being here with us. as we were considering a response to the downturn in the economy and considering the parameters of a recovery package, i asked you stated that helping the states cut back on services could have the stimulus of a fact. the indicated support for a bond market. the act that we passed did include money for stabilization and had bought options. -- bond options. eek when i was insachusetts massachusetts, as part of the break in -- and happened to meet with our governor as well as state senator who chairs a ways and xhemeans committee, i can t you how grateful they were for the fact that we included significant funds to help the states deal with the downturns in their revenues and the impacts on their budgets. it has been -- i think it is one of most difficult places to be today in state and local

government. so i want to thank you for that. and also for your reiterating your support today for what we have done with the recovery package, the necessity for it. in your testimony, you just stated that about one-quarter of the funds will come out through tax cuts or direct benefits, indirect spending this year. one half next year and possibly the next last quarter in 2011. are you concerned that we're doing -- we're meeting that timetable and how important is the timetable as we go forward, beyond the tax cuts that have showed up in people's paychecks today? >> well it very early days. to this point i think something on the order of only 5% of the mond monies appropriated have entered the blood stream, so to speak. it is important that there not be extensive delays in that process because it would possibly give you a fiscal stimulus at exactly the wrong time where the economy was already in a substantial recovery mode. but i don't have any information

to the effect that the stimulus is not being dispersed in a reasonable -- at a reasonable pace. i think it is just too early to know how quickly the monies will get out. >> you're confident the administration is moving in a timely fashion, especially at the -- within the various departments where they have to put in place a regulatory framework to process to make peop applying for the funds, that that is going along in a manner that should be helpful? >> as far as i know. but we all recognize that this is a -- from a bureaucratic point of view, a very challenging task. but so far, of course, i think payments are under way and the planning process is under way. >> so the impact we see today, given the fact that only 5% is out, moved out, what do you attribute that to? >> the recent improvement in the economy? it is partly the fact that we

had this very sharp decline in the latter part of last year related to the financial crisis. that caused the big buildup of inventories. very importantly, as i discussed earlier, we seem to have gotten -- done a -- achieved a good deal of progress in stabilizing financial system. that has helped restore confidence. final demand is beginning to stabilize. we still had a very bad first quarter and we may yet have a negative second quarter because of the need to work down those inventories. but because the financial markets are doing better, because there is more confidence in the economy, in the financial system, as those inventories work down, we should begin to see a modest increase in growth. i would put the internal dynamics of the economy, in terms of inconvenient toirz and so on, as being part of it. i also would like to give credit to actions taken by the treasury, the fed, the fdic and the congress to help stabilize the financial system. >> thank you, and i yield back.

>> thank you so much, mr. chairman. and thank you, mr. chairman, for being patient. i have three questions. but i want to start out with your certainty that we won't be facing inflation and your certainty that we have gotten a handle on deflation. just your last answer and to mrs. tsongas about the buildup of inventory. and certainly goes by a loss of value in the housing market. given the unemployment rate that is going to continue to rise, even recently from the gm and chrysler restructuring, given tw can you and the build-up of inventory and loss of value housing, how can you say that

deflation is not at risk, that we are not having to get rid of inventory and losses being taken in the housing market. i guess i don't understand how we're going to avoid deflation. >> well, you correctly point out that we have a balancing act between on one hand, deflation risks and median inflation risks. we've got to look at both sides of the equation. resently, since the outlook has improved, because inflation expectations is measured by a lot of different means, seems to be pretty stable, i put a lower probability now on deflation now than i would have a few months ago. >> but people don't have jobs, how they going to buy it what's going to happen when people have to sale their houses?

