c-span [captioning performed by national captioning institute] [captions copyright national cable satellite corp. 2009] >> the issue of stock warrants is coming up and some bankd were forced -- banks were forced to provide tarp funds. they would have to pay a price that reflects as a very high interest rate. regarding the some of them did not need this in the first place, what do we do about the liquidity as they try to restore themselves, to their former status? >> let me say this, the valuation of these takes place in the shadow of the february

valuation of this transaction for the initial infusion of $350 million, into the banks. this is a very public reminder to the financial institutions that there are valuation experts and -- we can review these transactions and we have made it clear that we will review the transactions. that is the first thing to remember. the second thing is that this is the subject of the july report. we are working on the valuation, and the issues involved. we will have a report on that in 30 days. you see that there is still a large issue, rather than simply

the dollar. there are profound policy questions about the representations that were made for the financial institutions as they enter the program, and what is fair under the circumstances as well as what is right for the economy. i hope that's the sum -- this is something that we will be able to address. i certainly see the issue. >> what is the barrier to being able to do this? >> his time has expired but you may answer this. >> what is the barrier, you do want to be able to a value with this, what may prevent this or make us more difficult? >> that are five people on the panel, and the issues that they want to take on will depend -- we will talk about these issues.

i hope that this is an issue that we can address. >> the gentleman's time has expired. >> thank you. >> he is recognized for five minutes. >> thank you. thank you once again, you are inspirational. and frankly, i wish that we had given you more power, including the power to issue subpoenas, because you would use this very effectively in light of the circumstances that we are dealing with. the economic circumstances that we are facing were caused by the manipulation of investment practice some years ago, the falsification of information. and now, we have continuing

falsification, you talk about one of these specifically, with regard to getting back 66% of the money that has been put in, and the accountability of the $700 billion, that was not issued as a grant to use however people wanted, but a loan. this was used to bail out the banking circumstances. but has this occurred, to pay back the money to the people of this country? what should we do to achieve these objectives? doesn't need to be in law or regulation put in? would it be wise to give you some additional power, to engage in the efforts that you are using, and there is one other thing i would like to ask, the repeal of the glass-steigel act

is the reason we have the manipulation and the lack of accountability. i know that they had been manipulated earlier, but the elimination of this was intentional and purposeful, this was designed to allow the manipulation of these investment practices to go forward in a more aggressive and unaccountable way. i know you have probably thought about this, should we put back into effect a modern version of this, which would cause the separation of investments and the openness of investments, the honesty in investments and accountability. >> let me see if i can do all of these questions. if you want for us to do more work, we are the congressional oversight panel. if you want for us to do more

work through hearings, and if you want us to be able to have more officials in front of us, bankers appearing in front of us, we cannot do this without subpoena power. i should say, there is plenty that we can do without this. we will be able to write a report to expose misrepresentation about the value of transactions, this has been valuable. and we have been able to deal with the other parts of the program. the treasury is not operating in the same way that it was operating before. let me turn your question, i want to say something about this. glass-stegel was about rest

manipulation. they understood after the depression, that we have gone through these cycles every 15 years, and the banks were part of this, the banks were the risk takers and they would roll the dice and as long as they made money, the investors got rich, and then they took down everyone with them, taking down a lot of local communities. the basic understanding was that we cannot keep doing that, that is not going to work for us. you are not just hurting yourself, the one little business, that goes out of business, you are taking down a lot with you when you do this as a financial institution. we said we would create a wall, and we would have banks run like public utilities, they would make modest profits but they

would be rock-solid. and the risks will be taken somewhere else where we do not have to worry about this. if the fancy investment houses want to do this, they can do this but they cannot take any one out with them. on only did the financial institutions find a way around us, the market changed. so dividing along this line, we believe that this is not the most effective way to do this. every time we talk about regulation, we're addressing the same question during the depression, how do we find a way to have a certain kind of financial institution that can hold a deposit and be safe and secure, to put money in, to know that money can be transmitted

across the country, how do we celebrate this from something that is risky, and frankly can either be allowed to fail, without any government intervention, or taxpayer involvement. how do we accomplish this? we have recommendations in the regulatory reform report, which i omitted, we also did a regular report at your request. this is the issue. this is the systemic risk, this kept us say for 50 years, we will have to have a new version of this. >> thank you very much. congressman? >> thank you. professor of want to make a comment.

