9çokxlçi knowok there have bee people who used the name la raza in a name that has been derogatory. the reality is we are an american institution that served the latino community and many families in this country for 40 years and we are a great american institution with a tremendous record of service and one that i think folks a look at our website, nclr.org, can see the tremendous benefits and opportunities we are creating for many families today. host: while we are looking at the website, we will take our next call from new jersey, mark on the line for independencts. caller: i will be running for congress against illegal aliens, i believe they need to be removed. çi am a small business contractor, i worked in construction. over the past five years the hispanic community, in legal

community has estimated the value of american workers. they destroyed our health-care system. how can it be fair for us to just give these people anything without allowing them accountable and make them pay forç the damage to our country? guest: i don't know if you caught this, but in the collar'q question he did something that isç highly offensive it -- offensive to many of us in the latino community whoi] are citizens of this great country. he acquitted the hispanic community with the legal community. i don't know of anybody else caught that but obviously i caught it. that is something that i think created an issue for many, particularly many that we solve reflected on the extreme viewpoints that have, i think, polarize the debate around immigration reform. but they're oftentimes individuals who will paint a broad brush when they talk about the undocumented community, and when7sçó they refer to what thy

called illegals, p çcommunity. çççv[óo/áoçk[ççit is an and it is one i think not only that hispanic community resent that anybody who has immigrant origins present spirit of for us, i think we need to clarify çthat when you are talking abot xdthe undocumented community, there are folks that are here without documentation, but we should not assume that they are all latino or all latinos are undocumented. it is an assumption that to the peril of many -- i am sorry for the gentleman who is running for congress because of gimmicks that assertion and plans to get the latino vote, i will make a prediction you will not get very far in the race. we should not be painted for this broad brush. we have fought and died for this country and have a record of great patriotism and for folks

to sing aloud undocumented immigrants and tried to paint a broad brush. host: for viewers and listeners tune in to see the senate finance committee hearing, they are a little bit late getting started. ç. we will go live until they start a hearing. we will continue our discussion about the latino community. our next call comes from boise, idaho, linda on the line for democrats. go ahead. caller: i am listening with great interest. i was born in phoenix, arizona, in 1943 and lived there most of

my life. i left that state in 2000. i also was university of arizona in tucson right after high school. that town has and had been a wonderful hispanic community that keeps going for many years since before the turn of the century. i do admire their contributions. but the influxççó of a criminal element, whether it is legal or illegal, into arizona, has destroyed both of those towns that i love so much. phoenix has more kidnappings than any other town in america, and they are all drug-related, because so many of the hispanics but, across the border bring their drugs -- drug-

dealing ways with them, and are extremely violent. host: linda, i will leave it there. guest: i appreciate linda's point ofç view is thatxd no on# welcomes a criminalç element in their community, not hispanics, not anybody. that isokçççç

guest: use the an over-abuse, sometimes, of that authority.i] it is harming not only our community, but is really a threat to our american society. we need comprehensive immigration reform for a lot of reasons. i think we should be clear that no one at welcomes the criminal element. is how you deal with it and we should do with it in a comprehensive fashion. host: thank you very much for being on the program. çguest: it is a pleasure. thank youç very much. host: we see that treasury secretary tim geithner has entered the room and will begin testimony very shortly on the fiscal 2011 budget overview. chairman senator max baucus, democrat of montana. you can watch itxd on c-span anç you can listen to it on c-span radio.

we will be back with another edition of "washington journal" tomorrow morning at 7:00 a.m. eastern. çho[captioning performed by national captioning institute] [captions copyright national cable satellite corp. 2010]

>> here we go. hearing will come to order. in 1958, former president harry truman said,çç "is a recessioç

fáwhen your neighbor losesxd yor job, but it is a depression when you lose yoursç." for more than 7 million çamericans,ç this great recesn has been the great depression. çthe americanç economy has lot more than 7 million jobs since the great recession began. çthe nonpartisan congressional budget office tells us that the recovery act enacted last year added between six and a thousand and 1.6 -- 600,000 and 1.6 billion jobs. plainly, there is more work to do. plainly, creating jobs must be our top priority. we need to work on legislation that will create jobs, and need to work across the aisle said that legislation on which we work can become law. yesterday, the president released his budget. appropriately, the budget focuses on job creation.

the president calls for a job creation tax credit for small businesses, wl(r would encourage businesses to hire. two members of this committee, senators schumer and hatchç, advanced a similar proposal. the budget proposes toi] increae incentives for smalli] businessç investing in plants and equipment, which would also help to create jobs. the president recommends extending the divisionsç for bonus depreciation. the budget but also encourage investment by excluding from in, all capital gains from a certain small business stock for more than five years. i know to that two members of this committee, senators kerry and snowe, advanced a similar çproposal. and held family businesses and çbridges and farms, the budget would provide certainty under the estate tax, i know that several members of this committee, notably senators

lincoln, cantwell, andç kyl, he been working on their proposals in this area as well. i support the president's ideas for job creation. i want to work with my colleagues on both sides of the aisle on these measures. i have a proposal to create jobs by increasing the small business lendingç to the community development financial institutions to work. these nonprofit lenders serve communities by providing access to capital for small businesses to create jobs. as we seek to find sources of sustained economic growth, i note that we must also bush to offer -- open new markets to u.s. experts. the budget also calls for $265 billion to accelerate recovery and helps families and businesses and state governments to get through this recession. the budget also focuses on the economic security of middle- income americans. the budget makes permanent many of the tax cutsç enacted in 201

and 2003. theselu more individual income -- lower individual income tax rates, education incentives like the student loan interest deduction. in addition, the president's budget would expand the child extended care credit almost double forç middle-income families. the budget also provides for permanent alternative minimum tax relief. more and more middle-income taxpayers -- without the relief proposed by the president, more andç more middle-and to taxpays would be paying this tax every year. -- more and more middle-income taxpayers would be paying this tax every bridñryear. many budget experts believe that when the economyçxd --ç?m(ok keeping annualxd deficits at or

çóbelow 3%i] of gross domestic product. çcurrently we are far from full employment, but let's look at fiscal years 2014 to 2020. if no policy is changed, the budget deficit will be 5.1% of gdp and the school year 2014 and grow to 5.6% by fiscalq year 2020. these deficits wouldçó cause det held by theçxd public to ris- a share of gdp. w3oçthe president's budget prol has a number of policies that would significantly reduce the ñrsize of theñr future deficits. çthe president proposes to free theç total funding for annually appropriated non-security programs for three years, and to propose a fee for a large financial institutions to recoup protected taxpayer losses from the tarp program. when you add up all the budgetary pluses and minuses, you get about $2 million of net deficitç reduction over a 10-yr period of the fiscal year 2011

to fiscal year 2020. we go for a deficit ofç 3.9% gp in 2014 and 4.2% of gdp inç 20, an improvement from doing nothing, but these deficits remain unacceptably high. çi note that the obama administration has issued this -- i did to issue an executive order for a bipartisan -- has decided to issue an exhibit order for a bipartisan commission to reduce the deficit many of these proposals can be enacted into law. it is a daunting problem for our fiscal policy over the long run, not just the next 10 years. budget analysts made clear that the primary cause of this explosion is that health care costs are going -- growing faster than the economy. the solution to this problem is to enact comprehensive health care reform through serious cost containment. and that is exactly what we're trying to do.

çaccording to the nonpartisan congressional budget office,ç e senate health-care bill would reduce the visits by $1.30 billion over the next few years -- reduce $1.30 trillion over the next few years. i look forward to working with my colleagues in the house and çsenate on reform. u!there is much work to do. let's continue to work on this legislation to create jobs, but as much as possible work across the aisle so that the legislation onw3 whichç we worn become law. let's get to work now. senator grassley. >> thankç you, chairman baucus. welcome, mr. secretary. today we focus on the revenue side of the budget. the country faces. the president and congress face is very tough set of tasks to get us to fiscal discipline. ignoring the past makes the

ultimate reckoning more difficult. we need to ask three questions -- where are we, how did we get there, and where are we going? the president is right thatç he did inherit large deficits and debt. i have one chart that shows the inherited deficit and another that shows that in debt. çrepublicans recognize the çinheritance. to have an intellectually honest discussion, members on both sides need to own up to the fact that the deficits and debt were bequeathed on a bipartisan basis. the congressionalç democratic leadership road toç the budgets and pass the spending bills for two years prior to president obama coming on to the scene. outgoingçç president,ç repub, signed these bills. these areç the facts. the democratic congress and our republican presidentxd left deficits and debts.

çover the past year, with the levers of power all concentrated in the hands of the other side, we have seenw3q the fiscal path worsen. deficits, as you see, are up, and debt is up. that, mr. secretary, is where we are. how did we get here? how did a bipartisan fiscal problems arise? both sides disagree. many on the other side look at the last two decades of fiscal history and reduce it to two points -- all of thgçç "broodx" fiscal history in the net -- "good" a history in the 1990's is due to the taxç increase bi, and all of the "çbad" history s due to the bipartisan tax relief plans of 2001 and 2003. last year, during the budget debate, i showed that this revisionist fiscal history does

notç stand up to scrutiny. the data was drawn from the clinton administration's office of management and budget, and the congressional budget office. what we do know is that a growing u.s.ç economyçw3ç a c xdtonic to the physical ailment. fiscal history in the past two çdecadesç shows thati]çó revew strongly when the economy recovers. that history shows that with bipartisan tax reliefñr in effe, revenues grewç faster than aftr theqçç partisan tax increasesd you can see that in the chart here as well. the two sides disagree, though, on this relationship. çit is like the saying about te tail wagging the dog. in our view, a healthy economy is the dog, and revenue is the tail. too often, one side views tax

imperative to help the economy . ixd believe that that is precisy theç opposite. the two sides' views of how we got here informs the views of how we go from here. the president indicated that we need to look forward/ i agree to in thisç town, too i]oftenq the tendency is to grow çspending and raise taxes.ç some folks look at restraining growth in spendingç. unfortunately, looking at the path ahead, the president's budget proves that point. how many families have had the luxury of growing the budgets by 25% over the last two years? how many businesses, large and small, have had the luxury? the answer is that the american families and businesses have done it just the opposite over the last two years. the president talked about a freeze in the spending. he got pushed back fromççç hn

congressional leadership. look at the budget and you will find a big fiscal hole. that chart is up here now. democrats and republicans no bolt is there -- democrats and republicans know the hole is there. those on the other side of the aisle in view the tax side of the ledger as under-subscribed. the budget is consistent with that view. both sides agree that small business is the key to a goal that both sides agree on, job creation. yet the president's budget raises the marginal rate on small businesses by over 15%. the congressional democratic the house health care reform bill would have gone yet further, raising the marginal rate about 33%. the senate health-care reform

bill would have raise the marginal rate by 20%. oncexd enacted, either of those bills would take the marginal çtax rates well above the hight rates even during the clinton era. more dramatic, marginal rate increases would fall on investment. for instance, if the house health care reform bill were enacted, it would push the marginal rate on capital income up by almost 7%. the response from some on the otherç sidew3 -- almost 70%. the response from some on the other side is that because these increases are aimed at a certain income level, somehow they would cause now3 economic harm. that provision is a very politically popular, but ignores the fact that taxes affect behavior. economic growth occurs when positive behavior of families, businesses, and investors. it is often said that tax cuts are not free, but on the other side of the coin, from the viewpoint of those paying higher

taxes, tax increases certainly are not free, either. some of the groups targeted for the tax increase may absorb it, but others will react by changing behavior. small businesses will be affected. that means workers and suppliers and others will be affected. if investors shifted their money into tax-favored activities, the supply and cost capital for garden variety business activities is adversely affected. once more, contrary to the rhetoric of many, it is not just the top 5% of earners were singled out for tax increases. the revenues in the cap-and- trade program will adversely affect many families earning below $200,000 a year income. and the health care bills both contained tax increases that adversely affect millions of the middle-class families. i would like to have you take another look to the chart, look at the fiscal hole in the path

ahead. what i ask my friends to do is to look not just at the tax side of the federal ledger, a look at the spending side. think about it, every time a new politically popular entitlement program is proposed, every new entitlement, every expanded çentitlement, every double-çdt increase in new preparation spending, is popular with the group targeted to get the çbenefit to those who oppose these initiatives, it seems like they are always on the defensive. somebody has to pay for the spending. that somebody is usually the portion of americans not targeted for the benefits. ç in a budget with rising deficits, it means that those americans not targeted for benefits can expect future tax increases. looking forward, then, we need to examine tax policy in this budget in three phases -- short-

term, mid term, long term. in the short term, the president, democrats and republicans agree on a basic objective -- jobs, jobs, jobs. everyone agrees that these jobs will come from the expansion of small business. what are small business folks saying? they are worried about the business environment. there are higher taxes in that environment. there are many new mandates and the environment, new regulations in the environment, a tight credit market in the environment. since this hearing is about tax initiatives in the budget, i would like to focus on that. some higher taxes are known, such as the marginal rate increases in the budget before us. some are possible and to some degree not known. will the taxes be directed at small business in the house and senate health-care bills materialize? my advice, and this is to the

president on downçóxd -- listeno what small business is saying. back off the marginal rate tax heights. don't bury recovering small businesses with new fees. be conscious of the tax burden you are raising on capital. remember, cash is the lifeblood of small business. be sensitive to the credit markets that small business is struggling with. in the near term, the first five years of the budget, take a look at how all the fiscal policies and spending affects current and future hidden tax burdens. in the long term, years six through 10 of the budget realize spending on its currentç path s unsustainable. it is the explosion of spending, not taxes at or above historical averages, riding is frightening deficit numbers. thank you, mr. chairman.

