it show that? >> not >> not tangible. >> mr. lewis, you said that you had added that bank of america are reviewed. you could be in breach of security laws. the government did not believe you that merrill lynch was the primary cause of the problems and thought merrill lynch's losses were more significant than bankamerica was experiencing. the government even thought that you are making the threat to move mac as a bargaining chip. the government had already given you $25 billion before you approached it about merrill lynch. if the government believed all of that about you and your management team, were you surprised that the fed arranged for you to receive an additional financial support in january? it did that surprise you? financial support in january, does that surprise you? >> we received 15 billion, not

25 billion from the original t.a.r.p. package. it did not surprise me they were willing to give us more. we talked about coming to a solution to get the merrill lynch deal done. >> there was a financial crisis and they thought it was necessary -- unanimous consent for twoore minutes. >> without objection. >> there was a financial crisis and they thought it was necessary for the system, for the deal to go through. if there's one thing about your record that's clear, you have experienced negotiating deals. what do you believe your leverage with the government was at the end of 2008? at the end of 2008? >> the only leverage i would say we had was that two honorable people had given me their word they would try their best to find a solution. >> isn't it true it was because bank of america was a big bank. if you hadn't been a ceo, been the top executive at the mid

sized or small regional bank and acquired a similar size bank, do you think the federal regulator would have behaved in the same way? >> i don't think i have a favorite son from the e-mails you just read. >> if you were a smaller institution been taken over and liquid ated? >> i can't speculate on that, sir. >> we have a large financial institution that doesn't face the same consequences for management of small ones and the fed had an opinion there was considerable evidence of mismagement. there's been a misconception here that the government put a gun to the head of bank of america when it's quite possible it was the bank of america that put a gun to the head of the fed by threatening to invoke the mac and i think that this whole idea, mr. chairman, about mr. lewis somehow being a victim here, flies in the face of the

fact that you were ceo of the largest bank and that you are pretending that you didn't ask for help from the government to take the burden off your back, that you didn't ask for a letter. you're going to have to excuse me. this is not credible, you're trying to change the scenario to you as a victim to you as a powerful ceo that made a decision that denied your stockholders, your shareholders, material information that they needed provider to a vote on a merger. and i think that is the central point of this hearing and i'm sorry, that you haven't been forthcoming enough about that central point. yield back. >> well, one thing for sure, there was a shotgun marriage, shotgun wedding, no question about that. let me sort of raise this issue. on december the 22nd, 2008, mr. lewis you sent an e-mail to your board and let me quote, it says, i just talked with hank paulson.

he said that there was no way the federal reserve and the treasury could send us a letter of any substance without public disclosure, which of course we do not want. do you remember that? >> i do, yes, sir. >> you know, that sort of -- i was raising this because of the answer that you gave to my colleague from virginia, mr. connolly, i didn't get that point, that you actually sent that memo. i mean, it seemed to me that in his question that didn't come out. >> may i give you the context. >> sure. >> i had called mr. bernanke and said is there something you can give us in writing because my board is concerned that everything is verbal and we have nothing concrete and going in towards the end of the year and

about to have to consummate this deal without anything in writing. he said let me think about it. and the next call i got was from hank paulson. and he told me that first of all, if they gave us any kind of agreement it would be so watered down that the board would not find it satisfactory and secondly that they did not want disclosure. he was talking about the government not wanting to create a discloseable event and have to disclose, not bank of america. >> sure didn't make that clear with my colleague from virginia. let me move on. >> i apologize. >> congresswoman from ohio. >> mr. lewis, i've been here since this morning and find your testimony a bit disquieting today for some of the following reasons. bank of america owns 49.9% of

black rock. but you seem not to know anything of its activities. number two, you are the person who was in charge when bank of america acquired countrywide over a year ago, but you apparently weren't aware of its books and the losses inher ent in the purchase. number three, you are the ceo of the largest bank in the country and you seem to present yourself as having a rather hands off relationship with the federal reserve and the treasury. i find that somewhat incredulous. let me ask some follow-up questions. in terms of the purchase of black rock that was a part of your merrill lynch merger, it's

my understanding that black rock now valued over $1.3 trillion. and that they've just received 5 no-bid contracts from the federal reserve, among them managing troubled subprime mortgages in the freddie mac and fannie mae portfolios. the people of the united states have through the fed have propped up fanny and freddie to the tune of $200 billion. for the record, can you provide the contract that black rock has with the fed, particularly the one regarding the management of fannie mae and freddie mac's port fort yoes? >> i don't know if i can. we don't run black rock. we have two or three seats on the board, but don't have a ceo or chairman and he doesn't report to anyone in bank of america -- >> you own 49.9%.