we have a 6 month old boy, she went on leave from her job and this meant we became a one income family, and this has made more sense to me in the last few months. i appreciate the work that you have done. i would like to ask, in page 36, you see the best way to increase the capital base is to earn income, and do this for the capital account. it says they will not be able to earn their way out of this. in the opposite happen? i am not certain what the normal banking businesses anymore, it seems that this is almost predatory, with computer

programs designed to prioritize the processing of debt it and checks to drive people into more overdrafts, loaning money at exorbitant rates. she has done wonderful work on credit cards, and this -- there has been beat -- predatory behavior there. congress is interested in looking at normal banking business compared to what it was in the past. can we go the other way, to lower the income of the bank's to get rid of these predatory practices, who have been putting too much of the business in come from things they should not be doing? >> we talk about the transformation of the banking world, from the investor

perspective, but the real transformation has happened at the household level. consumer lending does not look like it did 30 years ago. the business model has changed. the notion that we carry that some lender of out with a view about whether it would be able to repay this -- who is making money by screening customers, this is not true. we have gone to a model where those who sell financial instruments, such as credit cards, they will identify a few main things, the nominal interest rate, the free gift, and the warm and fuzzy relationship with the financial institution. and they want to increase revenue and profit with all the

things in the fine print. the typical credit-card contract has gone from one page and have to more than 30 pages today, this 30 pages is not there to help families. it is important in this crisis because, you get down to the heart of what it means to have a working financial system. this problem started one household at the time, one lousy mortgage, one overwrought credit card, one bad loan down at the household community. this was aggregated and put into trusts, that were sold up the line, so the rest of the level was magnified throughout the american economy and throughout

the world. if we go back to a world where the basic consumer financial products are just steady, they have a level playing field. nobody should be protected for making and mistakes, -- making a mistake, if you spend money you do not have you should pay for that, if you buy a house you cannot afford, you should have to pay for this. but ordinary people who have done ordinary transactions deserve ordinary instruments, to do that. this will help us at the family level and will completely reform what the financial institutions look like, to give us a more secure financial system. >> someone who has been making money off of taking advantage of

families, in the long run, the economy and the credit markets will come out better? >> i cannot say it better than that, that is the answer. >> thank you. >> thank you for holding the hearing today, and thank you for your leadership and thank you for what you are doing. i have always believed that we have to restore stability. to do this we have to have the best results at the lowest cost. this means transparency and accountability. when you look at the past, previous to this administration there was not that kind of transparency. there is a lot of lint -- a lot of criticism, but there were loopholes that were open, blame on both sides for that and the

leverage that was allowed, back in 2004, many things that went wrong, that should not have happened. i appreciate what you are trying to do here, we are trying to get here, instead of the short-term view of the economy, we're trying to get a long-term view to encourage responsible behavior. i want to start with the stress tests. we have a lot of banks in our state, in the and they did well, and we also have some small community banks doing well. the believe there'll be a need to do these tests, at the time i was concerned that these tests had an effect on the banks that were having problems, people were afraid that the banks would be nationalized, this has evened

out, with the results being released, because the capital has been raised. can you talk about that going forward and is this a good sign? the estimate of the money that has been raised since the announcement, how are these working going forward? >> we embrace these tests, they made everyone nervous at the beginning, but the consequence was to get more information into the marketplace, which have more reliability, for the numbers that were circulating. everyone was worried, all the banks may fail and we may have a terrible crisis. this has a terrible effect on a market and across the country. what financial institution will

lend to small business, and what medium-size businesses will expand their inventory? that information, this puts us in a position of trading in these rumors, so i am a strong believer that the more information that we can get out there, there will be some problems at the beginning, but not only will there be readjustments, we will rebuild on a solid foundation. the view of the panel on the stress tests, is, we like them, they could be stronger and we think that they should be used in more ways and more often. >> one other thing that you have spoken about his the idea of systemic risk, how some people can do bad things and the whole system goes under.