>> i would like a personal inquiry. senator roth used to swear in -- sometimes, not all times -- used to swear in our witnesses on a given occasion. i would make a request that our witness be sworn in today. >> member of our committee, senator bunning, has asked to require secretary vendor to swear in under oath -- agreed diner to swear in under oath. i would respectfully decline to do so. i will explain why . >> i think i understand why, that anyone who does not tell the truth to the congress is under the same regulation -- >> there is no senate rule, no committee rule -- >> no, there is not. >> it rarely requires witnesses

to testify under oath. there are a couple of instances where th it does, with a confirmation hearing. secretary geithner, as treasury secretary, representing the obama administration, i will turn to you. please proceed. >> chairman baucus, ranking member grassley, members of the committee, it is a pleasure to be back before you today. i want to start by welcoming the constructive tone in your opening statements. if you listen carefully, there are at least five things that i think most americans would agree on in what you both said. one is that deficits matterw3. another is tax cuts are not free. another is we should be paying for programs that are new that

we commit to. fourth, we face great fiscal peril to the country. finally, our priority has to meet to make sure that the economy is growing snd getting people back to work. a year ago when the president took office, our nation was in a deep recession, the economy was contracting at an annual rate of about 6%, the financial system was on the verge of collapse, credit was frozen, the housing market was in free-fall, millions of americans had lost their jobs, and we were losing about three-quarters of 1 million jobs a month. wew3 also faced a deficitok[ç 0 oktrillionqç, and projected deficits, before weç took a single act, that according to the cbo, would more than double our nation's2debtç over the net decade. this recession has caused tremendous damage, and millions

of americans today are still livingç. -- living with the consequences of that damage. we know that the road to fiscal sustainability starts with economic growth. as a large part based on the policies congress enacted, we putç out the financial fire and the economy is growing again, and last quarter it grew at an annual rate of about 6%, more rapidly than at anyçó time in te last six years. this is progress. it is notq enough, though. that is why we need to renew our focus on a job creation and investment and innovation. when you@a1-çç to, as i knowu do, small businesses across the country today, theyç tell a similarç storyi] to talk aboutç uncertaintyç with their producy they say that their ability to expand and hire depends on better access to credit. çi was in minneapolis last week and i visited a small

family-ownedxd business called small heating and air- ççw3conditioning, and they wee to build a new warehouse for their growing business and add 80ç jobs. okand a banker said that without access to capital from tarp, such a loan would not have been possible. i met with the bakery owner with plans underway to build a second plant and create 150 jobs, if they can raise the credit necessary for expansion. small banks are a very important source of credit for small businesses, and that is why when the president took office, the only incremental money we put into banks were not to the large banks in the country, but to small community banks, regional banks. that is why today in new hampshire, the president will announce that we will support new legislation to transfer $30 billion of tarp funds, funds that we took back from our investments in the major

institutions, to help create a new small business lending fund. this fund will offer capital to community banks, whichxd will -- at the center of lending to small businesses, and we need now to grow andw3 expand. that is why he will propose today the legislation to support $17.5 billion in loans and guarantees. we want to increase the loan çsize, the maximum loan size, n the most heavily used programs, and to expand theç recovery act provisions that raise fees and guarantees, further improving access to small businesses to credit. okinç addition to these steps n credit, we are also proposing a three act tax relief for small businesses, and we're proposing for small businesses, and we're proposing a new tax credit, whichok will provide $5,000 cret to every new employee hired in 2010, qn will reimburse

employers for. taxes on salary increases above t(inflation -- or payroll taxesn salary increases about inflation. we're also recommending expected to the r&d tax credits that the chairman referredç to, and proposing a permanent exemption from the capitalq gains tax for small businesses. we will work very hard to stabilize the housingç market d make sure that we held more homeowners stay in their homes, and we understand and we know that government has to be smarter at doing things governments -- only governments can do. in the president's budget, we laid out a comprehensive agenda to enhance innovation and strengthen our agenda this is designed to make sure that washington is creating the conditions that allow the private sector to grow and expand, that allow businesses, small and large, to create jobs and makeççó investments. to do this, we need a financial reform, because families and businesses bothw3 need a financl

çsystem thatw3çvçççi]çt(t innovation enjoys, provides better protection for consumers, but is taking the savings and investments of americans and channeling them to innovation and investment, not financing real-estate and financial booms. i]ççwe need to encourage inno. last year, supported the largest investment in basic research funding in this country, i want to build on that with incentives for r&d and incentives forç technologies and will improve xdçproductivity. >> take whatever time you want to take. however, i will -- [unintelligible] >> we to increase exports. -- we needed to increase exports. we need to invest in education. businesses need an education system that does a betterç jobf çteaching and creating a skilld and productive work force, and that is why this budget supports

reforms to raiseçóç thuáuk of the achievement produced by our college education more affordable. w3çand of course, we need healh care reform, said that we can w3ççççprovide greater econoc security for the tensç of millions of middle-class families and businesses and help reduce their health care costs. these arei] reforms that the government has to make. when government fails that these basic challenges. -- when government fails at these basic challenges, americans suffer and businesses suffer. the government needs to address these challenges in order to provide the foundation for a stronger, more dynamic private sector. thatç is why the budget proposs a series of important% investments in these areas. part oft(ç laying a foundationr future economic growth and prosperity is returning to living within our means. when we have a strong growth in place, we need to begin the process of bringing down theseç deficits. ñrthese deficits are tooççó higd

the americançó people and investors around the world need to have confidence in our will and ability as a country to bring them down over time. now the president's tbudget has proposed important steps towards that objective. for three years -- he has suggested that we kept non- discretionary funding for three -- cap non-discretionary funding for three years. we have proposed closing what is called the tarried interest to pull by taxing -- carried interest loophole. we want to eliminate unnecessary tax subsidies. b(óçç as we take these modest steps, we are also proposing to extend, just for one year, the make-work-pay tax credit,ç whih goes toç 95% of working

americans. wráj+e proposed a series of additional tax incentives to help retirement security make college -- reduce and make college education more affordable. t(we are working to close down a tarp at zero cost to taxpayers. last year at this time, the independent budget scorekeepers estimated the cost of fixing the financial crisis couldç exceed $5.0 billion. today, those estimates areç don in the range of $100 million. we proposed a fee on the largest institutions and the country, those that have benefited the most from our efforts to restore the financial system, it to ensure that american taxpayers are not exposed to anyxd of loss under tarp. third, we must restore the basic disciplines of budgeting that all americans live with, by reinstating pay-as-you-go.

çin the 1990's, the basic set f disciplines helped to play an important role in moving us from a deficiti] was 4.5% of gdp in t(1991 to a significant surplus in 2000. the budget outlines a plan to bring the share ofç -- the çdeficit sure of gdp could just below 4% of gdpç. we cannot let our future deficits and debt continue to grow faster than our economy without hurting future investments and growth. that will be a difficult task. it will require veryç tough, politically unpopular choices, and will require democrats and republicans to come togetherçó n things and will make a serious difference. supported the creation of a bipartisan fiscalçw3 commissio, identifyingresponsible policies that can bring these deficits down and win support on both

sides of the aisle. nowç the commission's posture first task will be recommending changes that will bring the operating budget, the expenditures for interest, to balance over the next five years. it will also be asked to find and identify solutions to the longer term fiscal problems. i just want to conclude by saying that america is in much stronger position today than it was a year ago. but our challenges are not just to repair the wreckage caused by the recession. we are in very tough, competitive race, with companies and governments around the world, and that race will determine who meets the future economy, and will be stronger and better at attracting talent investment and sharing the gains of growth more broadly across our citizens. we in many ways dominated the competition for decades and we will do so in the future, but our lead in some ways is eroding and it is because for too long our government has not

been able to make policy changes and reforms and the kinds of investments that are essential to produce economic growth. that is why the investments and reforms we have proposedçç ine budget are so important. i look forward to working very closely with this committee and i look forward to answering your questions. >> thank you, mr. secretary. first of all, i very much appreciate the emphasis on jobs and small businesses. you mentionedç the $30 billion tarp, the small business loan guarantee, $33 billionç in sma- business employment tax credit, etc. the president's announcement today on $30 billion in tarp -- to give you a little more explicit on how that would work --ç some of the concerns that some of the money that his loan is made available to banks and sometimes they don't lend as much as we want them to. >> you are exactly right.

our judgment is that the most important thing we can do for small businesses right now is to give them tax incentives to invest, as we do, for eight range of things you highlighted and senator grassley highlighted in the opening statements, to add a new tax credit to encourage hiring, which building on suggestions made by many in congress, including, as you said, senator schumer and senator hatch, to expand what the fba can do, which can be very powerful, and by expanding loan guarantees, we think that helps. but a critical role has to be to make sure that the banks and aceticdfi's have access to capil to help them land. it is one of the most effective use of taxpayer resources. for every dollar you give for capital, it can support up to $8 to $12 of additional lending. banks can use this program to support additionali] lending, ad

they will be more likely to reduce lending if they are or made bad decisions during the boom. what to do that, we need to make sure that it will take the capital and use it to expand lending. we have suggested a variety of ways to do that. we think we've got some good ideas to do that. we want to work with congress and members of this committee and members of the banking committee to find the best possible to do that. small businesses rely on banks for all the credit that they generate. and help them, we need to make sureç that the banksç that thy rely on how the financial ability -- >> how are you going tow3 help çóguaranteeç the bank's lead? that isçó -- the banksçç lend? that has been the concern in the has been available to them toi]

actually lend. >> i think the evidence shows that banks that took capital expanded lending. i think it is a pretty good story on this side. but you are right. our objective as we that we design these things to substantially improve the odds that we see lending to grow, and not shrink. a lot of banks took on too much risk in this crisis. that was true of community banks, too. it lot of them have been forced to retrench and pull back, and that has hurt a lot of their traditional customers, small businesses. i think it is a very good and legitimate objective tou! work togetherçñr to find ways to mitigate that pressure. >> how youç balance spending fr jobç creation and the recession on one hand and come back and address the fiscal problems on the other? whatç are some of the paramete,

the benchmarks, in making that decision? basically, i think the deficit increases in the short term, and that the budget proposal it decreases in the longer term. how to you sought -- how you decide where to draw that line? >> many people think the objectivesç are in conflict, bt theyt( are not, for theç foll¤3 reasons. if we do not succeed in repairing the damage caused by this crisis, getting growth back on track, having a growing economy with businesses confident, we will not be helping the long-termçóç defic. çthey will be worse. the fiscally responsible thing to do now, given the damage caused by theq recession, and te importance of recovery, is to make sure that we are doing censible things,ç effective, targeted things that reinforce a ççrecovery and improve business confidence and get americans back to work. we cannot do that effectively unless people also believe that once work is established that we

will bring down the long-term deficit. unless we convince people that we can restore gravity to our long-term fiscal position, we will have limited ability to meet the immediate challenges that we all share -- >> i guess my question is how did you decide where to draw the line where you did? qwhy did you draw the line where you did? >> there are two critical aspects of the issue right now. what is how much more now can we afford? there are limits to what the government can do now. as everybodyç says, our deficis are alarmingly high. it will have to come out in time. we do not have unlimited resources available that we will have to borrow from the rest of the world and putçó into, even well design programs. what the president has proposed in the budget is to set aside $100 million on topç of the extension of measures in the recovery act already approved, like extensionç of unemployment insurance. i believe the country can afford that if we designed the use of

the package sensiblyi]. it will be a good thing not just for growth but fori]t( the longm fiscalç position. the second question is timing. howçç quickly we move to rest? in the budget we have proposed in fiscalç year 2011, which we believe will be more than a year çafter we have positiveç growh çrestored, it will begin to brg the deficitsç down. we propose to reduce them by two percentage points of gdp by next fiscal year. some people think that is too much, that the economy may be a little fragile, short of growth them, and it is possible that will be right. we suggestç that we begin the process of restraint when we are more confident -- w3>> my time has expired. i will just point out the obvious, namely that we cannot afford to make mistakes. we've got to getç this right. that means kicking down in çlittle bit deeper and asking

tougherç questions and getting this right as we possibly can. i write, i nei] -- by r ight, i meanççi]the balance between tho objectives. you cannotç afford the luxury f being cavalier about this. this is serious stuff. >> i agree, and we have to make sure that every additional dollar has a higher return. >> mr.ç secretary, on february1 last year, the congressional budget office road it -- wrote disturbing letter outlining the effects of making the provisions contained in the stimulus bill permanent. i would ask the chairman to insert that letter in the record at this point. ççcongressçó -- to the surprif

the very few, progress is being asked to extend the provisions in the stimulus bill. ççç

what we want from you is assurance that this will not be let loose on the american people. my party is often criticized for not offering a tax increases to facilitate debt reduction. the same criticism could be made of people on the other side of the aisle for enacting a so- called temporary spending that is likely to have a larger-than- anticipated fiscal impact once the temporary provisions are extended. trying to get back to what we originally thought we were doing, would you be able to tell us that you are going to be able to contain the hit in fiscal liability of extending the stimulus bill, could you promised to ensure that the cost of the stimulus bill is limited to the original estimate?

