Well, thank you very much, Congressman Hamilton. Indeed, a privilege and honor to be here with all of you. I see a lot of familiar faces out there. I certainly consider it an honor and privilege to be introduced by, literally, a living legend -- a real patriot who’s served this country so long and so well.

I understand sir that you’re contemplating stepping down at the end of the year as present director of the Woodrow Wilson International Center for Scholars. And that you and Mrs. Hamilton are moving back to Indiana to be closer to the family. And as a native Hoosier myself, I can certainly appreciate the attraction.

I’d also like to thank the rest of the Bipartisan Policy Center for inviting me here. And for the selfless work that the center does. I believe the students of history will point to the publication of the 9/11 Commission Report -- and thank you again Congressman Hamilton and Governor Kean -- and the rest of the commission -- as the date when we realized that no matter what the source we need to integrate our intelligence, which is my major theme at the Office of the Director of National Intelligence, where I’ve been now for 58 days -- who’s counting?

Students of history will note that it was 29 years ago today that President Anwar Sadat was assassinated at the annual Egyptian Armed Forces Day Parade in Cairo. And if you think about it, we’re still feeling the repercussions of that day.

The assassins believe they were justified because they’d received a fatwa from the Egyptian named Omar Abdel-Rahman. You’ll know him better as The Blind Sheikh. He was convicted in part for his role in the first World Trade Center bombing in 1993. And he currently resides in a federal prison in Pennsylvania.

Another noteworthy figure from that same October 6th day was a radical doctor. He became the de facto spokesman for all the defendants at their trials in Cairo because of his facility with the English language. It was Ayman al-Zawahiri who runs al-Qaida these days and had his finger prints on the USS Cole bombing on the embassy bombings in Kenya and Tanzania. Who’d have imagined that 29 years later the broad reach of influence from these two is still directly affecting the territorial U.S. and our homeland security in the broadest sense?

Our focus today as Mr. Hamilton said is on the state of domestic intelligence reform, which means different things to different people. For my purpose here today I mean foreign intelligence activities of the intelligence community that take place inside the United States mostly under the purview of the FBI and the Department of Homeland Security.

I’m not addressing criminal-intelligence and law-enforcement information when they involve purely American -- domestic activities such as Timothy McVeigh or other purely domestic terrorists, which would be the province of our law enforcement and homeland security agencies, not the Intelligence Community.

Instead, I’m primarily concerned with total intelligence reform. Particularly integration as envisioned by certainly the spirit and the content of the Intelligence Reform and Terrorism Prevention Act, or IRTPA, which of course traces its inspiration to the work of the 9/11 Commission.

And when I think about the state of total intelligence reform I’m focusing on integration, the merging of collection and analysis -- particularly at the ODNI level -- analytic transformation, analytic integrity, acquisition reform, counterintelligence, which is big on my agenda -- and information sharing, of course. These important concepts apply to foreign intelligence collected within the U.S., just as they do on intelligence collected outside our borders.

Let me assure you that progress is being made in this total context of intelligence reform. We’re never there yet. We’ll never reach nirvana. The challenges will, I think, face us in perpetuity. But I think -- you know, I’m a glass-half-full guy -- I think a lot of progress has been made, particularly, as I look back -- you know, if you go back 10 years ago -- where we were then and where -- and I was in the community then -- and where we are now.

We’re working on information-sharing initiatives across the board. But the classic dilemma of “need to share” versus “need to know” is still with us. And I would observe that the WikiLeaks episode, of course, it represents what I would consider a big yellow flag. And I think it’s going to have a very chilling effect on the need to share.

So we’ve done a lot. But as I indicated challenges still remain. We’re dealing with the realities of globalization, the blurring these days of foreign and domestic matters, which of course was indelibly thrust upon us with 9/11. So when threats like terrorism and international organized crime transcend borders it’s critical that we think holistically about intelligence.

But at the same time we’re also a people who -- constitutionally and culturally -- attach a very high premium to our personal freedoms and our personal privacy. Those values have appropriately, I think, led to restrictions on the collection, retention and use of information about U.S. persons.

