i want to know what sort of resources your after at this stage. you said you copy to this letter to gordon brown. what response did you get on that particular request -- you said you copied this letter to gordon brown. , what response did you get? >> i think tony blair convened a meeting, and gordon brown was there -- what response did you get? >> i think tony blair convened a meeting, and gordon brown was there. .

there was lots of delay. the treasury set of some kind of working group and came with no money. no money -- money is tight, and we have to have resolution so we can get everyone in. that was the treasury response, and we only got extra money

until it started. how you can find an exemplary role when it is not late is impossible. there is one other thing on this. at some play, my officials suggested we sent a couple with our military to the south, and i said we should go on the scoping mission, but we should not put people in because we did not have the money, and if we put people in like we were going to bring lots of money, that would be greedy, so we sent a scoping mission. we had no answer. it is part of the dysfunctional nature of the government. >> as far as you are aware, you

send off this letter. you are not aware of response. >> the response we got in the end was after the invasion started. prior to that, we got the results of this group saying there is no money, and that is where we have a unique resolution. >> we were taking on a potential role, but when you ask for more resources prior to the ward 2 support this exemption, you had -- prior to the war, you had not been given anything else. >> there was that group saying no. >> can i ask you a final question? leading up to the war, you mentioned the importance of the

un to you. this was a major concern when it became apparent a resolution was not going to be filed. what was your reaction when you realize that was not going to be the case? >> the first thing is, they claimed the french had vetoed, and permanent members voting against it as a separate thing, and they said they would not support any military action, and that was untrue, but that was said repeatedly. i remember saying it cannot be the french, because it was a statement that we needed more time. when they said the french have said that and there could be no second resolution, i believe

that at the time. you do not want to displease the prime minister in a run-up to the war. i believe them too often, i think, but my idea was that we prepare for everything, and we might get the thing done right. that was the idea in my head. i decided i would do this interview, and my servants were called out of the cold. they had nothing to do with it.

we tried to get the thing done properly. that was my concept of what i was doing. >> did you discuss this with your colleagues of the time? it would have given a much reduced role. did you discuss the situation with them? >> there was a breakdown in normal communications. i discussed with him, and he was very unhappy. he would say on iraq we must call the un, and i said i agreed, but are we going to do it that way? he thought about the issues that

worried him. i am not sure we were communicating fully. i talked with him on the five form and said, is there any risk tony will go to war without the un, so we had the conversation. gordon tom made robert could told someone in the media that gordon, robyn, and i were against. i did not know robin was going to live. he told me when he called and said, i am going today. >> you were unaware of the serious misgivings? >> i knew there were misgivings, but robin had said

if we do it properly, we're all for it. it was breaking out what was meant to be the policy a. >> you have a meeting that encourage you to stay. what were the assurances? >> he rang me up and was really cross. he did not want to of us of the same time, and then he said to come see him. i said, what is your bottom line, and it is involved a second resolution, and the road map had been negotiated.

he said, if you care about the road map, that might help, and he had made back and said, bush is going to make a statement that he excepts the road maps. at this point the president and the prime minister said something as profound as that, i thought it meant something, and then he had made separate times. i got bush to agree, and i want you to stay, and we need international cooperation, and a vote my place to make our resignation speech. the conservatives were voting with the government. i thought, if we get

reconstruction, that would be better than what would happen, and i took flak for that, but i still think it would have been much better. >> i think we might take another break and come back in 10 minutes. thank you. we will reopen questions. >> thank you. we heard earlier your letter on the 14th of february, but that was not the only letter. you wrote began on the fifth of march, and i think there was a statement. you talked about your concern about optimistic assumptions,

and you also said it was not as complete as it could be, so you were obviously concerned, and why do you think the prime minister was ignoring the warning you were given and going ahead? >> this gives to the root of why we went, and i think now you can see the documents. the americans were determined to go. he could not get rid of them without going to the un, but-and if the americans were going, he was determined to go there was no need to go of the time. there was nothing happened. >> you said that in march. >> i am saying in general it is an important point. was it fair to say to the

americans, i am not going with you now. it is too early. i promise you i would be with you, but this is the wrong time. we can take another six months, and i think he was so frantic to be with america but all but was thrown away. replacing the role in the world would have been so much more honorable. britain needs to think about this. do we have an independent relationship and say what we think, or do we go wherever of our code goes? that is it, and that is a tragedy. >> what do you think he was saying at that time? the thing he was raising these issues in terms of planning? >> i do not know, but i think he

thought the americans could do it, that they knew what they were doing. you have to ask him. i can only thing that is what he thought, because how irresponsible >> in terms of the special relationship, we heard about these conditions, about the process and the aftermath. did you think we were able to have enough influence? >> i do not think we influenced anything. i think it humiliates britain. if we had said we are not going now, but american public opinion was saying, in coalition, yes, and if you look, they ran around

the poorest countries, getting them to go on the list so it would look like a coalition. i think if britain had had the courage to mean what we said, we would say no, there is no emergency. do not forget the russians and french and german were all saying we agree there should war if need be. that is where britain should have been. he was not willing to do it. >> as i said earlier, you were raising these concerns. why did you continue to support its? >> are supported the policy i supported, which is doing a through the un. >> i am talking about planning, because you have evaded these

issues. why did you continue to support the policy, because the aftermath is more important zone of >> why did i resign when i said i would thelma i tried to answer that. if i had known then what i know now, i would not have. giving the president of the united states to agree to the road map, think of how that would've done to the middle east, and i had the prime minister of britain promising may death he was pushed to agree, so although i thought it was wrong to rush, if i stayed because i thought if we did those things we could avoid what would otherwise take place three of ice filigree. if we had done those things, it would have been a disaster. >> you still have the view that

if we had more time and resources it would have been better? >> i still think we should have done what they want. we should have said, you cannot keep going forever. we're willing to use military action. there rose -- there were all sorts of ways that would have been better, but i agreed with the par-3 did the policy. i just did not think that was the policy. blair's policy was, i am going to go through the un. i am going with the americans come what may. >> what about resources 72 thing more resources would have made a difference? >> i knew all those people of

the world day. i knew they were desperate because they thought some of the provisions of the security council might come in, and they were looking at, could you engage with an occupied power, and we said, i know you hate the war, will you come in? this is for the people of iraq, and they all said they would. we were saying, if we get this right, and that is why if i resigned, because it did cover the world bank and imf explosively, but it was not strong enough to bring the international community in, and they said there are no resources

here. we have to get resources. >> were the other parties raising concerns about the invasion? >> i think by then there is massive arm twisting to get people to vote, and everything was absolutely and a terrible condition, and people thought to go with blair, come what may. >> she was taking military action. five there had been preparation, and it was endless. it goes on and on. >> you were doing this. >> it was not only half. -- not only us. then it was swept aside suddenly, we're going to war,

and we combine the french, and off we go. >> you have seen pictures. you know they were optimistic. >> all of the state department planning, which included secretary fighting, was thrown away. the pentagon took over. they believe there was not going to be any trouble, and off they went. the british government's capacity to think better was subverted and thrown away >> thank you. >> of the military action began, they said no un lead of any sort had been agreed.

