host: meanwhile, former president bill clinton is in north korea this morning. it was a trip not announced in advance, as he tries to bring home those two american journalists. his wife is in kenya this week. at the white house, president obama meets with robert gates this afternoon. among the issues, the possibility of additional troops

moving into afghanistan. it is tuesday, august 4. it is also the president's 48 birthday. we will begin by talking about taxes, the deficit, and the u.s. economy. what are the headlines that we want to bring to your attention? this front-page of "the hill" newspaper. airports that the obama administration on monday quickly shot down a trial balloon that opened the possibility of new taxes on middle-class up for the nba came under heavy fire from labor unions, liberal leaders, and republicans. the press secretary robert gibbs scramble to backtrack on the idea. we will show you later on what he said to reporters at the what does.

inside, the reporting of two reporters -- as the economic policy is working, and public appearances the president will attempt to regain the initiative on the economy. it says he has had several weeks of rocky support. we're joined this morning by the reporter from "the washington post." all this dovetails into what we will see later this week as he travels to indiana and tomorrow to detroit. what can we expect? guest: you can expect talk about the reason gdp numbers. never has a shrinking quarter been so welcomed by a white house. it shrunk by 1%, but this was less than expected. as rahm emanuel told me recently, the rescue phase of the recovery effort is now wer

moving into the rebuilding phase. they will talk about access to education and investment in new technology, specifically battery research in places like michigan and indiana where cars and rv's are made. host: part of this is that the administration expects when the jobless rate comes out later this week it will be at or in exfss oce 10%. guest: yes, there is a delicate message they're trying to send. the recession has bottomed out. everyone should start feeling better. the stimulus has cushioned the fall. but jobs will not be coming back soon, so do not misread a rising unemployment rate as a continuing tumbling economy. the economy must bottom out before grip can take place. i do not know of many people

will buy into that since jobs are so central in the way that people perceive things. the numbers on friday it will be high. host: one of the things you have in your story this morning, you're quoting john boehner. it says it is baffling that the administration would celebrate an ineffective trillion-dollar stimulus. guest: i talked to a couple of economists yesterday. there is an unknown question about this. we will never know what the world would have been like without this stimulus. that is what a conservative economist told me. we have backed away from that edge.

a number of previous quarters of gdp have been revised to show a deeper recession than we had them. the republican side moseley says this is ridiculous. the jobless rate continues to go up. -- the republican side mostly says this is ridiculous. host: here is an editorial which is called the calledteeing up the middle class. it says you cannot run a welfare-style and thomas it without those levels of taxation on the middle class. -- you cannot run that style without those levels of taxation. guest: we had top economic advisers not ruling out a middle-class tax hike. we had robert gibbs saying yesterday that the president intends to keep his campaign

pledge not to raise taxes on families earning less than $250,000 per year, but if you look at the extent of his current policy with healthcare and energy reform, that is $9 trillion over the next 10 years. even liberal economists say that some kind of middle-class tax increase is the only way this program will be paid for without continuing to add on to the national debt. something has to give. host: and your colleague has this headline. so, for the moment is its a dead

issue? guest: i think so. describing it as a trial balloon is a good way to describe it. economists say that it should be known to operate in a different way from the political side of the white house. we saw this with regard to the bonus at aig earlier. there was outrage and tim geithner did not even the to was a big enough deal to bring it to the attention of the president. you have a policy and a political side operating differently. this is another illustration of that. host: we want to hear from you. we will get to your calls in a moment. scott, before we let you go, here is the front page of your newspaper. here is this article. this reporter says that bill clinton landed in north korea on tuesday. it is to negotiate the release

of two american journalists. it will likely be a long day at the white house because robert gibbs will not have any announcement from the president until these two journalists are safely free. can you give us any sense of what you are hearing? guest: this broke late last night in an interview with a korean newspaper and we have been scrambling. i think that mike allen has it about right. it is a surprise. it is very interesting and we did not see it coming. we return to figure out this morning what the day holds for former president clinton. host: we will check your work this morning at your website. thanks for being with us on this tuesday. on to your phone calls. we will share with you some editorials from the papers. first, we want to hear from john from ohio.

caller: i was wondering if obama was planning on taking those millions of dollars from the atomic plant? host: i have no idea where you're talking about, john. we will go on to another call. caller: they are taking $2 million out of the rim program for cash for clunkers. the post office is already asking for money. government should not be in any of this. they are taxing us to death. the more that you tax people, the less money they have to spend. reprivatized the post office -- back to the railroads, we could have a balanced budget. but thewhen we keep voting

these same jokers into the white house, we will have the same problems. host: another story -- this speculation prompt obama to renew the bell of no tax increase on the middle-class. it began on sunday when it was said on "face the nation close-" that it is never a good idea to rule things out entirely. critics interpreted the comments as lange the groundwork for trying to get out of mr. obama's campaign pledge. chris come on the republican line. caller: good morning. i don't to talk too much about the merits of the issue. i would like to talk about the president's competence as a politician. he is completely inept. he sounds out his treasury secretary and then his national economic chairman.

that was on sunday and by monday they have to take the whole thing back? his cash for clunkers is going to die in the senate this week. his entire agenda is already dead in six months. he has 60 senators, and enthralled media, and what remains alive? cap and trade is dead. personal diplomacy with iran is a joke. closing gitmo, prosecuting dick cheney, the car takeovers, indian rendition, ending detention, ending the patriot act, and being remarks, taxing those making less than $250,000. tax and medical benefits? this guy is blowing up. -- blowing it.

can you name something that is still alive? what, minimum wage? host: you put a lot there, thanks for calling in from california. the latest edition here has a bomb on the cover. six months into his term and a look at the issue of taxes in the deficit, the economy, and the cash for clunkers program. there is a development -- some key senators indicate their support for the cash for clunkers program. we'll talk more with our guest about that later in the program. good morning, on the line for democrats. caller: i just called to say that the republican party funded the gulf war, the iraqi war, that did not -- but did not

provide appropriate funding for it. it is not only the actual cause of those who have died and those who were hurt, the overall cost is over several trillions of dollars. it is the same party that has fought against the public portion of the health care leadership. now, the health care -- for example, the public plan is analogous to a post office. if you want a certain service you go to the post office. if you want ups or dsl, you go and get that service.

i wonder if the american public -- i want the public to rise up and protest this republican decision to kill this bill. host: let's go back to this piece this morning. he writes concerning the development of possible tax increases comes at a time when congressional democrats are trying to figure out how to pay for expanding health-care coverage and are considering proposals to increase taxes on the wealthiest americans. also, this morning, are related editorial from inside "the new york times," already 10 states and the district of columbia are coming up short by $4 billion. 33 states currently foresee deficits for next year. it is mainly because high

unemployment is expected to depress tax revenues as it increases demand for state aid. there are no cheap or easy ways out of what they call the great recession. mike joins us from ohio on the independent line. caller: hi, this whole health care think i think is just a mess. everyone wants to help out. it's going to saddle the middle class. everyone thinks the government is their savior. it uses our money and the rich have a lot of money, but it will not help us to keep on hurting them with taxes. host: so, who should pay the taxes? should it be everyone? caller: in my opinion you should

have it spread out. it would be good to have a fair tax like a national sales tax. get rid of income tax. i would say the capital gains tax, a lot of these business taxes just hurt small businesses. you could tax certain once a little heavier than 1% and it does not hurt. but tried to pay health care for employees will hurt you. host: i am checking on some messages from twitter. cspanwj is our twitter address. also, from "the wall street journal" -- this from the editorial page.

barack obama advisers are laying the groundwork for taxing the middle class of climbing the deficit made them do it. the liberal establishment is even further along and finally admitting that mr. obama was not telling the truth. we're joined from stone mountain, ga., on the line for democrats. what do you think? caller: well, i'm thinking the government is doing their job. since there is a black man as a president everyone agrees he is doing his job, but me, what i'm thinking, is that no one sees

the bottom. there are people who can eat in this country. for me it is a recession where everyone needs money. i would not pay the bank endi ad then give money to go cars. yes, you can tax the millionairess and everybody, but the main thing we need to understand did you can tax the millionaires -- there are people in america right now who cannot even eat breakfast. who is not beating? including their kids. if we really want to do something for this country -- there are people who are not eating. i would not be concerned with the banks or car companies. we should give $5,000 to each united states citizen in this

country. host: we're joined in a few minutes by tammy darvish. we'll also talk about the nomination of sonia sotomayor. the vote could happen as early as thursday. we will return to the paper, this editorial page pointing out that democrats have already taxed the middle class by raising cigarette taxes. they are also giving average earners their cap and tax energy bill. mr. obama had hoped that it would raise some system of $46 billion over a decade. but they have given away most of the money in bribes to businesses to pay their bill. -- to pass their bill. this came up with robert gibbs yesterday. he was asked about comments made on sunday. this is what he responded. >> why didn't secretary geithner's summers said it would not raise taxes on those

families? >> i did not watch the shows, but read transcripts. they allow themselves to get into a hypothetical back and forth. i will say this and it is imperative for us all to understand. we have talked about this issue throughout the time we have been here. we do have big structural deficits that will have to be dealt with to meet the president's commitment of cutting it and having given us back on the path of fiscal responsibility but there's no question about that. with both talked about was one, we cannot sustain any economic recovery until we have a path toward fiscal responsibility. but they also said it should not be done as a way of burgeoning middle-class families -- burdening middle-class families.

the president's view of this is clear. >> in terms of what secretary rattner said it was not a hypothetical back and forth. it was whether they think it's possible -- that was with secretary gunnar. >> we can quibble about the word possible. >> is a possible to do all the present ones to do without increasing revenues for the middle-class tax? >> i want to state clearly that the president has made a clear commitment to not raise taxes on middle-class families. >> is there any time limit? >> this is a hypothetical game. the president was clear. he made a commitment in the campaign. that commitment has passed.

i am saying that the president has made a commitment. fine, ignore everything that i have said in the last 45 minutes. >> robert, back on health care -- he >> if you will not trust what i have told you, why do we do this? the president made a commitment and is clear about that commitment. he will keep it. >> then why it did tim geithner and summers not say it? >> date left it to me. >> the headline this morning says that the tax trial balloon popped. we're joined from annapolis. caller: how much more national debt can united states stand?