So we have to strike the right balance between the acquisition of information essential to protect our nation and the protection of individual privacy and civil liberties. That requires tackling and resolving complex challenges to make intelligence reform a reality. And we must do intelligence reform in that context.

So how do we make sure our agencies have the flexibility and agility they need to find and address threats inside the U.S., especially, when our Constitution, laws, polices and system of government are designed specifically to guarantee people inside our borders fundamental freedom? And when our agencies have developed their own policies and procedures over decades, specifically, to ensure that they respect those freedoms as they conduct their activities?

And there really aren’t any easy one-size-fits-all answers to these questions. We’re working them hard. I know that many have a great deal to say -- to think and say about this. But above all we know we have to remain true to our oath to support and defend the Constitution.

Let me quote part of the vision statement from the National Intelligence Strategy, which was drawn up by my predecessor but which I certainly subscribe to. The Intelligence Community must exemplify America’s values: operating under the rule of law, consistent with Americans’ expectations for the protection of privacy and civil liberties, and respectful of human rights and in a manner that retains the trust of the American people.

So with that let me speak briefly about what we do and what we don’t do. The Intelligence Reform and Terrorism Prevention Act does allow the National Counterterrorism Center -- which is part of the Office of the Director of National Intelligence -- in fact it represents about a third of it -- to receive and analyze intelligence pertaining to domestic counterterrorist activities.

Its role is to analyze and integrate all terrorism information to identify international and trans-national terrorist threats. NCTC’s function is strategic and analytic. But it has no domestic collection mission per se. It receives the information it analyzes from the IC and from other government agencies. Each of which properly collects that information under its own legal authorities.

And I believe -- it’s my view that NCTC is an impressive organization under very capable leadership. Not to say as Mike Leiter, the director himself agrees, that there’s not room for more improvement. But it does put a laser focus on counterterrorism. The FBI is the primary agency for conducting counterterrorism and counterintelligence investigations and operations inside the U.S. It collects domestic information for purely domestic threats and coordinates clandestine collection of foreign intelligence within the United States.

The Bureau also runs one of the longest-standing and most successful examples of a partnership that crosses federal, state, local, tribal and territorial entities -- the series of 104 Joint Terrorism Task Forces or JTTFs. I’ve been impressed with the FBI’s transformation having watched it, somewhat afar, in my last job in the Department of Defense. And now, of course, I’m a little closer to it. But I think the systematic, disciplined way they’re managing their transformation is actually quite impressive and quite effective.

The intelligence elements of the Department of Homeland Security also have a responsibility to analyze homeland security information which can include purely domestic information. We are improving information sharing through state, local and tribal organizations via the National Fusion Center network. And this network is not part of the federal government per se.

It consists of 72 federally recognized fusion centers across the country, in all 50 states and some 22 major urban centers. I’ve visited some of these, and they’re not necessarily mirror images of each other. And some are -- have progressed farther than others. But I think in all cases they’re certainly maturing. There are other components at DHS that also collect purely domestic information such as integration customs and border security. They pursue these collection activities for law enforcement and integration-enforcement purposes.

So why does all of this matter? Well, as you all know during the past year the three attempted operations by al-Qaida and associated groups: two in New York and one over in Detroit. There were two lone-actor attacks by homegrown violent extremists in Little Rock and Fort Hood.

Together they surpassed the number and pace of such attempts during any other year. So this underscores the challenges of identifying and countering a persistent, adaptive enemy. There have been several studies, recommendations and corrective actions as a result of these events in New York, Detroit, Little Rock and Fort Hood and the changing threat environment.

Of note was the failure of analysis to identify, correlate and infuse the various pieces of information, the failure to assign investigative responsibility and accountability and the shortcomings of the watchlisting system. We followed through on the recommendations from each report and even those which are still not public. But our adversaries are always going to try to adapt.

The increasing role of westerners, including Americans in al-Qaida and associated groups increase their knowledge of western culture and security practices and of course enhances their access. And of course that, obviously, raises the potential, the specter for attack. Then we have the ever-growing popular use of online social media and blogs by violent extremist groups.

These new media provide new avenues for groups of all kinds including prodemocracy movements which were helped by them during last year’s elections in Iran. Well, when it comes to susceptibility to radicalization, virtual communities have become as important as the physical communities where people live especially among youth.

