united states. they do not go to other governments because they know they're not receiving help from them and will not get their voice out. host: thank you. in 30 seconds, can you comment here -- can you see a way out from the situation where this? guest: no matter what the outcome of this election, something has changed. a barrier has been broken. . .

>> host: thank you for spending the first hour with us this morning. yesterday the president announced a big overhaul of financial market regulations. coming up next, two members of congress. first, republican jeb and sterhensarling. explaining the new policies and how they will work to solve the issues in the financial markets. we will be talking with our two guests. the first, here is a little bit of what the president had to say. >> we are proposing a new and powerful agency charged with just one job, looking out for ordinary consumers. this is essential.

this crisis was not just the result of decisions made by the mightiest of financial minds, it was also made by ordinary americans, taking on credit cards, home loans, other financial obligations. there are many who took all loans they knew they could not afford. but there were also millions of americans who signed contracts they did not always understand, offered by lenders who did not always tell the truth. even today, folks sign up for mortgages, student loans, credit cards, and face a bewildering array of incomprehensible options. companies compete not offering matter -- not by offering matter -- not by offering better products, but -- build on credit-card reform that i signed into law a few weeks ago. this agency will have the power to set standards so that companies compete by offering

innovative products that consumers actually want and actually understand. consumers will be provided with information that is simple, transparent, and accurate. >> "washington journal" continues. >host: let's take you live to capitol hill where jeb hensarling is our guest this morning. he will have an opportunity later today to question the treasury secretary. thank you for being with us. guest: thank you for the invitation. host: your reaction to what you heard from the administration yesterday on their financial regulation plans? >guest: i could have written 90% of the president's speech. unfortunately, i agree with 20% of his policies. frankly, i think his policies will create more systemic risk in our economy instead of less. number one, it allows a

mechanism to designate certain firms as systemically risky. that puts the implicit guarantee of the federal government behind them, which, as we all know in the case of fannie mae, freddie mac, turned out to be an explicit guarantee costing billions and billions of taxpayer money. so my first concern with the program is that it is essentially institutionalizes us as the bailout nation. second of all, i believe, as do many economists, that the federal reserve ought to be concentrated on military policy, tied to inflation -- on monetary policy, tied to inflation targeting. what the administration does instead is diffuse their mission even more and allow them to pick winners and, establishing firms as a systemically risky. next, with respect to the president, he said this is going to be sweeping reform. what i did not know is that he

would sweep fannie mae and freddie mac under the carpet. fannie and freddie represented greatest systemic risk these government sponsored enterprises within our economy. they will prove to be the mother of all bailouts, and his plan is absolutely silent. the administration got the wrong diagnosis, and therefore they will get the wrong remedy. their diagnosis is that there was a failure in deregulation. it was not deregulation as much as it was dumb regulation. we need to enforce what we have on the books in the first place. the administration takes the field structure, and instead of trying to repair it, rearrange it, it adds on more regulation, more regulators, and again, it will institutionalize bailout nations and it ultimately i believe harm taxpayers. host: let me bring the phone numbers to bear here so that we can get audience reaction and

questions for you, congressman. for phone questions, 202-737- 0001 for our republican viewers. democrats can reach us at 202- 737-0002. and our line 4 independents, 202-628-0205. and our tour address, and our e- mail address at c-span.org. guest: the threats to our economy, as far as systemic risk, looking horizontal as well. i applaud the president for putting that counsel together. i agree with the president that we need a strong will -- a stronger capital standard. let's remember that one of the basic tenets of investment is due not put all your eggs in one basket and save -- is do not put all your eggs in one basket and

save for a rainy day. i agree with the president that consumers were disserved. consumers failed to understand prime mortgages, but -- subprime mortgages, but i believe the president would punish consumers by taking away choices. the republican plan would ensure that consumers have choices, have market competition, and that we have more accountability for those by strictly enforcing our laws on those who would mislead consumers as to the nature of the financial products with which they are going to invest. but i very much disagree with the president's in institutionalizing bailout nations. if americans think we're doing the right thing in bailing out aig, citigroup, chrysler, and gm, maybe next week we could get around to bailing out starbucks. if they like that as an economic policy, this is the program for