host: how do you deal with the deficit? caller: you have to stop printing and wait until people earn it to have the revenue built up. you are spending money we do not have not only for our generation, but for many down the road. host: part of that is spent for the cash for clunkers cars program. the senate is taking up the debate over whether to approve another $2 billion. the white house says if not approved, the program will end. here is the headline from miami. also from california, sales accelerate as the clunker rebate this the auto industry. we're joined from lincoln, neb. by jerry. caller: i did not make over $30,000 per year, but i would

not mind paying my fair share of taxes. if that is what it takes to get america going, i am willing to sacrifice that. the problem i see is that every time we have a problem to pay for something this country needs the republicans always bring taxes into the debate. [inaudible] host: i apologize, we were getting thfeedback and i think we just lost you. here is a headline from pittsburgh. there will be a meeting on though 24, and th 25 for the world summit. the white house has selected pittsburgh for the site. it will be on the 24th and 25th

of september. host: good morning, how do you deal with the economy and taxes and the deficit? caller: why can't the government do a federal lottery where they auction off these repossessed houses and cars? put the money toward the deficit to pay for the medical insurance, and there is a federal law that says that insurance companies cannot give you something for 12 months some government wants to put its own entrance and. if the government would lift that regulation many people could afford it. -- the government should put its own insurance in. they should bring back lotteries. host: some say that the lottery

is a tax on the poor. caller: but if they make it tax free for you can bid on a house or car and if you when it you do not have to pay taxes. they have these repossessed homes for $40,000 or so. why can't the government do something like that? host: if you go to this website, not only is it keeping track of the politicians, but now they have the pundit-o-meter. the editor will join us. you can go to politifact.com. here are some items on the site. the guest will join us at the 9:00 a.m. hour. this these concerns tim geithner

who blasted the top u.s. financial regulators in an expletive-laced critique last friday as frustration grows over the obama administration's faltering plan to overhaul u.s. financial regulation. the proposed regulatory revamp as one of the top domestic priorities, but since it was unveiled in june it has been criticized by the financial- services industry. among those who gathered in the treasury conference room, the fed chairman ben bernanke, the head of the sec, and the fdic chairman -- friday's roughly hour-long meeting was described as unusual. he did postures that were generally independent of the white house. robert joins us from massachusetts.

good morning, on the line for democrats. caller: i wanted to expand the health care is at the heart of our tax issue. at the end of every year, the government accountability office issues a financial report. it treats the united states as a business, were they not only look at the current period, but at the increase in unfunded commitments going forward. they showed we had a loss last year just due to health care of $1.2 trillion at the federal level. if you back out the future- scheduled increases for doctors -- and the congress has reversed that every year -- the analysis

shows we had a loss last year of $3 trillion. therefore, this is really bigger than the iraq war. it is bigger than the defense department. it is something that if we do not address, it will totally bury us. the rest of the world has figured this out. we ignore this at our own peril. host: thank you. inside this paper, bill clinton travels to north korea to free two journalists who were sentenced to 12 years of hard labor after being convicted earlier this summer. quiting washington sources to tell political, the family then approached the former president. the source said the white house

approved the mission. clinton's visit comes amid heightened tensions over north korea's string of nuclear and missile tests in defiance of the u.n. resolutions. amnesty has been called for with regard to the two reporters. we will ask our guest about this visit to north korea. our last call is from gary, indiana. welcome to the program. caller: i appreciate your taking my call. i think that policy is the code name for partnership of legal theives. those who are courting pay increases by moving businesses of short are being helped to form these players that we have. they should not be allowed to participate.

also, a lot of the things that have been promised, i cannot see all these things being brought, these things been accomplished. host: here is a story about president obama's white house counsel. he reports that his job is at stake. the obama administration officials are holding discussions that could result in a rare greek credit leaving his post. it is what they call following a rocky tenure. mr. craig is a top lawyer at the white house and a close aide to barack obama, has helped to lead the administration's efforts on several national security issues that once a enjoyed popularity, but have since become problematic.

that is reported this morning inside "the wall street journal." vehicle sales skyrocket in july. more on the cash for clunkers program with our guest. she will talk about what it means for car sales in this area, washington, d.c. we will be back in just a moment. ♪

>> this morning the senate banking committee holds a meeting on regulation and will hear from officials from the federal deposit insurance commission. live coverage begins at 9:30 a.m. eastern. in the afternoon, a banking subcommittee hears from local officials and local transit officials on how to better fund transit systems. that includes the systems of washington, d.c. and also that of san francisco. this morning, the senate homeland's security hearing on health emergencies are responded to with regard to trigger. -- with regard to children. the to join the conversation on

race relations today with author juan williams at noon eastern. that is on c-span2. "washington journal" continues. host: we want to welcome tammy garvish, wearing a number of different hats with regard to our issues. i want to begin this morning with a story on the front page the gets into the details of the back and forth in the senate. it gets to the heart of what might be happening this week. democratic leaders will have to struggle to overcome the slow pace of the senate to get the bill to the floor before the senate adjourns. friday is the deadline. if it does not pass the bill the program will end. guest: yes, there will be out of money.

the first $1 billion that was allocated went much more quickly than anyone anticipated. host: what has it meant for your industry? guest: it has created a lot of excitement and brought many customers into the showroom. in our particular case, and i'm pretty sure you will see it across the country, we have several dealerships and see nearly 80% of our business under this program in our import dealerships. people are trading in domestic cars. host: some of the most often asked questions -- why doesn't this program just a benefit american guest: dealerships how do you define an american a maker? toyota has sold more cars in america and made more than some of so-called american automakers.

host: 1 not cashed forwashers, or other appliances? guest: the original premise was to get american rolling. the only way the american economy can rebound is to get the automotive industry to rebound. as goes the automotive industry so goes our economy. if washing machine sales are down it does not have as much effect on the economy. i am not really sure why the government took this approach -- we think it is great and have sold so many cars from it, but there are so many other things that would have cost us nothing to be able to get this industry to rebound. host: what have you seen? obviously a big influx, but what else is happening inside share rooms? if you do not have a clunker, are people still buying? guest: yes, even without the so- called clunkers.

we see a lot more late night because people never know. dealership's oliver washington were open until 3:00 a.m. because customers thought it would be the end. -- there were all over washington. there was a grace period on friday. toward the end of this week if this does not go well and the senate, i suspect will be another mad rush. you see much lower inventories in the dealership lots. host: isn't that good? guest: in normal times it would be, but with so many plants shut down they will not be able to restock as quickly. host: and some reporting last night there was one sentence that struck me -- the industry was coming back anyway, why did they need this stimulus? guest: it is a great stimulus, but you have to remember -- this particular plan began several months ago.

it just took them so long to get going. if it had come out in february or january, this entire year would have probably seen a different result then we see now. host: you have spent a fair amount of time in the senate. diane feinstein who initially opposed it now says she will support it. people are trading clunkers and for hybrids. guest: not only for hybrids, but toyota has 16 models eligible under cars program, only two are hybrids. it is more for fuel efficiency, not just hybrid technology. host: if you have some of the more commonly asked questions you can talk to secretary ray lahood on sunday. he will direct you to cars.gov in terms of what qualifies for

the program. good morning, angela. caller: i support extending this program. watching the results from last week and seen a massive responses going on at dealerships nationwide, people need to realize that within the auto industry there are so many related businesses that require employees. this has a big potential if extended to put people back to work. it can really improve things especially for states so hard hit by the downturn. we really need to give this another chance and extend it. i ask anyone out there supporting it to please call their senators now. tell them that they supported and need to support funding this again. it is too important to let it slip. host: thank you for the call. guest: oh, we agree. we hope the program does continue.

you're right. there it is a lot of ancillary effect from the program. most importantly, it creates excitement for the economy. it gets people out, thinking about spending, and actually spending. originally when the program was designed to was more about getting so-called dirty cars of the road and replacing them with cleaner ones, but because of the change in the economy it has benefited in many other ways not initially anticipated. host: let me follow-up on my earlier point. this free press for detroit mentioned dainne feinstein and two other senators, saying that they do think there's sufficient money to support the program, but cannot agree on how or when to take the vote. what kind of pressure is the industry giving lawmakers? guest: i am sure that the

industry is lobbying very hard with lawmakers. it has already passed congress. we have until friday with the senate until the recess to have a resolution here. host: with all the changes having taken place, with an gm shutting down so many dealerships, with ford not having gone through bankruptcy, and with chrysler going through its own transition, where do see the domestic auto industry five years from now? guest: i am very concerned. 3400 dealerships are slated to be closed between gm and chrysler. there are over 169,000 jobs affected. they will not be able to keep customers because there will be no place to service vehicles.

automobile dealers are imbedded into communities. these communities resent this action. i was walking us not looking at all the clunkers -- almost 500. we have done over 300 toyotas, and nearly 90% of the trends are domestic. what does that tell you? it will not go back to buy domestic vehicles three or four years from now. host: you hear this sentiment from critics of the program. guest: when people say that, i agree that there is a lot of taxpayer money being used unnecessarily, but it will not go to dealers. an automobile dealer -- we are independent business people and are fully funded with private capital. all of this taxpayer money is

going to ask executives, bonuses, paying for lobbyists to have gm on the hill all day to fight independent business people to keep their basic right of being independent entrepreneurs. the dollar's not going to the dealers. they are filing bankruptcy and losing the amounts of their own money. host: our guest is a member of the board of directors of the national automobile association and is chair of an association in washington, d.c., and the vice president of her own darcars group. good morning ,larry. caller: i would like to take a moment to wish president obama happy birthday as i share his birth. i hope that he is listening. host: happy birthday to you.

i would suspect he is not listening. caller: my opinion on these cars is that looks more like a disaster to me. let me explain. my local cbs affiliate did a story on a dealership here in columbus last night. when they were showing the cars that were coming in and what they did to disabled and disarm them -- they don't something into the engine -- i expected to see a bunch of broken-down clunkers. that is not what i saw. i saw 1990's model cadillac, lincoln town cars, ford explorers, pickup trucks for all perfectly good. there is an enormous market for those. one market is for people who cannot afford to spend $30,000 on a new vehicle. and the the people are cut out of this loop.

it is only good for cars that get certain gas mileage -- take the middle-class family that makes $60,000 per year and has four kids. they have no use for a prius or echo. in many cases all they can afford is that 10-year-old cadillac because it is big enough and good enough. there are many, many cars been destroyed needlessly. it is slimming the market for those who do not have enough money to go out to buy a new car. host: here is a related e-mail. to both of those points, how would you respond? guest: you're right, the disaster part is the processing of the vehicle. we are having a very difficult time on the web site. remember, the dealers are

carrying the responsibility of the accounts receivable here. in our organization we have nearly $2 million out there and have not been paid the first dollar from the government on them yet. i agree. there are two ways to look at this. yesterday i was thinking -- you are right, there so many perfectly good cars and poor families who could really use them. think how many people we could donate them to who could get back and forth to work. but remember, the original premise was to take the dirty cars off the road and replace them with more fuel efficient vehicles. by the way, they have not made the toyota echo in many years. host: to follow up, the beauty of twitter is that they can respond quickly to your point. guest: no, it is not benefiting the dealer.

in the car program, yes, it does bring customers into the showroom, but all the money allotted for the so-called bailout of general motors and chrysler -- not one penny went to the dealers. host: the next call alice, from new york. caller: it is a shame that the government has to intervene in anything you -- and everything. cash for clunkers is a stupid program. they are spending our money stupidly and a lot of ways. guest: as a salesman with love anything that will get customers and to the showroom and spending money. maybe they could have done it with far less incentive. i do not think they needed to do the $4,500. host: is this a sugar high for the auto industry?

guest: there will be some sort of dropped off. in the early 1980's when they first began to do customer rebates, we have never been able to get out of that. the begin with a $500 rebate? the other area of our business in the economy it will hurt is the used car business. all these vehicles are being destroyed. normally, we would take these cars in and recondition them, make them pass the state inspection, and re-sell them. we will see a depleted inventory on the new car side because of the increase in sales and plants shut down, but we will not have it used cars on the lot. host: does this headline give you an idea of what will happen on the senate floor as we watched the proceedings -- that

the clunker debate teams up old foes and the vote will be closed. we're joined from ohio the maryann. istrotwood located in this state? caller: it is near dayton, ohio. let me ask kirk, who thought of the plan? other people did ask some precautions. -- let me askher, who thought of the plan? i have a 1996 dodge pickup truck. i am a single parent and have my last year in college and i could not possibly afford to treat this car in because i could not take on a payment. i did not even have health care coverage brennan because i have my last kid in college.

