must have transparency and even to get to that, we have to understand understand. >> we had paul son and ben bernanke. what have we learned. have we been able to show at this point? >> if you watched, you heard mr. paulson say that there a lot of people responsible. the interesting question that i'm going to get to in a minute is he thinks there was any criminal activity and think that anybody should have been fired? i would say if you bring down the economy of the world, somebody should have been fired and ought to be facing the justice system. i'm 0ing your question and i want to find out if he referred anybody to be brought to

justice. >> he said it was wrong for paulson and or bernanke threatened to fire him. >> you never heard me say he shouldn't have been fired.d. i don't know. i don't like the idea of the threat. again, he may very well should have been fired. we may have sufficient information. when bernanke testified, he would not say he believed that lewis was competent. i have a lot of respect for him. and seems like the more we have, the murkier it becomes. we have a lot of opportunity i think during my lifetime to bring on regulations and hopefully prevent these things ever again. >> i will ask you the same

question. do you think the super regulator who whoever is in charge should be the federal reserve or not. should it be ben bernanke. >> i think the federal reserve should do it. >> did ben bernanke do it? >> he could, but i think that's up to the president. he has to make that decision. >> thank you so much for joining us.. i know you are busy and have to get back to the hearings. elijah cummings. that does it for us. "street signs" will pick up the mantle and go to the hearings as well. see you tomorrow. you can see henry paulson testifying and you heard them intrusion one of the men doing the questioning. elijah cummings. it's an amazing set of theater, questions asked again and again. he said he could lose his job

and the government has a right to do that. we have people on stand by to an lice that and we will go right back in to listen. >> and this alignment of interest as you know he said if you didn't take the money, we would fire you and your board. that's a far cry from how you characterize it as a conflict of interest. the interest was what i said. we didn't want b of a to be simple. in terms of my communication i have been direct. i wouldn't use the word threat. i said what i said and i was i

intended to give a clear message that that was -- i'm not characterizing it as a threat because lewis didn't characterize it as a threat, but i did explain the fed's powers. that was in terms of the confluence of interest, that's an obvious thing. if you follow the train of logic, you accept the logic or you don't. some will say nothing would have happened to the financial system and i can't satisfy those people. >> yes and i'm with you, mr. secretary. there was a crisis and i understand where you and i federal reserve chairman were coming from. i guess we were trying to understand -- my time is up, madam chairman. i hope i have the opportunity to return to questions regarding the terms, conditions of the

agreement to go forward with t.a.r.p. money. thank you. >> i thank the gentlemen. >> thank you, madam chair misdemeanor and mr. secretary. following up on mr. mchenry's questions about tim geithner's involvement, you said you kept him informed when he was nominated. we have notes from joe price who is a chief financial officer for bank of america basically chronicling the conversation you had with chairman lewis and yourself. and in those do you means he said fire bod, if you do it, irresponsible for country, board of directors. tim g agrees. did you ever invoke tim geithner's name or suggest he was on board with your view on this to apply additional pressure to mr. lewis or bank of

america? >> i have sure got no memory of that. none whatsoever. >> you don't remember mentioning tim geithner in the conversation? >> i don't remember it. those are joe price's notes and someone would have to ask him. i don't even remember talking to joe price. i remember talking with ken lewis and as i said, i posted geithner and i didn't look at him as a decision maker and i just don't have a memory in that kind of detail. >> you never used him to your connection as additional pressure that he was on board. >> yeah, i sure don't recall that. >> there seems to be a lot of confusion and we are arguing overy is mant ibs and whether or

not you threatened mr. lewis and bank of america. i think you have been clear if they went forward with invoking, you would attempt to remove him from his position. >> i wouldn't move forward. i did not have the authority. >> what i said to him was i said to him if he did something so irresponsible -- >> that would in your view be responsible sf. >> the fed could do that as his regulator. >> you felt that would be irresponsible? >> yes, absolutely. very clear. >> that is clear. so maybe threat is not the correct word. maybe he felt pressure. is that a fair term? >> i would rather tell you what i said and let you characterize it. >> fair enough.