isn't that a strange relationship. >> we don't own 51%. that would be the difference. >> do you know how much black rock will earn from that contract with the federal reserve to manage fannie and freddie papers. >> no, i don't. >> let me mention, "new york times" wrote the following, can a company being paid to sell troubled assets for the same kind of assets for private clients without showing preference and should the government seek counsel from a company that stand to make or lose billion fz the policies are enacted. can you outline how the bank of america will avoid conflict of interest in the mortgage portfolios and insider dealing charges as mortgage portfolios are resolved and bank of america mortgages are involved when black rock is actually the des

ig knee to manage the portfolios on by half of the federal reserve. >> black rock would have to manage those with the client would have to manage anything like that. >> but obviously, bank of america, some of your mortgages are held by fannie mae and freddie mac, you were acquirer of country wd, the largest subprime abuser in the country. >> and black rock would have to take that into account, yes. >> can you provide for the record the documents you may have at bank of america that contain or record the conflict of interest review undertaken by bank of america to ensure proper ethic as these mortgages are resolved. >> the conflict would be with black rock and the client, wch would be freddie or fannie mae. countrywide is doing quite well

and we have changed policies to become one of the most reputable in the country. >> there's a whole hearing on countrywide. >> it would be prebank of america. >> are any of the former countrywide staff on your staff of bank of america? >> there's some stuff but nobody in executive management. >> i beg your pardon? >> we sent our ceo to run the company. >> mr. chairman it wouldn't be bad to hold a hearing on the relationship, black rock the countrywid and fannie mae and freddie mac and explore the interlocking relationships that you claim have no bearing on activities within your institution which sound very unusual as you state them before the committee today. i wanted to just in my second question here, relating to superior banks, which had the largest settlement in american history at the fdic in 2001,

over $450 million as a result of their subprime activities in chicago and beyond including services by merrill lynch, which is how you would acquire the superior loans, troubled loans. let me ask you when bank of america acquired those loans, did you audit them prior to reselling them to investors? >> i'm not sure of that transaction. i would have to get you somebody who was more familiar with the transaction. >> explain to us as head of this massive and important bank in our country, what is your plan for dealing with bad loans such as the superior loans that came to you through the fdic merrill acquisition? >> well to the extent that you have loans, you can rehabilitate, you do. to the extent that you can sell loans for discounts, you do. to the extent you can't do either, hold them on the books and at some point write them off. >> if you sell them to knowing

investors enthey were bad loans, what happens? >> you would take a massive discount. the bank selling them would take a massive discount. >> i would like the paper trail, audit trail on the superior loans that your bank has been handling. >> thank you, mr. chairman. >> mr. chairman -- may i ask the chairman to yield just for a second -- may i place in the record an article from the atlantic monthly, may 2009 on the financial crisis, please? >> without action. >> ask unanimous consent to insert e-mails i offered on the screen for the record. >> without objection. >> the gentleman from maryland. >> thank you very much, mr. chairman and mr. lewis, i'm confused. just picking up on some of the things that the chairman and mr. kucinich were asking about. i can kind of understand your reaction to discovering there

was a $12 billion loss suffered by merrill lynch especially coming after shareholders vote to purchase merrill lynch. i can understand you telling the fed and secretary paulson you were thinking of backing out of of the deal. i can understand that. that was based upon your expertise and your experience. i cannot understand the agreement you reported that you made with treasury and the fed which they both denied to disclose the $12 billion loss. if the loss made this horrible business deal to acquire merrill lynch, why did you still do it? and i know you've told us over and over again. but let's be frank. i mean, and i'm wondering, how do you determine what is -- you must disclose. we have shareholders here who are concerned. you're about to go into a deal with a company that is worse off