-- because i have one last getting college i could not even afford health care coverage right now. last thursday night, neither one of the speakers should people in washington, d.c. although suspended, who were marching for health care reform. chris matthews asked where the other side was -- he missed it. i'm fascinated with what the mainstream media does and does not cover. the covered everyone protesting against health care last night, which is interesting. host: would you like to respond to her earlier point? guest: this program began historic week in europe. some of our lawmakers watched and studied how it worked over there and sort of translated it into our own environment. host: this paper reports this

morning -- spurring sales, the car rebate plan is left. up in the left dealers estimated that they sold about a quarter million cars in rebate money. on a typical week, how many cars would you sell? guest: it depends which viewership and which franchise, but if you take in two days alone last week in a toyota store, they sold over90 cars which is about 1 weeks or 10 days' worth. host: how you feel about the economy? are you optimistic or concerned? guest: i am very concerned with how things are being handled, because when you take a group of people, these so-called czars, not elected officials -- the

amount of power they are given to interfere with basic constitutional rights of americans, i have got to believe that president obama -- he did the right thing. he put together a team he thought he could trust to handle a situation, but the gross abuse of the power and dressed that some of these groups have displayed it is despicable. host: we're joined on the independent line from north carolina. our conversation is tammy darvish. caller: good morning, thank you for taking my call. a couple of issues that i thinklarry from ohio mentioned -- the clunkers being destroyed. the clunkers are really in washington, who thought this deal up. to take $4,500 of taxpayer money and give people a bonus to buy a

car. any time the government gets involved in something like this it scares me because they do not understand profit or business. two issues. one is that the used car should not be destroyed in this bad economy. plenty of people up there would love to have a 10-year-old car like a family man working in a job making only $10 per hour. the second issue that might be more concerning -- remember the housing market, and how the government injected themselves into the market? they got people loans who could not afford to pay for them? how many of these new automobiles will end up repossessed and back on the used car lot? a lot of people will see $45 and jumped right in. are these people been screened?

can they pay for these cars? i want to see the automobile industry held, this is the wrong way. guest: of course, customers have to get loans. those have to be approved by banks. banks are not approving loans anywhere near under the same criteria as one year ago. frankly, there has never been a better time to buy a car. to get back $4,500 from the government, then 0% financing, and dealer incentives -- that is huge. you can give and $18,000 car for nearly $9,000, depending. in the last couple of months i have learned from all the time i

have spent in washington -- we expect our lawmakers to be experts on everything. on health care, birth certificates, czars, anything that comes. it is up to the people of the united states to be in constant contact with your local congressmen and senators to let them know how you feel during the process of lawmaking. laws are based based on feedback of constituents. so if you pick up the phone to call. i have had a over100 meetings with lawmakers in the past month and only a handful have refused to meet with me and most of them are on a task force. but there have been virtually no congressmen or senators who

have refused to me. host: tammy garvish chair of the washington area new autos association and it sits on several committees. host: good morning. caller: i would like to agree tammy. i would like to see american- made cars on the next round have a chance of the imports. i think it should be an american-based car dealership program instead of including imports. it has also been a wonderful program. guest: i would comment again on how you define an american car? if you take toyota

manufacturing, they have about 10 plants in america. nine of 10 that are sold here are produced right here in the united states. host: under the u.s., under the trade agreement, the u.s. cannot provide money that way. can you explain? guest: frankly, and a car salesman. i'm not as familiar with trade issues. but i think what they could have done, because the government has a much invested in general motors and chrysler -- if you buy either of those we will give you $4,500, but in the other car, but the incentive is only half as much, or something like that. host: good morning ,amy. caller: i have recently been learning because my mother is in the market for a new car. i do not mean to sound like a

cynic, but where is the reporting for the dealers taken these clunkers and actually trash them for parts? guest: that is really simple. the burden was put on the automobile dealer. simply, no ticket, no wonder. we have to get them to a certified selvage auction. until they provide us with a certificate that the vehicles have been destroyed, we do not even get paid. host: your follow up? caller: that is great, thank you. where is the incentive for people like my mother who did not have a clunker to turn in, but she would like to buy in a car? we have spoken with many car dealers and i do not see many deals for those who do not have a clunker.

the other thing they're really confuses me -- i spoke with many car dealers yesterday. i thought it my mother said she would pay cash they would be happy. but they said actually is better to get a loan. i watched all the hearings during the automobile issues. what happened to gmac going out of business? guest: well, the car companies are tied to the loan companies. there is only one way that a loan company makes money and that is to loan money. the only thing they loaned money on its cars. so gmac and chrysler financial need that. if you take toyota motor sales and toyota financial-services -- they work very closely together. when you say you do not see many deals.

many people perceive that. unfortunately, many of us have targeted most of our advertising for clunkers. but there are still great incentives and rebates from manufacturers. dealers have all kinds of incentives. . .

host: thank you for doing us. -- the joining us. coming up later, the conversation with a professor at hillsdale college, burt folsom. we will look at franklin roosevelt and his administration. we will also speak to bill and there and sort through the fact and fiction. >> and up there on former president bill clinton ' to north korea. the former president has landed in pyongyang in an unmarked jet and was met with flowers and handshakes as he continues on his mission to bring home two jailed journalists. robert gibbs in in in a statement about the trip, said

the white house will not have a statement about the trip, not wanting to jeopardize his success. meanwhile, wendy gramm speaking earlier saying he hopes president clinton's visit can open talks on nuclear issues as well as winning the release of the journalists. texting while driving will be the focus of a summit next month. the transportation secretary ray lahood has announced the meeting with safety officials. looking ahead to 2010 elections, joe sestak has announced he is challenging arlen specter in next year's primary. he speaks in a few hours in philadelphia. those are some of the latest headlines. host: posted on the abc news websites is a story about a

meeting that took place between senior military officials over a meeting that took place on the future of afghanistan. among those, robert gates, will be meeting with president obama later today. first of all, where did the meeting take place, and what came out of it? >> the meeting took place in belgium, and no aides were present. seven of some of the most important people in the u.s. defense department. among them, admiral mullen, secretary gates, david petraeus, and most importantly, the general stanley mcchrystal. he is now in charge of afghanistan, and he is in the midst of a 60-day assessment. that is what secretary gates wanted to hear about.

he did not want press there. he just wanted to have this session. host: you have reported that they have requested six brigades. >> this was a suggestion, that they can increase the number of forces from four to six brigades. that is about 27,000 troops. it depends on how many people are in each brigade. this is not something that has not been accepted yet. you can hear secretary gates say that he would have to think long and hard if anyone suggested adding more troops. so this is just a suggestion. i think there are other options that will be presented to secretary gates, ultimately the president as well, over what to

do in afghanistan. it has been such a violent period. they have seen the highest death rate in july. the nine troops also killed this month so far. host: we are beginning to learn more about what general mcchrystal brings to the table as we undertake this process. based on what you have reported, how is he doing? >> he has a team in place, is assembling a large team to look at the problem and stay engaged. one of the things general mcchrystal wants to do is have a team of senior officers and civilians who will essentially stay with him for three years to provide an update, more information, to look at this problem in afghanistan product -- constantly, not just

rotating new people in and out. one of the things they said it is that they need to see results within one year to 18 months. the question is what our results? improved security situation is? -- what are results? they say it is not a military problem, but a political problem. new you want to improve security? if you want to improve security, that may mean more troops. host: if you were meeting with the defense secretary and president on this issue, one when the conversation in jail? >> -- entail? >> i think secretary gates will discuss the different options and results. this is what may happen if we

put troops in, this is what may happen if we do not put troops in. i think president obama would be reluctant to approve that, but at the end of the assessment, if general mcchrystal decided that they are necessary, it would be difficult for leaders to refuse. host: thank you very much, martha. i wanted to get your reaction to your lead story. bill clinton in north korea to discuss the release of these journalists. we have some video from the associated press of his arrival. >> what is astonishing here is the north koreans had a couple of things they wanted before they let the journalists go. i believe you will see them return home with former president clinton within the next couple of days, if not sooner.

one of the things they wanted was a high-profile american to come get them. they certainly have that in president clinton. you could not get a more high- profile emissary, married to secretary of state hillary clinton. remember, al gore was one of the founders of current tv, who these journalists worked for. host: thank you very much. we appreciate the information. >> great to be with you. host: open phone calls for the next 20 minutes. republicans, 202-737-0001. democrats, 202-737-0002. independents, 202-628-0205.

send us a tweet or email as well. six senate finance committee negotiators reconvene to reform health care deadlines, while party leaders from the debate into the august recess. they plan to meet throughout the weekend over the month-long break to try to reach a deal by september 15. while players continue to insist progress is being made, democratic senators are ramping of the finger pointing, accusing each other of standing in the way of meaningful reform. also this morning in the new york times -- this story on spurring car sales. the fate of the cash for clunkers program remains

uncertain, even as people flocked to dealers to trade in those old gas guzzlers. and another story from "the washington times." two top republican activists have formed a nationally based expenditure group dedicated in taking down the senate majority leader harry reid. the two will head the dump harry reid political action committee. although none of the top republican town declared it their intention, there strategy is to challenge -- and their strategy is to challenge mr. reid. you may have seen some of this video. angry protesters shouting and democrats over the weekend, only

and leaving them one hope of getting the message out. in texas, one official was drowned out by a noisy demonstrators has he tried to talk about health care reform. we have our first phone call on the republican line. caller: cash for clunkers, if anyone thinks that the democrat party is for the so-called working man, i think this is proof positive that they are more interested in money than they are their constituents. also, about this trip of bill clinton to north korea, they were going to send a delivery -- hillary along to accompany him, but they were afraid they were going to take on too much sniper

fire. you know how that goes. host: good morning. if you want to give us a call, republicans, 202-737-0001. democrats, 202-737-0002. we read this story earlier from the "wall street journal." "without singling out officials, mr. gardner, question the wisdom of giving the federal reserve more power to oversee the federal -- financial system." the headline is, the treasury secretary, after debate, wants to see some of these controls and these agencies as part of the domestic agenda. next phone call from los angeles.

