gate near er here i will defer o him on the specific questions. again, the underlying tax policy justification for the change, i'd think, has been well laid out in a variety of articles. i will work with you. >> i appreciate it. it may have been answered before, but that don't recall it. some of our colleagues were talking about the fact, making a claim that in terms of non security discretionary income we raised it 84%. with your response that can speculate on ready how they got that number and whether there is -- well, just comment on that. explain please. ..

thank you very much away now turn as far as they have to leave and completed the question. >> mr. chairman, thank you, and mr. orszag thank you for your patience for having answered every member's questions attended this hearing. i appreciate the president's remarks at his state of the union address last week and appreciate he understands the plight of so many american families and the difficulty they are having. i could have a charge for put up

on the screens i would like to talk about why this is an important discussion. as we see, as we talk about a budget deficits and we talk in terms of trillions in billions, most americans are thinking in terms of the number one and that is the job that each of those individuals have and unfortunately for far too long we saw americans losing thousands of jobs to the point where it down to be billions of jobs and while i finally we are starting to see a reversal of that job loss, it's taken some time. each one of the bars we see on that screen and represents the number of job loss in the thousands so you have to add that if i'm correct, you have to add up every one of the bars and put, stack each on top of itself in order to figure out how many jobs have been lost in the last several years of most of the the previous administration and its been some time in that course of

those months the scene progress made. i noted that there is one of loan positive a par on that graf and that would back in november a couple of months ago where we saw job growth. it was only 4,000 jobs that we netted in that month but at least it was 4,000. if i recall correctly you said we have lost as a country more than 700,000 jobs the day that president obama was handed the keys by former president bush in january 2009. 741,000 jobs i believe the exact number was which amounts to 24,000 jobs americans for losing a day in january 2009 as president bush exited in the white house. that has changed. obviously not enough because we still have to add each of the bars for the months depicted on the screen and on top of each other, but as you mentioned we're hoping to see positive net

job growth in the next couple months and so when you put that in the context of this discussion about deficits most of us recognize our priorities should be to make sure the private sector is grading the jobs people the because once they are working they can pay taxes and they can pay taxes and take care of our obligations to make sure the men and women in uniform are well-trained and we have a good a well functioning government etc. etc. so to me the most important discussion is not so much about trillions and billions, talking in deficits but the men and women right now working hard to hold on to their jobs in their homes. you mentioned quite a bid to about the proposal the president has to freeze discretionary spending. i think it's a tough decision to make, probably something we have to do. i'm very disappointed to have heard the president say it was only non security discretionary spending as others have

indicated as well. we used to hear about several hundred dollars toilet seats, we know that during the height of the iraq war halliburton it ended up charging the american tax payer tens of millions of dollars for meals to our soldiers which were never served. we know from some recent information uncleaned from the department of defense and that in afghanistan we can account for a least a billion dollars a contractor related spending that we have no idea how it was spent but it was about a billion dollars in those categories examine totaling 16% of the contractor dollars that have been expended by the taxpayers. so many of us believe that's why we have to make tough decisions to free-spending, in all accounts, if you're going to freeze it for the schools, if you're going to freeze it for seniors programs, free-spending for homes and housing programs

or environmental cleanup programs, then we should take the same brush to scrub the department of defense. i don't think any military leader, general, or admiral would say that he or she is opposed to having the department of defense run as an efficient manner as possible so we can expend every single dollar weakened to the department of defense for the men and women i uniform and so i would hope the president and you all would reconsider this notion there is some agency protecting while others said to pore in worn -- aboard work are not. i know you mentioned has been made within the dod but that doesn't mean we can't continue to examine and i suspect congress will continue to do so. i just wanted to get into a final subject and that is the proposal put by our colleague and friend, mr. ryan, republican budget proposal which you mentioned before. i would agree with those who said the is appreciated and in the proposal and i agree with

the disagreements and i hope that you continue to talk about how would impact our seniors when it comes to health care and social security since it would move us toward privatizing those programs at a time when we saw 401k accounts of the last two years major dips in the economy. having said that i appreciate that you are here and i suspect you answered my question and i have inserted in a number of members questions in the past. i hope you take a look at the defense budget because while we agree we have to provide the men and women in uniform with the best we have to make sure that we give them the best that we can offer. >> well as -- dr. orszag, thank you for your excellent answers and thank you for your equanimity. we appreciated and we look for to working with you as we move forward in the budget season. at this point i would ask unanimous consent that all members that didn't have an opportunity to ask questions be

given seven days to submit for the record. >> mr. chairman, a lot like to ask unanimous consent to place questions in the record regarding omb enhanced huizenga authorities and loan programs and also on the fbi in financial fraud that in the stabbing that would be attended to this budget in that regard and. >> without objection. thank you again, we look for to working with you. [inaudible conversations] [inaudible conversations]

[inaudible conversations]

now more about the jobs legislation from today's "washington journal". >> we're going to start off talking about jobs with lila lerer with the politico who wrote friday about a possible jobs bill in the senate. lila lerer, senator reid is the majority leader said wednesday or thursday last week there would be votes in the senate on a jobs bill. what's the status of mack? >> guest: that's exactly right, he said the last thursday he would know on monday and that won't happen. the senate aides are planning this no wishes pushing back the votes till tuesday but it's unclear whether with would of been able to proceed without the snow. i would reach a bipartisan consensus on anything in the senate has been hard. even on a limited jobs bill. >> the white house said there pivoting toward health jobs that the president has called on hotjobs legislation. what are you hearing that is in

the midst of this legislation? >> guest: is a former limited bill than the other things and type of legislation they were considering. scott brown in massachusetts, there was a lot of corporate tax what extenders' one. one bank in extended every year like the corporate rnd tax. it includes money for the highway trust fund. it is going to include a payroll tax holidays sponsored by senators schumer and hatch so it will be a mix of things but largely focused on taxes. >> host: ciro in politico on friday there is intense pressure on leadership to move the jobs focused bill before the senate leaves for the february recess, what is the pressure coming from an minded expect to see them in every recess? >> guest: that's exactly right. the senate leadership wants to move a bill before the recess as well but moderate democrats want

to see that happen. obviously the when democrats lost in massachusetts to scott brown win that shook people up in the capital and particularly shook up moderate democrats up for reelection so people like even bayh, blanche lincoln, they really want some of this to happen before the recess and i believe they will go out on friday in. >> host: we will spend 45 minutes talking about trade agreements that the president has called for it that a number of folks are calling for to stimulate job growth. what can you tell us about interest in the senate side of things for that legislation? >> guest: i know that the administration has been reaching out to the democrats for support for. policy so that's happening in the senate, the focus in the house and senate as well so they are trying to move on things. >> host: lila lerer, reader worked at politico.com. thank you for joining us this morning. >> guest: thanks for having

me. >> congressman john murtha died this afternoon at the age of 77 at a hospital in arlington, virginia. after publications following gall bladder surgery. chairman of the house appropriations subcommittee on defense, the democrat became pennsylvania's law disserving congressman last saturday. he was also the first vietnam war, would better in an elected back in 1974. >> for educators c-span offers the new c-span class from.org. now minorities and women in leadership positions.

new from the first african-american mayor in jackson, mississippi. pri conference hosted by the national urban fellows, this is about 15 minutes. >> i am going to invite with them up to the podium. to introduce mayor harvey johnson. in class of 2010. [applause] >> whopping one. >> good evening everyone. in good evening. and while it is my distinct honor and privilege to introduce the honorable mayor harvey johnson jr. of jackson, mississippi. a man who is dedicated his life to public service and really embodies the values and mission of national urban fellows. in 1997 he made history by being elected jacksons' first african-american mayor. he served two terms leading the charge for economic vitality and

growth. the answer in the call to service again in 2009, mayor johnson ran and was reelected for his third term with over 85 percent of the votes. prior two his life in public office, johnson dedicated much of his time and expertise to help the economically depressed small towns with minority leadership obtain access to essential services. he also served as founding executive director of the center for university base development at jackson university. most important mayor johnson is a listing member of the any you have class of 1976 in a longstanding board member birgit ladies and gentlemen, please join me in welcoming mayor harvey johnson. [applause] >> thank you for that kind introduction and thank you for that warm welcome here and it's my pleasure to be here. i know it's the and so i'm going to speed faster than most

others. [laughter] once you understand the time is of the essence. i'm really honored to be here. it was mentioned when that's why i'm in the class of '76 so i want to acknowledge in my class and will lead to some years ago. lloyd johnson and fey edwards, can you standing when. who [applause] puerto that was many years ago. bombay was a baby when we were in the class. i also want to recognize my wife, kathy. [applause] one i am honored to stand here today as we celebrate the 40th anniversary of the national urban fellows program. make that the national urban fellows leadership development movement. because that is what actually has been over the last 40 years,

more like a movement than a program. this is true -- truly a milestone because for 40 years this organization has successfully provided the people of color with the education and with the experience needed to manage and maintain. in the name of social justice and equity. in addition the national urban fellows nuf has been instrumental in addressing a critical challenges faced by america. particularly as they relate to people of color, and women who, serving in leadership positions and the public sector and in the non-profit sector. i like to congratulate the members were of that first class of 40 years of those members here? standing up. [applause]

what i want to congratulate them for paving the way for people like me. who are in the position that we're in today. although not in the first-class, i would also like to give special recognition to lead alvarez. [applause] with his 35 years of the affiliation and with the nuf was invaluable. in the organization's ability to survive and to thrive. unwound an extension yahoo! out like to give special recognition to franco. [applause] although many have you may not know him personally, i have known him personally. frank was the founding president of this organization who first

realized into the nuf baby some 40 years ago. you know, many serving leaders across the country zero a debt of gratitude to this brave individuals who came through during a time of terrible unrest and social injustice in the country. communities across the country were reeling from the likes of discrimination, segregation, poverty, unemployment, poor housing, police brutality, and many other challenges. when i was here today, ben, who work for some time in jackson post a question. his question was: how many of you were born after 1954? and a lot of people stand up with them. i would like to pose the question, how many of you were born before 1954? and still willing to raise your hand.

[laughter] with because i was a different time periods and those of you would who were children during that time and grew up during that time can remember back perhaps what it was like. me as an african-american growing up in pittsburgh, mississippi. during that time i had to ride in the back of the boss. because colored people didn't ride in the front of the bus. when i went downtown and i got thirsty and had to drink out of the color the water fountain. if i didn't go to the colored movie theater and went to the other theater and had to sit up in the balcony and the buzzards roost although i paid my quarter like everybody else. and we didn't have the hamburger joints we had, they weren't the franchises in the fast-food joints, we have the de luxe cafe. but even going to the deluxe cafe for a $0.12 hamburger i had to go to the colored side. with so those times note yielded

people who wanted to make a change, who wanted to make a difference in the way things work. some of you who can remember back will remember the summer of 1963. special summer in the south and the movement that was taking place across the country. it started with the assassination of a mentor ever saw was field secretary of the mississippi naacp. a shot in the back as he entered his home in june 1963. it was a summer that saw the clubbing of a cynical worker and saw the firebombing of the home of the first black voter africana at holmes county. it was a summer in august were two under 50,000 people gathered in in washington d.c., 60,000 of whom were white to protest injustice is being heaped upon black people at the time. was a summer that ended the on september 15th, 1963 when it

for a little black girls were getting ready to go to sunday school. denise mcnair, carol robbins, and he may collins, cynthia wesley. they were killed and by bob brown into the 16th street baptist church in birmingham, alabama. you know, many brave individuals laid the foundation on which we now stand. they persevered, they help to bring about positive changes in our community. and i'm very proud to say that the nuf over the years has done its share. we know, since that first group of an nuf class members, who i am sure can remember with me these times, more than 1,000 others have followed in their of footsteps. 1,000 permanent committed to diversity, committed to social justice, committed to equality.

these individuals of the past have raided a legacy and it's up to us, at the nuf family, to continue that legacy. those pioneers who came through during the early years had a commitment, they had a determination to help create a better society, and their efforts have paid off in a big way. their hard work has helped shape the political and the social and cultural fabric of our nation. but i am here to tell you that there is still much work to be done to appear in we have experienced tremendous changes in this country but some of the same old challenges exist. this is evidenced by the disparity in the percentage of people of color occupying leadership positions in government and business and in the non-profit sector. it is also obvious when you consider the disproportionate number of people of color who are trapped in poverty, who are suffering from social and medical maladies.