>> that was a very negative effect on the economy. i agree with you that the economy remains quite weak, but we've seen consumer spending, even at a lower level, seems to be stabilizing. those kinds of considerations, we think the deflation risk has rece receded, but continue to follow that. >> there's been a lot of talk about the fed being named as superregulator or as alternatively as systemic risk regulator. mr. ryan asked about the federal reserve and i want your comments about whether your appropriate agency to be a superregulator and whether or not that's a little insist yous. >> first of all, i do think there's a benefit to going

towards a more systemwide regulatory approach because so many things that caused problems in the recent crisis slipped under the radar. we need a system where the large firms are being appropriately overseen. where we have a way to address failure of firms. >> should that be you? before my time expires. >> the federal reserve needs to be part of that process, but given our expertise, our historical role in financial crisis management, we should have a substantial role in that. the exact structure remains to be discussed. the administration hasn't even come out with their proposal yet. >> i want to ask the question about what monetary policy should we be purr seeing given the chinese seem to be putting up the dollar as reserve

currency. this would be a great loss to us. what should we be doing to maintain the dollar as our reserve currency? >> first of all, i don't see a risk in the foreseeable future -- >> you don't see the chinese, brazilians are using their own? the chinese concerns about the strength of the dollar as being a challenge? >> the share of reserves held by all countries, that's gone up. that being said, we have the responsibility to make sure our economy is appropriately runnd my view is the best way to get the strong dollar is to get a strong economy. to get the economy back on the growth path with high productivity, a good amount of savings. that's the best way to get the dollar strong and that's why it's important to get us turned around and get the economy growing again. that's what the federal

reserve's poll icy is trying to achieve. >> i yield back. >> thank you, mr. chairman and chairman bernanke, thank you for your patient ens. i want to begin by saying that very privileged and powerful bankers in our country have hurt our nation deeply. yes, it seems they get special treatment by t federal reserve and other financial regulatory agencies that should be protecting the public's interest. these bankers have earned huge profits for themselves, but when their inprudent behavior causes bad economic dislocation, it raises our national debt. taxpayers who are hurt, people lose homes, their jobs, companies. bankruptcies go up. but they don't get the same

treatment. so i'm interested in the favorites of these bankers as well as the -- other federal regulatory agencies. the presidents of the fed have been expressing what's going on and the power of the new york fed, kansas city fed, st. louis fed, the richmond fed, shockingly, find in agreement with you, an unprecedented agreement, where you agreed to absorb any losses that would be incured by the fed. the treasury actually signed that agreement. my first question is yes or no, do you support the concept of having the presidents of each

bank be confirmed by the senate? >> no. >> thank you. for the record, before this month is out, how much t.a.r.p. money will aig, can you provide for the record before this month is out, how much t.a.r.p. money aig has disbursed since january 1st of this year and who are the recipients? >> i think so, but i can't do that here. >> can you do it within the month? >> i think that information is in the public domain. >> how many of those and which contracts were paid at 100% on the dollar and which were not? >> i wish there was a legal contract, there was no bankruptcy allowed. we need a system where we can renegotiate those things, but we don't have a system like that. >> well, we are going to want as much detail as you can provide for the record because the fed is really, heavily involved in

that. am i correct? >> the fed is involved unwillingly because there is no good system for addressing the failure of an institution. >> how much of our rising debt is being provided by foreign creditors? can you provide that? >> actually less than it has been because we know the current deficit has been declining. that measures the flow of lending for creditors. as the federal deficit has gone up, the private borrowing has gone down. >> thank you. how many no-bid contracts has the fed now signed with private money management black rock and its subsidiaries? >> several. all that information is to be provided in this monthly report. >> will the contracts be released to the congress? >> i believe so, yes. >> what is the value of the assets being managed by blackrock?