than is made to believe. and it just seems to me that and a person with your experience, there are a lot of people in this situation and i don't care what paulson may have said, what bernanke may have said. they would have said, the tell with you, i'm going to stand on principle and my principles tell me there's a mac here and a real problem. if i go down, i go down. but i'm going down on principle. i want to give you an opportunity to tell us, because i got to tell you, i mean, i'm kind of concerned because i thk there are some serious credibility issues and i think mr. kucinich raised some things that if i were your lawyers, i would be concerned about. so help me. >> your referring to the fact that despite the fact we thought

we could have a mac we relied on the -- >> and i'm also going to the point that i believe that when you said you don't just go and tell the feds and paulson that, look, i smell a rat here. somebody of your stature, i can understand if you were some guy that came off the street six months ago and the last thing you did was even though you were a bank teller, no offense to bank tellers, that's all you did, you're a major player. and when you speak, people listen. so i'm trying to figure out, you've got -- you -- i mean, you said there is a problem here. but then you let these folks -- i mean in all due respect to bernanke and the feds and all

due respect to paulson, you're the head of this bank and head of bank of america, they are not. you're -- you've got to answer to the shareholders. i'm trying to figure out why -- and this is stuff, it seems to me, if i had this kind of information, i wouldn't even want my shareholders to be voting on something and they did not have full disclosure. i'm trying to figure out where does the disclosure come in. i get the impression that there was insufficient due diligence, i know you were dealing with a crunch time and only a matter of hoursz irp you were trying to turn all of this over. i got that. i man of your stature i refuse to believe you set traps parns sparnscy to the side for xpeed

yency. i'm trying to give you ap opportunity to explain this to us. if you don't want us, that's up to you. >> if you ask, i will do my best. i don't know what else i can say other than we were influenced by the strong nature of the wording from the federal reserve and the treasury in the sense that they obviously felt very strongly that we did not have a mac. i also looked -- still thought we had a strategic reason to do merrill lynch despite the fact it had a financial issue. and the third i thought the downside of calling a mac and not winning was severe. all of those factors were factors in me making that decision. if i had thought that it was a mac i would have called a mac.

>> i see my time is up, mr. chairman. >> thank you, gentleman from maryland. as we come to the conclusion of this hearing. it's important to remember that we have heard only one side of the story today. the committee needs to hear from mr. paulson and mr. bernanke before we draw any hard and fast conclusions. i do believe in fairness. however, i do think it is fair to observe that a flawed financial regulatory process was at work in this case. we see closed doors, meetings, coded messages. motives questions and private e-mails. basically the regulators and the financial institutions seems to be making up the rules as they went along. as congress considers financial regulatory reform, one of the lessons from this case is that

we need much more transparency and accountability in the financial regulatory and oversight process. the american taxpayers and corporate shareholders deserve no less. they need to know what's going on. let me again, thank you mr. lewis, for being here today. before we adds adjourn let me stay, this committee has and will continue to protect the american taxpayers. and we'll continue to make sure that the taxpayers dollars are spent in a transparent and wise manner. without objections, i enter this binder into the committee records and without objection, the committee stands adjourned.

>> this week, supreme court justice ruth bennett ginsberg talks about the court cases this term. that is at 7:00 p.m. eastern on c-span. >> national intelligence director dennis blair discusses the intelligence community and his trip to afghanistan, pakistan, and singapore. this is just under one hour. >> thank you ellen. eight is good to be here this evening.

their way to many friends in the audience for me to tell my usual stories. you have either heard them before or know that they are wrong, so i will have to make it up here as i go along. but, it is a pleasure to be here with all of you who have been friends of longstanding and come together as a group to support u.s. intelligence. let me start by thanking for the truly and press the devitt alliance of movers and shakers in the intelligence and national security communities. there's certainly no form quite like it, government come industry, academia to share this commitment to meeting the challenges of our times. it was an honor for me to be seated with some of the founders of this organization at the table here earlier this evening. so i would like to talk about three subject tonight. first, i will update you on some of the areas of concern we are following closer and the intelligence community.

i will ellen tell you a little bit about the trip that i was on in pakistan and afghanistan, and then i will finish by talking about the priorities for the intelligence community that i have the privilege of bleeding, so let me start by talking about a few of these areas that are of concern to us in the intelligence world. one that is perhaps and usually at the head of the list now are the national security implications of the worldwide economic recession, which we are now enduring. it is one thing to look at it as a financial and economic problem, and i will leave it to others to predict how long the current recession is going to go on and when we are going to come out of it, but we tried to view it with regard to the events coming out of it that might help or harm american security interests and the effects, cut both ways.