we're looking at reforms for regulating the market and we want to do this in a prudent way. what should we be doing? >> i will start with how to frame the issue. this issue concerns me the most. the tricky part of this is to identify what it is that puts us at risk. is its size or the industry that you work in, we have had major companies fail. enron and worldcom failed. these have very serious consequences, i am and not saying that this is done without pain, but this was making the argument shortly before

bankruptcy, that it would cost failure, it was out there in the power industry and it was such an important player -- but this was not true at all. we said, we will have to live with a view. what i want to emphasize is, the importance of identifying the rest, before we say, make certain we know what the problem as before the solution. if i can say one other thing, to go back to where you started just now, at the family level. we did not increased as for the banks, the american household owes 130% of their income.

we have been heading numbers that are unprecedented, they have never even been close at any time in history. when we reform the financial products and put some safety in so that families are economically stable, and they are not introducing into the stream of financial commerce, these high risk and high profit instruments, we turned down the rest overall and frankly we can deal with this with a lighter touch. those who were worried about the heavy hand of government on the back end, would do well to observe that modest changes on the front and could mean that we require less intervention and less supervision. we will be -- if we can change

is at the beginning this will be solid throughout. >> we are making the proposal to help the consumers with those products and this is a very interesting idea. thank you. and for your leadership, you are a star. we have many hearings on financial regulation and health care reform and energy, we will be presenting the future questions to you in writing. we thank you for your time and your dedication, and your commitment to public service, and the influence you have had on financial reform. >> i will ask consent that my opening statement be put into the record. >> everyone has the opportunity to submit their questions, and the meeting is adjourned.

>> coming up on c-span, president obama meet with democrats to talk about the federal budget deficit. the health and human services secretary testifies at a hearing about the budget of her agency, and on "washington journal" we will take your questions. we will talk about health care with sen. coburn and howard dean, author of "howard dean's prescriptions for health

reform." >> teh latest -- the latest on [unintelligible] mrs. cahill ran for congress, she is interviewed by eleanor holmes nolton. then, "inside the revolution" with joel rosenberg, then "waht is next for the economy," a panel on texas and the end of prosperity. thyen, forecen, "foreclosure nation." look for the schedule at boo

ktv.org. >> how is c-span funded? >> donations? >> i do not know. >> contributions? >> 30 years ago, c-span was created as a public service, with no government mandate and no government money. >> now to the white house, where obama met with congressional democrats, for the pay as you go budget rules. on the podium, spratt and pelosi. we will hear from them in a moment, but first, president obama. we will hear from them in a moment. [applause] >> have a seat. thank you.

thank you for joining us in the white house. i want to talk about the comment of the treasury department on the financial stability plan. through this plan and the predecessor, taxpayer dollars were used to stabilize the financial system. this funding was also meant to be an investment, and this was meant to be temporary. that is why this announcement is important. several institutions will pay back $68 billion to taxpayers, and we know that we will not escape the worst financial crisis without a loss to taxpayers, in the first round of

repayment, the government has actually turned a profit. this is not a sign that the troubles are over. the financial crisis we inherited is still creating major challenges, everyone sees this in their own individual districts. this is a positive sign. we see a return on these investments. we are restoring funding to the treasury, where they will safeguard against the risks to financial stability. as this money is returned, the debt will go down by $68 billion, billions of dollars that this generation will not have to borrow and future generations will not have to repay. i have no interest in managing the banking system or running out of company -- running an auto company.

the return of this money does not [unintelligible] it is important that we learn the lessons of this crisis, the short-term gains are not pursued without regard for long-term consequences. at the same time as we look for greater responsibility from the private sector, it is my view and the view of the people behind me today, that greater responsibility is required on the part of those who serve the public. as a nation, we have several imperatives of this difficult moment. we are confronting the worst recession we have faced in generations, another imperative