caller: i wanted to give you a couple of stories about my experience in going through the process of purchasing a car. a few years ago i bought a camaro. i was never even told what the percentage of the loan was going to be. they said my score was low, and you can have the car, but a couple of days later, we will tell you what it will be. it ended up to be a 20% loan. about the third year in alone, i lost my job. therefore, i ended up contacting this company and i let them know that i could not afford to pay

them, but i could afford about $415. they worked with me a few months, and then after that, after several situations of getting hassled, after sending them extra money, they decided it was best for them to take it back. host: from the "new york post" dan rather is going after his old bosses at cbs. the former anchor yesterday filed a $70 million lawsuit against cbs executives saying there fraudulent conduct caused him significant financial loss in his chosen trade. next is mitchell from miami.

democrat line. caller: i am glad you brought up that situation, but i wanted to comment on bill clinton first. dan rather came in at the right time, the right place. the republican party and those hate mongers, they went after and threaten companies that were sponsored, and that was a shame. moonvies should not have gone for the okie dokie. dan rather is a good man. he is going to win. now that i have said that, clinton is good for this situation. i think we need more of him to go into situations and perhaps we can get a positive and there. on cash for clunkers, i think we

are going to get money back from the government. that will be cleaner for our air. all of these young people observing these tactics that the republicans are doing, everything they are doing is really - -- negative. they do not think about their children. if you see all these people put testing, you do not see 18-year olds. they are trying to have their time in college and they are embarrassed because their parents are children of the dixicrats. there are bad for the country and we need to move on. thing got for c-span. the corporate broadcast industry helped the situation, and this is why we have c-span. corporate does give back, but we

should not be hypocritical to think that it is all about money. the government needs to be involved, should be involved, and by the way, the government held the insurance industry just a few months ago. he's hypocrites need to stop what they're doing because they are not good for the country. host: i am not sure i understand your point about corporations and broadcasting. caller: the fact that all of you in the cable industry are supporting c-span, and the idea and theory that you give back. this is a blessing that we get. as a result, here we are able to dialogue. you get good comments, that comments, but we are able to dialogue. on that premise, we are able to move the country on the platform

of cleaner air. host: i just want to make sure that you are clear that the cable and satellite industry does support this network, you are right. you can visit our website and seen that we receive no government dollars. caller: that is true, and i am supportive of all of these ideas. the same people who were criticizing, believe it or not, in their same cities, and don't you think those foreign companies have come to the south from the north? they got in touch with these car companies and these hypocrites are driving the same cars.

they even invest into halliburton and other corporations. they are hypocrites. you talk about god is good? when judgment day comes, i will not get and what ever line they are in because they say one thing and they live in different way. host: wayne from texas, on the republican plan. caller: on the government cash for clunkers, i just went down on saturday and went to trade in my car. i was told by one and the major ford companies that the government has not paid them for

48 cars. therefore, i cannot use that benefit yet because they stopped taking money for it. i do not understand if the government is going to offer this. anyway, i hope this gets straightened out. host: to bar the president travels to elkhart, indiana. detroit is also holding its third malemayoral election in fe months. kwame kilpatrick resigned last september after falling to cover

up an affair with a top aide. linda from los angeles. good morning. caller: of want to talk about health care. i think we are being sold a bill of goods. it is like a carnival act that is trying to sell us snake oil. they are going to plow that field and not check for land mind. there is no way they can check every person in the country. -- for landmines. illegals are still going to go to the emergency room, and they will pass the bill to the people who have insurance. it seems to me our elected

officials are turning our country into minimum paid employment. we have over 1 million in the country legally who want jobs. they have done nothing to deport the 30 million who are here illegally. they also allow refugees from other countries. there is no way we can provide jobs for all these people, and health care, and it is a vicious circle. host: in case you missed it does today, john mccain saying no, cementing his role as president obama's critic in chief.

he will be voting against the confirmation of sonia sotomayor. the debate will begin this afternoon and will continue for the next couple of days. senate republicans have asked for one hour each in their conversation. a final vote could come on thursday. a swearing in could come in as early as thursday evening, possibly friday. that depends on what happens on the senate floor. greensburg, north carolina. good morning. caller: you read an article about protesters at the town hall meeting. host: that is right, this is the front page of "politico." caller: these are organized protests by the republicans. there was a former congressman who was behind that.

they showed some of the talking points that protesters were given to go around to all of these town hall meetings and disrupt. that is not fair for the people who are coming to these meetings to listen. i understand one certainly has the right to protest, but they are disrupting the meeting so that the person cannot get any information out. they are being bused in. host: a spokesperson for the national republican committee says that they will begin circulating in regular e-mail to reporters highlighting the protests at democratic town halls. the title is "recess roasting ."

democrats feel the heat at home. you can see some video of catherine sebelius receiving that kind of treatment. caller: that is what i am talking about. they were bused in. they were brought in specifically to disrupt that, and that is what is unfair. also, the republicans have decided to become the no republicans, no matter what the president wants to do. also, with the protests at town hall meetings, they are protesting on behalf of the insurance companies. the chief executives get such high salaries, people need to look at them, because they are trying to maintain their position. my daughter need a procedure

right now that the insurance company says they will not pay for. people who are satisfied with their insurance, they should wait until they get into a medical situation, and they will see how the insurance company handles it. host: thank you. another demonstration, organized protesters just like the one to stop the recount. on the "washington times" we will be talking about new orleans and the issue of mental illness. barbara joining us from kentucky. good morning. caller: the comment that i had

is on this cash for clunkers program. i do not know if people realize this, but first of all, dealers were advertising it before the regulations were even finalized. many are having them sign papers that say if your car does not end of qualifying for the program, you will be responsible for the credit. or they will have to bring their old car back. i understand why they are trying to get these older cars off the road, but when they do, that takes those vehicles out of the marketplace. there will be people who cannot afford a higher price vehicle.

some are just looking for a cheaper car, and that will not be available. some people will be looking for a lower priced vehicle, and they do not have the money to go to something more expensive. they will be negatively impacted. another thing i have heard is some regulation with regard to qualifying for the program is that it needs to be insured for the last year. you need to have the tunnel for at least one year. they do not want someone buying the vehicle for $1,000 and then turn around and sell it for $4,500. i'm hearing people coming in off the street asking for a letter, saying that their vehicle had been injured for one year.

i wonder if this possibility will be on the dealership or government to make sure the information they are providing is authentic. host: white house counsel john at stake, focusing on the greg craig. in a statement from the chief of staff who says we have addressed these rumors before and they are nothing more than typical washington parlor games. while we are focused on the economy and two wars, others attempt to point fingers to promote their own status. the lohan ben is a story about the private security chief who is quitting. -- below that is a story about the private security chief who is quitting.

her resignation highlights the difficulty the obama what house has had on its cyber security efforts. the president first outlined his plans in a speech on may 29, announcing his intentions to create a position that he has yet to fill. next, -- next phone call from davis, calif. caller: regarding cash for clunkers, a lot of baby boomers, they turned away from domestic auto manufacturers because of the history of high handed tactics they used in sales. the previous guest you had, when given the opportunity to say which manufacturers were benefiting from this, she said toyota.

my generation turned away from domestic auto manufacturers because of the tactics they used in selling their vehicles. also, the quality of the automobiles. i used to be in the car business, selling. i got so sick of it. one of the tactics they used was if you got a customer, you got them into the finance office. that woman who said that she called for her mother and said that they were not interested in money, that is right. they want them in the finance office so they can benefit from the higher interest and then sell it right back to them. i do not know what is going to happen to the american automobile industry. the boomers have turned their back on that, and that is my

point. host: thank you. the book is called "new deal or raw deal." the author of that is our next guest, professor burke full sum from hillsdale college. then a conversation with bill adair from politifact.com.

in the afternoon, a banking subcommittee hears from federal officials and local transit officials on how government can better fund transit systems. this morning on c-span3, a senate homeland security meeting on health emergency management response to children's needs. >> the full senate debates the nomination of sonia sotomayor for supreme court justice. watch live coverage. in coming this fall, for the supreme court. -- tour the supreme court.

host: to our next guest thiis bt folsom of hillsdale college. let me begin with your latest book on fdr and keeping his legacy. you say franglais roosevelt created new deal programs marked by a contest in planning, wasteful spending, and opportunities for political gain, ultimately elevating his political situation but falling flat on the things that americans desperately needed. elaborate. guest: that is correct. the new deal -- one of the biggest myths is that the new deal and got us out of the great depression. we have 20 percent down unemployment, -- 20% unemployment, bread lines, and

everything else. then he comes in with this new deal. the end result, roughly 20% unemployment. all of those programs ultimately created no jobs. that is because he needed to raise the tax rate so high to pay for the programs, it stifled investment, and in fact, made the economy go into a tailspin. we were never able to recover. with the massive spending packages, no recovery. the lessons for this administration are you need a plan. the better plan is to cut capital gains rate, income gains rate. we have the second highest corporate tax. encourage investors to start businesses, and and things,

create jobs that way. -- invent things, create jobs, that way. we tried this after world war room and one -- create the jobs that way. we tried this after world war i. host: the argument is that you need to get money spending. if the government does not create stimulus, who will? guest: that is a good question. there is a variety of federal spending, all of which has done nothing to reduce unemployment.

bush comes from the hoover school of thought, using government to create jobs and increasing taxes. bush at least decreased taxes. by doing that, he was different from hoover. host: legal get to your phone calls in just a second. our guest is burt folsom. you write -- guest: yes.

part of the problem is, with all the programs that he had, -- roosevelt made sure that he put road builders in districts that were crucial to democratic party success. franken was about is the only presidential candidate to win an election with double-digit unemployment, an incredible accomplishment. he was able to do that by taxing wealthy people. he used the revenue to plow into particular districts and hand the democrats win those races. the idea is we need to sustain the spending in our district in order to achieve some kind of prosperity. of course, it was to the detriment of other areas. host: matthew on the republican

hotline from ralston, south carolina. -- charleston, south carolina. caller: i just want to -- host: we will go to brian next. caller: i am 61 years old and i have a bone to pick with the professor. is it true in 1937 the republicans were forcing mr. roh is about to raise taxes to balance the budget so that they could be reelected in 1938? guest: no, actually it is not. the republicans wanted to reduce taxes, although they were very flustered. a lot of time they did not know what they wanted. roosevelt initiated a profit tax. he also it exercised -- also

exercised a cigarette and alcohol tax. roosevelt felt like these taxes could supply revenue which she could then spend to get us out of the depression. the problem is, this discouraged people from making investment, we had continued high unemployment, and we laughed into recession. then the republicans picked up 80 seats in the senate that year. host: next phone call. caller: everything that happened in the new deal and coming forward has been on purpose. all the constraints, loss of freedoms for the american people, all the destruction that goes around us, it is all on purpose. people have to understand that.

