can lay it. we have made a lot of progress in restoring the secondary market for the loans. the remains suggestions i have. >> i need to know your thoughts on an idea that has been bounced around. there is the new employee tax credit concept, providing credit if they bring on a new employee. it has been done before. what is your perspective on it. >> i do not think we have a clear answer to that. the historical record is mixed. there is not clear enough consensus that i would what we

did want to make their recommendation to. . especially since i told senator corker i was not making fiscal policy recommendations. >> we're talking jobs. >> i know. there's a loft ways to approach the jobs. i'm sure you've seen a list that was in the wall street journal. i would have to say that some of the yoers mentioned are more straightforward. we would have a better sense of what the effect would. but, the jobs tax credit, i think one of the drawbacks is we think one of the drawbacks is we don't have a good how strong an effect that would be or how permit it would be? >> regard less of how it's structured? >> it would have to be who it was based on. >> if we had a more concrete proposal, you could? >> we could help you analyze it.

i'm reluctant to make a clear recommendation. >> i understand. >> thank you, senator. >> mr. chairman, thank you for being here. i'll show bias to start out. i believe less government and lower taxes helps create jobs. let me pursue something with you. i think your biggest challenge is maybe not what you have been through, though that was significant, it's what you do from here. at some point, there has to be an artful exit strategy. the fed has done some things that have been unpretty dented. it's gotten a lot of debate, a lot of concern, some have agreed with you, some have not. i think that's refektive of

what's happened with the committee today. i would like you to just walk us through the things that the fed has in place, everything from your policy with treasure ris to interest rates. and talk to us about the exit strategy. number one, and what timing, and i'm not necessarily looking for by june 1st, we'll do this. i'm looking for what economic signals will cause you to reach a conclusion that we can pull back from this or we can do that. so, talk to us a little bit about that. >> certainly. well first, as you know, the federal reserve created a number of special programs to try to address problems in specific markets, like the commercial paper market, the inner bank market and so on. the money market mutual funds.

a variety of areas where there were stresses. we tried to reduce the stresses. as things have improved, the demand for funding from there is improving. we're down to about 15% of the dhars outstanding. we have made progress because demand for these things have gone away as markets have improved. we will be cutting back the size and closing them as first as market conditions normalize as they continue to do. and in particular, those programs are just fied only under so called unusual and exgent circumstances. from a legal perspective, we'll need to think about closing them down. we've made a lot of progress in that direction.

beyond that, our major programs have been asset purchases. we had a treasury purchase program that brought our holding of treasury bonds about to where it was before the crisis. we have also had a very big program of purchasing fannie mae and freddie mac mortgage based securities. the current program will be wound down, tapered off through the first quarter of next year. that's currently on schedule. so what we have is a -- if you will, a lolling exit process. the special programs are running off because of lack of interest. they'll be shut down over time. we've bought a lot of treasuries and mbs. we've announced tapering off of those programs. the next step, at some point,

when the economy is strong enough, is to begin to tighten policy, raising interest rates. we can do that by raising the interest rate on excess reserves. congress gave us that power. by raising that rate, we can raise rates throughout the money markets. we will reduce the amount of reserves in the system. we'll do that over time. from a technical perspective, we have plenty of clarity about how to commit from the programs. how we can tighted policy, raise rates, remove the accommodation at the appropriate time to get a sustainable recovery without inflation. the xun occasion, timing, and so on is difficult. it always is coming out of a recession. it's not specially difficult in the sense that the various programs and unusual steps we

have taken, we have good means now of reversing them and unwinding them as the time comes. >> as we look out to next year, let's say the next 12 months. we have unemployment now over 10%. probable, well not probable, it's much higher than that if you count people that have given up and not -- that number is in the 17%, 17.5% range, from what i understand. we're a consumer driven economy. a bunch of consumers are on the sideline trying to keep things together as best they can. a whole bunch of other consumers worried about losing their job. as you look out there over the next 12 months. what is your expectation when it comes to unemployment numbers? and is this going to get worse before it gets better is kind of

the bottom line of where i'm headed with that question? >> the unemployment rate is very high. it's tremendous problem. it means a lot of hardship for a lot of people. and some very long-term scars in the laber market. the rate at which the unemployment rate comes down defends on how fast the economy grows and how much confidence empoiers have to bring more workers on. we have an employment number tomorrow. we'll get a near-term reading of what is happening. i do not know what the number is. at the most forecast right now are for job loss. but as the economy continues to grow, we should begin to turn that corner and see job creation. however, because we have people coming into the labor market all the time, you need to have a certain amount of growth to

absorb the new entrants to the labor market. you need 2.5% growth in the economy to absorb the new entrants. right now, the fomc expects growth to be somewhere in the 3.5% range. over the next year, we'll see the rate declining. but slower than we would like. it depends on employers. they have been very effective in increasing productivity and reducing the amount of labor that they need to produce output. our sense is that they can't keep that kind of cost saving up indefinitely. at some point they'll have to bring back some workers. that will be another drag. the bottom line is, we don't really know. our forecasting is far from precise. if the economy grows at a moderate rate, the unemployment

rate should peak, but then come down slowly. >> my last question, one of the things i hear as i talk to the business community, in my home state and those who come into my office, is they just feel there is a tremendous amount of uncertainty that is causing anxiety about decision making in terms of investment, capital expansion, even when they see the business pick up, they are very very reluctant to add people. here's the uncertainty they talk to me about. day talk about climate change legislation and the impact that will have. they talk about car check. and the impact that would have on their business. the impact of regulatory reform. the impact of health care reform and that has a real financial impact on them.

how big a problem is that in terms of our economy starting to find its equilibrium, stabilize itself, with all of those you know, really exorbitant things going on out there impacting that psychology of the marketplace? >> well, we have heard the same thing in our digss. you know, the fomc has reserve bank presidents from around the country. they talk to business people as well and bring the message to us. a lot about concerns about uncertainty. one place where it's particularly relevant to the federal reserve, one reason banks may be reluctant to lend is that they don't know what the capital standard is going to be. don't know what the regulatory standard is going to be. that creates uncertainty for them as well.

i don't think, i don't have a real way of measuring how big an effect this is. my guess is that it will not be, in itself, a reason that the economy can't grow. it does probably mean that firms will wait a lit longer to hire. maybe they'll start with temporary workers, maybe part-time workers to work full time. maybe some overtime. it will impact the slowness. >> thank you, mr. chairman. >> senator, thank you very, very much. senator bennett? >> thank you for hanging with us today. i'm a little under the weather. one of the great benefits of being at the end of this horse shoe is you hear everybody el's questions and your answers. one of the enormous frustrations to me and i'm sure it's

frustrating to you, too, to listen to senator after senator, myself included, talk about what we're hearing on the ground about lending to small business. hear stories of small businesses maxing out the credit cards because they can't get access to capital. the community banks can't lend because they believe they're not getting the head room they need to lepd. every time we have the conversation, you answer it wisely and well. you say we're doing training, we have guidelines. we don't want people to lend poor loans. no one here wants that either. i guess my question, is is there way the move beyond this conversation to place where we can acquire evidence or whether or not lending is going on? in our communities? is the t tightness of the credit related to the fact that we don't have good credit risks? or is it that we're

overcautious? how will you e value what they? how do you know your training and guidelines work? how do you know what is going on in the states? i don't want to go through another hearing in another month, another week where we don't know what the evidence really is of what's going on on the ground. >> well, it's -- it's intrinsically to have statistics on how many good loans weren't made. if we knew what loans were good, we would instruct the banks to make them. what we do, one metric we have. >> i might agree with you prospectively. i mean, even retro actively, if we can look at what has happened. your choice on the period of time so that we can get -- we could take the aneck dotal

evidence and the efforts you have made and see whether the efforts are successful or not. if it's not been successful, people go to the trainings and come back and don't follow the guidelines you have given them or if we are being too conservative. i would not -- i stipulate to the view that we shouldn't do bad loans. how are we going to know that or not? the reason it's so important is i don't see any way to get the unemployment rate down without our small businesses having access to having credit. i think you've heard that unversely today. >> i have heard it. i will give it more thought. one statistic we have is we do survey the loan office, the senior loan sters at banks. we ask them a whole bunch of questions.

one thing that is clear is that the tightness of lending standards imposed by the banks themselves are at record tight levels. so it is not just the regulators. >> so here's what i -- first of all, i, for one, would be willing to work with you and your staff on this. because we have to move past the he said, she said aspect of what is going on. the examiners saying one thing is true, an observation gnat you just made about banks holding on to capital. i feel like we're being guided by vague impressions of what might be going on when the people that actually cannot keep their doors open and feel that they are good credit and that they are able to pay can't get access to credit. and they may be wrong, in other words, they credit may not be good, i can tell you there's an

avenue vanalanche of that feeli there. i would like to be able to say, here's what is going on. or at least be able to say that the examiners and banks, and people in washington have somehow convened together the try to diagnose the issue. so a month from nourks we can say, thinks ags are getting bet or things are getting worse. the frustration, is we have no measuring stick at all, really, other than people's impressions. >> other than surveys and data on the loans being made, the fed staff did work -- >> we woundn't run our business that way. survey data is useful. >> i was going to add the fed staff did work with the treasury to try to develop metrics for the t.a.r.p. program.

there was progress made. your point is well taken. i have heard it many times. i will take this back to our staff and see if we can figure out some more useful metrics or ways of thinking about this problem. >> i think again, because of the consequence of my siting at the end, i can hear the same conversation over and over again. >> as you can imagine, i have heard it many times. >> i know. i think it would be useful for everybody if we were able to agree upon a set of metrics going forward. you mentioned something early this morning about the importance of withdrawing from this economy in what they creates jobs. i may be putting language, i think i wrote it down in manner that promotes job creation, something like that. could you talk about that? >> with drawing the policy accommodation? >> no, withdraw your balance

sheet from our economy. >> right, so, um, as part of the normalization of monetary policy, right now it's quite supportive to economic growth. we have a number of programs to keep down interest rates. as i was describing to senator johans, we'll have to unwind those programs. we have a set of ways of doing that. basically, the trade-off is the same one we usually have. at a certain point, we need to scale back the stimulus so we don't create over problems down the road. that's a judgment call. all i was saying is that we have to find, sort of the right moment, the right communication to begin the withdrawal of

stimulus or continue that process. we've done that by reducing the size of our programs. how to withdraw the stimulus in way that would avoid side effects. at the sim time, be consistent with a sustainable and increasing expansion. that's the challenge that we always fats at this stage. >> thank you, mr. chairman. appreciate it as always. >> senator, thank you very, very much. senator gregg? >> i apologize. senator hutchinson. >> thank you. i appreciate that note. thank you, mr. bernanke for coming to be with us in what has been a long hearing. i appreciate that you are here. during your awe peerns before the committee in july, we spoke of the effect of the proposed

health care reform that it would have on our fiscal policy and the economy as a whole. at that time, you said that when considering health care reform cost must be an issue. it must be the issue. the democrats proposal has come to the floor and we see that it has a $2.5 trillion price tag over the ten years when it starts to where it ends. yet, the huge government takeover of health care is not going to lower health care costs and, in fact, insurance premium for every individual and family will go up. and i think if we're going to look at how we can change that cost curve, we need to have the ability to determine not only how to do it but what is going to be the long-term effect of

the $2.5 trillion price tag that is going to be on it on our long-term economic situation. i would like to ask what you think it will be? >> as i said last time, i think the real issue is health care costs per -- not just the total bill in some sense but what does it do to the cost of care per person. health care costs per person have being rising about 2.5% a year faster than income. that's not sustainable. so what i consider to be the key issue, given that the government has exposeur toerks medicaid, medicare, i have not read the cpo study. i know enough to know that

health care economists have differed quite a bit. i'm not going to weigh in with a number i don't have a good number to give you. only to repeat what i have said before, which is that as part of this process, it's very, very important that we do our best not to reduce the quality of care or reduce coverage, or to make health care worse. this is a very inefficient system. there must be ways to reduce the cost of delivering health care. many ideas have been suggested. ranging from information technology to various ensentive payments to experimental or evidence-based medicine. i just want to reiterate that because sit critical that we get a stable and sustainable fiscal trajectory going forward, we do

need to address this issue. i don't think we can get a sustainable fiscal situation without addressing the issue. in terms of the specifics, there's a lot of disagreement about the effects on individual health care costs that this will have. >> if i understand what you're saying is you have not looked at the numbers yourself but if it is, in fact, going to increase the costs of premiums to every family and the overall cost to every individual, every business, as well as to the government, that that would have a harmful effect on our economy long term? >> if that's the case. higher cost to the private sector increases the cost of doig business, reduce wages. higher cost to the government means a significant effect to interest rates and the health of the economy.