i would like you to respond to mr. bernanke's testimony. chairman icea asked him if there were threats which i know you don't like that term or if people felt threatened to go through with the deals, it's okay because it worked out. do you agree with that? bernanke responded no, sir, in other words it wouldn't be appropriate for ken lewis and bank of america to feel pressured. given bernanke's acknowledgement in the hearing that threatening to fire bank of america's management would have been inappropriate, are you prepared to take responsibility for issuing an inappropriate statement? >> i certainly take responsibility for what i said. i think it logically followed. i laid out a train of events and i think it logically followed that that's what a regulator should do.

i would say i think chairman bernanke when he testified here last month, he acknowledged that if someone put their decision to harm the company, they deserve to be held couldable. that's what i was trying to communicate to ken lewis. >> you stated you took issue with bank of america's reason for invoking the mac. did you read their legal justification? >> nope. >> you stated you relied on the legal basis or rather the fed's legal staff for their view on the mac as your justification. are you aware or do you know the names of the staff you relied on? >> i listened in and participated in a number of calls where i heard the legal

staff and i do know some of the people, yes. >> do you know if they had background or insurance in mergers and acquisitions? >> i know they were experienced lawyers. i do not know their specific experience. >> there is a difference between being an experienced lawyer and an experienced lawyer in mergers and acquisitions that would know whether or not they have the legal basis. >> one other thing i particip e participated in markets and deals for 32 years and when i hear a lawyer say to a company what's your legal justification, after two shareholder votes and with a mac that is structured this way, i'm not getting much back on the other side and i will tell you something. someone who has been around in the markets, everything that i heard squared with my instincts

and judgments. >> were you aware they invoked the mac? >> was it after shareholder votes? >> i am trying to understand that if they legally had justification and legal expertise to invoke the mac clause one, i would question why they would come forward and justify that they could do it in this instance and be wrong. i told you ho i made the judgment and i think it was the right judgment. >> thank you, mr. dharman. mr. secretary, some contend the timing of what you call in your testimony of the financial crisis unprecedented in our lifetime was actually a calculated call street scenario

underpinned with masterful deceit and hazard. your call for the taxpayer bailout of wau street's excess came six peeks before a major national election when our government is the most vulnerable and tender and congress skiddish. this was an unprecedented dumping of losses on the u.s. taxpayer. history will show that the government and you knew about wall street's growing losses long before the merger. the purchase of countrywide was but another positioning of interest in preparation for what i call the greatest hail mary pass of all time in taking those losses and placing them on the next three generations. what interests me is who you

helped and who you didn't. yesterday's "new york times" reports that goldman sacks, the firm where you spent your life posted the largest quarterly profit and the 140-year history. 3.4 billion. each employee reportedly could earn $770,000 this year. across our nation, unemployment is rosing and foreclosures are surging and lending is constrained. i wish i had an hour to talk to you about that. looks like rich people are profiting handsomely. i can tell you that the profits resolved about one quarter of the housing situation in ohio that we face today. since appointment by president bush as secretary of treasury in 2006 until today, have you or your family have ties or investments tied to goldman sacks in any way whatsoever? >> no. >> what about bank of america? >> not that i know of.

