. And I made a promise to myself a long time ago that I would not see all of our conflicts, ground operations in the context of Vietnam. I really try hard. I have an automatic check that says, you know, not everything is that. But I have to tell you, in the several visits I have now made, escape it as I might, the parallels just really keep leaping out in so many different ways. We are struggling to fight with and for people with a different culture, a different language, different custom, different history, different religion, if any. And all of those similarities exist. We don't live there. We don't live in the community, in a hamlet, in a small town, pocket, whatever you want to call it. And so we're not there often at night. They are. And the night often rules with insurgencies. The complications are profound in both Pakistan and Afghanistan. And I went to both -- and to India -- immediately after Mumbai and was really struck by the extraordinary distance we have to travel in both places, Senator. That is the center of the war on -- I've got check myself. I hope this administration and all of us will begin to think differently in this terminology of war on terror and think in terms of the global counterinsurgency and the difference between counterinsurgency and counterterrorism and the challenges that we face in addressing both and understanding them both. One person made a very interesting comment to me while I was over there and said, you know, Pakistan is a government without a country, and Afghanistan is a country without a government. And if you stop and think about -- so the real application -- and no insult meant to anybody. President Karzai is a friend. We've all met with him. We want his success. But there are inherent contradictions in the structure that we have been trying to impose in Afghanistan. And more and more, as I travel that part of the world -- I served most recently as chair of the Subcommittee on Mideast, South Asia -- so I was frequently there. It left -- it kept leaping out at me in ways that, over a number of years here, I really, frankly had not given enough consideration to. But recently read a wonderful book when I commend to you by Rory Stewart, you know, "The Places in Between" and another book, "The Forever War" and a whole host of them that really give you the flavor of this if you really want it -- I mean, "Gertrude Bell, the Desert Queen" is a fascinating study of sort of the region and of tribalism. And that's really what I want to point to. We have not, I think -- we honored tribalism when we dealt with the Northern Alliance and initially went in to Afghanistan. We really haven't adequately since. And it strikes me that if we just put troops, plunk them down, another 20, 30,000 in Afghanistan, without very limited view of what they can achieve and need to do and a comprehensive view of other things we need to do to build the successful structures of governance -- the police, the judiciary which may be a pipe dream, the construction programs, the ability of Hamid Karzai's government, as well intentioned as he may be and as much as we like him, the ability to even get out of Kabul and be able to do anything in the countryside, I think -- Madam Secretary Designate, we're on the wrong track. And I think unless we rethink this very, very carefully, we could raise the stakes, invest America's reputation in a greater way as well as our treasure and wind up pursuing a policy that is, frankly, unpursuable, unachievable. So I'd like to elicit your thoughts on this. I was in Pasharah (ph) a few weeks ago. I learned that -- and some in Pakistan would disagree with this, and I'll probably hear from some of my friend there. But many people believe that it would not be hard for the Taliban to move in there if that's the decision they decided to make. It was so dangerous that we were not able to move into the downtown and other areas. And we just saw last week 600 Taliban cross the border from Afghanistan and came in and directly attacked a frontier corps military outpost. I have anybody who has really traveled on the ground, listened in the right ways, and not just accepted the sort of briefing culture will suggest to you respectfully, Madam Secretary, this really has to be rethought very, very carefully. Our original goal was to go in there and take on Al Qaeda. It was to capture or kill Osama bin Laden. It was not to adopt the 51st state of the United States. It was not to try to impose a form of government, no matter how much we believe in it and support it, but that is -- that is the mission, at least, as it is being defined today. So I'd like to ask for your thoughts on this as you engage in what will, obviously, be a hasty and important critical review and some judgments that we need to make about our policy.