it's a very crucial issue that we try to address the cost issue. in health care. >> thank you. we share your concern. let me move to the financial regulatory policies that chairman dodd has put a bill forward. a bill has also come out of the house. one of the issues is the too big to fail issue. and i think every one of us is concerned about it. we have different approaches to that issue. but let me ask you this. in chairman dodd's proposal, there is a systematic risk resolution mechanism that would allocate the risk, attempts to allocate the risk, and it would exempt community banks at the $10 billion or below level.

i have concerns about using the asset test because at $10 billion, you could include funds that are highly lempbled and risky to our financial system. you would exclude asset heavy mid market community banks that pose no threat. do you have a recommendation, as we work through this, for how you could measure a financial institution's risk so we ensure that sit not a safe and sound community bank paying for the too big to fail policy risk that it will not have a part in reducing nor profiting from? because i don't think any of us want another taxpayer bailout. many of us are concerned about the one that is before us now. and not being used the way we were told it would be used. but secondly, i am very

concerned about putting any more burden on the community bangs, which are trying to lend. and trying to have -- an impact for business. that would give them liquidity and so, i want to protect those community banks from having to pay for the -- risk of the too big to fails so that the taxpayer doesn't have to do it, nor do they. what would you suggest is the best measure to determine who should pay for the risk so that taxpayers will not going forward? >> well, relatively simple thing to do. this is just one suggestion. to exempt all insured deposits. don't make people do a liability test but excluding deposits for

which the premiums w are being paid to the fdic, which seems fair. beyond that, it would in practice exempt most community banks that have primarily deposit-based funding. and perhaps additional exemption above that. a more difficult apoach would be the analogy to what the fdic does now, make the premiums risk based. that would depend on things like the riskiness of the positions that the bank takes that affects the fdic premium. the fupding might -- might be affected by the funding mix. the complexity of operations. a variety of things. i think that would be a complicated thing to do.

my first guess would be to try to find a formula that exempts deposit funded or community sized banks, for the most part. and puts most of the weight on firms that do a lot of proprietary trading and riskier types of activities. doing it based on uninsured dep sits. >> my time the up, thank you very much. >> thank you, senator. let me turn to senator gregg. >> am i it? >> you may be. my colleague ma have a thing or two to say. you're not the last person. >> i want to say thank you on behalf of people that live on main street new hampshire. if you had not been there and willing to take extraordinary action last fall and into last winter and the early spring,

along with the secretary paulson and geithner, this country would be in a catastrophicic financial situation. we would be experienced potentially a depression or a recession radically more than we're expeer yens. the way i describe sit like people driving over a bridge that was about to fall down, they didn't know somebody was there to fix it because it didn't. they don't give you credit. it was an aggressive and creative action. you have acknowledged over $2 trillion that it looks like to mow that went into making the institutions liquid at this time. i respect what you did. obviously don't agree with 100% of it. i didn't hold the magic wand. the proof is in the pudding that

we're coming out of the recession and the world didn't deinvolve into fiscal chaos. which it might have done without your initiative. there are a lot of big issues pending sllt of that. as we try to reorder the way we approach the structure of financial institutions. what i think is critical is that as we do that, we not undermine our great an unique strength as a nation, that is we are able the create credit, create capital, and we are able to advance credit and capital to entrepreneurs in way that no ere nation has done. people are willing to take chances, create jobs, they can find the resources to do it. we move this forward, we don't want to create unintendeded consequences. the rest of the world has advantages over us, we have

advantages over them. how the fed is postured in this is critical. you're at the epicenter of the financial and credit institutions and the monetary policies. i am concerned, deeply, about this i call it pandering pop list movement to step on monetary policy. have the political entities step on the monetary policies. you've spoken out against it well and eloquently. i want to second what you have said. i know secretary somers did research on this. i can't think of nation where the value of its currency was turned over to or significantly influned or marginally influence

ed be people to cause to it fail. we don't want the political process to set the value of the money. we're too big and too important to allow this to happen here. i understand it's a political vote. go out and beat up on the fed. you're a mysterious event. you could be in a deann brown novel. we recognized as nation it was important to keep monetary policy separate from fiscal policy and monetary policy independent. that's the long explanation of support for your position. you are as you said, audited in every area in a very open and aggressive way. and we have the access to those audits. everyone does except on the issue of monetary policy. that's the way it should be.

i want to get into the too big to fail issue. i haven't figured out how to ard this yet. there's a proposal out of the house banking committee that said healthy, well capitalized, institutions with no risk to them will be stoubt the potential breakup. that will be determined by an independent group of politically pointed people, or maybe even members of congress for all i know, arbitrarily. i mean, that, to me, is a european model of governance that is very threatening. their biggest, not necessarily bad, in my instances, it makes for a competitive advantage. if these institutions are solvent and structured well. and competing. they give us an economic advantage. and it would be incredible

industrial policy for a group of politicians to say, you're too big, we don't like you, we're going to break you up. where does that stop? does that stop with wal-mart because they're not unionized? does it stop with coca-cola because they produce a product some people blame for obesity? i guess i would ask you, obviously, too big to fail is a big issue for us. it's got to be addressed. but shouldn't it be addressed on the issue of the institution be a risk as opposed to just being big? >> so, my preferred approach to too big to fail is, i agree, the central issue in financial reform, one of the biggest ones has two or two and half components.

one is two offset some of the incentives to become too big to fail. and to take into account the additional risks that a very large firm may pose to the system. >> by raising the capital requirements? >> making sure their safe. >> which is a function of making them safe. >> that's the regular ta la toir approach. the other part is to have maskt discipline. the way to do that is to have the ability to fail. we've talked about this several times today. it's crucial that when people lend money to a large financial inty institution, they're doing due diligence and looking at the riskiness and profitability. not make the loan on awe su assumptions. >> the stockholders are at risk.

>> if we say, under the current system, we say we're going let them fail, it's not entirely credible. if we come to a huge crisis and need to protect the system, we might intervene. the only way to make it credible is to have rules and laws that allow us safely to allow firms fail. so that their failures don't affect the broad economy. size is not a particularly good indicator of riskiness or danger to the financial system. i think it would be worthwhile to consider, for example, whether regulators might prohibit certain activities if a financial institution can not demonstrate it can safely manage the risks of a particular type of activity, it could be scaled back. or otherwise addressed. i think those are the elements that would solve the problem. the tougher regulation and

resolution regime. >> i'll take your xhenlts then as saying that simply because a company is large is not a reason a group of politicians should step in and break it up? >> i do recognize. i think we all should that size and complexity often have economic benefits. we should, as much as possible, let the market decide. one of the many advantages of getting rid of too big to fail is the ability to sell funding and shares, is not on the government's backstop, but on the economic value of the operation. >> if i might be undull jed for one more second, not the imply that the chairman's proposal falls into the category of what i'm saying. the one is the language out of the house. the living women for large

institutions. is that a situation where you, almost by saying, you have to b have a living will, you're giving the too big to fail. or is that the opportunity to say that's not the case? >> i think living wills can be a usefuled useful adjunct. for tax reasons, international reasons, financial institutions are extremely complicated. it's difficult to unwind them when the time comes. it would be helpful in a planning sense for us to understand how the firm is strug which you ared, what the legal connections are. and in situations where extraordinary complex legal structures are there for tax

avoa avoidance is there. i think it would be a useful tool in the wind down or in the process of understanding how the firm works and whether or not simplification in terms of structure might be beneficial. >> thank you. >> thank you very much. just for the purpose of public. we're not talking about death panels. it's a separate hearing that deals with those. senator? >> thank you very much, mr. chair. thank you for your testimony. several times today, when you have been asked about too big to fail, you've emphasized the power to unwind the institution. you mentioned in passing in one of your replies the issue of risk from one company to another. and but i don't think you

specifically talked about it in terms of the role of derivatives. folks would say that those are the issue in too big to fail because that's why we intervene. not to save one financial institution but because through derivatives, there are kons quens of failure are transported to other financial institutions. could you elaborate on that piece of the puzzle, on the role of derivatives on too big to fall. how do we reduce that risk? >> i don't think that derivatives are by any means the only issue. we have had destructive crises where that were not the point. in this crisis, they were not

proep rately overseen. they were not protected by capital or reserves. the classic case was aig. they had a lot of one-direction nal bets. they didn't have reserves of capital behind that. when the bet went wrong, then the company came under a lot of pressure. one thing that the aig example illustrates is that derivatives have the risk associated with the outcome but counter party risk. those people who are holding aig insurance faced not only the possibility of loss because of the underlying but because of the possibility that have aig could not pay. so clearly, making derivatives safer both this terms of the operational sense in terms of the way they're traded and protecting against counterparty

risk is an important part of this reform. i agree with proposals that have been made that derivatives that can be standardized, that's quite a few of them, and are accepted by central counterparties for clearing on those institutions should be traded on a central don't party. it would be an organization that, by taking margin and holding capital, essential lly insures against don't party risk. a much more transparent situation. people will know what outstanding issues look like. no credit of false swaps. there's confusion about who owes what to whom. i do think that strengthening the infrastructure generally,

but in particular, making sure derivatives are traded on an exchange is an important step to making the system stronger. it sighs into too big to fail in a couple of ways. if you get rid of the count counterparty risk, there's less risk of contagion. and secondly, you should be regulating those derivatives to make sure you don't have a situation where a company is essentially betting the bank, saying that if coin comes up heads, we make a hot of money, if coin comes up tails, the government bails us out. we don't want that situation. a good regulation of derivatives

would be part of a new resheech. >> if i could summarize. you support moving to an exchange. as you put it, for all the derivatives that could be standardized? we have the challenge of deciding to what degree derivatives can be standardized. we have a loft end users very resistant to the idea of going to an exchange because they feel the margin costs would impede their ability to hedge. that might be an argument that may be coming forward regardless. any thoughts about that issue? >> i think the case for exceptions is not the margin costs. that's an appropriate cost of protecting against the counterparty risk. the case for not putting everything on the exchange, some

risks are not hedgeable. i may want to hedge against a complicate ed set of events as municipality. they might not be a standard that meets my needs. there will be circumstances where derivatives are not customizable. a couple of practical issues come up. the main goal is to avoid getting around the regulations through indirect means of setting up tease deals. for legitimate end users who have, who are nonfinancial companies that need to hedge specific risks. we ought to make it possible for them to do that. on the other side, if they're trapgs acting with a bank or a dealer, the bank or the dealer should face regulations or capital requirements to make

sure they're safe in the positions they're taking, and to intern liz the potential costs to the system. there's a risk associated with the derivatives not traded on corral counterparties. if a bank knows it has to hold capital, that will affect the cost of offer those positions. that will, in some sense, balance the scales so there's not an artificial incentive to create noncustomized derivatives. we want the leave some space for derivatives the that are specialized for individual needs. >> the challenge of drawing that line between what is customized and providing that community, if you will, to address it, also then the challenge that i think this is -- i think this is what you're saying, and i'll just repeat it and make sure i understand, is that you want to have an appropriate boundaries on that to prevent that

exception from being something that the entire derivative market is driven through. >> that's right. >> and then when you say that there need to be fees based on otc derivatives that as part of that system? >> not necessarily fees, but to the extent you have demonstrated that the otc derivatives -- there should be sufficient capital behind them and sufficient oversight of their positions. so that a., the institution is not being put into mortal danger by its position that its taken and b., the extra capital that its cost and that would tend to even the playing field between customized and noncustomized derivatives. >> mr. chair, can i put in one more question here? >> yeah. i think we've got to vote here. >> a quick question, then. you referred earlier to the fact