>> i don't have the information. >> will that be provided for the record? >> oh, yes. >> what is the fed paying blackrock? will that be provided? >> we have a committee, which has gone through and made a whole set of recommendations and writing a great deal of information. i don't remember every decision made, but i would like to defer to their decisions. >> do you know which foreign companies are a part of these transactions? >> i don't understand the question. >> what other business does blackrock do besides service the fed? >> so you wouldn't be aware? >> not necessarily. >> are you aware of one contract blackrock manages may be compromised, dealing with fannie mae and freddie mac? and i wish to state this for the

record. lawrence bank, the head of blackrock, in which the mr. summers who heads the national economic planning council, is a major investor, just got several no-bid contracts from the fed including one to manage fannie mae and freddie mac. does the fed now that he is the person who first created a collateralized mortgage and brought that instrument to freddy mac and sold it to them for over $1 billion? he's now the fed's go to man. how you protect investors? >> the federal reserve is a

separate institution from freddie mac. i do not understand your question. >> you have signed a contract with black rock to manage freddie mac. i understood it was one of the four or five contracts that you had signed with black grout. >> i would have to go back and check on that. >> i would appreciate that. >> before you have to leave, i've -- we are going to make to fiscal policy decisions this summer. when talk about capt. trade and health care legislation. that is more to impact our borrowing and our deficits. the bill that is moving to the floor that is already in the commerce committee, they auction off 88% of the permits which dramatically reduces the ability to do the rebates such as you discussed. which therefore

dramatically reduces the ability to do the rebate as needs to be off setting the blunt impact on the economy. gives away 88% of the permits. given that the lels we're looking at gives away 88% of the permits drying up the money to do rebates. do you think that has a negative effect on the economy? >> my understanding is that they'll be given to consumers? >> no, to various industries. >> if you give it to the industries but prices reflect the cost of the permit, it's basically money given to the industries. the tarkt targets will be as aggressive. the point i'm trying to make is the revenue from auctions will not be there because the permits will be given away to the firm. >> it's true, if the permits are given away, you don't get the money. >> and therefore, if there's not an off setting rebate, do you

think that has negative effects on the economy? >> it could. but again, my understanding is that these permits, which have different effect in terms of spending, but to some extent goes against the promise of the policy, which is to reduce energy consumption. >> i think a lot of the us would question the logic of requiring it to be passed to the consumers because it counted against the whole notion of the program. let me ask you one final question. do you think it makes sense we need to spend more on entitlements? we're in the middle of this health care debate. the discussion revolves around raising about 1.2 triion in new revenues to spend on a new

entitlement program to be created for health care for the under 65 population. we already spend more than 2.5 times more in health care compared to any other country in the world. is it a good idea from a fiscal stapt to increase that over the next ten years and is that the best way to save more money in the long run with the entitlement programs? so we've got two health care entitlement programs already, medicare and medicaid. we're going to create a third now, with a revenue stream that may or may not meet that requirement. never the less, it's a larger tax and spend program than what we have now. is that the right way to go toward containing our fiscal problems? >> the reforms to health care need to address the cost issue. the question's about how to change the structure of the

health care system, whether to do it or not or how the government's role should change, but if you don't get control of the cost of health care, then the fiscal issues are very serious. in particular, medicare trustees assume that costs are going to grow. in fact, they have been growing 2.5% faster than per capita. part of the effort has got to be addressing the cost. the cost of per capita health care and growth in that rate. if you don't do that, just adding programs would be a big program. >> thank you. >> and for conclusion, the the members who did not have the opportunity to ask questions, be given seven days to submit questions for the record. thank you very much for your testimony and your clear and

the u.s. house gavels and tomorrow at 12:30 p.m. eastern. on the agenda, a bill of rights and state department programs which includes u.s. peacekeeping and legislation were guarding pakistan. the senate is also back tomorrow at 2:00 p.m. eastern. this will continue to regulate tobacco products it is also possible that congress will vote on a conference report to the war spending bill. the house is expected to vote on the measure first, followed by the senate.

there could be information on overseas tourism as well >> there is still time to get your copy of the 2009 congressional directory with information on house and senate members and the nation's governors. plus, district maps and how to contact committees and caucuses. it is $16.95, online at c- span.org/products. >> and now, a preview of the democratic primary in virginia is governor's race. c -- from al jazeera arabic. john mercurialo, the battle lins are drawn in the democratic primary.