>> president bush was not the first president you served. who was the first president? >> richard nixon. >> who did you report to in the white house in those days? >> first to lou and then john -- >> let me ask you about the deals you structured. in terms of the warrants that you structured, the term sheet provides that once goldman redeem the shares, they have the option to purchase back warrants the a fair market value at a timing of its discretion. why did you craft that allowed the borrower to determine when the taxpayers must sell warrants? >> in terms of how a specific deal was structured, i'm sure the deal structured for goldman was the same as the other warrants. >> why would you leave the

taxpayer or the borrower set the term in? >> i would say this, congresswoman. those warrants are going to be profitable for the taxpayer. >> they will be profitable, but if goldman sets the terms, we are not going to get back what we deserve for the american people. >> there is a process and it's not a processes where they set the terms. >> that's not what the deal said. the terms he prois that at a timing of its discretion. could you check into me that for me? >> the timing is one thing and the process for how that is set is another. >> i don't know how you are defining terms, but it's clear that goldman sacks will determine when our taxpayers, when we will get our money back and that's serious questioning. let me go to another point about who you help and who you don't.

warren buffett caught in at a level of $5 billion. your under watch, our taxpayers were forced to invest 10 billion not counting the counter party's dealings. warren buffett received free $1.5 billion. 1/5 as much for their investment that doubles his. he is being paid 10% on his preferred stock yet taxpayers get 10% and 9% for the second five years. buffett has a 10% call premium and taxpayers have no premium rights. buffett got $5 billion of present value for the $5 billion investment and taxpayers have $4.9 billion for the $10 billion

investment. how is this fair and why did warren buffett get a better deal for stockholders than the american taxpayer at goldman. >> there is a clear reason why. when we structured the capital to go into all the banks, it was the middle of a crisis. the capital was not available. we wanted to do something that was available not where we provided it under duress, but capital structured so the taxpayer would get paid wack. >> the banks, we put out the capital and it's preferred stock and the taxpayer will get paid back the money. as various tirms and a number of

firms have done well and paid back. you do not stop financial panic. by putting capital and offering capital on the terms and the only terms it's available in the middle of a crisis. what we were doing is moving quickly to put capital to a range of major financial institutions that were picked and i would argue to you that a fkt of those sthugs have done well. >> they're have done very well. >> that's something we should all be pleased about rather than the reverse. >> i wish you had gotten a better deal and you got a good deal for a lot of the clients. i have additional questions. >> if you look at what the taxpayer will make, it will have been good.

the biggest advantage we did not have a collapse and we did not have double the number of foreclosures in ohio and double the level -- >> they are happening mr. paulson. you ought to come and visit and see the results of your handy work. >> i know what it is. i'm saying it would have been worse. >> that's not good enough. >> i agree it was a crisis of your making. >> the gentlemen's time is expired. in your testimony you stated that you would like congress to be able to intervene and facilitate the wind down of a systemically important institution.

what do you envision? >> i think something very similar to what has been suggested by the obama administration makes sense. there needs to be when there is a real systemic risk so this should not be been frivolously. when the system is at risk, there needs to be a way to avoid the normal bankruptcy process and let a regulatory body come in and handle the wind down of the liabilities in such a way as it does not prevent a real damage to the basketball in a financial system.

if this is structured properly, we won't be in a situation where they are too big to fail. >> what do you see for the fdic? >> there have been a number of things suggested. what we suggested was the fed looking across the economy and across the capital markets for risk and being able to access and having authorities to act. in terms of the windcg$açóxdçd there is a potential failure, there needs to be a high bar and a determination by the secretarc

of the treasury and by the chairman of the fed and by other regulators that there is a true systemic issue. this should not be an easy bar to get over. when there is, then the regulator needs all of the powers to fail. >> given the government intervention, we are left with the reality that 10 banks in the country control about 50% of the deposited assets. is that a systemic risk in your view?