if you agree that we should limit the fiscal impact of the stimulus bill to a temporary nature, would you be willing to carry this out by either working to support the original expiration dates contained in the stimulus bill, or by offsetting any expansions with spending reductions in other programs? >> senator, i think it is very important that we all commit to the objective of making sure that the temporary things that we did to pull the economy out of crisis are temporary, and are not built-in it long expectations of high expenditures in the future. i completely agree with that. part of getting our deficit down in the medium term is to make sure that we allow those timber reactions to expire -- to our reactions to expire. we do believe there is a strong economic case now for extending certain provisions of the recovery act that we think have

a powerful impact on investment and job creation. as the chairman said, we need to be careful that the things meet the test. you're not going to propose to extend everything. we've proposed to some limited extensions. we think there is a good case for that because we want to increase growth. but we cannot allow that to add to expectations of long-term commitments on the expenditure side, because that will make it harder for us to bring those down over time. our basic test should be what is going to add jobs, what is going to add spark to investments, what is going to provide good leverage to the taxpayers' money? we need to make sure we doing that in a way that is fiscally responsible over the medium term. >> mr. chairman, i think i would like to reserve 44 seconds for the next round. i]so i can ask a largerw3 questn ç-- ç>> you may have even more -- [unintelligible]

>>ç secretary diner, i want too right to --ç secretaryçç geiç i want to go right to call in the energy part of the budget. -- coalxd in the engreçzç paf the budget. i come from a state, west virginia, which has a very hostile attitude towards any +tcoal, which isç against cap-- trade,w3 any kind of change reay at alll(ç -- not in all cases. i am trying to change that. çokw3this budget is going to mt really hard. çlet me explain. ç3hpì(lc@&c+ the way i see atçkoçóit at thç

abouti] 6.7% of its electricity. q coal gives itçóç about 85%. but you gotç all kinds of tax credit elimination's in about coal, which come out of the meeting in pittsburgh of the g- 20, and i understand that. but also don't really believe that china and india are going to be part of that. çóso on top of thatç, a relatiy small thing but a nettlesome thing, you shift costsw3 of osm onto the coal industry. you shift that on to the industry. you call it a fee, you make the

states do it, the statesimuá on difficult place, because it is not certain we will get a climate bill thisw3 year. it would be very good if we did. i talked to the people i represent about the fact that cap-and-tradeç is inç fact the exact mechanism we used some 30 years ago to do acid rain. there is no difference. at time, it came inw3çç only f the cost of what people had predictedç. i'm trying to be helpful in this. i talked to coal miners, talked about cap-and-trade.

there is the climate change bill talking about substantial amounts of money for making " clean. but at the same time you are saying to west virginia, up for dead at -- forget it. production of coal is going down, and that is what you have got from the budget. which makes me say thank heavens is the president's budget, and the staying power may be a week or two. we write the legislation. i want to do it in a way that makes " clean -- coal cleaner, which puts discipline on the industry and the coal miner to do the right thing for the country.

and not giving a percentage to ethanol, which is a political move and i will not get into that. but there is not really anything in this budget which i can take home and talk about in favorable terms with respect to coal, when i want to greet the president talked about being for research and development. the budget does not reflect it. i have run out of time for questions. >> may i make a quick response? we are very supportive, like you are, in making sure we provide significantly larger incentives and subsidies to encourage it clean energy technologies, including clean coal. there are a range of provisions

in the budget, without having to go through with you, that substantially increase but the government is doing to facilitate the transition. we want to make sure that we do things that work, but we want to support the same objectives. we believe, as you got the answer is in technology, and we would be happy to make sure that we have the best ideas for that in the budget. >> ok, but they are not in there yet. you do agree. >> if you look at the tax credit for renewable energies and the broader range of support for r and d, there is more support for that objective, but we're happy to work with you. we have the same basic objective. we understand the tension between the reality today that coal will continue to play a major role in our energy future, and we want to use it more efficiently and make sure that we adopt the kind of clean technology -- >> thank you. senator lincoln.

there she is. >> thank you, mr. chairman. i appreciate you and the ranking member for holding the hearing, and certainly, secretary geithner for being here. mr. secretary, we all know that a budget is nothing more than a blueprint that outlines a list of priorities, and it is not binding legislation, but it indicates your values. it indicates how he planned to lead this nation in the year ahead. -- how you plan to lead the nation and the year ahead. talking about all the ideas that people had for years beyond 2010 are grand and glorious, but americans are hurting right now, and we need to have a real plan for 2010, 2010 and 2011. i want to begin my comments, and then i will move any questions i might have. just to say that in the budget the administration has proposed, i think there still is a great deal of nervousness among americans.

i hope that he will work with us. -- i hope that you will work with us to try to alleviate some of that. in the wake of a difficult time for some americans, i see in the budget that we have put in place and a cap-and-trade system, just as senator rockefeller was mentioning. long-term goals, perhaps. changing the longstanding tax policies that encourageñr domesc oil and gas production. i think this would undoubtedly result in an immediate increase in energy prices for consumers and businesses, at a time when they cannot afford it. although we all want to have long-term goals, we have got to understand what the immediate present. i seek the imposition of new tax on their businesses that are trying to compete around the world, without substantive policies to reward them for keeping jobs here at home, which is critical. not only that we do the research and development, but that we encourage those industries to be ensured that the research and development is safe here in this country come in american jobs.

i see an additional tax and regulatory burdens being placed on small businesses and the self-employed, a financial regulatory reform proposal that seeks to create -- recreate the wheel. putting the vast majority of mainstream banks that have played by the rules all along it to a whole new regulatory structure on the focus should be on improving oversight of the bad actors. .

i don't understand the vision of the administration when it comes to the economic policy in the economic climate today. to create the jobs arkansas residents need right now in our economy, it is critical that we focus on to the here and now. mr. secretary, i don't know how many people you spoke with. folks in the real world. you mentioned that you visited ohio. i don't know how much farm country that you visited.

i do want to help pass along the message that the budget and did it -- administration's economic policies lately provide more questions oftentimes then they do answers. americans, individuals and businesses, are desperately trying to regain their footing. they're trying desperately to pull themselves back from the brink of this economic crisis. now is the time to provide stability and certainty. you mentioned certainly almost the first five words out of your mouth. i hope you mean that. i impress upon you how critical that is in these economic times. confidence in economic policy they can see and understand and can get their businesses on in many instances. my concern is i think our budget can do more. i think it can do more than that. building on that, one of the first things we as a government can do to help provide stability is to focus on legislative issues. that should have been addressed

last year. i pledged that to myself and my colleagues write your that we have to do as much. but many of those have been put aside for the effects of a long debate we have had on healthcare. i hope you'll take an opportunity to look at many of those things. for the empowerment zones, 40 renewal communities across the nation. between 500,700 thousand jobs either directly or indirectly to benefit from the incentives. so many other incentives out there. you look at venture-capital and the biodiesel tax credit that expires in 2009. there is no certainty for venture-capital. they don't investing in renewable energy because they don't know what to expect. the 10,000 or 15,000 jobs in the timber industry directly affected by the provisions that were not -- that expired in may, were not renewed. we need you to help us focus on

those issues. between 2.5000006 0.7 million -- >> i want to let you respond briefly, secretary. the senator's time -- >> i want to briefly on small business. then you may answer. >> mr. secretary, briefly. >> i agreed with you. i'm testifying on the 2011 budget. that you let along way away for many people. it begins in october. our focus is right now. we want to work with congress right now on a set of additional measures to reinforce the recovery and get more people back to work. that is what the president said our immediate priority is to focus on the things that matter right now. there are limits to what we can do. we want to make sure we things -- that we do things that go directly to small business, such as job creation, incentives for adopting clean technology, helping stabilize the

government. we cannot wait to do those things. i agree. we also need to make sure we are looking ahead a little, we need to make choices now about longer term. i agree with you about the need for certainty. the recoveries depend on confidence. they depend on the confidence of businesses. they depend on the confidence of american families that we will prepare the damage that has been done. everything we do should be guided by that basic recognition. we need to give people more credit -- more clarity than we have in the last few years about what will be the rules of the game, what regulatory powers will be out there. it is important we bring the things we are working on. in financial reform and regulatory reform so that people make plans for more certain future. >> thank you, mr. chairman.

mr. secretary, you mentioned certainty and confidence. those are the two key elements, without question, that are the essential ingredients in economic recovery for it to be strong and sustainable. i have some small business forums a couple of weeks ago in the state of maine. what i heard from small businesses on the ground -- because i think there is a disconnect between washington and the rest of the country and main street -- between reality and fiscal fantasy land in washinton about the practicalities of policies coming out of washington. whether they are as - or they are real. it is immaterial. if the presented is there will be more policies coming out of washington to increase the cost of doing business, they simply won't do business. i have heard that time and time again. that certainty is impossible for

them to predict or calculate the cost. if i did not hear it once, i heard it a thousand times. "how do i calculate the cost of doing business when i am hearing from washington, increases in taxes." we are talking about small businesses. the 93% of small businesses have flow-through income. they pay 82% of those taxes. that could have profound impact. furthermore, as we continue to discuss tax increase potential, they will stand still, they will freeze. that is the point. that is what will hamper our ability. then you talk about all the tax increases and the proposed health-care bill. 62% increase on the medicare payroll tax, still looking at that, that is a broadly -- disproportionately affect small businesses. there's been not only a disconnect, a large like time to

respond to the needs of small business in a practical fashion. there won't move forward to job creation. who would take the risk? would you take the risk, would you put your money on ? >> that is the issue. -- would you put your money on the line? >> until we find out more about regulation and on the issue of healthcare, and that is bouncing between house and senate, we will not have job creation. i would like to hear from you, talking about the tax increases, from 9% of the 15% increase in taxes. furthermore, you believe we should pay for things. but using tarp is not a means of paying for it. that is a loan that was meant to be paid back, not to be spent. i think we ought to use unused stimulus money for that purpose.

so i hope you would consider that. i'm asking for a list from the omb director for all the unused stimulus funds, to use that. finally, we should have a jobs impact statement, every piece of legislation that comes through the u.s. congress, so we know whether it is creating, preserving, or losing jobs. it is that critical for the future of this country and for the interests and well-being of small businesses. we are depending on them to create jobs. >> i agree with much of what you said. what businesses need more than anything is more confidence there will be growing demand for their products. they also want less uncertainty about what will happen in washington and about the basic rules of the game. i want to respond to what you said, the two things. this is important. we have proposed to let the tax cuts that were given to americans with incomes above $200,000 to expire by the end of this year.

congress designed for them to let them expire. we are proposing to let them expire. independent analysts that have looked at this, not just the treasury, they say those will only affect toole% up to 3% of small businesses. you could say that is a lot of small businesses, but it is only up to 3%. the most fair independent assessment justified that concluding. i completely agree with you that to bring health care to resolution would be helpful in reducing some uncertainty. it is important to recognize that business is today under the current system, small business in particular, face enormous hidden costs in health care system. those that have held their pay much more than large businesses. they'll pay the hidden cost for the uninsured. this country's health system is not a good system for businesses or small businesses. they are facing much more rapid

growth in health care costs than large businesses. i agree with you that bringing resolution to healthcare reform would be helpful for confidence and would be helpful for small businesses. >> i want to pick up on your questions as well. secretary geithner, the banks are getting bigger. lines of credits to main street employers are getting smaller. it looks like a vicious cycle. the taxpayers' bailout to a good too big to fail institutions, only to be more vulnerable to them. a few minutes ago you told the chairman that the banks that got the bailout money were increasing lending. your own treasury data, however, paints a different picture. your treasury data demonstrates the 22 banks that got the most help from treasury bailout programs have actually been decreasing small-business lending.