how did this affect of the moment the division of responsibilities the moderate impact what you saw as your perspective contribution, but you could deliver at that time? >> we can do humanitarian any time, because you should always tell people in need, so even if it was a crime of aggression, you can still go in and help people, so no problem with that, and we spend money early to give the euan system ready, -- you in system ready, and that was absolutely fine. then for the aftermath reconstruction, there were serious questions about obligations and the attorney general got involved, giving a legal advisor, and the attorney general saying you have got to have legal advice.

they cannot do reconstruction if it means reorganizing institutions of iraq, so it was a fair old nests. arguing we have got to get the un resolution, and blair said jim may, we have got bush's promise of reconstruction, and then bush came and said, you win six times, -- un six times, and people say you should not expect america to let the u.n., but it was the same administration with the same views, but they were -- the effort to construct a new political system was led in afghanistan, so it was not crazy

to think bush might do the same. at a good copy to the cabinet tuesday, we can do it again, but in the end, we got 1483, and he said, we're not going to do a blue watch for this attack and occupation, so the un was not going to bless it. in the end of, we got 1483, and it had to be brought in by the occupying powers. it did not say it was a legitimate occupation. it said that was what we are. other countries were not going to come in, and then i left the government. it was no good. what he promised me was no

record. we could not do it right. there was later another un resolution to recognize the beginning of some of iraqi government a third day, and they insisted on elections, that there is going to be more trouble because of the u.s. plan to draw up a constitution before they had a process in iraq. >> can i go back briefly to the time when it had been established. first, did the establishment lower your expectations that there would be a you win route? was this something that impended -- impeded its? >> we were still doing the best we could, and i believe what the prime minister said to me.

i was using all my friendships to get everyone to agree we would come together. it was another bit of the problem, and it went from washington to kuwait, and then it moved into baghdad quickly, and then they take of this ad hoc ministerial committee, and we were getting pressure from him to agree to a particular individual to do human -- humanitarian, and we were saying, we need to do that, but we send out an official to see what we could do, and he came back and said, it is disastrous.

he does not know what he is doing. we decided to put a small liaison in, because we are getting reports that this hospital is being looted. you cannot wait when you have got these kinds of problems. and then you have got a decision to send 100 officials in. we know about crises you get chaos, so imagine you're going to put another 100% san. they could be the best people in the world, but it is going to be more mass. >> the perception that they were reluctant and that you are holding back was a misunderstanding? >> it was a mess, and putting more people in would be dreadful.

we also had attorney general legal advice about what people could do. he wrote a number of letters as well. it was not just a one-off thing , and the prime minister said we have got to put in -- i think 100 people with a am by now, the treasury had said we could have of to 60 million. you had to justify, but we could claim that extra money, and we did not want to move take report to responsibility for what we thought would be chaos, so we agreed the foreign office could pay for those three votes, and we would carry on keeping humanitarian stuff going. >> one last question.

>> we knew it was chaos. it was completely hopeless. >> given the dominance of the american role in the reconstruction, was there any alternative? was there any other route you contemplated using to work in the south, >> they in, day out, every day i am saying, there is a breakdown in the electricity. i see an outbreak of cholera there, so we were bombed. -- we were busy. we ask the admiral to give -- get facts for the medical stocks that were in danger, so we were very busy, and of course the luting.

there we are trying to keep people said -- fed, and beyond that, we knew the world bank. they were sending this mission. this is the construction, and we knew how all about work, and we were not ignoring them. we were not writing them off. some machinery had to be brought into being, but you cannot work on it when it is dysfunctional, but we kept our eyes open, and if did change. >> you were satisfied given the resources that you were able to do the maximum in terms of the things you describe? >> we did for humanitarian, and people could still be fed.

icrc did a lot. they did a magnificent job, so we were doing all that, and the looting was getting worse. chaos was growing. >> before you leave, you had gone in, having worked very closely in the planning in the last time with the military. what was the relationship once the person now were there with the military? how did that relationship of fact if? >> on the ground, we have always had a good relationships with the military. we all want to make things work. in this case, it was totally different because we have been

frozen out. we worked on pakistan together and so on, but it had nothing to do with me obviously. in the war have nance, when i would say, this is happening, it really annoyed him. he was not getting those reports, so he thought i was moaning, but it was true these things were happening. you could tell someone was irritated, and he was irritated, but that was my job, so that was not a good relationship. some things the military would have said -- cfi is a very good organization, and they knew we had to do what we had to do it

is admired as one of the most effective organizations, and because it was a mess, they are looking for someone to blame. it is chaos. that is the military costs job, to keep order, so i think they rejected death. >> the real issue is were you able to raise them with the secretary general? >> there was a flurry of correspondence. joseph the last minute they were writing letters and saying we must make preparations. i am saying, you are going to ref to feed people, and in the last week, they order food. it was man, they did it.

the situation was too serious, but the chaos had its consequences, and both order. the british military should have said, we are not ready. that was their duty, and they failed in their duty. >> we would like in a few moments to get your reflections, but there are two or three judgment questions i would like to ask, and i suppose the first one is your concern about the growing prominence of the united states in the aftermath and the diminishing role of the united nations. you say in your letter that the

negotiations which defined the relative role were secret. you would have been aware negotiations were going on, wouldn't you? >> yes, but you have to remember, i was leaving the government. he asks to meet -- tony blair asked me to stay. normally, when a resolution is being negotiated, there are lots of them drafted. we knew they were talking about it. >> you are still relying on the undertaking tony blair had given you? >> absolutely. we were kept out. no telegrams. none of that, and suddenly, we're told it has been agreed.

nobody had seen it, and then what i do great faith in what blair has said in may, the resolution is feeble, and we did not get the resolution through, which is the whole point. >> was it does breach of faith by tony blair? in effect, we were told it was bush who said to the prime minister that the un would have rolled. we to a false comfort in it. that might have included tony blair. >> he said, please day. i will need you to help me get everyone in so we can reconstruct.

