no less than what our experiences allow us to be. i think the police officer in this was responding to a call, and the question to me was, if i was calling, but with the neighbors role in all this? did they take into account that they may have overreacted? there are some new variables in all of this. i have watched television, and he seems to be a good guy. but there are times i would have reacted, and that is human nature. >> and now we have to end our

discussion. we will be right back with our reporters. is this health care debate democrat versus democrat, or do republicans have role also? >> i would say the republican role as a spoiler. the democratic differences are so great and meaningful for why it is so part pass this bill. >> republicans are out there as kind of -- not naysayers, but their view is different. republicans keep saying that they want a bipartisan approach and you should get 60 votes?

their basic nature for health care is different than democrats, democrats have to cobble this together alone. we never even got to first base. is it possible this bill will come back? >> they're predicting they will meet this goal of october 15 for this year, it is hard to set in.

>> i give it gets around a democratic congress and president, it is possible it could happen, but obama has made headlines. >> the prescription drug plan was the last major plan. >> there were allegations of bribery, and the democrats were against it. so this is a major mirror image.

now that democrats will have to force this through with their president. >> someone was complaining the other day that the only thing people remember about the bill with three are " -- 3 hour vote. i'm guilty as anybody about chasing it. it will be difficult to do something like this, especially on this kind of time line, having this bill and passing it. >> there is the overall cost and

tax increase issue, but is a regional issue, because states have different levels of reimbursement, and that was set by congress, pretty much. so we will take that away. they want to equalize things, so it is north versus south versus east versus west. >> there are still disagreements, and it is reasonable -- regional, because you have these people in the commerce committee to our southern side.

so that is that right there. >> thank you. >> the health-care bill likely will not see action soon in the senate. harry reid says this chamber will not debate it, but it is possible that the house could consider before leaving. john larson plans to consider. it will go as long as necessary to answer all questions. next, a hearing with ben bernanke on the state of the economy. than a look at the health care debate with president obama, and later, house republicans on

government run health care systems. >> how is c-span funded? >> donations, maybe? >> government? >> c-span gets funding through federal -- >> a public funding thing? >> may be, i do not know? >> america's cable companies created c-span as a public service. >> watch in 1997 interview with the late frank mccord, talking about "angeles ashes." >> next, a hearing with ben bernanke. this is one of two appearances made before the committee each

year to assess the state of the economy. barney frank chairs the committee. this portion is one hour and 25 minutes. barney frank. >> i will now begin reviewing on substance. ausley welcome the chaman and i think it's very important and i was pleased to see his article in "the wall street journal" about a question very much on people's minds. the united states government according to the federal reserve, the federal reserve for a variety of reasons mostly bought of its choosing the federal government was deeply engaged and increasing liquidity putting money out into the economy particularly to a constriction of credit and they want people who are concerned that this will be inflationary. i think the chairman has shown

consistently has of secretaries of treasury paulson and geithner aware of this but when you were talking about inflation you talking not just about a reality that perception. if people think there's going to be inflation that's inflationary and it's very important the chairman address as he has been doing in a very straightforward way these concerns. i am persuaded by the chairman and others that we are able in an orderly way to undo what we had to do so that there wouldn't be that inflationary impact. i hope we believe the inflationary danger is not the current most important one, but it is i think a very good opportunity for the chairman to address but i also want to talk about another matter and want to make a confession apparently of the leverage is of apparently my vision is deteriorated more rapidly than i hope to would be.

i have looked carefully at deliberations we have seen about the bank of america merrill lynch issue and our colleagues on the government committee have had a number of hearings on that. i must say one of the interesting and potentially constructive things that cannot was secretary paulson's explaining that he couldn't because he has never sent them. that is a practice of i recommend to many others will follow myself, but as i studied all of this here is my problem. i cannot find the villain. many of my colleagues have found various fillings. they tend to be private sector or public sector depending on the ideology of the founder. but as i look at what happened, what i see is a very difficult situation that threatened

further severe damage to an economy already damaged. a repetition of the attack on the credits issue which is central to the functioning of our economy which we have seen in earlier failures, and i believe we had people faced with a difficult situation to say to some of my democratic friends have been critical of the bank of america as i have been and other areas they've not done what they should in modifying mortgages. i would have plenty of criticism to make in the financial but people health said well, why was he not focused entirely on the shareholders? many of my colleagues who have made the criticism said they don't want private-sector people looking up the narrow interest of the shareholders but they do want them to take into account the broad impact of what they do. possibly terrible credit crunch would hurt their shareholders. as to the federal reserve and the treasury, i think they had a

very important responsibilities not to see a repetition of the collapse of merrill lynch by bank of america they would have had very negative consequences. i think there was one thing people need to remember. solutions cannot be more elegant than the problems they seek to resolve. brandt you have a terrible mess it is unlikely those who try to immediate danger of that mess will come out looking clean. not for the first time as an elective officials on a and the economists believe a, how have available to them in a medical approach the counterfactual economists can explain that the given decision was the best one that could be made because they could show what would have happened in the counterfactual situation. they can contrast what happened to what would have happened. no one has ever gotten reelected with a bumper sticker that said

it would have been worse without me. [laughter] probably you can get a ten year without but you can't win office. [laughter] i understand that but we shouldn't let that distort house. and it would not i think eckert collis every so often to admit not every action by every public official was a bad thing and sometimes we should give people credit for trying to cope with the unpleasant reality they can. the gentleman from alabama. >> i thank the chairman. thank you for appearing before the committee today for your professionalism and service to the country. all of of us in congress appreciate your willingness to make yourself available on countless numbers of cases both to congressional committees as we confronted this crisis. so why thank you. over the past year we have witnessed unprecedented government involvement in the financial rackets.

for sometimes republicans on this committee have expressed a growing unease over the magnitude of federal government involvement and manipulations of our economy. trillions of dollars of capital commitments guarantees, loans have been extended. what started out last year is a large but temporary stabilization effort to prevent a financial collapse has evolved month by month into seemingly permanent government in many competitors of the too big to fail corporations deemed too small to save are no longer in business. i read your opinion article in the "wall street journal," , which acknowledged the need for a national plan.

the obama administration has spent a staggering amount of money to fund a recovery and stimulus, and it has been almost half a year since congress passed a $787 billion so-called stimulus bill, and yet we continue to see record job losses. unemployment has gone to 9.5% and seems headed higher. your testimony predicts it will last for not only a year, but if we passed the package, unemployment will peak at 8%.

keeping the homeowners in their homes, the plan has only offered 220 trial modifications. at the same time, the private sector and private efforts have their efforts to result in millions of homeowners staying in their homes. so far, there has been very little bang for the buck. it is not only past expenditures that gave us pause, but a multitude multitude of new proposals coming from the obama administration and their allies in congress calling for more government control and management, from health care to energy to financial services. one of the central questions the committee needs to answer as it considers reforms or a financial

regulatory system is whether regulatory power should be centralized in the federal reserve at a time when our country is facing unparalleled fiscal and monetary policy challenges. the fed has made big mistakes and historic leave the board has reports of identifying and addressing systemic risk before they become crises. a prime example of this is troubled linder c. i.t. allowed to convert to a bank holding company last december and placed under the fed supervision. only after the fed declared it was adequately capitalized. this inability to access risk once again threatens to undermine the fragile economy and erase the 2.5 billion in tax payer funds provided cit under t.a.r.p.. they would make the fed responsible for identifying and regulating those findings that

in the fred's you are systemically significant and preventing systemic shock. republicans believe the fed's core mission and conduct of monetary policy seriously undermined its regulatory responsibilities or expanded in this way. let me conclude by saying at a time when our economic economy faces serious structural problems and threat of inflation if we maintain our current course on spending patterns it distracted and overextended central bank subject to potential political interference is a luxury we cannot afford. republicans believe really think the federal reserve cut its current regulatory responsibilities and focusing on the core monetary policy mission would enhance the fed ability to execute an effective exit strategy and ensure interest rates that are greatly -- affect

both individuals and small businesses with a single goal in mind, sound monetary policy. the proper conduct of monetary policy is the best way the fed can serve the american people. asking the fed to serve is a systemic regulator is just in fighting a false sense of security that inevitably will be shattered at the expense of the tax payer. thank you, mr. chairman. >> the gentleman from north carolina is recognized for three minutes. >> chairman bernanke, look forward to your discussion on the status of monetary policy and the economy. it is good news that many experts say and that the economy has improved since the last time your before this committee in feb to the extent that is true the federal reserve certainly deserves some of the credit. unfortunately my constituents are not yet feeling it. growing unemployment, foreclosure all are around and

the like of much if any rebound in the value of their investments contained delete continue to feed their and sunday and uncertainty whether we have in fact turned the corner but the fed has been a sturdy methodical hand. more public exposure with the fed does has also stimulated discussion about some other things a lot of people had taken for granted. the level of independence from political influence by the legislative and executive branches of government that is appropriate for the fed to have in order to achieve its long-term policy goals. the extent to which the fed's operation is even monetary policy discussions and decisions should be subject to regular audit. the extent to which the various parts of an operation of the fed should be subject to more transparency. whether the fed having a field

along with other financial regulators to pay the equivalent attention to the consumer protection responsibilities as it did to other responsibilities should be stripped of these responsibilities in favor of a new consumer protection agency focused solely on consumer protection. and whether as proposed by the obama administration the fed should be delegated even more power and responsibilities for systemic risk regulation. this certainly is a critical juncture for the fed and i want to assure my colleagues on the committee that our subcommittee on domestic monetary policy, which i chair with the knowledgeable input a ranking member ron paul has been grappling seriously and consistently with all of these issues. for a change we have even had some members who are not on our subcommittee showing up at our were subcommittee hearings.

