another example where information help us to address potential threats to the integrity of the clearing houses that cleared futures contracts. recently an example of this problem in the u.k., over the past few years the government of britain removed most of its supervisory authority and invested them in the supervisory authority. but when the crisis hit, the bank of england was completely in the dark and unable to address affectively what turned into a problem for the british economy. currently that trend in the u.k. is quite the opposite. it is to give the central bank the information it needs to know

what is going on in the banking system. senator shelby asked me about the role of monetary policy. i say the role is there, is more unusual, but for financial stability of maintenance it is important the fed have that insight into the banking system. >> on both of those points i say respectfully. at the g-20 more than half of our colleagues separated supervisory and monetary policy. the companies that have weathered the storm well have been countries that have separated both. the british system was a light touch regulation. they did not have deposit insurance very well and they did not have the information. when they set up the system they did not allow the central bank to -- that contributed more to what happened in great britain.

that is a legitimate discussion, but i don't think you could say with certainty that the other is true. >> thank you very much. >> i want to focus on how we should establish our financial system. this committee is working on regulatory reform. one of the biggest concerns is that we don't institutionalize the too big to fail some drum -- be too big to fail sandra. we have allowed companies that should have been resolved to continue with been propped up by the fed. that has led to a moral hazard we need to deal with in the structuring of our system. you have often said we need a new resolution authority so you can have the tools to deal with

allowing large institutions to be resolved. at the same time in your testimony you believe we should have the ability to provide necessary liquidity at times of crisis. there is a problem there. how do we make the determination of what systemic risk is? how do we make a determination of when is we should provide liquidity as opposed to when we should maintain an institution as opposed to when we should result in an institution? >> on the liquidity function, that is to be distinguished from bailouts. it is short-term credit that is fully collateralized made only

to sound institutions. it is meant only to provide a backstop went sources of short- term funding disappear. >> do you believe we could structure a resolution at 40 in such a way that we could achieve that kind of assurance that the quality efforts would be limited in that way? >> i do. but i think it is very important. the actions we took last fall to stabilize these firms were done reluctantly and only because we had no good mechanism to allow them to fail without having severe consequences for the broader economy. it is imperative that theme as important thing congress can do is to solve the too big to fail problem. the only way to do that is to find a way to let those firms

fail. i believe that can be done in a way that's forces creditors to take losses and in a way that is predictable that it will not cost as much destruction as the problems we had last year. i think the model we can use is the one we already have for resolving failing banks just applied to larger institutions. >> what types of institutions should have that authority? would it be the fed or would it be a new financial regulator? >> i think the one with the most experience is the fdic. they would say a significant role.

the fed is not interested in being part of this process except insofar as congress sees temporary liquidity as part of the wind down process. we do not want any more aig's or lehman brothers. we want a well-established system that can be used to wind down these companies and let creditors take losses, but without destabilizing the whole economy. >> i am concerned we will not reestablish the kinds of proper approaches and principle of moral hazard until we end tarp

and provide an exit strategy and decide how we will proceed with fannie mae and freddie mac. would you agree? >> i do agree. they have to be addressed, but under the current situation, the tarp was used to bail out companies and make them whole under a well-designed resolution regime. many creditors should lose money which would create market discipline going forward, which is what is needed to avoid the moral hazard. >> the recent quarterly report states there is $317 billion of uncomplicated tarp funds available. do you support letting this expire? >> it is appropriate to begin winding it down. we should clarify what

additional needs are still remaining to make sure the financial system is still stable and will not run into any new problems. i think the tarp has mostly served its purpose and it is time to start thinking about how we will unwind that program. many banks are paying back the tar and a lot of the money put out is now coming back to the treasury. >> do you believe we will recover all of the tarp dollars? >> if you look at the money put into financial institutions specifically, overall we will end up pretty close to breaking even considering what was achieved in terms of stabilizing the system and avoiding the collapse, that

would be a good outcome. unlike some of the stories about $700 billion being thrown away, i believe the financial institutions collectively -- they will be close to breaking even. >> i would like to shift to derivatives. i appreciate the fact that you got back to me with a progress report on the efforts to strengthen the markets. you stated that there will always be occasions when the risk-management needs cannot be met by clear products. an important issue is to preserve the ability of counterparties to customize deals while properly managing the risks of these deals. they have not typically created

the exposures -- do you believe as we try to structure how we will approach our system that we can effectively avoid the concerns we need to deal with from the legitimate need for and the users to have the flexibility -- for end users. >> i think we can. we need some scope for a certain users. those derivatives can be traded on exchanges. that is the plant, but unlike aig which did not have significant oversight, that we should be very clear between the sec and bank regulators, that thanks to create customized

derivatives will also be carefully watched to make sure they had adequate capital for those positions so we don't get something like the aig situation. >> thank you very much. i will turn to senator schumer. there is a boat that has started. wheat -- there is a vote that has started. we will come back at 1:00 p.m. i don't want it to be so disjointed, so we will go to senator schumer and then we will reconvene at 1:00 p.m. and >> thank you, mr. chairman. i want to say that i sat in the room with many others, senator dodd and senator shelby when we were told about the collapse of the financial system.

we have lots of problems. this economy is not moving well enough for my purposes, but we are not in the great depression we might have been. you are a victim when you solve a problem you are better off -- society was better off the problem was avoided. i think people forget how important that is and easy to criticize, easy to say it could have been done differently. but at that moment action was needed quickly or we would have had financial collapse. i talked to warren buffett and he said the government deserves a high rate for its efforts to prevent the collapse of the financial system. i hope my colleagues will remember that. my question is on something i have been very critical of the

fed in the past. that is consumer protection. the fed dropped the ball on consumer protection issues. i support the creation of a strong independent consumer protection agency. every day we find a new way. banks are in trouble. many of their profits are being squeezed. their reaction is to raise these fees. there has been a new report that has come out on atm fees. according to that report, the average fee rose 12.6% in 2009. that is a heck of a lot. plus, he not only will the bank owns the church -- -- bank owns the charge.

over 7% of banks charge customers this feat. together with massive increases in credit card interest rates and these overdraft fees, consumers are bearing a burden disproportionately in maintaining the health of banks balance sheets. i believe the fed should conduct a thorough review of these fees to ensure consumers are protected from excessive atm fees, especially for the double whammy fee of using another bank. what is your opinion on this? will the fed agreed to conduct its own study and get us some answers quickly? >> we have just put out some rules on overdraft protection as it applies to atm's. it will require banks to get an opt in before they can charge

them. we will definitely take a look at atm fees and try to verify what is happening and what the patterns are. >> could you make some suggestions as to what should be done? >> we will see what we learn. >> from your preliminary look at the report, do you think what is happening here is similar to what is happening with credit cards? that fees are going up at a greater rate than they did in the past? >> i would like to get back to you on the numbers. i find it plausible. i think banks are trying to find ways to get revenue. we will look at it. >> is the second question relates to the next bubble. senator dodd talked about the international baubles and what

happened in dubai, but i