and to act now. that's why i'm working with congress to pass reform that lowers costs, improves quality and coverpbl, and protects consumer health care choices. i know some question whether we can afford to act this year, but the unmistakeable truth is it would be irresponsible to not act. we can't keep shifting the growing burden to future generations. with each passing year, health care cost clssume a larger share of our nation's spending and contribute to yawning deficits that we can't control. so let me be clear. health care reform is not part of the problem when it comes to our fiscal future, it's a fundamental part of the solution. real reform will mean reductions in our long-term budget. and i've made a firm commitment that health care reform will not add to the federal deficit over the next decade. to keep that commitment, my administration is already identified how to pay for the historic $635 billion down payment on reform detailed in our budget.

this includes over $300 billion that we will save through changes like reducing medicare overpayments to private insurers and rooting out waste and medicare and medicaid. however, any honest accounting must prepare for the fact that health care reform will require additional costs in the short term in order to reduce spending in the long term. so today i'm announcing an additional $313 billion in savings that will rein in unnecessary spending and increase efficiency and the quality of care. savings that will ensure that we have nearly $9350 billion set aside to offset the costs over the next ten years. these will come from common sense changes. for example, if more americans are insured, we can cut payments that help hospitals treat patients without health insurance. if the drug makers pay their fair share we can cut government spending on prescription drugs. and if doctors have incentist

to provide the best care instead of more care, we can help americans avoid the unnecessary hospital stays, treatments and tests that drive up costs. for more details about these and other savings, you can visit our web site, www.white house.gov. these savings underscore the fact that securing quality affordable health care for american is tied directly to fiscal responsibility and these are rooted in the same principle that must guide our brder approach to reform. we will fix what's broken while building upon what works. if you like your plan and your doctor, you can keep them. the only changes that you will see are lower costs and better health care. for too long we've stood by while our health care is frayed at the seams. while there's been excuse after excuse to delay reform, the price of care has gone up for individuals, for business, and sfor the government. this time must be different.

this is the moment when we must reform health care so we can build a new foundation for our economy to grow, for our people to thrive, and for our country to pursue a responsible and sustainable path. thanks. >> i'm indiana congressman mike pence. across the country, gas prices and home utility bills are on the rise again, during these difficult times, higher energy prices impose a hardship on families. unfortunately, the democrat joisht in congress is embracing a national energy tax that will lead to even higher energy prices and massive job losses for the american people. president obama even admitted that under his energy plan utility rates would, quote, necessarily squy rocket. if the democrats cap and trade bill were to become law, estimates suggest that the average american family would face up to $4,300 a year in extra energy costs and anywhere between 1.8 and 7 million

american jobs will be lost. since manufacturers will probably ship their plants and their pollution to countries with less stringent environmental safe guards, this national energy tax amounts to an economic de cla ration of war on american people. the american people know we can do better. this past week republicans introduced the american energy plan. without imposing a national energy tax. the republican energy plan calls for more domestic exploration for oil and natural gas, a renewed commitment to clean emissions free nuclear energy, investments in renewable and alternative energy technologies, and incentives to spur greater conservation among individuals, and businesses. the american energy act is the comprehensive energy solution this country desperately needs to achieve energy independence,

create good jobs, and help our environment. during these difficult times, the american people don't want a national energy tax out of washington, d.c. we want a 21st century answer to our nation's energy needs. the all of the above strategy of the american energy act is that answer. for more information about the american energy act, log on to g.o.p..gov. i'm mike pence. thanks for listening. >> this week on c-span's "newsmakers," senate minority whip john kyle discusses soom of the issues on the senate's agenda including health care and preparing for the confirmation hearings for supreme court nominee. >> i was reading last night. there's a lot of reading involved here and i was reading some very troubling things last night about her views toward international law, in effect saying that you can interpret the united states constitution by looking to see what public opinion is in europe.

well, public opinion in europe has nothing whatsoever to do with what our constitution means. and if that's really her point of view, that's very troubling. i mean, i could not vote for a judge who believed that. she said it on several occasions. i'm going to have to ask her what do you mean by that? when people talk about a fill buster, understand that we couldn't do that on our ofpblete there aren't enough of us. so even if we wanted to. and by the way, none of us are talking about that. it's all in response to questions by the media. which are fair questions but we're not proposing that. and it would be difficult for us to pull off anyway. >> "newsmakers" with senator john kyle, sunday at 10:00 a.m. and 6:00 p.m. eastern. >> the government funding of colleges, direct aid to colleges and their students really is a late 1950's, early