that you didn't feel in the aig that you all had much leverage in terms of asking institutions to take a haircut. and that it was a little -- it's a little hard for ordinary americans and some of us, myself included, to get my hands around that, because if the risk is that folks might have a tremendous loss, it seems like they would be ready to come to the table and say, well, we'll mitigate that by taking some share. but let's just say that in that crisis, that moment, the need to move fast, that wasn't possible. are there things that we should do in structuring this bill that in the future, when there is that situation arises that gives the sort of leverage reach that makes sense to enable the fed to drive a better deal, if you will? >> absolutely. my earlier response -- i didn't want to convey that we didn't want to get the haircut. we really did. and we tried. the problem under the existing

system is that the only way to get the haircut is to have a credible threat that, well, if you don't take the care haircut, we're going to bankrupt and lose everything. but since we had the means to prevent going bankrupt, and everybody knew that it just wasn't credible we would let that happen, and so we didn't have the leverage. so it was a bad outcome, absolutely, i agree. but it was -- we really didn't have much choice, given the legal structure we were in. by all means, the reform ought to fix that. and in particular, when a -- the government comes in, the treasury, the fdic comes in, to unwind a systematically critical financial firm, it should be using a special bankruptcy procedure, not the usual one, a special procedure, which allows the government to under perhaps some specified rules in advance to take haircuts, to -- not to protect the equity holders,

subordinated at the time holders, for example. at the same time that you're still having a safe line down. so i think if you structure this resolution authority, one of the many benefits of it will be that the government will be able to put the cost on the creditors, it will be able to renegotiate contracts, including bonuses and things of that sort. those are all of the things we needed. but we didn't have in the current system. >> all right. thank you, very much. >> thank you, very much. and we're going to briefly turn to my colleague. and then closing remarks. but senator corker wants to come back. he has a question or two for you, as well, mr. chair. >> thank you, mr. chairman. i'll try to be brief, mr. chairman. chairman bernanke, i believe that the last few years have provided us with ample evidence concluding that the current regulatory structure that we have, one in which the fed serves the preeminent regulatory body, requires considerable restructuring. in fact, i believe the american people realize that. i also believe, too, that the feds' monetary policy

independence is crucial, and it must be preserved. very important to central bank. fortunately, the regulatory reform process gives us here, i think, a chance to develop a better, more accountable regulatory structure, and enhance the real and perceived independence of the federal reserve as a monetary policy setting entity. very important. but to achieve these ends, i think the fed would have to give up some of the regulatory authority senator dodd has proposed. i would hope that you as the chairman in the interest of achieving better regulation and better monetary policy and independence of the fed, would put, you know, the monetary policy ahead of your interest, of the feds' interest, in prote protecting turf. mr. chairman, i do have just a short letter, and i want to share it, and i would like it to be made part of the record. this is a letter in the "washington post" today, and some of you probably have read it. but it was written by vincent

rhinehart, a res department scholar for the american enterprise institute, and it has to do with proposals chairman dodd. it says regarding federal reserve chairman ben bernanke's november the 29th sunday opinion commentary, quote, the right reform, that you wrote, and as a result of legislative convenience, and historical happenstance, a variety of responsibilities have accreted to the fed over the years. in addition to conducting monetary policy, the fed also distributes currency and runs a system through which banks transfer funds, supervises financial holding companies, and some banks, and writes rules for tech consumers and financial transactions. mr. bernanke argues that preserving this medical an j is not only efficient but crucial to protecting the feds' independence. apparently, the letter goes on, there are hidden synergies that make expertise in banks and

writing consumer protections useful and serving monetary policy. in fact, collecting diverse responsibilities in one institution fundamentally violates the principle of comparative advantage, akin to asking a plumber to check the wiring in your basement. there is an easily verifiable test, he writes, the arm of the fed that sets monetary policy, the federal open market, has scrupulously kept transcripts of its meeting over the decades. and the man writing this says, i should know, i was the fomc secretary for a time. and then after a lag of five years, this record is released to the public. if the fomc made materially better decisions because of the fed's role in supervision, there would be instances of informed discussion of the linkages. anyone making the case of beneficial spillovers should be asked to produce numerous, relevant excerpts from that historical resource.

i don't think they will be able to do so. he writes further, the biggest threat to the feds independent is doubt about its competence. the more that congress expects the fed to do, the more likely will such doubts blemish its reputation. i ask this letter be put in the record. >> without objection, it will be. mr. chairman, senator corker will close up here. but first i want to thank senator shelby for his comments about the efforts we're making. and i want to thank him as well, and his staff. and you have been tremendously helpful already, very constructive. i was one of those people in that room the night of september 18th, when the new ag policy came into the room. and there is a lot of people going back, and i'll go to my grave believing what you did, what we did, over that two-week period, some of the economic equivalents of 9/11, such as you described that evening, very straight forward, monotone voice, i'll never forget your words, will go down as the right thing to have done. and he's not here now, but judge

gray, bob corker, jack reid, chuck schumer, on this side, anyway, we met, along with some others, and worked with you and others in putting that proposal together. and is you deserve, in my view, a great deal of credit for moving that forward and then the creative ideas that kept us out of the difficult. improving the negative is always hard. and obviously, we don't to be in a situation to have to prove that. but nonetheless, i think we did by the actions that were taken. i also want to go over the idea of having something big is bad. i think it's a bad idea, and we won't include that. i think the idea you have described, how you acquire capital standards and so forth to make sure that you don't have an institution be at risk makes a lot of sense, as well. and the door is open here. look, we're very much in the process, dynamic process we're engaged in. i strongly support your confirmation, and as i said at the outset, i believe you're the right person at the right time to do this job. and -- but i want you to know, the door is open. as we're trying to evaluate how best to do this. i think all of us here are very much appreciative.

this is a unique moment we're getting. there are many of us before who talked about doing this, but there was never the will to do it. if there is any silver lining in what we have been through, and the fact that we have been through 52 hearings a year on this chubt alone in this committee, if we wait too long, the moment passes. and people say why bother. if we acted too early, we might have overreacted, in my view, and that would have been bad, as well. and i believe there is a common determination by virtually everybody on this committee, democrat or republican, not seeing this ideal logically, but what works, what doesn't, what's right, what's wrong. and we invite you and your staff and others, to be at that table with us as we go through this. not to suggest we're going to agree on everything, but i want you to know that door is open. >> mr. chairman, can i say one thing? >> yes. >> i agree with senator dodd. i don't think big is necessarily bad. but i do believe big is bad when it has an implicit -- >> i agree. >> -- response out there with the marketplace that the government is backing. >> i agree.

>> i agree, as well. >> we all agree on that. senator corker? >> thank you. >> we're going to vote. you're in charge. >> okay. well, when you come back, you'll never know what may have happened to this place. but i'll try to behave like a gentleman. thank you. mr. chairman, i thank you for being with us so long, and i think you know that -- >> thank you. >> that -- i think you know that i was, you know, happy that the administration decided to renominate you. and i think you knew coming in these confirmations, unless something really strange happened, that i was going to support you, and i am. okay? i am becoming slightly frustrated, though. and i just -- i know that you're probably going to be confirmed, and i don't know when that's going to happen. you know, it may be held off until after the right reform occurs, as i mentioned the other day on the phone, it may happen for the fed chairman, regardless. i think you're the fed chairman

until another fed chairman is nominate and had approved, and is i think that's the case. your staff is nodding no, but that's debatable, i guess. but i do -- i've worked very closely with you over the last year, which i appreciate, a year-and-a-half. and we have talked about a lot of important -- important to our country things. and what i appreciate about you is i absolutely do not believe you have a political cell in your body, as i have said publicly many times, and i really believe you wake up every day trying to do what you think is best for our country. but i am concerned, and i'm becoming sort of frustrated with it, that the activity -- i mean, you have worked very closely with both administrations. this is not partisanment. i mean, i think much of that is -- >> i think much of that has hurt

your credibility some. just as you mentioned, we talked earlier on the fiscal side. you ended up being used as a tool for administrations to advance policies that they think is good. i just would caution you. i think that hurts you. the bush stimulus was ridiculous. it was silly. it was sophomoric. it had no effect. and he supported it. what happens on the senate floor is when been bernanke says he supports something, it has been a fact. same thing with the obama stimulus, which, regardless of what people say, it did not accomplish what they said it would do. we can debate that. it doesn't really matter. that is not what matters. what matters to me is that you wade in. and when you weigh in on something, it is like it gets

the moody's rating. not that that matter as much anymore. i think the same thing is happening right now in financial regulation. and as i said, way back long before this, six to eight months ago, it may be at the last meeting, i think to the extent the fed continues to thrust itself in the middle of things, of being the systemic regulator, which again, we will have another systemic risk, another failure. i don't care who the fed chairman is. . . happen. and it just seems to me that the more you thrust yourself in the middle of those things that are outside of monetary policy, and outside of last resort, the more you do things that damage the institution. and i say that because i respect the institution, and just like judd gregg said, and just like i

think i said in my comments, i don't want us involved in monetary policy. i think that would be a disaster not only for our country, but for every country that does business with us, which is every country. so i am just -- i'm becoming -- you know, i know you're lobbying us heavily. right now. as far as what the fed role should be in regulation. and on a private basis, i want to hear that. i mean, just a minute ago, i know that you alluded to chairman dodd's bill, and i have to tell you, and everyone on this staff knows this. i very much appreciate what he is doing to try to work out a is doing to try to work out a bipartisan think we're going to do that. or at least i'm going to keep saying i think we're going to do that, until i think we're not, okay? but just like, for instance, saying a minute ago that you think his bill absolutely solves too big to fail. well, at least that's what was

reported to me. and it wasn't another -- please clarify that. because as much as i respect him, i think there are some frailties in the legislation. >> i only -- i only talked about some general elements. i certainly didn't endorse the bill. >> good. i got an e-mail, and i'm glad. i just think that you -- you are highly respected. the position is highly respected. i think the more the fed throws itself in the middle of things that are outside the categories that it's charged to do that chargeses are -- maybe not you, but the next person down the road, the feds' independents end up being undermined. and no question to me that the efforts by congressman paul and others to do the things that are occurring right now, note his longer term goal -- understand he is a gold standard person. and i understand there are other goals behind that. but i do think that much of

what's happened recently in the hyperactivity of some of the 13-3 issues with maiden lane and aig. i mean, you know, that's kind of questionable. i mean, it ends up sort of being equity. and i don't mean that, again, to poke jabs. but that type of activity ends up hurting the fed, an institution that, like judd gregg and others, i respect. you i respect. and i guess over the last 45 days ago or so, i've become very nervous about that activity. and i just want to tell you that. and i'm nervous about us and what we might do. but i'm also beginning to be nervous about the powers that you at the fed want to take on, that treasury is encouraging you to take on, and i wonder if you might respond to that, knowing that i'm somebody who -- unless the sky falls in, i'm going to support your nomination, and i respect your abilities and

intellect, and i appreciate what you have tried to do on behalf of our country. but i'm concerned about what that's actually doing to the fed itself. i don't know if you're understanding -- i don't know if i'm expressing myself well. >> you express yourself well, senator. i would like to respond briefly, if i couldment and first of all, i thank you for the conversations we've had, and very good to work with you. first, your point on fiscal policy. i have tried to stay out of fiscal policy. i will be more vigilant in the future. i think there is an appropriate division of labor. congress and the administration, fiscal policy, federal reserve, monetary policy. and i will try to -- to do that. although i should say that i think there are some broad general issues, like the deficit, for example, where the federal reserve chairman does have some responsibility to speak up. and i think i'll have to continue to do that. >> and i'm speaking more just specific policy proposals, and i think --