venezuela, russia and iran have less oil revenue. that can be a good thing if it means reduced funding for actions which are against u.s. interests. the overall slowdown has put general pressure on military budgets throughout the world and that is a pretty good thing if these are military budgets that are against our interests but it is not such a good thing if they are the military budgets of our partners and allies with defense budgets and overseas assistance budgets. we have been getting less help around the world for the things we need to do together. and then of course we are concerned about the effects of this recession on the stability of countries. it has been the stability and weaknesses of countries since the second world war have seemed to have triggered american overseas involvement. if you look at it since 1990 or so we have had more problems caused by countries that are too weak and ones that are too

strong. somalia, haiti, bosnia, east timor. afghanistan is the latest example of a country that is said to struggle to remain cohesive with american peace operations coming as a result. so we look quite closely to see if there are countries that are fragile states, that could require an american security response. so far there has been no major government that is toppled the to the recession. there have been peaceful changes of government. there have been reactions, strong reactions within countries to economic events. durbin policy changes within countries but we really haven't seen anything yet for example like the fall of this the part of government in the late 90's which was caused by the asian financial crisis. nonetheless, the recession continues, it's the worldwide gdp goes down the way it is predicted to next year and a trade continues to decline, protectionism raises barriers we can already see pressure

countries coming under greater pressure that might result in internal instability and be subject to meddling from outside. that is the kind of thing that could trigger an american response or a coalition response that we might be a part of, so we are watching these sorts of dfcs pretty keenly. when you analyze which countries it is that are affected by economic problems, the ones that are well-established democracies seemed to be able to handle it. dave odell dealed government in the next election, bring in the new one and give them a try for a while. in other words some of that syndrome happened in our own country recently. on the other hand countries that have really strong, authoritarian regimes handle it by turning down the screws on the claims. if things get works economically it does not matter because the police and armed forces are so powerful and certainly north korea is in that category.

although, north korea seems to be staying fairly busy these days mapping out the sea bed in the pacific with missile probst so they seem to have other things going on. but, it is the countries that have a combination of some of their-- authoritarian features and at least populist not democratic that seemed the most susceptible to change and loss of stability due to tough economic conditions. the new democracies of central and eastern europe are examples. ukraine in particular is under a great deal of political pressure due to difficult economic conditions. except for and yet many questions of south asia are similarly under pressure. virtually all the ander developed countries, especially africa, under the under greater siege because of the economic assistance drop, the further deterioration of their own economic situations and other factors that are important such as tribal or ethnic conflict and

violence nearby. the intelligence community analysis and modeling shows that really the duration of the recession is the key factor in the strength of its effect. while the current recession is the worst since the 1930's so far does not have the political impact of the great depression which had the longer time run, however another year or two might bring a different and worse story. so, this area of the economic, the effects of the economic recession is one that we are watching in a new way. if there is a geographic region of the world that we are looking at most closely it is the area from turki down to the eastern border of pakistan. that seems to be were the most american and western security concerns like. as this administration has undertaken its initial round of policy refuse the interconnected issues of iraq and afghanistan and pakistan, israel, palestine

at commanded most of the attention. transnational isu's extremism, the proliferation of nuclear weapons, and trying to sort out the reality on the ground of all of these intersecting both national and transnational and multinational effects, identifying trends, trying to predict their effects. those have been a steady challenge for the intelligence community. as ellen mentioned i just returned from a trip to pakistan and afghanistan so let me report on some of the developments that are going on there. in pakistan, the primary security event is this offensive in the swat valley that is being pursued by the pakistan army. we have seen these operations in recent years, but i think there is some interesting and important changes to what is going on this year. in the first place, for the

first time, the pakistan army operations in that part of the world have support of the government and of the public. there was a parliamentary solution, which occurs. defences takes place. there been statements of support by the government, and more public support and this is really different from the past when the army went up and there was little backing from the public come a little backing from the government. as we all know who served in the armed forces, when you are up there making sacrifices and nobody back, seems to be caring or supporting you, it is not something that you push hard. it is not something that maintains that intensity. another difference now is that, and this