you are not being educated by the public education system. and who are in jail. no one has to tell you that in just a still exists. and now today more than ever this country needs leaders representing a diverse population and who are committed to making sure citizens receive quality service and are able to have a better quality of life. that's why i commend the national urban fellows whoe'er continuing the mission that was started so many years ago. i am thankful that this organization is still committed to a developing leader who change america. many have come before us and have left their mark on society but it's up to the leaders of today as well as the leaders of tomorrow to pick up the torch and follow their footsteps. that's why i urge the class of 2010 to continue upward that

condition of making leader contributions. our previous graduates have laid a foundation on which you can stand. and it's up to you to build upon that foundation. to reach new heights in our efforts to bring about positive change. again i congratulate each of the graduates, past, present and future. and i commended the national urban fellows movement for according individuals who had traditionally been underrepresented in the government and nonprofit sectors the opportunity, the visibility, and the recognition necessary to manage programs intended to improve living conditions in their community. i also commend paula, in the current nuf staff, i commend the nuf board of directors under the leadership of of ben.

i commend the other mentors throughout the united states and now in our academic partners at baruah college. for all the good work you do to keep the nuf movement of moving ahead in. i am proud of this great organization and i am proud of the many graduates who i now making a difference in our society. but it is about a movement. it's about not necessarily working hard to make sure you get there. but making -- working hard to make sure that those who follow behind to get there. because as i get older i recognize that these legs are not as strong as they used to be. i'm little stooped when i walk. in i don't need glasses but my eyesight is not as well as it used to be. i recognize that this movement as well as any is not necessarily about me, it's about people who fall behind you.

and so in closing i want to leave you with a poem that i think is very important, important in my life and i think important ally of the people who come to this program. it's all about building bridges. it's all about making sure that the people who are behind you are able to travel the path a little more better then you are traveling. and this poem goes like this and it is by miss allen. it is simply called the bridge builder. an old man going along highway came that evening cold and gray to a chasm that was deep. and wide. who wouldn't have a selling tide. he crossed this that's the one stream had no fears for him but he turned when he reached the other side. to build a bridge. the old man building strength. you're journey will end with the ending date never again will pass this one. you cross the chasm deep and

wide, wide bill to add eventide? the builder lifted his own grey head. good friend, in the past i have come he said, they follow that to me that passed this way. this chasm that has been known to me one may pitfall be appearing he too must cross in the twilight dam i am building s bridge for him. god bless you, god keep you. thank you. [applause] and so we conclude an there and we still have the same name appears so for those of you who will join us tonight we will be celebrating at 6:00 o'clock are in the class of 1970 and a

chorus the very special class of 2010. and for those of you who have been with us for these many days it's been an inspirational and glorious time and i hope and pray it will be the same for you. godspeed, let us do something and make a difference. god bless. thank you so much. [applause] [inaudible conversations] .. we

>> were federal reserve will volcker testified last tuesday on the first to impose new limits on the baking industry. the plan announced by president obama would prevent commercial banks from owning or operating like hedge funds or private equity firms. mr. chewed what is now president of the economic recovery board joined by deputy secretary neil wolin. this is about to enough hours >> committee will come to order. mme welcome our very distinguished witnesses this afternoon in the audiences here and i'm sure there will be more coming in. this is a little out of the ordinary. married entre unturned. we're very grateful for you to accommodating us this year and we always welcome back to does a great job at the department of the treasury and an honor to have you here as well. many of you may know we're going to have a hearing on thursday as

well to follow-up and hear from industry and other people talk about these ideas that have been opposed by the administration, particularly by chairman volcker. so we're grateful for you being here with us this afternoon. i'll make a few brief opening comments myself in the turn to senator shelby for any comments you may have an following what i now call the corker world will go to criticism of some members here feels up that we compelled to be heard. built submit any documents they think would be worthwhile for the commute to have been a beacon of line of questioning. depending on the number of people here, we'll try to have enough time available to every thorough discussion of these ideas. and without today. , were entitled to prohibiting high-risk investment activities by banks and bingo to companies. and again, chairman paul volcker and turn to our heroes witnesses. we be today as we have overpass

number of months in the shadow of financial crisis that nearly toppled the american economy. it's worth repeating again the cost of the greed of recklessness that brought us here. over 7 million jobs in our country have been lost. the retirement plans of millions of americans have been dashed, trillions of dollars of household wealth and gdp are gone and obviously all about, regardless of which are political party is a affiliation, we cannot allow this happen again. the obama administration has proposed bold steps to make the financial system less we welcome those ideas. the first would prohibit banks or financial institutions that contained banks from owning, investing in, or sponsoring a hedge fund, private equity fund or any proprietary trading operation unrelated to serving its customers. the president of the united states is called this the volcker will and today chairman

paul volcker himself will make the statement. i think it has great merit in the sector would be his cap on the market share of liability for the largest financial firms, which would supplement the current caps on the market share of their deposits. i think the administration is headed in the right direction with these two proposals did i know the timing of them and how they've been proposed at a critical time when we've been deeply engaged on this committee. i'm proposing ideas to reform in the financial site or has raised the eyebrows and other considerations by people. but i think we need to get past that if we didn't think about the merit of these ideas on how they would work if they couldn't exactly put in place. so i would welcome the conversation we're going to have today and the meeting will have this week on these issues. and so, today we will hear from the chairman of the deputy secretary of the treasury, neil wolin and on thursday will hold another hearing the business and academic experts.

these proposals were born out of a fear that a failure to act with the most vulnerable to another crisis and the frustration and refusal of financial firms to rein in some of these more reckless behaviors. i share that fear and assure that frustration as well. and i certainly oppose those who would argue that the boldness of these proposals is out of scale with the need for reform. we need to take action and we must consider scaling back the scope of a david these banks may engage in, while they're using deposit. and so today i look forward to hearing how these proposals may be most effectively applied to consumers and our economy and also as a double side the kids, why these ideas may not work and what risk they may propose if adopted. some of object did to the volcker rule on the ground that it might not have prevent the crisis or that these particular mitts are unwise. i think those objections are worth discussion and am interested in giving her witnesses and colleagues here in chance to meet these items and a

chance to have the kind of vibrant, robust debate and discussion about them. but we must take steps i believe to change the culture of risk-taking and our financial sector, including the management and compensation incentives for job so much of the bad decision-making. i applaud the administration's commitment to scaling back risky behavior on wall street and i think chairman volcker and secretary wolin for joining us today to share their thoughts and ideas on this proposals. and i look forward to working with them and of course my colleagues here on this committee, democrats and republicans that we have been working over these past many weeks a month to fashioning reform package that would allow us to step forward on a bipartisan basis. cheery consensus bill that we can bring to our other 85 and colleagues in the senate for their situation ultimately conference of the other body and ultimately of course for the signature of the president of the united states. we have a lot of work left to be done for this debate is an

important one and we welcome me today to share your thoughts and ideas on this proposals. senator schumer. >> thank you, mr. chairman. chairman volcker, welcome again to this hearing. and then put them a first few weeks on this committee was he testified as federal of the reserve. we welcome you back. the financial crisis has had a devastating effect on our economy. millions of people have lost their jobs, trillions of dollars, household wealth have evaporated and the american taxpayers on the host for nearly all of that. we cannot allow such a calamity to occur again. for this reason and others, i'm willing to consider any proposal that will strengthen our regulatory framework and help our economy, including the president latest recommendation. that's why join my republican colleagues and ask in this hearing, today we hope we can

gain a better understanding of the specific activities that would be banned under the president's proposal. and the risk associated with those activities. we also need to understand clearly the cost of the benefits associated with the plans proposed changes. finally, we need to determine whether we should incorporate the president latest ideas into the current regulatory reform debate, or whether they can be considered at a later date. i believe our main goal today is regulatory -- and regulatory reform must be to eliminate taxpayer exposure to private desk, while establishing the strongest most competitive and economically efficient regulatory structure possible. achieving this goal will involve ending bailouts, addressing too big to fail, reorganizing our financial regulators, strengthening consumer protection and modernizing derivative regulation among

others. putting this together in a legislative package is a very difficult task. yet, it's difficult insert after i-india through me today to achieve our overarching goals. with that said, however, i'm quite disturbed by the manner in which the administration has gone about introducing the latest proposal for consideration. we are more than a year into our deliberation on regulatory reform. the house already has completed action. regrettably the administration waited until a little over a week ago to bring this very significant concept to the table. seven months after the administration first introduced broad recommendations that the president characterized boat, sweeping reforms not seen since the great depression. this concept that we have before us today with air dropped into the debate. i applaud chairman dodd for giving us the opportunity to begin a thoughtful process

regarding the president latest notion on regulatory reform. i hope however that this is not an indication that the administration intends to substitute thoughtful analysis with whatever polls well on a given day. this is too important, it's too complex. a subject to be political litmus testing. i know chairman volcker knows this and i hope he will continue to work with us. mr. chairman, last volume offered a regulatory reform discussion. and while i supported your policy aims, i question the means at that time. in response, you rightly slowed the process to consider more carefully how to accomplish our mutual objectives. i believe we've made tremendous progress in that regard. whether we ultimately reach a consensus is yet to be seen, but we're working on it. as i said many times we must get it right and this is a goal that

i know we both share. thank you. >> thank you, senator turn four. any other senators who want to be heard and made that offer before. thank you. any comments at all on the record e4. chairman volcker, and most people know you but for the sake of the record, said forrester's as chair of the present economic reverse to report. he also had that the group of 30, which has been engaged internationally of financial regulation than last year with a city or influential report tonight at on financial reform. prior to this time as a think on this committee and also, working in the investment banking world chairman volcker served as chairman of the federal reserve from (197)019-1997 under presidents carter and reagan. neal wolin sirs and the deputy secretary of the treasury having been confirmed by the senate in may, prior to assuming his position who served in the

administration as deputy assistant to the president and deputy counsel to the president for economic policy. prior to that, debbie secretary wolin is the operating officer and also served in various positions for the clinton administration. very impressive records by both of you. chairman volcker, welcome again. you've been before this committee on countless occasions over the many years over the past 30 years and we welcome you here once again. [inaudible] you've got to turn the microphone on. >> this is a familiar location that i forget to push the buttons. i'm a fan to appreciate the seventh unusual scheduling of the hearing. coincidentally, what the british parliamentary considering financial reform in britain. so i'm able to touch both sides of the atlantic today with your rescheduling and i appreciate that. my nisei off the bat, making a

very simple statement because i think there is some confusion. a lot of this issue are talking about today revolves around proprietary treasury and some people say was that a big rest or small risk or whatever. it certainly is a risk here at everything we do as a rest. this is not a question in my mind on what is the greater risk. it's the question of what risks are going to be protected by the federal government to the safety net, to deposit insurance,. in my view is that commercial banks have an essential function in the economy and that is why they are protected. but we don't have to protect more speculative activities without an inherent function of commercial banking and we shouldn't extend the safety net, extend taxpayer protection to proprietary activities. so that's a very short summary of at least one of the issues

here. as you know, the proposal that the president set out, if it was enacted would restrict commercial banking organizations from certain proprietary and more speculative activities. the first point they want to emphasize is that the proposed restructuring should be understood as part of the broader effort to deal with structural reform. it is particularly designed to help with the problem of too big to fail like senator shelby just emphasized. too big to fail and the related moral hazard that looms so large as the mastermind of the emergency rescues of financial institutions, bank and nonbank alike, it in the midst of crises. attached to the statement i show an essay that i showed the press on sunday to try to point out the larger perspective. the basic point is that there has been and remains a strong public interest in providing a safety net. in particular, deposit insurance

and the provision of liquidity in emergencies for commercial banks carrying out essential services. there is not however a similar rationale for public funds, taxpayer funds, protecting and supporting essentially proprietary speculative activities. hedge funds with equity firms and trading activities and related to customer needs, unrelated to continuing banking relationships should stand on their own, without the subsidies implied by public support for depository institutions. those quintessential market activities have become a natural part of investment banks. and a number of those most prominent of those firms both heavily engaged in an engaging and activities failed to divorce into publicly accepted virtues under the pressure of the crisis. it also became necessary to provide public support of the

federal reserve, federal department insurance corporation or the treasury to the largest remaining american investment banks. both of which assume the bulk of the banking license to facilitate the assistance. the world's largest insurance company thought up a huge portfolio of credit default swaps quite apart from its was rescued by many tens of billions of dollars of public loans and equity capital. not coincidentally, the huge financial affiliate of one of our largest industrial countries was also extend the privilege of a banking license and granted large assistance, contrary to long-standing public policy against combinations of banking and commerce. now what we claim we need are the authority and message to minimize the occurrence of those failures that threaten the basic fabric of financial markets. the first one in defense along

the lines of the administration proposals and the provisions of the bill passed by the house last year must be authority to regulate the certain characteristics that systemically important nonbank financial institutions. the essential need is to guard against excessive leverage and to insist upon adequate capital and liquidity. it's critically important that those institutions, its managers and its creditors do not assume, do not assume a public rescue will be forthcoming in kind of pressure. to make them accountable, there's a clear need for a new resolution authority. an approach recommended by the administration last year included in the house bill. the concept is widely supported internationally. the idea is that with her sedro safeguards, a designated agency be provided authority to intervene and take control of a major financial duchenne on the brink of failure.