>> i'm only going to deal with things that were said. we put forward a blueprint that call forward consolidation of banking regulation as opposed to the regulators. i think having greater consolidation and stronger regulation coupled with the wind down powers so that you don't have banks too big to fail is a meaningful way of dealing with the risk because in my judgment a regulation no matter how good is always going to be imperfect. you need to have it in balance with the market discipline or moral hazard. we got to a point where we wouldn't rely on market discipline because it would have taken the system down.

to the extent in the infrastructure that the markets are fixed and i'm talking about the triparty repo market and credit default swaps and the work being done and the wind down powers, so then we are not held hostage by institutions that are too big to fail. >> we have changed the expression from too big to fail to too big to succeed. are we now in a place where we because of debatable actions and i am not trying to play here, looking ahead to say are we now in a situation where the actions that were taken to try to stabilize the economy. that left us with further

vulnerability am. because of this highly concentrated control in the hands of the few. >> i understand your question and there is going to be when you look at the numbers of banks, there will be a lot more consolidation before we are done.. i understand your question and i think it's important we get this imbalance. >> time is expired and we will go back in and out of this hearing for a couple of moments. we want to bring in the panel and i want everyone to know we will be talking to jim cramer. this issue of what they lent money to the banks and this warrant issue, but can be ex-explained simply and may be important. that questioning back and forth was important. we want to talk about the big issues and editor in chief of

boston proper. >> what's your take on this hearing? do you think this was a good exercise in what congress should do or not. the financial system is in a process of consolidation and we don't know if they are putting it into a greater risk. we don't know if they have them backing up, but that's not the best way to run a financial system. the people should be the ones who get the gains and take the risks and pay when their gambles go wrong. they have a huge concern over the stability of the system. we will have to look at that very, very carefully and have a different regulatory system to make sure that the kind of assumption of risk which was taken by large portions of the

financial world simply are not going to be allowed in the future without appropriate regulation. for example, the ratio of debt to equity allowed to go up from 12 to 1 to 30 to 1 is preposterous. that should never happen. we have to look at the appropriate ratio. >> let me put this screen up here. this inflirkts evil or damage. i know it sounds silly that we are doing this, but we are making a point that it is threatening ken lewis. he said you may lose your job. we are having a -- what is this

about whether that is a threat or not. i don't understand. >> the key question and the base of this hearing is whether or not he or bernanke overstepped legal authority and we all agree he didn't. was he playing hardball and that they would willingly use that authority. i think he did that. i don't think that's a threat, but making the situation clear. back then, there wasn't a time to worry about hurt feelings and i don't think he should have overstepped authority. >> i want to go back to you, all of them are fair. this is a question earlier. they were trying to debate whether anyone heard the

conversation between ken lewis and hank paulson. here's what hank paulson said. we don't have it? sore. what he said was and i believe i have it, but it was along the lines had i made the call from my living room and the questioner said there was no one else in the room and he said it does appear that we are focused and are these kwar questions that we should focus on that? >> the purpose of that question is to find out if he was telling the truth. what does the secretary and he did believe that the entire financial system is at risk. at this point you have a heart to heart conversation with whoever it is.

i don't know about the legalities, but that game was being played and no one would have any doubt about it. i call it a threat. if someone call skmeed said you have a way to lose your job if you don't go along with it, i don't know how anybody would report it. interpret it. i want to bring in jim cramer and when this interchange happened between paul and marcie from ohio on the interest create of the tarp poen and i wanted to get you in because you know more about this than anyone else and the issue of the warrants. it's coming up a lot and a lot of people interpret the parents are a way to undermine the taxpayer. that seemed to be the perception from the congresswoman from ohio.

that is not rat all the purpose. >> the bond trading departments at a company called brave asset management. i read it on the street and make a public auction. they are these warrants. why are they not being sold? there is a degree of unsophistication and all the problems will be solved. if jpmorgan will buy back. >> that's a fair point. the basic thing of what a warrant is. what hank paul son is trying to say, they basically had to give loans to the banks. below market interest rates to ensure they would survive. because the taxpayer was not getting a good deal. he put the warrants in and if stock prices recovered, they are

guaranteed to be a piece of that. >> this is a great deal for the taxpayer, but if you trade the warrants like at a government auction, who could possibly explain about that. >> anybody could buy them and a hedge fund and mutual fund and they went upside to banks. it's a natural solution. bunting and hair are sophisticated and ran government trading at first boston, but i think the plan should be implemented immediately. i wish i could get to paul and suggest it to him, but obviously he is -- >> he has to answer the same question. >> that's the way to do it. you offer them up.