imagine that three it in the wake of the great depression, concrescence drafted rules that served us well for 75 years. we are facing another once in a generation opportunity to fashion of rules that should serve well for the next 75 years. and chairman bernanke's testimony today is yet another step and harming us with the knowledge and information we need to address these important issues. i welcome the chairman and yield back the balance of my time. >> the gentleman from texas, the two minutes remaining on the republican side, we will make it two and a half. >> thank you mr. chairman and good morning chairman bernanke. the federal reserve in collaboration with the banks has created the greatest financial crisis the world has ever seen. the notion of limited amounts of money and credit created out of than error has delivered this crisis. instead of economic growth and stable prices it has given a

system of government and finance that threatens the world financial and political institutions. real unemployment is now 20% and there has not been economic growth since the onset in the year 2000 according to an on government statistics. permitting debt and credit expansion past 38 years has come to an abrupt end as predicted by free-market economists. pursuing the same policy of excessive spending, debt expansion and monetary inflation can only compound the problems and prevent the required corrections. doubling the money supply didn't work, quadrupling to 12 were either. the problem with debt must be addressed. expanding debt when it was a principal cause of the crisis is foolhardy. excessive government and private debt is a consequence of louis federal reserve monetary policy. once a debt crisis hit the solution must be paying it off or liquidating we are doing neither. u.s. it is now 273 present of gdp and the crisis of the 1930's

it peaked at 1.5%. household debt service is required disposable income and historic high. between 2000 and 2007 correct it expanded five times as fast as gdp with no restriction on spending raising taxes will be present to the economy. by teeing up the bad debt of privileged institutions and dumping of worthless assets on the american people is morally wrong and economically futile. monetizing government debt is as the fed is currently doing is destined to do great harm and in the past 12 months the national debt has risen over $2 trillion. future entitlement obligations are now reaching 100 to william dollars. u.s. foreign debt is $6 trillion. for and purchase of u.s. securities in may were $7.4 billion down from a monthly peak of $95 billion in 2006. the fact the fed had to buy $30 billion worth of government

security last week indicates it will continue its complicity but congress to monetize the expanding deficit. the policy is used to pay for this those lusatian of america and maintenance on wise policy and make up for the diminished appetite of foreigners for our debt since the attack on the dollar will continue i suggest the problems we faced so far are nothing compared to what it will be like with the world not only reject other debt but our dollar as well. that is when we will witness political turmoil which will be to no one's benefit. >> the time for opening statements has expired and for once, i think not before the patience of the audience. the chairman of the federal reserve is now recognized for his statement. >> chairman frank, mean the

delete kringen number bachus and other members and pleased to present the annual policy report to the aggressive policy actions taken around the world last fall way to becoming have averted the collapse of the system and even that would have had extreme adverse consequences for the world economy. even so the financial shock it hit the global economy in september and october were the worst since the 1930's and helped push the global economy to the deepest recession since world war ii. the u.s. economy contracted sharply in the fourth quarter of last year and first quarter of this year. more recently the pace of the decline appears to have slowed significantly and final demand and production have shown signs of stabilization. to labor market however has continued to weaken. consumer price inflation which fell to levels late last year remained subdued the first six months of 2009. to promote economic recovery and foster price stability the committee last year brought its target for the federal fund rate to historic the low range of 02

a quarter% where it remains today. the excelencia purchase of its conditions are likely to warrant maintaining federal fund rate at exceptionally low levels for an extended period. at the time of the february report financial markets at home and abroad were under intense strained with equity prices at multi-year los riss spreads for private borrowers at elevated levels and some important financial markets essentially shot today financial conditions remain stressed and many households and businesses are finding credit difficult to obtain. nevertheless on that the past few months have seen notable improvements. for example interest-rate spreads and short-term money markets such as the bank market and commercial paper market had continued to narrow. the extreme risk of last fall east somewhat and investors are returning to the private credit markets. reflecting this great investor corporate bond issuance has been

strong. many markets are functioning normally with increased stability. equity prices at the low point in march recovered to roughly the level set the end of last year and the banks raised significant amounts of new capital. many improvements in financial conditions can be traced in part to policy actions taken by the federal reserve to encourage the flow of credit for example the decline in the rates and spreads was facilitated by the actions of the federal reserve and other banks to ensure financial institutions have adequate access to short-term liquidity which in turn increased stability of the banking system and the ability of banks to lend. interest rates and spreads on commercial paper dropped significantly as a result of the liquidity facilities the federal reserve introduced last fall for that market. quote purchases of mortgage backed securities and other long-term assets helped lower conforming fixed mortgage rates

and asset backed securities loan facility or to talf help restart the markets for various causes of consumer and small-business credit. earlier this year the federal reserve popularly known as the stress test, determining financial institutions. subsequently, institutions, of the largest companies, all of which participated, paid a total of nearly $700 to the treasury. the markets have been and accompanied by improvements and prospects. consumer spending has been stable and the decline in housing activity appears to have

moderated. businesses continue to cut capital spending and liquidate inventories, like the slowdown that might support a turnaround in activity. although the recession caused a steep drop in exports, the direct and our economy appears to be weighing in, as many trading partners also see signs of stabilization. despite positive signs, the rate of job loss is high and unemployment has continued to see a steep rise. a steep rise. job insecurity together with the declines in home values and tight credit is likely to limit gains on consumer spending. the cost stability the recent stabilization household spending will prove transient is an important downside risk to the outlook. in conjunction with the fomc meeting board members and presidents prepare economic

projections covering the year 2009 through 2011. fomc participants generally expect that after the declining in the first half of this year output will increase slightly over the remainder of 2009. the recovery is expected to be gradual in 2010 with acceleration in activity in 2011. although the employee rate is projected to pique the end of this year the projected decline in 2010 and 2011 would still in 2010 and 2011 would still le fomc purpose of the views of the longer run sustainable rate. all participants expect inflation will be lower this year in recent years and most expect to remain subdued over the next two years. in light of the substantial economic lack monetary policy remains focused on fostering economic recovery. accordingly as i mentioned earlier the fomc believes a highly accommodative stance of monetary policy will be apprriate for an extended

period. however we believe it is important to assure the public and markets that the extraordinary policy measures we've taken in response to the financial crisis and recession can be withdrawn in a smooth and timely manner as needed thereby avoiding the risk policy stimulus could lead to a future rise in inflation. the fomc has been devoting considerable attention to issues relating to the strategy and we are confident we have the necessary tools to implement the strategy when appropriate. to some extent our policy measures will on wide automatically as the economy recovers and financial strains ease because most extraordinary liquidity facilities are priced at a premium over orland tristani spreads. indeed total federal reserve credit extended to banks and other participants has declined from one of roughly 1.5 trillion at the end of 2008 to less than $600 billion reflecting improvement and financial conditions already occurred. in addition bank reserves held up the fed will decline as the

longer-term assets we don't mature or are prepaid. nevertheless should economic conditions warrant a tightening monetary policy before the process of unwinding is complete we have a number of tools that would enable us to raise market interest rates has needed. perhaps the most important such tools is the authority that congress granted the reserve last fall to pay interest on balances held up the fed by depository institutions. raising the rate of interest paid on reserve balances will get substantial leverage over the federal funds rate and other short-term market interest rates. because banks generally will of supply funds to the market at an interest rate sycophant ehlers a tichenor risk free by calling balad balances of the reserve. indeed many banks use ability to pay interest on reserves to help set a floor on market interest rates. the attractiveness to banks leading the excess reserve balance with federal reserve can be further increased by offering banks the choice of maturities for their deposits. but interest on reserves is by

no means the only tool we have to influence market interest rates. for example we can drain liquidity from the system by conducting purchase agreements in which we sell securities from the portfolio with an agreement to buy them back at later dates. reversed purchase agreements which can be executed at the primary dealers and sponsored enterprises and a range of other counterparties are a traditional and well understood that of managing the level of bank reserves. if necessary another means of a tightening policy is outright sales of holdings of longer-term securities not only such sales trade reserves and raise short-term interest rates also put upward pressure on longer-term rates by expanding the supply of longer-term assets. in some we are confident we have the tools to raise interest rates when that becomes necessary to achieve the objectives of maximum employment and price stability. our economy and financial markets face extraordinary near-term challenges and strong and timely actions to respond

have been necessary and appropriate. i've discussed with financial stability the congress also has taken substantial actions including the passage of a fiscal stimulus package nevertheless even as important steps have been taken to address the recession and intense threats to financial stability maintaining the confidence of public and financial markets requires policy makers begin planning now for the restoration of the fiscal balance. prompt attention to questions of fiscal stability is particularly critical because of the coming budget and economic challenges associated with retirement of the baby boom generation and continued increases in the cost of medicare and medicaid. addressing the country's fiscal problems will require difficult races but postponing the choices will only make them more difficult. moreover agreeing on sustainable long-term fiscal term path now could yield considerable near-term economic benefits in the form of lower long-term

interest rates and increased consumer business confidence. unless we demonstrate a strong commitment to fiscal sustainability we risk having the financial stability for durable economic growth. a clear lesson of recent financial turmoil is we must make the system of financial supervision and regulation more effective in the united states and abroad. in my view comprehensive reform should include at least the following elements. a provincial approach that focuses on the stability of the financial system as a whole and not just safety and soundness of institutional once and that includes mechanisms for identifying and dealing with risks. stronger capital liquidity standards for financial firms with more stringent standards for large complex and financially interconnected firms. the extension enhancement of supervisory oversight including effective consolidated supervision to all financial organizations that pose a risk to the system.