the mandate is to arrange an orderly liquidation or merger. in other words, euthanasia. not a rescue. apart from the very limited number of systemically significant nonbank institutions, there are literally thousands of hedge funds, private equity funds and other private financial institutions actively competing in the capital markets. they are typically financed with substantial equity, provided by their partners or by other sophisticated investors. they are and should be free to trade, free to innovate, free to invest, and free to fail. managements, stockholders and partners should be at best. able to profit handsomely or to fail entirely as appropriate in a competitive free enterprise system. for now i want to deal with specifically as they can

questions that have arisen about the presidents recent proposal. first, surely a strong international consensus on the proposed approach would be appropriate. particularly cost those few nations, hosting large multinational banks and active financial markets. they needed consensus remains to be tested. however, judging from what we know and read about the attitude of a number of responsible officials and commentators, i believe there are substantial grounds, very substantial ground to anticipate success is the approach is fully understood and second, the functional definition of hedge funds and private equity funds that commercial banks will be for bid in two owner sponsor is not difficult. as with any new regulatory approach, authority provided in the appropriate supervisory agency should be carefully specified. it also needs to be broad enough to encompass efforts, efforts

sure to come to circumvent the intent of the law. we do not need or want a new breed of ink-based funds that had all but name functionaries had equity funds. similarly every banker as he does very well what proprietary trading means and implies. my understanding is that only a handful of large commercial banks. maybe four or five in the united states and perhaps a couple of a dozen worldwide are now engaged in this activity in volume. in the past, they are sometimes explicitly labeled a trading affiliate organization as proprietary. the connotation that the activity is or should be insulated from customer relations. most of those institutions and many others are engaged by meeting customer needs to buy or sell securities, stocks or bonds, derivatives, various commodities, other investments.

those activities may involve taking temporary positions. in the process, there'll be tabulations to speculate by aggressive haile remunerated traders. however, given strong legislative directors -- direction, bank supervisor should deal to appraise the nature of those trading activities and contain accesses. an analysis of blogging relative to customer relationships. and particularly of the relative volatility of gains and losses, would itself glenmont ways to reform in such judgments. for instance, patterns of exceptionally large gains and losses over a period of time in the so-called training but should raise and examine his eyebrows. persisting over time that the results should not be just raised eyebrows, but substantially raised capital requirements. third, i want to note the strong conflicts of interest inherent in the participation of commercial banking organizations

and proprietary or private investment activity. that's especially evident for banks conducting substantial investment management activities in which they are acting explicitly or implicitly in a fiduciary capacity. when the bank itself as a customer, that is when it's trading for its own account, it will almost inevitably find it subconsciously or inadvertently acting across purposes to the interest of an unrelated commercial customer of the bank. inside hedge funds and equity funds with outside partners, they generate generous fees for the bank. without the custom market price they. in the same inside funds will be favored over outside competition in placing funds for clients. more generally, proprietary trading activity should not be able to profit from knowledge of customer trade. now i'm so i may test you think all potential counselors can or

should be expunged from banking or other businesses. but neither am i so naïve to think that even with the best efforts of boards and management, so-called chinese walls can remain impermeable against seeking maximum profit and personal regeneration. in concluding i've added a list of the wide range of potentially profitable like to these that i went to the province of commercial banks. without reading that list, the point is there's plenty for banks to do beyond any concept of a narrow banking institution. it is quite a list and i submit to you to provide the base for a strong competitive and profitable commercial banking organizations, able to stand on the own feet, domestically and internationally, in fair times and foul. what we can do and what we should do is to recognize curve in the proprietary interest of

commercial banks is in the interest of fair and open competition, as well as protecting the provision of essential financial services. we current pressures, volatility and uncertainties are inherent in all market profit-seeking financial system. by appropriately defining the business of commercial banks, and by providing for the complementary resolution authority to deal with an impending failure of large capital market institutions, we can go a long way to promoting the combination of the competition innovation and underlying stability that we see. thank you. >> thank you very much, is your chairman. >> chairman dodd, ranking member transfer, thank you for the opportunity to testify for this committee about financial reform. in particular about the recent proposals to brand a certain risky financial activities of

banking firms and prevent excessive in the factor. the recent proposals complement a much broader set of reforms proposed by the administration in june, passed by the house in december and currently under active consideration by this committee. we worked closely with you and with your staffs over the past year we look forward to working with you to incorporate these additional proposals into comprehensive legislation. the goals of financial reform are simple. to make the markets for consumers and investors are an efficient, to fully the foundation or a safer more stable financial system, less prone to panic and crisis, to safeguard american taxpayers for brand risks that ought to be born by shareholders and creditors and to end once and for all the dangerous perception that many financial institution is too big to fail. from the start of the financial reform process, we have sought to constrain the growth of large complex financial terms. through tougher supervision, higher capital and liquidity requirements, the requirement

that larger firms develop and maintain rapid resolution plans and the financial recovery fee which the president proposed at the beginning of january. in addition both administrations proposal the bill passed by the house would give regulators explicit authority to rick quire banking firms to cease activities or to divest businesses that might threaten the safety of the firm or the broader financial system. the reforms are posed by the president a few weeks ago complement those reforms and go further. rather than merely authorize regulators to take action, we proposed to prohibit certain entities that banking forms, proprietary trading or the ownership and sponsorship of hedge funds and private equity funds as well is to place limits on the size of the largest firms. commercial banks enjoy federal government safety net in the form of access to federal deposit insurance, the federal reserve discount window and the federal reserve payment systems. these protections in place for

generations are justified by the critical role that the banking system plays in serving the credit, payment and investment needs of consumers and businesses. to prevent the expansion of that safety net, and to protect taxpayers from the risk of loss, commercial banking firms have long been subject to statutory activity restrictions. our scope proposals represent a national revolution in this framework. the activities targeted by her proposal tend to be volatile and high risk. the conduct of such activities also makes it more difficult for the market, investors and regulators to understand both the major financial firms and for managers to mitigate such risk. exposing the taxpayer to the risk of these activities is ill advised. in addition, proprietary trading by definition is not done for the benefit of customers or clients. rather it is conducted solely for the benefit of the bank itself. accordingly we have concluded

that proprietary trading and the ownership of hedge funds and private equity funds should be separated from the business of banking and from the safety net that benefits the business of banking. this proposal forces firms to choose between owning an insured depository institution and engage in proprietary trading hedge fund or private equity activities. and this is very important to emphasize, it does not allow any major firm to escape strict government oversight. under regulatory reform proposals, all major financial firms, whether or not they own a depository institution, must be subject to robust, consolidated supervision of a good nation, including strong m. liquidity requirements by fully accountable and fully empowered federal regulator. the second of the proposals is to place a cap on the relative size of the largest financial firms. in 1994, the u.s. is at a 10% concentration limits on bank

deposits. this deposit copies of constrain the u.s. banking sector and i served the country well. at its narrow focus on deposit liabilities has limited its usefulness. while the increasing -- with the increasing reliance on non-bank financial intermediaries and on deposit funding sources it is important to supplement the deposit cap with a broader restriction. for closing i would like to emphasize the importance of putting these new proposals in the broader context of financial reform. the proposals i've outlined do not represent an alternative approach to reform. rather they comprehend -- complement the scent of comprehensive reforms put forward by the administration last summer. added to the core elements of the effective financial reform previously proposed activity restrictions and concentration cap that are the focus of today's hearing will play an important role in making the system safer and more stable. but like each of the other core

elements of financial reform, the scale and scope proposals are not designed to stand alone. we look forward to working with you to bring comprehensive financial reform across the finish line. thank you, mr. chairman and senator shelby. jeanette thank you, where the good participation participation in alaska clerk to put up seven minutes on the clock for each of us and again i won't rigidly hold annuity that the cuban frank unter in mind that timeframe. we left the premises do not filibuster although it is a habit, were not going to allow the witnesses to anyway. let me just say at the outset again, i think the proposal you're making makes sense to me. the question is we have is the committee in the coming days is crafting a bill. and any idea including this one cannot unintended consequences, how does the work, how do they put in place. i want to emphasize from island of questioning although i'm in

support of it i want to race and questioned about the practicalities of how this would function. i begin with that in mind. let me begin if i can with observers and others i'm sure we'll hear on thursday these issues. maybe the members are themselves have raised questions about how this prohibition on proprietary trading should be interpreted your how should congress for instance that the boundaries of proprietary trading, presumably a separate trading unit designed to produce trading profits would be prohibited. thus the presumption. can we clearly separate bank hedging behavior, which i presume is something that you would insist upon for profit media and trade. how do you separate those activities. for regulators have a difficult time enforcing this prohibition? would you have a dual conflict seems to be occurring. one has to begin. whoever wants to begin. paul, if you want to start. >> well, i addressed that

question to some extent in my testimony, mr. chairman. it does put a burden i think inevitably on the supervisor and the legislative intent ought to be very clear. essentially trading for one's own account related to customer trading would be prohibited. trading incidental to a customer relationship would be permitted. now how do you make that distinction. i think you can do we clearly over a period of time with sufficient accuracy to make the policy appropriate. one thing as you said you just look at the sheer volume compared to the volume of customer business. you look at the pattern of gains and losses, which have a strong suggestion of proprietary trading because of you are just, getting the customer and not likely to be big gains or losses. you don't have to have a class

prohibition. it's clear that you want to prohibition of purely proprietary trading, but if the other volume gets big enough to raise suspicion, you have the tool of capital requirement, which i think should be available and is available to the supervisor to suggest any particular circumstance there ought to be a very heavy capital charge for this activity and that would automatically resemble it veered >> secretary wolin. >> thank you, chairman.here it i agree with chairman volcker. i think that there are important are obviously. i think we would basically want to embed in statute the basic principle that if it not customer related that it's prescribed. at that if it is related to customer dignity and hedging customer activity or making markets with respect to customer services,..on the other side of

the line. >> if you're hedging -- is not the advantage of the customer of the banks of the bank doesn't end up in financial trouble? >> mr. chairman, i think to the extent that they are doing proper hedging activity. right now regulators and accountants without hedging activities and make judgments about whether it's to hedging activity are not all the time. i think that a big word and is to be placed on bridge leaders in implementing the basic principle that i just articulated and that chairman volcker has articulated. i think they do this in a range of ways including with respect to hedging currently and whether it's legitimate hedging activity or whether it's something else with the basic principle again been whether it's customer related or whether it's for the firm's own balance sheet. >> but to acknowledge this is an area where it poses some challenges for the regulator? >> right, if they are you've got to work on established policies and procedures.

i point out the account of 30 faces problem in developing accounting standards as to what transactions of the bank are hedging and which are not hedging. in accounting reporting. take the case of aig. they were heavily in the credit default swaps. credit default swap is presuming you are hedging instrument. i don't think anybody would look up what aig was saying, doing and saying come of this is a hedging operation, not a trading operation. it was always the trading operations at nothing to do with protecting aig. in fact it was ruining aig it wasn't protecting it. and they were engaging in credit default swaps with people who are perhaps speculating. >> one problem was they didn't hedge enough. >> that's quite right. >> they didn't do a book is due and lay off their bets. >> let me ask you this because her testimony on page three,

chairman volcker because this is an important point i think if you make the statement. on your first point here on page three you say it is a strong international consensus on the proposed approach would be appropriate, particularly across those two nations hosting large multinational banks and you point out maybe 12 or so around the world that would fall into this category. an active financial markets. further down i will just be the last cause i believe either substantial grounds to anticipate success is the approach is fully understood. again, being the devils advocate to some extent because obvious to the question is raised here for us to impose it's kind of a rule and not to have a complementary set of rules adopted internationally makes us basically on unworkable. i'd like the international community adopt what we did not hear. you've got a heightened degree of anticipation of this occurring, maybe more so than we could anticipate. we make ourselves vulnerable by

insisting on a certain standard here that we have to hope the international community might adapt. and if they don't reflect our institutions exposed to a vulnerability. >> while i don't think it's impossible for us to do with the phone if we had to. that's obviously not the desired outcome. but i wouldn't want to make the challenge to grave. the really important of the financial center of courses london. and if we can have some agreement basically an basic outline with the british should come a long ways. the governor of the bank of england authority called the identical approach, the opposition party of the east in the u.k. have indicated strong approach for development along the spine. i cannot speak for -- >> not a government jet. >> i understand. but the parliamentary committee which has people that are in office will issue a report, the government will decide.

