whether we have a franks style inquiry or whether we have a fully public inquiry. i have given the reasons why a fully public inquiry does not seem to me to be appropriate when we're dealing with issues of national security and issues affecting the military. >> the most important decision and one makes one coming here is to send troops into iraq. i have felt that since we came here. i have never once asked a question that would embarrass the troops for the government because i always waited on the knowledge there would be a public inquiry. therefore i am extremely disappointed that the inquiry will be limited because at the end of the day, we will look at that inquiry for two reasons. one is to learn the lessons of the mistakes are made. second is the truth must,. at the end of the day, the general public needs to know the

truth. it's far more important for people to understand when the device to prime ministers that there will be a day of reckoning and a public inquiry is the only way to deal with that. >> i am grateful and he has always stood by the armed forces of this country and i appreciate he holds strong views about the issue. i just have to say that while the inquiry is done in private, the report will be fully published for people to debate in this house. people will be able to see for themselves what conclusions are drawn by this inquiry. at the same time, as i said earlier, i have asked the inquiry will publish in permission other than all the mission other than the most sensitive military information. the house will have a chance to debate a fully comprehensive report that covers eight years and covers all issues in the run-up to and aftermath of the conflict.

>> president obama takes his health-care plan to the american medical association today. the ama is holding its annual meeting in chicago. congress begins work on the plan this week. president obama is on the road to promote it. you can see live coverage of this comment at 12:15 eastern on c-span2. here on c-span, we are live at 1230 as the you -- at 12:30 as a house devils and for morning hour. legislative work begins at 2:00 eastern. among the 20 bills is one allowing the inspector general overseeing afghanistan or spending to hire more inspectors. another is limiting the impact of lawsuits against u.s. journalists that take place in other countries. c-span3 is live at 1:30 as the head of the world health

organization's polio eradication efforts gives a speech on disease and prevention. he is expected to take questions on the h1n1 swine flu virus. >> people like to have books. it's a very sticky medium. we've seen this medium be sticky since the 15th and 16th centuries. >> tonight, on quality the communicator's" the owner of random house on how the public -- how the publishing industry is changing. >> when you read something great, you want to be an airline product for you personally. when you have digital media, it's harder for that to be true. you cannot be proud of a bookshelf that is a memory stick. >> the future of publishing, tonight at 8:00 eastern on "communicators'." >> how is c-span funded? >> i have no clue. >> government grants.

>> donations. >> advertising. >> public money i'm sure. >> my taxes. >> how is c-span funded? 30 years ago, america's cable companies created c-span as a public service, a private business initiatives, no government mandate, no government money. >> treasury secretary tim geithner says small banks will be eligible to receive funds from the government's troubled assets relief program. these remarks came at the policy summit in washington d.c.. this is about half an hour. >> welcome to this special edition of conversations on the circle. our journalists at cnn, time -- cnn, "time," and "fortune" come together to put these things together and get them on the

screens at cnn or if we're lucky, we get them in person for a face-to-face. our guest this morning has been described by president obama as a treasury secretary faces the most daunting set of challenges since alexander hamilton. the president is right, of course, if you don't count aaron burr. in just under five months, he has led to treasuries unprecedented efforts to rebuild the financial system, to restore trust in america's position in the world, and that process is in the middle of under way. judging by the energy and intelligence with which he is taking on our economic crisis, i would put my money on him. in fact, i think we all have put

our money on secretary tim geithner. leading this morning's discussion is one of our country's most thoughtful journalists. he is the 16th managing editor at "time" and not only the start of their command to journalistic excellence, but he is leading our 21st century reinvention of the brand and role and mission of that magazine and our public life. in conceiving this interview series, we were motivated by the realization that it is good to read, it is a good to watch cnn, but in this high-tech world, there's nothing like a face to face discussion to get to not only the ideas, but the thinking behind the ideas. with that, please welcoming -- please join me in welcoming the 75th treasury secretary of the united states, the hon. tim geithner. [applause]