guest: i think some of it is. roosevelt generally believed that by introducing massive tax hikes, and we need to be descriptive. 79% on top of incomes. he wanted to raise it to 90% of top incomes. of course they are not going to produce because of that. in a way, you are right, it is on purpose. roosevelt felt, as obama feels, that this will lead to recovery. but it did not happen in the great depression. cutting tax rates in giving an entrepreneur is a incentive to invest, reducing spending, giving people confidence, that is what will get us out of a depression. host: are there any policies

that are working by the administration? guest: i do not see any at the moment. i have heard people say, what about renegotiating contracts of executives who received federal aid? by the way, much of that is misplaced money. no question, these people receiving federal aid, there are grounds for controlling bonuses and salary. the danger is extending that into the private realm. president roosevelt renegotiated contracts that he felt were too high for delivery airmail. right away that creates a certain instability. who is safe? he ended up having the army deliver the mail. when that happened, we had 12 deaths from army pilots who were not trained to fly in the inclement weather.

then roosevelt had to go back and say, let us go back to something else. that creates the kind of instability that will perpetuate unemployment. host: next phone call from charles. caller: i have a hypothetical question. roosevelt introduced social security. i presume that was and confiscation of part of everyone's wages. i presume if they could do that, they could have passed a law that says you need a certain percentage of your wages and put it into a savings bank, or perhaps another mutual-fund.

the question i have, really, is supposed social security was not a government plan, but more of a mandated individual thing where people control their own money and retired on that. similar to a 401k. what would have been the result? what have been the social impact? guest: i think people would have been much better. we can look at countries like she lay -- chile. a senator introduced a motion to do something exactly along those lines, along private plans to compete with the government plan. that was passed by the senate. we had a bill that would allow private plans to compete with

the federal government's social security plan. a lot of private companies were anxious to compete, but the house did not pass a bill to do that. in conference committee, roosevelt said he wanted that bill. what happened was we ended up with that choice being excluded in conference committee. then it became a federal plan. some are concerned health care will work the same way. once it gets into roads to health care, the mandate will come in and private plans will ultimately be forced out of the market. it could have done in that direction if the senate plan had gone into being. it did not. host: a tweet now -- guest: no, that is not the case. if you look at the reagan

administration, next to calvin coolidge, and bill clinton, you have the lowest misery index of any president. we had a dramatic reduction on inflation and unemployment in the 1980's. and we had a doubling of revenue. that was after cutting the top tax rate. you look at all of the invention of expansion, developments of cell phones, the internet, fax machines, all of this -- silicon valley. all of that innovation came about when we told people, you get to pickeep most of what you earn. now people are going to keep less and less, and people are going to retreat.

host: next phone call. caller: i disagree completely with the professor. ronald reagan's first few years were nothing but recession. and we had a market crash. and jimmy carter had to beg people to stop spending. i wanted to talk about roosevelt a bit. we had a drought that lasted for five years, and we also had the republicans who took away in the republic -- the liquor business. when it was bought back by roosevelt, people were afraid to invest in it because they were afraid that the republicans are going to make it illegal again. think about that. roosevelt tried to sell the idea of conversation -- conservation, but everything went black with

the republicans. if it had not been for black sunday, and they would not have done it. please tell history the way it is. guest: it is hard to blame the republicans too much for the drought, but it did bother farm crops tremendously. the roosevelt farm program was to pay farmers not to produce. if we have a drought, and farmers cannot produce, isn't it foolish to pay them? we were paying them not to produce wheat and corn, and we were importing 35 million bushels of corn while paying farmers in the midwest not to. i think the republicans have a good grievance to complain about that. we also imported 13 million bushels of wheat. we were even importing cotton. it seems to me if you have an

agricultural policy that pays people not to produce, and then you have a drought, and then you pay the people not to produce, that is going to get the country into trouble. host: 1 morone more tweet -- guest: it is interesting, there are some areas that you can opt out of your program. the danger that we have with social security -- you do not get anything until you are 62. a lot of times, it starts at 66 to get full benefits. and a lot of people do not live until then. once you get benefits, they stopped coming when you die. whereas with a pension, you can

have benefits that you can transfer to your heirs. in return on social security is not as good as a private plan. host: hamilton, montana. you are next on the republican line. caller: carmen, montana. come on, you know me. host: i should have known. caller: i have been talking to you for over 10 years. this guy is not young. his party promotes nothing but freed them, but i do not know why you left boobs like this on tv. why do you let this jerkoff on

tv? host: we are going to stop it there. thank you for coming in. guest: that is a pretty big accusation, but we are moving in the current administration, that we may double the national debt in 15 years, if we continue on this path. that is what roosevelt did. we doubled in national debt from 1932 to 1940, and we still have 20% unemployment. that is what we did in the 1930 's, and the danger is we are doing it again today. host: young americans for freedom. they tend to be republican

younger people. the birther. he concludes by saying, is this an orchestra did campaign to delegitimize the obama presidency? is the fact that he is a first african-american president a factor? some people cannot accept the fact that he has won our election as commander in chief. guest: i do not think it is a question of race, but ideas. his opponents represent ideas that have been floating around for several decades with black- and-white on both sides. there was a recent editorial from the black economist that was critical to president obama. the young america's foundation represents the idea that liberty

-- if we increase liberty, we increase freedom, and if we follow the constitution, we will be a better society. that is the same thing at hillsdale college, we have a required course on the constitution. if we understand that, if we understand what congress is allowed to do and what not to do, then we have a better of understanding of how to increase individual liberty and have prosperity as a result of that. yes, these ideas work. historically, if we increase liberty and reduced taxes, you have more prosperity, more innovation, a happier society. host: eugene robinson says lou dobbs and others have an obsession about this birther story. guest: the problem when you look

at those types of things it is you say, he is against me because i am a woman, or he is against me because i'm black. it then deflects the conversation from what are the quality of your ideas? is a stimulus package a good idea? have a stimulus packages worked in the past? that is extremely significant to me. plunging massive amounts of money into the economy to create jobs have not worked. if it has not worked in the past, we should not expect it to work in the present. host: we have an e-mail from new jersey -- guest: the federal reserve did play a role. milton friedman didn't get his represent -- reputation at this time writing.

he argued when the federal reserve raised interest rates in 1929, it discouraged borrowing and investment. that created greater unemployment and helped lead to the greater depression. we also had record high tariffs. then-president hoover increased the income tax for top rate from 25% to 63%. i think the federal reserve played an instrumental role in getting us to depression. in the current situation, the fed artificially lowered rates. and the reinvestment act was forcing banks to make loans to people. high risk loans combined with low interest rates created a situation where banks became under pressure and had loan portfolios that could not be

sustained. so i think the federal reserve in a small way contributed to the crisis as well. host: our guest has been burt folsom from hillsdale college. how word is next from california. -- howard is next from california. caller: i said that you would be disingenuous if you did not read editorials from "the wall street journal." you focused on a few today, so i apologize. host: go ahead with your question. caller: first of all, to your guest, i have a question, but i

already know the answer. i would like the listening audience to listen to his answer. hillsdale college gets how many federal dollars? guest: that is a good question, zero. we are unique in the nation. we receive no federal money, whatsoever host. host: the students, do they qualify for student loans? caller: yes, but there are not allowed to bring them in. the college goes out and recruit private money, so when we compete for a student, and they come in with a federal loan, if we really want that student, we will offset that loan with private money.

host: with tuition? guest: tuition is about $25,000. we have about 1300 students. caller: that must drive the liberals not to find out that you can have a student body that has a success without federal dollars. c-span is another example, steve, as most of you know, does not receive a single dollar of federal subsidy. i would like to read the last paragraph of the editorial you were reading about the middle class. host: let me try to pull it up. go ahead. caller: if you want to do this

-- maybe as i will just read the paragraph. "the undeniable reality is you cannot run a european-style welfare and, state without european-style liberals and taxation on the liberal -- middle-class. without blow to european-style growth, high jobless rates, slipping more and more like mr. obama's no middle-class tax pledge was one of the greatest confidence tricks in american political history." thank you, so mucsteve, so much. guest: you will have to visit if you have not been to hillsdale college. caller: i will do that. my biggest problem is keeping my wife off of cruise ships right now. host: any response to your

editorial? caller: i thought it was very good. it suggests, once you go down the road of taxing, you cannot avoid taxing the middle class. if we raise taxes on the rich, weakened on the programs. first of all, if you tax the rich too much, investment will go down, and the money will not be there. california is seeing this. .

we did have, of course, some under roosevelt. the problem is that hoover -- primarily talking about the hoover administration here, the problem is president hoover raised the income tax from 25% to 63%. he also signed the highest tariff in united states history. the first federal farm program. massive, in effect, federal gifts to industries. the end result was instability, it was budget deficits and, yes, we had runs on banks. it was a policy that was not good and roosevelt followed it further. i think one thing was the bid was good, though, is he did reform the securities and exchange commission in a way that produced the fdic, and that did help. host: thank you so much for being with us. guest: thank you, steve.

host: we will cover some of the panels, including some of the college presidents. the president of hillsdale college, grove city college, a look at conservative colleges and universities that you can see later. bill adair will join us in a moment, you can check out this website at politifact.com. first an update. >> the commerce department says consumers boosted their spending in june for the second straight month. the increase of nearly 0.5% is slightly ahead of analysts' estimates. consumer spending accounts for 70% of total u.s. economic activity. a government report on the progress of the administration's $50 billion loan modification program said only 15% from the homeowners eligible have been offered help so far. of the 38 companies signed up for the program, two -- american home mortgage services, and national city bank -- have yet to modify a single loan.