1960's thing that has grown since then. >> title 4 of the higher education act is 400 roughly pages long. we have a lawyer here in town who tries to keep the government from giving us money, and i asked him to send me title 4 and he said there wasn't any use, i wouldn't be able to read it. >> bank of america's c.e.o. ken lewis was on capitol hill thursday to talk about his company's merger last year with the financial services company merrill lynch. the deal included billions in taxpayer dollars and over $100 billion in government guarantees.

this is about two hours, 45 minutes. >> thank you for being here. bank of america announced that it was purchasing merrill lynch, creating one of the nation's largest financial institutions. at the time, bank of america's c.e.o., mr. lewis, called the merger a great opportunity for bank of america shareholders. when it was announced on september 15, this merger was a marriage negotiated between two willing parties. it was designed for the exclusive benefit of private shareholders and it was to be paid for exclusively with private money. four months later, on january

16, 2009, after the merger was cons mate and the quarterly earnings were announced, the world woke up to a different kind of marriage. the american people discovered that merrill lynch had experienced a $15 billion fourth quarter loss. most importantly, we found out that the merger had taken place only after the federal government had committed to give bank of america billions in taxpayers' money. what happened in the intprim? when bank of america urged its share holders to approve the merger, there was no public disclosure of any problems with the transaction. in a deposition taken by new york attorney general combo, mr. lewis testified that just nine days after the share holder vote, he discovered a $12 billion loss at merrill lynch.

mr. lewis said he told then treasury secretary hank paulson that he was strongly considering backing out of the deal. according to mr. lewis, paulson ultimately told him if he didn't go through with the acquisition, he and the board would be fired. however, internal e-mails we have obtained from the federal government indicate officials were very skeptical about mr. lewis' motives in threatening to back out of the deal. federal chairman ben bernanke thought lewis was using the marle losses as a bargaining chip to obtain federal fund. other e-mails reveal that federal analysts found it suspect that mr. lewis claimed to be surprised by the rapid growth of merrill's losses given the clear sign in the data. they noted that at a minimum it called into question the due

diligence process. bank of america has been doing in preparation for the takeover cht in short, the treasury department had provided a $20 billion for a shot gun wedding. but the question may be, what was -- who was holding the shot gun? at today's hearing, we hope to better understand what happened in the four months between september 15, 2008, when the merger was announced, and january 16, 2009, when the public learned that bank of america had received $20 billion in taxpayer money. we will be looking for answers to some puzzling questions. why did a private business deal announced in september, and approved by share holders in december with no mention of government assistance end up costing taxpayers $20 billion in january? did paulson and bernanke abuse

their authority by ordering mr. lewis to go through with the merrill acquisition, or did mr. lewis threaten to back out in order to squeeze more money out of the federal government? did the federal government tell mr. lewis to keep quiet about the escalating merrill lynch losses? and the government's commitment to provide billions in federal funding? i'm sure there will be other questions as well. to get to the bot bottom of these issues, we also intend to invite mr. paulson and to invite mr. bernanke to testify at a future date. the committee's willingness to issue subpoenas should clarify our expectations of full cooperation by perspective witnesses. i want to thank, mr. lewis, for being here today. and i look forward to his testimony. at this time, i yield to the ranking member of the committee, mr. darrell icea of california.

>> thank you, mr. chairman. and thank you for holding this important bipartisan hearing today. it is important that those of us who see this hearing today recognize that we are not here to evaluate the value of bank of america or merrill lynch or their transaction, whether it was a good deal then or a good deal today for either of the parties. we're here because there's been a serious allegation and a number of pieces of evidence have arisen that make us believe that government officials felt necessary to use the power influence and in fact potentially threats in order to cons mate this deal. when congress envisioned the tarp and other assets or in other powers in order to help in the post september meltdown of the economic market, we did so in a way that was intended to make dollars available to

help lessen the impact as we unwound credit markets around the world. no where in the legislation did it suggest that hank paulson, ben bernanke, or anyone else operating on behalf of the united states government was given the power to force shotgun we haddings. today, we're going to hear from ken lewis, c.e.o. of bank of america, a man who has spent decades understanding the vallu of financial institutions. we undoubtedly will hear that in fact at the beginning of this transaction the ratios determined for a stock trade type merger were in fact considered to be reasonable. as the chairman has said, rightfully so, the federal government played a clear part in this. but the american people should understand their dollars were not given to any party in this transaction but in fact loaned