>> well, even in the cases you cite, i never said anything more than, you know, maybe it's time to think about this general thing. i never endorsed any particular plan, i never endorsed any components of it or any size or anything like that. but i take your point. secondly, some of the steps we have taken, like the aig episode, for example, obviously have hurt the fed a lot politically. we know that. we did it -- and i think that should just be proof that we did it for the good of the country. we didn't do it for ourselves, because it obviously has hurt the federal reserve, and the public's view. we did it because we felt that there was no other way to avoid what number of your colleagues have called the risk of a catastrophic collapse of the financial system. and so we did what we did, knowing it would be politically unpopular, knowing it would bring problems for the federal reserve. but because we didn't have an alternative, and one of the things we're hoping, of course, that congress will come up with will be some framework that will allow this to be done in a more

orderly way, and will leave the federal reserve completely out of it. we would like to be left out of it. on financial stability, i would like to differ just a little bit, which is that the federal reserve actually was founded in 1913 for financial stability purposes not monetary policy. and has been for 100 years, almost. and in that respect, we haven't been lobbying, but what we have been doing, if in addition, is trying to provide advice and our reasoned views on the subject. and what some might think of as turf, in my view s an important component of thinking about how a successful financial stability program ought to be structured. so given that that is very much in our domain, i -- you know, i don't want to use undue influence, but to the extent that we have arguments and positions to take, i only ask you to believe that we do it based on what our view is of the appropriate public policy, and not because of turf. and you'll notice that we had not used the same kind of energy

on some other aspects, that this has been the thing which we view as critical. and i do actually do believe if the federal reserve is eliminated from financial stability policy, it will have very negative consequences at some time in the future when neither you or i may be here. so i hope you understand that on that particular issue, we do feel we have a state and an expertise, and that we are trying to just get the right policy. >> well, i appreciate that. and i also apologize for being given some information about the hearing a minute ago that apparently was off base, and certainly i'm very glad you cleared that up. and i would just say that -- echo the same thing that chairman dodd just said, and that is, i think that we -- all of us here, just are trying to get it right. and i think it's really hard. i think the resolution piece and the too big to fail piece is -- is the most important. if we do nothing else over the

course of the next several months but solve that, i think it's the most important thing, in my opinion. if we only did that, that would be fine. i hope that you will, you know, continue to talk with us in our offices, both privately and in any other setting to help us work through this. and my comments today, again, are not in had any way to -- they're just to say that, look, my antenna right now makes me feel nervous about the hyperactivity and the unintended consequences of what could happen down the road. i mean, you responded aggressively during this last cycle. and as -- as has been said, i mean, you know, you're being criticized for responding aggressively. and -- and i think if we allow

the feds' role in our financial system to become something far greater than it should be, there's an appropriate level, i understand. but far greater than it should be, we're going to set ourselves up to do some ultimate longer-term damage to our country. and anyway, thank you for letting me talk with you. i -- i know all of us could monday morning quarterback the many zillion calls you've had to make over the last year or so, and with little information and little time. i respect you for what you're doing, i thank you for coming and being so patient with us today. and i do look forward to over the next couple of months with chairman dodd's staff and ranking member shelby's staff and all of us working together to try and get it right. and i thank you. >> thank you.

[captioning performed by national captioning institute] [captions copyright national cable satellite corp. 2009] >> vermont center bernie sanders opposes another term for mr. bernanke to head the federal reserve and had put a hold on the nomination. that senate procedure makes the approval process more difficult. senator sanders spoke on the senate floor for 10 minutes. >> mr. president, what i want to touch upon is my strong belief that ben bernanke should not be reappointed for a second term as chairman of the federal reserve. in that regard, i place a hold on his nomination. mr. president, everybody in this place -- in this country understands we are in the midst of the worst economic crisis since the great depression. we are looking at 70% of our people either being unemployed or underemployed. we are looking at average length

of unemployment being longer than it has been since world war ii. we are looking at a situation where over the last eight or nine years, median household income has declined by over $2,000. we are looking at a situation where, according to "u.s.a. today", accept 18, 2009 -- quote --"the incomes of the young and middle-aged, especially men, have fallen off a cliff since 2000 leesk more age -- leaving more age groups poorer than they were in the 1980's." we're seeing a collapse in the middle class, an increased gap between the rich and everybody else. and then, to make a very bad situation worse, as a result of the greed or irresponsibility, and illegal behavior of wall street, we're now in a terrible,

terrible economic decline. mr. president, the american people voted overwhelmingly last year for a change in our national policies and for a new direction in the economy. after eight long years of trickle-down economics that benefited the very wealthy at the expense of the middle class and working families, the people of our country demanded a change that would put the interest of ordinary people ahead of the greed of wall street and the wealthy few. what the american people did not bargain for was another four years for one of the key teark architects of the bush economy, federal chairman, ben bernanke. mr. president, the chairman of the federal reserve, and the federal reserve itself, has four main responsibilities. and i want the american people to determine whether they believe the fed has, in fact,

succeeded in fulfilling these obligations. here they are, four main responsibilities. number one, to conduct monetary policy in a way that leads to maximum employment and stable prices. maximum employment. well, when you've got 17% of your people unemployed or underemployed, i do not think the fed or all of us or any of us have succeeded in that area. number two, to maintain the safety and soundness of financial institutions. well, obviously that has not been the case either. to contain systematic risk in financial markets. and, four, to protect consumers against the deceptive and unfair financial products. mr. president, not since the great depression has the financial system been as unsafe, unsound, and unstable as it has been during mr. bernanke's tenure. more than 120 banks have failed

since he has been chairman, and the list of troubled banks has grown from 50 to over 416. mr. president, mr. bernanke has failed to prevent banks from issuing deceptive and unfair financial products to consumers. under his leadership mortgage lenders were allowed to issue predatory loans that they knew consumers would be unable to repay. this risky practice was allowed to continue long after the f.b.i. warned in 2004 of an epidemic in mortgage fraud. here's what the bottom line is: the bottom line is that there are -- the key responsibility of the fed is to maintain the safety and soundness of our financial institutions and they failed. they failed. and as a result of the greed and speculation on wall street, which the fed should have been

observing, which the fed should have acted against, which the fed should have warned the american people and the congress about, they did nothing, and our financial system went over the edge. and then, mr. president, after not doing their jobs as a watchdog, not fulfilling their obligation to protect safety and soundness of our financial system, then the financial collapse occurred. and what happened? what the fed did is provide not only -- not only the -- that congress put $700-plus billions of dollars into the bailout, the fed provided several trillion dollars -- trillion dollars of zero interest loans to large financial institutions. and, mr. president, when i asked chairman bernanke which financial institutions received these zero interest loans, the answer was, i am not going to

tell you. not going to tell you. mr. president, the reason that congress, against my vote, bailed out wall street is they were too big to fail. large financial institutions were too big to fail. well, since the collapse, three out of the four largest financial institutions have become even larger. so the systematic danger for our economy is today even greater than it was before the bailout. mr. president, the american people want a new wall street. they want a wall street which begins to respond to the needs of small business so that we can begin to create jobs, not just to wall street and outrageous executive compensation. let me just suggest to you some of the things that i think a fed chairman should be doing, things that mr. bernanke are not.

number one, today bailed-out financial institutions are charging consumers 25% or 30% interest rates on their credit card. the fed has the power to stop that, to put a cap on interest rates. that's what they should be doing. the fed has the power to demand that bailed-out institutions provide loans at low-interest rates to small and medium-sized businesses so that we can begin to create the kinds of jobs that are desperately needed in this country. that is not what mr. bernanke has done. mr. president, the fed has the power now to do what is taking place in the united kingdom, something that many economists are demanding, and that is to start breaking up these large financial institutions which are too big to fail. in my view, if an institution is too big to fail, it's too big to

exist. we have to start breaking them up. not to allow them to get even larger. the fed has chosen not to do that. mr. president, we need transparency at the fed. i am the author of a g.a.o. audit of the fed which now has 30 co-sponsors, which i hope that we will pass. at the very least if the taxpayers of the country are putting at risk trillions of dollars being lent out to large financial institutions, we have a right to know which institutions are receiving that money and under what terms. let me conclude, mr. president, by just saying this, this country is in the midst of a horrendous economic crisis. millions of families all over this country are at their wits end. they are suffering. they're trying to figure out how they're going to keep warm this winter, how they're going to pay their bills. the time now is for a new fed -- for a new direction on wall street, for a wall street which

is helping our productive economy create decent-paying jobs. not a wall street based on greed only for themselves whose goal in life is to make as much money as possible for their c.e.o.'s. so, mr. president, we need a new fed. we need a new wall street. and we surely need a new chairman of the fed. my hope is that president obama will give us a new nominee and not mr. bernanke. >> federal reserve chairman ben bernanke says he is concerned about a proposal to audit the fed. that is part of a bank reform bill working its way through the house. the plan was proposed by republican representative ron paul of texas. he was on "washington journal for 40 minutes. >> former presidential candidate ron paul, a member -- is the guest our next program.

thanks for coming in. one of the things i wanted to start with is the fact that ben bernanke is going to be up on the senate side of the hill today with a confirmation hearing on renomination of the position. you have been speaking out for quite a while now. it seems as though the course has gotten louder. you have been speaking out about the fed for a while now and it seems as though the chorus has gotten louder. guest: there is no doubt about it. it seems with the recession/depression people are worried and they are sending strong messages to washington. people are very concerned and i think rightfully. they're looking more closely about the agenda -- at the federal reserve. generally, people do not look to see the source of problems when things are going wrong, but now

they're looking at how the fed participate in the crisis that we have. host: give us an example of some questions but you would ask if you were on the panel today. guest: why do you think we need a federal reserve at all? why will you not tell us how to spend the money? who do you buy the assets from and at what price? what kind of deals do you make with foreign governments and foreign central banks? what are the agreements? have you ever been involved in the gold market? have you ever bought and sold the gold in order to keep the price lower? we have asked those questions over the years and you never get answers. host: is the information to any of those questions available? guest:, not really. to be sure, there are a lot of assumptions and people postulate, and we know how many bad assets of approximately they've bought up in the

mortgage security market, over $800 billion. we know they created money out of thin air to do that. we do not know how much they paid, with a bill out, they refused to buildup -- to bail out. -- who they bailed out, who they refused to bail out. they probably paid these companies, may be a goldman sachs or somebody like that, the nominal value, a face value. they might have even been worthless or worth 10 cents on the dollar. it is very important, especially when you finally come to the conclusion that this is the source of the problem, this mischief of the fed creates a business cycle, causes inflation, causes unemployment. they say they do not want transparency. they want independence. independent means the secrecy. at the american people are waking up and realizing that

congress has a responsibility. they created the central bank and they are to act more responsibly in what they're doing. host: how with the american economy function if there were not k-fed? guest: better -- if there were not the fed? guest: a lot better. in 1913 when the fed came into existence, it was not to in the years later they gave us the depression. starting in 1913 day and created an excess of credit, have interest rates too low. that was full world for i. but they still understand -- understood they could not keep doing this. it kept inflating and they had a pretty bad the depression in

1921. then there with vekton and flooding in the '20s, ghana, a a -- then they went back into inflating in the 20s, you know, stimulating credit and bring on the depression. that perpetuated the depression by continuing to do the same thing, continuing to prop up bad debt and to not allowing the correction to occur like they did in 1921. it goes on and on. you have had recessions since then that have been numerous, but because they were able to cover over them out rather quickly and put them aside, all they did was build a much bigger in bubble which was destined to burst, and that is what happened in 2008. that bubble has burst and we are in the midst of a correction that has a long way to go because they're doing exactly what they did during the depression, trying to prop of all the bad debt.

instead of eliminating the debt, eliminating the mistakes and getting back to work, they're buying up the bad debt. instead of buying up all of the house in securities -- uc, the housing crisis triggered arab have sharply, more than they have -- you see, the housing prices should go down sharply, more than they have. there are 18 billion houses out there waiting to be bought. the last thing they need a stimulus. they need a correction. they need a pause. it would be painful for about a year, but this way, there or drag it out for a decade or two by prolonging the agony. host: all morning we have been talking about jobs creation. and what is your prescription for it? guest: way to get -- one way would be to get rid of the federal reserve because they create the bubble. when the bubble is being

inflated everybody feels good. people can buy houses. impressive? -- impressive houses go up and they think they are rich. it is all an illusion. when the correction comes inevitably, if you have unemployment. you need to have central economic planning a a -- you need to get rid of this idea that you need to have central economic planning behind closed doors by a secret group of men and women. it is a total, rejection of free market capitalism. it is keynesian economy. it has been -- a totally predictable. they do not have a timetable. they cannot say when the bus will come or what the price of inflation will be next year or what -- i cannot say when the bust it will, or what the president's pledge will be born of one of, but the devaluation

of the -- or what the price of inflation will be, but the devaluation of the dollar always occurs, and implement always occurs. host: let's take a call from pennsylvania, good morning, rich. caller: congressman paul, i know your a follower of austrian economics, but not all austrians are the same. which do you follow? guest: i think all three, they have slight disagreement. there is one that is the best known that i looked to for the intellectual guidance. another talks about competing currencies. raw board studied under -- rothbart studied under the first one i mentioned.