>> why the not do this and i don't understand why they don't suggest it. >> the government is trying to what a government is and why it was put in here to protect the taxpayer. >> warrants are like a warrant to arrest. like a fourth amendment issue. we have this instrument that gives you the upside to the bank and we want to auction it off.f. i would like it. it is just a piece of paper. we don't need that. >> i think hank paulson would come out and say to her, may i please explain. i put those in to give it and if they explained, they were gaining steam.

why doesn't he do it and why does it take guys like hair and hunting, the government is not sophisticated anymore. we all know it's painful. the only thing i saw from the testimony is let's get indictments women have czars for everything and i feel like it's russia in the 1800s. why can't we have a federal government justice czar who goes after the people who brought down the world. they are human beings and where they live and if they need the names, they can call me. >> i'm sure they will do just that. >> let's go back into the hearings. they had a conflict of interest and is it possible that there is so conflict of interest that they don't realize that you are helping people that you are associated with and reputing

yourself for america's ethics? >> let me make several comments. i asked for the t.a.r.p. and i asked for authority to purchase illiquid assets. we changed opinions because the situation changed dramatically. >> in 10 days? >> you betcha. if you look at what happened in that 10-day period and what happened around the world, it changed dramatically. number one. >> i don't want you to use all my time. >> i want to respond to secondly. >> i left goldman sacks and i sold my shares. >> deferred too. you didn't have to pay any tax. >> i sold my shares and. >> if you come in and sell the assets and you are tax deforred. huh a $200 million profit and

you didn't have to pay tax. is that true or not? >> you do not pay a profit with the tax on someone. >> the next thing i would say and say it clearly is -- >> you didn't put bear sterns in bankruptcy and folded merrill lynch? isn't there some point where you have to say hey, i have a conflict of interest here? you don't feel a sin tilla of ethics on this at all? >> totally. i operated very consistently with the ethical guidelines i had as secretary of the treasury. when it became clear that we had

significant issues with goldman sacks with morgan stanley, what i did then, it would have been very wrong for me to recuse myself. i got a waiver from the ethics agreeme agreement. >> who is in charge that you have a waiver? >> we have an office of ethics and treasury and a white house ethics office? >> you got it from the white e house?e? >> we got it from the ethics office. >> time is expired. >> this is part of the record. >> without objection. so ordered. >> the congresswoman from california, diane watson. >> mr. paulson, i want to thank you for being here and your patience. a few mondays ago, we talked about an institution that you

thought would be able to deal with regulatory activities. how do you feel about the regulatory proposals that have been put forth by president obama and congress. >> that's a brought question. >> have you been following it? >> i would say i made when i was secretary of the treasury, a number of regulatory proposals. put forward a blueprint and there a number of things that the administration put forward that i am pleased about. the wibd down authorities for nonbanking institutions and the idea of a macrostability regulator.

>> would you please if we send your questions responds in writing and say when we form this system that these are the points we ought to consider. we try to unscramble the eggs that are rotten at this point and we must move forward and correct this system. it's impacting not only the united states, but the rest of the world too. we have got to get it right. i cannot be convinced that this wasn't seen back a year ago, but in trying to move on, i want to reiterate what happened on tuesday. it was reported that just one month after repaying their $10

billion in aid, goldman sacks would be posting a second quarter net profit of $3.44 billion. i'm curious to hear your perspective on their success despite the recession and the unique role former goldman employees have played in economic policy, considering the chairman of the bank of new york and the head of the new york stock exchange and the former assistant secretary treasury responsible for t.a.r.p. were all former goldman sacks employees and why do you believe that they have been able to

bring in such proves despite the economic conditions. >> i don't have an answer for you. i have not worked at goldman sacks for three years and i can't explain what they are doing and i take comfort that you should have a number of institutions that are more profitable today and it looks increasingly like the government will be paid back with profits. in terms of your request to give you something in writing, i will work with you on that and i don't have a staff like i used to. >> you can handwrite them and we will send you in writing what we would like to ask and what you think should be proposed.