that was the thing he said. then there was the hillsborough meeting and this vital role. i think by then britain did the -- did not have much leeway because we had given it all away, but he did not talk to me. he did not even say, i've tried. what can we do? it is hopeless triggered cressida is speculative fed had he done that, might you have reconsidered your decision? >> i do not know. the other thing is it became obvious by his behavior that the assurances had been about not telling robin and i and the same day. >> you have been critical of the

contents. is there an argument that it limited the role of the united nations, but it did nonetheless bring the international community together when those who oppose the resolution came in behind its? >> i think the security council is pretty unhappy, and people let that through. we're not going to justify what you have done. you should not have done it. it allowed the world bank in an. i think maybe it was done separately, so people say, we have to let them have this, but

the japanese prime minister, the indians, the egyptian president -- they were all saying, if the strong un, and we will all come in. that was on the record, so you have to deal with what you have to do. the americans were not doing anything. it was pretty hopeless, and everyone knew that. we could have got an extra troops we needed extra troops. if we had a stronger lead in, we might have gotten that. >> i am going to ask you something you might decline, but i want you to put yourself in the position of tony blair. the invasion is pretty much done, and there has to be a

united nations security council resolution to build the thing back again. were the terms the best he could get from the americans, or you have spoken about the loss of leverage. >> i would have said, first of palestinian state. if you want me, really move on that. let's get some progress on the ground. get everyone to help us. secondly, i would run it through the un. of we would have been in such a position the middle east would have been happy. the world would have cooperated. everything would have been better. >> we cannot do the. >> it was possible. >> we dispute with other witnesses. you were not part of government

at the time, but it defined the united states and the united kingdom as joint operating powers, thereby giving the united kingdom equal responsibility and accountability, everything that happened across all of iraq. was that a sensible decision? >> it probably made blair feel important. it is just a very sad story. the important thing is we usually have the un special representative, and in the case of afghanistan, he led the consultations and all that. that was the thing with me in

1483. the americans and -- kept asking for sergio, and sergio became the viewing human rights representative but also was in a weak position, that normally the special representative was in a much stronger position. it was all pretty insulting and hopeless, but the americans were gung-ho at that time. they thought they had done well. >> i have got one last question before you leave the government. wasn't becoming apparent as the likely outcome to the invasion would be a resolution without a

viewer in the? was this something to be planned for as a real estate instance of what could happen? >> in those scenarios i talked about earlier, we had reaction without the worst-case scenario. >> this is not the worst case. >> that is similar, so we talked about it, but now we were back to say we need more resources. if you're not going to get everybody in, you have got to come up with money, but they did not do that either. >> no resources available there. >> all we did do was argue humanitarian, and we did that

well. >> i am going to ask my colleagues if they have any further questions. >> you say we should have allowed more time. we should have done it all through the un, and you said earlier the russians, french, and german were saying they would be prepared to military action, but not at this time. we have heard the argument that president chirac' had said on te 10th of march that they were not going to agree in any circumstances. mr. blair says it was not that they would veto any resolution. it is just that they would veto a resolution that authorized force in the event of reach.

>> that was a deliberate lie. at that quiet, if you remember he was thin and under enormous strain. at that point, john prescott came in and distracted him and claimed they said they would veto anything. they cannot have said that. that does not make sense, because there have been a written statement from france and russia and i think germany. or was it just a player because it was germany, saying we agree there might be military action, but not yet, and later, somebody sent me the statement, which was being sent out by the french embassy, and it is clear that he is saying, not now, and we have them asking for more time and

getting some success, so that was one of the big deceives, and it was only way they could get through. remember when americans stopped buying french fries and all that. >> did you talk to the french about contacts with france? >> at the time, i asked my secretary to find out what the french have actually said. shortly after he said, if only britain and france would cooperate, then we could achieve a lot and that france's very upset, but he would like us to get back together, and could beguin blair to ring chirac? so that had gone down, but blair

said, he was going to america, and the french and -- french investor, -- french ambassador said, can you get him to ring me before he goes. >> the argument was that at this point asking for more time was not going to make any difference at all. it was effectively clear so dom sosadd -- saddam not going to comply, so what was the point of seeking more time. >> that was the airline at the time, but it was not true. did you remember, he got rid of all those ballistic missiles,

and he started off believing there were wmd, and he said, can you find out, and he was starting to see he was getting some progress. he was terrified of the success. >> how much more time was needed? >> there was talk of resolution asking for 45 days. people were saying, we have to support the troops to prevent war, and then they said, we have to go. you could have rotated them and brought them home, and it would have been a good thing. the point is, there was no

emergency. we could have taken more time and got it right. >> you got the troops deployed in huge numbers. you cannot just rotate them, because you have to have them retired -- prepared, and you cannot leave them indefinitely. >> i am sorry, but they were not ready, and they had not faced up to their obligations. it is not just go bomb a few things and take over. you have to take over, and they were not ready for that. given that you deployed them, you could have had much better preparation and got and more equipment. you can bring people along, and they can do training. >> we have heard from other witnesses, this process was to

jerk our strings, and he could manipulate and spin it, and he did do this until the pressure had gone off him. >> that is not true. they were saying things like that. the arab world was talking more about taking him out, getting more pressure on him, getting a resolution without a war. it is not true he was jerking any strings. why did they agree to the ballistic missiles being broken up, they were worried. >> he appears to believe with more support we would have had the french and others on board. >> i cannot know what would have happened, but there would have been a much higher chance of getting those things, and we would have been more ready, and if we had tried for those

things there would be more honor, and there was no reason to rush to accept the the americans wanted to go, and they i believe were scared. they started to smear him. there's no doubt about it if you looked at the media. dreadful. >> martin. >> a couple of questions. first, on the money, you have mentioned resources, and used the figure of 60 million pounds. can you explain where this amount came from and whether it was negotiated? >> we had been asking the treasury for money for a considerable time, and then there was a letter from the

financial secretary at the time giving 30 million to the military for their geneva convention humanitarian obligations, and i think this was after it special forces have gotten in, so it had all started, and i think 60 million for us to draw down, so we had our own contingencies, and by proving we needed it, we could draw down. >> where did that number come from? was it your proposal to them or their proposal to you? >> i do not remember. officials talk to each other of law. it was something like that, but i do not know. >> were you content with that number? did you think it would be announced in the short term thelma >> until we were in a

crisis. i was hoping to get the international community. >> the strategy at the time was to get the world bank's to pick up the cross? >> there is a paper to live extend, because then we will get all the other parties, and we will contribute, and it will not be a big cost. >> did you discuss this after the integration it was all after more cups of coffee. -- after the integration? >> it was after more cups of coffee. it was not in the media, and he said, i will have you back, things like that. >> in terms of where we were on

the financial side, you had a provision, but it came rather late, and it would do so long as you were able to get the world bank in. it would be a far greater drain on resources if you were not able. >> the amount america's friends. i cannot remember how much in a week. 60 million pounds. it was nothing. it was not serious british strategy for international cooperation, and neither the prime minister nor treasury came up with anything except the 60 million. >> the other question relates to the time just before your

resignation when it was clear all had failed. did you talk to john soros at all? >> i knew him, and we had worked on sierra leone together. he had been the liaison to the prime minister, but i did not talk to him before he went. >> you were not engaged with the question? >> that was all being done by america. >> in terms of the general approach in terms of palestine and the un, the prime minister had clearly spoken a lot about this issue going back to a major

feature of policy, which iraq was a part of, and he reaffirmed his commitment when he spoke to us last friday, and we certainly put it to others that there was a degree of unreality about the expectation of what could be expected at the time, and i think he said in retrospect it probably was not a time when he would see lots of progress. >> he has the road map. >> there was a road map, but was it ever that a realistic at this time to expect it would be that straightforward to move to a palestinian state?