on capitol hill the senate is in session and will begin debate on the nomination of supreme court nominee sonia sotomayor later today. live coverage on c-span2 and on c-span radio. the house recessed last week, allowing members to work in their home districts. house ways and means committee chairman charlie rangel released is campaign finance disclosures, showing more than $1 million paid to lawyers defending him against investigations of his personal finances. as of june 30 his reelection campaign and leadership pac nearly a million dollars on hand. the president was at the white house today. later he will meet with the defense secretary robert gates for a review of military operations in iraq and afghanistan where earlier at least five rockets hit kabul, one falling near the u.s. embassy. commanding general of the second airborne briefs reporters and an hour. you can hear it later on c-span

radio. somalian president says his upcoming meeting with hillary clinton presents, in his words come a golden chance for his country. he says the meeting this week is a signal that world governments are serious about supporting somalia. he spoke to journalists earlier before leaving the capitol to kenya where he will meet with secretary clinton. >> "washington journal" continues. host: we want to welcome that bill adair, the editor of "politifact." thank you for being with us. i want to begin with something new, and that is what you call the pundits meter. on the page right now is something, if our audience was watching glenn beck yesterday, he was c was cars.gov, and whether or not there was a

virus. the question are posing, is big brother snooping on the cash for clunkers site? what is the truth? guest: the truth is, no, the government is not. this started last week on his show, one of the fox anchors, kimberly guilfoyle raised some points that the cars.gov, the cash for clunkers site allows the government -- there was a disclaimer that said the government had the right to go into your computer and a personal reformation. it began actively with beck on the show reading the disclaimer. he notes correctly that the disclaimer related to strictly dealers that went in to try to log in the cars that they were junking. but gil foil then takes it into a different discussion about whether you as an individual

would have your computer violated by the government if you went to this site. she then makes some leads that we then fact check. we talked to the department of chairs the taking yesterday and found that it is just not true. there was a disclaimer there, but it is not the case that individuals who go to cash for clunkers has the government taking into their hard drives. we rated it a falls on our truth-o-meter. we have in fact checking more of the pundits. in the past, as you know, we spent a lot of time fact checking elected officials, we started in 2007 fact checking the candidates in the presidential campaign but we recently decided that glenn back and kemberly doh foil and keep older men and rachel mandell are really part of the -- keith olbermann, rachel madow.

host: true, have true, pants on fire. guest: of pants on fire ratings. host: a lot to glenn back. guest: his ratings recently are not so good. we use it for things that are not just falls but ridiculously so and allows the site from being too serious. what has happened in the health- care debate, and i am sure you will talk about a little bit come in the health-care debate as the critics have made that argument against it, they have made some factual claims but they also made a lot of claims that are not true to varying degrees and in some cases are just ridiculously false. we have been getting a lot of pants on fire ratings. host: i want to put this issue out because it has been talked about exhaustively, but eugene robinson talks about the birthers and whether barack

obama is legitimately a u.s. citizen. what is the truth? guest: the truth is there is a birth certificate from hawaii posted on the internet that we have spent a lot of time screening and dick scrutinizing. and more importantly, and robertson makes his comments in his column today in "the washington post," i think the best proof that obama was born in hawaii where the birth announcement published in the newspapers in 1961. in fact, 48 years ago today the president was born and their just is nothing to this bursar thing. robinson says it is amazing that is persisted so long. we fact check did a lot on "politifact." there is a supposedly new documents, a birth certificate that supposedly came from kenya that we are examining nail -- examine now there are writer is looking at it today. but there is just -- and we

really, it would be a heck of a story if it were true, and so we really looked into it pretty thoroughly. what is amazing is that -- is the persistence of the story. i think it speaks to the nature of political discourse these days, that everybody has a megaphone because of blogs and internet and so people who would not have had a voice in the political discourse before have one now, and so a lot of what we do at "politifact" is a fact check what the people are saying. the spread it through chain e- mails and postings and we fact check those when they go into political mass. so we put a lot of energy into fact checking the claims about the birth certificate. it is your classic american conspiracy theory, no different than when president kennedy was shot or when we landed asked not

on the moon and there have always been these conspiracy theories. they didn't really land on the moon, they were on the sound stage, was the allegation. twa flight 800 was shot down by missiles. there is a long history to conspiracy theories. what is different today is that the internet gives people a megaphone to spread those widely and be heard, whereas they would not be heard before. then, add to that, you have in the cable news business, i think it desire for a little bit of controversy, and so you have somebody like lou dobbs to jump on this as he did a few weeks ago and start pumping up the whole birth rumors, and so it gets exposed to even more people then who would have seen it before. that is why i think it is even more important now than ever for politifact. what we do is look into these claims, we fact check what people say, whether president obama or senate majority leader

-- senate majority leader harry reid or jon wiener -- or john boehner of the house or glenn beck and we fact check them. we are far journalists. i think to take -- i forget his campaign slogan was -- but politifact, now more than ever. we are really needed because there is so much chaos in the political discourse. i think politifact is a place where people can come and sort it all out and see what is true and not. host: more than 500 promises by candidate barack obama. if you go to the web site and look at promises made, those who have been stalled, are in the works. so far 374 with no action on the promises. you could go to the website at politifact.com. a treasure from ohio, good morning. gucaller: i appreciate the sides like his and not agree with him on the focus on the

berserk birthers -- it is just endless. drop in already. i wonder on your site if you could use of in like this. i have followed how often these unsubstantiated claims about iran are being repeated. like hillary clinton repeated that iran is after nuclear weapons and then i heard john mccain to put on stephanopoulos, i heard john bolten on nt are repeated that unsubstantiated claim numerous times and then i heard terry gross from fresh air repeat those claims herself. the prior head of the international atomic energy agency as well as the new one says there is no hard evidence to back up those unsubstantiated

claims. so i'm wondering if you guys could set up a site where we could go on to your site and document how often we are hearing those claims be repeated. guest: thank you. it is an interesting point. what we have found -- a figure point about things being repeated is a really good one. once something begins, whether it starts in of blogs or start in talk radio or wherever, claims just take on a life of their own. it is clear when you talk to elected officials, it is not like they put a lot of time into researching whether something is accurate or not. basically wanted becomes a talking point, it is a talking point for ever and you may not really have much to back up. in the case of iran, we look at that a few times and i think the challenge is for our truth-o- meter rulings, to find enough solid evidence one way or another.

and so we haven't addressed it. i am familiar with the comments by the former -- international -- the weapons inspector. and there is definitely some doubts about some of the claims about iran's intention and how far it has progressed. but for office -- but for us, for politifact we set a bar and we say we will only rate something if we are sure there is enough solid evidence. and i am not sure there is enough in this one. the question is whether we should come up with another vehicle or feature on the site. we tended to be more about meters, of the obameter, the truth-o-need a commit a we need a new one. host: muehlenbeck says the office of science and technology policy has proposed forcing abortions of putting sterilants and a drink of water to control population. john holdren never said that.

why would glenda excite and where we did the information and how were you able to verify that he was wrong? guest: i have to confess i was on vacation last week and i did not edit it so i was not familiar with this particular one. often what happens is the dewitt these, though, there is a germ of truth. it will begin with something that maybe someone said long before. we did one on the president's nominee to be the regulatory czar and some things he had said. so it would often begin with a germ of truth and then it would take on a life of its own. it is funny when you watch these shows, i was watching his show yesterday, some of the clips on the internet, and things sort of snowball and what began with his accurate reading of the cash for clunkers web site and his accurate description that the

statement was on the part for dealers, suddenly becomes, well, the government can look into your computer, you as an individual if you just visited cash for clunkers. these things snowball and at no point does the host say, wait, we are talking about different things. we are talking what the dealer said. he never said that at that point. there is also a certain amount of entertainment here. whether it is lou dobbs o for loulbermann. -- whether it is lou dobbs ortiz olbermann, trying to put on an entertaining show. if they can pump up, they would do that. host: the republican line, from texas. article good morning. i was going to ask and two questions. both about rachel maddow. a lot of times when i hear her say, especially when it concerns political actions of different groups are stuff, she has the facts to back up.

second thing, i can't understand -- have you done anything on rush limbaugh? he can say anything and his limbaughites -- everything he says. please, elaborate on him so that the listening audience can see where he is really coming from. thank you. i will hang up and listen. guest: great questions. we have indeed looked at several clips rachel maddow has made. i think we have done for ray and i think one was a false and maybe two others that were more in the true range. we have a range on the meter from true to false. true, mostly true, half true, barely true, false, and pants on fire. so she has a mixed record. rush limbaugh -- and you can check this by going to our site -- one of the things we did is allow you to look at someone's record so you can look at rush limbaugh on our site, click on

the people and then click on his name and you can see his record, how many true, half true, etc. come. host: according, he has been true once, barely true twice, and false ones. guest: that is a mixed record. it also is a function -- we have only begun doing the talk show host and the pundits. so we are not looking at a large sample, as political scientists would talk about it. so i am not sure you could draw a lot of conclusions. we choose to check things that we are curious about. if we look at something and we think that an elected official, talk-show host is wrong, we will fax -- fact check it. in limbaugh's case he makes his transcripts available on his website so it is relatively easy for us to see his statements. and i think there is a transparency there on his part that is commendable, that he is willing to just sort of put out there what he says and it makes

it easy for us or anyone else to examine the accuracy of it. host: alex from massachusetts. independent mind. for bill adair of politifact.com. good morning. one more time? next to sheeler -- sheila from massachusetts. jon scott want to -- caller: i want to ask who fronts politifact, because keith olbermann is every bit as bad as they say rush limbaugh. he has a pretty seedy past and he has a little problem with his taxes, too. i would like you to be at least fair on that. host: i should point out along with joseph barbaro and rachel maddow, he is on the list. guest: politifact.com is run and owned by the st. petersburg times, an independent newspaper in florida, say bidders for,

florida. it is a fairly rigid very highly regarded newspaper, the largest in the state. and i think it has a great reputation for excellent journalism. so we are not accountable for anyone, not affiliated with a big corporation. and i think it allows us to do great journalism. as steve was no telling about keith olbermann, we did two items and we are examining he and rachel maddow and the commentators from the left and of the political spectrum just as we do the folks from the rights and of the spectrum. and we also invite readers and viewers like you to submit any ideas you have for as of things we should check. they have to be things we can verify, but people will want to e-mail us with suggestions, the e-mail address is on our website,truth-o-

meter@politifact.com. welcome suggestions of claims on television or members of congress. host: keith olbermann we should keith olbermann was mostly true once and false ones. did the pants on fire come from the childhood, liar liar, pants on fire? guest: this was part of the mission as a started politifact two years ago. part of the mission was we wanted to make sure the site was not too serious. one of the editors of the st. pete * came up with the idea of pants on fire using that rhyme. and it just really stop and it has been our most popular thing. one of the things you can do when you come to the site ratings that earned that. it shows people that, we don't take this stuff too seriously. we represent that it is

politics but it is a sport, too. host: in his playbook, the daily blog, one issue that would drive click -- table chatter is something that happened yesterday and today. if you want to the drug report, there was video of candidate obama talking about health care and private health insurance and this morning linda douglass, office of the white house, quickly refuting what was on that site. this is about three minutes. we will not listen to all of the book is part of it to give you a sense of how the white house is responding using biotechnology to get their side of the story out. >> i am linda douglass, communications director for the white house office of health reform. one of my johnson to keep track of all of the disinformation that is out there about health insurance reform. there are a lot of deceiving headlines out there right now. in this one. take a look at this one. this one says, uncovered video, obama explains how his health care plan would eliminate