them. the republicans say no more bailing out financial institutions. before reserve could make liquidity available to the economy, but quit picking winners and losers, quit putting that on future generations that -- quit putting debt on future generations that could never pay it back. caller: mr. hensarling, i was watching you in sessions on this bill, what they tried to get through the house, and still i do not think it has passed yet. i believe it was 17-5, doing away with these type loans. now, this is not -- how many millions of homes have been repossessed because the house payments start off with $400 a month and went to 900. now, if i'm going to rob a bank,

i will go to jail. if miami banker, i can put out these type of loans where i take -- if i am a banker, i can put out these types of loans or i take the money from the american people. keeping them in force, keeping these predatory loans in force. i do not understand the republicans, how you can say these loans are ok. through the veterans act, they can have a variable rate loan. now, i want to know why you support it. thank you. guest: number one, i did not say what you said i said. number two, there was a lot of predatory borrowing as well as loans. mortgage fraud has run rampant. any u.s. attorney will tell you they did not have the resources to prosecute it. so the republican plan is, number one, hold these people accountable. no one should be able to

mislead, false advertise what their products are. but if you say that you believe that we should outlaw variable rate mortgages, i simply do not agree. i want to make sure consumers have choices. i want them to understand what the choices are. but there are millions of americans who never would have had their shot at the american dream but for an adroit -- but for an adjustable-rate mortgage. there was a time in american history where if you do not have 20 percent that sign down 20% down, you could not getting a mortgage. most of it, in some respects, the worst fraud perpetrated on the american people was the creation of fannie and freddie, where the government allowed them to monopolize our secondary securities markets. they were given a "affordable housing mission," and they were

essentially told to loan money to people who cannot pay it back, and the system has collapsed under that. that was bad public policy. that is what i am talking about as far as dumb regulation as far as -- as opposed to the regulation. caller: yes, i have watched you in some of the hearings, and you have been outrageous about them wanting to limit the amount that people should make before they have a credit card or take out a loan or a mortgage, saying that if they do that, the people that need it most are not going to get it. and then you are saying that forcing them to do this -- how does it make sense that if people are struggling and have a limited income, that you charge them 60% to 90% more than you would a normal person that has

income. how in the world can you formulate that in your mind to make any sense? i am confused. guest: i'm not confused about the fact that the greatest consumer protection is a competitive market. i feel that under the administration policies, much of what i see out of the democrat congress, is making sure that there are fewer competitors in the market. if you want to protect consumers, number one, give them a choice. number two, make sure that there is a competitive market to drive down the price, making sure that there is greater accountability. number 3, police that market. have the right resources to make sure that people do not engage in fraud, people do not have misleading advertising. we have these regulations on the books. the federal trade commission, the truth in lending act, the deceptive trade practices act of the problem is, a lot of these

laws have not been in the forced -- have not been enforced. the average american cannot understand their mortgage documents because they are about 100 pages long. the reason is washington over the years has decided on a policy of essentially giving voluminous disclosure written in legalese, as opposed to effective disclosure written in english. if you throw out disclosure, thousands or hundreds of pages, nothing gets through. you cannot tell me any citizen understands these mortgage documents, and a lot of that is washington driven. i would hope we could work on a bipartisan basis to make sure we have effective disclosure but that we preserve consumer choice and try to make our markets more competitive. i do not believe in washington coming in with a one-size fits all product regardless of who you are, what your vision of the american dream is, and start trying to "protect consumers from themselves." listen, i have been in private

business. i am a husband, a father. when i came to washington i did not have some epiphanies and all of a sudden became smarter. washington does not know all. we need to make sure that consumers have choices, are well informed, and that we have effective disclosure and competitive market. host: do you think the creation of the consumer. -- do you think the creation of the consumer financial protection agency will go toward doing that? guest: i think it will punish consumers. the market will say, the government complicit guarantee will give people at -- will give them an advantage and drive away everybody in the market. it is exactly what happened with fannie and freddie. number one, we will have less competition. number 2, we already have the regulatory structure in place. you can say it was not enforced

well or maybe smart people were not there. but they have the ability to regulate a number of these products. then the question is are we trying to protect investors are trying to predict and skimmers trying to protect consumers? -- or are we trying to protect consumers? what this agency is going to do is decide for you what is right for you and your family. they will say, no, that product is not quite right for your 401k. you cannot invest in your children's college fund because we're washington and we are smarter. i am afraid if we had this institution in place, we never would have had frequent flier miles, debit cards. this is an agency that will put "no" in "innovation. that is not something we should do.