the questions i am asking are really about how much she really could have hoped at this time, even if your working relationships were excellent? >> i think tony blair's seriously it -- sincerely wants to have peace in the middle east. there is terrible suffering and a breach of international law and all the rest of it, but he does not seem to be capable of using the leverage in his hands. he should have sequin fit differently, and we would have seen. either the americans -- he should have seen it differently, and we would have seen that either the americans would have gone their own way, are we would have some progress. we have treatment of human

rights violations, and no one evokes them. i think he is absolutely sincere in thinking what he did was the right thing. i am not saying he is insincere. this is back to the point about the special relationship. what is it? he did not try. >> on the you in question, it is a version of the same question. you talked about the euan concern that they did not want an endorsement. we found evidence of some reluctance in the un to get themselves involved, so was it only a case of us not pushing

enough with the americans? do we think the un was ready to take a much larger role, given how difficult it was going to be? >> tony blair had a conversation with kofi, and kofi said, we do not want to run post-war iraq, but he did not run post- deviation afghanistan. you can give you in its proper role, but it is not going to run everything. no question of sovereignty and an occupying power the does not have a legitimate way of creating the new government, and therefore you need the un to do that. kofi did not want to pull us what had taken place, but they would have taken on the proper role, but it was not on offer

the u.n. could hear more of the rhetoric coming out of the u.s.. kofi even gave them on asking sergio to go, because he was a personal friend, and that was an american demand, so tony blair builds on fat, saying, we do not want to run iraq to excuse the siebel role given to the un. >> they have done quite well in getting the resolution. >> i read the evidence. he got rid of coordinator. he got a better phrase, but they agree with the voice. britain had virtually no leverage by then. >> this inquiry has two basic tasks to fulfill. first is a reliable account from

many people's perspectives, and the other is to identify lessons to be learned. i would invite you to give any lessons you have learned. >> the first lesson is for the white house system in its relationship to international development. if we're in a post conflict, you have got to involve in the bigger picture. you cannot just release humanitarian superior i know number 10 was telling them not to be rushing. they need to learn it the flavor. the lesson for the government -- i think the machinery of government is broken down quite badly, and they are powerless to

understand too much legislation, and they can get anything through. i think when you add secrecy and the seat, it is positively dangerous, and i am shocked britain could do -- when you add secrecy and the seat -- deceit, it is positively dangerous, and i am shocked britain could do that. .

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this is, the volcker rule would have worked to be in place and would not have solved all the problems and nor is it the only piece of comprehensive proposals but there were1lvçków3çt(ç p holding companies that did suffer inñr the funds and had capital holds in part therefore filled by taxpayer funds and we think as we go forward the real goal at the opening day is to create a financial regulatory system in which firms do not hold up due risk and whole as a society is not regulated not. and subsidize in these areas because they have access to the safety net, is a something that we can and should avoid as we construct a framework going forward. >> here's the challenge that you have here today, i think.

- in trying move this committee in this direction. the challenge is when you say, well i can find some places where they loss money. my response is that, you know what, i can find places where they lost money on mortgages and commercial real estate and residential real estate. and so what are we getting to here? >> let me try that one. commercial banking as i said is a risky business. the question is whether you want to, in effect provide a subsidy and protection when they're lend together small business and medium size business and homeowners. when they're transferring money around the country. those are important continuing functions of the commercial ban income my view and i do believe it's supported and i do not believe speculativety falls in that range.

they're not lend together your constituents. they're making money for themselves and where the big bonuses and why do we want to protect that activity. i want to encourage them to go into commercial lending activity. >> but you're a assuming something about what i'm doing. i don't like the bail-outs and i voted against tarp. the second part of tarp. quite honestly, i don't think we should put the taxpayer in that position, but i also like wise think if your goal isçç toç wrestle risk out of the business you get to a point where quite honestly you don't have a workable system anymore and that's what worries me about where you're going here. your using this opportunity to put in today something in place that has pretty profound consequences and i'm not sure the kirks justify this step. that's why i ask the questions.

>> that's reasonable question. sorry i a parently get through with the answer but i don't want to restrict traditional banking business. i want to encourage their lending but don't want to encourage speculative activities. >> let me wrap up on a time that i think the chairman, both appreciate both you being here and we're wrestling with tough issues and trying understand them without damageing the economy so it's critically important we ask the tough questions. >> glad you asked them because they got to be gettingçç answ. >> thank you. >> um... thank çççi]you, ch volcker and secretary. chairman volcker, one of the actions taken by the fed during the crisis was transforming

large banks into bank holding companies with access to the fed's window. what should be done with investment banks that became bank holding companies if the volcker rule is adopted? >> well, if the rule was adopted, they would have been engaging in some activities but they can still get in trouble. banks have a history of getting in trouble. that's one of the reasons you have a federal reserve. get this trouble and it seems to be a viable solvent institution and you have recourse to the federal reserve to handle even rather extreme liquidity needs and i think that is totally appropriate. that is one form of government support given to the banking system and i don't see that changing. i think it's important to

provide that backstop and almost every country in the world provides that backstop to it's banking system so that does not change. >> secretary wholen. in the proposal includes a provision to give banks the explicit choice to exit the bank holding company regime, do you have concerns this would create new regulatory gaps or are there concerns that american companies would go a broad where there's not proprietor treating restrictions? >> i don't think that we're likely to see regulatory gaps. where you choose to be a bank holding company or a financial company to do the other activities you would be still subject to the overall consolidated regime that has strong capital standards and

equity and so forth. from that perspective, there are other pieces of our proposal which we think are absolutely critical that would still apply to those firms that chose no longer to be bank holding companies. on the international dimension of your question senator, again i think we're working closely with ourg-20 to make sure you get a regime that works worldwide so we don't have new opportunities for ark channeling. i think that's the chairman said, it's important to lead in that effort and we are and at the end of the day, again i think that for us to have a strong regulatory regime is in some sense the most important advantage we could create. capital wants a flow where it's going to be protected and safe and where the overall framework is one that can be relied upon.