private insurance. nothing could be farther from the truth. the people who always try to scare people whenever we tried to bring them health insurance reform are at it again and they are taking sentences and phrases out of context and cobbling them together to leave a false impression beard the truth is the president has been talking to the american people lot about health insurance reform and what is at stake for them. what happens is because he is talking to the american people so much, there are people out there with a computer and a lot of free time and they take a phrase here and there and cherry pick and put it together and make it sound like he is saying something he did release a. for example, here is a clip that they probably will not show you. >> they go on to some of the events, including president obama at the aarp. but your reaction to linda douglass as you see this technique. guest: it is fascinating. and that is part of the reason we have to stay so nimble and

political journalism, is to recognize there are so many different ways that elected officials and government agencies are getting their message out. i think from a politifact standpoint, we want to fact check everybody and everything out there. that is why we fact check twitter messages and we fact check facebook ditchings and anything that comes up. the points she makes i think there is some truth to what she is saying about how will obama's statements have been chary picked, and more broadly the way that the critics have portrayed the health reform plan. we have many examples, and you can click on the word health under subjects and you can see all of our ratings. but there have been many, many cases where critics of the health bill had indeed taken things out of context. and i think it is important for us in the news media to help

people sort of that out, which is very much obviously what we do act politifact -- at politifact is to take these things you here and really examine them. in this case we have not fact check what was on the judge -- george report yesterday but the technique of taking some of these things out of context has been used repeatedly been the biggest one that will enable us was a chain e-mail that we check that had many, many claims about the health care bill that went page by page. we went page by page and looked at each of the claims in this e- mail and just found in nearly every case it was wrong. host: based on early track record, you look at glen beck or bill bennett and in a culture they are wrong more often than right and rush limbaugh is right more often than wrong. guest: it is still a small sample to draw conclusions from. it is early. i think alternately as we do

more and these, there is value in that kind of talent. we resisted initially counting up those things, but we realize that we are really creating a tremendous data base of independent journalism that is assessing those things and it is valuable for people to see, how often is president obama right and how often was senator john mccain right. i think like the back of a baseball card, sort of somebody's career statistics, what is their batting average. but as we keep doing this, rush limbaugh will continue to have a record on politifact and all of these folks will. george will, we have checked several times, and i think every time we checked in he has been right. does not mean he is not getting things wrong but of the things we have looked at, he has been right. this is a columnist who has a

research for that fact checks is things so he definitely puts an effort in getting things right. host: 10iowa -- tim from iowa, good morning. caller: what was your process for validating obama's birth certificate? and a question of whether it was a birth certificate, certificate of live births, if you could cover that? guest: thank you. you bet. the sort of fundamental thing, the debate had to do with whether the certificate that was posted on the web by the obama campaign was indeed the board certificate. i think what you are referring to here is, there is a different document maintained by the state of hawaiia -- hawaii that has not been released. it is probably the case in many states where there is an

original document that isn't released. but if you write in and say i am barack obama and i want a copy of my birth certificate, what you get is what the obama campaign put on the web. we talked to the folks in hawaii and they have even more recently issued statements saying, what is on the birth certificate that the obama campaign put on the web is it the same as in the original one that is in hawaii. case closed. and i feel like we really should move on to more substantive and important issues. we have spent a lot of time looking into this. as i mentioned, we are still looking into it today with this canyon one, there been questions raised about its authenticity already -- kenyan one. it seems as journalists we have done our duty, check that out. i think it is probably wise to move on and check things that are more significant for public policy. holes cut you looked at dan

lundgren, republican of california, russ carnahan, missouri, both made false statements on the president's initiatives. host: next from silver spring, maryland. good morning. go ahead, please. you are on the air. caller: hi. first, i like to say, thank you for the web site -- i'm not saying it right, but i will look at it. number two, i wish you do do more investigation of russian limbaugh because i think you would find out more information about him. get that up to speed right away. the third is this, you seem to deal with a lot of national politicians or whatever. i want to ask, would you do anything concerning states -- at least on the level of governors'? because in the case of south carolina, rejecting the stimulus, it has been reported

that of the republican governors have wanted to not do the stimulus but then they have come out when they have gotten the stimulus check and stood before the press saying, looked at what we got a, sort of like, we are getting money for this particular thing. would you be looking at things like that on the state level when they seem to be so against obama, so to speak? guest: yes, actually, we already are. in the case of the governor of south carolina, weak indeed had fact checked three things he made during the debate about the stimulus. we have looked at some governors and we fact checked bobby schindel, governor of louisiana, to 03 times. -- bobby jindal. in florida we are beginning to use the meter on elected officials in florida.

we will do more as the campaigns heat up for 2010. we have also had a request from some news organizations in different states who are interested in using politifact for their own state races and we were talking about how we might be able to do that and sort of maintain the quality that we recognize. so i think there is great potential there. my grand vision for politifact is to have politifact in every state because i think this is the kind of journalism needed in the new media world. i think it is the perfect thing for veteran professional journalist to do to sort of makes sense of everything else and fact check it. i would love to see politifact in every state. host: we talked about pundits and politicians but you also have something relatively new, these jane e-mails we so often get with misinformation. specifically a claim that the senate voted to give -- let

undocumented workers get social security benefits. guest: in fact, if you click on chain e-mails on the site and you click on the record will the the two years, it would be a dreadful -- it would be overwhelmingly false. i think we checked about 50 claims of jane e-mails and nearly half have been false or pants on fire. host: what do you tell those who receive them? guest: just delete. they are so often wrong that they are really not worth reading beard i am always fascinated that people will spread days without taking any time to verify the accuracy. i think again among the same lines and that this is a new media world and you have to recognize that people are not getting their news as much from traditional surf -- sources like

television and newspapers and they are getting their news from lots of different sources, whether it is jon stewart award chain e-mail or whatever. i think we have to help people make sense. that is what to us and makes a lot of sense to fact check those e-mails. host: politifact.com, sponsored by "the st. petersburg times." bill adair, to barbara joining us again. please come back. host: we will take you to a hearing that began about 20 minutes ago. it is the senate banking housing and urban affairs committee. the issue is regulation for some of the banking and financial institutions among those testifying is the chair of the federal reserve insurance corp., fdic. also comptroller of the currency, member of the board of governors of the federer reserve system and acting director of the office of thrift supervision.

it is being chaired by senator christopher dodd of connecticut. live coverage here on c-span. >> the capital structure of the company. that is good because bear is the market's instrument, as long as it is a debt instrument they want to be paid and they know that if a financial institutions gets in trouble, that debt will be converted into equity, a buffer against loss and they would be subject to loss. so i think that market discipline has a number of different and -- avenues we should pursue. and market discipline itself should be pursued along side of some of the regulatory mechanisms. if i could, you know, i was not at the federal reserve up until a few months ago. and as i have said repeatedly, i do believe there is plenty of blame to go around everywhere. but i don't honestly think all roads lead to the feds. >> which don't leave it to the fed? >> i would say, senator, bear

stearns, aig, lehman brothers, fannie and freddie. there were a lot of problems in this system, and as i said earlier, i think before this crisis is over we will have seen a lot of failures in a lot of kinds of institutions. i don't say that to try to reflect -- reflect responsibility. i think part of what i was trying to say and my prepared remarks and my introduction remarks was that i, and i think everybody on the board, take seriously where things did not get regulated as well as they should have and where the structure needs work. that is why we started to make the changes we are already making. the images for the record, and we all know this, but who is -- >> just for the record, and we all know this, who is the regulator? in know it is the federal reserve. you are now a member of the board of governors. let's be honest. >> absolutely true, senator. in some cases the bank is

regulated by of the regulatory agencies, -- >> but the primary regulator -- >> of the holding company -- >> is the federal reserve. i don't have much time. i want to pick up on a couple of things. today's "the wall street journal" had a tough article dealing with secretary geithner when he met a bunch of you where he told the financial regulators that they should stop -- could you imagine the gall here -- that they should stop criticizing the obama administration is a redwood to reform plan. my gosh. i hope you won't quit. i think your honesty and your candor here is very important. and we recognize the role of the treasury to set policy for financial regulation, but ultimately it is going to be the congress. this committee, both sides of the aisle, and the house, it's going to set the tone and create the laws.

i appreciate you bringing this independent perspective with all kinds of pressure placed on you. does the testimony that you have given here today, that you provided, is that your own views, such as it was, not any way influenced by secretary geithner's tirade against the other day? serious question. >> who are you asking the question of? >> asking all of you. >> congress requires and prohibits the treasury department from intervening in any legislative -- expressed to this committee. we did not clear our statements to the treasury department and we take that independent function very, very seriously. >> sheila? >> yes, i don't think anybody thinks we are not independent. >> we hope -- >> at some of the, senator. the only people i discuss this with our my fellow members of

the board and staff at the federal reserve. >> senator shall become i think our testimony speaks for self -- yes, we are independent. >> thank you very much. >> a little surprised by senator richard shelby's question considering the positions you have all taken. let me look at this and kind of a different way. the public has a general understanding that the investing public and the victims of this financial disaster -- as a general understanding of the regulation of financial institutions, putting it mildly, fell far short. somehow the belief that the most egregious institutions found an agency that was too easy on them, and washington, we call it regulators shopping. they just think that the government for whatever reason is too easy on wall street agreed.

maybe cynical way to look at -- and i apologize if that is the way you take it. if you see the president's plan , the bank supervision framework, i hear each of you disputing major parts of that. how would you explain to the american public what the next up is? how would you fill the financial gaps of the red the taurus system if consolidation of regulators is not the best move? how do you explain to the public why four very smart people playing very important roles and are financial institutions, rigor-matory system, and an administration that i think has equally smart people that understand this, why is there not -- how do you explain in understandable terms if you are talking directly to the american people now and not to this committee, what we should do to fill those gaps so that these kinds of egregious and awful things don't happen again? starting with you.

then i think there was arbitrage -- >> i think there was arbitrage, but between the bank and non- bank sectors, other vehicles vs. higher leverage the misplaced capital requirements for commercial banks. on consumer protection it was third-party mortgagor regulate -- originators, not affiliated -- original loans being funded by wall street funding vehicles. pretty much outside any type of prudential or consumer protection standards that are within the purview of the banking regulators. so i think it is unfortunate the word bank is used for just about everybody. my role -- bank as an fdic- insured institution, and, listen, we all make mistakes but the insured bonds apart institution, that sector has held up pretty well. this is why you saw in december so many fleeing to become bank holding companies and trying to grow their insured institutions because that was the sector that was left standing. which is hard for us, because

our exposure has increased significantly, we have tried to do the things we need to do to stabilize the system, but in this increased our exposure significantly. so i think that testified before, the arbitrage between the banks and non-banks and have a consumer agency with a focus especially on examination of non-banks sector and system risk council that we have the authority to define system issues or systemic institutions whether or not a voluntary one to come in under the more stringent regulatory regimes we have four banks and bank holding companies, that they should be told they need to do that. so i do think of are the charts between the banks and nonbanks sector, not between individual different types of bank charters and certainly not between the choice of state of the federal charter, of 8000 community banks of the country, most do have a state charter, we regulate about 5000 of them. i don't think they really contributed to this but -- you have seen additional assistance community banks -- to read what

rick and television for fear of franklin, which right here come inevitably there would be a regulatory the point that would be dominated by the large institutions, london together. there is a valid reason for state charters. community banks from a state charter community banks tended be more local and their interest in how they conduct their lending. so i think to try to draw that issue in to the much larger problems we have with arbitrage between banks and non-banks and a lack of regulation of derivatives i think is misguided and it is not where we should be focusing efforts on what the american public should focus effort. >> your thoughts? >> i agree with everything shall bear just said and to point out we also regulate about a quarter of the nation's community banks, all different sizes of institutions. most of the problems did not take place inside of the insurance depository institutions that we supervise, which are the most extensively regulated parts of the system.