what is going on today is a contest between austrian economics and cannes. the austrian was a well-known economist during the '20s and '30s, during the depression, but he was rejected because people did not want to hear it. they did not want to hear that you could not regulate the money supply. people love td caines. but what has happened is that central baking has failed. we are in the midst of this crisis. austrian, the -- austrian economists, all of them are economists, all of them are

session, and i am a supporter of a non interventionist foreign policy and my opponent accused me of being an isolationist. [laughter] @@ '" can you explain why you would disband the group? if so, would we have seen more transparency, and what was the function of this? guest: i would just reversed the executive order. we do not need another group of people, even if they are part of the government like the federal reserve and treasury and sec people are all involved. they get together and they have this sole authority to do whatever they want to prop up markets. for all we know, they buy and

sell. it is called the plunge protection team. when it was started in 1987 after the stock-market crash, wall street sort of like this. this will prevent the crash. even if they get in the market and slow up a bad day, they get in and start buying, they cannot change the market. day, they get in and start buying, they cannot change the market. it is kind of like interfering in the gold market, keeping the price of gold artificially low and the dollar artificially high, eventually, the market went up. we should not have these economic planners. in a way, they are an extension of the federal reserve and the federal reserve is a key member of the president's working group on financial markets. we should get rid of it. we should believe in the marketplace, believe in a free- market economy, and that is when people make the decision. austrian economics teaches that

business does not run the show and labor does not run the show. the consumer runs the show. the consumer votes every single day. and every single thing they buy when the market is working. when the businessman is not doing well or paying too much for labor, they go out of business and they have to be left to go out of business. today, people got of business and then we prop them up, you know, all the people that make mistakes. it does not serve the high cost of labor or businesses, but it does serve the consumer. host: talk more of your velocity on wages. people complain that they cannot compete and that -- talk more about your philosophy on wages. people complain that they cannot compete. guest: real wages are going down, but that is again back to the fed. if someone is making $25 an hour, $30 per car, it never

keeps up with the cost of living. taxes are higher and sellers are going up, so that hurts labor. on the other side of the coin, if you have a free market, you would not have the fed destroying the value of the currency. but he would have the power of the labor union to push the car automobile employees, a labor in automobile industries for the steel industry or the railroad industry pushing way above the market to be paying some of these people $80 per hour when the market should be $40, but they get it because the power and influence of unions. they put them out of business. this is so dramatic. look at what has happened in michigan were the unions are strongest. they destroyed general motors, not by themselves, but in combination with what the fed does and over regulations and a lot of other things. but companies in the south might have less regulations and they have more of a market level for

labor and they survive. but you can introduce this globally. labor, once again, the businessman has to make profits to exist. he has to keep costs down to give the control of the best deal. but our whole country has interfered with the marketplace and pushed costs so high with over regulations and inflation, and all these problems. if we are pushing labor overseas. and that, of course, export jobs and everybody gets hysterical about this. they say we have to stop it, we have to try and do not permit this to happen. but they have to -- we have to draw a line and not permit this to happen. but they have to change the policies. you have to talk about the policies that prompted this to happen. host: carl, democrats line, lebanon, oregon. caller: i would like to us can -- to ask him what we're going

to do about this but that we got, and if he is talking about keeping labor down, and i can we not come to a happy medium -- why can't we come to a happy medium where we have a fair wage? a worker has got to be able to live. guest: he is absolutely right. we have to have a fair wage, but as i explained, the wage is not fair and is going down because the money is being depreciated. his question about the debt, that is important. what are we going to do? we are not one to pay it off, we know that. when a country gets so deeply in debt that it cannot in -- cannot get paid, they liquidate it by default. when you have $10,000 in the treasury bill you are always going to get your money, but the government and the federal reserve -- of money supply last year, so if you have a treasury bill -- doubled the money supply

last year, so if you average rodrigo -- have a treasury bill, you may not get as much back. the dollar is worth less right now. but the debt is liquidated. if we go $10 trillion and we inflate or destroyed the dollar value at 20% per year, that is $200 billion that was wiped off the slate. so, governments always the fault, but not like an individual or company does by refusing to pay. governments are always powerful enough to create new money and deceive the people. but nevertheless, it is every bit as immoral and deceitful and some that should be prohibited and has to do with the nature of money. that is why paper money is so dangerous to us. host: someone writes in about your political philosophy.

this year is trying to square your independence with the fact that he appreciates the fact that a public-sector brings us things like schools, roads, bridges. what would you say to that? the cause guest: attrition does not give us any of that. when eisenhower guest: the constitution does not give us any of that. when eisenhower could build the highways for defense purposes, they realized it was not constitutional to do that. but that does not mean we cannot do that. all the states could coordinate their efforts. schools could still be local and public. we could probably do a lot better job than we have in the last 30 years or so with the federal government getting involved. but there is no authority for the federal government to get involved. there's no benefit from that. some of those functions would exist, but some of them would be

picked up by private sources. you do have a lot of roads and private developments that are paid for by the development and they are protected and they have security. there are other ways it could be done. but the fact that you do not do it at the federal level in order to run of debt, because once you consumassume that you can give l these things to people, medicine, education to all of these things that are not in article one, section 8, then this becomes a political football. the politicians to say, we have got to do it, we have got to get reelected. then they vote for all of this. then there is no money. they try to raise taxes and there is a limit. they try to borrow and there is a limit. then it comes, the fed will take care of this. the fed is this magical machine. they just crank out, they crank out new money, which is the tax because the devalued the currency. host: next question is from

georgia, south, republican line. caller: the day requirement for next year is figured to about $350 billion per month, and that does not include any future bailouts we are looking straight at into the trillions. how can foreigners possibly be buying up all of this debt now, much less in the future, especially when japan and britain are pretty much doing the same thing with their horrendous debt requirements? their money printing? right now, there is [unintelligible] guest: some of the countries, say, china for instance, they fit into this. there were glad for us to buy products from them and they were sabres and they ended up with a lot of dollars -- and they were savers can they ended up with more than $1 trillion and they

did not know what to do with it, so they would feed it back and boost our housing and economy, but there is a limit to that. they would talk about it, you guys in the u.s. better be careful record they have to sort of protect the dollar and they're going to ease out now. and therefore to ease out by easing into gold, just like india. -- and they are going to ease out by easing into gold, just like india. we suspect given our government may have flown to the gold, which we would like to know for sure if we could get an audit. but the price of -- the shifting in the price of gold is not telling us that the value is going up, but that the value of the dollar is going down. historically, the value of money has always been measured by gold, and that is just an economic law that just exists.

you cannot repeal it by saying that we have a smart a group of people who know how to make money act like gold. host: this question by tourism is -- by tweitter is, i would like to know how ron paul would explain the economic crisis before the fed. they cannot all be the fed's fault. guest: there were certainly booms and busts, but a lot of times inflation by fractional reserve banking there was not prohibited. we certainly have a lot of inflation during wartime, whether it was 1812, or especially during the civil war timeframe. it was always excessive credit. that means we did not have a perfect system before. but if you took a long term, say, from the beginning of our country until 1913, because they

usually would go back to restrain the effort to inflate, prices remain relatively stable, you know, long-term growth is only since 1913, especially since 1971 when the last link of gold has been removed. those sidips in prices were usually short-lived because they got out of wet with the market, but they knew to leave it in -- and leave it alone. they did not try to prop up the bad investments. it was over rather quickly. but this argument has been over for a long time. jefferson got rid of one and jackson got rid of the other. it is the sacredness and the power that exists with the central bank that finally usually arouses the people to the point of saying, this is a

bad deal. we need to know more of what is going on. host: we have about 15 more minutes with ron paul. this is a port charlotte, fla.. caller: i think it was january or february of this year, there was a story that broke about a couple of guys trying to smuggle -- i think it was $135 billion worth of government securities into italy and there were rumors that the federal reserve was involved. but that story was dropped as quickly as it came on the scene. do you have any information about that? guest: no, i'm sorry i do not. i remember reading about that, but i do not know exactly what was going on. it reminds me of the stories of shipping carloads of cash over to iraq to be distributed, literally billions of dollars of cash. and there was no audit exactly of where this cash went into iraq.

a lot of those things happen. maybe something like that would come out in an audit, but i'm afraid that even with an audit, they would be able to cover their trails and cover of most of that kind of stuff. host: 50 bill that is coming out of committee becomes law, will we be in better or worse shape? guest: it is a tremendous amount of regulation. and chairman frank has been sympathetic to having more transparency in the fed. he did not vote for my amendment, but he did nothing to try to prohibit it. he has been very fair and said it will be in the final bill and he knows that i will vote against the final bill. that will be helpful, but overall, -- and chairman frank has heard me say this so many times -- you cannot compensate for the mistakes of the fed by regulators, thinking that we regulators, thinking that we create all of these mistakes

i see this as an impossible task. i want regulation, but i wanted to be free market regulation. i want bankruptcy's to occur, and i won treasury to regulated, so we can see what they are doing. the regulations are packed into that bill. it reminds me of the kind of regulation we did in the mid 1930's that prolonged regulation. host: so ron paul has decided before an audit that the audit would do no good. interesting. guest: of course, we have been if we had an audit it would do a lot of good, but the whole thing is, the question was, willie cancel of those regulations? the audit will not correct all our mistakes. if we are making more mistakes, it really is not meant to solve the problems. it is meant to get to the seat of the problem.

my bill purposely got away from managing the money supply and monetary policy. it would have been too controversial. we have 313 co-sponsors, but they never would have co- sponsored if it was to interfere and regulate the money supply. that is what would have happened. things do not get better with an audit, but it is a stepping stone to a fighter who are the beneficiaries and what kind of mischief they aren't. hopefully, that would lead to more commonsensical -- what kind of mischief they are in. hopefully that will lead to more common sense " approach. host: kansas city, go ahead. caller: could these corporations be tried as treason in dealing with china, being that they are building missiles with their

profits in does it? -- aimed at us? and we are in such bad shape in our country. why do we keep giving billions to other countries, you know, like israel and saudi arabia? isn't that hurting us, too? guest: it is, but a a businessman doing business with china is not treason. 1ñbut us being in the arms business and selling weapons around the world, whether it is to israel or the arabs -- i mean, we are on both sides of the conflict and a lot of times weapons and of being used against us. i think that is very bad. but not doing business with china would be like saying, let's not do business with japan, let's not do business with germany. china has changed. they do not believe in individual liberty like we do, but i tell you what, in some

areas they believe in economic freedom. it is easy to start businesses over there. they are prosperous. people save and they do some things that we used to be known for. they have become our banker. i would say that, yes, those kinds of things happened in the korean war, but i do not think we should have been involved in the korean war. it was a tragedy. will redoing there? what we're doing in vietnam? -- what were we doing there? what were we doing in vietnam? to come down hard on china and say is their fault, a if they were -- i think we should be honest about this because they killed a lot more vietnamese than the americans did. host: next call from pennsylvania. caller: would like to read a quote from harper's magazine in

1922, titled "industrial activities and improving conditions despite various factors in that situation, general motors is better at this writing early in june that it was at the beginning of the year and the of look is more promising than it has been over the last two years. in consequence of the severity of the depression and the necessity for drastic liquidation continued over many months, the improvement that has developed thus far has been more pronounced in the conditions surrounding money and credit and elsewhere -- a than elsewhere. but it has been found in the numerous departments of commercial air activity. and limon has gathered such momentum as it has progressed as to lead to the conclusion that the betterment is something more than a near seasonal recovery.

i would also like to take very quickly that i once bought a house down in custody in a texas in 1990 -- down in texas and debose due to re -- and about was due to a depression that was happening in texas. people were laid off and nothing was ever done. people lost their momentum in their lives, you know. i know after i left texas, nothing was ever right in my life because i was no longer a texican and if it was not from texas it was not right. you see everything happening today with giving everybody extended unemployment and like that, i did not have anything down in texas. host: how are you doing today? caller: not too good. all i have is about eight dozen books and vibrant. thank you. -- and i rent.