>> chairman, it's my understanding that federal banking regulators already have discretionary authority to impose activities restrictions right now. very similar to what would be mandated by the obama proôp&. ÷% companyçç to terminate anyç activity or to vest control over anyw3çóç sub did rare that has reasonable belief that constitutes serious risk of financial safety or necessarily bank on a firm by firm basis. do believe the fed has this authority. are there specific examples in the last couple of years where

you think they failed use this authority? >> well, there's noç doubt th need further instruction from the congress, if you put it that way. i don't know. i've been too far removed as to what authority the federal reserve would have to prohibit some of the activities. most of them are provided for in law and law says the bank can do so and so. i don't think the federal reserve can say i don't care what the law says, you can't do it. they can have general concern about safety and soundness and within limits i think they can say your conducting an a limited activity in a risky way and don't do, but i don't think they can say you can't do pro prior tear trading as law permits ias.

our proposals suggest those authorities aught to beç strengthens but in three areas we believev it shouldn't be lef up to the discretion of the regulator. if your going to get the benefit of the safety net that banks and banking firms enjoy you shouldn't be allowed to do the three activities that are riskier getting subsidize benefit of that access to the safety net, so we think it's important for the regulators to have even stronger authorities to act in discretionary way to make sure when they see something in a firm or that's broader, that they can take appropriate action, but this aught to be hard wired in our view. >> what are the benefits of restrictions of activities on a whole scale basis instead of

restrictions on our firm by firm basis? >> well i think you want some consistency over the industry. that's all i would say about that. i don't think you want to say firm a can deal with this and the other can't. you might, because of particular circumstances have some reason to think that firm b is taking extreme actions that are not credit worthy so you stay, stop it because they're going over board but i don't think you can say they don't have the same authority to take action that another bank does. >> and my time is up. >> thank you senator. >> mr. chair, thank you both for being here. i appreciate it very much. in your written statement. secretary, you said that we should limit the ability of financial institutions to get

bigger. it's in your written statement. chairman volcker you do not address the size of firms in your state. you agree with secretary wolen to limit the size of financial institution and if so what limited would you put or should we set? >> well i've not been involved with the discussions directly but i think there's a kind of common sense feeling that at some point, financial institutions particularly a ban sk so large in comparison to the whole market it raised questions not just of stability and failure but of competition and united states is a very big market. and as i indicated at one point we thought a five restriction might have been and now it's

becoming higher i suspect.ñrt( nowçoç there'sççw3o7kd8 not a particular number but at some point it makes me feel uncomfortable. we got too big and what that point is i think you have to decide.éd >> would you like to ó5respond? >> thank you. i think this is an important question. let me why clarify. we do think there aught to be a limit on relative size propox night to the overall system. we don't want to have this bind on the current size of firms to say firms do not have to shrink so it's from further growth. in our view it shouldn't apply to organic growth. like the ten percent deposit capital growth where you jump over the size limit through acquisition. at the end of the day it's our view that there is important

correlation between size and riskiness of firms. it's not to only thing but at some point firms get to be so big they impose a risk on the system. through new let me follow up on your statement because you said that we need to stop larger financial institutions from getting bigger and then you just have said that we shouldn't try to shrink them. is that correct? >> that's right. >> if these firms are already too big to fail, and the last two years has shown that at least this the adjustment or judgement of the fed and treasury that's case, why should we not force them to get smaller in addition to stronger regulations? how does letting a firm that is already too big to fail, stay big - how does it solve the

problem? >> it's incredibly important question. two basic responses. we do have in our proposal a series of elements that we think create positive economic energy incentives to shrink. leverage restraints and all things that will create economic incentives in the direction you're talking. this is a set of proposals that build on one another and not one of them is the entire answer. so i think that you know the other part of it of course is we do agree it is critically important that resolution authority be adopted so that we don't have this horrible choice between having firms fail with tremendous knock on consequences to the broader system on the one and or having to make the taxpayer put the bill on the other so firms are essentially put out of their misery or ours

in ways that accomplish the goal in an orderly fashion. i think those are the basic answers. >> senator johnson brought this up. on regulations, you know the congress has acted on regulations. in 1994, we by regulation and by law gave the fed the authority to regulate banks. and mortgage brokers. we gave them the power. we didn't force them to use it. so, for 14 years. they sat on their hands and did nothing. now how do you propose in your proposals. to force the regulator to act. >> well, i think senator that's

probably critically important. the statute should lay out this is what the law should be. >> we did that. >> well, i think that you know, we've all learned a lot of lessons through this. >> i know, but 14 years is a long time before you rewrite one rule. >> sit, indeed. >> and so, all i'm saying is that we can do those wonderful things that your proposing but can't force the regulator to enforce it and i want to make sure that if we do overhaul our financial regulatory regime, that there is guts in what we do. >> senator, one of the ways in which you can have confidence that would happen in the proposal we put forward and with which we're working with the committee is to have a council or group that has political

accountability a, including to the congress and i think that's way to make sure that the will of the committee and congress, overall is moved forward. we certainly take that very seriously. >> we also have to have really basic standards that the financial institutions to have meet. i mean, you know we talked about all the things that are nonbank activities. well, if they are nonbank, bank activities then only nonbank, banks should do them. getting into pro prior tear trading. chairman volcker you said that -

i know we're looking back and i want to look forward to prevent it. >> certainly, the whole mortgage department was a whole problem here and banks were participating in that and contributing to the problems of the mortgage market if this gets into other areas we do want a mortgage market and make those available to the people. >> we're having problems with that. >> i think one of proposals that's in administration approach and i guess, i think it is in the house bill is that when a bank or other institution packages securities whether mortgage or otherwise and sells them, they keep part of the package themselves which is a discipline that was- >> i think that's great idea. >> then they share the risk. >> right. >> my time is expired. thank you, mr. chairman.

>> thank you. senator reid. >> thank you chairman volcker and mr. secretary. there are lots of institutions now at bank holding companies. the investment bank model seems to be a footnote in history but when you go on the street very few are performing like banks which is to take deposits and provide safe return and also to make commercial loans and residential and consumer loans. my sense is the essence of your proposal is not simply to prevent proprietary trading but to get them to make commercial loans and consumer loans and residential loans. >> i don't want them diverts from that. >> can you and you have, but can you once again sort of stress how this proposal would focus them on those activity? >> well i think the only answer i have to that is focuses on

those activities by removing temptation to get highly involved in more speculator types with immediate returns they seem to be high and you have highly paid people that want to keep that kind of activity going. i think commercial banks i would like to understand they're basic role in the scheme of things that you just outlined and concentrate on it. one thing i might add that's accomplishment at this time and i apologize, late in the afternoon but there's a question about money market mutual funds, that they originated in a kind of regulatory ash channel some years ago because they didn't have to put up with restrictions banks have put up with ch.

