the 46 million people who currently do not have health insurance. people with pre-existing conditions that live in geographically out of the way parts of country -- the country would have the same quality of care as other people do. that was the message that he was trying to send. he was trying to preempt the ama. you look gets some of the concepts that are coming out of the senate in particular. he is trying to prevent them to not launch a full-scale offensive. >> what will you be looking for as lawmakers began a workout that could take weeks? >> the house committee, there is not too much to watch in terms of the action. it is now pretty much democratic

territory with a bill that reflects the priorities of most of the senate's liberal democrats. it does not go as far as people like bernie sanders would want in having a single payer system. the finance committee is set to begin marking up its bill. max baucus, a democrat out of montana, has been adamant in wanting to produce a bill that would garner republican support. doing so would make sure that it has staying power of the coming decades, let alone over the next year or two. i would like to see if the sketch of the bill that they markup will leave republicans screening or frowning. >> thank you for talking with us. >> in a few moments, treasury secretary tim geithner on the

economy and the government's efforts to aid financial institutions. in half an hour, senate term rakowski talks about the energy bill being marked up in committee. -- murkowski talks about the energy bill being marked up in committee. on "washington journal" tomorrow, we will discuss the supplemental spending bill. and with the former director of the national institutes of health, and she joins us at 9:00 eastern to discuss health care. after that, our guest is the un bureau chief of the "the new york times." he has written a new book called "at hezbollah wishes you a happy birthday." a couple of live events to tell

you about our companion network, c-span3. the house financial services subcommittee holds a hearing on an subcommittee oversight. they will look for ways to keep insurance companies from pursuing policies that might hurt the financial system. later, nominations are considered for the federal communications commission. that is at 2:30 eastern. >> how is c-span funded? >> i have no clue. >> may be some government grants. >> advertising for products. >> public money i am sure. >> my taxes? >> how c-span funded? 30 years ago, america's cable companies created c-span as a public service. no government mandate, no government money. >> next, tim geithner on the economy and the government's

efforts to aid the financial markets. this is half an hour. >> are journalists are constantly working to get the great minds on great issues. they want to get it in print, on their screens and cnn, or sometimes here. our justice this morning has been described by president obama as a treasury secretary that faces the most daunting set of challenges since alexander hamilton. the president is right, if you do not count aaron burr. in just under five months,

secretary geithner has led the unprecedented efforts to rebuild the financial system, to restore trust in america's position in the world and that process is in the middle right now. judging by the energy and intelligence with which he is taking on our economic crisis, i would put my money on secretary geithner. i think that we all have put our money on secretary geithner. leading this morning's discussion is one of our company's most thoughtful journalists. he is the 16th managing editor. he is a steward of our long term commitment to journalistic excellence.

in conceiving this interview series, we were motivated by the realization that it is good to read and watch cnn on tv, but in this high-tech world, there is nothing like it face to face discussion to get not only the ideas, but the thinking behind the ideas. please join me in welcoming the 75th treasury secretary of the united states, the honorable timothy geithner. [applause] >> let's get right down to it. you have an up and laying out the new regulatory framework of the united states. >> we have -- we had a system

that proved too fragile that undermine the great strength of this country. we had a financial system that was the best of the work -- in the world at taking the savings of the people around the world and channeling them to the best ideas. our system is still good at that, but it was too unstable and fragile. it did a bad job at basic protection of consumers and investors. that is something that we have to change. >> we were going to do a chart of all of the regulatory agencies that exist. there were too many to put on a two-page chart. >> it was a spectacle. >> the system that you are going to lay out is a bit of a compromise. if you are not getting rid of too much. you are putting in a new college of regulators. how is that going to work? >> we are trying to get at the

things that were at the core of the problem in this process. there are a lot of things that would be nice to do that if we had time and infinite capital. we're trying to focus on the practical issues. they are basic gaps in protecting against systemic risk and price -- crisis prevention. basic gaps in their efforts to manage crises. we need to change that first by putting a stronger restraint on risk-taking. we can help have oversight on the risks structure, too. >> you muted the idea of actually having a risk regulator. what about consolidating that into one institution or person? >> one of the problems where you have too many people involved, there is an accountability problem. at the core of making the system

stronger is to give one place in the system clear accountability, responsibility, and authority for preventing future crises. otherwise, if you have a bunch of people going like this. that is important to fix. we will eliminate gaps in the basic structure. markets that were really critical to how the system functions have stronger oversight over them. they have better tools for managing the crisis when they happen. >> what role did congress play in this? people will point out that men like barney frank still have that supervision over the same areas. is that the problem? >> i do not think that is a problem. congress has to oversee these reforms. a lot of the changes that we need will require legislation by congress. we are trying to build a consensus on reform.

we are moving very clearly to do this. we have an economy facing enormous challenges. because of the magnitude of the pressures by this crisis, because it they are trying to move quickly wald the crisis is still ahead in people's minds, we do not want the crisis to set in. we're trying to move very quickly. >> i am trying to get you to make some news. what are you going to get rid of in this plan? are you going to get rid of the office of supervision? >> this is a challenge for you. the president is speaking on wednesday and testifying on thursday. i do not want to get ahead of the president. i am trying to focus on the course objectives. we want a system that is more stable and resilient, protect consumers and investors better, better tools for managing future crises. we can do better than that.