the inspector general's report on january 30, the tarp reports, says exactly the same thing. so my first question to you picks up on theñi chairman's pot about the urgency of small- business lending. tell me, if you would, how the new program that is being discussed is going to be an improvement on the two programs that your own data and inspector general have said are not working. >> if you look carefully at the evidence of the people who took our money and those who didn't, the evidence is pretty good. there was less sharp reduction in lending. >> not for small business "? it's even under that case. how are begun to make this better is my point, how are we going to fix it. to be honest, the big challenge we have had is small banks have not been willing to take

advantage of these programs, because they have been deeply concerned about the stigma that comes with taking that assistance and a potential concerned about conditions in perspective. hundreds of small banks withdrew their applications from the treasury even as we tried to make the programs more attractive. they did that because of fears oplp stigma and fear of the conditions. whatçó we proposed in order to separate this, in a sense, from the trauma associated with the tarp and to do it with a more sensible set of conditions, but that requires legislation, inputñr from community banks aso how to do it, we proposed one way to do it. a lot of people have ideas. we will work with you and other members on how best to do it. but if you don't do things that help community banks, it is very hard to do enough to help small businesses that depend on

community banks. >> i would like more detailed answer in writing, if i could get that, because i continue to be uncertain with respect to how this new program will improve on two others that your inspector general has criticized. two areas where we are seeing progress, the fundamental structure. the bill america bond program, to the extent of the chairman and senator grassley, we thought might promote the issuance of $5 billion worth of bonds for roads and transportation systems. it exceeded $60 billion. clearly, this is now boldest effort in municipal finance as it relates to generating improvements needed in infrastructure. you all proposed making this permanent, but you also, it

appears to me, seem to be suggesting that there be additional areas that would be eligible for billick america bonds, refinance projects cover operating expenses. what concerns me is if the country goes that route, that won't do as much to create new jobs, new family wage jobs, particularly in transportation, where there is a great economic multiplier as the original bipartisan proposal that a big group of us have been working on. tell us, if you would, how your provisions in the build america bond program will still help us to achieve what has long been a bipartisan objective up here, which is to generate more new jobs in the infrastructure area. >> you are correct. remarkably effective program, to the credit of you and many of your colleagues.

it is one of the most effective per dollar of taxpayer money we have seen. that is a good case for making it permanent. but there's also a case to look at the scope of applicability. we would be happy to work with you to make sure if we expand it, we are not going to reduce its basic effectiveness. we proposed something that is no cost and therefore meets the basic test of fiscal responsibility. because of this program and a range of other programs, the cost of borrowing by taking over government has been dramatic. that has been very helpful. state and local governments face difficult challenges that they have not seen in the long -- many decades. we need to keep working at trying to help them get through this. we think this program is one way to do that. >> thank you. >> senator bunning? >> thank you, mr. chairman. a lot of my colleagues had

spoken of clarity, confidence, and uncertainty, i was glad to see that. because that was one of the unbelievable things that the american people are having difficulty with. therefore, i am going to question you on some other things that kind of lead up to that clarity, confidence, and certainty. the reasons that you and others have stated for bailing out aig and changing the terms of the bailout seemed to have changed over time. so i want to give you the opportunity to set the record straight on two questions. first, why did you believe aig could not be allowed to fail? was it the impact on insurance policy helpers? the derivative counterparties? the money market? or something else? >> thank you for asking the

question, senator. our adjustment -- our judgment was the failure of aig could have been catastrophic to the for the ability of the financial system. it would have had the effect of undermining confidence in the insurance system. it equated prospectsçó of must greater failures across the financial system -- it would have created the prospect of much greater failures across the financial system. look back to what happened after lehman brothers failed. our judgment was -- this was the judgment of a range of people responsible for those decisions at that time, including president bush, secretaryw3 paulson, chairman bernanke along with me. our judgment was those problems would have been dramatically amplified if aig had failed and they would spread to parts of the system that would have otherwise been unaffected, including basic confidence in the insurance industry. >> or is it to the derivative

business? securities lending and insurance companies? the commercial paper? the aircraft leasing business? or something else? >> it is hard to separate. what is systemic risk is a difficult thing to judge. >> we are all finding that out. >> that is the reality of it. i think the simplest way to say it is look at what happened after lehman brothers and the broader collapse of many of the large institutions. the value of american savings fell 40%. hundreds of thousands of businesses forced to close. mary and the people lost their work. basic confidence in the system was broken. derivativto have vote largest ie company in the world that had written savings contracts hundreds of thousands of american households, and under a state and local governments, to have that institution fail in

that environment would have been catastrophic in our judgment. what we did with the best we could with limited tools to limit the risk to taxpayers and contain the border damaged. >> when did you first become aware that aig was in trouble, you personally? >> aig informed the treasury and the federal reserve on friday, i can't remember if it was september 12, but it was that friday, that they were that-- >> in september? >> september of 2008. they were at the edge of that point and they did not believe that they would make it without government support. >> the a i decondition did not, at the july 29 meeting with the company ceo when he was asking about access to a fed lending? >> no, aig's's decision, including the ceo, approached us

and my colleagues over the six month- period and said what if we face a possibility of liquidity pressure, what circumstances would be possible for the fed to come to our assistance? it was only on that friday that they came to us --federal reserve had no authority or responsibility for the risk aig was taking. they were subject to supervision by state insurance companies, by federal regulators -- >> the federal reserve did have recourse? >> the fed had absolutely no authority or responsibility for supervising, overseeing the activities of aig. >> not for supervising. >> that is in -- >> is that why the tarp money was used? >> you know the history well, senator. >> i do. but when they got to where they could no longer operate without

the government's assistance, they came to the fed disable you help us avoid default? >>-- and asked would ñiyou helps avoid? >> we made the judgment with extreme care and reluctance. no one would not want to ever be in the position of giving the dollar of taxpayers' money to a company like that, that had been mismanaged, despite the supervision -- >> evin at a time when you knew it was failing? >> of course. no one wants to be in a position --if it was any other way --to put the taxpayer money on the line to prevent defaults at a company like that. if there was any way to avoid that, we would have jumped on that. >> but you did it with bear stearns and not lehman brothers. >> in the bear stearnsñr case, t was a willing buyer, able to

come in and buy and guarantee -- >> they were willing corn not -- or not. >> you are next. >> thank you, mr. chairman. welcome, mr. secretary. i want to put back to what is happening to american families and businesses. çóto avoid a disaster, actions were taken last year, aig investment bank, because the country was at the edge of a cliff, on the brink of disaster. we have 15.3 million people without jobs with breadwinners in their families. most of that overwhelmingly did not happen on president obama's watch for your watch. i would first state that wh--ñr.

when many people, six people looking for one job, that is a disaster. the disaster to families have been facing, it was an appropriate response. we need to keep our focus there. i wonder -- i appreciate your focus on small business, which is critical for job creation. i am sure you know, even though things have been done this last year through the sba, we don't have enough capital available for small businesses. we have serious issues. we have small businesses that don't have collateral because their equipment, their business is not worth what it was. their house is not worth what it was. now it's a one-two punch of they cannot get a loan and don't have collateral. that is something we need to address as we're looking at these issues. we have suggestions on how to do

that. but i appreciate the focus on small business, on exports, education, health care costs, deficits. i would like you to speak for a moment on why it is so critical now in terms of deficit reduction and the economy, to focus on jobs, jobs and deficit- reduction are not separate in mind. i wonder if you might just speak a little more about how creating jobs will actually grow the economy and reduce the deficit. >> you said it exactly right. the economy is in crisis still. for the average american and many businesses, this is still depressed economic environment and most challenging economic environment they have ever experienced. that is true even though we have been successful in putting out to the financial fire at the center of the system and even though we have been successful in starting to repair the damage and putting a floor under an

economy that is all off the cliff. it is because of that, that our first priority has to be ways to use additional assistance from the government to provide incentives for investment and job creation. we want to make sure as we do that, because we don't have additional resources, we are focusing on things that have the biggest bang for the buck. focusing on small businesses and tax incentives and credit is one way to do that, that is not the only answer. we it -- we think it's important that be complemented by support for broad range of other investment incentives, clean energy technology, infrastructure state and local governments need something is desperately now to make sure they can weather this major storm ahead. >> i wonder if you might speak a little to one critical investment that i was pleased with in the president's budget, that relates to manufacturing,

clean energy manufacturing. the eight years prior to president obama taking office, we lost almost 6 million middle- class manufacturing jobs in this country. i think there was a belief at that time that if you could buy something, it did not matter merit -- did not matter where it was made. we want very much to see the words "made in america" on the products around the world and in this country. the $5 billion expansion of the manufacturing tax credits, i am pleased to work with senator bingaman and senator lugar and senator hatch. we have legislation to expand what we worked on hard with you in the recovery act. i wonder if you might speak to why it is important to focus on the clean energy manufacturing incentives and the success that we have had up to this point. >> you heard the president say,

"what the u.s. to be a leader in those technologies. we thin-- we want the u.s. to ba leader in those technologies. we want to have the american worker is working on things that will be central to our economic future. this taxñr program is, by all measures, a very effective prot)am. it has been a remarkably oversubscribed. we are not going to extend it. we think it makes a lot of sense and we would be happy to work with you and your colleagues, to make sure it is designed in a way that it meets the basic test. we want to do things that have the maximum bang for the additional assistance we provide either through the tax system or direct investment. this program meets that test. >> thank you. thank you, mr. chairman. >> senator?

thank you, mr. chairman. i'm glad toñi see the president with tax relief for middle-class families in the country, the new jersey, that have been affected. i appreciate your comments on loan guarantees. i have a concern that if there are no loans, there are no loans to guarantee. so we look forward to working with you on that maybe, to see how that becomes something much more than a hollow promise. i want to go out to three things ñrquickly and a hope you'll work the administration has proposed a modest responsibility fee on the largest banks to help pay back the taxpayers of tarp funds. the banks are objecting to this modest fee to pay back the taxpayers because of the supposed effects on lending, as they claim, and the cost to consumers. at the same time many of these entities are paying some of the largest bonuses to their own executives. number one, how do they reconcile that position?

second, shouldn't we be looking at banks paying back taxpayers for the tarp in a few years? shouldn't we have those banks continue to pay into an insurance fund so that in the future the bank rather than taxpayers effectively will pay, if one of them fails? >> senator, i don't think there is any significant risk that this fee would have a negative impact on lending. barlett for the reasons you stated. the banks don't have to pass this on. modest reductions in the compensation would soar because of the fee. we think it is absolutely essential to make sure if any financial reform legislation, we are meeting the basic common- sense test, which is the government has to take a risk of loss in the future to put out some future financial fires. we don't want the taxpayers to have to bear the burden of the cost. that is what we propose, to make sure they don't bear a penny of costs under tarp. knew what to make sure the

future that taxpayers are not on avoca to save large financial institutions from the consequences of their mistakes. -- arnott on the hore not on t. >> we look forward to working with you on that. second, it is ironic that some of my colleagues on the other side of the aisle that past 2.5 trillion dollars worth of tax cuts, failed to pay for two wars, expanded drusi benefit wih an overwhelming majority in the republicans, without guaranteeing one dime, have rediscovered the issue of deficit? at the same time i hear the same voices clamoring on that, saying let's repeal the estate tax fully. what sort of consequent would be to our deficit if we fully repealed the the estate tax? is there a way to get 99% of

americans exempt from the estate tax but not bus to the deficit in the process and allowing the room for a middle-class tax cuts the president's budget calls fort? çó>> what the president has proposed is to extend the rates and exemptions that were in place in 2009 and to make them permanent. we would like -- we hope congress will act to make those changes retroactive to january 1 of this year. we think that is there. it captures only a tiny fraction of all the states, between 1% and who%. we don't think it would be responsible - >>çó 98% of americans would nevr pay an estate tax? only the wealthiest 1%? >> we want to make itñr permanet and start in 2009. >> that would be in place if congress did not act this year

because they would go up higher in 2011? >> that gives us the opportunity to create no liability for 98 or so% of americans and give us an opportunity to pursue the middle-class tax cut without busting the budgets. -- 98%. we discussed reinsurance that allows foreign-based insurance companies to shift revenues offshore to avoid paying taxes. this behavior gives foreign insurance companies and a significant advantage over u.s. competitors. i'm pleased to see that this year's budget has a proposal to resolve this problem. however, the approach that you all are taking a different from the approach of the senate finance committee. a similar bill introduced in the house as well. could i get you to commit to me that you will work to make this

a priority and have your staff work with those of us on the finance committee to find common ground to a technical loophole? to work with you on that. >> thank you. senator lynsey? >> thank you, mr. chairman. one of the things i have been concerned about in the budget are the way small businessmen will be affected by the tax increases. they talk about it being over $250,000 in revenue. i know young couple from gillette, wyoming that started a restaurant that was very ñisuccessful. if they have expanded up to eight restaurants. i went to the newest one in casper. i ran into one of the people that started the business. he said, we started this with $2,000 in our pocket. we have eightñr restaurants ande still only have $2,000 in our xdpocket. if everything they have earned, they put back into the business. we're going to stifle the economy by stopping them from xdputting it back into the

e will make themñrñi pay it to the federal guarantee instead. i appreciate your comments on small business that you made. you remember in your confirmation hearings, i mentioned small businessman from montana had mentioned to me the need for $5,000 per new employee in order to bid to expand their business. i appreciate particularly that number being in there. a bunch of complications that i will work with you on to be sure that we are expanding jobs in order to get that. we also need to expedite the way that they get that. the $30 billion in small- business lending, which you mentioned in your opening statement, would that be funneled through the spf? the-- the sba? >> it takes a long time to go to the process because they don't have the money to begin with. they are trying to get it to the people that need it most.