enhanced bankruptcy resolution regime model on the chrysostom for depository institutions would allow financially troubled eckert and non-bank financial institutions to be wound down without disruption to the financial institutions a system and the economy. enhanced protection for consumers and investors and financial dealings. measures to ensure payment arrangements are to shocks and practices relating to the trading and clearing of derivatives and other financial instruments do not pose risk to the financial system as a whole and finally improved coordination of cross-country's in the development of regulation and supervision of internationally active firms. the federal reserve has taken and will continue to take important steps to strengthen supervision, and prove resiliency of the financial system and increase the macroprovincial orientation of oversight. for example we are expanding the use of reviews of the financial firms to provide more capri and

some understanding of practices and risks in the financial system. the federal reserve also remains strongly committed to carry out the responsibilities for consumer protection. over the past three years the federal reserve has written rules providing strong protection for mortgage borrowers and credit card users among many other actions. later this week the board will issue a proposal using authority under the truth and lending act which will include new consumer tested disclosures as well as rule changes applying to mortgages and home-equity lines of credit. in addition the proposal includes new rules governing compensation of mortgage originators. we are expending supervisory activities to include risk focused reviews of consumer compliance and on bank subsidiaries of holding companies. our community affairs and research areas provided support and assistance for organizations specializing in for closer mitigation and we've worked with nonprofit groups on strategies for neighborhood stabilization.

the federal reserve combination of expertise and financial markets payment systems and supervision positions us well to protect the interest of consumers and their financial transactions. we look for to discussing with congress ways to further formalize our institutions strong commitment to consumer protection. the congress and american people have the right to know how the federal reserve is carrying its responsibilities and how we are using taxpayer resources. the federal reserve is committed to transparency and accountability and its operations degette we report on activities in a variety of ways including like the one i'm presenting to the congress today other testimonies and speeches. the fomc releases a statement immediately after each scheduled meeting and detailed minutes on a timely basis we've increased the frequency and scope of the published economic forecast of fomc participants. we provide the public with details annual reports on the financial activities of the federal reserve system audited

by independent public accounting firm. we also published a balance sheet each week. we've recently taken additional steps to better inform the public about the programs we instituted to combat the financial crisis. we expanded the website this year to bring together@@@@@@$ including breakdowns of the lending, seceded collateral, and other facets of the program designed to address the crisis. these steps should help the public understand the efforts we have taken to protect the taxpayer and supply liquidity to the financial system and report the functioning of key credit markets. the congress recently discussed proposals to expand the authority of the cheap -- of the g a l of the federal reserve. the fed is already subject to reviews by the gao. that brought 42 of our

operations and functions. congress recently granted them a new authority to conduct audits extended by the fed to single out specific companies under the authority provided by section 13 of the federal reserve act, including loan facilities provided to a i g and bear stearns. the special general had a 42 monitor the talf program. which uses funds from the troubled asset relief program. the congress however purposefully and for good reason to exclude from the scope of giglio reviews erie is notably monetary policy durations and operations including open market and discount window operations. in doing so the congress carefully balanced the need for public accountability with strong public policy benefits that flow for maintaining appropriate degree of independence for the central bank in the making and execution of monetary policy financial markets and in particular likely proceed guarantee authority in

these reviews to the gao as a serious weakening of monetary policy independence. because the gao reviews may be initiated members of conagra's review or the threat of reviews in these areas can be seen to try to influence monetary policy decisions. a perceived loss of monetary policy independence could raise your about future inflation and lead to higher long-term interest rates and reduced economic financial stability. we will continue to work with congress to provide information it needs to oversee activities effectively yet in a way that is not compromised, terry policy independence. thank you, mr. chairman. >> thank you. let me begin with one question because i am pleased that as i said you've responded to the fear of inflation because i think that you are all capable of control and i also think it's important they not be invoked prematurely with the greater

problem i believe the federal reserve commonly thinks is still further on the negative side, and one looming threat we hear about a lot is the commercial real estate issue. there was a great deal of fear that there would be in commercial real estate issue a series of failures that some of the economic problems of the home mortgage would be reproduced. we've discussed this. what is your current posture? do you expect there to be problems, and how were you and other elements of the government ready to respond? >> mr. chairman we are watching the situation very carefully. there's a lot of loans coming up for refinance and the capacity is limited which opposes the possibility of foreclosure and commercial space. much as in the residential situation. we are urging banks to continue to make loans to creditworthy borrowers and examiners are presenting a balanced view in their discussions with banks.

the others that we've taken to address this problem is that we have recently added to the t.a.l.f. program both new and legacy commercial mortgage-backed securities by doing that we hope to open up the mortgage-backed securities market which is an important source and finance for the crc market. >> i know there's been some who have been critical. i don't share that on the other hand in some cases but some people said what about commercial real estate? and the fact is they had to do some work. let me ask you now i was interested in reading the report on page one you note consumer spending has been supported by the boost to dispose from the tax cuts and increases in benefit payments that were part of the 2009 fiscal stimulus package. with regard to state and local borrowing you know interest rates on long-term bonds declined in april as compared to

the credit quality with the fiscal stimulus plan which included substantial increase of the federal grants and state and locality and in the discussion of the labour market there was reference to the fact that ironically one of the things that makes is the participation rate has gotten higher and that is a good thing because you know the emergency unemployment insurance from last july contributed to the participation. i am pleased these are three references by you to the positive impact to intervene in the economy in terms of boosting consumer spending in helping state and local governments directly by revenue and than by keeping down their interest cost one of those counterfactual as you get to have fun with. we have problems and i think as i said it's good to know that you can on wind. i think a premature on winding would be a great mistake about

the counterfactual is had we not passed the economic recovery plan in february of this year with the economy be better or worse? >> mr. chairman as you describe reading the and affected consumers and state and local authorities to have improved the situation so in that respect there's been positive impact but i would withhold the overall judgment since we've only seen about a quarter or less of the money being dispersed and i think there is some time to wait and see how significant the impact will be. >> the impact would have a positive impact -- >> you would so it would tend to raise consumption, yes. >> i appreciate those points you have mentioned. let me just ask one last question. if the resulting authority resolve does appear to be dissolved, if that authority were vested in the appropriate agencies of the federal

government would be aig and lehman brothers and merrill lynch situations have come out differently? >> what they have -- >> come out differently? >> of course it wouldn't have been necessary for the fed or even the treasury of t.a.r.p. to intervene in the situations with a good resolution of 40 we could have wound down the company's and the creditors take loss to eliminate or reduce the too big to fail problem. at the same time of waiting the very destructive effects particularly in the case of lehman on the world financial system. >> thank you. the gentleman from alabama. >> chairman bernanke, the chairman frank asked about the commercial real-estate market. you mentioned t.a.l.f. programs for the new and legacy program. the new program has been in an operation about a month, is that right, taking loans --

>> yes, that's right. >> and the legacy just about a week, is that right? >> yes, sir. >> i noticed you were going to cut those of december 31st? >> the program right now is slated to end at the end of the year bill we will be reviewing those programs and others to assess whether or not they are needed beyond that time. >> i noticed several others on through the end of 2010. >> be extended several through february, not to the end. >> what is the state of the commercial real-estate market? >> well, for a good bit of the recent years the commercial real estate market was pretty strong even as the residential market was weakening. but as the recessions have gotten worse the last six months or so we are seeing increased vacancy, falling prices and more pressure on commercial real estate which is raising the risk

of lending to commercial real-estate so that is a negative and as it was mentioning to the chairman, the facilities for the refinancing commercial real-estate either through banks or theommercial real debate coke market seemed more limited so we are somewhat concerned about that and paying very close attention to it. we are taking the steps we can to the banking system and through the securitization markets to try to address it. >> i think that may be the wild card and i know the way to think this week came out with a report and barney last week obviously raised concerns. you have talked about a resolution of 40 to veto authority for non-bank financial institutions. and you have referred to that as expedited bankruptcy. would it be within the bankruptcy code? would it be part of the bankruptcy regime? >> it would be a specially -- a

special regime invoked only under circumstances of financial stress and it would be analogous to the law we currently have resulting failing banks which allows the regulators to intervene before the actual bankruptcy occurs to avoid the negative impact of bankruptcy on the market. so yes it could be a broad bankruptcy regime but there would be a special category of bankruptcy invoked only during financial crisis. >> enron, world,, drexel works very well, the bankruptcy regime and do you agree that it's very important that you force creditors to internalize the cost of their credit decisions? >> absolutely otherwise you have it too big to fail institution which doesn't have any discipline other than the regulatory oversight. >> so this regime would totally

reject the too big to fail? you wouldn't be asking taxpayers to guarantee or backstop losses. >> absolutely. too big to fail is an enormous problem. if we don't do anything else we need to solve that problem. this is critical because it would mean creditors would take losses if there are resolution costs the presumption is they would be paid by assessments on the other financial companies. >> with the republicans have proposed our financial services regulatory reform proposal includes an expedited bankruptcy within the bankruptcy code and i would ask you to particular attention to that. one thing that i am also concerned about is even having the financial system take those losses or the taxpayers and i would hope that we would preserve a true if we call it expedited bankruptcy it is in fact expedited bankruptcy.

thank the chairman for his testimony. >> the gentleman from north carolina. >> thank you mr. chairman. chairman bernanke, let me inquire into two areas i need a little clarification on. on page eight of your testimony this morning, you say that we are expanding our supervisory activities to include risk focused reviews of consumer complaints in non-bank subsidiaries of holding companies. what's the authority for that, and i've been under the impression that one of the reasons that was not done previouslys the fed didn't have that authority. is there a new authority or what, under what authority argue acting?