>> how did that committee go? >> you just said you had a hearing this morning. was this issue raised in what was the response? yes, it was definitely raised. >> what was the reaction? >> they pass out why this international commodity at two b. and we discussed is important between the british and the united states. you may have noticed the president made some welcoming comments. president obama's initiative, the finance minister of france did as well. so you know there's some call me among the banks, no doubt about it. relatively few banks, but i think the prospects for achieving what i think and many other people think is a very sensible approach. >> meal, we comment on this. >> the proposals they put together are consistent with the principles that have been articulated by the g20 liters in

london and pittsburgh. a lot of the implementation is being carried out by the financial stability board and last week the chairman of that board put out a statement consistent i think with some of the statement that chairman volcker a second about welcoming these proposals with the constructive art of this whole dialogue with respect to financial reform. i think were moving forward in terms of creating agreement amongst the g20. obviously, we will need to keep that appear but i think there's reason to believe that this is consistent with a lot of the discussion that is happening in those four. >> let me just say no conclude in turn to senator shelby. having above the porch in the united states to the here and we're the leading country of financial services and i think if we don't act, then reboot ourselves to follow. while i raise questions about cooperation, i think there's an important moment for the united states to demonstrate that he gets this and understands what needs to be done and that by doing this the settings of the

night to you raise significantly the possibility others will follow. if we don't ask, i think you'd almost similar prediction. senator shelby. >> thank you, mr. chairman. chairman volcker, commercial banks that engage in activities, considered to be investment banking to repeal including some proprietary trading. there does not seem to be evidence that i've seen that proprietary trading created the losses that resulted in the great need and race for bailouts. some argue it's questionable how curtailment of proprietary trading will protect the financial system from future instabilities, what we are going after. in addition, there are notable examples of failing institutions such as bear stearns, lehman brothers among others that were at the root of the recent crisis, but did not engage in commercial banking and were more dangerous by being interconnected than by being

large. and while aig did have a small thrift, a very small thrift, the systemic threat from aig did not emerge in that thrift. would you just share with us what you believe are the top three institutions that were engaged in proprietary trading and discuss what it was about these institutions that contributed to the financial crisis that we're confronting now? >> well, in following the development of the financial crisis, which was the mother of all financial crises, it was quite clear particularly in the american perspective that sense of crisis to panic the defaults were proceeding through proprietary trading oriented institutions, beginning with bear stearns and losses and hedge funds and they were trading institutions, lehman was very much a trading institutions , merrill lynch, so

forth, some of them got saved. >> but none of these firms were the commercial banks at that time. >> well, the commercial banks got in trouble, too. >> of these firms you just listed here at >> these firms are just listed were not commercial banks until they were given the bank holding company in the midst of crisis. that's right. now all i'm saying about was the demonstration that proprietary trading can be risky. now how can we bring that to heal, so to speak and what this program suggests is two things. they will have the oversight body who can intervene that is both large or very interconnected in presenting a risk of the whole system and limit the leverage, which had not been limited prior to the crises. in the capital liquidity had not been overseen.

they ran free. and very important we want to set up a system and this is the whole philosophy that those institutions will not again be rescued. they get in trouble and are going to fail. and apple make their own financing more difficult or less easy and presumably in itself tend to contain their leverage. so between the oversight and the natural self protective instinct hopefully, knowing that they're not going to be saved, we reduce the chance of crises. >> dr. volcker, one of the president's recent proposals is a limit on consolidation of the financial site are. in particular, the president proposed to quote from the white house press release a quote place limits on the excessive growth of the market share of liabilities at the largest financial firms to supplement existing caps on the market share deposits.

along those lines i have three questions. first, could you elaborate on what constitutes excessive growth and on what particular liabilities restrictions will be imposed their? in other words, what would excessive growth be? >> well, the answer i can give there is like. you know it when you see it. i think when debbie terry secretary -- >> you might see it, but with the regulator see it. the regulators will see it unless you give them some instruction. to give you a little bit of history at this point. i haven't been engaged in these discussions and neal may be able to say something to the point. i propose to this committee at one point or maybe with house committee in the 1980's when there wasn't an interstate banking that we should have nationwide banking, but we didn't want to dominated by just

a few institutions and we modestly suggest that perhaps a 5% limit on to be appropriate for any one bank, in terms of deposits. well when the congress finally got around to backing, they delivered at 10%. now i don't know exactly what they're going to talk about now, but i'm sure it's more than 10%. and assets relative to the country. and so let me say, it's a matter of judgment i'm a bit if you're talking 50%, that's a pretty big institution of the united states. >> a huge institution. dr. wolin, my second question along those lines is could you tell me or tell the committee actually what limits will be on the firm share a similar liabilities in the u.s. banking system in the global market or in a market in each country in which a u.s. firm operates? or let's say if a foreign firm operating in this country.

we have a lot of banks domicile overseas that operate to your >> that's correct. >> how does that work? >> i would hope these banks that are going to be major domicile operating here or overseas would be in countries that adopt a similar approach. the big banks are in the u.k., they are in paris. there one in germany. there's some in japan, but the japanese banks don't do this sort of thing anyway, so there's no question. chinese banks suddenly are going to become big proprietary traders. when you take care of europe and the u.k., there may be a dozen banks that are, maybe 20 if you add in a few canadian banks. they may provide competition here, which i think is good, but the competition ideally ought to be on similar grounds and they follow the same general

prescriptions. >> dr. volcker, it's my understanding and counsel that under existing laws and regulatory authorities, existing laws, banks and holding companies can be limited with respect to trading activities, including proprietary trading under the safety and soundness considerations. could you explain why you believe current authority is not adequately in what you believe regulator discretion should be eliminated by statutory prescription? >> well, this is another area -- >> do you have the concerns we do that the regulations are the regulators? >> i've been around a long while. >> i know. >> sometimes as a regulator, sometimes contesting with the regulators. i call you if you have a general permission for regulator to put on adequate controls, the regulator ends up in an

impossible position doing fairweather because all the banks will say, what are you talking about? nothing is happening, my trading is perfect, we haven't had any big losses. you can't restrict us. i'm going to go down to the banking committee and tell them you're being unfair and unreasonable. and that tends to be a bit persuasive for the regulators. i think you need a hard legislative prescription, rather than a kind of loose -- the house bill has a voluntary kind of provision. if you just take away the word voluntary of the house bill i think you can get a better bill. >> yes, sir. >> i just wondered whether i could add something on the questions you raised with respect to the size constraints. >> yes, sir. >> we believe that important piece to an end to big to fail is to constrain the size of financial institution. that something as i suggested

earlier that always well embedded in law. the problem with deposit cap which of course is such a device is that it only applies in a sense to the safest kinds of liabilities of financial firm can have an at least implicitly causes firms that want to grow beyond the funding or liability base of deposits are present into whether sorts of funding, which are riskier still. and so, we believe in order to update in fact and make useful in a world which deposits are no longer really the only or even the core source of funding for these biggest firms, that you need to have a definition of size that is more broadly gauged. >> quickly, mr. chairman. and fences on these proposals for the amendment, mr. wolin, part of the uncertainty created a recent proposals from the administration, regarding banks stems of insurgency about cohesion among members of the administration and among regulators.

following the announcement of the century, they reported treasury secretary geiger may have expressed doubts about the utility and size limits. reports from why and secretary geithner concerning banff by banks. according to german vernacular the federal reserve, banff on proprietary trading for commercial banks may not be construct this. dr. summers chief economic adviser in the current administration in the past has been a vocal proponent of removing last legal restrictions on banks. my question is this, is there a consensus within this obama administration that among the reagan leaders concerning the volcker rules and restrictions on size. and if so, what process -- what was expressed their?

through my thank you, senator shelby. that's a very good question. proposals of the birds and articulated with size and scope were ones that were based on a consensus recommendation of all of his economic team. and i think you've heard secretary geithner now speak to this quite directly. i think with respect to the regulators they are of course independent so i think i feel slightly less comfortable expressing their views. but i do think that in the main they are also supportive of this and we will work together with them and obviously with this committee to try to move these ideas forward as an important part, we think, is making sure that firms are not overly risky and that the system itself is not overly risky. >> chairman, you're being generous, i want to make one statement quick. i don't believe myself being big is necessarily bad here but i do believe that being big is thinking the government is going

to bail you out is bad, bad. thank you veered >> thank you primus, senator merkley. >> thank you to both of you for your testimony. i wanted to start by going to his distinction between trading in a fashion that is related to your customers and trading on your own account heard one person summarize this by saying it's like a grocery store that puts peanut butter on the shelf for its customers versus buying a whole warehouse of peanut butter can do want to speculate on how much peanut butter will be worth next week. i think in your testimony, mr. volcker, you refer to a volume rule. and i believe that goes to the heart of how you distinguish between peanut butter on the shelves to service customers and a warehouse to speculate on the price. can you give us any more details on how that might work and how much is to be done by this body and how much needs to be, if you will, delegated to the fine print can be worked out by

experts in the field? >> i think the answer to your question will have to be worked out by the regulators and supervisors. i think what's important is to get a very fair direction as to what the object is, proprietary trading is out, trading incidental to a customer relationship is okay, you be careful about i do find that or you're going to have to delegate. >> mr. wolin, do you want to add to that? >> no, that their view. >> in addition to such training on your own account, creating risk, there was also the reference to creating a conflict of interest when you're also managing funds asset management and so forth. do we have examples of dashes out of the radical problem? >> no, i don't think -- >> we have seen evidence in the field. >> i don't think it's all theoretical. i don't know what else i can say. it is very real. and there's been quite a lot of

discussion in the press and elsewhere, in particular, institutions or particular agencies. it's bound to be real because you are bound to run into a conflict between dealing to your own account and the customer -- you may go directly contrary to one of your customer's interests it's inevitable. and it's inevitable, and maybe not quite so inevitable but it's very real but if you're doing a big customer business, that they help you kind of have a feeling about which direction the market is going and and might help your proprietary trading. it's just human nature i'm afraid when you put these things together. >> and so, when firms respond by saying i think you referred to in your testimony, they created a chinese law within the firm,

which i assume means the great wall of china, broad, large, distinction of separation. your belief is we can't create -- it's impossible to do human nature to create such a law that would be effective. >> well, he did say this story, but when i was a young officer at the bank and there was considerable conservation in the congress about whether the banks were being in the trust business, there was a lot of conflict of interest. i was asked at this bank to go examine the situation so i could report to congress. i was just a young fellow. and i said, look at the chinese wall. i thought they said chinese wall because they thought it was so permeable. i thought the chinese wall hadn't kept out the hans, but that was not demeaning or meant to convey. but i've never -- that initial impression of mine has never left me as i examine the chinese wall of that particular institution. >> i want to turn the -- thank

you. i want to turn it into another piece that switches depository institutions have access to low-cost credit to the fed. and one of my concerns is that our banks, our commercial banks do an effective job in fueling businesses in our economy, getting loads of the door. is it a significant concern? is a legitimate concern that if you have proprietary trading throughout churn account that funds might otherwise have gone out in the form of loans to peel our economy might end up buying the inventory, if you will, the financial inventory. >> well, i don't know if that's a big problem. i don't believe the other is valid. sometimes you hear the argument that they have to do proprietary trading to make a lot of money to support the lending business. i mean, i don't believe that the

banks could all make a lot of money and proprietary trading so i'll go out make more than i would otherwise make. they make the loans because they think the loans are profitable, quite regardless of whether they're making or losing money. in the proprietary trading, in my view. >> senator merkley, to the extent that they're tying up capital through proprietary trading or in hedge fund businesses and so forth, the kinds of things we said we think should not be allowable by banking firms. they do not have that capital to be used for things that commercial lending activity and so forth to and so we think that among other things is the reason why this is a good set of proposals. >> could i ask you, mr. volcker, to expand on what the actual proposal would ease for the 10% limit on other liabilities?