>> i appreciate the point and return together tissue. when i go and i think my colleagues go back to their homes. people are saying i can't get alone. i got good credit or they've just cut my line of credit and raised the interest rated by ten or twelve percent when the course of the funds is close to zero and some of that is covering as you suggest the losses in other types of activities or some of it is because they can take that low course money and put it in the proprietary to make a much larger return. if you're a business person that's what you do. how you get a bonus. >> that reaction became extreme in the middle of the crisis and nobody wanted to move money any way. i hope there's a little evidence

from bank or survey that the federal reserve may be less tight than they were, but this is partly a matter of the severity of the economic crisis and a lot of loans went a bad and we want to do what we can to increase confidence and beat the money flowing. >> let me ask you if there's another way to approach this concept which is to say to an institution, if your commercial traditional commercial banking activities are less than 75 percent, then you don't have access to the fed window. i mean, essentially what my colleagues have said time and time again, we don't want to subsidize the risk. we don't want the bail-out but that comes particularly in the context of bank holder come thinks when the fed takes whatever collateral they're willing to a take. >> i haven't thought of it. it's interesting. reverse of many other ideas that

you withdrawal support if they don't lend support. deputy secretary mentioned some things that kind of discourage growth and would encourage, i hope lending but i have to think hard about this suggestion of removing in effect the safety net that banks that didn't act like banks. >> well, proof of point. >> any other comment? >> i think it's an interesting idea. senator reid we want to be careful the safety net is incredibly important for the safety net that banks play for individuals of small business for everyone. i think want to be careful about unintended consequences but something for us to work with you on and give additional thought to. >> this has been described variously as fed put. we can go out and take some risks and then we go to the,

there's some way to put the risk off on to the fed which ultimately is the taxpayer, but i think again, i think we have to think about away that not only gets banks back into the banking business making loans and taking deposits but also and my colleagues have said that several times. something that doesn'ts require abba toll yen of regulators making comments is this a proprietary trade, et cetera. i think your proposal deserves very thorough thought and also think of others that might be implemented.ç >> thank you. very creative idea. my experience has been over the years we have this debate and discussion about what is proprietary trading and how you define it and limit it. probably some 22-year-old

sitting in the balls sitting in an institution that's already figure out a way to get around it. we'll pass a law and then there will be a whole new creative idea. so, zach your idea the beauty of it, it achieves this goal without getting incredibly complicated. no the rule is, kiss. keep it simple. >> not a bad rule. >> thank you very much, chairman. i want to follow up on that and a number of other e questions asked today and that's detail. the administration submitted a proposal last summer how to approach reform of issues in the financial world. the volcker rule was not in that last summer. i assume part of the reason was because we - it with us as

legislative proposal that we don't have the detail yet for the legislative language as to how to actionty make the definitions and chairman volcker, my question is drawing lines between permissible and unpermissible proprietary trading is going to be difficult. some people say impossible or unworking. if the government makes it too difficult for banks to take position there will be less ebbing questionty in the market and capital formation and real robust economic activity. do you expect that we will receive some specific legislative language to understand specifically what we are talking about? or what the proposal is and other details of what's being discussed here? >> i think that's mr. wolens responsibility. >> you give us theory right?

>> important question obviously, like the other proposals that we first articulated in june in the form of the white paper, we will send legislative draft legislation to the committee for your consideration. i think on these things like on lots of others pieces of the proposal, we'll want to embed and statute the principals that we've arctic hated with some detail but like an awful lot of banking law and a lot of banking proposal lots will be there to detail in various ways. that's the process forward. we're keen to work with you and we're wrently working in tear in thely with regulators to craft language you can consider and that we would want to work with you on obviously. as you move forward. and then inevitably on these kinds of thing's making

adjustments at the margin and trying implement the principals in particular context is what regulators do in really the full range of banking laws on the books or that are being proposed in the current discussion. >> i under is a stat the difference of rule in the interpretation although there's always push and pull or tug in terms of what kind of specificity we need. am i to understand that we're saying that you would expect congress to pass legislation implementing the idea that we would not really have a good feel for what proprietary trading means passing this? >> i didn't mean to leave that impression. we want to specify and have a rule that's clear that regulators could implement but inevitably in the same way that exists with the capital standards or a range of other

questions that exist currently in federal banking law or that would be in acted federal banking law in the proposals the committee is considering. certain lay lot of the detail would be left to specific application this the rule making process. or the advisory process. >> so we can expect further detail from administration on what it means by the proposals? >> i suspect we give you the same sort of legislation on the other proposals we've put forward at the same level of detail and specificity. we really think of it is very similar in those regards. >> if i may just interject. senator, bankers know what proprietary trading is and what it's not and don't let them tell you anything different. >> i suspect that may be true to some extent but i suspect we

can find different points from bankers as what what we're talking about but what we're talking about is the law and what it says. >> i agree and i don't think it's so hard to set forward the law that establishes the general principal and that's going to have to be applied in difficult circumstances. chairman spoke about the banks all having a lot of 6-year-olds and the supervisors need a few 28 year olds that have had the same kind of trading. >> well, can i say and i understand the point you're making but i can tell you i think this committee and congress need some level of specificity on which to act with these proposals if we get them wrong we could be doing as much damage as good. mr. secretary you have any idea when we could get the detail? >> we're working on it hard senator.

"in focus" short order i don't want to define days or weeks but it'll be soon. we understand your busy putting legislation together and we want timely context that you're talking about. >> in the short time i have remaining i want to shift gears to our,gse. in january of 2010 and this is probably for you mostly, mr. secretary. the c.b.o. background paper of fanny and freddy. c.b.o. thinks it's appropriate to include financial transactions along other side of those in the budget. administration in it's recent budget submission has not chosen to do that and has not chosen to bring the,gse on budget. can you explain why that's case? >> senator, i think you know the,g fc's are not owned by the

u.s. government but under the conservatorship of the, f.h.a.. there's some amount of discretion to use. we laid out the financial circumstances of the,gsc. certainly the, f.h.a. has sent a letter up to the committee as recent i as today laying that out in budget documents. there's been a high degree of transparency in whether or not it was consolidated on to the balance sheet of the federal government. >> well, i understand that but we're talking about cb o'sest makes of 291 billion dollars and that's a difference included or not and only thing administration said in the proposed budget is they continue to monitor them of,gse and will provide updates for longer term

of reform as appropriate. i guess two part question still. is administration going to account for the 291,000,000 in the budget discussion this year and secondly. when will we get details on what the proposal is going to be? >> senator again on the first question. we've laid out in our budget documents the transparency of the financial circumstances related. i think the question of consolation is a question frankly of whether we own them or don't. we don't own them. the fh fa is conservatory and in respect to the policy going forward, obviously we're focused on the stability of the housing market. we're looking at long-term options for the,g fc's and as we said we have that we'll certainly bring forward our recommendation as clearly