>> well, the gramm-leach-bliley, that he would defer to the regulator in dealing with nonbanks, in any case the regulator would be either a state regulator or the ftc, and we've done this in collaboration with those bodies particularly the state regulators, the pilot program that we ran to the examinations of nonbanks was done in collaboration with these other bodies and we believe that in the cooperative spirit and looking at our responsibility to enforce these walls of a somewhat protective stance is justified. that being said i think that congress ought to clarify the presumption of the ability of the supervisor to look into these subs. >> but it's clear that the fed hadn't been for real proactive in that area prior to this

crisis is that right? >> for non-banks of that's right. >> on page five of your testimony you talk a payment of interest only reserve balances which we authorized last fall. had the fed not had that authority prior to last fall at all? >> no, we did not. >> that seems to me to be perhaps even more powerful tool than the adjustment of the fed for interest rates. and i guess i mean little surprised why some central banks had had that authority previously and the fed had not. can you give a little history lesson on that? >> certainly most banks do have this authority and they set the funds equivalent rate on the open market.

the year's interest on reserve rate as a sort of four or backstop. the fed authorities the back to the 30's and we are actually somewhat more limited on these areas than other central banks. other central banks have broad powers to buy assets to pay interest on reserves and land to financial institutions for example we invoked the 14th three authority to lend to our primary dealers and the investment bank's whereas in europe for example any financial institution can borrow from the central bank. >> am i overstating the power that is a potential tool for the fed to use or do you perceive it in much the same way? >> many central banks around the world use what is called the carter system where they have an interest rate on reserves as the floor and then a lending rate like the discount window rate as the ceiling and that keeps the interest rate market interest rate between the two levels. a lot of banks use that so yes

it is a very powerful tool and we wouldn't have been able to expand the balance sheet as we had if we hadn't had that tool to help with the exit. -- in your singing until last fall actually the fed extended the fed power before we granted this authority was actually substantially less than a lot of central banks around the world? >> that's right. >> okay. well, i guess that is a double-edged sword from some of my colleagues. it gives the fed more authority they would likely future. your assessment is that as we wind down these positions that would be as important or more important than the fed funds

rate? >> that interest on reserve rate will help control the fund. they should be closely together so they should be closely tied and both affect longer-term interest rates. so they will be working together. >> thank you, mr. chairman. >> the gentleman reminded me that decision to grant the fed that power was bipartisan, and in fact it first passed the house when the republicans were in the majority, the gentleman was the chairman of the subcommittee, did not pass the senate, there was a lot of that going around, and it then came up again and it was again passed so that has been broadly supported on this committee although not unanimous which brings me to the gentleman from texas. >> thank you, mr. chairman. in the past, most members of the federal reserve board including your predecessor when they come before the committee endorsed in

general the idea of transparency. they don't just say we are against restaurants, it's the definition that counts most members then but also argue for independence, which generally means that they don't want congress to el xm ackley what they are doing -- i saw an article in "the wall street journal" and there are a few quotes i wanted to ask you about, and i do know that all of us can get misquoted in the newspaper, but i want to clarify this because it is either misleading or somebody is confused. and i want to see if i can figure this one out. and the first had to do with you saying that mr. paul's bill, 1207, the transparency bill, would interfere with the fed's interest rates decision and since i wrote the bill and the

intention, and i know the intention has nothing to do with interference with monetary policy or interest rates manipulation there's nobody in the concourse going to be monitoring the federal open market committee. it is after the fact and all it can occur and find out what transpired. there is no management. so, is that your position that this bill if it were to be passed would interfere directly with interest rates, setting interest rates? >> welcome conagra's and paul, as you know at some point we are going to have to start raising interest rates to avoid inflation and people talked about the politics of that and how whether the fed will be able to do that without intervention or interference. if we were to raise interest rates in a meeting and someone in the columbus didn't like them and said of the gao to audit the decision wouldn't that be viewed as interference or at least that

exposed -- >> i wouldn't think so. this is just reviewing it and you can do what you want. what about today? interest rates are artificially low. could there be rates to keep interest rates low? it has been documented and written about how other federal reserve chairman, you know, they are on the verge oã this idea that it would be political because we know what happens afterward just is not seem to add up. since time is short, want to go to the next thing which i find fascinating -- hopefully i can agree with you on this. this says we absolutely will not monetize the debt. that is one of the major reforms sometime in the distant future that would be beautiful. that would stop this chaotic

monetary policy, inflation, depression, recession, all of the mess that we have. but you say you will not. at the same time, there's the $38 billion from last week and a plan to buy $300 billion of securities. these securities are bought by dollars to create. you create, if you're buying u.s. securities, what is that if it's not, and besides, if the markets really believe that, that you would absolutely not monetize the debt i think the markets would get hysterical so it seems to me like i would understand exactly what you mean by that. ..

the true definition of inflation is when you increase the money supply in the immediate consequence is, it sends out false, that information to the marketplace so whether it is when the bubble is being formed or afterwards, all you are doing is inflating constantly, doubling the money supply. interest rates are artificial and people make mistakes so it seems to me that you are in the midst of the massive inflation but i guess you have a different definition, when you double the money supply that is not inflation itself? or are you looking only at prices? >> may i respond?

inflation is the change of the consumer price level which is very stable right now in their various measures of money and the broad measures of money, the measures of money in circulation like m-1 and m-2 are not going quickly. >> the gentlemen from california, mr. baucus. >> first of all i want to thank you and the ranking member for computing this hearing and i want to thank chairman bernanke for taking the time to be here once again. by first question is in reference to the derogatory reform plan put forth by the obama administration that puts a lot of faith in the federal reserve's ability to oversee the largest most interconnected firm in the marketplace to prevent against failures. i have a question related to the financial oversight relate in this test. how you envision the role of the financial oversight council taking shape, just one of the questions and then it is my understanding that the council will play a purely advisory role

have been no real power or wait in our regulatory issues and can you describe how the federal reserve would work with the federal consul under this proposed plan? >> yes sir. there is i think, of a misapprehension that somehow this plan makes the federal reserve a super regulator with powers to go wherever it likes. in fact there is a multiple part plan, multiple plants as you point out. a critical component is the council which will oversee the overall strategy and will look for emerging risks and advise regulators on what steps to take so in particular this issue about which large institutions that that would oversee i think that would be prepared for the council to make that determination and not the federal reserve. the federal reserve will work closely with this council which again will have broadbased ability to gather information and look for gaps and problems in the regulatory system. and other major portion by the way is the resolution resume which would not be the fed be there. that would be the treasury of

the fdic. that is critical to winding down firms. the feds role as envisioned by the administration is a modest three irritation of our current system. under our current system the federal reserve is the umbrella supervisor of all financial holding company so we are already the supervisor of essentially all the firms that would like to be identified is tier 1 terms-- firms under the administrations proposal, said the main differences would be we would have some additional authority to add capital liquidity it requirements based on-- and stromer ability to look it nonbanks of says we were discussing before, vis-a-vis. the biggest challenge would be to take a provincial approach rather than looking at each firm intellectually the intellectual challenge would be to us the question is this not only is this from safe in its own situation, but does its failure

threaten other firms, other markets ended so how should you adjust capital and other requirements to accommodate that so the challenging thing for us to do but it does not radically reorient our senate powers. >> as a follow-up question, would you then be in favor of increasing the authority of the council or are you confident the collaboration of the fed and the council would work as stated in the white paper? >> i am very open to discussing the role of the council. i think it is a very important role, to coordinate regulators to oversee the system to identify risks and so on but there may be situations, where the counsel could have authority to harmonize different practices or to identify problems and to take action, so i think we should discuss you the congress, should discuss of the council should, what powers that should have. >> i hope we do in congress here, but let me refer back to an article that appeared in the "wall street journal."

this is july 20th, and in their the death of a global recession has required a highly accommodative monetary policies and you go on and on. bennett says we have greatly expanded the size of the fed balance sheet to the purchase of long-term security through targeted lending programs aimed at restarting the flow of credit. what do you mean by this? >> congressmen, our policy is using our balance sheet to try to improve the functioning of credit markets which been disrupted by the financial crisis over example we have been purchasing mortgage-backed securities which has lowered mortgage rates for every day american down to 5%. we have opened up a program that is called the talf, which has helped increase funding in reduced rates on consumer loans like ata loans, steve loans and small business loans. we have taken actions to improve the function of the commercial paper markets of these various steps have tried to address the fact that during the crisis many markets have become disrupted and our actions have been trying

to stimulate improvements and we have been fairly successful what doing that. >> in the second paragraph , you state that these actions have soften the financial crisis and have also approved a functioning key credits including the market for interbank lending, commercial papers, consumers, small business residential mortgages. how does that impact those in foreclosure right now? >> your time is expiring is not a good time to ask a question. mr. chairman will have a few minutes to answer, but we can't just extend it that way because in fairness to the other representatives. >> the mortgage market, consumer markets come interbank markets we have brought down interest rates, increased availability and improve the functioning of the markets in those areas. >> how will it help those in foreclosure? >> the gentleman's time has expired. the gentleman from texas. >> thank you mr. chairman, chairman bernanke, way over here on the far right, your left.

there we go. thank you. one of the things you mentioned in your testimony was about regulatory reform, and you had a bullet point there. one of those bullet points was enhanced protection for consumers and investors in financial dealings. then, on page 8 he said we are expanding our supervisory activities to include the risks focused reviews of consumer compliance and non-bank subsidiaries of holding companies. as you are aware the administration has laid out a blueprint for regulatory reform in the chairman also has a bill. one of the pieces of that is an interesting concept of separating the consumer compliance from the regulatory primary regulators and having a separate entity. the first question i would have is, what you think about that structure? >> i understand the rationale and why people would like to have that and i'm not going to criticize it but i want to say

my remarks the point with the fed has been doing a good job for the past three years or so and we are committed to doing it and if we allow this to work in that area we would be interested in doing so. >> are there dangers of bifurcating the regulatory process where you have got one entity looking at consumer products in determining what products financial institutions can offer and in endorsing those and then having another regulatory agency looking at the safety and soundness and how does that work? >> there are some costs to it in that he would have doubled the exams and there wouldn't be as much coordination between the safety and soundness and consumer protection issues so there would be some issues related to that separation. >> so, at a time when i guess we are all feeling it is time to tighten up the regulatory structure, make sure we plug the holes and that's moving forward if we had some places where we weren't actually able to have

the ability to or in fact doing our jobs, the separating those make sense? >> well, the argument for doing it i think is that those who believe that you need a separate agency that will be committed to consumer protection will have the institutional commitment outweighs some of these other costs and i simply noting the federal reserve is also committed in wants to be committed to that goal. >> if you were writing the regulatory reform would you keep them the same and not separate them? >> if i were writing it, i would keep the consumer protection which the federal banking agencies with additional measures to ensure a strong commitment. >> thank you for that. the second thing is, some of your projections in looking forward, what you think the economy is going to be like in 2009 and 2010 in relationship to jobs for example. when you were using the numbers and assumptions you were using,