at an amount substantially greater than the interest rate paid by the federal reserve. as such, ken lewis and all the parties involved had an obligation to recognize they were going to have to pay this money back and that they had to receive value in this transaction. allegations have been made throughout the press and will undoubtedly be reiterated here today that the value that was being questioned by bank of america had something to do with getting more money from the federal government. that may be true. having done acquisitions myself more often it is in fact the ratio being paid between the buying company and the selling company that is more at stake. had bank of america had to pay a greater amount in a stock trade than it did, the value of

the bank of america to the existing stockholderers would have been reduced. had on the other hand instead of a roughly 8-10 ratio, had it been a 5-10 ratio, the stockholderers of merrill lynch would have had a significantly lower value to their stock. we are not here, though, today to deal with any of that. we are clearly here today as the government reform and oversight committee to deal with the question of whether or not allegations made and evidence that has arisen lead us to believe that those operating under the color of our government's seal used any unreasonable influence or threats in order to cons mathe this or any other deal. mr. chairman, i thank you for holding this hearing. i appreciate the fact that this is clearly the first of two hearings that will be necessary. today we have part of the story when we have mr. bernanke and

mr. paulson then we will have the other half of it. i look forward to this first hearing and yield back. >> thank you very much. i now yield five minutes to mr. cuse niche, who is the chair of the subcommittee. >> thank you very much, mr. chairman. members of the committee. bank of america became the largest commercial bank in the nation, the 11th largest corporation in the united states, and the 23rd largest company in the world through the aggressive acquisition of other financial institutions including the purchase of merrill lynch last year. but something went terribly wrong with the merrill lynch acquisition. nearly enough to bring bank of america down. taxpayers now own $45 billion in preferred shares and warrants in bank of america. that money was committed by treasury department and the federal reserve and mr. lewis is here today as the c.e.o. of bank of america thanks to the commitment of those funds

through a seer as of events that unfolded through the end of december 2008 and into early january 2009. due to the secretive and unaccountable conduct of the fed throughout its interventions addressing the current financial crisis, many questions about the bank of america-merrill lynch deal and bailout have until today remained unanswered. some of the key questions have been, were the merrill lynch losses that precipitated bank of america's distress call to the treasury on december 17th the first such accelerating losses bank of america observed at merrill lynch since agreeing to purchase the company? did the government believe that bank of america had a credible case for abandoning the deal? did the federal reserve compel bank of america to complete the

deal against its will? or, did bank of america's mistakes and miscalculations more than any other single factor cause the experienced corporate deal maker to be exposed to merrill lynch's predictably large losses? did the government believe that bank of america knew or should have known about those losses before its share holders rat fid the merger? did the government have an opinion about whether bank of america could be libel for securities fraud for withholding from its investors material information it possessed about a significant deterioration in merrill lynch's balance sheet? did bank of america in effect negotiate an extraordinary deal for billions of additional dollars from taxpayers to continue its growth as the nation's largest commercial bank? this hearing today will help to

answer those quess. this committee's ongoing investigation and subsequent hearing will answer the following questions among others. did the federal reserve in attempting to protect the system apply well established remedies when it eengneered billions of dollars in subsidies to bank of america to complete its deal with merrill lynch? or, did the federal reserve peru an untested experiment -- pursue an untested banking regulation in variance in commiting billions of dollars in taxpayer funds to a corporate management that the federal reserve believed had failed in major ways? mr. chairman, members of the committee, this committee has sifted through tens of thousands of pages of documents produced by bank of america, the department of treasury, and the federal reserve. our investigation will help set the record straight about bank of america and merrill lynch. furts more, the story of bank

of america's merger with merrill lynch and its huge taxpayer provided subsidy helps to answer broader questions about how the corporate management of very large financial institutions operate with virtual impunity. for their mistakes. the documents we will reveal today provide the public a rare look into the disconnection between the feds' ability to analyze financial problems and its ability to remedy them when they involve very large financial institutions. finally, mr. chairman, before congress rushes to revise the banking regulatory framework, we would do well to incorporate the lessons of the bank of america-merrill lynch episodes that this committeings hearings over the coming weeks will draw.