>> let's get right to it. you and larry summers have an op-ed in the "washington post" laying out a regulatory framework for the nine states. what is different? >> we have a system that proved too unstable, too fragile, undermined what was the great strength of this country, which was a financial system that was the best in the world at taking the savings of americans and channeling them to the best ideas. it helped finance growing companies. our system is still pretty good at that, but it was fundamentally too unstable and fragile and did a bad job at basic protection of consumers and investors. those are things we have to change. >> a couple of weeks ago, we are

going to do a chart of all the regulatory agencies that exist, but there are too many to put on a chart. >> is a spectacle. >> it seems like the system you are laying out is a bit of a compromise. you're not getting rid of very much and you are putting in a new college of regulators. how's that going to work? >> we are trying to focus on what was at the core of this crisis. there are a range of things in a system that she would not put and if he were starting from scratch. there are things that would be nice to do if we have time and infinite capital, but we're trying to focus on the practical issues. they are basic gaps in protecting against the system, basic gaps in consumer investor protection. we need to change at first by putting a strong set of constraints on risk-taking.

we can streamline the oversight structure, but we will focus on those things at the core of the problem. >> early on, you moved the idea of having a risk regulator. what about consolidating that into an institution? >> i think part of the problems was at the first you have made accountability problem. -- you have an accountability problem. yet to give responsibility, otherwise you have a bunch of people going like this. i think that's an important thing to fix. we will try to eliminate gaps in the basic structure over the core institutions that the markets like for derivatives and that markets that are critical to how the system functions and better tools for managing crisis when they happen. >> what role did congress play

in this? one thing people will put out is that the chairman still have supervision over the same areas. is that a problem? >> no, i don't think it's a problem. congress has to legislate these reforms, but all of the changes we need it will meet regulation by congress. -- a lot of the changes we need will need regulation by congress. we are moving very early to do this. we have an economy facing enormous challenges and a financial system in the early stages of repair. because of the magnitude of pressure and the importance of reform, we are trying to move quickly while the memory of the crisis is acute in people's minds. we don't want complacencies said then and people to get comfortable with where were living with too long for decades. >> i'm trying to get you to make some news. what are you going to get rid of in this plan? are you getting rid of the

office of thrift supervision? >> this is a challenge for you because the president is speaking on wednesday and i am testified on thursday and i don't want to get ahead of the president. i just want to focus on the course objectives. what the system that prevents further crises and preserve the benefits of innovation, protect consumers and investors better and has better tools for managing future crises. our financial system is a great strength of the american economy, it does a great job of using innovation, but we need to do a better job of making it more stables of crisis cause less damage in the future. >> the toxic assets buying program, is it dead? >> not at all. let me step back. when the full week -- when the president came in, we had a financial system that was very damaged. the banks cannot raise equity and not able to re -- not able to lend because of that. the credit markets that provide

half the credit and our economy were not functioning well. so we put in place a framework of facilities to try to repair those core features of our financial capital markets. if you look at where we are today, we made substantial progress. we had a huge amount of common equity coming into the system, a substantial of money come back to treasury, a comparable amount coming into the banking system new and fresh. banks were able to raise capital much more easily than we thought it would be able to because of the disclosure transparency produced by the stress test we undertook. i think you are saying risk premiums come down the markets open up again and that's a very encouraging thing. you raise the question of toxic assets. what you are suggesting is because the system seems to be

getting healthier, the banks think the prices for toxic assets are not high enough. the key test is our banks able to raise equity? are investors confident enough to judge the strength of the bank's balance sheet? we have seen substantial progress in that area. we're still going to put in place these facilities for legacy assets because we think it's good insurance against the risk of a future downturn and we think it provides broad help to this process of falling. we want them to be in place, but if the world gets progressively better, you may see less demand for its facilities. >> as a taxpayer, is this in my interests? and i going to get a better price for the assets i'm going to buy? >> the whole thing is designed to make sure get maximum benefit for minimum risk to the taxpayer. to make sure they are buying with again in the game and that's the best protection. those protections are the core of these things. the key thing is broad concern

in the markets about the possibility of a deeper, more protracted global economic downturn, concerned about the risk of a wave of deflation or concern about systemic risk and finance has greatly diminished. that has helped provide some stability for economic activity, confidence is better cars craniums are lower, easier for banks to raise money. but it is very early. we do not want complacency to set in and we have a ways to go. this will still be an enormously challenging time for the u.s. economy. >> the banks are getting healthier. 10 of them want to return their federal money. why cannot lending at the level they had hoped if they are healthier? >> there is more credit available today than it would happen in the absence of this capital. a dollar of capital is about $8- $12 of lending capacity.

