terror trials? and if so, does this incident give you pause in that respect? >> welcome i think unfortunately new york and washington d.c. remain targets of people who would do this nation harm and regardless of where particular trailers, regardless of where particular event is going to occur that is going to remain true and why we have to be especially vigilant in new york as well as washington. we are considering a number of options with regard to where the trial might be held. [inaudible] >> commissioner kelly, could you address whether this incident highlights any additional vulnerabilities in midtown should there be more cameras, should there be more resources put to work. inadequate a lot of police officers and today have on patrol in times square.

this individual drove his vehicle up very quickly and left it very quickly. the police officers arrived immediately on the scene there. so to that extent, we were present. would we like working with their? gas, as a matter of fact we have a program that we would hope to have funded, where we will take our lower manhattan security initiative, which consists of about 3000 cameras in my growth of program to midtown manhattan from 30 district to 60 district. that's our goal. we have plans to do that, but sure would like more cameras. >> are you giving any more credibility to the claims of responsibility by the taliban and? >> i would refer that to other people on the panel here. [inaudible] and a heightened state now, we have the underwear bomber case,

the zazi case targeting the subway system and for eight years it didn't seem like we have this be seen as terrorist attempts that were inserted the final stages. >> in new york city, we have had now 11 plots directed at the city since september 11th. so we always see ourselves at a fairly high pace, you know, to a certain extent nothing has changed in that regard of people coming to new york are planning to come to new york and trying to kill new yorkers. >> a talk about the cooperation between the fbi and the new york police department? >> it seem less. glass that question and the answer is the same and it's true. we're working extremely well together. >> attorney general, you refer to this as a terrorist plot. can you give us any idea of whether we're talking about three people or more, for

example, and a terrorist group being part of this? >> at this point, i think i'm going to say no more than what i have said in that regard e >> president obama also commented on this when speaking before the business council. he then spoke on the proposed financial regulation bill. this is half an hour.

>> good morning. it is a pleasure to be here this morning. i want to thank everyone for joining us. we have a busy agenda and we have some excellent speakers. i am looking for to wait productive two days. it is my pleasure to introduce our first speaker. i want to thank the president for making that time, given his extremely busy schedule, did join us at this critical time. the topic of improving the economy, focusing on the deficit, it is really the focus of the business council meeting. please join me in welcoming the president of the united states.

thank you for their introduction and for your leadership. i want to give the american people a brief update on the investigation into the attempted terrorist attack in times square. a suspect is now in custody and is being questioned. the american people can be assured the fbi and their partners in the process have all the tools and experience they need to learn everything we can. that includes what, if any, connection this individual has to terrorist groups. and it includes collecting critical intelligence as we work to disrupt any future attacks. justice will be done, and we will continue to do everything in our power to protect the american people.

attorney general eric colder and other members of my national security team are going to be providing more details, but this is another sobering reminder of the times in which we live. there are those that would attack our citizens and who would slaughter innocent men, women, and children in pursuit of their murderous agenda. they will stop at nothing to kill and disrupt our way of life. but once again an attempted attack has been failed. it has failed because ordinary citizens were vigilant and reported suspicious activities to the authorities. it failed because these authorities -- local, state, and federal -- acted quickly and did what they are trying to do. i had the opportunity to personally thank some of the citizens and law enforcement officers who may of saved hundreds of lives. and this suspect has been apprehended because of close and effective coordination at every level. finally, new yorkers have reminded us once again of how to

live with their heads held high. we know that the aim of those who try to carry out these attacks is to force us to live in fear, and therefore -- and thereby amplifying the effects of their attacks it, even those that fail. but as americans, and as a nation, we will not be terrorized, we will not cower in fear, we will not be intimidated. we will be vigilant, we will work together, and we will protect and defend the country was -- we love to ensure a safe and prosperous future for our people. that is what i intend to do as president and that is what we will do as a nation. of course, expanding prosperity is what you work for the business council, so i am pleased to have this opportunity to meet with you. it has been a little more than a year since i last spoke to the members of this organization, and of the past year, i have appreciated the abies offered by many of the leaders in this room every of grappled with a set of very difficult economic challenges.