CLINTON: Well, Mr. Chairman, I think that your cautions are extremely well taken. There is, as you know, a review going on right now under the direction of General Petraeus through CENTCOM. If I understand it, he has approximately 300 people, some of them detailees from the State Department, who are crisscrossing Afghanistan trying to determine, as I understand it, what is and isn't feasible. We are in close communication with General Petraeus. We intend to, when it's appropriate on January 20th, to begin our own immediate review because I share your concern as I know the president-elect does. You know, his approach toward Afghanistan, which is has been more for more -- you know, more troops would go in but there would have to be more from NATO and there would have to be more from Afghanistan -- you know, presupposes that we have a set of discreet goals that we are trying to achieve. And that is in the process of being assessed and analyzed right now. As you're aware, President Bush had inside the White House General Lute, who was largely responsible for coordinating policy with respect to both Iraq and Afghanistan. So the Bush administration has put a lot of assets to work on trying to determine what is the best way forward with Afghanistan and how do we affect the future of Pakistan, the decisions that they make. But I think that asking the hard questions and raising the red flags is exactly what this committee I know will do and should do. Sitting here today, when I think about my trips to Afghanistan, my flying over that terrain, my awareness of the history going back to Alexander the Great and, certainly, the imperial British military and Rudyard Kipling's memorable poems about Afghanistan, the Soviet Union, which put in more troops than we're thinking about putting in -- I mean, it calls for a large doze of humility about what it is we are trying to accomplish. Having said that, I think that we will keep you informed as we move forward. And on the civilian side, I hope that we will have the opportunity for more in-depth conversations. I mean, I've been on both sides now of the table here. And there is so much to discuss, and there is so much expertise on this committee -- people who have traveled widely, thought deeply, know a lot of the players. And I hope that, you know, if I am confirmed, that I'll be able to have you and others literally sitting down and talking with the people that we're going to be tasking to come up with the civilian side of this strategy so that we go in with our eye open, whatever it is we're trying to achieve.

KERRY: Well, I really appreciate that. I don't expect you to be able to lay out that strategy now. I would say that I think it's important, perhaps, for the administration -- the incoming administration -- to not just have the review process that's been put in place be the only standard for a baseline. And I think we need to make certain that there's a subsequent expectation with regard to that. I think it would be a mistake to just do that. I think you probably agree with that. Secondly, with respect to the current military operations, I spent a lot of time in a couple of briefings that we're not allowed to discuss in public here. But trying to really get at this question of the targeting with respect to the Pakistan, the Fatah, and our efforts to take out terrorists in that area. There has been a considerable blow-back and, I think, counterproductivity in the collateral damage that has been occurring there. And I hope that you would also agree to really dig into that and take a look at whether or not all of that, the targeting, is in fact as purported to be and as important as is suggested because I think we're creating some terrorists and losing some ground in the effort to win the hearts and minds as they say.

CLINTON: Yes, sir.

KERRY: On the situation with Pakistan, they not only face the challenge of the insurgency in the country; they have a dire economic crisis also. And in many ways, the economic crisis may be just as challenging. We, after I went over with Senator Biden and Senator Hagel last year, we came back and propped a tripling of the aid to $1.5 billion a year over the course of a number of years. And I wonder, can you say today that the administration is -- remaining absolutely committed to that because we want to try to move that as rapidly as we can?

CLINTON: Yes. The president-elect does support the regulation that you were part of and Vice President-elect Biden and, I think, Senator Lugar was as well.

KERRY: Correct.

CLINTON: And we want it try to begin, to some extent, to separate our military aid from our non-military aid. The tripling of the non-military aid is intended to provide resources that will both support the Pakistani people but also give some tools to the democratically-elected government to try to start producing results for the people of Pakistan. The military aid, we want to, you know, really look hard at seeing whether we can condition some of that on the commitment for the counterinsurgency, counterterrorism missions. So we certainly are inclined to support, when appropriate, the legislation that you were referring to.

KERRY: And this is going to take a very significant hands-on effort, as I think you know. We've been, obviously, reading about or hearing about the potential of special envoys, as series of them. Do you want to address that at all today?

CLINTON: Well, no final decisions have been made. That is a tool that I think you will see more use of. I believe that special envoys, particularly, vis a vis military commands, have a lot to recommend in order to make sure that we've got the civilian presence well represented.

CLINTON: I believe that special envoys, particularly, vis a vis military commands, have a lot to recommend in order to make sure that we've got the civilian presence well represented and in other areas that are hotspots that will demand so much time that we need to put someone, well experienced, an expert, to work on it.

So we are working through that and, again, this is an area that we will be coming back to you with.

KERRY: I just noticed Senator Vitter is back. I don't want to -- I've gone over my time a little bit, because we were sort of in a wrap-up. Did you -- OK, fine.