you can write it in hand and do it until the paper. >> i will do my best to wo with you. >> i appreciate that. >> do you think that goldman sacks has benefit friday the economic crisis and the debt solution of some of their strongest competitors such as lehman brothers. >> i don't know the source of the profits and have no source to sec ult on it. . >> how was the determination made with institutions like bear stearns, aig and merrill lynch should be saved either through direct assistance or acquisition while lehman brothers would be allowed to fail. i'm not quite clear and i know you addressed it. >> i did i and will say to you

we will not have the legal powers we believe to do something in the lehman brothers case. we did not have the t.a.r.p. to put capital in and we did not have a buyer as we did in the case of bear stearns. so we were faced with sort of an unfortunate set of circumstances. >> i will conclude, i see the red light. i want to say if we have missed the oversight responsibilities, i need to know what you consider in writing and we will put that in our letter to you. what you consider government could do more of. i do know that we did not -- this committee under the former administration did not do the kind of oversight. maybe we were asleep at the wheel or looked the other way, but i would like to hear from you what government could do so

we don't get in this situation again. i think really it's worse than the depression of the 30s. thank you, mr. chairman. >> i yield to mr. garrett of new jersey. >> thank the chairman. >> with hard to aig, saying there is a gap in coverage with regard to authority and regulation there, we had a number of panels and financial services looka the this and the bottom line is there is not a cap in regulation and there were regulators, but what they admitted to was the authority and the personnel, but they just missed it. they weren't looking in the right places. it was just an error in

capability. >> that could be it. >> one of the things that you said and others is what we needed here was resolution authority. that's what we need to answer her question going forward as well. here's a question i will pose hypothetically. had we had resolution authority prior to the aig situation, can you think and explain how it would be different. if you had the resolution authority and they tried to move in and tried to wind down the firm in a quicker manner, that is the same reason. that's to put a larger burden on the taxpayer. what they are doing now is doing it out over a period of time. there is still the threat of the problem. help me understand why anything would be different to the taxpayer and the structure had

we had a wind down authority in place prior to the aig situation. >> it was necessary to keep the current and didn't go through bankruptcy. kept the current corporate structure worked within the legal framework. the one thing that is similar is that the fed made a lone which is going to be repaid as pieces of the company are sold. since i don't know in terms of aig, my role was giving the fed report and once the action was taken, i had no dealings and

that's what they are doing now and what they may do differently. >> i do know you weren't on the scene after the fact. you have been in the past. i'm i haven't godden my hands around what would have been different in that situation. now we have the situation as you know with the cit looking like they are not getting a bailout if you will. we look to the government to bail out and under the proposals, we will bill out tier one entities and just doesn't fall into that category. they are not going to get the bailout and you have a disincentive or disservice to the taxpayer. you are going to encourage companies like that and say i

better get into that situation again or else i'm not going to be -- i'm going to fall into this situation.n. isn't that the problem with the proposal? >> i don't have all of the facts in terms of what happened. when i was here, the regulators made cit a bank holding company. we fund them out of a t.a.r.p. and i lost touch. i don't know what's happened. we need information from all of these programs as soon as we can. >> would we not only perpetuate

going forward? we set the plan into place and then the cits of the world may not be up to the particulars right there, but the cit of the world say we get into that situation in the future. we can perpetuate the problem. >> i do agree that we don't want to move towards a situation in this country. the organizations that are too big to fail and everyone else can fail. we want to get to a situation where no one is too big to fail. i'm not -- i don't know enough about the cit to jump to the same conclusion you are about that, but i understand the dilemma you point to. >> time expired. >> we are going to go back to

the hearings in a couple of moments. thanks so much forever your patience. you have been able to listen to that as well. you saved a lost taxes by becoming treasury secretary. >> this is a part of all of this. this is widespread concern and the very people are being bailed out. i'm not saying paul son is being bailed out, but financial institutions are being bailed out. now they are making that up again. the issue of the warrant is interesting. the point is right. you do not want to have the warrants framed so that the lending institution has control of it. there has to be another method where by they can determine when those warrants can be exercised. it's a part of this concern.