critically important set of things for us to be focused on but want to do that in the context of stbility in the markets to make sure especially at this critical moment we don't do anything with respect to their long-term future that would curve that stability. >> thank you. i personally think we need to that better e reflected in the budget analysis and i look forward to continue this discussion on that reform. thank you. >> thank you, sir. >> thank you. thank you, mr. chairman. thank the witnesses. sorry i've been busy with a million different things. better late than never i hope. want to thank you mr. volcker for your thoughtful proposals. particularly, relating to the two big to fail issue. i remain convinceed the steps the government took were

absolutely necessary but i suppose like everyone in the room would prefer we never be in that situation again and agree that the heartier propose it will safety net in the last sent ri not be put at risk by financial activities outside of the core function of the banking system. >> that's core. >> yeah, okay. now i'd like to ask a few questions to help us understand and probe it. from what i'm told, the questions, there's still a lot of trying drill down to what we're talking about. i'd like to talk a little bit about canada and use it by way of contrast. they have a banking system dominated by six large service full banks but it's the only, g7 country where the country didn't have to bail-out it's banking system in the recent system. some argued canada is more risk a verse and their bankers are no

different. but others have argued this answer had more to do with their regulatory system. i tend to belief that. i don't know if culture. were the british morris can i than the canadians. who knows. but, this regulatory system and in particularly it's willingness to say, no to risky practices. there's my specific questions. consumer protection. canada has a separate consumer profession agency and higher than the u.s.. the percentage is less than half of that in theu supply and demand. the default is less than one percent in canada compared to ten percent in the u.s.. what role do you think canada's consumer protection agency played and in not allowing billions of dollars of no loans

to be stamps and securitized. >> i can't answer because i don't know. one characteristic of the canadian market is interesting to me. it's essentially, much more privately owned market, so to speak than the american market. they don't have the equivalent of for any may and freddie mac. they haven't had the pressure frankly from the government to push out very low down payment mortgages. market is dominated by commercial banks which is no longer true in the united states. and i think they've had an incentive to stay with more conservative practices in their own interest. >> what was their incentive? why would their banks have that and ours not. >> our banks were out of the mortgage market. they were getting packaged and sold to freddie mac and fannie mae. there's not so many residential

mortgages left on american banks. i think that whole thing deserves some kind of review because the american mortgage mark set broken today. no doubt and you have to rebuild a strong mortgage market. >> you don't think - i think if we had a financial consumer profession agency that wouldn't have allowed practices that we saw that frankly came initially not from banks but mortgage brokers. >> i'm personally unfamiliar with it. >> what about security? >> well- >> 27 percent of canada mortgages are securitized compared with ->> what percent? >> 27 percent in canada and 7 percent in u.s.. >> well the mortgage in canada is still traditional. their mortgages are short in

duration. they don't have the favorable exchanges. they have no tax advantages. they have pre payment charges that that kind of thing so they're different. we should learn from them. not maybe, we ought to the to. it's less dominated. >> you think securityization is related to for any and freety guarantees. >> you agree with that? >> yes. >> so if we didn't guarantee as many mortgages, there would be less securityization. i don't know. we securitize everything. credit cards. without any federal guarantee. >> i think it's fair to say- >> if you compare the canada banks they're rate of security would be just as low and that

would have nothing to do with fanny and freddy. >> there's a lot of difference between canadian banks and american banks. they only have five or six heavily involved in retail banking and that's not any longer true here. >> little true of bank of america before two or three years xdago. >> and because there's so few the competitor situationç is quite different. . >> any otxe  lessons you migh draw from the canadian situation? >> i think they have been more conservative in regulation. that's my observation as supervision but there the central ban sk not the chief regulator and it's like the british, but some years ago, not recently, they got in trouble when two of the mayor regional banks did go bankrupt and at that point, people were not so

proud of the regulatory system there. >> another question, the in verse of this question. you had canada, big, big banks and relatively secure. just because an institution is small doesn't mean it's not risky and i would argue these days doesn't even mean they don't post systemic risk. if 50 hedge funds do the same thing, together they post a problem of systemic risk. if it as risky activity. and with all the counter party risks and intertwined spaghetti like nature of the financial system. even back an a while ago, you know whatever place was in green which. long-term capital management wasn't that large a company but if the fed didn't heavily intervene, we might have had the whole system unravel. i guess the question i'm getting at, at both end office this,

isn't it - i don't want to even put it that way. it's the riskiness of the activities that the financial institutions do as much as their size that matters? or would you not argue that? in other words because risky activity done by one hedge fund or one small investment bank doesn't shake up the system but if 509 of them are doing it, it counts with counter party risks. that's my last question. >> i think it's multi factual. inner connect edness is related. riskiness and some combination. i think our proposals are meant to address each of those things in various combinations but, we do think that size at some level, above some threshold is an important indicator of risk to the system but it's absolutely true, senator there's other elements to that equation.

new you could say one posts just as much risk as a large one. >> your touching an very big question of contagious. institutions not knowingly being in trouble in a reasonable stable position are no longer stable if other people are failing, there's kind of this panic. the answer to that in terms of hedge mond funds is they're les likely. you don't withdrawal because they typically don't take short-term money but largely take equity money and that's a very different situation to the effect office panic spreading around. >> that's the fateful week that chris was there. the worry was the people with

short-term paper was withdrawal it from large institutions and that's right. it couldn't happen for most of the smaller institutions because the capital was small term. very interesting point. thank you. >> senator mendez? >> mr. chair and mr. secretary, thank you. i want to reiterate as you visited with me earlier today and i looked at famous new jersey citizens on the outer office i welcome you to send us an a picture and we'll hang it on the outer office loan area. married a jersey girl. that's the about as jersey as you get. >> depends on how this legislation comes out. >> basically, longer. >> what state did you live longer? >> um... >> eating up my time so you can take some other time.

>> as of now i lived longer in new york. >> you wished you lived in connecticut. [laughs] >> i wish i lived in connecticut. exactly. >> all right. well, the offer still stands. i - am reminded at the mantle of the archives building it says what is passed is prologue. seems to me a lot of people wand to dance around here but at the end of the day if we don't act we'reest tin to relive a crisis. and that would be the worse situation perpetuated on the american people, so i think this is incredibly important. you know, in the wake of the financial crisis. the surviveing bangs have actually grown bigger, not smaller and volcker rule doesn't

force existing banks to down size so does that mean that your comfortable with the current size of the banks that have still existed? . .