Threats these days -- be it a terrorist, cyber or something else -- are often not purely foreign or domestic. So to protect our nation, we have to integrate information from all sources -- both sensitive foreign and domestic data. And that vastly complicates the legal, security, policy, privacy and technical requirements because of different rules governing different kinds of intelligence.

Specifically we face and will have to overcome enormous challenges on the following fronts: first, on always ensuring appropriate protection of privacy while still allowing for the proper dissemination of U.S. persons information necessary to uncover and disrupt threats to the homeland; and second, ensuring that the U.S. government has the necessary legal and policy framework to allow discovery of critical information across departmental and agency data sets.

So let me close and then I’ll be happy to take some questions. At the end of the day the IC, the Intelligence Community, has to be able to integrate intelligence to effectively address threats to the homeland. And the bottom line is this: We need to do our jobs keeping our country safe while always maintaining the trust of the American people and protecting their civil liberties.

So thanks again to the Bipartisan Policy Center for the conference which provides a much needed forum for publicly addressing these complex issues. So thank you very much. Questions?

Mr. Hamilton: Okay. Let’s go. Are there questions this morning for the director? Let’s start over here, okay.

Question: You indicated that after the attacks in December that the analysis showed that there were three reasons why there were failures. And it was the failure to integrate analysis, failure to provide investigative resources and the watchlisting. Those three failures were exactly laid out in the 9/11 Commission Report. Eight-and-a-half-years later, we’re seeing exactly the same things. Why should we have any hope that in the next eight-and-a-half-years we won’t be seeing exactly the same problems?

Director Clapper: Well, these problems are perpetuous. As the complexity of the environment increase, which it is, and the sheer volume of data that we have to contend with I think these are -- and in light of the restrictions on, particularly, which accrue from protection of civil liberties -- these are going to be perpetual challenges. I’m certainly not going to stand up here and say we’re going to achieve Nirvana someday.

You know the system as much as -- as hard as we work at it we’re simply not going to bat 1.000. So these are going to be challenges. There certainly have been specific improvements that have been made. There are more that are in work. But we’ll always have this challenge. So I can’t guarantee you that eight-and-a-half-years from now that, you know, all will be well and we won’t have these issues any longer because, unfortunately, things don’t stop in place. The complexity increases.

Mr. Hamilton: All right. Further questions? We have one here. John?

Question: Good morning, sir.

Director Clapper: Hi. John.

Question: My question is, DCIs and then your predecessors as DNI have had to manage the very heavy tension between responsibilities to manage within the community very complex challenges against the substantive responsibilities of being the President’s intel analyst. So you have to attend those deputies, principals meetings. You have to be responsible for subsequent input to very complex, international issues. How do you manage those to -- or how do you propose to manage those two?

Director Clapper: John. That’s a great question. And in my first 58 days, I found at least personally, you know, the most daunting challenge I have is time management. And that is clearly -- and I think that’s been an observation of all previous DNIs and DCIs, for that matter. That is the responsibilities you have for the enterprise -- running an enterprise in the institution versus, you know, providing the subsequent intelligence report for customer number one and all that goes with that.

One of the things I’m doing is restructuring the -- this is, kind of, “inside baseball” -- so I won’t try to get too down in the weeds here -- but essentially restructuring the Office of the Director of National Intelligence to enable that -- better enable the DNI -- at least this one -- to attend to both of those responsibilities. So my intent with the principal deputy -- once we get one installed, confirmed -- would be to use that position as a chief operating officer, more or less, to internally run the staff.

And we’re in the process of making some adjustments on the staff. And I’ve stood up -- although the law allows four deputy directors at National Intelligence. We’re only going to have one who will be a deputy director for intelligence integration. And that stood up, provisionally, Friday. And that collapses what -- the heretofore separate endeavors of collection and analysis.

And it’s my belief at the ODNI level certainly, that, that’s a place where these two normally separate endeavors in intelligence need to come together. It’s certainly appropriate at the agency levels to keep them separate, to keep this one separate. But at the level of ODNI I believe they should be integrated. So this is, you know, some causing a lot of angst and that sort of thing, but I am convinced that this is the right way to go to get at some of these issues that I mentioned in my remarks.