host: schron, your next. are you there? i'm going to move on. let's go to mara in baltimore. republican line. caller: i think it is hilarious that republicans had anything to say. you guys had six years. where were you? it admitted over the last six months that you knew fannie and freddie back then, there was something wrong. you knew that people should not be buying certain homes, and you guys keep blaming the public for buying homes, but the reality is many of these people could afford a 30-year fixed rate. what was happening is that the mortgage companies were putting them in these crazy loans. the pricing of their mortgage payments doubled, tripled, and that is why people cannot afford it. but they could of floridafford r fixed to rome -- a 30-year fixed

loan. you guys bring up ragan, a man who did not care about the poor -- you guys bring up ronald reagan, a man who did not care about the poor, did not do anything. host: let me jump in and get an answer to your question about current policy? congressman? guest: i am not quite sure about the history lesson. and did not understand what the caller was trying to say there. listen, i cannot speak for the entirety of the congress. all i can say was i was elected in 2002, and the data that was sworn in, -- in the day i was sworn in, i started trying to introduce legislation that would rein in fannie mae and freddie mac. if you look at history, when you will see as 95% of the democrats supported fannie and freddie. add that to 15% of republicans,

and that made a majority. unfortunately, we were not able to do with the greatest systemic risk. some republicans did not agree with me. but what i find ironic is any time i hear people say you republicans spent too much money, well, the democrats are spending more. the democrats were supporting fannie and freddie even more than republicans. all i can speak to is what i have tried to do. now we have a plan on the table. the republican plan would rein in the federal reserve, have them focus on monetary policy. the democrats' plan would expand the federal reserve, institutionalize a bailout nation. if you agree that bailing out aig, citigroup, and gm at the expense of struggling taxpayers and small business, if you think that is good economic policy, fine, support the democrat plan. if you believe the best consumer protection is less competition and an additional layer of

bureaucracy to decide for you what is right for you and your family, yes, please, go support the democrat plan. if you still believe in freedom, competition, accountability, then i hope people will support the republican plan. host: arnelle last phone call -- our last phone call for a congressman jeb hensarling. danielle, you are on. caller: i appreciate the opportunity to call, and i hope i have the opportunity to say everything i want to say. for eight years i have followed not only the markets through cnbc, but also c-span and what the republicans have been doing. i see some of what mr. hensarling is saying is borderline psychological abuse. we have had a free market here. that is what caused the problem. it was a free-for-all market.

the rating agencies did not do their job. you people supported these "products" where mortgages were chopped up and sold, so even people that were able to come back and tried to pay, they could not because they could not figure out who owned the mortgages. as far as fannie and freddie, that is a code word for racism. low-income people are the only ones who have any regulations at all. and you are saying that for the government to be looking out and checking in advance risk, that is what the rating agencies did not do. the purpose of the it is to prevent bailouts in the future. that is what the president said. so as far as the debt and all

that, the republicans racked up 80% of the debt that we are in since george washington. host: thank you. let's get a response. guest: again, we do not have the regulation, we have done regulation. the democrats created a monopoly for ratings agencies, technically an oligopoly. if they got it wrong, you were simply out of luck. federal policy, witregardless of what the intent was, all were in geared -- all were geared of getting agencies to loan money to people who were not able to keep them. instead of lifting up the opportunities of the boer war, when that policy did was bring down the lending standards of the -- of the bar were, what

that policy did was bring down off the landing standards -- the lending standards of the investors. in his administration, the federal deficit will increase tenfold in just two years. under his administration, we are now borrowing from the chinese, another foreign entity, 46 cents on the dollar, and we are sending the bill to our children and grandchildren. again, it is interesting when the democrats deride the spending patterns of republicans, they decide to double down, trickle down, it quintupled down. we're on the verge of being the first generation in america's history that will leave the next generation with a lower standard of living. no nation in the history of mankind has bailed out, borrowed, and spent its way into prosperity, but that is what the democrats are trying to do and that is what they will enshrine in this new law that will