our system is a great strength for the american economy. it does a great judge. we need to do a better job of making things more stable. >> but switch subjects. the toxic assets buying program, is that debt? >> not at all. when the president came in, we had a financial system that was very damaged. banks were weak and could not raise equity. they were not able to lend because of the cloud of uncertainty over the banking system. the credit markets were not functioning very well. we put in place a framework of facilities to replace 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 equity coming into the banking system. we had about $70 billion come back to the treasury.

a comparable amount went into the system new and fresh. banks were able to raise capital much more easily than we thought, partially because of the disclosure transparency. even the asset backed securities markets that were so damaged crushed -- are starting to show signs of life. we're starting to see markets opened up again. that is a very encouraging thing. you raise the question about toxic assets. u.s. suggesting that because the system is getting healthier, that the price for the toxic assets are not high enough. >> our banks able to raise equity? are investors confident enough in their ability to judge that they want to put equity into a bank? we have seen substantial progress in that area. we will still put these in place for legacy assets. there could be risks of a future downturn.

we think that they might provide some help. if the world gets progressively better, you may see less demand for those facilities. >> as a taxpayer, is this in my interest? >> the whole thing was designed to make sure we are getting maximum benefit at minimal risk to the taxpayer to make sure that investors are buying this with money at risk. those protections are at the core of these things. the key thing is that brought concern in the markets about the possibility of a deeper, more protracted economic downturn, a concern about the risk of a wave of deflationary, concern about systemic risk is dramatically diminished. that has helped provide some stability in economic activity. confidence is better. it is easier for companies to raise money.

those are encouraging signs. it is clearly still. we do not want complacency to set back in. this is still going to be an enormously challenging. for the time to come. >> why are banks not lending? why are they not lending at the level that we had hoped? >> there is much more credit available today than there would have been in the absence of this capital. $1 of capital is about $8-$12 of lending capacity. remember, this is a crisis born in part of the fact that households are around the world took on too much debt. our economy rose to extraordinarily high levels. we have a recession that is deeper because people are having to go back to living within

their means and paying down their debt. that is a healthy process for us. you will see less demand for credit falling as people get themselves back to the point where they're living within their means and they are less vulnerable in the future. that is a healthy process. you'll probably see a slower recovery than we would normally see. >> elizabeth has mentioned the fact that the stress tests may have missed a big area of stress, which is commercial real-estate lending. is that true? are you reckoning with that? is that something that you. o under the carpet? >> they were careful to put concerned estimates of potential losses across of all types of credit assets. there is a picture that they put out is very important. they had peak losses over the last century. the estimate that they use, this

is not a prediction of losses. they have to make sure there is a thick enough cushion. the estimate that they used was the -- worse than the peak two years of losses during the great depression. our economy had shrunk dramatically. it was a very conservative test. when the results were disclosed, and you saw that level of transparency brought to bank balance sheets. you see a lot of capital going into the finance system. >> you were in china recently. i wonder, how worried are they about their debt in america? you mentioned that you were hoping to see that the 3% of gdp. they did not think that would be possible. >> i think that the chinese have a very sophisticated understanding of the strategy we are embarked on. they have a lot of confidence in the u.s.

i think that they understand that faced with the crisis we were faced by the beginning of this year, it was necessary for us to take extraordinary action. the results were a temporary increase in borrowing as we try to get the economy back on track. that was going to be the best path to getting us to the point where our budget deficits are more sustainable and we can get out of the extraordinary interventions in the financial sector. when faced with a crisis, the conservative response is to be aggressive. that is the best way to get yourself back to where you can put your fiscal house in order. i think they recognize that. they recognize that their economic fate is very closely tied with united states. that is a healthy recognition. >> what do you look at first thing in the morning to gauge how healthy the economy is that date? >> cnn.

>> and time.com >> absolutely. we have a great team of people across the executive branch looking at all of the economic data and looking at all of the financial indicators and risks confidence. my sense is that we need to look at everything. there is no fund that dominates the others, especially during such a period of uncertainty. you can see an anomalous in encouraging direction or not. we have seen a lot of improvement. encouraging signs of progress. it is utterly still. this process of repair and recovery is going to take time. this will still be an exceptionally challenging period for businesses. we want to make sure that people

understand that we are going to keep at this until we fix it. >> you mentioned about unemployment rising. i love that you use the term, a lagging indicator. that is not a lagging indicator if you lost your job. how do you think the taxpayers are doing? >> if you look at measures of confidence among businesses and average households, the confidence has improved. it has steadily improved as they see the president and congress act. my own sense around the world is that that term in confidence came when they saw the president and leaders of other countries come together and commit to a very substantial amount of policy to fix the economy. crises cannot burn themselves out without the risk of terrible damage. the lesson is that you have to be forceful early. you have to be cheaper, less

than damage. i think that is what has helped return confidence a bit. it is early still. we have a ways to go. >> we were chatting with him earlier on. he does not seek a bottoming out of the real-estate market. do you? >> i try not to talk about markets or the outlet in a detailed way. it is not a good thing to do for the secretary of the treasury. if you look at our economy, we came into this with big pockets of excess leverage in the financial sector. a long period of excess borrowing by the housing sector and a big boom in real estate. the rest of the economy is pretty resilient, pretty healthy, no large, dramatic and balances.