did you assume that congress would not continue this huge deficit spending, where we are on track to literally double the national debt? are your assumptions based on performance going to get better if congress has a better fiscal policy or are your job assumptions based on continuing to spend money like drunken sailors? >> our forecast were based on our best projections of what government spending is likely to be and in particular includes the fiscal stimulus package. >> and come up with your assumptions than that this would be the job situation, assuming that congress does not do something about the current level of spending? >> if the fiscal stimulus package did not exist for example we would anticipate there would be higher unemployment. >> you are not on the same page. the stimulus package is already done. i am talking about the fact that

for every dollar this congress is spending right now we are borrowing 50 cents. if that trend continues in the future appropriations and some people talking stimulus to cop, with that alter your job prediction down the road? >> down the road it might. as i talked about in my testimony i do think it is important that we look at medium-term fiscal sustainability and we have a plan for getting back to reasonably low deficits and a sustainable debt to gdp. >> what you are saying is 2 trillion-dollar deficits a year for the next for five years is not a sustainable? >> no sir, it is not. >> thank you. >> representative cleaver. >> thank you very much for being here. i read over the weekend that the

unemployment rate in california is the above 11%, and the hill reported last week that the federal reserve reported that unemployment was between nine and ten and would continue to rise. if this is in fact going to happen and you look at california, ohio, michigan, which already double digits, should we expect another round of foreclosures? the chairman asked you earlier about commercial. doesn't all of this almost make for a perfect storm for another avalanche of foreclosures? >> the combination of unemployment and falling house prices, the double trigger, this great high rate of foreclosures. our assessment of the foreclosures is that it is likely to be, it is likely to peak in the second half of 2009, corresponding with the peak in the unemployment rate and

perhaps be somewhat less than 2010, but clearly we have high levels of foreclosures and unemployment rates would be the reason for that. >> this may be more may be theological, or philosophical, but if you look at, i mean you and others in the federal reserve and even in the @ @ @ @ @ @ @ @ @ @ our attitude toward the trouble may be more problematic than the trouble. i'm wondering what can we do to change the atmosphere in the

country. consumers are loath to go out and buy and couldn't -- and employers are not inclined to go out and hire. rehire. what can congress do? what can be done to not to stabilize the economy but to stabilize our attitudes? >> i am not sure what to suggest there, except i'm obviously-- gude leadership and good explanations help but the public has been responding to some signs, some glimmers if you will of improvement, so consumer sentiment for example has improved somewhat as stock markets have gone up and as the yellow kid looked better and the job situation cassilly stopped deteriorating as quickly as it was. i want to be clear that we have a very long-haul here because even though the economy turns up

in terms of production that unemployment will stay high for quite awhile so it will not feel like a really strong economy. >> thank you and the yield back the balance of my time mr. chairman. >> the gentleman from indiana-- i am sorry. are you finished? mr. castle. i apologize. the gentleman from delaware is recognized. >> thank you mr. chairman. chairman, let me say in praise of you because my questions may imply some negatives. i think you are doing a good job on monetary policy and i think that meets one of the goals of the humphrey-hawkins act. just looking at that act, it outlines for goals for restoring the economy, full employment, growth in production, the balance of trade and budget which i think price stability is the one that stands out now. i think that as a lot to do with what you do and maybe this is government 101, but i am not

100% sure what your role is with the administration. we are watching a circumstance in which we have deficits creating greatly. debt will go up over $10 trillion according to the budget and in the next ten years and so. of poor patients are up dramatically for this year at least. the health care legislation that is being considered in the house and the senate doesn't seem to have any real cost controls and it. some may be passing way but that but that is about the extent of it and are probably in trouble, because of that. my question to you it is, does the executive branch of government, the white house consult with you about any of these broader economic issues? i am a part of their responsibility under humphrey-hawkins is to try to make progress toward these goals and it seems to me just setting monetary policy you know will

necessarily solve the problems of the full employment, the growth production in the balance of trade and budget. i did not know if that is just off balance for you and for them, or if there is any consultation going on. obviously if you have any comments about your point of view on some of these expenditures, i would be interested in hearing them as well. >> of course the federal reserve is nonpartisan an independent. i to speak to the president's advisers periodically as they speak to members of congress and their staff. in terms of my policy positions, because i am nonpartisan, i try not to get involved in the details of specific programs, fiscal programs in particular but i have spoken to the issue of fiscal sustainability which i did-- begin today and the importance of when thinking about the programs that one is undertaking, timeframes, cost in silwan to think about the implications for the federal budget, to make sure that we have a trajectory that will be

sustainable in the medium term and i have made that point several times and am sure the administration as well as congress are quite aware that point and achieving it of course requires some effort. >> maybe we would be better served to let you go right note to the white house and keep making the point based on what we have seen. following up on something the gentleman from texas asked on the financial protection agency that is being proposed. did i hear you say, you saying that you would keep the consumer protection functions that you have the federal reserve there, if you had your preference in that area? >> as i have said, i am proud of the work we have done. i think we are well placed to do it. we have a lot of talent. we have a wide range of people. in terms of economists, financial specialists, payment specialist as well as lawyers and consumer specialist.

there compliments with the supervisory activities so with the congress decides to consider that option, we are very interested in pursuing it ourselves. >> and you indicated that, you said several new rules you are working on including rules on mortgage originators and that area. can you go through that list again quickly? >> we are having a meeting on thursday where we will announce some new rules that are being circulated for comment, and they are primarily, primarily disclosure changes, consumer tested disclosure changes for mortgages and mortgage origination cent for home-equity lines of credit and we are also going to address and that rulemaking yield spread premium which is of brokers and other lenders are paid for making mortgages so that is an issue we will be addressing as well. >> thank you. at the governors' conference which just took place, which is republicans and democrats down an alabama i believe, mississippi i guess it was

actually, they indicated they were not interested in a second stimulus. that is obviously something sort of hypothetical at this point. would you agree with that? i have heard you reference the fact that the first emulous is still being spent out there and has a long ways to go. >> i think it is less than a quarter of the first stimulus has been spent and we will have to see how the economy ball so i think it is premature to make any judgments. >> they also indicated they were concerned about restalin health care plan. the overmedicate costs and other things they are concerned about. do you have any-- i am sorry, my time is up. i may submit a question in writing to you. >> the gentleman from indiana is next. are you ready? we will then be going on the democratic side, seniority from then on. >> thank you mr. chairman. vet chairman bernanke thank you for being here. let me ask you a question alaikum from an area that does a lot of manufacturing and is

relying on credit. what would have happened last fall if we had just walked away, and had not passed the program? >> i think you would have had a very good chance of a collapse of the credit system. even what we did see after the failure of lehman was for example commercial paper rates shot up and availability declined. many other markets were severely disrupted, including corporate bond markets, so even with the rescue and even with the stabilization be achieved in october there was a severe increase in stress of the financial markets. my belief is that we have not have the money to address the banking crisis we might very well pettite platts of the global banking system that would have created a huge problem in financial markets that might of left it several years. >> have lost any of the funds that the fed has lance? >> the fed on book value is a little bit under water on the

aig bear stearns interventions, which we would very much not like to have them but we did not have the resolution which team. on all the other programs which is 95% of our balance sheet were making a nice profit which we are sharing with treasury. >> in regards to the talf program, which is, which is an area that we had hoped for some help on in that we had discussed before, at the present time, none of that has gone to a floor plan landing as we discuss. what other areas do you think can help open up the floor plan landing? we know the sba has helped a little, but what other avenues if any are being explored or do you think are available out there? >> we are continuing to look at floor plan landing. there are several possibilities for the one in particular is we are doing a review right now of the credit rating agencies, the nationally recognized rating agencies whose ratings we will

accept and the criteria of which we will accept those ratings. depending on what that list is, and what views they have about floor plan landing, it may be that some floor plan deals can get the aaa being-- aaa rating they need to be eligible for itself. they will be putting out roles on the criteria for choosing rating agencies. >> what are the other-- what is called the hareco rate, and on floor plan that is the highest of all. the reason for that, and is there a review of that, that might come down the road? >> the haircuts are set based on evaluations of the riskiness of the various assets. i think there's a lot of uncertainty right now about four plan given the state of the industry and what is happening with gm, chrysler and so on and i hope is that in the next few months, as the situation become somewhat clearer it could be that ratings will be upgraded and that we will see is so much better situation but right now

it is a lot of murkiness in terms of the credit quality of the floor plan loans. >> we are looking at a december 31 determination date as of now but i think approximately 27 billion out of the potential 1 trillion has been lent out. has there have been any looking to extending that termination date? >> we will extend it, if conditions warrant. we will try to give the markets plenty of advance notice. were not going to necessarily try to have any particular number. we are going to f.a. to make a judgment whether or not the conditions of the markets are sufficiently disruptive that such an intervention is necessary. remember this is based on a determination that conditions are unusual pandith norm-- markets normalize we should no longer be using that kind of program. >> one last question, the small businesses in our area, they come up and say you know, we just can't get the credit we

need. we can't get the help we need. and, i am not talking about the loans that should not have been made but the loans to good businesses that aren't being made. approximately what timeframe do you think the small business owners will be able to, to see the same kind of credit availability they had before? we have had so many credit organizations just walk away. can't make loans anymore, don't want to. >> in terms of having the exact same terms and conditions that they had before the crisis may be that will never come back because of credit is permanently tightened up in that respect. i'm hopeful that as things stabilize, and we are seeing some improvement says the economy stabilizes that we will see better credit flows. >> thank you mr. chairman. >> thank you mr. chairman and i

want to thank chairman bernanke for his leadership, for all the criticisms about transparency of the fed, many of which i share. you have always been a very plain spoken representative of the fed, certainly much more clear and candid than your predecessor, who made the oracle seem downright were those. to that and, listening to the previous questions he referred to, my friend, mr. cleaver, that is not going to feel like a recovery and we have talked about some of these issues which begs the question, the last to recover is which of minutely too much more shallow recessions then what we are in now, they were characterized as jobless. do you believe that this will be a jobless recovery as well, and given the answer either way, what shape do you believe that recovery will take?