in the meantime, that stifles the economy. could that go through the banks instead? >> i want to start where you ended. we are proposing to expand what the sba can do, by raising loan limits, luring the guarantee fee ñixdñrñrwe are working hard to e sure to streamline the requirements in those programs without leaving the taxpayer more exposed to risk of loss. we want to complement that by trying to make sure we are helping community banks as well. so the $30 billion program the president referred to is to take $30 billion of repayments from the largest institutions we received, but those aside to help make available to help community banks that are committing to support small business lending. i want to come back to the tax bill. we are, in the interest of what makes sense for the economy and interest of certainty and clarity, we are proposing to

make permanent the tax cuts now in place for people earning below $250,000. that is about 97% of small businesses. the increase only affects two% 02% of small businesses. we are proposing to extend the expensing provisions to extend the accelerated depreciation allowances. proposing to make credit the r&d tax credit. we are proposing a well- designed initial incentive to small businesses that adds to jobs and increases wages and payroll. we think that is a very powerful package that gives assistance and clarity to small businesses on balance. i hope you can work with me and find common ground on what we think is a very well-designed powerful package of tax measures. >> thank you.

i want to switch to another topic. york proposing eliminating tax preferences for the oil and gas industry and for the coal industry -- you are proposing. that will cost jobs in places like wyoming and it will increase the taxes on oil and gas industry and the coal industry. those will be passed on and we did on to consumers in their electricity bills and at the gas pumps. i a -- that will be passed on to consumers. i want to know how you'll keep that from being passed on to everyone else? there is an abandoned mine land tax the president is talking about, eliminating in certain cases. that is a law that was passed, it was not an appropriation. it was crafted by senator baucus and i and others. it was designed to extend the abandoned mine land tax, which

for 30 years had promised that those states that received it would be paid back the money that was kept in a trust fund. what we have done is released that money. in exchange, got the companies to agree to extend the tax. we got to the unions pleased that we were able to take care of miners. all those things, plus the production stand a chance of having difficulty, if we eliminate those payments. so i hope we will take another look at that. >> happy to work with you and make sure we understand your concerns. without that was designed and proposed. what you said at the beginning, you are right, we are proposing to eliminate a set of subsidies that now go to the oil and gas and coal industry. those will raise a significant resource is over,. you're doing that not only for the reason that we think it is part of being fiscally responsible and because we think we need toñi eliminate subsidies

in the system, that go to objectives that conflict with our border effort to improve energy efficiency and reduce carbon emissions. but i recognize the will be difficult to. i don't think there will be an effect on prices. we don't think they will. people may disagree about that. they have been carefully designed. i understand it will be difficult and hard. we would be happy to work with you, particularly on your concern about ways -- on how the abandoned mine proposal was designed. >> thank you. >> i hope we can work that out. >> thank you, mr. chairman. one of the reasons i sought for so long to serve on this committee, eight years, actually, before i succeeded in getting here, was i liked a bipartisan way this committee

works. that history and that characteristic has really been tested over the last year. we have the opportunity asçziñii have resetçóñi and focus onçó jd job creation. we have the opportunity to go back to that tradition to make it effective. i very much admire you in the senate. mr. secretary, yesterday was mike in the's birthday -- mike enzi's birthday, i could offer a resolution for that and i don't think i could get 60 votes for that. >> i imagine you could. >> it could get out of committee, but i'm not sure what would happen after that. you have outlined in your oral testimony what seemed to me some pretty good comments, ideas to try to keep job creation

activity going as we move from a huge net loss of jobs a year agoñr. you haveñi outlined some ideas that wouldñiçóñiçóñi seem to rsd enjoy añi democratic support frm folks on our side. a number of our republican friends as well. i want to talk about the ones where you see more potential for common ground on moving the package forward. >> senator, we have tried to take what we think are the best ideas from both sides in this area. i think at the core of this agenda is the recognition that businesses need to be able to grow if we are going to create jobs. jobs. that requires that the make that easier and not harder. ñiñrñiñiñibusinesses have a hugn making sure that we have the government investing in research and development, providing targeted tax incentives that will help the technologies of the future, make our education

system do a better job of educating our children. these are things that the business needs to rely on. i think at that score, these suggestions should have broad support. i think -- i tried to say when i began, you had people on both sides of the aisle saying very important things. saying that the deficits matter, tax cuts are not free, if we are going to do new them, we have great fiscalñrñiñl ahead, but that our party right now -- our priority right now is growth, jobs, and confidence. that core message, our hopeçó is americans want to see their leader is coming together and try to bring practical solutions to those problems. we provide a set of suggestions for doing that. we don't have a monopoly of wisdom or ideas. we are open to other suggestions. our test will be what will offer the best prospect of support now to help prepare what has broken

our country, get people back to work. >> i am going to ask you to be a little more specific. in terms of the proposal you submit it to us, on whether it be $17.5 billion in sba loan guarantees, the $5,000 tax credit for those companies hiring workers. >> business expense and, accelerated depreciation, permanent r&d tax credits, zero capital gains for new investments in small businesses, a new jobs tax credit to that rewards small businesses that expand employment and wages, sba credits to small community banks. those things i have heard from members on both sides of the aisle are very important to them. if they meet the basic test. they are pro-ñjrowth,ñr pro-ñrñ. you can do them in a way that is fiscally responsible. a dollar of taxpayers' money will make a difference in those

areas. those are just some things. >> my colleagues on the other side, those are pretty good ideas, not just a democratic or republican ideas. they're pretty smart ideas. i hope we can find common ground. i spoke to you before about another idea, to free up a lot of money. the student loan auction rate securities. the promise of economic status. they said we could free up a lot of money, a $60 billion debt would not cost taxpayers a dime. it would translate into potentially up to]iñ 400,000 jos % i've raised this with you and i thought itñr was a goodñi ided i still do. i will lay it at your feet once more. >> mary schapiro and other state agencies are working on this across the country. there are lot of agencies working on that. i would be happy to spend time

with youñi working on that and other things to work on that problem. >> thanks for your service. >> secretary geithner, first let me talk about the bank's tax or the feeh. ow many firms will pay the tax that did not directly receive top funds? >> i cannot give you the correct number. i would be happy to respond in writing. only the firms above $50 billion in assets. those are the ones that were the principal beneficiaries that we had to fix the financial system. >> we all benefited from it. indirectly. ? yes or >> did all of america indirectly benefit from the infusion of tarp money? >> absolutely. >> i would appreciate getting the number of those directly in receipt of the funds. some entities will pay the tax that did not directly receive the funds. of those that did receive it,

were there not some that were ñrreluctant to take the funds ad argued they should not have to? >> i have read that, but i think it is fair looking back at the capitol was essential to all of them. one quick point, senator kyl, they all benefited from the guarantees the fdic provided, emergency guarantees they provided also. >> let's go with that, because what you said is your going to keep the fee until the taxpayers are made whole. this is almost a direct quote, " the taxes on the banks have benefited most from tarp." i think you are shooting at the wrong target. the entities to whom the tax will apply have either already paid or are expected to repay what they directlyñi received i. >> ok. so the banks that are going to be taxed, some of them did not

receive direct fundsçó. some contend they did not want to take the funds. in any event, they paid them back. there was an implicit guarantee for some other folks, however, and a direct guarantee, they have not paid money back is received. i'm talking about general motors, aig, a group spirit of their the ones that have not paid the money back. why do we tax entities that have paid the money back, but not tax the entities that have not paid the money backed? >> the way the law was written, it puts an obligation on me to propose to the congress how to make sure we recruit -- recoup any losses. so the question is how to do that. we have the obligation, so the question is how to do it. what we designed -- and this is a proposal for congress to consider -- a proposal targeted to people we thought benefited

most from the financial actions we took to rescue the economy. it is fair in that way. designed as a fee on risk as a fee on leverage. that will help reinforce -- >> you could also in that logic apply the tax to the three types of entities i just mentioned. >> there is no per pickaway to say this. you could test it much more broadly. you could test it on every bank in the country. you are trying to go after the people that have the money and those are the banks that have repaid the money. shouldn't you be trying to get the money back from the entities i mentioned? >> we are going to work hard to make sure we get as much back as we can from those entities. we will be remarkably successful. we still have that obligation. >> could you send a letter to the committee at an appropriate time, indicating how you might be able to get more money back

from the entities i mentioned that are not subject? >> absolutely. >> you have a responsibility for managing dollar policy. i gather you believe in a strong american dollar. >> of course. that particular phrase and commitment of policy was first written in my office at the treasury department in 1995. >> let me ask, does more government debt make the dollar stronger or weaker? >> senator, i think you are raising the right question, which is that if the world does not have confidence in our ability to manage our financial future, then we will lose confidence in -- >> isn't an honest way to answer the question, that is more government debt makes the dollar weaker and that is a problem and we need to do everything to work around that problem and it's probably not the best idea of growth to be taking on more debt if you want to have a strong dollar, that there are other

problems -- other policy reasons that caused the president to do that? >> i would not say it that way. over the past year, when you look back, the world was in crisis, when people were deeply concerned about the stability of our financial system and the state of the global economy, people still wanted to hold dollarsçó and told u.s. financil assets. the dollar rose over that time. our borrowing costs fell even thoughñi we were taking exceptional actions to help fix this economy. that isw3 because they believedn us. they thought we were going to fixçó it. adair county on us to do that. as people become somewhat more confident, they're willingñr to take risks again. that is the story. ñramericans shouldñi understand this. ñrit is that when the world was most at risk and most scared, people were still puttingñi ther resources in dollars. >> excuse me.

this isñi the point, we're talkg about next year's budget. the huge deficit we are going to incur next year. there's a point at which our lenders are not going to have that same kind of confidence. wouldn't you be willing to state that you agree with me that it is not a good idea to have a big deficit if we want to have a strong dollar? >> i agree completely that if we don't make people believe that we're going to fix the deficit, bring them down over time, then we will risk losing confidence in our financial future and that will raise interest rates, give less investment, that would be bad for the american economy. >> senator? >> thank you, mr. chairman. mr. secretary, why not take $30 billion in resources that the president has outlined for small business and implement a program immediately as opposed to working its way through a legislative process? >> excellent question. the best way to say it is this, we have been trying for eight months to try and get community

antr small banks to, and state capitol from the treasury under programs that many of you supported, to use that to lend. frankly, they have not been willing. they took back their applications by the hundreds, because they were worried about the stigma and the conditions. it may be that that would fade over time. >> i don't think they were worried about the stigma of tarp dollars. i don't think they liked the terms of the agreement. for somebody who gave 100 cents on the dollar to aig, i think you would understand thatçóñr te terms of the agreement matter. >> i agree with what you said. >> why not implement a program now that -- we have small businesses everyday that are folding, we acted with urgency when it came to the big banks, but when it comes to the small banks and small businesses,

americans are being told no, that we're not going to come up with a program. the inspector general has said you were supposed to come up with a program last march and in the have-nots. >> that is not quite true, senator. again, we have substantially extended resources to community development and financial institutions. we have had a program that has attractive terms to small community banks. most have been reluctant to come. the terms do matter. you are correct. this is easy to do. it requires legislation. >> excuse me. it does not require legislation. we have been in conste consultation. they say you could not to the bailout from the automobile industry without dark without legislation. >> i never said that. >> that is exactly what happened. help was given to the automobile

industry by the administration afterwards. i am sitting here with a high- tech company in my state who adair, a lot of credit pulled by bank of america and ordered to repay within 30 days. the ceo took himself off the payroll so they could barely survive. i have a woman who is a state employee with no debt, according to court over 800, a house, but 25 banks have denied her access to a lot of credit. when the fdic closed the bank of clark county and they did said the euna readily cut customers off their -- they unilaterally cut customers off. there was a popular restaurant where the assets were frozen and taken over. these are not people that cause problems. these people have lines of credit and they have had their capital cut out from under them. >> i could not agree more. what happens to them as deeply unfair. people who rowand and ran good

businesses -- >> where is the urgency in solving this? if we go through a legislative process and we take another 90 days -- who is to say in the legislative process that you would have the right criteria and the right terms --we could come out of bed just as bad as the talf program and other programs that were supposed to help small businesses and then we find out it has not solved the problem. why not come to terms now with community banks? somebody came to terms with the big banks. they walked away happy customers. but small businesses in america are not getting access to capital. >> senator, we want to fix this as quickly as we can. nothing would make me happier if small banks want to come today for the programs we have to take capital. but they have hundreds that have