i am here today to reiterate the importance of this partnership and the importance of seeking common ground. i recognize we not going to agree on every single item. but as i indicated to a group of your members last night, my door is always open. i believe the success of the american economy depends not on the efforts of government but on the innovation and enterprise of americans businesses. and it will be america's businesses that help us emerge from this period of economic crisis and economic turmoil. the fact is these have been a tough two years for our country. i do not need to tell you that. at the height of the recession, countless businesses had to shut their doors. the trains of dollars in savings were lost, forcing seniors to postpone retirement and young people to forgo college, entrepreneurs to give up stuff on starting a company. many businesses that remained standing had to let people go.

and some of you had to make some painful decisions. and more than 8 million men and women lost their jobs during the course of the downturn. just about every day i hear from some of these people -- people who are out of work. i hear from them through letters that i receive each night or in town halls that i've held across america. every once in awhile, i hear from children seeking to make sense of what is happening in their families, of the sadness and uncertainty that they do not fully understand. and it is a reminder that what has happened is not just an economic problem. it is a human tragedy. it is for this reason that my administration has maintained a relentless focus on reviving the economy and job growth. and in order to deal with this crisis, we have had to make a number of difficult decisions, some of which are very unpopular. but as many of you have reported, today we are beginning to see some hopeful signs.

one ally spoke to members of the business council soon after taking office, the economy was losing an average of 750,000 jobs each month. today america is adding jobs again. many of the businesses in this room have resumed hiring, which is welcome news. last year that the economy was in freefall. today the economy is growing again. we've seen the fastest turnaround in growth in nearly three decades. and while we had been seeing a steady decline in manufacturing, we learned yesterday that manufacturing expanded in april for the ninth consecutive month, and at the fastest pace in nearly six years. now by no stretch of the imagination can we declare victory. not until the millions of our neighbors looking for work can find work, not until incomes and economic security are actually increasing for middle-class families, many who saw their income and wages flatline even during boom times in the 1990's

-- over the last decade, after the 1990's, rather. and not until we face the weaknesses in our economy that preceded this recession, problems that have been allowed to fester for decades. we have been reminded of late that we can also face at any time a sudden and costly crisis that can harm our economy. one of the discussions that we had last night was around the bp oil spill, which is going to affect the lives and livelihoods of people all along the gulf coast, from the fishing industry to the tourism industry. we're committed to preventing as much of the economic damage as possible, by working to contain the impact of this potentially devastating spill. in addition, wherever possible i'll like to see the people most affected by the disaster employed in helping in the cleanup. and we will continue to explore every option to create jobs and support local economies in the

gulf while continuing to monitor a potential effects on the national economy. but obviously this is going to be a significant challenge and we're going to be working overtime to make sure that we mitigate its impacts. more broadly, spurring job creation and economic expansion continues to be our number one domestic priority. that is why, as i have said since the very beginning of my administration, we cannot just build the economy to where it was. we are going to have to rebuild it stronger than before. we have got to build it on new foundation of lasting growth. we have to tackle structural problems from educations to energy, from our financial system to our health care system, from our trade imbalance to our fiscal imbalance that did not lead just to two years of recession but a decade of economic insecurity for middle- class families. there is a legitimate question about what the government's role can and should be in bringing

this new foundation for growth about. and if you turn on cable news, you might run into folks with some strong feelings, and also some mean -- some misleading claims about the view of my administration on the subject. what has guided me throughout the last 1.5 years, what has informed the decisions i have made is a fundamental belief in markets that are free and open to all who are willing to work hard and pursue their talents. i believe businesses like yours are what drive growth and create the conditions in which families and small businesses can thrive. and i believe america is great strength has always been society -- it is a society that values and rewards the continuity of people. -- ingenuity of people. that does not relieve government of its responsibilities to help foster sustained economic growth