what other liabilities may be included in that analysis? >> so the answer, senator, as we do not have the details of that fully nailed down. we want to make sure that we get it right. we want to work with the regulators, with this committee, in coming forward with a proposal. we don't think that it got to be a limit that is currently binding. we said that. but with respect to what exactly is the percentage of what is, if you will, the denominator of this fraction. we have not landed. we're still working on that and would want to work with this committee on that. >> finally, in 30 seconds, basel to approach an internal risk limits that allows somewhat unlimited leverage in investment banks do we need to rethink that can have more of concrete leverage limit? >> if you want my response, i

haven't been involved in that the very complex discussion. i think we do need to do some rethinking of basel ii, with some more explicit overall leverage i think is a good thing. a lot of the basel ii staff has to be clarified and made. i believe more binding. arrested very heavily on banks internal risk management procedures and on credit rating agencies. both of those have been somewhat discredited in the past couple of years. and that is the place where you need, speaking of common international duty, a couple of requirements you do need a common standard. and getting agreement among the lot of companies, not just u.s. and u.k. and europe. it's japan, china, emerging

countries. and getting them all to agree is a challenge. .. there are very people i can announce a policy and we have a hearing this quickly and it shows respect we have for years

as an inflation fighter. secretary mr. wolin thank you for the conversations. to put this in perspective we've talked a lot about banks, but proposal actually says the financial holding company or bank holding company conglomerate that is a financial institution that has a commercial bank as a component of it could not engage in these activities that you talk about the. >> and me be clear on that. >> i just say that for the listening audience, not just talking about the bank but talking about the entire bank holding company, the affiliate's that operate around the world. >> yes. >> none of those can be involved and i want to point out well senator shelby did a good job in this question and i know this last crisis is causing us to focus on reform and we don't want to focus on the past

always, but it is true that not a single organization that was a bank holding company or a financial holding company that had a commercial bank had any material problems at all with proprietary, that is a fact. unless you reviewed the ads. >> wait a minute. i don't know how far back you want to go. >> this last crisis. i know we spoke -- >> not going far back in history, i recall at the beginning of the prices there was a large loss. with one trader that cost hundreds of millions of dollars. >> in the united states has there been a single institution -- i just want to point that out. it is a fact. >> banking institution or non-bank? >> there is not a single bank a

holding company in this last crisis that had a commercial bank that had issues that are material to fill you're with proprietary trading -- not what an. >> i have to look at the proprietary trading but there are certainly american banks. >> maybe we can get back on that so let me go a step further, i'm going to say that is a lack of love somebody tells me different. >> i think obviously the causative distress in these very big firms are multi factorial but i think there're plenty of bank pulling companies that suffered losses in headstrong as the sponsored or in a proprietary trading activities that were part of the the capital's. >> i am talking about material. >> even material cost -- cause why of taxpayer money was committed. so to pinpoint a single reason why this or that burma -- this is clearly one of the reasons. >> let me move on, my point

stands and we can talk bought back. i take your point. let me make another point that the capital of a bank, a commercial bank within a bank holding company or financial holding company cannot leave and go to any other part of that affiliate's without reducing in the capital of the commercial bank which reduces their ability to make loans into that sort of thing -- you all and -- it knowledge that? >> there are laws between the activities or their relationships with -- >> i'm talking about the bank's capital cannot leave the commercial bank and go to the other parts of the bank holding company without taking a reduction in capital and that commercial institution. that's a fact. >> right but to the extent that capital is fungible in some sense. >> 23a and b limit that. >> i don't understand that all. i use to regulate bank:

companies and if you think they can find ways to lose capital from 1.2 another overtime. >> i am talking about leaving the commercial banking operation, cannot leave it without reducing the capital of the commercial bank. >> there is a restriction and a particular point in time taking a lump of capital out of the bank into another part of the holding company. over time it will reallocate the capital the way they want too. >> and a half to take a reduction in the bank's capital so let me just ask a couple questions. and just making that point to say that there are firewalls that exist and that no bank holding company fails that a commercial bank due to proprietary trading or hedge funds or any of the activity you're talking about, in recent times in the u.s., so let me ask the question -- can a for client -- can one of these institutions or affiliate's make a market for

a client? i think the answer is, yes,. under your proposal. >> certainly in response to declines nina. >> if they wanted to sponsor a hedge fund so that a client would know that the bank was creating his funds and limit seed capital, could they do that just to know that the bank had an investment there and good enough investment for their client to be involved in. would that be illegal under this proposal? >> it would not be legal if i understand the question but the tax is hedge fund and. >> even if they were putting seed capital to show good faith? >> yes, sir. >> could a community bank trade bonds or mortgage-backed securities within their portfolio to balance it out? >> yes. >> but that is proprietary trading. >> you sent to balance out.

is there an occasion where they had too much of this into little of that. >> let me ask this, if we have a bill that as you use the word and in the company, creates euthanasia, and i think we might end up having a bill like that, if we have a bill that stipulates capital requirements that says that if you're going to be in these risky areas of activity that higher capital will be required and i have an idea that we might end up with a bill like fats. with a proposal like this through that land, if those two areas were dealt less, with a bill like this or this type of legislation even be necessary? >> well, i think it would certainly be useful and that's what the administration has proposed as i understand the question. i wouldn't think the congress is going to specify precisely what

the capital requirement is but they're going to give a this or any direction, they can change the capital requirements depending upon the the riskiness. >> but if you had a resolution mechanism has said it and institution fails there weren't going to be bailouts and they would resolve the business and if you have a piece of legislation that stipulated that, if i may call the company engaged in risky capital had to be increased. would there be a need for an arbitrary restriction of the time that's been laid out? >> i think so for the reason i suggested earlier, that without the congress being very clear in law as to what kind of activities are restrictive or eliminated one ought, overtime and in fair weather the restrictions will be voted the way because it's hard to maintain tough restrictions when

nothing is happening. and i thank you leave the legislative direction beyond the general statement that you were able to change -- the supervisors can already changed the capital requirements. they don't need legislation to do that. in what they need is a clear legislative intent as to the acceptability of proprietary activity to my view. >> mr. chairman come i know my time is up and aerosol again want to thank both witnesses were being here. i think there has been a misnomer put upon the american people by many commentators to talk about the fact that we give money to these banks in the use them and casino operations when in essence there already are firewalls that exists, capital cannot leave a commercial bank to other parts without a charge against capital reducing that's

-- that's just a fact -- and the fact is that foreign affiliate's i assume having these operations taking place in dubai and other places, it seems to me that i appreciate very much the policy being put forth but it seems to me that it's been put forth without taking into account some of the other things that may be a part of this legislative process which would render it unnecessary. >> center, although the fire walls are obviously important, insofar as the banking firms get a lower cost of capital, lord cost of funding because of their access to the safety net, the entire thing: company gets the benefit of some of that's benefit meaning capital is fungible loa and their overall funding costs on a system wide consolidated basis is lower on account of this -- we are saying

this and then it should not be put toward these higher risk, more volatile kinds of activities. we agreed that higher capital standard is important and we agree the resolution authority which is a critically important, but we also think that in order to make sure that taxpayers aren't exposed to extra risk in these banking firms that these three activities which are on customer related to to be prescribed. >> thank you, senator, and one of the things i wanted to say is clearly as looking back and it's a appropriate where the gaps we need to fill and so we don't have a repetition of the problems that got us to the crisis but one of the things we haven't talked about over the last few months is looking for and as well. so not only is it a question of trying to plug the gaps but also what is the architecture we are praying for the 21st century that allows this country to leave in financial services worldwide and protect against

potential problems that can emerge i don't want just the argument of fixing a problem accretive the issues we're grappling with but also what to think about as a committee and congress that goes forward. senator warner. >> thank you mr. chairman, thank you and senator shelby for having this hearing. i echo the appreciation of it working on this issue. and i do think there are challenges around some of the definitions, but i want to come back to that in a moment. if we go back to your accurate recitation of how we got here, acknowledging that the most of the initial folks who got us into this downward spiral or not the commercial banks but investment banks and that in the throes of the crisis then it and others decided to allow these investment banks to convert into

bank holding company status. if we were to adopt "volcker rule" wouldn't in the fact the first action would be under morgan and goldman and lose that status, when that be the first action taken? >> there would be no choice. >> recognizing how much of their book is based on proprietary trading, hedge funds -- >> they would maintain -- i think those two institutions are quite different but if they were to maintain free emphasis on proprietary trading and have to give up their licenses. if they want to retain a license would have to do the rules of the bank. >> the constant it being the ability to have access to lower capital, that was the trade-off? >> right. >> if we talk about 33 areas

proprietary trading, a private academe and hedge funds, i know you have talked a little bit about definition of a proprietary trading act. i do wonder and a private equity business if there are private equity a different type of instruments that kind of all along that continuum of what we now broadly defined as private equity, some of those traditionally have been in the traditional banking functions. >> i think that is true, but i was concerned about the obvious sign of that fact that you can be in an equity fund in the bank would develop like an equity fund but they didn't call it an equity fund. >> hedge funds, right? >> the same thing that could be, ultimately conducting proprietary trading operations. that is what the legislative

language i think has to be pretty clear to tell the supervisors that somebody is getting around the intent of the goal of the supervisor can do something about the. >> would you care to rank, the legislative process a give-and-take here, is the primary area and you want to shine to prohibit the proprietary trading activities and proprietary trading activities being remarked or remastered as a hedge fund or a private equity investment or would you say we want to take the first thing to get rid of private equity and then hedge funds unless prior training -- is there a rank order of the strings? >> not to me, there are substitutes a bowl. and the bank's point out to me the line is too limited and i should have said something about real-estate funds which are really important.

i think that is part of a private equity fund, but you could explicitly say real-estate funds, but i think there is enough substitution and i don't see reason to permit one and not the other. >> that is also -- >> the order was customer, not customer. obviously there are regulators that will have to deal with some definition issues as they implement the basic principles if it were to be launched in statute. what we said is there a whole lot of activity is that traditionally have been in the investment banking spectrum of underwriting in asset management and so forth which are okay but as respect to the three things we think are not customer facing and fundamentally more risky, riskier, i think that would avoid the opportunity to rank within those. >> i would concur with that.

having been passed by some other firms along my career, those laws it disappear oftentimes when you are being pitched as a potential client, the value of being able to cross ming will these different functions. one of the things about bomb and i know everybody else races this as well, i kind of struggled with this size cap approach, clearly the deposit cap approach as you've seen an inability to lever up outside the depository institution has not created it the kind of intimidation of accumulation of capital and systemic risk in a few top winds institutions. i know where you're head and i'm not saying i don't completely disagree with that although again the challenge comes how you write it out and from both the standpoint of putting

american firms at a competitive disadvantage the chairman raised that. if we do this and the rest doesn't follow suit in a minute we are able to, as some of our european school long, could you see a migration to chartering some of these institutions in a kind of a one off country that could avoid this kind of restrictions even from inside dance just real place between the next generation of kanan islands? and then to a also have the problem that we don't want to give an end to competitive advantage because they do have it this terms and cost of capital to the large firms but as some .1 of the best people leave these firms when they start bumping against the size capital? >> well, i would say, senator,

and i think those are extremely important questions, i agree with senator shelby that size by itself is not the mowing saying. but we do believe that it's an important element of risk and that there is a meaningful correlation in general between size of rest and part of what we try to constrain, not too i think to be sure. in i think on competitiveness u.s. banks are already relatively smaller than an awful lot of financial institutions in europe and elsewhere in the world and i think they compete also well as its stands. so i don't think that's liable to be a competitive problem because i think chairman dog said at the end of the day the most important thing for the competitiveness of our financial system is it safe and sound and that people will see it as a and sounded and that will i think be an awfully important thing going forward to make sure that we do

maintain the strong competitive position of the u.s. financial services industry. so i think those are all considerations. >> but i think as capital requirements, leverage restrictions, convertible debt requirements, a funeral plans, may also be other tools we can use that wouldn't go at this plane straight out size. >> no question, there are other important tools but we believe that in the same might the deposit capital is insufficient tool that we ought two also pay attention that some of. not in a way that this dismantling of firms but that at some levels size really does become an important element of systemic risk and to be defined obviously together with you all and with the regulators. >> thank you, mr. chairman. >> thank you very much.

is senator joe hands. >> thank you mr. chairman. there are many seems that i think about where we are headed with financial reform and i think there is consensus on. i think resolution authority, and gosh, if not all of us systemic risk and how we approach that there may be some difference of opinion about how we approach it but again i think we are there. this, though i must admit, i have sat to this hearing and i get more confused as he testified. you are not really clearing up forming what we're doing. so let me just ask a pretty straight forward and, maybe a bit of a basic question, to start out west. telling mean that he will then you are trying to wrestle out of the system mumbai this rule, if

we were just to say, great, where would we pass at the way you wanted the past? what do you vote this appears? >> i wouldn't call them evil but i feel that i fail to be more confused than before. >> that's all, right. >> what i want to give his taxpayer support and expect little activity and i want to look ahead. if you don't bar that it will become bigger and bill year. in answer to what is already risky business and i don't want my tax payer money going to support some of its proprietary trading. it's as simple as that. >> but here is the problem, mr. chairman, and here is where i am struggling to follow your logic. let me just give you some concrete examples. aig, how would this prevented it all the tax payer money going to aig? israel had been in place, what

would have been different? anything. >> riss all i think it is a big insurance company that should have been better supervised in the first place that was. if there was an effective supervisor and aig and hadn't been a soviet, because it had a small thrift appendix, somebody should have been there and senate, what are you doing over there in london with trillions of dollars of credit defaults swaps? you're jeopardize your business. >> but we can stipulate to that. i've said many times i've never seen so many pay so much money to do so many stupid things. >> we want to shut off the is. >> yes but let's say the "volcker rule" had been, in fact,, have that stopped aig? >> of those have been in a fight insurance companies really would have stopped at. >> okay, so you were saying if "volcker rule" had been in place aig would not have happened?