But you’re right on, John. That’s a huge challenge for any DNI, the way it’s constituted now -- running the enterprise and providing the intelligence support to the President.

Mr. Hamilton: Okay. Question way in the back.

Question: Eli Lake of the Washington Times. Mr. Clapper, in an article over the summer in the Washington Post, you remarked that “only God knows” the number of special access programs. Now that you’re the DNI, are you any closer to omniscience? And can you confidently say that the White House and appropriate congressional oversight is fully apprised of the activities that the Intelligence Community is doing.

Director Clapper: Yeah, I don’t know if Dana Priest is here but I think we met for about 45 minutes and that’s the only quote she took away from that session. I was humorously observing that there’s only one entity in the universe that actually has all of the SAPs -- the special access programs -- and that’s God.

Now, my piece of that, of course, are all the intelligence. There are many, many other compartments that don’t deal necessarily with intelligence, so I was speaking of the totality of that. And I think -- you know, I certainly have all the access I need, I think, in the totality of things when it’s necessary, certainly. Those over me do as well.

There’s always this dilemma between compartmentation and sharing, collaboration, all this sort of thing. But I’ll tell you, in this day and age of the hemorrhage of leaks in this town, I think compartmentation -- appropriate, reasonable compartmentation -- is the right thing to do.

Mr. Hamilton: A question here, and then we’ll come to you right here.

Director Clapper: By the way, if I may, I was at a meeting yesterday with the President and I was ashamed to have to sit there and listen to the President express his great angst about the leaking that’s going on here in this town, and particularly when it’s the widely quoted, amorphous, anonymous, senior intelligence officials who, for whatever reason, get their jollies from blabbing to the media.

I’m not criticizing the media at all. You’re doing your jobs. But I am criticizing people who are allegedly government officials in responsible positions who have supposedly taken an oath to protect this country. And as the president remarked, the irony here is people engaged in intelligence who turn around and talk about it publicly.

Mr. Hamilton: All right, sir.

Question: Mr. Director, the topic of our conversation today -- meeting today is domestic intelligence. And I think we all note kind of in a geographic sense what that means, as contrasted with foreign. The one area where that blurs significantly is in cyber space where the boundaries are very vague, uncertain -- if they exist at all. It’s a global realm. So I just wondered if you could share with us if you have any initial thoughts during your early tenure about how the Intelligence Community should be organized to tackle this new realm.

Director Clapper: Randy, that’s a great question. Well, you’re quite right. First of all, cyber is a new frontier. You know, our policies and what we do in cyber are kind of a work in progress. I think a huge step which I was a big proponent of when I was in the department was the establishment of Cyber Command; dual-hatting Gen. Alexander as director of NSA and as Cyber Command. I think this is a very logical move on the part of Department of Defense and it is the department’s response to how to protect and, if necessary, warfight in a cyber context. I think we’re making headway on kind of the civilian side, and a structure for that to protect the nation’s -- particularly the nation’s civilian infrastructure.

But the fact of the matter is that the nation’s center of excellence for the cyber realm is the National Security Agency. And so the challenge, here, or, the trick, I think, is to build mechanisms with due regard for civil-liberties protection and privacy concerns but nevertheless will enable us to dynamically protect our infrastructure.

And so we’re working through this but as part of, now, two Administrations -- the last one and this one -- I think many -- the issues kind of continue. We just have different lawyers making the same arguments, I guess.

Mr. Hamilton: All right, the question, here, and then we’ll come over to this side of the room. Where’s the microphone? Okay, thank you.

Question: Yes, Diana West, Washington Examiner. You mentioned the shortcomings of the watchlist system and also the dangers posed by domestic actors gaining access or exposure to our security practices. And I just wondered, did you know that a known Hamas operative was invited by the FBI into a six-week training session -- Sheik Kifah Mustapha -- and is that the kind of problem you’re talking about? What is your reaction to that?

Director Clapper: Well, I think -- the FBI will be here later. I think the FBI has -- you can speak to them about that. But I do think there is merit, frankly, in outreach to engage as much as possible with the Muslim community. I will acknowledge, I don’t know the specifics of  how this particular person was invited, but I do think there is great merit in such programs. And  again, I think there will be some FBI representatives here later who can speak more specifically  to that.