guest: you quoted what was -- what it was like coming out of the depression in the early 1920's. unfortunately, they began inflating again in the 1920's. but they got out of the depression of 1921 rather quickly. trebek they did not do that your or so ago troop we would have been talking about true liquidation -- recovery, not liquidation. host: you are asked by a viewer, will ron paul run for president in 2012? guest: i do not have any plans to do that. host: miami, the go-ahead for mr. paul. caller: [unintelligible]

could you please comment what would be the economic result if they only in force that and nothing else? i think it could be done easily and will have the largest effect on the economy. guest: i would say that all labor costs be dictated by the market. let not the government have any interference in what the price of labour should be, whether it is minimum wages or artificially high wages by a force of government. the market should set labor and you would have full employment. host: next is michigan, good morning to dole, democrats line. caller: congressman paul, i'm afraid i lay the blame at the door of the legislature. host: why is that, sir? caller: particularly in times like this, we need to help our

suffering neighbors, but the legislature refuses to tax and instead, accomplishes its goals by letting the flat -- letting the fed inflate the currency. i wonder if you will comment on this. guest: whom are you going to tax? people are paying too many taxes already. that is not going to work. i agree with your statement, look to the legislature. they are the source of the problem, yes. there and collaboration with the federal reserve. -- they are in collaboration with the federal reserve. but if your core to start bailing out and you do not want the fed involved, that is right you have to raise taxes. but raising taxes at any time just destroys capital. and what is in the banks is true savings and then you do not have anyone to invest in businesses and create jobs. you do not want to tax and you do not want the government further in debt and you do not want the fed to print.

but i would not think for a minute that any good could come from raising taxes in order to prop up a system that we created in the legislature. i agree with probably half of what you are saying the source of the problem is in the legislature allowing this to go by. for instance, the housing bubble occurred by the fed allowing easy credit. but also, the congress passed laws that actually dictated that banks make these subprime loans, give loans to people who do not qualify. it is like a christmas tree. you buy a house for $100,000 and it goes up to $150,000 and ibarra against it. that was inflation that was -- and they borrow against it. that was inflation that was like drugs. it looks good and they do not want this in terms of removing the drugs. the drug should be removed or we're going to kill the patient. host: what about specifically

the taxes to fund the war in afghanistan? guest: my answer is the same. we should not be in the war. we are in a crisis now, if financial crisis, -- a financial crisis, and we have a foreign policy that is a major reason we are in the financial crisis. we spend over $1 trillion per year maintaining our empire or on the world. we're still in korea, japan, germany, all over the middle east. the speech by the president the other day was conditioning as for the next war in pakistan. -- conditioning costs for the next war in pakistan. what you do is bring the troops home, save the money, defend this country. it is our presence, especially in the middle east, that motivates people to become a radical extremists and potential

terrorists that will commit suicide. it is because they detest occupation of their land. we get into trouble and we think, oh, we need to occupy more countries, only compounding our problems both internationally and for safety, but also compounds are financial problem. i think the worst thing we could do is to raise taxes for the war. host: last call on the republican line. caller: i saw that twitter message about your running in trade -- in 2012. i am one of those college students that was awakened by your message. i look at what the republican party is right now and i cannot see the sarah palin or one of these other republicans.

these guys say what suits them politically at the moment. i think you should just run until there is another champion for liberty and then you can quietly back away. guest: but me ask you a question. how can i compete with the popularity of sarah palin? she has a lot of people interested. she has a lot of popular appeal. but i did not say no. i just have no plans to do it. in a way, -- that is a long time off. a couple of years is a long time when you think of this crisis. one thing that i did say that i have said in the past is, it is readily apparent that we are in a severe dollar crisis. it is going to be hard for me not to speak out. host: matthew, is that your answer? caller: i guess for now.

host: what is your answer to the question about competing with governor palin? caller: i was at the nevada state convention and we would have had more delegates than john mccain, but thahat is a separate issue. >> senators are continuing their debate on health care bill for the weekend. our regular book tv schedule will be pre-empted during these rare senate sessions. with book tv programs resuming after the debate. what's the senate debate on health care, like, gavel-to- gavel on our companion network, c-span2, the only network with the full debate, unedited and commercial free. to read the senate bill and the house version plus watch video on demand, go online. senators continue debate on their health care bill tomorrow morning with the men and boats

expected during the day. live coverage is on c-span2 at 9:30 eastern. >> in a few moments, president obama and administration officials meet with business leaders at the white house jobs summit. in a little more than an hour and a half, vermont center bernie sanders explains why he put a hold on the nomination of ben bernanke to another term as head of the federal reserve. after that, chairman bernanke testifies before the senate banking committee at a reconfirmation hearing. he is expected to be approved for another four-year term. on "washington journal" tomorrow morning, the role of the federal reserve. retired general in george

joulwan will take your questions about nato's role in afghanistan. lou frey will talk about his book, "political rules of the road." plus a discussion of today's white house job summit. "washington journal" is live on c-span every day at 7:00 a.m. eastern. >> as we get better and better at what we do, we are run in ever increasing risk of over confidence and arrogance. . .

[captions copyright national cable satellite corp. 2009] >> good afternoon, everyone. i want to thing president obama for asking me to be here today and convening this form. i also want to thank all of you for joining us on this vital discussion for jobs and economic growth. of the past 10 months, the obama administration has taken a number of bold steps to break this recession. we have work to stabilize the financial system, revise lending to small businesses and families, and prevent responsible homeowners from losing their homes, and it through the recovery act, taxes for middle-class families have been cut, we have extended and

increased unemployment insurance, and created and saved more than 1 million jobs. and as a result of all of this war, we have moved back from the brink and the economy is now growing. but the bottom line for people is jobs. the jobs that put paychecks in their pockets. even though we now have economic growth, it has only led it to the slowing of job losses, not yet the job growth that we urgently need and want to see happen for all american families. the unemployment rate stands at 10.2%. the day when these numbers come out is always a stark reminder of how much we have left to do to create good jobs for everyone. the focus on all workers is important, because the unemployment rate is disproportionately high for workers of color, the young, the disabled, and, frankly, it is not acceptable. behind these numbers are real

families facing real hardships. their worries, fears, and problems are the single most important focus of this administration, and a day are who i am fighting for every single day. we need to be honest, about the challenges we are facing and the frustrations that americans are feeling. in my 10 months in office, i have travelled throughout the country. i have been to 20 states and 40 cities, and consistently i see and hear that the american people want us focusing on the issues that most affect them and their families and their daily lives, most importantly a pathway to a good job. it would need strategies that will get all people back to work -- we need strategies that will get all people back to work. this administration will not rest until we accomplish that goal. the president and his team are focused on jobs and job

creation every day. that is what brings us all together here. we have already been working with many of you in this room on identifying strategies to create jobs, because it will take all of us to accomplish this goal. we welcome your new ideas, your voices in this debate, because economic recovery and job creation depends on the cooperation and the ideas of employers of all types, including small business owners, workers, labor organizations, and of course nonprofits. america is a great, innovative country, but there is a role for government and encouraging innovation and promoting good ideas that will help people get back to work. let me give a brief example. in october, i was in nevada, where i announced an award to the nevada at energy advance service delivery project. because this funding was more than matched by the private

sector, this is nearly 8 $300 million investment. these funds were part of 100 grants made available by this administration, totaling $3.4 billion to help build a nationwide smart energy grid system. i saw firsthand the work that was done to support the infrastructure. it will help modernize clean energy and provide a clean energy jobs that will follow suit. we need more stories like this, stories about public/private partnerships that leverage innovative ideas to create jobs for all americans. that is why i am energized to begin today's conversation and hear from many of you. i think we can all agree that no matter who you are, work is much more than a source of income. it is a source of dignity. but the work is about who and what we are, -- work is about

who and what we are, so let's get to work. tomorrow, president obama will travel to allentown, pa.. the white house media team traveled to allentown and has captured the storied local small businesses making their way in these difficult economic times. there is a close-knit staff dedicated to serving one another and their communities. they have weathered the recession by tightening their belts and making personal sacrifices for the sake of the business. applied separations inc. is a small engineering firm that hires and tradespeople and green technology and some cases. training workers who have been led off from -- and in some cases re-train workers who have been laid off from other industries. i invite you now to watch their stores.

-- to watch their stories. ♪ >> i think this morning, there was about 550 french bread, and that does not include pumpernickel or the russian rye, all the different kinds of bread that we produce. i am esther, and i am president of the egypt star bakery in allentown, pennsylvania. they know about are hard baked rolls and bread. we have approximately 40 employees. we have bakers helpers', drivers, clerks, and no matter what job you have, if you are

needed someplace else, you are expected to go there and do whatever is needed as part of this small business. i know about the number of applications that i get, asking if we have a full-time position available because they may have lost their job or their hours have been cut, or maybe benefits have been cut and they're looking for someplace to acquire those things. that hours might get cut a little bit during the summer when our volume is not as heavy, but normally our employees are here to stay. >> we have been fortunate i guess that maybe people come to us instead of paying higher prices at bigger chain grocery stores. they come here and they feel that they can get just as good quality and not pay as much

price-wise. >> money is very tight now. you just tighten your belt. as an owner, you take a pay cut so all of your employees can be paid. >> i am very happy. the economy has been sluggish, but the bakery has not taken much of a hit. my girlfriend and i moved up here. working here has allowed us to save the money to afford a house. >> my hope is that we can continue today -- to bake and sell and service the public with the kind of products they are used to. >> you just don't open a paper and see a job for super- critical fluid technicians. >> we are the manufacturers of super-critical fluid extraction equipment here in allentown.

it is an excellent replacement for many of the control-based solvents that we have. we use this technology to have a much greater world. these are all green technologies, renewable technology. the mere fact that we are under pressure to go ahead and clean up the environment, everyone has pretty much said this will cause job loss. the problem with that assumption is if you have a replacement for that, those jobs will be taken up. >> this particular technology was new to me. i was fortunate to live close enough. i came in and things worked out. >> i got laid off from another company and i was able to start up right here in the lehigh valley. they needed technical people.

>> i am actually wiring a helix control cabinet. it applies all voltages to the necessary meters in the unit. my previous job was repairing televisions, vcr's, electronic equipment. this was new to me when i started here. >> more people become aware of it. as we make the equipment here, this trickles down to jobs that ordinary people can have an allentown. most of our employees are from the local community and have a high-school education or less, and we have gone through and train those people in specific jobs so they can contribute to the high technology. -- to lehigh technology. success is not achieved by a hard work, success is achieved

by smart work, and that is what we have gone ahead and chief here. -- gone ahead and achieved here. >> ladies and gentlemen, the vice-president of the united states. [applause] >> thank you very much. please. thank you. i welcome you all here today. it your presence is welcome, but quite frankly it is not nearly as important as your input. we're looking to you, we're counting on you, and we need help. we realized after all that we have done these past 10 months to revitalize american communities, our capacity, the government's capacity is still somewhat limited. we can help create the conditions that make for a stronger economy, make a

stronger economy possible, but it is you, all of you in this audience to war in a position to make it a reality. without you, it cannot become a reality. our task together is not easy. we have not faced this kind of economic dilemma and the lifetime of anyone in this room. so building a new and invigorated platform upon which we can enter this century and a way that we can lead in the 21st century the way that we did in the 20th-century is at rock bottom with this is all about. no more bubbles. you cannot sustain world leadership based on a housing bubble or a dot-com bubble. it has to be based on a firm foundation. i know you all understand that. the recovery act, much maligned, has worked very well.