>> we expect a gradual recovery. i don't know what letter that corresponds to. we should be picking up steam over time, perhaps well above the potential rate of growth by 2011. we do expect to see positive job creation in the end of this year or early next year, but it is going to take a while, given the pace of growth for the hannan plenary to come back down to levels that we would be more comfortable with. so in that respect it should take time for the labor market to return to normal. >> in your op-ed in today's journal and it your testimony you spend a great deal of time talking about preparations for the fed-- the fed is making in terms of the exit strategy. what metric or metrics are most compelling that allow you to read a recovery and given, in your testimony there is a correlation between inflationary

fears and your prediction of when the recovery begins, essentially munaf villosity kicks then and the money supply, the recovery and the inflationary pressure or concurrent, so what metrics the u.s. valuate that allow you to get ahead of that curve when that knock on the fed has always been that they are too late reading the trends? >> it is a very difficult problem and even though we have these unusual circumstances it is really the same problem we always face as you just pointed out, picking the right moment and taking your appropriate pace. since monetary policy takes time to work the only way we can do that is by trying to make forecasts, make reprojection and we use large amounts of information including qualitative information, and if the receive, formal models, a whole range of techniques to try to estimate where the economy is likely to be a year or a year-and-a-half from now. is a very uncertain business but it is really all we can do and

based on that we try to judge the right moment to begin to raise rates so we will be looking to see more evidence of a sustained recovery that will begin to close the albert gap and gid to improve to labor markets and looking for signs of inflation. there are expectations that would cause us to respond as well. >> given the debate about overhauling regulatory structures and the role you have played in that as well as others, you are having to carve out a separate approach to these new non-bank financial institutions. which, to me sort of raises the question, which is probably question, which is probably going to be one for historians between banking and investment have ever been torn down? in other words was glass-steagall the right

approach after the graham leach bliley the wrong approach? says the enough time lapsed as we move for the setting up an entirely new regime? >> i don't think that less steagall, if it had been imports would it prevented the crisis we saw. we saw plenty of situations where the commercial bank on its own or an investment bank on its own had problems with out crossed the text between those two categories. on the other hand i think that we do need to be looking at the complexity and the scale of these firms and asking do they pose a risk to the overall system and if that risk is too great, is there reason or scope to limit certain activities and i think that might be something we should look at but i think >> next, we have a look at the

health-care debate with president obama. >> tonight, susan jacoby and in the espionage trial of alger hiss. at 8:00 p.m. eastern and pacific on c-span. >> prime minister gordon brown takes questions on british politics, the economy, and afghanistan in his final news conference before the summer break for parliament. that is tonight on c-span could crest today, alaska gov. sarah palin officially steps down. she will turn over power at a ceremony in fairbanks. lt. john -- the lieutenant governor will be sworn in.

>> next, president obama is at a town hall meeting on health care legislation. this took place at shaker heights high school. he also turnetoward the clevelad clinic. this is an hour. >> already.

thank you. everybody, have a seat. hello. [cheers and applause] there are a couple of quick intelligence -- a couple of quick acknowledgement how to make. we have some special guests. first of all, the governor of the great state of ohio, a ted strickland, is in the house. [applause] there he is right there. your state treasurer, kevin boyds, is here. [applause] your secretary of state dinner for brunner's here. -- jennifer brunner is here. [applause]

that cleveland is here. [applause] shaker heights mayor is here. [applause] the shaker heights superintendent mark freeman is here. [applause] not here, but a couple of my favorite people, congresswoman marcia fudge and jeff brown could not be here today. they have work to do in washington. [applause] it is good to be back in the great state of ohio. [applause] i know there are those who like to report on the back and forth in washington, but my only concern is the people who sent this to washington, the famil ies feeling the pain of recession, those who have lost their jobs, savings, and health care insurance, but have not

lost soul. when my administration came into office, we were facing the worst economy since the great depression. we were losing an average of 700,000 jobs per month. hundreds of thousands of ohioans have felt the pain firsthand. our financial system was on the verge of collapse, meaning families and small businesses could not get the credit they need. experts were warning that there was a serious chance that our economy could slip into a depression. but because of the action we took in those first weeks, we have been able to pull our economy back from the brink.

now that the most immediate danger has passed, there are some who question those steps. let me report to you exactly what we have done. we passed a two-year recovery act that means an immediate tax cut for 95% of americans and small businesses. [applause] 95%. [applause] extended unemployment insurance and health coverage to those who lost their jobs in this recession. [applause] it provided emergency assistance to states like ohio to prevent even deeper layoffs of police officers and firefighters and teachers and other essential personnel. [applause] at the same time, we took needed steps to keep the banking system from collapsing, to get credit

flowing again, and to help responsible homeowners hurt by falling home prices to stay in their homes. in the second phase, we are investing in projects to repair and upgrade roads and bridges ports and water systems and schools and clean energy initiatives throughout ohio and all across the country. these are projects that are creating good jobs and bring lasting improvements to our communities and our country. but there is no doubt that the steps we have taken has helped stave off a much deeper disaster and even greater job loss. they have saved and help create jobs and began to put the brakes on this devastating recession. but i know that, for the millions of americans were looking for work, for those were struggling in this economy, more recovered cannot come soon enough. i hear from you at town hall

meetings like this, i read your letters, and the stories i hear are the first things that i think about in the morning and the last thing i think about at night. there the focus of my attention every waking moment of every day. the truth is that it took us years to get into this mess and it will take more than a few months to dig their way out of it. [applause] -- to dig our way out of it. [applause] but i want to promise to this, ohio. we will get there. [applause] and we're doing everything in our power to get people there. >> [unintelligible] >> i love you back. [cheers and applause] we have to do more than just rescue this economy from recession. we have to address the fundamental problems that allow

this crisis to happen in the first place. otherwise, we would be to blame for the same short-term thinking that got us into this place. that is what washington has done for years. now is the time to rebuild its economy stronger than before, strong enough to compete in the 21st century, strong enough to avoid the ways of boom and bust that have come a time and time again, a least misfortune upon families across the country. that is why we are trading a new clean energy economy. it will create millions of new jobs, helping to end our dependence on foreign oil. [applause] we are transforming our education system, from cradle to college, so that this nation will have the best educated work force on the planet. [cheers and applause]

we are pursuing health insurance reform so that every american has access to quality, affordable health care. [cheers and applause] i want to talk about health care for a second. i want to be clear. reform is not just about the nearly 46 million americans without health insurance. i realize that, with all the charges and criticisms being thrown out, many americans may be wondering how does my family or my business stand to benefit from health insurance reform? what is in it for me? folks are asking that. so i want to answer those questions briefly. if you have health insurance, the reform we're proposing will give you more security. you just turn rick's story. reform will keep you out of the health care decision, allowing

you to keep the coverage if you're happy with it. do not lead folks say that we're going to be forcing government- run health care. that is not true. i ended will keep the insurance companies out of your health care decisions, too. [cheers and applause] it will stop insurance from cherry picking who they cover and holding insurers for a higher standing -- to a higher standard for what they cover. [applause] you will not have to worry about receiving a surprise bill in the mail. it will limit the amount that your insurance company will charge you to pay out of your pocket. [applause] you will not have to worry about pre-existing conditions -- [cheers and applause] because never again will anyone

be denied coverage because a previous illness or injury. [cheers and applause] >> have to worry about losing coverage if you lose -- you will not have to worry about losing coverage if you lose or change your job. there will be a marketplace where insurance companies will compete to cover you, not to deny you coverage. [applause] if you run a small business, and you're looking to provide insurance for your employees, you'll be able to choose a plan through this exchange as well. i have heard from small business owners across america, trying to do the right thing, but, year after year, premiums rise

higher and stresses are more limited. that is certainly true here in ohio. if you're a taxpayer concerned about deficits, i want you to understand that i am concerned about deficits, too. eight years reform which came into office, washington enacted two large tax cuts, primarily for the wealthiest americans, added a prescription drug benefit to medicare, funded two wars, and all without paying for it. [applause] it did not pay for it. the national debt doubled. we were handed a $1.30 trillion deficit when we walked in the door. it is one that we necessarily have to add to in the short term to do with this financial crisis. i have to say that folks have a lot of nerve in helping us get

into this fiscal hole and then tried to talk about fiscal responsibility. [cheers and applause] i am always a little surprised that people do not have a little more shame. [laughter] about having created this mess and then pointing fingers. but that is another topic. [applause] the truth is, i am not president. [-- the truth is i am now president. [cheers and applause] and i am responsible and together we have to restore a sense of responsibility in washington. we have to do with businesses

and families do, cut out things we do not need to pay for the things we do. that is why i pledge that i will not sign health insurance reform, as badly as i think it is necessary, i will not sign it if that reform and even one dime to our deficit over the next decade. and i mean what i say. [cheers and applause] we have estimated that two- thirds of the cost of reform to bring health care security to every american can actually be paid for by reallocating money that is already in the system but is being wasted in federal health-care programs. let me repeat what i just said. about two-thirds of health care reform can be paid not with a new health reform and not with new tax cuts, but moving it into things that will make people healthier.