and, of course, we did make some mistakes and the were some problems. we are not discounting that. that is not where most of the more. the second thing i would say, i think there are a number of very sound and strong proposal in the administration's reform proposals which i do support, as i testified, just some places where we think it should be shaped differently. and carrying out our duty to provide our views independently, that is what we are trying to suggest. with cfts, we agreed to have a strong federal consumer protection rules writer to set a single set of rules that applies to everybody. a very powerful change. but we think taking that same step and applying it to enforcement and examination of financial and depository institutions to do that should stay with the bank regulators where it works well and it is that all of that effort should go, on examination, enforcement and implementation side, to the non-banking sector where there really were very substantial problems that have way disproportionately higher levels

of foreclosures, for example, in your state and many of the stage for prevented in this room. >> thank you. >> thank you, senator. i think, if you are asking what the public should be focused on, my suggestion would be, too big to fail. that is not the only problem, by a long shot, but to me it continues to be the central problem, the ability to avoid the moral hazard that comes with too big to fail institutions. as i said a moment ago, i think we need a variety of supervisor and regulatory tools to contain that problem, whether it is resolution, bringing systemically important institutions into the perimeter of regulation, making sure the kinds of capital and liquidity requirements that systemically important institutions have will truly contain on toward risk- taking. i think we are going to need a broad set of activities, but too big to fail was at the center,

not the only cause, but what at the center of the crisis, and that is what i think we all need to focus on. the only other thing i would say quickly, it harks back to a colloquy you and i had a couple of weeks ago when i was testifying, when you and i were talking but attitudes and orientation and how people in the congress and regulatory agencies and the administration think about issues and problems. it is not easy to insure against people losing interest in issues. but i think that is a role that in a system of government that has a lot of checks and balances, we have to think about. how do we try to institutionalize skepticism, institutionalize critical thinking, to look at developments in the financial world so that we don't just say that is just a market development, it must be benign, but instead being able to distinguish it intelligently between the nine, useful innovation and one hand and building problems on the other.

>> thank you. >> thank you, sir. one of the advantages of a panel on this, you get to agree and dispel the notion that we disagree on some anythings. i agree with my colleagues. but i would also like to focus on our veterans position between banks and nonbanks. the cftc provision goes along ways toward dealing with it -- cfta. you don't get to sell a product at a non-regulated entity under different terms of conditions from a different regulatory structure that you would and depository institutions or otherwise related entity. i think that is one of the critical components of the administration's proposal, to fix that gap. >> thank you. to recommend mr. chairman. >> senator corker. >> thank you for your testimony. i also, like most people did, read the story this morning in "the wall street journal" regarding the meeting on friday, and generally speaking, did it captured the essence of the attitude?

>> you take that one. [laughter] >> very briefly, i just -- want to move on. >> it was a candid conversation about the institutions, our agencies different views on the subjects. >> generally fair article? >> a lot of it was true. >> ok -- [laughter] i guess what i would like to get at is it is my understanding that the original draft had the national banking supervisor not being actually a part of treasury. i think we have seen today -- and we have known for some time -- treasury can exercise -- tried to exercise influence over organizations and my understanding is in the beginning, the banking supervisor was not a part of treasury.

at the last minute it was put back in. i just wonder if one of the things we ought to be looking at is absolutely ensuring that this banking supervisor -- even more independent than has been laid out. very briefly. >> may i respond to that? >> adulate this may surprise you, but i was a strong advocate of keeping it within the treasury but subject to the same fire walls we have now, which dose -- does give the agency is strong ability to operate independently. i believe creating a new board, if you have three other regulators still in existence and everyone has forced them i'd think it will confuse things. it is critical, however, you do have the statutory fire walls. that is a position that i actually advocated for. >> any different opinions in the panel? >> as an independent agency, i think the types of supervisory

functions that occ and ots perform, and will look at them in terms of the front line prevent -- prudential supervision of the banks we ensure. i think there are some merits making it independent. i think you do want to make sure it is as and solid as possible for an nea -- from any type of influences -- as insulated as possible for any influences. >> i think i have actually been very supportive of our chairman of the federal reserve. yet at the same time there is no doubt the federal reserve had some failing in this last go around. i read your 2005 federal reserve system purposes and function document. it actually does, for what it's worth a mistake that one of your

responsibilities as maintaining the stability of the financial system and containing systemic risk that may arise in financial markets and providing financial services to depository institutions. so i think it is fair to say that in essence you sort of did have responsibility there, and i am wondering how harboring all of that at the federal reserve would not alter, if you will, be a bit. i think all of us understand today that we need to be more concerned about systemic risk. i am sure the fed does, too. and i say this with respect to the organization. but obviously with concerns. i am just wondering what would be different if in fact the fed was a system of regulator, the system of regulator? >> first off, senator, i don't think there are any proposals on the table that would really make the fed a systemic risk regulator in a sense to be able to swoop in anywhere and anytime

saying we need to do something about this. the proposal that we endorsed was making the federal reserve the consolidated supervisor of systemically important institutions. i would say in direct response to your question, there is certainly a responsibility there. and i would certainly be the first to say that responsibilities at all the financial regulators, including the fed had, were not exercise as effectively as they ought to have been. but i would also say that when you give an entity responsibility, you do have to make sure you give it authority to achieve that responsibility to fulfil it and you have the mechanisms that would allow it to do the job. and when you have a circumstance in which large institutions which turned out to be systemically important, i think, in some cases come to the surprise of many, were not within the perimeter of

regulation, it was obviously not going to be an easy matter to contain the activities of those institutions, including a lot of the wholesale funding and a lot of the very tightly wound approach to securitization, that was a major contributor to these problems. so, i guess i would say, first, need to make sure that the appropriate authorities are present. second, as i have often said, there needs to be a real orientation of our regulatory approach more generally -- and i mean the system. and, third, the federal reserve i think needs to take more advantage of the comparative abilities that it has. that is why we wanted to move forward, to make use of the economic and financial expertise to provide a monitoring of and a check upon the on-the-ground supervisors. that is where the advantages lie

and that is where you bring together. >> one last question. i know there is differing thoughts on too big to fail, but each of you feels that it is a big issue. i know i would like to see a resolution mechanism in place, much like chairman bair proposes. mr. dugan, i don't understand how, if you continue to give treasury the ability to solve the problem with taxpayer money, if they deem it an important thing to do, i don't understand how it creates any market discipline. it seems to me leaving that they got line in place defeats all market discipline. i don't understand how you can cause those to measure up or how we can craft something that actually worked and calls people like the senator of ohio posset

constituents and mine, which i think are different in thinking about some things, i think it would agree that is wrong but he would propose to keep it in place and i don't understand that. >> i think there are ways have to limit it. presumptions to make it more difficult to exercise. i think there are measures to take up front so you don't get yourself in that position beard my only point, though, is this -- that position. my only point, though, it is this, if you need to take action to protect the financial stability of the system, i don't think we should tie the hands of the government able to do it in a moment's notice if we have to. i don't ever want to be in some of the weekend situations i was in last fall. we did have wreck -- mechanisms that ensured a wide variety of government was involved. people can second-best some of the judgments, but i really do not think it is a good idea to completely forbid the ability to address system and situations and crises of we have to.

-- systemic situations and crises. >> thank you all for your testimony. i gather from the panel that, in fact, there is a sense that the un may be what the administration is promoting, which is merging ots into the occ, there isn't a view that there should be further regulatory consolidation. my question is, if we don't do that, then there still seems to be the opportunity for regulatory arbitrage. weather regulated companies would choose what they believe to be the most -- regulator. so what mechanisms can we put in place to prevent that, to prevent the shopping? for example, the administration's restrictions that are proposed on the ability of a troubled bank to switch charters -- is that enough by themselves to prevent

regulatory arbitrage that we want? i would like to hear some of your ideas. >> senator, i will start, if it's ok. i think first of congress has provided some mechanisms to contain regulatory arbitrage. a lot of restrictions that apply to national banks are made by congress to apply to state banks if they are going to get federal deposit insurance. that is an important backdrop, number one. number two, the provision you referred to i think is an important one, it is one in which the agencies have already tried to act. actually i was going to tell the chairman this, there was a break in the hearing in march where chairman bair turned to me and said we have to figure out a way to do something about entities trying to get different charters when they see enforcement action coming.

launched -- to have agencies all reaffirm this charter converting ought not to happen unless it is a signed institution and unless you don't have the enforcement kind of actions pending and you ought not to be will to use it to avoid supervisory ratings. a couple of instances of institutions shifting charters over the last few years has become reasonably well known, and engaged sort of flight from enforcement. so i think this was a very important gap to plug. >> anything else? >> i think it is very important. we have seen over the years a number of institutions come in number of situations in which people have switched charters to avoid supervisory actions. anatoly support the action we have taken. if we wanted to go forward and put some things in legislative language, i think that might be very good idea. just make sure we don't change in the future. >> i would agree.

and we indicated and are written testimony. we are the insurer -- so once the insurance is granted if the entity decides to leadership we really don't have a role in that. we particularly feel it is in our interest to make sure we want good strong -- prudential supervision and we don't want charter convergence to undermine the process. we would also have to work with you, and the center and i had a conversation about that, putting some of like that in the statute. >> i joined senator reid and that effort. >> senator addendas -- senator menendez, could i address the question? from one of the charter's acting being used as an example as an arbor try opportunity -- arbitrage opportunity is countrywide moving from the fed to regulation by ots did this was march of 2007. in doing so, countrywide brought approximately $92 billion of assets to the ots.

we undertook extensive investigation by the fed, including fed bank of san francisco and others as well as state regulators within the fed's holding company jurisdiction. granted the charter to countrywide. one of the things that seemed to be lost in the discussion is that the three months or four months before countrywide came before ots, citibank took two historic thrift charters totaling $322 billion of assets to the national bank charter from the federal thrift charter shortly after countrywide came, capital one took approximately $17 billion in assets from a thrift charter to the occ. i would suggest that the mere action of an entity, a business entity, choosing to chains -- change its charter on its business plan in and of itself does not necessarily suggest they are fleeing. i just wanted to make -- >> i