it played a vital role in kick starting this process. it has not only told us back from the abyss that we were looking at. remember in your college days having to study samuel johnson? one of the favorite quotes i remember is, "there is nothing like a hanging to focus attention." let me tell you, our attention is focused. we have been able to pull back from that dark abyss. my deceased wife used to have an expression. she would say it the greatest gift god gave man is the ability to forget. my mother quickly added, yes, it was not for that, all of us would only have one child. all kidding aside, it is amazing what we have forgotten already in 10 months, just how bair and bleak things looked 10 months ago. -- just how dire and bleak

things looked 10 months ago. before the president and i dropped are right hand on january 20-year, already -- on january 20 this year, already 720,000 people have lost their job. another 640,000 people lost their job in the short month of february. the fact of the matter wrist the last jobs report was not good, but a lot better, 190,000 jobs lost. our economy was shrinking when we took office at a rate of 6%, actually above that. now it is growing at a rate of about 3% last quarter. leading economists attribute a large portion of that gdp growth in the last quarter to the recovery act. according to the most recent cbo report -- if you notice, the one thing that those of you who cannot work here every day,

you'll notice the one thing republicans and democrats agree on is the up should the nativity -- we agree on is the objectivity of the cbo because they are bipartisan and responses. the cbo report, the most. -- the most recent reports that the act is responsible for creating as many as 1.6 million jobs. a couple of my friends on the hill wrote a note saying, joe, stop quoting that the act created over 600,000 jobs. i would write back and say, i promise i will do that if you promise to say that it created 1.6 million jobs. the point is that it has created jobs. there has been progress. but it is not enough. that laid-off teacher, they do not want to hear about the gdp. that out of work although

worker or the tipster, they do not want to hear about the cbo report -- the out of work all the mobile worker or the teamster, they do not want to hear about the cbo report. when your brother-in-law is out of work, it is a recession. when you are out of work, it is a depression. and it is a depression. over 10 million americans. which is why i am pleased that the next phase of this recovery act, and we're only about half way through it, we are entering at a more rapid rate where we are distributing the money quicker, projects are hitting the ground faster, and we're spending and focusing on those aspects that have proven successful creating jobs, putting will paychecks in the pockets of hard-working americans. by design, the biggest impact are in the days to come. in the next few weeks to a

month, another roughly $13 billion will be announced doling out in terms of both investments in broadband and high-speed rail, competitive education, infrastructure. the money spent on clean water, a renewable energy, superfund sites, and much more will more than double. it will more than doubled this quarter and will maintain a similar pace the next two quarters. tomorrow, for example, secretary lahood will make an important announcement about the number of high-speed rail manufacturers who are looking to come to the united states, built facilities here, manufacture components here, manufacture trains here based on our willingness to provide the seed money to invest in high-speed rail. and many more announcement like that are coming in the months ahead. we're not looking too bold new programs. many of these upcoming investments are expansions of our most successful programs to

date. and that is where you come in. at today's jobs summit, we are hearing about ideas. ideas that do more than what we have done so far. some of you will urge us to invest more in infrastructure, roads, bridges, water projects. we have seen them succeeding creedon jobs. today, we're hearing the case for doing more along those lines. others will argue we should invest in green jobs, retrofitting, making homes and offices more energy efficient. again, we have seen these investments successful in creating jobs and today we're hearing the case for doing more along those lines. still others of you will talk about the need for more incentives for small businesses and other ideas to help businesses with tax incentives. again, similar investments have shown real promise. we should see if there is more we can do in those areas. many different participants are here and many different

offerings will be looked at, many different ideas. in the end, it is the same, take the things that we know work and make them work better and faster. all of this can be done, none of it can be done without your leadership in the private sector. president obama has focused on this issue with an intensity that it demands and with the intensity it deserves, but everything else he has on his plate -- i have been here for 8 presidents, i don't think i can ever say that more president has had more crises sitting on his desk when he walked into office. notwithstanding that, his laser focus has been coming every morning when we have meetings relating to the principles on the economy, the principles of the economic team, the

presidential daily briefing, it is jobs, jobs, jobs. so, folks, we have to create good jobs, jobs you can raise a family on, the foundation for a new economic future. no man is more committed to making that happen them president barack obama. so, these gentlemen, please welcome the president of the united states of america, president barack obama. [applause] >> thank you. thank you, everybody. thank you very much. please have a seat. good afternoon, everybody. i'm glad you could join us for this jobs for met the white house. we have leaders from just about every sector of the economy, government, labor, academia, nonprofit, businesses of all sizes. i know that year unions are universities or cities are companies do not run themselves,

so i appreciate you taking the time to be here. i appreciate the need perspective that each of you brings to the great economic challenge before us. the continuing plight of millions of americans who are still out of work. sometimes in this town would talk about these things in clinical and academic ways, but this is not an academic debate. with one in 10 americans out of work and millions of more not have enough hours to support themselves, this is a struggle that cuts deep and touches people across this nation. every day, i meet people or hear from people who talk about sending out resume after resume, and they have been hunting for a job for over a year and still cannot find anything. they have not just lost the paycheck they need to live, they are losing the sense of dignity and identity that comes from having a job.

i hear from business owners who face the heart. of having to lay off longtime employees -- that face the heartbreak of having to lay off longtime employees or shut doors altogether. some tense businesses that took years to build, or they inherited from their parents or grandparents. i see communities devastated by lost jobs and devastated by the fear those jobs are never coming back. it is true we have seen significant turnaround since the beginning of the year. our economy was in free fall, the financial system on the verge of collapse. we were losing 700,000 jobs per month. it was clear that our first order of business was to keep the recession from slipping into a depression, from preventing financial meltdowns and getting the economy growing again. because we knew without economic growth, there would be little to nothing that we could do to stem

the job losses. we knew the time to create jobs with an economy based on inflated home prices and credit cards and over leveraged banks was the can to building a house on sand. -- was akin to building a house on sand. we revitalize the the initial system and past recovery act, which passed -- would stop the freefall and helped spur the growth that we see. our economy is growing for the first time in a year, the fastest pace in two years. productivity, but companies are reporting profit, the stock market is up. despite the progress we have made, many businesses are still skittish about hiring. some are digging themselves out of the losses they have incurred in the past year, many have figured out how to squeeze more productivity out of less workers. in fact, cost cutting has become embedded in their

operations and culture. that may result in good profits, but it is not translating into hiring. that is the question we have to ask today, how we get businesses to start hiring again? how do we get ourselves to the point where more people are working and more people spending and you start seeing a virtuous cycle and the recovery starts to feed on itself? we knew from the outset of this recession, particularly a recession of the severity and a recession spurred on by financial crisis rather than as a consequence of the business cycle, that it would take time for job growth to catch up with economic growth. we all understood that. but we cannot hang back and hope for the best when we have seen to talk -- seen the kinds of job losses we have seen. i am not taking a wait and see

approach when it comes to creating jobs. i am interested in taking actions right now to help businesses create jobs right now in the near term. that is why we made more credit available to small banks to provide loans to small businesses, that is why we provided tax relief to help small businesses stay afloat and it proposed raising load limits to help them expand. that is why we created the cash for clunkers program and make sure the recovery act included investment that would start saving and greeting jobs this year. as joe mentioned, as many as 1.6 million have been created according to the most recent analysis. that is why i have been working continuously with my economic advisers and congressional leaders and others on new job creation ideas, and i will be speaking in greater detail about more ideas early next week. i want to be clear, while i believe that government has a critical role in creating the conditions for economic growth,

ultimately, a true economic recovery is only going to come from private sector. we do not have enough public money to fill all whole -- to fill the hole created by the crisis. that is only when the private sector starts to re-invest, businesses are hiring again and people see improvement in their own lives again that we will have the kind of economy that we want. that is the measure of the real economic recovery. that is why i have invited all of you here today. many of you run businesses yourselves. each of you is an expert on some aspect of job creation. collectively, your views span the spectrum. that was deliberate. we are looking for fresh perspectives and new ideas. i want to hear about what unions and universities can do to

better support and repair workers, not just for the jobs of today but for the jobs five years, 10 years, 50 years from now. i would bring new investment to cities and towns and help recovery money get to where they need to go as quickly as possible. i want to hear from ceos about what is holding back business investment and how we can increase confidence and spur hiring. there are things we're doing here in washington that are inhibiting you, we want to know about them. i want to consider this cop. i want to continue this conversation outside of washington, which is why i will be meeting with some of the small business owners that you saw in the video of allentown, pa., to get their ideas. i am asking officials to hold their own jobs forums and report back with the ideas and recommendations. let me be clear, i am open to every demonstrably good idea i

want to take every responsible step to accelerate job creation. we also, though, have to face the fact that our resources are limited. when we walked in, there was an enormous fiscal gap between the money that is going out and the money coming in. the recession has made that worse, but because of fewer tax receipts and more demands made on government for things like unemployment insurance. we cannot make any considered decisions right now, even with the best decisions -- we cannot make any ill-considered decisions right now, even with the best of intentions. we need to come up with the best ideas to give us the biggest bang for the buck. i need everybody here to bring their a-game, and i am going to

be asking tough questions. i will be listening for good dancers. i don't want to just brainstorm -- i will be listening for good answers. i don't want to just brainstorm at 30,000 feet. the want ideas that will spur job growth as quickly as possible. i want to be cleared, we will not overcome the unemployment challenge in just a few well hours this afternoon, but i assure you there is extraordinary skepticism that any discussions like this can actually produce results. i am well aware of that. i don't mind skepticism. if i listened to the skeptics, i would not be here. but i am confident that we will make progress. i am confident that people like you, who have built thriving businesses or revolutionized industries were brought cities and communities together and changed the way that we look at the world, innovated, created

new products, that you could come up with additional good ideas on how to create jobs. i am confident that the spirit of bold, persistent innovation has gotten through -- has gotten our country through its darkest hours. we still have the best universities in the world, some of the finest science and technology in the world, we have the most business-like spirit in the world, the most productive workers in the world. if we get serious, then the 21st century will be the american century, just like the 20th century was. but we have to approach this with a sense of seriousness and try to set the politics and chatter aside and actually get to work. so, welcome. thank you for participating. we will maximize the productivity of this effort over the next several hours, and i

will be returning back with you so i can get a report on what kinds of ideas seem to make most sense. thank you very much, everybody. [applause] >> when they finished the breakfast session, the met again with president for about an hour. -- they met again with the president for about an hour. [captioning performed by national captioning institute] >> thank you. i hope everyone had a productive breakout session. a lot of great ideas still on the table. i know our panel, we had a rich discussion, a lot of great ideas. i think it was generated because we offered a lot of treats, m&m's, snickers, drinks.

not paid for by the taxpayers, but us individually. it you have to have good food and treats to have these discussions. we had great ideas. some of the issues were the need for certainty in health care, energy, tax policy. of course, congress is debating that now. the sooner they decide, the better and more certainty the business community will have. consensus we have jobs emergency and we to focus on public sector and private sector jobs, and a lot of support for tax credit on net new jobs created. we also need government policies that focus on long-term, not just a short term, and focus on incentivizing demand, whether coper benefits, extension of unemployment, etc. -- whether cobra benefits, extension of unemployment, etc. these are just some of the ideas. i am sure there are similar

great ideas from the other panels. i do not think anyone here today has any illusions about the challenges we face as a country. there is no silver bullet to reduce an unemployment rate that has surpassed 10%. that figure is completely unacceptable. to the president and everyone in this administration. this gathering is an important part of the economic recovery process that began even before president obama was sworn into office, and it will continue until every single american who wants a job as a job. we welcome any idea that to help create jobs, whether comes from the left, right, business leaders, labor, or academics and nonprofits. that is an attitude that begins at the very top with president barack obama. all of the president's domestic initiatives, reforming health care and expanding credit access to businesses and families, are designed to make existing businesses more competitive,

viable, creating new businesses, and ultimately putting people back to work with good-paying jobs. a few months ago at georgetown university, president obama promised and unrelenting, unyielding day by day effort by this administration to fight for economic recovery on all fronts. real recovery is achieved when all americans have the dignity and security that comes with a good-paying job. that is the message that president obama has relayed at virtually every meeting i attended, with a full cabinet meetings to small meetings focused on domestic policy. today's meeting, this forum, is another demonstration of that relentless commitment to job creation. so let's welcome back the man who convened us all and once your thoughts and your ideas. ladies and gentleman, the president of the united states of america, barack obama. [applause]