essentially institutionalize the bailout nation and make the u.s. government a continuing occupation force in our economy. we need to let freedom ring, we need to let opportunity ring, and we need to unleash the spirit of entrepreneurialism, small business in america. with more spending, more taxes, that is why we need more of the republican plan, not the democrat plan. host: as we close, what will you asked secretary geithner? guest: again, what i do not understand, with the bailout creating this incredible amount of debt for the american people, which everybody says will harm our economy long term, how can they put forth a policy that institutionalizes us as a bailout nation?

how can he favored the uaw over non unionized workers? how was that good economic policy? does he really think we can bailout, bar come and spend our way to prosperity? i hope not. host: thank you for entering our questions. @ c-span cameras will be at the hearing today, covering a by videotape. thank you for your time today, sir. we will continue taking telephone calls for a few minutes. then, joining us in just a few minutes, also from the cannon house office building on capitol hill, will be congressman luis gutierrez. also, we will be questioning the secretary at the hearing today, and we will be -- also, he will be questioned the secretary at the hearing let me get some editorial-page reaction to the president paused plan yesterday.

"the financial times," " redesigning the financial rulebook. they're right "the administration cost proposals will disappoint those hoping for a tidier u.s. regulatory system. the plan has many good points, notably an expanded role for the federal reserve, and oversight council of regulators to coordinate the efforts of new and existing bodies. they're careful approach would fill many gaps in regulatory coverage. still, no one would call the design elegant." and here is the view from "the washington post." "the proposal raises questions, the government receives -- the government list of system of the important firms is tantamount to a list of government-backed firms. the biggest challenge could be to the fed's independence. the broader its control over the financial sector, the more it will get lobby, directly or indirectly. political capital defense spends -- political capital the

fed -- to calls. let's go to florida. this is bernice, democrats line. good morning, bernie's. caller: good morning. since 1945, we have been giving israel $4 billion a year. there are only 5 million in israel. they are only using it on tanks and nuclear energy, nuclear bombs, and i think we should cut that out. people and not realize that hitler was a jew. host: we're moving on to new york city, from paulette, on the independent line. next, falls church, david, democrats like. caller: hi. i wish i could have asked the congressman a couple of questions. it is interesting how he himself can come before the

american people, through c- span, and completely just misrepresent what the democratic position has been. you know, the last eight years -- for that matter, the last 25 years, any time a republican has been in power, they have completely butchered our financial system. it has always been looking for and taking care of the big banks and what not. but let me understand. this election that just happened in november is the out like a complete rejection of the republican philosophy of government, and we are in the process of unraveling all their mess and pretty much trying to get america back on track. for him to come on here and completely talk about the democrat party, it is the democratic party. it is not -- we do not go around

talking about the republic party. i support the president, he is doing a very good job. slowly but silently, you'll see our deficits being reduced. host: did it in falls church. the opinion page of "the wall street journal, up their editorial, "hope versus financial experience." here is how the editorial, which is 2/3 of the page, concludes. "the larger question is why all this regulatory reshuffling needs to be done so quickly when we are still too close to the mania and panic to have to live or their policy implications. the political class wants to rush something through to claim it has solved the problem even if it means different problems later. the bankers are relieved that treasury's proposal that would leave their business models intact, even if they have to wear her chastity belts.

someone in congress should slow this down and make sure we do it right." next phone call is a call from paulette, independent, new york city. caller: good morning. i want to say that the gentleman who just spoke said a number of things i was going to say. i am so -- hello? host: yes, we can hear you. caller: i am so fed up with both parties at this point that i could scream. everything that has been done -- first of all, let me say, the republican party as far as i'm concerned, is the pbp party -- process before people. all of the regulatory stuff they are talking about doing now -- fdr did. i am 85 years old and i remember all that. he did most of it, and starting with reagan they pulled across -- they pulled apart everything the democrats tried to do. the democrats could do nothing. they turned into a second-class