taken back their application because of concerns about the terms. it is not hard in this way for congress to do a quick, deft, surgical, powerful act to reduce their concerns, that the conditions they face would make it untenable to run their businesses. >> i think you should take swift, deft action to implement that immediately. if you don't understand that, that is what people in america are angry about. the administration took action to help the big banks on terms that some people find out rages today. now the small banks are not getting access to the terms that would help small business. these are not unfair terms. these are not unfair justification's. but people put the screws to the community banks and gave all the money to the big banks. if we don't implement change right now, we will lose more jobs. we cannot propose a budget that

talk about credit keeping small business while people right now are cutting lines of credit to small business and laying people off. >> i agree, this is now the 2011 budget. i agree about the urgency. >> i would urge you, mr. secretary, they're coming into my office every day with these stories. i would urge you and the administration to act now. do not wait for legislation. come to terms with the community banks on reasonable terms that they can agree to with a broad spectrum of daylight. i think we will be well on our way to getting americans back to work off. >> i agree with you, the president agrees also. we are happy to work with you and your staff on the best ideas on how to do that. >> i think this senators, and have raised concerns shared by senator cantwell. >> this senator certainly does. i can tell you daily, mr. secretary, the same kind of cries of anguish of small

businesses going out of business because the banks will not lend. you go to the community banks and they say the same thing that i raised with you in the budget committee six months ago. which is the community bankers say, we cannot lend because the regulators will not let us lands. when i raised with -- raised this with you in the budget committee last summer, you said, we have a problem and we are going to educate the regulators so that these banks will lend. but the system has not worked. now a year you have taken office. ? where do we >> community banks, what they say to us is they have three big

concerns. one of them is they are very worried that in financial reform they will be subjected to additional burdens that make it hard for them to run their institutions. that is something they'll worry about. we believe we can work on a financial reform package that will be responsive to those concerns. second thing they say is our examiners and our supervisors are killing us. they say after a period where they were very supportive of what the banks were doing, they are now over correcting and making it harder for them to make new loans to customers they believe in and support. we hear this from everybody. i understand it. i am the treasury secretary. i do not have the ability to direct what theñi independent supervisors do. the chairman has said he is looking for other guidance of things they cano to that conce. you are right.

they do say the same thing to me. need to the ability to gets wew capital and more help from the sba. what they say is that we need a little bitçó more confidence. if we come and take the capital, we're not going to be subjected to conditions in the future debt would make it harder for us to run those banks, so we're going try to navigate through those pressures. >>ñr well, the system is not working. .

>> there are a bunch of us that are introducing a provision whereby banksç future tax deductions on large banks, that they are going to depend on responsible executive compensation. and the form would require banks to adopt policies that reward long-term performance.

so extended vesting, pay, and employer stock, call back arrangements for misconduct. all of those things would be required. and the banks that adopt these responsible pay practices for their executives. would therefore see no loss in benefits and banks that continue those irresponsible executive compensation practices would see their bank taxes rise. is that something you can get behind? >> you have exactly the right objectives and rightç standard how to encourage more prudent risk taking not in sense short-term risk taking, make sure your longer vested periods. happy to work with you and your colleagues how best to achieve that. we think a centerpiece is trying to make sure that shareholders have the right to vote on those packages. there's more disclosure and transparency and the supervisors

are enforcing just those standards. but i would be happy to take a careful look at your suggestions. >> ok. we are about to introduce that. there are a bunch of us doing this. i would just say in passing, remember and i have talked to you until you are sick of me talking to you about this, florida and other areas of the country are different in the homeowners mortgages that are under water. 40% of the mortgagees in florida are under water. and this loan modification program that you-all have started, the banks are using those trial modifications as a way to delay the recognition of the loan losses. and they are not making the permanent changes in the loans. and our people are hurting and

they can't get the mortgages extended so they can stayq in their homes and keep their lives going and keep the property values in the neighborhood from just plummeting when that would happen when they are foreclosed. please, we need help. >> senator, i agree with you. i think a topical thing we have to do is make sure those temporary modifications get turned into permanent modifications. they provide substantial cash flow relief for what's now more than 3/4 of a million americans. but we want them to be translated in permanent modifications for just the reasons you said. >> thank you, senator.çó this is perhaps plowing old ground. three things here -- you hear from banks and their concerns about getting capital, loaning to a small business. could you specifically address what's being done in the

administration with respect to each of those three concerns? >> exactly. >> i think senator nelson makes a good point. you may not have direct authority over some of the independent regulators. you are treasury secretary. you have credible influence in this administration. what's being done? >> the first concern is really a concern about regulatory uncertainty. in terms of the design of the financial reform package moving through the congress. in the house and i know chairman dodd is working very carefully to make sure there is a balanced approach that encourages innovation and competition. consumers have choice. we are protecting bappings from competition by unregulated entities. we are working very closely to get it to try to address those concerns. second is the concern about supervisors. this is a tragic pattern in financial crisis. what happens is you have a long period of credit, it's too cheap, easy, available. then when things turn, they overcorrect. examiners overcorrect, markets overcorrect, banks overcorrect. this is a very important issue. i have -- i won't say -- the

supervisors are worried about it, too. they are trying to send a more consistent signal across the examiners across the country for more balance and more care in this so they don't overcorrect. i think they have more work to do in that area. their concern is about not just the way the s.b.a. programç works, but how toç makew3 surey can come take capital under the programs we described and use that for things they believe in. and as senator cantwell said, it's not just the financial terms that matter. it's the financial terms of these programs were quite attractive. and there areç many sensible conditions in that program, too. but they are worried the bulk of conditions and fear about future conditions will makeq them vulnerable if they actually come. we need to be responsive to that concern. it won't work if we put something out again and nobody comes. that's the test we have to meet. and we are working very closely

with many of your colleagues, including senator warner and senator landrieu, on waysç to make sure we adapt this program so thatç they'll come and use and use it to expand small business lending.ç >> other question is on health care. explain how health care, formal -- form will help businessmen? >> you can do this better than anyone in the country. >> also get the deficitç down. >> our long-term fiscal costs are primarily driven,ç fundamentally driven, not just by the aging ofç our populatio by what's happening to health care costs.çq long-term deficits is to reduce the rate of growth in health care costs. future. the system we live in todayok i not fair and is veryxd expensiv to small businesses. they are the ones that pay much more for those thatç actually d for health insurance. they are the ones facing the most rapid growth in cost. they bear the most substantial

hidden costs in the system today. we are not helping them if we leave that system in place. we'll be left with aç worse fiscalç probla an risk of eroding confidence and to manage that problem unless we can demonstrate we have the capacity to put reforms in place to change how people use health care and reduce that rate of growth inç costs. it is goodç policy for the private sector and business community, for the country to do things to reduce the rate of growth in costs int( health car >> have you given thought to addressing corporate governance? shareholders in many cases don't have much authority as a practical matter. and the executiveç compensatio of the committees are often handpicked by theç top%qçç and i guess another similar question, our corporate governance laws rules are a bit

dated. maybe you are looking at ways to address that. >> i agree with you uxat part of whatç failed in our systemxd w failure of boards of directors of financial institutions to exercise their responsibility. and you are nott( going to have firms running the interest of the shareholders over the longer term if you don't have board of directors that understand the business of banks and able to exercise a setç of constraints f checks and balances what managementç is doing.çq one of the most important things wew3 can do is improve disclosu to the public and to investors, not justç about compensation package, butxd of the broader rk the firms are taking that. will help give the market shareholders a bit more leverage and influence over these decisions and help boards of directors do a better job. i think the basic responsibility of government, particularly in the financial sector, is to set and enforce better designed constraints on risk taking. we can't run a system based on

the hope that shareholders will be able toi]ok act in their long-term interest. that boards of directors will always be wise and knowledgeable about the future. it's the job of government to make sure there are constraints in place sensibly designed that limit risk taking bice those institutions because there will be times when the interest of the management and the boards and shareholders may seem to conflict with what's in the broader interest of the stability of the financial system. >> thank you. senator grassley. >> i just have two questions. one on education and tax policy and the other one on some questions of oversight that we haven't gotten documents from you. onç education, i thinkçç i c with confidence that every senator's concerned about high inflation and the costs of education. chairman baucusq and i include add package of education tax relief provisions in the bipartisan 2001ç tax relief bi because of that concern. recently i introduced legislation to make that package

permanent. and i'm pleased that the administration budget includes similarçó measures. the administration budget also includes an expansion of higher education entitlement provisions enacted last year.ç the provision would lower the cap of student loan payments from 15% to 10% of graduate's income, and then would forgive in 20 years instead of 25 years asç would be expected this new entitlement is very popular, but some experts worry about too risksç fromt( the fiscal expos one risk would be highmr than expected interest rates. the second risk would be aç (ju)áu(urjz of a 30-year trend where higher education costs, inflation exceed general inflation.w3 as a manager of our federal debt, i assume that you ought to be and are concerned about the potential oft( unlimited federa liability. since 2008 through this

committee's oversight functions, i have been reviewing the activities of universities with large endowment funds. for instance harvard endowment was last valued at about $26 million. just about the size of the gates foundation. of course that's a private foundation. our hearings and investigations foundç a bit of policy paradox. while these universities are accumulating large endowments, they areç at the same time raising tuition and other expenses at alarming rates. parents and students bear the costs of that riseç -- burden. it doesn't make sense to have tax favored endowments and tuitions both growing geometricically. while some of these institutions voluntarily agree to increase financial aid, there is no fixed policy to protect middle class families from futureçt( tuitio hikes. so my question, with everyone concerned about rapid inflation and higher education costs, aside from proposing more

popular entitlements, what is the administration willing to do to provide incentives tow3 colleagues to keep costs down? and i ask this question because parents and students are on the hook and under this budget the federal government would be on the hook to even a greater degree as i read the budget. >> senator, i thought you stated the challenge exactly right. i'm not sure -- coy probably say with confidence i don't think we found the best mix of policies to try to give americans confidence that's not going to see the same rate of increase in tuition in the past. we do think it's good public policy to make higher education more affordable to americans. we want to make sure people have a chance to go to college and we are generating a larger number of college graduates as a share of our population in the future. that is good polcy. we think there is a very high return on that. but happy to hear your ideas and listen to you, work with you on ways we can help, sensible ways we can limit future rates of

growth in tuition. >> congress wouldn't have to pass a bill if the president would give equal time to helping middle class families by, as he's doing, jawboningq banks an wall street, etc. there would notç beç açç disagreement with me on his part for doing that if he would do the same thing with some of our major universities or all of our universities for increase in tuition. let me go on. in december i asked you for details regarding the $168 million a.i.g. retention bonus payments paid in 2009, and the $198 million in a.i.g. retention bonuses planned for march of this year. some of the a.i.g. executives promised to return 45d million of the 2009 bonuses. that didn't happen. nevertheless a.i.g. still planned to pay $198 million

bonuses this year. last week i received a letter not from you but from kenneth fineberg, special master for tarp, executive compensation, you said you asked him to reply on your behalf. he offered to brief me but did not provide the documents i requested. the offer of a briefing is the documents&ç this is especially frustrating because i read in the press that a.i.g. has offered to pay the 2010 bonuses erlingly by the end of this week i have been told rather than march. a.i.g. is reducing the amount of bonuses by 10% rather than collecting on broken promises, some executives made to repay 2009 bonuses. the terms of this bonus deal is exactly the sort of information that should have been provided to congress earlier in response to my request. we shouldn't have to read about these things in newspaper only to have a done deal. when will i receive the documents i requested on my december 24 2009 letter?