I was stunned in India, Pakistan and Afghanistan to learn that our principal diplomats in that region do not get together to compare notes.

I was also shocked to learn that our INTEL (NASDAQ:INTC) folks likewise don't do the same. That is just, to me, absolutely mind-boggling.

CLINTON: Right. Well, Mr. Chairman, these are among the challenges that we intend to take on.

Trying to create more of a regional perspective and a functional approach instead of being caught in the boxes that people unfortunately too often feel imprisoned by, so that there are certain lines preventing you from actually communicating with your fellow American diplomat across that line or INTEL or whatever.

I don't have the experience that you have over the years on this committee and even before, but in my travels, I did see the results of that kind of compartmentalization, and we're going to try to break that down.

We're going to try to use the bureaus more effectively so that they can be encouraging that. I've been reading up on George Marshall, who made it clear he didn't ever want a memo longer than two pages, and others who have advised me to begin to break down the kind of paper culture that exists and to try to get people more focused on action items, and one of those is more communication back and forth among those who are American representatives in regions of interest and concern to us.

KERRY: Well, I'm delighted to hear you say that and I think that doing it through the bureaus is precisely an easy way to do and that way you'll know ultimately what is happening, I think. Senator Isakson raised a question about the Hamas political strategy and compared it to Africa, and I just -- I want to flag something for you, because the history of the last years in the Middle East and what's going on in Gaza today and the divisions between Hamas and FATA, the division in the West Bank, in my judgment, reflects, again, a stunning consequence as a lack of engagement and a lack of thinking about sort of common sense of how things work.

I had the privilege of being in the West Bank the day -- the morning after President Abbas was elected in 2005 and I met with him in Ramallah in that old headquarters and we spent some time together and he looked at me and he said, "You know, Senator, I know exactly what you expect of me. I have to disarm Hamas. Now, you tell me how I'm supposed to do that. I have no radios, I have no cars, I have no police, and Hamas has the ability to walk up to a door and deliver $20,000 value to somebody who's blown up, widows or orphans of a family of a suicide bomber."

They deliver the services and we, for years, have talked about the creation of a legitimate partner for peace and yet we've done almost nothing to fundamentally help them deliver that capacity.

So my hope is -- I mean, I fear -- I mean, Israel has all the right in the world and we are totally supportive of the patience they've shown, the forbearance, over 10,500 rockets, the fact that Hamas broke the ceasefire. We understand the need to deal with Hamas, but we also have to recognize the threat here that Hamas may, in fact, wind up being more powerful than FATA as a consequence.

And the question is: has this further set back the ability to create that legitimate partner for peace? Would you comment perhaps on -- you did a little bit in your opening, but I think it would be worthwhile getting a better sense of how you see the play there and the end game, if you will, with respect to Hamas.

CLINTON: Well, you know, we are at a point where the current administration is working very hard behind the scenes and in front of the scenes and we don't want to say or do anything that might interrupt or undermine what they are doing.

I think your point, though, is incredibly important and that's why earlier I mentioned the work that General Jones had done, in which he was part of a bottoms-up approach, working with Abbas, Fayed and others in the West Bank, and there were results.

That's what's so tragic is that more effort earlier, more sustained, more targeted, it got to the point where the Israeli defense force was willing to turn over security to members of the Palestinian force that had been under the training of this team that General Jones put together.

KERRY: General Dayton and...

CLINTON: Yes. General Dayton was on the ground. There is so much more we have to do and, obviously, we do support Israel's right to defend itself and we do understand and appreciate what it must be like to be subjected to rocket attacks.

And Hamas did break the ceasefire and they have no intention, at least so far as we can tell, of entering into another ceasefire at this moment and the rockets are still being launched.

So I think that working toward a durable ceasefire is going to be an initial challenge if it's not achieved by the time that the president-elect takes office.

But that's not the answer. The answer is how do we begin to rebuild some sense of cooperation and, dare I say, even trust and confidence-building measures so we can get back to this work of the slow, but steady building of the capacity of the Palestinian Authority.

So I know that General Jones is very committed to that. I share that commitment and we intend to look into that as soon as we are able.