if you had a dollar short of capital, he would have a dramatically less capital in the system. but remember, this is a crisis borne in part of the fact that particularly households around the world took on too much debt. our economy rose to extraordinarily high levels and we're having a recession that is deeper in part because people are having to go back to living within their means and they will have to pay down their debt. that's a healthy process. but it means you'll see less demand for credit flowing and demand falling as people live within their means and are less vulnerable in the future. that's a healthy process, but it means you will see a slower recovery than normal. >> elizabeth warren has mentioned the fact that the stress tests may have missed a big area of stress, which is a commercial real-estate lending.

is that true? are you reckoning with that? is it something you have buried under the carpet? >> the stress test was designed by the fed and the work careful to put in conservative estimates of potential losses across all types of credit assets. there is a picture in the report that is very important -- it shows what they used against peak losses over the last century. the estimate they use, this is not a prediction, but it is an abundance of caution to make sure there is a thick enough capital cushion, the estimates they used was worse than the peak two years of losses in the great depression. when emperor -- when unemployment was 30%. it was a very conservative test. when the results were disclosed any south level transparency brought to a bank balance sheets, you have seen a lot of capital coming to the financial system. >> you were in china recently.

i wonder how worried are they about their debt and america. you mentioned that you're hoping to see that that be 3% of gdp and they did not seem to think that would be possible. >> i would not say that. i think the chinese have a very sophisticated understanding of the strategy we are embarked on. i think they have a lot of confidence and a funnel strength and resiliency of the u.s. economy. i think they understand that faced with the crisis we were faced with, it was necessary to take extraordinary action and results were a temporary increase in borrowing as we try to get the economy on track and the financial system working again. but that was going to be the best -- the best path any aspect toward where budget deficits are lower and more sustainable. we can get out of these extraordinary interventions in the financial sector. it is a paradox. i'm faced with a crisis and the

conservative response is the best way to get yourself back to where you can picture fiscal house back in order. i think they recognize their economic fate is closely tied to the economic fate of the united states. that's a healthy recognition. >> what do you look at first thing in the morning to gauge how healthy the economy is that day? >> cnn. [laughter] >> and time.com. >> absolutely. we have a great group of people across the executive branch looking at the data and risk and confidence. my sense is that you need to look at everything. there is no particular measure that dominates all others, particularly when you're going to such a time of uncertainty. the best thing is to look at everything and look at things that seem anomalous in the

encouraging more troubling direction. the cautious. we have seen a lot -- be cautious. we have seen a lot of of it -- we have seen all lot of improvement. this process of repair and recovery will take time and it will be uneven. this is going to be an exceptionally challenging time for businesses and families across the country. unemployment will keep rising even as growth starts to recover. we want to make sure people understand we will keep at this until we fix it. >> you mentioned unemployment rising. i love that term lagging indicator. it's not a lagging indicator if you have lost your job. how you evaluate how the american people are doing and responding to this? >> if you look at measures of confidence among businesses and average household, confidence has improved. it has steadily improved as they have seen the president and congress.

my own sense is that are around the world, the turning of confidence came when they saw the president and leaders of another major economies come together and commit to a substantial amount of policy forced to fix the economy. crises cannot burn themselves out without the risk of terrible damage. i think the lessons of the financial crises is a you have to be forceful early and be cheaper and do less damage to the productivity class of the economy. if you are forceful early, i think that is what helped turn confidence. but it is early still and we have a ways to go. >> a professor from yale does not see the bottoming out of the real-estate market. do you? >> i generally try not to talk about markets or the outlook in any detailed way. it's not a good thing to do for secretary of treasury. but if you step back and that

the economy, we came into this with big pockets of excess leverage in the financial sector, a long time of excess borrowing by parts of the household sector, and a big boom in real estate. the rest of the economy, pretty resilient and healthy, no large, dramatic and balances. we are two years into this and has been a lot of it chessman and financial sector. a lot of adjustment in the real estate sector and private savings rates have come back dramatically. para 5% after being negative for a long time. you see a lot of healthy adjustment behind us. it does not mean we don't still have challenges ahead. but it is important to recognize that those are necessary conditions for getting through this and one of the great strengths of our economy is that because we are so flexible, these things happen with a