2009 letter? why is treasury allowing a.i.g. to pay bonuses again this year? >>w3i] senator, çi will commitu that we will work as quickly as possible to make sure you have the information you need to provide the oversight that this committee has to provide in this issue and all other issues. and i will -- i just want to emphasize that ken fineberg who i appointed to try toçt( make we are fixing what happened in compensation struck fuhr for -- streckture for this set of institutions is working very hard on just the concern you raised. and i'm sure he'll be able to provide more detail in public and in writing. in the interim i'll make sure we are providing the information you need to be responsive to your questions on this specific issue. >> thank you. >> thank you, mr. chairman. i want to go back to something you said earlier about the fed

and oversight on a.i.g. you said that they did not have -- did not have any authority or responsibility. but they did have authority on almost every a.i.g. major counterparty. almost every. not all. is that correct? >> no. that's not quite correct. because a very large number of a.i.g. counterparties on their derivative transactions were foreign banks. >> i agree with that. i'm talking about the united states of america. counterparties. >> many of those counterparties were, but what's important to recognize is the fed under the lawsç of the land had authorit over institutions called bank holding companies.

hundreds, thousands of conchte parties that were not bank holding companies. >> correct. i want to go back to something that senator cantwell was talking about, if i heard it once i have heard it 100 times from my community bankers. andç it's the fed regulatorsqt have stopped the flow of money out of the community banks to the small business person for fear of the fed regulators coming in and consuming the bank. or stopping all lending to the people who absolutely need the lending. i'm talking about small businesses that have 50 jobs and small businesses that need a line of credit and on down the line. and i'mi] telling you it's almo unanimous. it isn't totally, but it's

almost unanimous with the community bankers in kentucky. >> i have heard the same thing. and i think that in many cases i'm sure those concerns are justified. i think you are exactly right to emphasize. i think you need to keep this message very clear to those supervisors and examiners. they need to make sure they are not making this problem worse. it's very difficult as it is. >> they are both federal and state examiners, now. the state examiners are scared to death that they are not going to be as tough as the fed regulators. >> i think all the examiners, this is what happens in a recession like this, all of them are scared. they are looking over their shoulder. they are worried they are going to get killed and lose their jobs if it looks like they are > many were concerned they were too soft before. and the risk is very overcorrect. >> mr. secretary, i want to follow up on something you said at the house oversightç commite hearing last week. you were clear that you supported the decision to pay a.i.g. counterparties, no doubt about that.

and that you played no role in the decision to cover up those payments. what i want to know is if you thought then and think now that it was the right decision to keep that information of those payments private? >> that's a very good question. and let me say what i said to your colleagues in the house. when the fed disclosed that information in march of 2009, it looked like to me it was the right thing to do. i thought it was the right thing to do at that point and i think it's reasonable for many people to say looking back now if it was right then, why not right earlier? but this is a very important thing for me to say. i did not stand in their shoes at that time. i have enormous trust and confidence in the integ grit of the people that made decision and care and experience in making that judgment. i don't know how to say it differently than that. it was the right thing to do in march of 2009 and i understand why so many people would say if it was right then, why not earlier? but that's hard for me to speak

to since i did not sit in their shoes. >> then do you think it is appropriate for one federal agency or regulator to negotiate behalf of somebody who they regulate? because that is what happened here. your new york fed lobbied the s.e.c. to keep the information secret that normally would have been made public. >> i don't think -- again, i can't speak to the details of that question. i don't think that's an accurate characterization of what happened. that's something you better address to the fed and s.e.c. >> do you think fi$%m that receive government assistance should be less transparent than public firms that do not receive it? >> absolutely not. sejáor, one of the most important reasons why our system is more stable today is because we forced and compelled a level of disclosure and transparency on our largest institutions

about their riskç of loss in recession than they or any of their foreign competitors -- >> mr. secretary, yourç inspecr general on tarp would disagree with you 100%. i read his report. >> not on this question i think heç would. what made it possible for us to put out this financial fire with very little cost to the taxpayer was we made it possible for private capital to come in and pay us back. that wasç only possible becaus we forced a level of disclosure and transparency on these institutions that çwentw3 dramatically beyond what existing regulation required. >> you haveç read the a.i.g.w3 theç inspector general's repor on tarp. >> of course. >> ok. i spent a lot of time with him and his colleagues helping them work through and understand the choices we made. >> just so i know that you read it. thank you. >> following up on this issue

with the small community banks and the examiner issue as you are calling it, i'll come back to the regulatory issue, but on theç examiner issue isn't the issue really that capital requirements and leverage ratios were changed by the fdic, basically coming in and saying you have to have more capital? and basically at a time where would you go get capital? where would you get capital? nobody could get capital. so what they did was they basically started canceling loans to individual businesses. that's where they got the capital ratio to come back. they basically started saying to small business you don't have your loan anymore. so why not come back and change the -- lower the cost of the tarp money through dividends. why not adjust that and adjust the viability -- we were basically saying to people, ok, you can have tarp money if you

can prove that you're viable without tarp. >> excellent question. you are absolutely right. the community banks have a very hard time raising capital and that's part of what -- why they are shrinking. if you look at what the president announced in october you can see i'm trying to make sure the economic terms, in terms of dividends are more economically attractive for thefment i agree with that. >> what about the liability? >> viability, let's sort of step back and think about it this way. banks in the country, particularly small banks, are still under enormous pressure. and we have to be careful that we are using any assistance we provide as carefully as we can. as wisely as we can. the viability test that exists out there is designed to try to make sure that it's going to institutions that are more likely to use it to expand.

if you use it to firms that don't meet an objective standard of viability, then there is a risk not just that you put the taxpayers' money unnecessarily at risk but it won't be effective. >> what about viability with tarp? >> we are -- looked at a variety of different ways to make sure -- under our current system you can count the tarp dollar you get towards meeting, i have to go back and check and make sure this is right, in meeting that viability -- let me say it different-l. if you raise some capital as part of tarp money, you can count that to help meet the viability standard. what we are trying to do is make sure that the dollars we give don't put the taxpayer unnecessarily at risk and they go to banks that are more likely to use those dollars to expand credit. we want to get that balance perfect. i'm not claiming the supervisors got that balance perfect. in the system we have in place, we leave it to the supervisors to make that broad judgment about viability. we don't make the independent

just fiblet because it's a hard thing for this treasury to do is to go bank by bank. >> the criteria is part -- the viability criteria is part of the challenge along with making it amore affordable program. again i can't emphasize enough the anger in america when get 100 cents on the dollar for something and these people are basically cutting them out of capital because of these requirements. >> i agree with you. i want to be careful i didn't misstate this. let me shake sure. i'll make sure i'll describe for you in writing the way the current viability test works. you are going to hear a little more details on us for very small banks some suggestions how we can mitigate that. >> i couldn't urge you enough to act without legislation. on regulatory uncertainty, one thing that concerns me greatly about the proposal is that on this issue of separation of commercial banks and investment

banking, the definition of prop trading is going to beç so was theçmy economist or one of publications recently came out sayingw3 it was going to beçó ar to massive loopholes. how is that going to work? >> it is a very hard thing to draw that line in a way that's sensible. i agree with your concern. i think that's something we can solve. my colleague is testifying later today before the banking committee. he'll have a chance to talk through some of the complications we have been drawing that line. >> even the chairman of c.f.i. goldman sachs says it will be very difficult to extinguish between prop trading and traded for clients or hedging. even he's saying it's going to be difficult. >> start by recognizing the reality it's difficult. that's why reform is so important. the basic objective we are trying to do is make sure we have clear constraints on risk taking by these large

institutions so they don't bring us to the edge of collapse again. and part is making sure they are holding enough capital. part involves tougher constraints. what they can actually do. we got to design those ways that are sensible and careful and recognize the reality the way institutions are run. >> i think you know i support a more clean approach. thank you, mr. chairman. >> thank you, senator. thank you, secretary geithner. clearly we have huge challenges ahead of us. i think you can tell this committee wants to work with you. it's a two-way street. no surprises but tell us what you are working on. let us know. we want to help both with the economy and get those jobs -- i also urge you to take very strong heed of senator cantwell and others about the urgency.

there is not a sufficient sense of urgency in the administration, but getting assistance for small businesses and also community banks. get that program working together. >> weç share that sense sens o urgency. the president does. we want to make sure we are doing things that work and make a difference. where we don't need legislation we won't come ask you to do something. >> that's advisable. >> where we need it, we need to work quickly on it. i don't think this is complicated. it doesn't need to take a lot of time. >> thank you. >> as the hearing rests we'll take you live to the u.s. house coming in for general speeches. later today legislative business at 2:00 p.m. nine bills on theç calendar. the speaker pro tempore: the house will be in order. the chair lays before the house a communication from the speaker. the clerk: the speaker's room, washington, d.c., february 2,

2010. i hereby appoint the honorable gwen moore to act as speaker pro tempore on this day. signed, nancy pelosi, speaker of the house of representatives. the speaker pro tempore: pursuant to the order of the house of january 6, 2009, the chair will now recognize members from lists submitted by the majority and minority leaders for morning hour debate. the chair will alternate recognition between the parties with each party limited to 30 minutes and each member other than the majority and minority leaders and the minority whip limited to five minutes. the chair recognizes the gentleman from virginia, mr. connolly, for five minutes. mr. connolly: thank you, madam speaker. madam speaker, the time for fiscal responsibility is now. unfortunately, budget deficits are not a new if he none none.

-- phenomenon. in fiscal year 1969 under lyndon johnson we had a budget surplus of $3.2 billion. however, each of the next 28 budgets was in deficit. but starting in fiscal year 1998 under president clinton we had four straight budget surpluses totaling more than $559 billion. in fact, the long-term budget outlook predicted $5.6 trillion in surpluses. the last time we had four consecutive budget surpluses was in fiscal year 1930. the great recession which began in 2007 dramatically increased employment to a 26-year high. but those fortunate to remain employed, the recession was to depressed wages and benefits and growing at 1.5%, the lowest level since 1982. as a result, families suffers.

in 2009, corporate income revenue declined $166 billion from its 2007 level, and individual income revenues fell 20% or $230 billion. madam speaker, in addition to the tremendous toll this recession took on the american public, rising unemployment and wages added almost $400 billion to our debt. in fact, total federal revenues, which historically have represented roughly 20% of our gross domestic product declined to 14.8% in 2009. although the recession did not create budget deficits it exacerbated this enormously. in the face of this we took decisive action. the congress reinstituted pay-as-you-go, a piece of legislation. in 1990 congress enacted that statutory pay-go rule and required spending increases and

revenue decreases to be offset so as not to increase the deficit. pay-go was one of the critical tools used to control federal spending and effects rate budget surpluses. unfortunately, in 2002 a republican congress and republican president, president bush, failed to re-enact pay-go and allowed it to expire. the results were predictable and disastrous. the expiration of pay-go conveniently allowed the bush administration to enact three budget busting initiatives. tax cuts for the wealthy, a prescription drug plan -- a prescription part d unpaid for and two wars, one in iraq and afghanistan. none of these initiatives paid for. these actions dramatically increased spending and decreased revenues adding $$3.6 trillion to the national debt. and leaving the balance for the

foreseeable future. combined with the great recession, this led to the 2009 fiscal budget with a deficit of more than $1 trillion. for the better part of the past decade budget deficits were ignored and fiscally irresponsible behavior reigned supreme. this will require further action. and the previous surpluses had fiscal responsibility. we must demonstrate a long-term focus. budgets do not go to surpluses overnight. therefore, it's critical we set specific milestones and identical deficit reduction goals. the president's new budget reduces deficits to 3.9% of the g.d.p., a more sustainable level. this is a reasonable beginning for the next several years. however, more will be necessary and our goals should continue to further reduce the deficit over the long term. president obama's spending freeze proposal is painful, but

it's a small though significant action. it demonstrates a return of fiscal responsibility and represents $250 billion in deficit reduction. additional action, however, will have to be taken. for example, the ever rising cost of health care not only affects every american family's pocketbook but also is a significant contributor to budget deficits. today, health care costs are 18% of our g.d.p. without reform, that will rise to a staggering 34% by 2040. the house health insurance reform legislation was a first step in controlling these costs and reduce the budget deficit by $139 billion over the next decade. our efforts already have shown a lot of success. although we are still on the throes of an economic recovery, the improving conditions recently resulted in the 2009 deficit. while we cannot completely grow our way out of deficits, creating conditions for economic growth is critical to

deficit reduction. and the president's budget reflects that. i yield back. the speaker pro tempore: the gentleman yields back. seeing no further speakers, pursuant to clause 12-a of rule 1, the chair declares the house in recess until 2:00 p.m. today. >> members takingç a break now. back at 2:00 p.m. oorn for legislative work. nine bills on the calendar. including one commemorating the 65th anniversary of the liberation of auschwitz. any requested votes will be held until 6:30 p.m. eastern. more live house coverage when they gavel back in at 2:00. inç his state of the union address, president obama called on congress to overturnç the "don't ask, don't tell" policy regarding gays and lesbians in the u.s. military. defense secretary robert gates and chairman of the joint chiefs admiral michael mullen both testifying in front of the senate armed services committee. follow it live on c-span3.