KERRY: Well, I know that's going to be a high priority. I know you've already been meeting on it and I don't think we need to belabor it here now. But we wish you well with that and, obviously, want to try to be as helpful as we can.

Just two quick last issues. Are there any other questions? I'm going to sort of wrap.
One thing I do want to ask, if I may, and I don't want to belabor it, but it's coming at us enormously and that is the question of what we're really going to be able to do here with respect to global climate change.

I was in (INAUDIBLE) in a meeting and I met with all of the delegations that I had met with in Kyoto and Rio in various years and it is stunning to see the transformation on those meetings, particularly with the Chinese and with the low islands, the small islands representatives and with the Indonesians and others, with Brazilians with respect to forests and so forth.

They are scared. They are serious. And what struck me is the degree to which everybody is waiting for us to take a lead. Now, I say that in one particular context.
Recently, a group of our top scientists have run computer models and it shows that we are well ahead in terms of the effects of global climate change of all of the IPC studies today.

Every single study shows that today our rate of increase of emissions is way beyond what is supportable. In the last ten years, we are increasing emissions, not decreasing them, four times as fast as we were in the 1990s.

More chilling is the computer modeling they did against the current plans of every single country that is planning to do anything, and it's not that big a group. The European community has a 2020 date of reductions. The Chinese have a reduction of intensity, not a specific reduction of emissions.

The other countries individually have either set a loose 2020 goal. Some, like us, have set a 2050 goal, but 80 percent reduction under the Obama plan, but not yet implemented, not yet real.

They took all of these current projections and ran the computer models against what is currently happening in the science and in every single case, it showed that we are not just marginally above a catastrophic tipping point level. We are hugely significantly above it.

Scientists have now revised the levels of supportable greenhouse gas emissions from 550 parts per million to 450 to now 350. This had emissions at over 600. This had a temperature increase of in the range of three to five, six degrees if we do business as usual over the next few years.

The results, and I'm not going to go through them all now, but the results are on every single level of sea ice species, forest migration, drought, storms, disease, refugees, I mean, you start adding it up.

The consequences in terms of national security, human condition on this planet, are simply catastrophic. They're devastating.

So our challenge is going to be even greater than it was five months ago, Senator, or two months ago. The perception that we can kind of creep at this and perhaps do something this year, notwithstanding our economy, is foolhardy.

And so I hope -- I just flag it for you. I know that the president-elect has said he's going to focus on it. But I'm not sure that everybody coming into the administration is completely aware of what a big lift this is going to be and how imperative it is that we make Copenhagen a success.

I simply want to ask your undivided focus and leadership on this issue, because it is that critical.

CLINTON: Well, Mr. Chairman, you will have it, because I share your deep concern. You were eloquent in describing it and you've been a leader in trying to sound the alarm on it for many years.

As I've said, we will have a climate change envoy negotiator, because we want to elevate it and we want to have one person who will lead our international efforts. But I agree completely that our credibility leading internationally will depend, in large measure, on what we're able to accomplish here at home.

And as we heard the president-elect earlier at lunch, he will be putting forth a stimulus package that will have some energy, renewable energy provisions. So I think that's a good start and we have a lot of work to do.

KERRY: Senator Menendez, did you have any additional questions? You did.

MENENDEZ: Thank you, Mr. Chairman.

I was listening to some of the previous questions and I just want to make sure, since I made a statement earlier today, that I'm right and if I'm not, I'm happy to correct it for the record.

It is my understanding that participants and contributors to the Clinton Global Initiative have been publicly disclosed since its inception and that that will continue to be disclosed.

Is that a factual statement or am I wrong?

CLINTON: That is correct, Senator.

MENENDEZ: And those contributors have been listed in all types from press releases to event materials to a whole host of other ways in which the public has clearly been informed. Is that correct?

CLINTON: That is correct.

MENENDEZ: Now, it's my understanding, too, when I looked at this, which is why I didn't dwell upon it in my first round of questioning, that the determination has been made that there is no conflict of interest, but notwithstanding that, that you and President Clinton have been willing to go above and beyond in voluntary actions, as it relates to both law and ethics, to make sure that there is no question.

Is that a statement of fact?

CLINTON: That is also correct.