guest: polls show the race is tightening. there is a new poll out this morning showing that one of the candidates, a state senator, is now in the lead. two of the three candidates are running -- one of them, former dnc chairman terry mcauliffe, is bringing in some big guns in the final days, big guns from outside virginia, to make his case. bill clinton is returning to virginia this weekend to campaign for mcauliffe. he will attend a fund-raiser at mcauliffe's house in mclean, virginia. it is at least the third visit that clinton has made on behalf of mcauliffe in this race. also yesterday, and this is interesting, mcauliffe announced the support of montana governor bryan schweitzer, who also -- announcing the support, schweitzer made clear he is supporting mcauliffe because they are friends. he is doing it on a personal level, not as chairman of the

rg&e a. regardless, it is not entirely clear how many -- of the rga. republicans did not seem too concerned. the republican governors association responded yesterday with a simple one line statement that said, "who is brian schweitzer?" to a lot of virginia voters, they hope that is the questionnaire asking. brian moran, one of terry mcauliffe's opponents, did not seem to concern. he said this -- "the guide rumored to be running for governor of new york and when it -- the guy rumored to be on running for governor of new york is one to tell us who is running for governor in virginia." the virginia secretary of state yesterday said that what could be a piece of bad news,

mcauliffe relying on high turnout around the state to boost his prospects. the secretary of state yesterday said that she expects, based on absentee voting applications so far, expects the voter turnout on tuesday to be relatively low. again, that could be bad news for mcauliffe. moving on to california, where there is the governor's race going on, not for tuesday but for next year. there's a new poll that in the democratic and republican primaries, a top tier of candidates, relatively well- known democrats. first, leading the race by a slim margin, san francisco mayor gavin knew some trailing by 18%. there are other candidates in the race making up the difference. in the republican race, a lot of undecided voters, but former

congressman tom campbell, a moderate from these entrances go area, leads with 13%. former ebay ceo meg whitman, who recently got the endorsement of john mccain, trails with 10%. insurance commissioner john praisner has 11% in that race. a lot will change between now and that primary. finally today, and connecticut, the new haven register and other papers reported today that chris dodd, who had been rebounding, i think, from a tough series of developments in his reelection campaign for 2010, now looks like he is set to endure another round of bad press over a lingering controversy to which he has been linked over the past year. the federal government yesterday charged countrywide financial ceo and two other executives with civil fraud, which ensured that chris dodd, who had been getting a -- who is accused of

getting a sweetheart financial deal from countrywide -- he himself has not been accused of any wrongdoing, but shortly after reports emerged last year of the sweetheart deal, he was forced to ignore the comments are a lot of questions about it, and shortly after that, former congressman rob simmons was going to run against him. simmons now, according to polls, is in the lead in that race. that is what we have for you, steve. host: john mercurio, before i let you go, for anyone watching the first hour of "morning joe," the illinois senate race. a look at senator burris and whether or not he is going to reelect -- to seek reelection. he said probably not, but you never know.

guest: i think he will probably not seek reelection, but i probably will have to agree with jim. roland burris has really defined -- has really defied expectations. he fought democratic leaders in the span it -- in the senate, to gain leadership in the senate. he has refused to rule out the possibility that he will run. you look at the tea leaves, a couple of indicators -- during the first three months of 2009, he raised barely any money, barely any money, which is ridiculous to consider anybody running in an expensive media states like illinois. there are democrats seriously talking about running the state treasury. democrats at this point are

>> tomorrow, on washington journal, michael crittenden, , dave mccurdy talks about the auto industry and the government's stake in general motors and stephen after googoo. washington journal, live at 7:00 a.m. eastern on c-span. coming up next on news makers, labor secretary talks about the latest in a normal situation didn't senator john ensign and then former vice-president dick

cheney answers questions on a number of topics including the american national security. >> tonight, on "q&a," mitch daniels. q&a, at a p.m. eastern here on c-span. >> how does he spend funded? >> taxpayers? >> i don't really know. >> from public television. >> it donations. >> i do not know where the funds come from. >> how c-span funded? 30