watch c-span's "washington journal" for conversation, comments, and your calls about the day's public affairs. live daily from 7:00 to 10:00 eastern. c-span covering washington like no other. the president released his budgetúrlquest yesterday. here's a discussion from this morning on the nasa budget which cuts most of the funding for çó manned trips to the moon and includes new funds for commercial space flight. nasa administrator and others speak -- spoke to reporters this morning for about an hour. >> good morning.ç i'm the share for the newsmakers committee. -- chair for the newsmakers committee. it's a pleasure to welcome you-all on behalf of the national press club, with more than 3,500 members worldwide.ç

nbc.org our website for more details. i would not like to take a lot of your time as we have this newsmakers event. bold new developments in nasa's space effort. and we have speakers dr. john aldrin, director of the white house office of science and technology. andç nasa administrator charle baldwin. i will now pass to mr. hold runç --ç holdrin. >> thank you very much.ç it's my distinct privilege;háh morning to introduce you to a man who has excelled as a marine pilot and leader of his peers in that demanding and drugs profession as a astronaut, as a manager ofç high-tech agencies

and enterprises, as an advisor to businesses, universities, and philanthropies and now as the visionary leader of the national arrest nattics and space administration which he is restructuring into the science centered technology advancing forward leaning institution it needs to be to meet the challenges and the opportunities of our country's activities in space in the 21st century. but before i tell you a little more about major general retired charles f. bolden jr., i want to say a few words about those challenges and opportunities in space. i start byw3 noting that presidt obama realizes, i realize, and general boldenç realizes that r activities in spqace represent not just a grand and inspiring adventure of exploration and discovery of the universe we inhabit, but also an indispensable platform for observing what is happening in the environment of the earth below from the transformation of

land and vegetation to melting ice and rising sea level, to the tracks of hurricanes and typhoons. a vantage point as well for monitoring potential threats to our national security. an indispensable pillar of our communications infrastructure and geopositioning capability. and a source of new products, services, businesses and jobs whose potential is barely beginning to be tapped. u.s. strength in space science and space technology stands as one of the pillars alongside the vitality of our research universities and national laboratories, the strength of our education system from preschool to grad school, and our information, energy, and transportation infrastructure. the pillars that support this country's leatheredship accost the range of science and engineering capabilities we need for economic competitiveness, growth, and job creation, for clean energy and environmental sustainability, for long and healthy lives for all of our

citizens, and for national and homeland security. u.s. leadership in human space flight compellingly asserted in the landing of humans on the moon in 1969 and in five more such landings through 1972 and convincingly continued through the space shuttle program and the central u.s. role in the international space station, has brought forth the bravest among us to venture into this ultimate frontier. has changed some of the cleverest among us to develop the technologies by which they could do so. and has inspired countless of our young people to study science and engineering so that they, too, could reach for the stars. president obama understands all this with chris cal clarity. he said -- crystal clarity. he said so repeatedly in his campaign and has done so repeatedly since. the decisions unveiled yesterday about the directionç of the u. human space flight program and nasa's other important programs

ofçç innovationó÷i]ççç exp eagles, and discovery going forward -- observation and discovery going forward were made with the greatest appreciation for the importance of getting this right. they were made after a process of extensive consultation with experts inside and outside the administration. the commissioning of new analyses of the pros and cons of alternative strategies. and the study of these new the most careful reflection on the inevitable tradeoffs not excluding job losses and job gains in the affected states. i watç to takeç a moment here thank publicly norm augustine, one of our country's most distinguished aerospace engineers and the other nine members of the independent augustine committee to review the u.s. human space flight plan formed to advise me, the nasa administrator, and the president on the pros and consequence of the program of record and alternatives to it. the augustine committee was an all star group that included

three other aerospace industry leaders in addition to norm, two former astronauts, a retired four star airs general who chaired the national research council's recent study of the rt@onale and goals of the u.s. civil space flight program, and former chair of m.i.t.'s department of aeronautics and astronautics. and the chair of the national research council space studies board. as well as the princeton university spaceok scientist wh serves on president obama's committee of advisors on science and technology. this group supported by analysts at nasa and aerospace corporation worked tirelessly from june through october holding 14 meetingszqez three site visits inç that period an receivingç extensive inputç f members of congress, former astronauts, and nasa officials, professional societies, and the public. their 150-page report was immensely valuable to me, administrator bolden, and the president in clarifying the choices before us and manyw3 of

its keyçóçç çfindings are re in the new approach announced when the president's f.y. 2011 budget yesterday. but that approach is what administrator bolden is here to talk about this morning and i'm not going to steal his thunder. let me sayç only that i am convinced and president obama is convinced that the new approach on which administrator bolden will be elaborating at the moment is the right approach for this time, these challenges, these opportunities. it is note a retreat from u.s. leadership -- not a retreat from u.s. leadership in human space flight but rather an exciting and promising path forward that invests in new ideas, new technologies, and the complementary strength of nasa and the private sector in order to make human access both the orbit and beyond to deep space faster, safer, more affordable than it could have been on the old path. before i turn it over to general bolden to say more about that.

a few more words about him. born and raised in columbia, south carolina, he graduated from annapolis in 1968 and was commissioned second lieutenant in the united states marine corps. he became a naval aviator flying more than 100 combat sorties over north and south vietnam, laos, and cambodia earning a distinguished flying cross and air medal and a defense meritorious service medal among other awards. before being selected by nasa as a astronaut, as the beginning of 1980's, he worked in a stint as a naval test pilot and earned a master's degree in systems management from u.s.c. as a astronaut he flew four space shuttle missions between 1986 and 1994. two as pilot andç two as commander. these included the 1990 space shuttle discovery mission that deployed the hubble space telescope. the 1992 flight of space shuttle atlantis first devoted to nasa's

mission to planet earth, and historic 1994 space shuttle discovery mission, the first with the participation of a russian cosmonaut as a mission specialist crew member. in other rolesxd in nasa beside space flight it self, charlie served as astronaut chief safety officer, lead astronaut for vehicle test and check out. chief of the safety division at the johnson space center. special assistant to the director of the johnsonç cente and assistant deputy administrator at nasaç headquarters. in juneçç 1994, he left nasa returned to active duty in the marine corps, nish live serving as deputy commandant of midshipmen at the naval academy. subsequent will ily hew3 serveds deputy commanding generalççç th specific. th demanding general in chargeç o the marines or forces in support of operation desert thunder and situate. deputy commander of all u.s. forces in japan andç commandin general of thei] third marine aircraftç wing. he retired in augustt( of 2004

with the rank of major general. thereafter he served in a couple of managementok positions in th privatew3 sector and on a numbe of corporate academic and philanthropic boards beforei] nominated by president obama last year and confirmed by the united states senate as theç administrator of nasa. he began his duties at the nasa helm last july 17. all i can say is what a career. and there is more to come. this is an individual who has demonstrated again and again that he well and truly has the right stuff. and i have noym doubtç whateve that what he is bringing to nasa is change we can bel!e$e in. i give you the nasa administrator, general charles bolden. >> thank you very much for the n deserved compliments cnç introduction.ok jobç and i haveçç become ver

friends in my timeç here inçi çç d.c.i] and i think he, likeç me, inçy respects we are kindok of strangers in this town.ççñr so understand things when i say them sometimes because i -- some ofç them will come offw3 wrong. and it's just because i'mç goi to talk to youw3 the way that i would if weç were inçw3 colum south carolina or in houston, texas, orçói] if you came and e at the marine corps station mira march. and bruce ter is looking at me liket( i'm crazy. i want tomy thank all of you fo joining us this morning andi] thank thmç national press club for hosting us. we truly appreciate this opportunity to share more details with you about the president's plans for nasa and america's path forward in space. before i go any fartherç i wan to take an opportunity to publicly acknowledge a grup of people that i think sometimes

don't get thanked enough. and particularly over the last few daysçok depending on howñr readçç what you have readçóç bashed a littleçlpñ bit over t last fewçu! days. andt( that's the team that has been working constellation for a number of years. i happen to call most of them friends. i consider them a member of the family. i want to take this opportunity to thank them for their years of dedicated effort. they are not hobby shoppers as some of you in the media have called them occasionally in the past few days. they are really dedicated civil servants and contractors who have committed their lives and they have been focused on aç agreement of addressive and bold exploration. yesterday we untailed prom's historic budget that launched nasa on an ambitious effort to

help us realize these dreams of the people in the constellation team in a more sustainable manner, however.ok we can could go into why we are doing this, but you can read numbers as well as iç can. i don't think i need to dwell on that. when you have a program that's just going to cost a fortune to resurrect and schedules are getting harder to make without much more money than wisdom says , you make new course. that's what we have done.çó we want to explore new words. we -- worlds. we want to foster new industries. we want to increase our understanding of earth, our soldar system, and the universe. among the many fresh proposals is an enhanced focus on commercial partnerships. today we have with us some pioneers in that field who we will be working with. and i'll tell you more about them in a moment.ç but first, i'd like to say how

excited we are to have direction from our president to launch a new era of innovation and discovery. reaching and living in space is complicated. it's dangerous. and it's full of unknowns. the technology we need to sustain our leadership as a space bearing nation is going to take our ingenuity. the president has now given us resources including $6 billion of new funds overç the next fi years for significantly increased technology research and development. a long-term plan to think big, to grow. to imagine. and to move us vigorously toward the dreams for tomorrow. tough budget choices in the past have led to decades of underinvestment in space technology development. we have experienced cuts to other nasa -- critical nasa programs, including earth science, earth observation, aeronautics, robotic space exploration, science, education, and more.

and we would have cutç the -- t short the operational life of the international space station at the height of its promised potential. we believe that the technology shortfall we face is so fundamental that incremental change or tinkering on the margins will not be sufficient to address current or future needs. rather,xd a fundamental rebaselining of our nation's exploration efforts is needed. we must invest in fundamentally new innovation for space technology and new ways of doing business if we are to develop a space exploration and development program that is truly sustainable over the long term. this plan gives us a road map to even more historic achievements as it spurs innovation, employs americans and exciting jobs, and engages people around the world. it pledges us to a renewed commitment to invention and development and the creative and

entrepreneurialial -- entrepreneurial spirit that is at the core of our country's character. the president has asked us to develop a detail strategy for executing this plan in the week] to come. our goal is to revitalize nasa. and introduce the reforms needeç to lay a long term foundation for the agency's continued excellence and success. to do all ofq this, the presidet has increased nasa's budget over the next five years. an stroor show of support in these tough budgetary times. today several of our key partners in this future effort have traveled to washington to be with us. we ask them for their oldest ideas and concepts. the things that we would truly need toç make commercial crew reality.ç they gaveç us some great proposals. this is by no means the end of this process. but it's a fantastic start. i'll let them tell you briefly

inç their own words abouti] wh on the drawing boards in their shops. but let me also tryqw3 to answe the question that many of you are asking. what will nasa gainç from increqáqáç partnershipsç with industry to fly humans to spaceç the initiative supports and fosters the commercial space flight industry and its growing capabilities by leveraging private investment and reducing development cost to the taxpayer. it enduring the commercial -- that commercial systems can safely. -- it ensures that commercial system can safely and reliably transport humans toç lower ear orbit and draws on our existing nasa space flight experience and makes our specialists available to provide insight and expertise. with many right minds working on our problems, we may soon have the prospect of multiple providers of space transporeation. thisç would ensure that we hav safe,xd reliability,çç redund

domesticç capability. which is the cruxç oñdçç our dependence on ourzçç russian partners and the soyuz spacecraft and the reason we'll have a gap in domestic human space flight capability when the shuttle retires later this year. we want robust backup capability in human space flight and we want it to be made in america. we are departing from the model of the past in which the government funded all human space activities. this represents the entrance of the entrepreneurial mindset into a field that is poised for rapid growth and new jobs. and nasa will be driving competition, opening new markets, and access to space. and and catalyzing the potential of american industry. this is a good investment for america. remember that we already depend on commercial companies to launch all of our nation's most precious military and national security satellites. today commercial companies

launch all góvi95q communications, weather, imaging, navigation and intelligence lights upon which our lives depend at home and abroad. a major benefitç of this0new partnership isçóç the potentiar thousands of new high-tech jobs an spinoffsç of otherçó busine that can support this industry and also take advantage of affordable access to space. there will be jobs in propulsion, communication, and other industries. exploration programs drive innovation throughout ourç economy. and nasa will be leading this economic competitiveness and growth. there's a mis+o(ception that mergs crew is putting our astronauts in the care of untested providers. quite the contrary. these will be the same providers who will be transporting our multibillion dollar satellites. america's largest aerospace firms have for decades established expertise in human

space flight. and they, too, would be eligible to compete for this program. even the new entrants will have demonstrated successful flights by the time they would carry astronauts in addition to cargo. all of us travel on airplanes. and we feel safe because we know the government has set standards and oversees periodic inspection. for space flight, safety concerns are even more serious. these commercial flights will have to follow the same safety assurances to which nasa holds itself. as most of you know, i'm a former astronaut. and have flown four times on the space shuttle. i don't personally -- i know personally the great challenges involved in sending humans into orbit and lost friends in trying to do so. i pledge to you that i will make it my job every day to ensure that everything is done efficiently and safelyf] i'm pleased to lead a neem ofñr nasa employees who are the best and brightest in government.

and when my team commits itself to a goal, we have the will, the know how -- no how and commitment to do it right. as the augustine committee reminded us in the recent report to the president,ç the industry has always built the nation's crude launch vehicles. over its nearly 5 -year life, nasa has builtç a deep foundatn of experience and knowledget( wh a wide range of companies. theseçó companieshhavew3 been essential to all our successes from mercury to shuttle, as well as with our robotic missions and multibillion dollar scientific they have long demonstrated they can do the job. the augustine committee also said there's little doubt that the u.s. aerospace industry froç historical builders to the newt historical builders to the newt entrants has the technicalç