>> this produces an environment for risk taking the treatment take place. >> from our perspective, the size cap is one of the two elements of what the president announced a few weeks back. it is not the only piece of our proposal that deals with size. by asking for higher capital standards, liquidity requirements, leverage tenders, and so forth, we do create positive economic incentives for firms to shrink and believe that is done in the context of making sure that all of those standards are really focused importantly on making sure that firms individually and assisting in the aggregate is not overly risky so that those things are tethered to incentive for banks to get smaller and the cushions to which the banking get smaller in times of distress are interlinked. >> there is another point here -- with the resolution authority

which you have not brought up, what seems too to fill today may not be too big to fill tomorrow you have an arrangement for putting that institution to sleep without disturbing the all market. that is the whole purpose of this resolution. >> it seems to me that asking whether proprietary trading played a role in this crisis is missing the biggest lesson of this crisis which is, how do you apart the next one. we know proprietary trading can be dangerous and contribute to the downfall of some investment banks. mr. chairman, you talk about not having taxpayers support for speculate of activity. it seems we should attribute that to commercial banks as well

so that we, at the end of the day, can ensure that customer deposits do not end up being part of the speculative nature that can create crisis. with that, if we prevent commercial banks from engaging in predatory lending, one option is that a goldman sachs or a j.p. morgan will simply drop their bankholding as a company status and continued to engage in proprietary trading of hedge funds. if they do that, will our financial system be left systemically at risk? >> i think whether they choose to be a bank holding company engaged in banking activities or whether they choose instead to be engaged in these riskier activities, the full range of supervisory constraints and provincial standards that we think need to be tough and

heightened will still apply. from that perspective, we will still be well-covered in the proposals we are putting forward. additionally, we will have these activities not subsidized to affect where the firm has because of its access to the safety net, a lower cost of funding ended bandages that are helping them focus on engage in the activities we are concerned about. >> of the vocal role alone that we are concerned about -- people were -- volcker rule alone is not the only thing to consider barry >> absolutely. >> you have said that there is not a shred of evidence that financial innovation took as

brett -- right to be -- write to the brink of disaster. can regulators, as the chairman and the committee to deal -- deal with regulatory reform, can regulators be -- ever be in a position to keep pace with innovation and if not, are there steps that we can take to make banking innovation subject to the ability to insure that it does not get out of control? >> there is no assurance in this area but part of what i hope is the effect of what we propose is to reduce the capacity of the bank's to imaginative banking techniques to get way ahead of the regulators. the most fertile field for this is in the area of edge funds, equity funds, and proprietary trading. it does not mean they cannot do

a lot of complex things in the more traditional banking areas but at least to cut them, to some extent, the risk of which you speak. i do think the supervisory agencies will have to be better staffed. they're pretty well-staffed now but they have to have the funds and the interest and the capacity to attract some of the brightest and best financial engineers. there is a lot to be done in that area. >> the secretary can comment? >> financial vision is incredibly important to our economy and peopletñ and businesses across the country. the critical question from our perspective is that innovation should happen in a good environment. the taxpayer should not be on the hook for windows in ovations go sideways, that the funds

themselves, the downside risk of sales innovation. we want to make sure we have a system in which we have lots of innovation. it is important to our entire country and our economy. it is incredibly important that the done within those two critical remarks. >> innovation in which the elevator bears the risk? >> exactly. >> the key. >> but you very much, senator. a couple of thoughts. where banks would get rid of holding companies so they would not be defined accordingly -- since they were once covered by the safety net, should we worry about whether they should be viewed as being protected? what should -- should they act as if they were?

>> that is the big problem you face. they were protected ones and should they be protected again? >> that that is what i am getting at. >> i think you have to be very tough in legislative language with this war resolution authority. if it is not -- it is not a safety net >> we're working on the bill, as you know for a number of months. it is time to pull this together. . one thing seems to be emerging as a very, very strong proposal with ap resolution authority. clearly, the notion of too big to fail should become an historic term. bankruptcy receivership is the way these things will end up and leave an opportunity for the resolution but that would be such a painful road to go down, there should be enough incentive

to discourage people from taking that solution. the question is, as you suggested, that will do an awful lot with what we are trying to achieve, the notion of being bailed out will be absolutely off the charts. euthanasia is not a legislative term because what we're trying to achieve. i am probably in a minority on this committee but i, for one, have always been attracted to a principle-based system rather than a rule-based system. it gets to the heart of the system in so many better ways than trying to write this of the rules. someone tries to figure of how to get around a parade is a game you can never catch up on. the principle-based system can get more authority and latitude to the regulators. let me also suggest and i say this primarily to you, to a

lesser degree to chairman volcker, we're going to get something done. we have had 52 hearings this year and i cannot tell you the countless meetings we have had. this represents 1/4 of the united states senate on this committee. i have had endless meetings of people on the various aspects of this bill. this is not a movable feast. it is not what i can add ideas to on a weekly basis and expect to get this done. while i certainly have been familiar with the issue of dealing with proprietary trading and other issues, it does, late. the idea that the administration made such a major point a week or so ago, that seems to many to be political and not substantive. there are other ideas that should be in practice and are tipping points per there is only so much that this institution will tolerate. if you try and do more and buy

up more than you can chew, we are getting precariously close to that. i don't want to end up with because these ideas -- i liked the idea whether it's a variation or another -- i don't want to be in a position where we end up doing nothing because we tried to do too much of one. you to know that it is important from the administration bus stand point. we're getting late in the game. we need to do this right and carefully and i have been trying to do that. a want to do this on a bipartisan basis, if i can for it but don't want to go for the senate and bake for 60 votes. i will not do that. i want you to know that as we go forward. if you have other ideas, let me know. let me know on a timely basis. we have made the call and we are not getting good answers. >> let me just respond if i can -- it is important to get this

right. if you don't do in the first round, maybe in the second round for a >> i don't know either but you cannot do all it wants. >> you have a test to see what direction the british, the french and others are going in. if this comes down to a party vote, that is not right for this is not a partisan issue. let me say for the record that i read all this stuff that the president announced after massachusetts. i know personally that he decided this some weeks before. he has been discussing what date to announce it long before massachusetts. it was just a sheer coincidence that this thing came out on thursday. >> you and i know that. members of the committee know that. >> i want the public to know that. >> it looks as this will not help.

i make recommendations how to do this stuff and it falls on deaf ears until we end up in a situation where i am grappling and trying to convince people this is a substantive ideas. >> we will convince as many as we can to help you out. >> i hear you. we will work with you as you work through what you were doing. we believe this is part and parcel too many things that we do in getting it at this moment, we hope to help you as you get a bill from here to there. >> i appreciate that i should include a statement. that should be included in the record. we will have a continuation of this record on thursday. others will come forward and i appreciate your offer to be helpful. we will begin to move fairly quickly, now.