>> you are assuming that "volcker rule" is another act with an insurance company which is not immediately at issue here. it had been a fact -- >> we can send that to the side. >> and you have a particularly active copied requirement on the long sign it complement karina approach. i believe that we would not have been in trouble with aig. >> well, i thank you are losing the antenna. >> i am puzzled why i am losing you. >> here's why you're losing me. i don't think "volcker rule" would have stopped the behavior of a idps. >> why not? >> we are talking about banking institutions that didn't take deposits. >> yes, yes, the fact that insurance company was not covered is the debt problem. at the time i was suggested that you would not be federal supervisor of an insurance company, but that's not right on

the docket. >> that's not what we're doing here today and i'm trying to figure out -- >> today we have a limited. [laughter] >> thank you chairman volcker for another issue of. >> what i'm trying to figure out mr. chairman is this -- how we are going to even deal with preventing what happened by doing what you're asking us to do and i don't think how we're getting there. so aig, i think your answer is saying we have to go further than what you're asking, now let me go to lehman brothers. when we have to solve the problems with the lehman brothers had "volcker rule" been in place? on day at another institution that wasn't taking deposits but were doing some proposals? >> proposals did not solve all the problems. it is part of a i think it procured reform and the financial system. lehman brothers under not just

judicial order, they are not banks of the rule would apply, but under the general regulatory approach has been proposed by the administration, you would have had presumably unlovely restriction, a couple of restrictions and you would have a resolution authority that he favored. i hope and believe it that combination would have produced a very good chance of leaving without have failed. >> here is where i think we're getting to them. based upon what you are saying to me and i think it is now clear peering to are saying i think mr. chairman the this is a great opportunity since we're doing a financial reform anyway to put this rule in place. but it really would not have solve the problem with aig. it really would not have solve the problem with lehman brothers. >> it certainly wouldn't have solved the anc or lehman brothers, it was not designed to

solve those particular problems. >> exactly, that's the point and i think this kind of reminds me of what the chief of staff said, never let a good price is good to waste. and what we're doing here is we are taking this financial reform and we are expanding beyond where we should be. i just question the wisdom of that unless somebody can make the case to mean that this has been in place in the world would have been done differently. >> the chairman made the point that i would emphasize that the problem today is a look ahead and try to anticipate the problems that may rise and give rise to the next crisis. and i tell you, sure as i'm sitting here, that a banking institution is protected by the taxpayer and they are getting paid to speculate. i may not live longer have to say the crisis, but my soul is going to go back and haunt you.

[laughter] >> that may be. probably a lot of people -- you have to stand in line may be. [laughter] >> senator, and i can add, i think your question is a critically important on. in "volcker rule" and if it were two have been in place would not have solved all the problems and nor is it the only piece of what we think is a comprehensive package of proposals, but there were plenty of banks and companies that did suffer losses in their hedge funds and in their proprietary trading activities that had capital holds that were in parts therefore filled by taxpayer funds. we think as we go for the real goal here at the end of the day is to create a financial regulatory system in which firms do not pay is undue risk and where the whole system is entire team is well protected. our view is that having a banking firms that fundamentally

subsidize their riskier activities and be there because that have access to the safety net is something we can and should avoid as reconstruct a remark on ford. >> but here is the challenge that you have here today i think. in trying to move this committee in this direction. the challenges this -- when you say i can find places where they lost money, my response to you on that is an you know what, i can find some places where they lost money on mortgages, on commercial real estate, on residential real estate. ..

in that position. but i also likewise think if that if your goal is to try to wrestle a risk out of the system you get to a point where quite honestly you don't have a workable system anymore and that's what worries me about

where you're going is because you're using this opportunity to put into place something that has pretty profound consequences , and i'm not sure these circumstances justify that step. that's why i ask these questions. >> that's a reasonable question. i'm sorry i apparently can't be answered but i don't want to restrict commercial banks from doing bank business. i want to encourage lending activities. >> let me wrap up, i'm out of time and i think the chairman appreciates both of you being here. i really do and we are wrestling with tough issues trying to figure them out and understand them without damaging the economy. i and a stand. >> it's critically important we ask these tough questions. >> i'm glad you asked them. >> thank you. >> thank you senter very much.

senator johnson. >> thank you, chairman speed and secretary wolin. chairman volcker, one of the actions taken during the crisis was transforming large banks and two big to be cut bank holding companies with access to the fed's discount window. what should be done with investment banks that became bankholding companies if the broker who is adopted? >> if the rules adopted there wouldn't have been engaging in some of these activities but they still got in trouble. banks have had a history of centuries of getting in trouble. so that is why one of the reasons you have a federal reserve. they get in trouble and it seems to be a viable institution, solvent institution. you have costs to the federal reserve to handle even rather

extreme liquidity needs and i think that is totally appropriate. that is one form of government support given to the government believed the banking system and i don't see that changing. it's important to provide that. almost every other country in the world provides that kind of backstop to its banking system so that does not change. >> secretaries wolin, if the proposal includes a provision that gives banks the explicit choice to exit the bank holding company regime, do you have any concerns that this would create new regulatory gaps wax or their concerns that the american companies would go abroad where there are not proprietary trading restrictions? >> senter johnson, i don't think

and we are likely to see frigate for gaps. our proposal would say whether you choose to be a bank holding company or a financial company that can do these other activities. you would still be subject to the overall consolidated supervision three regime that has strong capital standards, leverage requirements, liquidity requirements and so forth so from that perspective there are other pieces of the proposal which we think are absolutely critical that would still apply to those firms that chose -- no longer to the bank holding companies. on the other dimension of your question, senator, i think we are working closely with our g20 partners to make sure we get a regime that works for cold play and so that we don't have new opportunities for arbitrage. i think as the chairman said it very eloquently it's important to lead in that effort and we are leading in that the end of the day again i think that for

us to have a strong regulatory regime is in some sense the most important competitive the advantage we could create because capital would want to follow where it is going to be protected and safe and where the overall framework is one that can be relied upon. >> chairman volcker or secretary wolin, it is my understanding that the federal banking regulators already have the discretionary authority to impose activities restrictions right now, very similar to what would be mandated by the obama proposal. the fed being a financial holding company determined any activity divest control over any subsidiary that has reasonable

belief that counter to a serious risks of financial safety necessary [inaudible] informed by the basis. do you believe that the fed has this authority? are there specific examples in the last few years where you think they failed to use this authority? >> i have no doubt the need further instruction from the congress, to put it that way. i don't know what authority the federal reserve would have to bring about some activity. some of these -- most of them are divided and the law says the bank can do so and so. i don't think the federal reserve can say i don't care what law says, you can't do it. they can have a general concern over safety and soundness and within limits i think they can say you are conducting a particular activity in a very

risky way and don't do it by not sure they could say you can't do proprietary trading as the law permits it. i think they need further instruction. >> mr. wolin? >> i think they do have a broad set of regulatory authorities to act in circumstances leading safety and soundness is at risk. our proposals suggest those authorities ought to be clarified and strengthened but in these three areas, we believe it shouldn't be left up to the discretion of the regulator. that if you're going to get the benefit of the safety net banks and banking firms enjoy, you shouldn't be allowed to do these three activities which are risky and would get the subsidized benefit in effect of that access to the safety net. we think it's important for the regulators to have stronger authorities to act in a discretionary way to make sure

when they see something in the firm that brought they can take appropriate action but this ought to be hard wired in our view. >> what are the benefits of restrictions activities on the wholesale basis instead of restrictions on the firm by a firm basis? >> i think we want some consistency over the industry. that is all i can say about that. i don't think you want to save play in a in this business and plan b can't. he might in some particular circumstances have reason to think firm be to become b is taking actions not credible and to say stop it because they are going overboard but i don't think you can say they don't have the same authority to take action when another bank does. >> my time is up.

>> thank you for a much, senator. center bombing. >> thank you, mr. chairman triet thank you, both of you for being here. i appreciate it very much. in your written statement, secretary wolin, he said we should regulate the authority of the financial institutions to get bigger. that is in your written statement. but chairman volcker, you do not address the size of the firm's in your statement. do you agree with secretary wolin that we should limit the size of financial institutions, and if so, what limits would you put or should we set? >> i've not been involved in these discussions directly but i think there is a kind of common sense feeling that at some point in a financial institution or bank is so large that it raises

questions not just of stability and failure but of competition. the united states is a very big market. as i indicated earlier with a 5% restriction might be appropriate and then it became 10% -- >> i was on the committee. >> -- and now it's becoming higher i suspect. there's nothing magic about a particular number, but at some point what makes me feel uncomfortable is it got too big. and what that point is i think you've got to decide. >> would you like to respond? >> please, center bombing. it thank you. this is important, let me clarify what we are proposing and what we are not. we do think that there ought to be a limit on relative size this to say in proportion to the size of the system. what we don't want to do is constrained or have this bombing, occur in size of the forms to say the firms do not have to shrink so it is from further growth and in our view

it does not and should apply to organic growth meaning like the 10% deposit capital to apply in circumstances where you jump over the size limit through acquisition. again, we have to work on what the size limit should be. but at the end of the day it is our view there is important correlation between size and frisking firms. it's not the only thing that has some point durham is it to be so big they do impose a risk on the system. >> let me follow up on your statement because you said we need to stop larger financial institutions from getting bigger and then you just said we shouldn't try to shrink them. is that correct? if these firms are already too big to fail and the last two years have shown at least in the judgment of the federal and the treasury that is the case why

should we not force them to get smaller in addition to stronger regulations? how does letting a firm that is already too big to fail stay big? how does it solve the problem? >> if that is an incredibly important question. two basic responses. we do have in our proposal a series of elements that we think create positive economic incentives for the firms to shrink. tightened capital standards, leveraged constraints, liquidity requirements, all of which will create economic incentives in the direction that you're talking about. so this is again a set of proposals that build on one another and no one of them is the entire answer. so i think the other part of it of course is we do agree it is critically important resolution of already be adopted so that we don't have this choice between

having the firms fail with tremendous consequences to the broad system on the one hand or having to make the taxpayer foot the bill on the other so the firms are essentially put out of their misery or our misery in ways that are accomplishing the goal but do so in an orderly fashion. i think those would be the basic answers. >> and senator johnson brought this up, regulations. you know, the congress has acted on regulations. in 1994, we, by regulation and by law come gave the fed the authority to regulate banks and mortgage brokers. we gave them the power. we didn't force them to use it.