force. the happen more quickly and that will ultimately be more healthy and we will come out of this matter because we just quickly. >> you alluded to this rear -- this idea that there is a silver lining to some of this. we did a cover story about the new frugality. would you say that it is true in the sense that american consumers have to hunker down and get back to older values? >> you don't want any family to go through this to learn the basic lesson that you want to live within your means. but i think it's a fundamentally healthy process and if we're careful, and make sure that as we fix the crisis we are laying the foundation for a more productive economy, then we will have a more stable and sustainable growth in the future. that is why at an early stage we're trying to make sure we have investments in improving

education outcomes, reform health care, and strengthen our infrastructure. the basic foundation of the economy is more stable in the future. these are healthy adjustments in behavior and people will be focused on what they do rather than what they earn. i think that's a healthy thing. >> you mentioned health care and the president is beginning to roll out his plan, although it's unclear what his plan has. what happens if health care -- healthcare does not get passed? what happens if it does? that's adding trillions of dollars to the economy. how are we going to pay for? >> i think health care will get passed. there is broad support and there has been a lot progress on the basic contours of the plan. fixing health care and the sense of improving health care outcomes at war costs is very import -- health care that --

health care outcomes at war costs is very important. you could say the path to fixing the economy goes through health care and some sense and i think there's a good chance it will get passed. there is no doubt, i don't think anyone close to health care does not believe we can do substantially better in getting better quality outcomes, more broadly applied and available, ally or future cost and that is what we're trying to do. >> -- at lower future costs and that is what we are trying to do. it is very important that this be done in a way that is deficit-neutral over the long run and is not add to our near- term or long-term deficits and we will make sure comes up consistent with that basic and straight. we face some very daunting long- term fiscal challenges. we need to make sure americans understand that we're going to bring this deficit down even as

we try to address and improved health care outcomes. if we do reform right, it will help us address those long-term deficits because the biggest driver of this long-term deficits is the unsustainable rate of growth in health-care costs. >> it seem as high in the sky to say digitizing medical records will save the funds needed for reform. something many people have mentioned is the notion of a value-added tax to pay for health care. is that in our future? >> let me come back to costs. one of the great strengths of our system is that for cost to count, in a fiscal sense, they have to be scored by an independent body as being real. there may be other things helpful to long-term reform and we will know whether they deliver, but the things on the

fiscal side have to be real, measurable things and there is an extraordinarily long list of things where there is broad consensus. i don't think anyone believes we're close the frontier of what is achievable. >> and value added tax? >> not in this context. >> is there another context in which it could work? [laughter] >> i did not mean to encourage you in that direction. [laughter] >> the fdic says there needs to be new management at citigroup. you agree? >> i don't want to comment on individual firms or circumstances. i would say that one of the reasons we have to have reform of the financial system is that i don't think we have a situation where we have so many entities crawling over individual institutions, sending

conflicting signals, adding to basic uncertainty. we are the united states of america. we should be able to design a system where there is more clarity of our rules of the game, the signals sent, and that is something we want to work on. but if you just that back and look at the financial system today relative to where it fell in january, february or march, we're in a stronger position today to get through this because of the has come into the system to make sure we have a system that is reenforcing recovery and not constraining it. >> in some ways, there is a misperception in the public about you. the figure you are longtime banker. you were a regulator of banker, all is a public servant and had never been a banker. you have said that you don't understand bankers. >> i don't know if i said that. >> i think you said it privately. >> i have been accused of being

a banker many times. >> but one day here skeptic about them -- do bankers care about anything else other than their own compensation? >> that's a very interesting question. [laughter] i'm not going to answer that question. [laughter] it is hard to judge motives in these things. >> they are frustrated that they have not had that other interests besides their own compensation. >> we have an economy that relies on the market. it relies on we have a set of constraints against excessive risk-taking and set of protections against the risks of what can be imposed on the economy and those protections failed. they failed for lots of different reasons. the basic checks and balances the boards are supposed to oversee were insufficient. supervision did not do what was supposed to do in terms of protecting the system.

part of that was because compensation was designed in a way that it overwhelmed the checks and balances. incentives were just too powerful. that's something we have to fix. last week, we announced not just some broad principles, but giving the sec more authority to provide disclosure and we have led the efforts the supervisor is undertaking to make sure they can supervise for compensation incentives to reduce the risk that happens again. we want there to be risk taking in our economy. there is a risk at giving what we have been through, people are taking too little risk. for this to work, investors need to take a risk on business and the american family and we want to see more of that. we want to see incentives for innovation preserved, but within a framework where there is better protection for the better protection for the innocent victims of crises