who is gaining and who benefits. the very people who got them into trouble. it's an unpopular term and piece of legislation. it's a sense on an individual basis and unfairly because it's a matter of government regulation and it's not just justified to him to have to pay the taxes. that looked as though he benefit and that is the problem. when he goes and here i will disagree, but lehman brothers like goldman sacks and morgan city loan, when they wanted to save them, they allowed them to be bank holding companies.

if they had, they would have legal authority to hold lehman and that would make consequence financial squeeze and crisis that we entered into. >> it would seem fair, though, and i want to get lou in, but it would seem fair to recall that at that time the public had no appetite for bailouts at all. >> yes, i think that's -- >> he had to let lehman fail. >> well, i donate know that you had to let lehman fail. >> well, there wasn't any public appetite, wouldn't you agree, to bail out another institution? wasn't that moral hazard -- >> i agree, that was the popular conversation. but this isn't just a question of public appetite or public attitudes. you have a situation here where the financial system undertook a huge hit as a result of allowing lehman to go under. it caused a financial squeeze in this country and around the world. it cost enormous, enormous economic damage, and if the secretary of the treasury can't respond to that then he's doing the wrong thing. and in fact, there was a response to it, and o'for whatever reasons they weren't willing to resort to it. and whether the public liked it or not was not the issue. at some point you've got to save

the financial system. the economic consequences, the financial consequences of letting lehman go under were very, very severe. and if they could have been avoided it was up to him to take that step. why he didn't i don't know. >> lou breen, one thing -- go ahead, lou. >> interesting, mort, because about a week before he ended up bailing out aig and letting lehman go he'd said no more bailouts at all. and then he backtracked on that. trading as a trader and came back and did that. it's the same thing with the tarp. at first that was for the toxic assets, and he said that to give money directly to the banks is to admit failure. and yet a few days later that's exactly what he had to do, give money to the banks. and then essentially because they were talking about failure and we still have the toxic assets on the bank's books and because house prices have continued to fall and because mortgage -- foreclosure rates continue to rise, those toxic assets are nothing but more toxic today than they were then. at the time, you know, certainly you're correct that lehman -- the lehman failure was one of

the cataclysmic events that cause the market trouble last fall. whether or not, you know, at the time he had any idea that that would be the case and whether or not -- as he did these things, he didn't know which would be the correct solution. i think he knew the direction he had to move in and he did so forcefully. >> can i just throw this out there since we're having this conversation? someone said to me recently something pretty interesting but it wasn't lehman brothers and everybody in this country says lehman brothers was the -- but it was actually a few days before that, when fannie and freddie were taken over by the government right after the government had said you are in compliance with all the regulatory restrictions, you have the capital you need to have, and all the investors took them at their word, counterparties, et cetera. and then the government came in and reneged on all of that. and lehman brothers, actually it was after that the counterparties lost faith in lehman so perhaps the precipitating event was not lehman it was taking over fannie and freddie, which was politically popular at the time. >> i would disagree with that. i don't think it was fannie and freddie.