we are two years into this. there has been a lot of adjustment in the financial sector, and lot of adjustment in the real-estate sector. prices have come back. they have been negative for a long time. you are seeing a lot of healthy adjustment behind us. it is a -- it does not mean that there are not challenges ahead. one of the great things of our economy is that because we are so flexible, these things happen with brutal force. they happen more quickly here. that will ultimately be more healthy here. >> you alluded to this earlier. this idea that there is a silver lining to some of this. we did a cover story about the new frugality. there is a silver lining in the sense that american consumers have to hunker down and get back

to some older values? >> you do not want families to go through this just to learn that the -- the basic lesson that you want to live within your means. it is a fundamentally healthy process. if we are careful in making sure that as we fix the crisis, we are laying the foundation for a more productive economy, that we are quick to have a more sustainable growth in the future. that is what the president is trying to do. we are trying to make sure that we make investments to improve education out comes a and strengthen our infrastructure so that the basic foundation of the economy is more stable in the future. these are healthy adjustments in behavior. people are going to be focused more on what they do rather than what they earn. i think that is a healthy thing. >> he mentioned health care. the president is beginning to

roll out his plan. it is not clear what his plan is. what happens if health care does not get passed. what happens if it does? that is adding trillions of dollars to the economy. how are we going to pay for that? >> healthcare will get passed. there has been a lot of progress on the basic contours of a plan. fixing health care in terms of improving the outcomes on costs is a very important to the compact disk in the u.s. economy. it is very important to dress in long term fiscal challenges. the path to fixing the economy does go through a health care in some sense. a good chance that this will get passed. there is no doubt -- i cannot think anybody close to health care does not believe that we cannot do substantially better in getting more broadly available outcomes at lower future of cost growth.

>> it is still unclear how it would be paid for. >> i am glad you raised that. it is very important that this be done in a way that is deficit neutral over the long run. it does that add to our near term or long term deficits. in needs to come out consistent with that basic constraint. we face some very daunting long- term fiscal challenges. we need to make sure that investors understand that we are going to bring the deficits down to a sustainable position, even if we try to improve these health care outcomes. if we do reform right, it will help us address long-term deficits. the biggest driver is unsustainable growth in health- care costs. >> it does seem a little bit of pie in the sky that digitizing

medical records will save the kind of money to pay for reform. one of the things that people have talked about is a value- added tax to pay for health care. is that in our future? >> let me go back to the cost. for cost to count in a fiscal sense, they have to be scored by a cbo as being real. there may be other things that are helpful to long-term reform. the things that come from the fiscal side have to be real, measurable, it's horrible things. there is an extraordinary -- scorable things. i do not think that anybody believes we're close to the frontier. " the value-added tax, what about that idea? >> not in this context. >> is there another context in which it could work?

>> i did not mean to encourage you in that direction. >> the fdic says that there needs to be new management at citigroup. do you agree with that? >> i do not want to comment on individual firms or circumstances. one of the reasons why we have to have reform of the financial system is that i do not think we have a situation where you have so many entities climbing over individual institutions, is sending conflicting signals, adding to basic concerns. we are the united states of america. we should be able to design a system where there is more clarity about the rules of the game, the signal sent, and that is something i want to work to. just that back in the contiguous financial system today relative to where it fell in january, february, march, we

are in a stronger position to get through this. the stronger position because of the capital coming into the system to make sure that we have a system that is reinforcing recovery, but restraining it. >> there is a misperception among the public about you. the figure that you are a long- term banker. you have always been a public servant, never a banker. you have said that i do not understand bankers. >> i do not think i have said that. i have been accused of being a banker many times. >> your skepticism about them coming here is a direct question, do they care about anything else other than their own compensation? >> that is an interesting question. i am not going to answer that question. it is hard to judge motive in these things. >> we've run an economy that

relies on the market. it relies that we have a set of constraints and a set of protections for the system. those basic protections failed. they failed for lots of different reasons. the basic checks and balances that the board of directors is supposed to oversee work insufficient. supervision did not do what it was supposed to do in terms of protecting the system. part of that was that compensation to overwhelm the system of checks and balances. that is something that we have to fix. we announce broad principles about compensation practices. giving the fcc more authority on things like disclosure, and the

supervisor is making sure that they cannot supervise for a compensation incentives to reduce the risk that that will happen again. we want there to be risk taking in our economy. we have a long periods of people taking too little risk, not enough risk. we want to see more of that. we want to see incentives renovation preserved, but within a framework that there is better protections. >> let's look over the horizon a bit. what do you want the banking system to look like five years from now? they have talked about how we want more smaller players. >> a more boring system. a little bit less exciting. >> a few big elephants rather than all of the smaller players? >> it is hard to talk about strength in our system because there