MENENDEZ: Well, Mr. Chairman, what I would hate to see is some who would put in doubt what I think is an incredibly important opportunity here and that is to have two extraordinary public servants be able to meet the challenges our country has in this world.

The Clinton Initiative has made a difference for people, millions of people in this world.

One point four million people, Mr. Chairman, now are living a safer life, and living lives longer, and having their lives saved as a result of the HIV/AIDS efforts that that initiative created.

The cost of medicine to treat children with HIV/AIDS has dropped by 89 percent over the last two years.

Forty of the world's largest cities are working with the Clinton Initiative to eliminate and reduce greenhouse gas emissions, something that the chairman is such a powerful advocate of.

Nearly 3,000 schools are promoting healthier educational environments. I would hate for what Nelson Mandela has said is a global movement where every word spoken, where every partnership discovered, where every promise made can have a direct impact on the lives of millions of people across our planet for generations to come, something that -- the president-elect, Barack Obama, has said that these initiatives help create a model for individual responsibility and collective action to the Clinton Global Initiative, bringing people together to take on tough global challenges.

In four years, you have made concrete commitments that have affected over 200 million people in 150 countries. I would hate for that incredible record and opportunity not just of what was done in the past, moving forward, to be blemished by some simply for purposes that are far less substantive and, in my view, a lot more political.

But I think it's incredibly important. I know that there are legitimate questions, and I think that those questions have been very well answered.

But I can't sit in my office watching what is going on and feel with myself, knowing what this initiative has done for millions of people in this country on things that I critically care about and so many members of this committee have, and let it go at that.

So I appreciate your willingness to go above and beyond what is both the law and the ethics. I am sure you will continue to do so. I have expectations as one member of this committee that you will do so.

And I certainly hope that President Clinton's work, while obviously conditioned by the agreements that you have all set out, can still be able to move forward in a way that those people will be able throughout the world to know that America is great because it is good.

And one of its goodnesses is, in fact, what we do through initiatives like President Clinton, like President Carter, and others as well.

Thank you, Mr. Chairman.

KERRY: Thank you very much, Senator Menendez.

Let me just say -- I wasn't going to -- I wasn't planning to comment on it, but in light of your comment, I'll just close out pointing out Senator Lugar and I and -- and all of us who have looked at this could not have more respect for CGI, the Clinton Global Initiative, and what it does and has accomplished.

And I couldn't agree with you more with respect to the distinction between that and the questions asked by the senator from Wyoming. That initiative, I think we adequately set forward here, is not at issue, because there will not be fundraising. There will be no foreign donors. And it really doesn't properly fit under the questions asked by Senator Lugar.

In fairness to Senator Lugar and to the thinking of the committee -- and I think Senator Clinton understands this full well and I'm confident from her answers that she's articulated a sensitivity to this which is going to have to be judged by the practice, and we're going to have to go forward and see.

But there is a legitimate question, and I think, Senator, you'd agree that it's hard to distinguish between a donation currently made and -- and -- and acknowledged publicly and a donation to be made in the future, a commitment made thereto, but not acknowledged publicly.

And so the effort here is not to cast any aspersion on anybody, or to suggest any lack of integrity or anything like that. It is simply to deal with the complicated legal concept of an appearance of a conflict of interest.

If you are traveling to some country and you meet with the foreign leadership, and a week later or two weeks later or three weeks later the president travels there and solicits a donation, and they pledge to give at some point in the future, but nobody knows, is there an appearance of a conflict? Could there be an appearance of a conflict?
That is what I think Senator Lugar is trying to get at. He has determined that it is simpler simply to adopt one of the options that he's articulated. For reasons you obviously feel are important, and we understand it, you feel otherwise. You have gone beyond the law. You have done things to set up a process.
And really, we're going to have to make the process work, and we're confident that you have put yourself on the line today to make that happen.
So that's really where we are.
MENENDEZ: Mr. Chairman, if I may...
KERRY: Yes.
MENENDEZ: ... just very briefly, my concerns, since you couched it in the context of Senator Lugar's questions, is not so much what Senator Lugar posed. I think he did it as he always does, in a very balanced way.
My concern is other questions that were raised by other members here.
KERRY: That's what I was referring to.
MENENDEZ: Oh.
KERRY: Oh, no, no, no, I'm referring to that, but I'm simply -- as chair, I want to share in the perceptions, as I have from the beginning, that -- that those are things that we make judgments about, and we honor that and respect that.
So let me say that I think this has been a -- a very positive and constructive hearing. I think you have acquitted yourself with great distinction today. I think people are impressed by the versatility and the breadth that you have shown both in the preparation as well as in your own knowledge. We really do anticipate trying to move this as rapidly as we can. And much more importantly, Senator Clinton, we really -- you know, this is an unbelievably important moment for our country, for the world, that waiting for this leadership.