and to ensure that our markets are functioning freely. governments cannot light a spark in the mind of an engineer but it can help an engineering student get loans to pay her tuition. government will seldom be the source of new products but it can invest in basic research that is not necessarily profitable in the near term but holds vast potential in the long term. government can build the infrastructure that allows products and services to reach customers. custom printed government can create incentives -- in clean energy for example -- that promote innovation and exports. these things are public goods that no business, no individual is going to provide on their own, but that create a favorable environment in which everybody, companies across the country, can open and expand. and that is why as part of this new foundation that we seek to build, we are investing in education, because our economic success depends on making sure that people have the skills to match their talents. so we launched a national

competition last year to improve our schools based on a simple idea -- instead of funding the status quo, we will only invest in reform. we have recently announced the first winners in what we're calling this race to the top. and across america, it is making a difference as states are implementing reforms to raise student achievement, to improve education in math and science, and to turn around failing schools that steal the future of too many americans. .

>> said cities that good of financial intermediaries for student loans. it also includes -- community colleges are a clear pathway for the children for some in working families. and a team that continually came up was the fact that there are a lot of skill jobs out there that don't necessarily require a four-year college degree. but they are not being filled. we have not done a good enough job, basic high school math skills, for example. we see our investment in community colleges as a potential way to bridge that. we are seeing we want to make

sure that folks are getting the best education possible so that they can serve effectively as part of the work force. the biggest drag on the economy was the cost of health care. i enjoy the willingness of many of the leaders in this room, including the folks that i spoke to yesterday to work with us and advise us on this issue. i believe the passage of this legislation is good -- it was one of those rare moments in which something from the irs was a welcome discovery. the forms that were passed, millions of small-business owners are eligible for a health-care tax cut this year. or perhaps tens of thousands of

dollars to afford coverage for their employees. businesses will also be eligible for insurance or not yet eligible for medicare. a lot of the people can apply for assistance starting this june. it used to be when you retired, you could count on insurance to be eligible for medicare. one of the consequences of a skyrocketing health-care costs is that a proportion of firms have been cut in half over the past two decades. these folks are often unable to find -- this will be a welcome reform for the retirees themselves -- we're only at the beginning. many of the provisions have yet to be implemented.

i am pleased to say that many insurance companies are voluntarily accelerating implementation of this law. the companies have decided to allow parents to have their young adult -- to add their young adult children to policies instead of waiting until next fall. others have stopped the practice where people are dropped from coverage after they get sick. these are all greatly appreciated, is the right thing to do. not to be vindictive, but to fulfil the responsibility of the american people, i think we have seen a spirit of cooperation. as we seek to reduce the crushing burden of health care costs on business and families, this alone is not going to be enough to drive the twenty first

century. we need to make sure that we are rewarding innovation. we need to invest an expanded broadband access. first, the first high-speed rail network in america. we set a goal of devoting more than 3% of gdp to research and development. we have also proposed making research tax credits permanent the key to our long-term prosperity is going to be sparking greater innovation. that is why, in my state of the union address, i set a goal of doubling our exports over the last five years.

it will increase to 2 million jobs. we will ramp up advocacy on behalf of u.s. exports. we are expanding the trade financing available to exporters including small and medium-size companies, and we're going to reform our expert -- export control we have a huge technological advantage. we can send more of the products to market overseas. we will pursue a more strategic and aggressive effort to open up new markets. we also have to recognize the long-term economic health of our country depends on addressing the fiscal health of our government. i know it will be a significant topic of discussion today. we continue to face not only the consequences of a fiscal crisis, we face a fiscal emergency that

has built up over years. we have a structural deficit that is unsustainable. the day i walked in the door, it stood at $1.30 trillion with projected deficits. as we have made -- we have to rein in these deficits in the long run. it is expected to bring down the deficit by as much as $1 trillion over the next 20 years. we will restore the pay as you go rule. it saves $1 elsewhere. we've got to the budget line by line. the budget also and loopholes as