have $100 billion in unwarranted subsidies that go to insurance companies, subsidies and do nothing to improve health care. we ought to take that money and use it to actually treat people and cover people, not to line the pockets of insurers -- [applause] and i am pleased to see that congress has already embraced these proposals. while they are currently working through proposals to finance the remaining costs, i continue to insist that health care reform not be paid for on the backs of middle-class families. [applause] in addition to making sure that this plan does not add to the deficit in the short term, the bill was signed must also slow the growth of health-care costs while improving care in the long run. i just came from the cleveland

clinic where i toured the cardiac surgery unit, met with the doctors who are cheating incredible results for their patients, and there is important work being done there as well as they university hospitals at metro health -- [cheers and applause] and cleveland clinic has won the best technology systems in the country. they can track their patients' progress. the agency would patients were indications are necessary. that means that they can -- they can cornet with doctors and nurses, both in the hospital and -- they can coordinate with doctors and nurses, both in the hospital and in the community. they have some of the lowest cost for the best care. that is the interesting thing about our health care system.

often, the better care produces better -- lower and not higher expenses. better care produces better quality of lives. you or your doctor does not have to fill up the same forms. patients are provided preventive care earlier, like mammograms and physicals, to avert more expensive and invasive treatments later. that is why our proposals include a variety of reforms. that is why in the greatest organizations of doctors and nurses support it. we also want to create an independent group of doctors and medical experts who are empowered to eliminate waste and

inefficiency in medicare. it is a proposal that could save even more money. overall, our proposals will improve the care for our seniors. that is why aarp has endorsed our reform efforts as well. [applause] the fact is that lowering cost is essential for families and businesses here in ohio and all across the country. let's take the ohio example. over the last two years, premiums have risen nearly nine times faster than waste it. that is something that rick and his wife understand very well. as we meet today, we are seeing double-digit rate increases on insurance premiums all over america. there are reports of insurers raising rates by 20% in california. -- by 28% in california. there was as much as 56%

increase in michigan. if we do not act, these premium hikes will just be a preview of coming attractions. that is a feature you cannot afford. that is a future that america cannot afford. we spend $1 out of every $6 on health care in america the biggest rising force on our federal deficit is the rising cost of medicare and medicaid. small businesses struggled to cover worker are competing with large businesses. we will never know the full cost of the dreams put on hold, the entrepreneurial ideas that are allowed to languish, the small businesses never found it because of the fear of being without insurance or having to pay for a policy on your own. ohio, that is why we seek reform. in pursuit of this reform, we have forced a consensus that has never before been reached in the history of this country.

senators and representatives in five committees are looking on legislation. three have already produced a bill. health care providers have agreed to do their part to reduce the rate of growth in health-care spent. the drug companies have agreed to make prescription drugs more affordable for seniors. the american nurses association, the american medical association, representing millions of nurses and doctors, they have announced their support for reform. [applause] we have never been closer to achieving quality, affordable health care for all americans. at the same time, there are those who would seek to delay in defeat reform. is that the air-conditioner? [laughter] [applause] you can still hear me, though.

we had one republican strategist who told his party that, even though they want to compromise, if it is better politics to go for the kill. another government senator said that it was about breaking me. it is really the american people who are being broken by rising health-care costs and declining coverage. [applause] the republican party chair seeking to solve our efforts said that health care reform is happening too soon. first of all, let me be clear. if there is not a deadline in washington, nothing happens. [applause] nothing ever happens. we just heard today that, while we may now be able to get the blood of the senate by the end of this are the beginning of august, that is okay. i just want people to keep on working.

just keep working. [applause] i want the bill to get out of the committees and then i want the bill to go to the floor and then i want that bill to be reconciled between the house and the senate and then i want to sign a bill -- [applause] and that one done by the end of this year. [applause] i want it done by the fall. [applause] whenever i hear people say that it is happening too soon, i think that is a little odd. we have been talking about health care reform since the days of harry truman. [laughter] how could it be too soon? i do not think it is too soon for the families to see the premiums rise faster than their wages year-to-year. it is not tuition for families who have to shed workers because of mounting health-care expenses.

costs turned to leave our children with a mountain of debt in. reforming becoming too soon for some in washington, but it is not soon enough for the american people. [cheers and applause] we do not shirk from a challenge. we can get this done. people keep saying, this is really hard. why are you taking this on? america does not shirk from a challenge. we were reminded that earlier this week when americans and people all over the world mark the 40th anniversary of the moment that the astronauts of apollo 11 walk on the surface of the moon. it was the realization of a goal that president kennedy had set a decade earlier. there were times when people said that this was foolish, that this was impossible. but president kennedy understood

and the american people set about proving what this nation is capable of doing when we set our minds to do it. there are those now who see our failure to address stubborn problems as our best days are behind us. that we cannot do big things anymore. i believe that this generation, like generations past, stand ready to defy the skeptics and the naysayers, that we can once again summon the american spirit and risk your economy. we can rebuild it stronger than before. we can achieve quality, affordable health care for every single american. that is what we're called upon to do. that is what we will do with your help, ohio. [applause] with your help. [applause] all right. [applause] thank you. [applause]

all right. [applause] thank you. allred, this is the fun part -- all right, this is the fun part. i am good to take off my jacket. so if you want to do the same saying, okay, it is a little hot. all right. here's how this is going to work. first of all, everybody should sit down. [laughter] the second thing is, i and as one to call on everyone that we can in the time that we have. just to make sure that it is fair, i am going to call on girl, boy, girl, boy. [laughter] so just raise your hand if you

have a question and try to keep your question relatively brief and i will try to keep my answer at relatively brief and we will try to get through as many as we can. there are people in the audits with microphones. please wait for the microphone so you can -- there are people in the audience with microphones. please with for the microphone so that you can introduce yourself. the young woman there with the colorful dress. >> hello. >> hello. >> good afternoon, mr. president. thank you for taking my question. my name is norman goodman. my question regarding health care is a twofold. it appears that your plan has the health-care industry funding your health care reform. i think you just alluded to that

a little bit it poses a concern for me. i am the owner of a medicare certified home care agency. by the way, my agency wanted to invite you to come on a home visit with us. but your proposed budget includes drastic cuts to reimbursement. i feel that that's threatens -- your shaking your head no. >> if i am not mistaken, the health-care industry has -- the home care industry has endorsed this reform. >> your budget proposal has recommendations and cuts for the next several years that will amount to $13 billion or

something like that. >> let me just respond. the medpac idea is to have health care experts and doctors sit down and figure out how we can improve medicare. how can we make it more cost efficient? it is not an exercise in cutting reimbursement rates. in some cases, we may need higher reimbursement rates for some aspects. i think that home care and the being cost-efficient in many cases, rather than institutional care and helps keep people in their homes. [applause] in rural communities, there are certain areas where doctors are not reimbursed at an adequate level and your seeing too many doctors leave those communities. what we do want to make sure of

is that, in your reimbursements, that we are incentivizing smart things. for example, right now, if a hospital is reimbursed for the number of tests that it does, then that man i give them enough an incentive to make their system more efficient. want to go to that hospital, you can have that test sent to ribeye so that you do not have to take five more tests. but the way the reimbursement is set up right now, you do not have the incentive to just have the one test and then use information technology to distribute it throughout the system. so those are the kinds of changes that we want to make. we think that the more we are encouraging the efficient, smart care, that will be good for providers. that will be good for patients.

that actually frees up more money so that we can, in some cases, providing higher reimbursement for folks to are not getting sufficient reinforcement right now. the idea is to spend the dollars we're spending largmore wisely n we are right now. ok? >> thank you. >> thank you. the gentleman right there. >> welcome to shaker heights. it is a city that makes things work. [cheers and applause] my question and my request is this. are you willing to urge senator reid and speaker pelosi to stay in washington to get this job done? >> i will tell you what -- i think that senator reid said today that he thought that we can get this bill out of the senate finance committee by the time of recess.

in early fall, they will come back and actually vote on the bill. i have not talked to him today. my attitude is that i want to get it right, but i also want to get it done properly. -- done promptly. as long as i see folks working diligently and consistently, then i am comfortable with moving a process forward that builds as much consensus as possible. what i do not want is what i referred to in my speech as the late for the sake of delay, delay because people are worried about making tough decisions or casting tough votes. the people are legitimately working out tough problems and some of these problems are tough. if i think people are really

working through these difficult issues and making sure that we get it right, i do not want to delay just because of politics. i have to tell you that sometimes delays in washington's occur because people just do not want to do that they think might be controversial. you know what? that is not how america has made progress in the past. medicare was controversial. social security was controversial. people accused franklin eleanor roosevelt of being a socialist -- franklin delano roosevelt for being a socialist because he wanted seniors to be more secure. going to the man was controversial. but we can be afraid to change tha system that we know it is broken.

[applause] we got to get it done and we got to get it done soon. of the late right there who is waving at me. [laughter] -- that lady right there who is waiting at me. [laughter] >> thank you very much. when miss semanthie grossman and i am the director of [unintelligible] [applause] i also represent a group called senior voices. we got 4000 signatures to our congressional members asking them in support of medicare. my question is about medicare and the doughnut hole in particular. we know that about 3.4 million seniors who have fallen to the doughnut hole on an annual business. when seniors fall into the doughnut hole, they have to make

dresses about whether or not they take their medication. they break their pills in half. they make decisions about buying medication or purchas andinsing food. will you support legislation in the house to close the door and held over the next several years? >> i am going to do more than that for you. in their health care reform proposal, we have -- in our health care reform proposal, we have already extracted concessions from the pharmaceutical industry to close that down a whole. for those of you do not know what the doughnut hole is is that the way the medicare prescription plan works is that it helps you pay for your prescription drugs. you -- for your prescription drugs until you hit a certain

ceiling. then the government hopes will go away. they have to pay out of pocket expenses of several more hundreds of thousands of dollars until you get to the point where health kicks in again. that is where the call of the doughnut hole. there's a whole or you don't get any help. it cost seniors thousands of dollars. we want to make sure that we're moving to close that on a whole. that is the commitment that will be contained in this health care reform bill that we get past. [applause] this young man right here. we will get a young guy in here. >> hello, mr. president. i am going to be a junior in high school. my question is, for students, how can we get this reform passed? >> i like that. [cheers and applause]

first of all, i appreciate that as a junior in high school that you are already thinking about this. usually, young people think they're indestructible. they think they do not need health care. in fact, a high proportion of the uninsured are actually young people, particularly right after they graduate from college. the have not on the job get that provides health care and they are very vulnerable if they, have been somheaven forbid, soms to them. they want to keep kids on their parents' insurance until they're 25. [applause] that will help a lot. but the question is how you can help to get it -- but the question is how can you help get it done?

activism reynaud, calling your congress, calling -- activism right now, calling your congress, calling your senators, that is what everyone needs to do. frankly, they are hearing from the other side. also sitter other saying that we cannot afford this, this is socialism, that this will lead to government-run health care, all of the people were getting ginned up on talk radio and some of the cable news shows, it has an effect on congress. it makes congress nervous. they need to hear from folks who where saying, in a very common- sense way, that this is something we can do. it is going to be paid for. it is not good to add to the deficit. it will control the deficit over the long-term. and young people should be concerned about that. if health care inflation keeps going of the rate at this it is.