so for 14 years, they sat on their hands and they did nothing. how do you propose in your proposals to force the regulator to act? >> i think senator that is obviously critical important. i think the statute should lay out this is what the law should be and then -- >> we did that. >> well i think, you know, we have all learned a lot of lessons through this -- >> i know, but 14 years is a long time before you leave right one rule. >> is indeed. >> you know, and so all i'm saying is that we can do those wonderful things that you're proposing. we can't force the regulator to enforce its to the coverage. and i want to make sure if we do overhaul our financial regulatory regime that there is

guts and what we do. >> one of the ways you can have confidence that what happened in the proposals we put forward, and with which we are working with the committee is to have a council, to have a group that has political accountability including to the congress and, you know, i think that is the way to make sure that the will of the committee and the will of the congress over all is moved forward. we certainly take that seriously. >> we also have to have really basic standards that the financial institutions have to meet. you know, we talked about of the things that are non-bank bank activity. welcome if they are non-bank bank activities, only the non-bank banks should do them. when we get into the proprietary trading and the -- chairman

volcker, you said that it's okay for banks to package mortgages. wasn't that at the heart of our crisis? i know we are looking back. and i want to look forward to prevent it. >> certainly the whole mortgage market was an important problem here. and the banks were participating in that and they were doing things that i think contributed to the problems of the mortgage market. but this gets into other areas. we do want a mortgage market. we want to make mortgages available to the people. >> we are having problems right now with. >> we don't want to prohibit people from making mortgages. one of the proposals within the administration approach, and i think it is in the house bill is when a bank or other institution

packages securities, whether mortgage or otherwise and sells them in a package they keep part of the package themselves, which was a discipline i think that was -- >> i think that's a great idea. then they share the risk. >> right. >> my time is expired. thank you, mr. chairman. >> thank you. senator reed. >> thank you, mr. secretary and mr. volcker. there are lots of institutions now might bank holding companies, investment bank models seem to be a footnote in history but when we go on the street very few are performing like banks which is on the populace sins of the bank which take deposits and provide safe return, and also make commercial loans, residential loans and consumer loans. my sense is the essence of your proposal was not simply to prevent proprietary stranding but more importantly get them to start acting like thanks again which is to make commercial loans, make consumer loans and

make residential loans. >> i don't want them to be diverted from those activities. >> and i wonder, mr. chairman can use -- and i know you have -- can you once again sort of stress how this proposal would focus those on debate collectivities. >> the only answer i have to that is it focuses on those activities by removing the temptation to get highly involved in a more specter live activity where they seem to be very high and you've got very highly paid people who want to keep that kind of activity going. i think that the commercial banks i would like to understand their basic role in the scheme of things that you just outlined and concentrate on that. one thing i might add, it is a complication at this time. i apologize late in the afternoon. but there is a question about money market mutual funds. that they originated in the kind

of regulatory arbitraged some years ago because they didn't put up with some of the restrictions banks put up with and they've attracted trillions of dollars. more of those dollars were in the banking system i think the incentive to lend whether businesses or homeowners or whatever would be greater and that is an area where the administration has made some proposals and i think it ought to be taken seriously. >> i appreciate the point and is well made. i think mcginn returning to this issue, when i go and when my colleagues the back to their homes, people are saying i can't get a loan. i've got a good credit -- or they just cut my line of credit in half and raise the interest rates by ten or 12% at the time the course of funds is close to zero, and some of that is covering, as you suggest, mr. wolin, the losses and other types of activities or i think some of it is because they can take the low money and put it into these types of proprietary

activities and a larger return. if you are a business person that is what to do. you get a big bonus. >> that reaction became extreme in the middle of the crisis a year or more ago. nobody wanted to give anyone anyplace. i hope that is changing some. there is evidence from a bank survey the federal reserve made that they may be less tight than they were but this is partly a matter of civility to the economic crisis and a lot of loans went bad and they are cautious and we want to do what we can to increase confidence and get the money flowed in. >> let me ask if there's another way to approach this concept which is say to institution if your commercial, traditional commercial banking nativities are less than 75% then you don't have access to the dead window. what my colleagues have said time and time again we don't want to subsidize the rest.

we don't want the bailout. the bailout comes as we have seen particularly in the context of bank holding companies when the federal reserve walks up and takes whatever collateral they are willing to give and gives them lots of money. >> i haven't thought of it, i must contrast and reverse many other ideas you withdraw support if they don't lynndie enough. the deputy secretary mentioned some things that discourage growth and would encourage i hope lending but i would have to think pretty hard about the suggestion of removing the safety net from banks that didn't act like banks. >> food for thought. psychiatry wolin, any comments? >> it's an interesting idea. i think we want to be careful. obviously the safety net is incredibly important related to this utility function that banks play for individuals, small business for everyone and so i

think what to be careful about unintended consequences and that is something for us to work with you on and give additional fought on. >> this has been described as the fed put which is basically we can take some risks and then go -- there is some way to put the risk off on to the fed which ultimately is the taxpayer. but i think again -- we have to think about a way that not only gets banks back into what we think is the banking business making loans and taking deposits, but also -- my colleagues have said this several times it is something that doesn't require a battalion of regulators constantly making judgments about is this a proprietary trade? is that a proprietary trading etc., so again, i think that your proposal is something that deserves very thorough fault and also think of other ways that might be implemented. thank you.

>> senator reed, thank you. my experience has been over the years as we have this debate and discussion about what is proprietary trading and how to define it and let is there's probably some 22-year-old sitting in the paulson institution that's already figured six ways to get anything we can write. that's been my experience over 30 years and we will end up passing a law and turn around and there's a whole new creative ideas. the genius of those creative ideas to create wealth and expand opportunities but we ought to be talking about instead of figuring out how to get around the world over the regulations of the duty of the idea is to achieve the goal without getting terribly complicated. >> i grew up where the rule was case, keep it simple -- >> not a bad rule for the contras. mike crapo. >> i want to follow-up on that and a number of other questions asked in the hearing today and that is the detail.

the administration support a significant proposal last summer about how to approach reform of issues in the financial world. the volcker rule was not in that proposal last summer. i assume part of the reason that we did not have it was because it was a legislative proposal that did not have -- we don't have the detail yet for the legislative language how to actually make the definitions, and my question, chairman volcker is drawing bright lines between the permissible and impermissible like today on the market making more the customer facilitation or proprietary trading is we to be very difficult and some people say in a possible or not workable. if the government makes it too difficult for banks to take decisions there will be less liquidity in the market and the corresponding impact on the capitol formation and robust economic activity. do you expect we will receive some specific legislative

language so that we can understand specifically what we are talking about or what the proposal is with regard to proprietary trading and other deals with is being discussed? >> i think that is mr. wolin's responsibility -- [laughter] >> so you give the fury, right? and psychiatry wolin will give the detail? >> i think important question obviously. like the other proposals we first articulated in june in the form of the paper we will send legislative draft legislative proposals to the committee for your consideration. i fink on these things like on what the other pieces of the proposal we will want to invent instead to the principles that we have articulated with some detail, but again like an awful lot of banking and a lot of the proposals, lots will be left to the regulators to implement and very detailed ways, so that is the process forward. we are keen to work with you. we are working internally with

the regulators to craft language that you can consider and that we would want to work with you on obviously as you move forward. and then inevitably on these kind of things, making judgments at the margin trying to figure out how to implement the principles in particular context as what the regulators to in the full range of banking laws on the book or that are being proposed in this current discussion. >> and stand the difference in the world between the policy-making and in the regulatory interpretation although there is always a conflict, push and pull or towed in terms of what kind of specificity we need but am i to understand you, mr. secretary, to be saying that you would expect congress to pass legislation implementing the idea that we would not really have a good field for what proprietary trading means when

we pass this legislation? >> no, senator, i didn't mean to leave that impression. we would want to specify it and have a will that is clear regulators could implement but inevitably in the same way that exists with respect to the capitol standards or range of other questions that exist currently in the federal banking law or that would be enacted and federal banking law in the proposals that the committee is currently considering, certainly a lot of the details would be left over to specific applications in the rule making process for the advisory. >> so we can expect some significant further detail from the administration on exactly what it means by these proposals? >> i expect we would give the same sort of language on these proposals as we have on the other proposals we put forward at the same level of detail and specificity. we think of it as very scholar

to the echoes similar in those regards. cynic if i may interject, senator. the bankers know what proprietary trading is and what it's not. don't let them tell you anything different. >> i suspect that may be true to some extent all the way also suspect we could find different points of view as to what we are talking about but i think the question here is what the law says and that is going to be critical. >> i agree the question is what the law says and i don't think it's hard to set for full law that establishes the general principle and that is going to have to be applied in difficult circumstances. the chairman spoke about the banks that are going to have a lot of 26-year-olds, a lot of fancy mathematical training and all the rest. the supervisors need a few 28-year-olds that have had the same kind of trading. >> and i understand the point you're making but i can also tell you i think that this committee and this congress needs a level of specificity on what to act with regard to the

proposals because if we get them wrong i think that we could be doing as much damage as good. mr. secretary to have any idea when we could get this detailed? >> we are working on a hard, senator crapo. in short order i don't want to define exactly how many days or weeks but it's going to be soon. we understand you all are busy putting legislation together and we want to make sure we get you language that can be timely in the context of the process that you've outlined. >> thank you. in the short time i have remaining i would like to shift gears to the gse, fannie and freddie. in january of 2010 this is probably mostly for you, mr. secretary. the cbo background paper on the budgetary treatment of fannie and freddie states the cbo believes it is appropriate and useful to include their financial transactions alongside all other federal activities in the budget.

the administration however in its recent budget submission hasn't chosen to do that and hasn't chosen to bring the gse on the commission. can you explain why that is the case? >> senator, i think the gse is arnall owned by the u.s. government. they are under the conservatorship of the fha. there's a matter of discussion that can be used. we try to be transferred as we lay out the financial circumstances of the gics. certainly the fhfb has been transferred and i understand they've sent a letter to the committee as recently as today laid that out in the budget documents i think there has been a high degree of transparency and whether or not it was consolidated on to the balance sheet of the federal government. >> i understand that but we are talking about the cbo estimate

of $291 billion that is a pretty big difference in the budget documents depending on whether it is included one of, and the only thing the administration said in the proposed budget was that the administration continues to monitor the situation of the gses and we will continue to provide updates on the consideration for the longer-term reform of fannie mae and freddie mac as appropriate. so i believe a two-part question. as the head of fenestration going to account for about $290 billion in the discussion this year and secondly, when will we get the deals with the administration's proposal for the gses reform is going to be? >> on the first question, we have laid out in the budget documents the transparency, the financial circumstances related to the gses. i think the question of consolidation as a question frankly whether we own the gses were we don't. we don't own them. the law is a conservator of them so that was the judgment made there. with respect to the policy of the gses going forward

obviously we are very focused on the study of the housing markets. we are looking at long-term options for the gses, and as we sit in our paper when we have that we will certainly bring forward our recommendation to the id is clearly a critically important set of things to be focused on but we want to do that in the context of stability in those markets and make sure that especially at this critical moment we don't do anything with respect to the long-term future the would perturb that stability. >> thank you. i personally think we need to see the to under $91 billion better reflected in the budget analysis that we are going through right now and i do look forward to continuing this discussion on the proposed gse reform. >> thank you, center. senator schumer. >> thank you, chairman. i thank the witnesses. sorry i've been busy with a million different things that i

can and that the very end. better late than never i hope. i want to thank you, mr. volcker, for your thoughtful proposals particularly relating to the too big to fail issue. all i remain convinced the steps the government took to save the financial system were necessary but i suppose like everyone in the room would prefer that we would never be in that situation again and agree on the premise that part of your proposal the safety net provided by the government put in place over the last century in response to bohm to become multiple banking panics not be put at risk by the activities outside of the core function of the system. >> that's the core. >> okay. now i would like to ask a question to help understand and probe. from what i'm told the questions here there's still a lot of trying to drill down exactly what we are talking about. i would like to talk about canada and use it by way of contrast. they have a banking system as you know dominated by six large

full-service banks but it was the only g-7 country where the government didn't have to bail out its banking system in the recent crisis. some people said it was culture are giving canadians are simply more risk averse as a society than americans and their bankers are no different. but others have argued this answer had more to do with the regulatory system. i tend to believe that. i don't mix ackley what works, i don't know if culture may be with british more risky than the canadians, you know, culturally, who knows. but the regulatory system and particularly its willingness to say no to risky practices so here my specific questions and then general. consumer protection. canada has a separate consumer protection agency and despite homeownership levels higher than the u.s. the percentage of canadian mortgages over subprimal is less than half of that of the u.s.. the default rate is less than 1%

in canada compared to 10% in the u.s.. what role do you think canada is consumer protection agency played in maintaining a safe and robust mortgage market and not allowing billions of dollars of no doc loans to be stamped and securitized? >> i can't answer the question because i don't know. but one characteristics of the canadian market is kind of interesting. adis essentially much more a privately-owned market so to speak the and the american market. they don't have the equivalent of fannie mae and freddie mac and the kind of volume we have. they didn't have depression frankly from the government to push out very low downpayment mortgages that market is pretty much dominated by commercial banks which is no longer true of the united states. they have had i think an incentive to stay with more

conservative practices in their own interest. >> what was the incentive? let me put it another way. why with their banks have an incentive and not become our banks not the same incentive? >> the route of the mortgage market basically all of these mortgages are getting packages packaged and sold to fannie mae or freddie mac. they have some in mortgages left, residential mortgages left on american banks. i think that whole thing deserved some kind of review. the american mortgage market today is broken. there is no doubt about it and you've got to rebuild a strong mortgage market and i think looking -- >> you don't think the consumer protection agency -- if we had a financial consumer protection agency it wouldn't have allowed a lot of the practices we saw that frankly can initially not from banks but from mortgage brokers. >> i am just personally not familiar with it. >> so you are neutral on that issue. what about the securitization? 27% to 80 in mortgages are securitized compared with 67% of

u.s. mortgages. you think -- >> what percentage? >> 27 in canada and 67 in the u.s.. >> that is a reflection of what i said. they are still the kind of traditional banking market. there are mortgages in short of duration. the event got all of the favorable arrangements from the mortgages we do. they have no tax advantages. they have prepayment charges and that kind of thing. so they have a different mortgage market. we ought to learn from them what may be but i think we ought to. it is different -- it is less government dominated -- de mckeithen de securitizations as related to the fannie and freddie guarantees? >> no question. >> you agree with that, mr. wolin? if we didn't guarantee as many mortgages they would be less securitization? >> i don't know about that. >> we securitized everything,