in fact, if fannie and freddie had been allowed to go under you would have had an immense financial collapse. and i think that's exactly the point. that somehow or other the treasury department did not estimate properly what the consequences were of a lehman -- the finance minister of france said this is a catastrophe. almost everybody in the major centers of finance in the world realized that the lehman failure was a catastrophe. and a lot of people here did. so i think frankly -- >> before it failed, mort?? >> before it failed. to allow lehman to fail when you look at the size of lehman and what its implications were around the world was a disaster. i'm amazed, in fact, that he didn't choose in a sense to find some legal way to be able to provide funding for lehman. so i would disagree with what paulson did. and i think everybody in retrospect has said that was a major inflection point in this whole thing and it went the wrong way and we are yet to recover from that.. >> it went the wrong way almost immediately because within days the primary reserve fund, the mutual fund, broke the buck.

and -- >> because of lehman. it started because of lehman. >> i understand. the lehman bonds. >> the money markets collapsed and the commercial paper markets collapsed. then the bank freeze started. we are still not out of that squeeze from the banking system today. there is still a major credit crisis in the country today, in the banking world, no matter what anybody may say. there is a little bit more -- >> lou breen, could anyone else have done a better job? it's very easy to monday quarterback this. we all could do that. but was there someone better who would have made better decisions and had been an authority figure and someone people looked to for confidence better than hank paulson? >> well, i don't know. what's kind of funny, that his career on wall street kind of cut both ways, in favor of the -- of his efforts and against them. i think that during the spring and summer of '08 he was very -- he expressed confidence in the financial system repeatedly. now, part of that was because he wanted to show confidence, he didn't want to show a lack of confidence, but i think part of that was because of his years on wall street, that he couldn't

conceive of the idea that his associates there had managed ris sock poorly that they could bring the financial system down. but then when -- in september when push came to shove he certainly understood the situation better than anyone e else in washington and was pushing forcefully for an immediate and forceful solution. did he get it all right? obviously, as mort said, no. but something had to be done and -- >> i'm sorry to cut you off. i want to get very quickly from each of you in ten seconds. nouriel roubini said we need another $250 billion in stimulus. warren buffett said we may need more. do we need more and how much? mort. >> i think we need another dramatically large stimulus program and we should be preparing for that immediately.. this economy is still heading south and the risks still on the down side are so great we'd better have contingency plans in case the unemployment numbers and the housing numbers continue to go south, and we are going to be in a lot of difficulty without an effective contingency program. >> mort, thank you. lou? >> well, i agree. i think that the labor market is in such a state of disarray that

something needs to be done. however, i don't think that they will come through with a stimulus program that helps the labor market anytime soon. >> all right. well, thank you very much to both of you. appreciate it. appreciate the conversation. and obviously, the hearing has just wrapped up there. you just heard the final comment. while it was going on, a couple headlines on the market. nasdaq moving up seven days in a row. 7% in seven days, to be exact. one t companies, america's leading superconductor. it designs wind turbines. 70% of its revenue comes from china. as we talk about the future of america china a big question. the chairman and ceo is with us. we appreciate your taking the time to be with us today. >> my pleasure. >> when we talk about the future of america and the president talks about it, he says the future is in alternative energy. and the "washington post" quoted him this morning. which country will create the jobs and industries in renewable energy i? want that answer to be the united states of america. and i look at your industry and all the wind turbine makers and growth is coming from china.

are we the leaders in alternative energy or not? >> well, we're certainly in wind we have the largest installed base of wind turbines in the world right now. but china doubled their installed base in 2008. they look likely to double it again this year. and they're really making the investment within a year, a couple years china's going to be the leader. that seems really quite clear. not just china, the asia pacific nations around them. so they're actually doing it. we're talking about it. we're moving a little bit slower right now. i think china's really going to take the lead. unfortunately for our company we're right in the middle of all that, selling a lot of product to chinese wind turbine manufacturers. >> while you're an american company and you can benefit from, it i know in some way that is good for our country.y. but you sound pretty sure. you're saying we're talking about it, they're doing it, and the leadership will be there.. it doesn't sound like it's something even open for discussion. >> you know, the facts are the facts. china decided to go in this direction. they have a perfect storm of reasons. theyee