Mr. Hamilton: Question in the center aisle here.

Question: [Off mic.]

Mr. Hamilton: Let’s wait for the microphone.

Question: Sure, okay. I want to go back to the first question and your answer to it, which touches not only on the fact that we clearly do not have a perfect intelligence system nine years after 9/11, but the reality is, I don’t know that the public fully understands how we measure the effectiveness of intelligence, that we don’t really have a good standard for saying -- as we do with policing, I assume crime took place in the District of Columbia last night, but Chief Lanier is not going to get fired. We don’t expect police to obliterate crime. How do you establish a metric for how good intelligence can be in this really complicated environment, one that can be communicated with Congress and can also be communicated to the public?

Director Clapper: Well, Bill, as we like to say on the Hill, thanks for the question. That obviously is a huge imponderable. Evaluating intelligence, measuring it, gauging it, is -- you know, it’s no difference than it -- as long as I’ve been in the business, it’s been a challenge. How much is a pound of intelligence worth?

When you can equate intelligence to saving a life, preventing an attack or some empirical measure like that, well, it’s easy enough. The problem with intelligence is that there is also a temporal dimension to the value of intelligence. So something that is collected today will have a different value tomorrow, next week, next month or five years from now.

This is particularly true in the imagery business that I was in pretty intensively for five years as director of NGA. So a given image that is collected today, say, from overhead, could easily have a different value a year or five years for now. But the great proclivity for Americans is instant gratification. If I collect something, I want to know its value right now.

Another dimension of this, I served in Korea 25 years ago as the director of intelligence for U.S. Forces Korea, and it was very important for me to have my eight hours of U2 coverage every day, and it if showed nothing, that was very important for me to know. In fact, if we didn’t see anything for three or four or five days, I got very, very nervous.

Now, you can’t count up the number of electrograms for that because there were zero, but it was very important that we got that so-called negative intelligence. So all the -- it sounds like an excuse or defense, but I just think that it’s very, very hard to effectively assess the whole realm of intelligence, of what’s collected, what’s analyzed, on a bit-by-bit basis. That’s very difficult.

The obvious connections, again: saving lives, taking down terrorists, preventing attacks, and there are many, many cases of that where intelligence has clearly earned its keep. But there are many other things that you need to collect in order to get to that point that aren’t so invitingly measured as someone with a green eyeshade might.

Mr. Hamilton: Okay, we have a question on the aisle there.

Question: Sir, you mentioned that the lines were being blurred in terms of intelligence collection between foreign and domestic. Is the law keeping up to protect the operators who both gather the intelligence and who act on the intelligence, in terms of targeting, possibly in areas where there is no war that’s been declared? Drones fly overhead, but they don’t gather some of the intelligence or take some of the action that we have seen reported in the past. Are the operators being protected when they are taking action outside a war zone?

Director Clapper: I’m not sure I understood. I’m not sure I understood your question. I think the -- if I understood the essence of it, it was, are there legal impediments to sharing foreign and domestic? Was that the essence of it?

Question: When you are going to gather intelligence, say, on the ground in the FATA or on the ground in Somalia and you’re caught doing it, what protects you?

Director Clapper: Well, I just have to say, what protects us is intelligence in doing that, other than the immediate hazard, I suppose -- what protects us legally, is that -- well, in this forum, I guess I would say that depending on what arm of the Intelligence Community might be
conducting this -- such activities and under what conditions, what arrangements might there be with a host government, if there is one -- all those sort of factors, and again, it’s not a one-size-fits-all proposition, are, I think, rigorously considered, debated and discussed. And if it’s going to be a military operation, there are certain rules and policies and procedures that pertain to that. If it’s non-military, that’s another set of rules.

Each of them has, I think, pretty rigorous oversight aspects, particularly from the Congress. So it’s those processes, I think, which afford the legal protections of this, if that’s what you mean, quite aside from what hazards there may be -- physical hazards there may be in actually
collecting that if in fact -- not acknowledging this in any way, but if in fact you are doing things on the ground.

Mr. Hamilton: Okay, I think we have time for probably about three more questions. Let’s go ahead back here.