not just federally guaranteed stuff and not just mortgages but everything was securitized, credit card loans without any federal guarantee. >> that is correct that it's fair to say -- >> if you compare the canadian banks on credit cards to read securitizations will also be considered lower. >> i don't know what i suspect so. >> and that would have nothing to do with fannie and freddie. >> there's differences between the canadian banks and american banks. they have only five or six major banks heavily engaged in retail banking. their life's work is retail banking. that is no longer true. none of the big banks. >> before two or three years ago, right? >> because there's so few of the competitors situation is quite different it is a stable oligarchy. spaghetti other lessons you might draw from the canadian situation? >> i think they've been more conservative in regulation. that is my impression of

supervision but the central bank is not the chief regulator and it's like the british but some years ago, not recently that some years ago they got in trouble when two of the major regional banks did go bankrupt and at that point people were also part of the regulatory system in canada. >> another question, the inverse of this question. you had canada, big banks and relatively secure. just because an institution is small doesn't mean it's not risky and i would argue these days it doesn't even mean they don't pose a systemic risk. maybe one hedge fund doesn't but 50 hedge funds to the same thing together they propose a problem of systemic risk if it is a risky activity and with all of the counter party risk and the intertwined spaghetti like nature of the financial system i mean even back a while ago,

whenever the place was, long-term, capital management, wasn't that large a company but if the fed didn't have we intervene and get other people to prop up we might have had the whole system unraveling. so i guess the question i'm getting that at both ends of this, isn't it -- i don't even want to put it that way. it is the riskiness of the activities that the financial institutions to as much as their size that matters or would you not argue that? in other words because, just take my accent, risky activity done by one hedge fund or one small investment bank doesn't shake up the system but 50 of them are doing it it does particularly with counterparty risk. that is my last question. could you comment? >> it is multifactorial. sissons related, interconnectedness, the riskiness of the activities, so it is a combination.

i think our proposals are meant to address each of those things in various combinations. but we do think that saudis at some level and some threshold is an important indicator of risk to the system but it is absolutely true, senator, there are other elements to that equation. >> you could clearly see one large institution during risky things poses greater systemic risk in a small institution. >> absolutely, senator. >> you are touching on a big question of contagion to. that institution who are not in trouble necessarily and may be in a reasonably stable position are no longer stable if other people are feeling it is a panic. the answer to that in hedge funds and equity funds and so for this they are less likely because the message of financing. you don't withdraw short-term money from hedge funds and equity funds because they

typically don't take short-term money. they largely take equity money and that is a very different situation when it comes to the affect of the kind of panic spreading around. >> the fateful week and crisp was there. the worry was the people with short term paper would withdraw from these large institutions and i guess that's right. it couldn't happen for most of the smaller institutions because the capitol was longer term. very interesting point. >> thank you. >> senator menendez. >> thank you, mr. chairman. mr. chairman, secretary, thank you. mr. chairman i want to reiterate as you visited earlier looking at the pictures of famous new jersey and on whom the office i welcome you to send us a picture and we will hang it up in the office along with the other famous -- [laughter] born in new jersey, married a jersey girl, that is about as jersey as you get.

>> how this legislation comes out. [inaudible] [laughter] >> which state did you live longer? >> since he is eating up my time you can take it -- [laughter] >> i live longer in new york. >> but you wish that you lived in connecticut. [laughter] >> i wish i lived in connecticut, exactly. >> the offer still stands. i am reminded that the mantle of the archives building it says what is past is prologue. and it seems to me that a lot of people want to dance around here but at the end of the day if we don't act we are dustin debt some point in the future to relive a crisis and it would be the worst situation perpetuated

on the american people. so i think this is an incredibly important. in the wake of the financial crisis, the surviving banks have actually grown bigger, not smaller and the volcker rule doesn't force existing banks to downsize so does that mean that you're comfortable with the current size of the bank's that still exist? >> i'm not terribly upset by it. i think there are limits we discussed earlier, the common sense limits how much concentration you want on banking and i have sympathy for what the administration is trying to figure out, is sensible kind of limit that doesn't put a hard cap on the organic growth of a bank but does say look if he were already very big you can't go, but something else that's a very big. i think these very big banks are

able to take care of themselves. >> isn't what the risks -- opposed this question for some time now through the hearing. if you are too big to fail, haven't we feel already? because it presumes were consequences to the economy are such weekend but uvedale but that also produces the environment for risk-taking that shouldn't take place. >> i think it's important -- from our perspective the size cap that is one of the two elements of the president announced a few weeks back is not the only piece of our proposals that deal with the size, so by asking for higher capital standards, liquidity requirements, leverage standards and so forth we do create positive economic incentives for firms to shrink and believe that is done in the context of making sure that all of those standards are focused importantly on making sure firms individually

in the system in the aggregate is not overly frisky so those things are tethered economic to get smaller and the cushions to the extent to which the firm can be more resilient at moments of distress are interlinked. >> there's another point here if i may add to that answer. with the resolution of 42, which you have not brought up, what seems to me to feel today may not be too big to fail to marlo because you have a better arrangement for putting this institution to sleep without disturbing the whole market. that is the whole purpose of this resolution authority to handle big failures. >> it seems to me that one of the -- asking whether the proprietary trading played a role in this crisis is missing the biggest lesson of this crisis which is how do you avert the next one? and we know proprietary trading

can be dangerous and contribute to the downfall of some investment banks and mr. chairman, you talked about not having taxpayer support for speculative activity, so it seems to me we should be attributed that to commercial banks as well so that at the end of the day we can ensure customer deposits don't end up being part of the speculative nature that can create a crisis. that is in essence what you're trying to do here. now, with that if we pass a law we preventing commercial banks from engaging in proprietary lending one possibility is that a goldman sachs or jpmorgan will simply drop their bank holding company status and continue to engage in proprietary trading hedge fund private equity activity. if they do that will our financial system be less systemically at risk?

>> i think, senator, whether they choose to be a bank holding company and engage in banking activities or choose instead to engage in riskier activities the full range of supervisory constraints and standards that we think need to be tough and heightened will still apply so from that perspective we will still be covered in the proposals we are putting forth. i think what we will have additionally is not having these risky activities to be subsidized in effect in circumstances where a firm has because its access to the safety net is essentially a lower cost of funding and advantages that are in some sense helping them focus on and engage in the activities we are concerned about. >> so the volcker will alone if we are concerned about the broad systemic risk of side is even

thinking it needs to be augmented by some of the other proposals. >> no question about it, absolutely. >> finally, mr. chairman, you have said that there is, quote, not a shred of evidence that financial innovation has improved our economy and the fact that innovative financial products took us to the brink of disaster. why do you believe that financial innovation got so out of control and can regulators as the chairman and the committee deal with financial regulatory reform can the regulators ever be in a position to keep pace with innovation and if not are there steps we should take to make banking and innovation, you know, subject to the ability to ensure that it doesn't get out of control? >> there is no assurance in this area but part of what i hope is the affect of what we are proposing is to reduce the

capacity of the banks through imaginative financial engineering techniques to get ahead of the rest -- way ahead of the regulators because the most fertile field for this is in the area of hedge funds, equity funds and proprietary trading. it doesn't mean they can't do a lot of complex things and the more traditional banking area but at least to cut down to some extent the risk of which you speak lightly. and i do think the supervisory agencies are going to have to be better staffed. i think some of them are well staffed now but they have to have the funds and the interest and capacity to attract some of the brightest and best engineers. it takes a few to catch a few so to speak. so, there is a lot to be done in that area. >> mr. secretary? >> thank you.

i think financial innovation is incredibly important to our economy and to people in businesses across the country. the critical question from our perspective is that innovation happened within a robust framework of consumer protection first and second that the taxpayers not on the hook when those innovations go sideways that the firms themselves bear the downside risk of field innovation so we want to make sure we have a system of which we have lots of innovation in this sector to its hugely important. i think to our entire country and our economy. but incredibly important that it be done within those two critical remarks. >> innovation which the innovators the risk? >> exactly. mr. chairman. >> thank you, senator. a couple spots if i can, picking up the question senator menendez raised. some raised the issue opposing an investment bank using the example where they would get rid of the holding companies and so

no longer would be defined accordingly. but since there were at least once covered by the safety net, should we worry about that would still be viewed as being protected? and as such that it would act as if it were? >> absolutely. that is the problem we face. having been predicted once being protected again. more important the creditors will expect them -- >> that is what i'm getting at. >> that is why i think you've got to be very tough in the legislative language with this resolution of 40 if the resolution of authority is not a safety net -- >> ayman we are working on the bill. as you know and you've heard now for a number of months trying to pull this together. and i am hesitant to tell you what is going to be in the bill but one thing that seems to be emerging is a very strong proposal dealing with resolution

of 40, and clearly the notion of the too big to fail as i've said repeatedly should become historic terms. but bankruptcy receivership is the way these things well in that and we will leave an opportunity for the resolution that would be such a painful road to go down that he would be -- enough incentives to discourage people from opting for that solution. and the question i guess is that seat said just an awful lot of that would do a lot of what we are trying to achieve, the notion of being bailed out a few will was going to be absolutely off the charts and to the extent, the maximum extent possible. so euthanasia to use your word, chairman volcker, while that is not a legislative term that is exactly what we are trying to achieve here and that i think was a long way. i am probably in a minority of one on this committee but i for one have always been attracted to the idea of a printable based system rather than rule based system because it gets to the heart of the matter in so many better ways in setting the right

specific rules all the time with a formal the jeffrey time you write one someone is trying to figure out how to get around it. it is a game you never ever catch up on. whereas a principal based system i think is a lot more leverage and a authority to the regulators but that is a separate debate for a later time. let me also suggest here, and i see this primarily to you, secretary wolin. and a lesser degree to chairman volcker. we've got to get something done up here. i've gone over 52 hearings this year. i can't tell you the countless meetings i've had with members of the committee. this represents one-quarter of the united states senate in this committee. and i have had endless meetings with people on the various aspects of this bill. it is of a movable feast. it is not 1i can add ideas on a weekly basis and expect to get this done. and while i've certainly been familiar with the issue dealing with proprietary trading and other issues it does complete and the idea the administration made this such a major point a

week or so ago seems to many to be transparently political and not substantive and it's adding to the problems of trying to get a bill done. there's other ideas that should be part of this but there are tipping point. there's only so much this institution will tolerate in a given point of time. we've been on this long enough to find if you try to do more and bite off more than you can chew. and we are getting precariously close to that and i don't want to in that on the day here while because these ideas many of them -- this is what i said i like the idea to read this creation or what jecker reed suggested on the lines but i don't want to be in the position we and between nothing because we try to do too much of a critical moment 351 you to know that because it's important from the administration's standpoint. we are getting late in the game. we need to do this right and carefully and i've been trying to do that and want to do it if i can on a bipartisan basis. i don't want to go to the floor of the senate backing for the 60th vote. i'm not going to do that. so why one you to know that as we go forth.

if you have more ideas, let me know. [laughter] and let me know on a timely fashion. also when you call down and see how the support and specifically what you had in mind i suspect the answers to the questions. i've made the calls and we are not getting the answers. >> with me respond again. it's important to get this right if you don't read in the first round, got knows when this account from -- >> i don't know either but he can't add stuff every day. >> it's a lid important we have a little translation to see with the british and french are giving and so forth. and the idea that this comes down to some party vote or 60 votes i don't think is right in this area because it is obviously not a partisan issue. but let me just say for the record and read all this stuff in the prisons and not as was critical and came after massachusetts. i know personally he decided this weeks before and he had been discussing what today to announce at one before

massachusetts it was a share a coincidence that this came out on thursday -- >> you and i know that and the members of the committee know that. >> but i just want the public to know >> it also looks as if these things don't help, and i make recommendations how to do this stuff and it falls on deaf years and then traveling with people there's a substantive idea that needs to be taken. >> we will convince as many as we can to help you out. >> i appreciate that. >> let me just say i hear you. we are obviously going to work with you as you work through what you are doing as you say and this we believe is part and parcel to a lot of the things we put forth. we understand adding that at this moment ads to the challenge and we hope to help you as you work through getting a bill from here to there. >> i appreciate that. senator crapo asked that i

include a statement for the record that he wanted to put in for the financial service roundtable and i will ask that be included in the record as well. we will have a continuation of the hearing on thursday. with others coming forward, and i appreciate mr. wolin or offer to continue to be helpful but we are now going to begin moving fairly quickly we now stand adjourned. >> thank you very much. >> thank you. [inaudible conversations] [inaudible conversations]

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