, when your generation is running things, you will appeal to afford anything in the federal budget. medicaid and medicare will control all their federal dollars. the main thing i want to of a size to people, when you contact your senators, when you contact -- the main thing i want to emphasize to people, when you contact your centers, when you contact your members of congress, make it a personal testimony. tell them your story. tell them why you are concerned. i get people -- i get a story from a woman who contracted cancer and suddenly, not only is she worrying about her cancer, but she is also worrying about the $100,000 worth of medical bills that she is having to deal with and her family cannot afford it. i hear from people who say that i have always worked hard, i

have always done well, i got a good job, and i love my job to start my business. i left and i cannot get health insurance because of a pre- existing condition. i will have to close my business and will have to go back to doing something where i can get health insurance. everybody knows the stories. it is one of the things that i emphasized yesterday to people who maybe don't think about it enough. if all the money is being eaten up in premiums, even if your employer is paying for them, and guess what. that means that the employer has less money to give you a raise. you wonder why for the last 10 years wages and incomes have been flat. if you look, on average, people have not gone mary's. why is that? part of it is because -- people have not gotten a raise. why is that? part of it is because it hasn't

been profitable. the group that understands it best are members of unions. what happens? you go into negotiations and your employer, even if they're well-meaning and even if they want to corporate with the unions, they said, look, guys, i cannot afford to raise the hourly wage because look at what has happened to my health care rates. and your whole negotiation and of being how much more of a health care burden are you going to have to carry when you thought those benefits were already locked in a grid that is why health care reform is so important, even if you have health care insurance. it is taking money out of your pockets and is leading a lot of people in dire straits. [applause] there's a gentleman who has come in with the microphone. >> hello, mr. president.

i and dr. dina lee mcintyre and have a question. the republicans and some democrats want to tax health care benefits. an individual mel would pay $1,500 at the age of 24 -- an individual male would pay $59 at age 24 and almost $10,000 at age 60 for the same plan. for a female employee, it would cost $3,300 at age 24 and $6,400 at age 50. family plans are more. a tax credit can only benefit those who make enough money to use a tax credit. most people do not need a tax

credit. how would you make a taxing the benefits of equitable to older and female workers? >> let me -- just to make sure i understand your question. first of all, in terms of taxing benefits, i said i oppose the taxing of health-care benefits for people who already receive it. that is not a proposal that i am supportive of. there is being discussed in the senate finance committee the fact that some folks have cadillac plans, meaning -- limit give you an example. the average member of congress 's plan is somewhere around 14,000-17,000. what the senate finance committee has been saying is that maybe, when you get to

$25,000 plan, one that is a lot more expensive and more fancy than the ones that even members of congress to get, maybe at that point, when you should do is that you capture the exclusion, the tax deduction that is available so that we are discouraging these really fancy plans that end up driving up costs. that is the debate that is taking place. i have not signed on to that approach. but i think that is a legitimate debate to have. i have taken of the guide -- have taken up the table the idea that you have described, that you would eliminate the tax deduction that employers give for providing you with health insurance. frankly, a lot of employers would stop providing health care and we would probably see more people lose their health insurance than currently have eight. that is not obvious they are the objective in reform.

this many -- this man right here. as a bow tie and looks very sharp. [applause] >> hello, i am brandon pederson. i am shaker heights senior vice president. [cheers and applause] we're at the age where we can be on our parents' health care. but we see states where they have no coverage between 26 to 30. though we still remain the large percentage of people who do not have health care insurance. how can we be guaranteed? >> keep in mind, one way of

dealing with this is having health insurance reform so that young people can be covered between the transition between college and getting a job. but anybody under the plan that we propose and we are seeing consensus in congress about -- anybody would be eligible to go ahead and get health insurance through what we're calling this exchange, with subsidies, with help from the federal government if you cannot afford it. you'll still be able to get health insurance if you're 20, 21, or 22, as long as you're eligible financially. if you're lebron james -- i love him, but he does not need a subsidy from the government for health insurance. but if you qualify in terms of income, if you're a working person and does not make a lot of money and does not get health

insurance on the job, regardless of age, you would be eligible to go ahead and buy health insurance through this exchange. that is the whole idea. we're creating a system where anybody who does not have health insurance is a bilable to get insurance. this exchange has a lot of private plans in it, if that is what you prefer. you can choose the plan that you think works best for you. we with them help you purchase that insurance. any insurer who is in the exchange would have to abide by certain rules, like you cannot exclude people from pre-existing conditions, like they cannot destroy you if they decide that you get to sit, you cannot lose your insurance because you change jobs, right? so we would be reforming the insurance industry and you would get access to the insurance that you can count on over the long term. [applause] it is a young lady stern.

let's see. -- it is a young ladies turny's. let's see. how about that lady right there. >> mean? >> yes, you. >> thank you, mr. president. i work for the cleveland clinic and community outreach. we serve the uninjursured and ts is connie robinson. she is a council that works with me. in the health care reform bill that you're putting together, are there going to be provisions for insurance companies to get paid for providing health education and health promotion type of things

for their people as well as more help with mental health services? that is a huge deficit. [applause] >> i have long been a supporter of mental health services as part of a package. i think that is important. but i really want to focus on, in addition, what you just mentioned, issues of prevention and wellness. this can make such a huge difference. but i was meeting with some of the officers at the cleveland clinic. they're all sitting in the frontier. they're very serious guys. they do very serious work. in fnc hospitals with fancy equipment, there also linked up with family clinics all throughout the area. what a family physician and clinic can do is focus on preventable disease, making sure

that you were hoping somebody with a nutritionist to keep their weight down before they get diabetes, as opposed to paying for surgery for a foot amputation if they already have diabetes, having a counselor who was working with the monthly to make sure they are maintaining a regiment to keep their diabetes under control. that is cost-efficient. right now, in a lot of the health system does not reimburse and incentivize that kind of preventive war and that will this work. we want to, absolutely, in this reform package, there will be reimbursements and incentives for prevention and wellness and we're going to make sure that those are the things that don't require out-of-pocket costs for the patient so that they are not being discouraged from using it, but rather being encouraged from using it.

that will be all the difference in the world. [applause] how much time do we have? ok. i am sorry, guys. i have only time for one more question. one more question did i apologize, guys. i am going to go with another young person. this young man right there who has a jacket on. is looking very sharp. [laughter] [applause] thank you for dressing up, guys. he has the votes tiny jackets. i did not trust a good one was their age. >> my name is parker smith. i am 14. how can you ensure many americans around the country that your health care proposal is not too much too fast? >> i think that is a great question. that is a great question. [applause]

first of all, i do think that sometimes people get the idea -- you know, i said, let's get this done by august. when i was referring to is let's get the bills voted out of the house and the senate by august. that still means that we would have to come back in the fall and reconcile the differences between the senate bill in the and the house bill. it would have to go back to the house to be voted on and finally come to my desk. our target date is to get this done by the fall. that is the bottom line. but keep in mind, even if we got it done in the fall, most of these changes would be phased in over several years. it is not as if you're going to wake up tomorrow and suddenly the health-care system has changed completely. we're going to phase this in an intelligent and a

deliberate way. but there are some things that have to happen pretty quick. for example, prescription drugs for seniors, we should not have to wait a long time to get that done. we should not have to wait a long time to make sure that people do not lose their insurance because of a pre- existing condition. i think there are some things that we can start implementing. is it too much? i don't think it is too much? it is only too much by the standards of washington politics today, which is basically that' anything becomes this big tangle of who is up and who is down and who's a dentist and who is not and the special interests and the lobbyists are all starting around. by that standard, i think i am working people pretty hard on

capitol hill. but this is not scrapping a health care system. all we are saying is, if you have health insurance, you can keep it. if you don't have health insurance, you can now afford to buy it with some help. if you have health insurance, we are going to reform the insurance industry so that it can still make a profit, it can still offer good services to its patients or to its customers. it just cannot engage in these rules that have been collecting a lot of premiums, but not wanting to pay it when people really need it and when people get sick. [applause] n.y. -- and here is what is complicated. changing the delivery systems so that we actually get more

quality for less money. that is when to take some time. it is not good to happen overnight. the reason i visited the cleveland clinic is because, along with the mayo clinic, they have been able to drive down costs more than any other health care system out there while maintaining some of the highest quality. when i asked how they went about doing it, when was it started? 1921. for example, doctors were part of the cleveland clinic are paid a salary instead of being paid for service. that makes it easier for some of them to make these changes. they do not have to do things our pocket. the man at the the thing that every doctors were to want to do, but there are other ways that we can take the same

approach where they can start thinking in terms of what is needed for the patient and making sure that they're getting reimbursed for what is good for the patient and they don't have to worry about what the government is saying or what the insurance company is saying. am i going to get reimbursed for this or not? to have to fill the 15,000 forms? most people who are doctors or nurses, they did not get into it to fill out forms. they got into it to make people feel better, to heal the sick, and that is what we want to free them up to do. but it will take a little time to get there. all right, everybody. stay on our members of congress. keep up the heat. we have got to get this done. thank you. love you. bye. [applause]