Question: Thank you, Director Clapper. Joel Spangenberg with the Senate Homeland Security and Governmental Affairs Committee. Recently, the fiscal year ’10 Intelligence Authorization Bill passed the House and the Senate. It includes a provision for the DNI to work with GAO to come
up with the directive to govern GAO access to the IC. Now, drawing from your background as Undersecretary of Defense for Intelligence, and also looking at DOD’s IC element’s strong cooperation in even the most sensitive matters working with GAO, how do you see this benefiting the IC across its management component, specifically information sharing, privacy and also helping more effective and stronger congressional oversight?

Director Clapper: Well, I’ve worked with, been the victim of, however you want to put it, numerous GAO studies in the past. Notably, in my last job, GAO was very involved in two areas that I had a lot of engagement with. One was on Intelligence Surveillance Reconnaissance roadmap sorts of things, planning ahead for ISR resources. And the other area where GAO has actually been a huge help by keeping the heat on us is in the area of clearance reform, which has been another avocation of mine for the last three years, and which I intend to continue in this job.

The concern I have, which I have talked to members about, is I am more concerned or sensitive about GAO getting into what I would consider sort of the core essence of intelligence -- that is, evaluating sources and methods, critiquing national intelligence estimates, doing this sort of
thing, which I think strikes at the very essence of what the intelligence committees were established to do.

My concern there is in the committees - who perform a very important oversight role - not advocating that. Now, they want to have the GAO assist, detail GAO staff to -- if they have the subject matter experts -- to the committees. I think that’s fine as long as it’s done under the
auspices of the committees when you’re getting at the core essence of what intelligence is and does.

Mr. Hamilton: Two more questions. Dave, you had a question? Center aisle.

Question: Mr. Director, thank you for your service. Dave McCurdy. We’re at the Bipartisan Policy Center, so I couldn’t resist the opportunity to ask you a question about congressional oversight. In the past, it was almost nonpartisan, but in the past few years or decade, it seems to be coming
more and more partisan or polarized and, I think, less effective. Would you like to take an opportunity, off the record, I’m sure -- to offer your suggestion or concerns about the way the committees are or are not functioning?

Director Clapper: Thank you, Chairman McCurdy. I was around in the ’70s as a young pup. I was at NSA in those days, and so I went through, watched the Church-Pike hearings, which is, of course, what led ultimately to the establishment of the two committees -- the House Permanent Select Committee and the Senate Select Committee on Intelligence.

And my earliest interactions with the two committees were in the early ’90s , when I was in the Air Force, and the atmosphere in the day was as you characterized; I think, largely bipartisan where the members felt that this was a sacred public trust that had nothing to do with home-
district or home-state interests or equities.

And I think it’s fair to say that over time, I think the two intelligence committees have gotten caught up somewhat in the partisanship that I think, prevails today.

My own view on this -- and I made this statement in the numerous calls I had on SSCI members in the run-up to my confirmation and in my confirmation hearing. I think there has to be a positive relationship between the DNI and these two committees. In fact, I would assert and
suggest that a positive relationship with the White House and a positive relationship with the Congress, particularly the two oversight committees, can do a lot to compensate for the alleged frailties and ambiguities of the office I’m now in. So it’s my intent to try to do all I can to make that a positive relationship and to do what I can to make it a bipartisan discourse.

Mr. Hamilton: Okay, final question right here.

Question: Yes, Christine Brim, Center for Security Policy. In the 9/11 Commission report, a number of terms were used, including jihad and Islamic terrorism, which subsequently have been removed from the parlance of intelligence collection and intelligence analysis. The most recent example, the Fort Hood report, in which you mention not only none of those terms but did not even mention the name of the alleged shooter.

John Brennan recently has come out essentially stating that the term “jihad” cannot be used. Do you support that policy of banning factual terms from intelligence collection and intelligence analysis?

Director Clapper: I support policies which acknowledge the sensitivities here, which acknowledge what I would consider the positive aspects of the Muslim religion. We have millions of people in this country who are practitioners of the Muslim religion, and I think we in intelligence need to be sensitive to those terms. There is plenty of terminology out there we can use that conveys the meaning and the message we need to.