President-elect Obama, you, the administration -- all of us -- are staring at a magnificent opportunity to be able to make America what we believe it can be and should be, and to bring it back, in a sense, in terms of these global efforts.

And we are excited about the prospect of working with you to make that happen. So thank you for your time today, and good luck to you. We look forward to working with you in the days ahead.

CLINTON: Thank you very much, Mr. Chairman.

Thank you, Senator Lugar.

LUGAR: Thank you.

KERRY: We stand adjourned.

Jim Rogers Calls Most Big U.S. Banks "Bankrupt"

Reuters reports:

Jim Rogers, one of the world's most prominent international investors, on Thursday called most of the largest U.S. banks "totally bankrupt," and said government efforts to fix the sector are wrongheaded.

Speaking by teleconference at the Reuters Investment Outlook 2009 Summit, the co-founder with George Soros of the Quantum Fund, said the government's $700 billion rescue package for the sector doesn't address how banks manage their balance sheets, and instead rewards weaker lenders with new capital.

Dozens of banks have won infusions from the Troubled Asset Relief Program created in early October, just after the Sept 15 bankruptcy filing by Lehman Brothers Holdings Inc (LEHMQ.PK: Quote, Profile, Research, Stock Buzz). Some of the funds are being used for acquisitions.

"Without giving specific names, most of the significant American banks, the larger banks, are bankrupt, totally bankrupt," said Rogers, who is now a private investor.

"What is outrageous economically and is outrageous morally is that normally in times like this, people who are competent and who saw it coming and who kept their powder dry go and take over the assets from the incompetent," he said. "What's happening this time is that the government is taking the assets from the competent people and giving them to the incompetent people and saying, now you can compete with the competent people. It is horrible economics."

Rogers said he shorted shares of Fannie Mae (FNM.P: Quote, Profile, Research, Stock Buzz) and Freddie Mac (FRE.P: Quote, Profile, Research, Stock Buzz) before the government nationalized the mortgage financiers in September, a week before Lehman failed.

Now a specialist in commodities, Rogers said he has used the recent rally in the U.S. dollar as an opportunity to exit dollar-denominated assets.

While not saying how long the U.S. economic recession will last, he said conditions could ultimately mirror those of Japan in the 1990s. "The way things are going, we're going to have a lost decade too, just like the 1970s," he said.

Goldman Sachs & Co analysts this week estimated that banks worldwide have suffered $850 billion of credit-related losses and writedowns since the global credit crisis began last year.

But Rogers said sound U.S. lenders remain. He said these could include banks that don't make or hold subprime mortgages, or which have high ratios of deposits to equity, "all the classic old ratios that most banks in America forgot or started ignoring because they were too old-fashioned."

Many analysts cite Lehman's Sept 15 bankruptcy as a trigger for the recent cratering in the economy and stock markets.

Rogers called that idea "laughable," noting that banks have been failing for hundreds of years. And yet, he said policymakers aren't doing enough to prevent another Lehman.

"Governments are making mistakes," he said. "They're saying to all the banks, you don't have to tell us your situation. You can continue to use your balance sheet that is phony.... All these guys are bankrupt, they're still worrying about their bonuses, they're still trying to pay their dividends, and the whole system is weakened."

Rogers said is investing in growth areas in China and Taiwan, in such areas as water treatment and agriculture, and recently bought positions in energy and agriculture indexes.

(For summit blog: summitnotebook.reuters.com/)

Ex-Executive Faults Fannie and Freddie for 'Orgy' of Nonprime Loans

The NY Times reports:

Fannie Mae and Freddie Mac engaged in “an orgy of junk mortgage development” that turned the two mortgage-finance giants into vast repositories of subprime and similarly risky loans, a former Fannie executive testified on Tuesday.