thank you. >> i thank the gentleman from ohio. now we yield to the ranking member, also from ohio. >> thank you. thank you for holding today's hearing. i want to thank you and ranking member icea's efforts to get to the truth about this issue. i believe today's hearing is an important first step in learning about the full extent of the government's manipulation of the banking industry. this investigation into the bank of america-merrill lynch transaction has raised troubling questions about the government's abuse of power as bodes the ranking member and chairman have indicated. we've learned that at a minimum then secretary hank paulson threatened to remove mr. lewis if mr. lewis exercised his legal option to back out of the deal. in addition, we've learned that the department of treasury and the federal reserve were involved in discussion about when and how the financial condition of merrill lynch was to be disclowed to the share holders. we also learned that this

transaction took place in the fear. we now know 2008 mr. paulson brought the largest and demanded that they accept the partial nationization of their bank for an exchange of the amount of money of the government's choosing. mr. chairman, i understand the significant challenges that our government faced last fall. i also understand they intended to do what they thought was in the best interest as a whole. but in our constitutional government the we must understand the full story of what happened in the process of the government taking over much of the banking industry so that we can understand the proper limits of government action in a free and civil society. i'm grateful that mr. lewis for his willingness to appear before the committee today. in addition to important questions regarding bank of america's transaction with merrill lynch, i also hope mr. lewis canshed light on his personal interaction with the government officials. and i intend to ask him about the participation in the

initial -- about his participation in the initial capital injections and to what extent they were forced upon bank of america and as someone who comes from an auto making count rirks i also would like to note the extent to which the government is currently involved in theday to day operations of the company. the full underscoring requires the government's decision makers, in this case mr. paulson and mr. bernanke, to appear before this committee to answer the tough question that is the american people demand to be answered. i know that the chairman and ranking member talked about that. we look forward to that happening in a bipartisan fashion in the near future. again, thank you, mr. chairman, for this opportunity to make the opening statement. with that, i yield my time to mr. mchenry to introduce our witness. >> mr. mchenry. >> thank you, mr. chairman. today i have the privilege of introducing our witness whose company is head quartered in charlotte, north carolina, which my district is just to the west of, and as the only

member of the committee from the carolinas, i think it's my duty and privilege to introduce our witness. >> kenneth d. lewis is currently the chief officer of bank of america, responsible for 55 million consumer and small business relationships and $1.7 trillion in total client assets. with various business and more than 150 countries and business relationships with 98% of u.s. for tune 500 companies, mr. lewis oversees one of the largest financial services corporations in the world. and is one of the largest institutions head quartered in north carolina. in fact, is the largest institution head quartered in nsk. born in 1947 plrks lose earned a bachelor's degree in finance from georgia state university and a graduate at sanford university. arriving at ntnb in 1969, he

served more than 30 years within the bank and in 2001 attained his current position as c.e.o. of bank of america. throughout his career with bank of america, he secured millions of new customers and paved the way for future expansion. he was named in 2007 as one of the 100 most influential people in the world by time magazine, has been twice named banker of the year by the american bankers association. he has been the former chairman of the national urban league, and has been involved in every possible community cause in charlotte. large and small. and for that we do thank you for your leadership for our community. bank of america's presence is certainly felt in western north carolina in my district and across north carolina generally. the tenth district has become particularly hard hit in this chick recession and bank of america employs about 17,000

north carolinaance many of whom are my constituents and are proud to work for a strong institution and we look for stronger days ahead. thank you for your testimony and your presence. >> it's a long standing pradigs that we swear all of our witnesses in. would you please stand and raise your right hand. do you solemnly swear to tell the truth, nothing but the truth? if so answer in the affirmative. be seated. let the record reflect that the witness answered in the affirmative. you may now -- let me sort of explain as to the light situation there. first of all, you have five minutes to sum rise your statement. and then the yellow light will come on. that means you have one minute. and then after the yellow light comes on, then there's a red light. and of course that means stop. and of course, after that then we'll allow the members an

opportunity to raise questions with you. so you may begin. >> chairman towns, ranking member issa, subcommittee chairman cuse niche, ranking member jordan, as has been said my name is ken lewis. this committee is reviewing important issues and i hope my remarks will be helpful to you. a little bit about banks of america. our business lines include deposits, corporate investment banking, credit cards and mortgages. we have a deep commitment to serving all the communities in which we operate. we have commimtted to lend and invest 1.5 trillion dollars in low and moderate income communities over the next ten years. as everyone here is aware, the financial services industry underwent considerable turmoil in 2008. bank of america was affected by that turmoil but nonetheless

earned a profit of $4.2 billion for the year. we also made two significant acquisitions, countrywide and merrill lynch. there does not appear to be any debate that these acquisitions were in the best interest of the financial system, the economy and the country. the failure of countrywide would have caused a massive loss and could have destabilized an already upset market. the failure of merrill lynch could have necessitated an a.i.g. style baitout. these were also in the best interest of bank of america and its share holders. certainly the merrill lynch acquisition came with risks some of which materialized in the fourth quarter when merrill lynch recognized significant losses. the marle lynch acquisition also came with the promise of significant long-term rewards, that we were already