>> thank you. please be seated. we want to get as much discussion as possible with our remaining time. i had the opportunity to attend two breakout sessions for quite some time, and i enjoyed some terrific conversation and great ideas. i heard a great deal of challenges, a great deal this afternoon about the challenges we are all facing, from businesses large and small, when it comes to trying to create jobs. there is no question it is difficult out there, but we also heard some exciting ideas and proposals for how to spur hiring today and laid the groundwork for sustainable economic growth in the future. in other words, ideas that help us in the short term but also point us in the direction of rebuilding the country. i attended two sessions, one on

infrastructure with broad agreement where the infrastructure in america is not where it needs to be and we have enormous investment to make. we got some good, hard-headed feedback from people like doug and others about how we need to do this more effectively and how we can measure the cost and benefits of infrastructure investment, how we could make sure that shovel-ready actually means that. how would have more effective coordination between federal, state, and local governments to maximize the benefits of our infrastructure spending. there was a considerable amount of discussion of how we can leverage the private sector to boost infrastructure spending. we also heard in the clean energy session that i just left some terrific ideas about how weatgherization and energy

efficiency promises immediate impact on the ground, will spur enormous amount of business opportunities for the clean technology sector, but we're also willing the ground war for energy independence -- but we're also laying the groundwork for energy independence and having made those investments set up the prospect that it would pay for itself from ultimate energy savings. i will tell you that in the green energy discussion, the clean energy discussion, there was also acknowledgement that we're not going to be able to maximize the benefits of clean energy investment unless we get settled how we are dealing with carbon and the price of carbon. we do not want to turn this into a discussion about congress and legislation, but i think there was consensus around a table that if we could focus on the

enormous business opportunities there, that in fact america will benefit and will be able to compete in the next great round of economic growth around the world. i was not in some of the other meetings, but i got a quick summary. i understand that the business investment and tax session, there were import ideas put forward about how we can provide additional tax incentives for jobs growth. for example, the ceo of liz claiborne explained the impact of the expanded tax breaks signed into law a few weeks ago, before provisions went into effect, he was planning to close 10 stores. now he can save those 10 stores and open an additional 25. that is a good news story, indicative of how the tax policy makes a difference. several participants, including larry and alan, proposed

additional tax incentives for job creation. this concept was raised in a number of sessions. it is an idea that we think is worthy of further consideration. in the small business discussion, joe presented an economic case for how the credit market can fail and not even good borrowers will get credit and put forward specific ideas of how to get credit moving again. all the reports we're getting is if you or a big corporation, the credit markets are working for you. if you are a small business or medium-sized business, even if you are profitable, then that you are still seeing credit frozen. we have to unlock that. that requires an interface between what we are doing on the recovery side and what we're doing on financial regulation and banking policies. angie, runs a company, where are you?

there you are. she explained how she is creating thousands of jobs, bringing jobs back to the united states that have gone overseas in the past several years. she had specific ideas of how we could foster more of this reverse job migration, which brings us to the export session. one of the things that obviously in a time of fiscal constraint we're looking for is how to spur job growth in the united states without spending a whole lot of government money. we're going to need to put public dollars in, but it needs to be leveraged. i think everybody agrees that expanding exports has to be a priority. this was a major topic when i traveled to asia at several you weeks ago. during the session, -- when i travel to asia several weeks ago. during the session, we heard from the ceo of boeing about the

22,000 small businesses that he relies on to make products, underscoring the fact that these suppliers, they're not getting credit, it is hard for him to build products for export. leaders from disney talked about how we can make businesses more competitive, with specific ideas about protecting intellectual property and innovation at home. finally, we heard from a cross- section of thinkers about more effective worker training. randall stevenson from at&t talked about a successful partnership with san antonio community colleges to train workers for jobs that the company is committed to bringing back from india. i think we all agree that we should look to build on this kind of partnerships and leverage the community college system. we heard from in our

infrastructure section the same refrain about the need to train workers effectively. randy weingarten suggested a specific idea, community schools, especially in the wuerl areas, where parents can get training after-hours the same places where their kids are learning -- especially in rural areas. we are exploring that. what was striking is the overlap that existed in a lot of the sessions. when we were in the clean energy session, there was an emphasis on how to get small businesses and small contractors to get certified and to get the financing needed to move forward and take advantage of these clean energy sector opportunities. when we were in the infrastructure section, there was strong emphasis on meeting to plan not just for existing road projects but also how do we think in the future we need cleaner transportation energy.

there is a lot of overlap between all of these different briquettes sessions that we engaged -- between these different breakout sessions that we engaged in. we will have to figure out how to break out of these silos and integrate the strategies if we're going to be able to get the most bang for the buck. overall, we generated a lot of important ideas. some of them i think we can translate immediately into administration plans and legislation. for the remaining part of this jobs forum, i want to call on all of you and see what kinds of ideas maybe i have not highlighted, things that stood out in your sessions, or if he did not have an opportunity is speak -- or if you do not -- did not get an opportunity to speak, but have a great idea, what to picture you have the

opportunity, i want to make sure that you have the opportunity to lay it out now. and please do me a favor and introduce yourself. a lot of you i know, but not everybody. >> my name is david, from portland, maine. one of the things we spent a lot of time on was regulation. not creating regulations and realize there are consequences. that is very important to us as a small manufacturer of food. one of the things i wanted to make sure, it did not get out and discussion, we are self insured. we spend $4 million every year in health care, self insured. we develop programs to have our sow seeds be healthier. -- to have our associates be healthier. we recorded a 10% rise and we kept that below 10% by creating

programs to keep our associates more healthy. we are sharing this with anybody who will listen. >> this is not a plant, but let me just point out, obviously the inefficiencies of the current health system are a drag on the economy, a drag on jobs. if you as a small business or large business are seen premiums for your employees going up 15%, 20% per year, i got letters from small businesses that there policy was jacking up their cost as much as 40%. those kinds of situations, you want people to invest in hiring a new worker because you're trying to keep the workers you have an provide coverage. it is very important for us to take steps both legislatively but also in the private sector to improve prevention,

wellness, and reduce costs. i think the legislation that we are working, as we speak i hope members of congress are working on, will have that kind of impact. you are right, companies like yours, companies like safeway have done some very important, creed of worked on your -- creative work. we'd to incentivize that and spread the work to -- spread the word to companies all across the economy to reinvest in business. yes, sir? >> in reference to silos, there ought to be a document so that people in my group understood what happened in the next group. >> we had extensive note-taking in every session, and that will be distributed to all of you. i want to assure you this is

just the start of this interaction we're having. you will then have the opportunity to continue to refine a lot of these ideas. will probably set up working groups coming out of this, and the input we are soliciting from you will be continuous. all right? yes? introduce yourself. >> i am the mayor of des moines, iowa. we feel it is imported targeted fiscal assistance from local government, whether air for structured products that we talked about in the group or whether energy efficiency block grants or tiger prints or cbdg. those have all worked in the past, and it gets money to where people work and live in were the gdp is produced in the country. we have to target those kinds of opportunities. >> let me pick up on this point,

and this may have been discussed in some of the groups. as tough as this financial crisis recession has been on the federal budget, it is in some cases worse on state and local government budgets. about one-third of the recovery act or essentially stabilization, either for individuals in the form of unemployment insurance, were assistance to states so they would not have to lay off teachers and crime fighters and police officers. we did not get a lot of credit for that. i would point out that some mayors and governors who were very critical of the recovery act nevertheless are very happy to get this money. but i think it raises the point that what we have been able to do this year is to stabilize

aggregate demand. and that has been very important to preventing a much more difficult economic environment and a tougher job environment. next year, we will still have some of those challenges, because usually state and local government revenues lags the recovery as a whole. they may need more help from the federal government, and i think it is important for business leaders to understand that fact. that if you see a complete collapse in state and local government spending on basic needs, that could create a very bad business climate for all of you, and that is something we have to consider working on carefully. ok? all right, the gentle man right there. >> thank you, mr. president. i'm from michigan. one of the things we're looking

at is the ability for financing. every month is getting better. but the ability to get the financing to buy the raw materials, orders. we're struggling to buy raw materials, hiring people. >> well, look, as i said earlier, the credit markets were completely frozen for everybody. because of extraordinary intervention on our part, the financial panic abated, and some of the credit markets out there thawed. for a fortune 100 company out there right now, you could probably get credit. if your small business out there and though, it is still tough. we have increased loans by about 73%. we are constantly looking for

more ways that we can push the banks and the credit markets to get money into the hands of small and medium-sized businesses who create the majority of jobs. one of the things i am not sure if secretary geithner is here -- there he is, in the back. one of the things that i think tim will testify is that basically at least every other day i asked him, what are we doing to help credit flow to small and medium-sized business, and there is going to be an overlap between what we are doing on the recovery act and what we need to do in terms of bank policy, what the fed is doing in terms of the credit markets, and one of the things that we are really exploring as

how we can help the community banks and smaller banks to loosen up credit. in fairness to them, they are a little bit caught in between, because bank regulators are looking at their books and sang, boy, that was a real mess, and they are asking that the increase capital requirements and tighten up their lending criteria. it on the other hand, that have the president of the united states that have the present -- that the president of the united states saying, what are you lending more? they're in a little bit of a fix. some of that is unavoidable. of the banking sector was in bad shape and it was over-leveraged and we needed to take some steps to shore up the system, but we have to make sure we do not over correct. that is something we are concerned about. some of the smaller banks, although they were not involved in some of the crazy stuff that was going on on wall street,

frankly, were overextended when it came to the commercial real- estate market. we built a lot of balls, a lot of strip malls, and now they're finding that the commercial real-estate market actually has not bottomed out. it is trailing the housing market in terms of problems is having, and that is affecting small banks as well. the bottom line is this, we know it is a priority. we're pushing as hard as we can to do with an irresponsible way. we think by getting financial regulatory reform done, which is currently pending in congress, that will provide the certainty in the framework available so we can then help these banks more effectively do the right thing. the cat? -- ok?

behind the gentleman i just called. i want to make sure that we get in middle gender equity. no, not you, right here. [laughter] go ahead. >> thank you, mr. president. i am a farmer from missouri. my name is ron that and i represent the national family farm coalition. i wanted to bring your attention. i know that you understand fully there has been a lot of conversation about where do we get the biggest bang for our buck. many times, and many places, wuerl communities, independent family farmers are the biggest bang for the buck in terms of creating jobs and businesses that depend on farmers, from the people we buy our seed from to the people used process army, to the transportation system to haul the grain. -- to the people we used to process art meet, to the

transportation system to haul the grain. there is an incredible move on foot or thousands of farmers are producing food for local markets. we need to make sure we have the infrastructure in place to make that a reality if that really is and could be a reality for us. and whereas we have tended in the past to put the money in the hands of corporate business, they have not proven to be the bank for the buck that independent family farmers have in terms of jobs creation that are good-paying and their jobs and the committee. thank you for all your doing on competition and on local food. we just want to remember that we are a job creator. >> thank you. wheat for the microphone so everybody can hear you. -- wait for the microphone so everybody can hear you. >> most of the things we talked

about today cost money, and there is this concern about the federal deficit. i hope that your administration will recognize, as i know you will, that it is possible, first of all, to reduce the deficit over time, and sometimes in the short run realize that it could be increased deficit. i hope the concern of the deficit and a lot run does not crowd out spending -- in the long run does not crowd out spending in the short term. i also think some of these programs that increase jobs and increase in gdp are probably the fastest way to get the economy back on track that will reduce the deficit over time, and a better way to reduce the deficit than putting ourselves into a debtor's prison and assume that we can deflate our way to recovery. >> that is an important point. we have been talking about

specific initiatives. there is a macroeconomic element to this whole thing. the me just amplify what was just said. -- let me just amplify what was just said. we have a structural deficit that is real and growing, apart from the financial crisis. we inherited it. we are spending about 23% of gdp and we take in about 18% of gdp, and the gap is growing and we have to do something about it. you then layer on top of that the huge ross -- the huge loss of tax revenue as a consequence of the financial crisis and greater demands for unemployment insurance and so forth. that is another layer. probably the smallest lear is what we did in terms of the recovery act. i think there is a misperception out there that somehow the recovery act caused these

deficits. no, we have a $nine point- something trillion deficit. maybe one trillion dollars of that could be attributed to the recovery act and the cleanup we had to do with the banks. turns out actually, tarp, as wildly unpopular as it has been, was much cheaper than any of us anticipated. that is not what is contributed to the deficit. we have a long-term structural deficit, primarily driven by health care costs and long-term entitlement programs. now, if we cannot grow our economy, then and is going to be that much harder for us to reduce the deficit -- then it is going to be that much harder for us to reduce the deficit. the simplest thing we can do now to reduce the deficit is sparked strong economic