The mortgage development, which began in 2005 and lasted until at least last year, happened as senior executives at the two government-sponsored enterprises ignored repeated warnings from internal risk officers that they were delving too deeply into dangerous territory, according to internal documents released at a Congressional hearing in Washington. The two companies have been taken over by the government.

The former executive, Edward J. Pinto, who was chief credit officer at Fannie Mae, told the House Oversight and Government Reform Committee that the mortgage giants now guarantee or hold 10.5 million nonprime loans worth $1.6 trillion — one in three of all subprime loans, and nearly two in three of all so-called Alt-A loans, often called “liar loans.”

Such loans now make up 34 percent of the total single-family mortgage portfolios at Fannie Mae and Freddie Mac, a level that will link them to eight million foreclosures, or one in six, in coming years, Mr. Pinto said. The nonprime loans “have turned the American dream of homeownership into the American nightmare of foreclosure,” he said.

The hearing was the latest by Congress on the collapse of the two companies, which guarantee half of all mortgages nationwide and are the engine of the housing market. The former chief executives of Fannie Mae and Freddie Mac, Daniel H. Mudd and Richard F. Syron, and their predecessors, Franklin D. Raines and Leland C. Brendsel, faced pointed questioning from lawmakers.

Referring to what he called “the total denial that’s going on here today and the refusal to answer simple questions,” Representative Stephen F. Lynch, Democrat of Massachusetts, told the executives that “if you have accomplished anything here today, you have made conservatorship look very, very good.”

But the testimony of Mr. Pinto, who was Fannie Mae’s chief credit officer in the late 1980s and who has studied the company’s financial statements, and other private analysts shed new light on the role of the housing giants in the subprime crisis.

That role has not been fully recognized, in part because many subprime and Alt-A loans show up in databases as prime loans.

Arnold Kling, an economist who once worked at Freddie Mac, testified that a high-risk loan could be “laundered,” as he put it, by Wall Street and return to the banking system as a triple-A-rated security for sale to investors, obscuring its true risks.

Charles W. Calomiris, a finance professor at Columbia, testified that nobody saw the crisis coming because the two mortgage giants “adopted accounting practices that masked their subprime and Alt-A lending,” but he did not elaborate.

The former executives at Fannie Mae and Freddie Mac were questioned relentlessly on why they did not see the collapse in housing prices coming and why they ignored warnings from their risk officers about stepping up purchases of nonprime loans.

Fannie Mae and Freddie Mac have long insisted that their involvement with subprime and other nonprime loans has been minimal. Asked about the increased purchases, Mr. Mudd insisted that “Alt-A loans were essentially a subset of overall A loans,” and not subprime.

But internal e-mail the committee obtained told a different story.

A June 2005 presentation by Mr. Mudd described the crossroads faced by the company, which at the time was focused on prime loans amid an expanding subprime market. “We face two stark choices: one, stay the course; two, meet the market where the market is,” he wrote. Another 2005 Fannie Mae document referred to “underground efforts to develop a subprime infrastructure and modeling for alternative markets.”

And in March 2006, Enrico Dallavecchia, Fannie Mae’s chief risk officer, wrote to Mr. Mudd to say, “Dan, I have a serious problem with the control process around subprime limits.”

Despite the concerns, Fannie Mae further increased its purchases of subprime loans, according to a January 2007 internal presentation.

Freddie Mac’s senior executives ignored similar warnings. Donald J. Bisenius, a senior vice president, wrote in April 2004 to a colleague that “we did no-doc lending before, took inordinate losses and generated significant fraud cases.”

“I’m not sure what makes us think we’re so much smarter this time around,” he wrote.

Housing analysts say that the former heads of Fannie Mae and Freddie Mac increased their nonprime business because they felt pressure from the government and advocacy groups to meet goals for affordable housing as well as pressure to compete with Wall Street. But Mr. Pinto said one in five Alt-A loans in recent years were made to investors, not to first-time home buyers.

Another lever was what Representative Christopher Shays, Republican of Connecticut, said was more than $175 million in lobbying fees the companies spent over 10 years, in part to counter attempts at stronger oversight.