well as tax breaks for the wealthiest of americans because we can't afford them. what the government raises in revenue, i understand some of you have a briefing the choices are going to be tough. we are determined to make these tough choices. we are determined to put our nation on a stronger fiscal footing, because in the end, we need to be less what we borrow and consume and more by what we produce. i believe that is essential. my administration believes it is essential, and we will need to work with you to help get to where we need to be. none of these steps will matter

if our financial system remains vulnerable to another crisis like the one we have just been through. as we have learned so painfully in recent years, the government has an obligation for the marketplace. it is not a hindrance, it is essential to the market. it becomes more attractive for some to gain -- game the system. it makes our economy less attractive to investors around the world. that is why i am working too fast -- to pass a federal reform bill to hold wall street accountable. the reforms we have proposed are in no way -- these are changes to make sure the markets are inoculated against the dangerous

risks that brought deep -- nearly brought the whole financial sector down. in the interest of the economy as a whole. you'll be hearing from my treasury secretary 10 geithner that will speak to these issues in greater detail. it is a way to protect the financial system in case the financial firm collapses. we will ensure that taxpayers are on the hook -- are never again on the hook because the firm is too big to fail. it will make huge and risky bets using -- in ways that defied accountability.

we believe there is a legitimate role for these financial products in our economy. they can help allay risk, spur investment, and there are companies that use these benefits to legitimate and managing exposure to fluctuate prices. derivatives from the beginning, it has been simple. we cannot have a $600 trillion market operating in the dark. the rest take place -- the strongest consumer protections ever. it is -- while too many americans took on financial

obligations that they knew they could not afford, millions of others were, frankly, duped. they did not know what they were getting into. they were misled by the fine print. it doesn't just affect these families, and hurt the entire economy. that is why we need to give consumers more protection and our financial system. with the dedicated agency. we're looking out for ordinary people in the financial system. we can power consumers with clear information when they are making financial decisions. instead of offering confusing products, they can offer better products and compete the old- fashioned way. unless your business product -- unless your business model is based on duping people, you have little to worry about.

we give the consumer more say and more sway in the financial system. it will give shareholders a voice. they are addressing a concern as a result of this crisis. that is what reform will look like. i am pleased that the filibuster was dropped in the senate, members agreed to allow debate. we expect a vigorous debate with amendments on both sides. make no mistake, we cannot allow these reforms to be watered down. i want to urge you, as i said a couple of weeks ago, to join us rather to fight us. it does not mean there will be legitimate differences on what is a complicated piece of legislature. it is a reasonable, non-

ideological approach for the problems that we have seen in the financial sector. i believe these reforms are not only in the interest of the broader economy, but in the interest of financial reform as well. it will not only protect our system against crises, but make the system stronger and more competitive. i want america's financial sector to be the most trusted and most respected in the world. the only way we will be able to get through them as if we align the interests of workers and businesses and government are around a common purpose. at a time of such economic anxiety, it is tempting and easier to turn against one another. so politicians can rail against wall street, against each other, businesses can fall to

capitol hill, and all this back- and-forth makes for easy talking point in a good political theater. it does not solve our problems or move us forward. it traps us in the same debates that have held us back for a very long time. it prevents us from tackling the challenges we have been putting off for decades. i don't believe we can afford that kind of politics anymore. i believe we are in this together. i believe we are going to succeed. i am confident that if we can rise above these, we can emerge stronger than before. because of the ingenuity of our entrepreneurs, the drive, the skills, the talents of the people. i believe, and i know you believe, our best days are still ahead of us.

the storm is receding, and these guys are brightening. we can lead the world to new horizons. i think you for your leadership. thank you. may god bless america. >> our public affairs content is available on television, radio, on line. you can connect with us on twitter, facebook, and youtube. >> timothy geithner is urging congress to impose a $90 billion fee on the nation's largest financial institutions to recover the cost of tarp, the troubled asset relief program. it is a package of regulations and the debate on the senate floor. this is two hours.

hos[captioning performed by national captioning institute] [captions copyright national cable satellite corp. 2010] >> thomas jefferson may have gone to fouro far -- to far when he talked about standing armies. but in this great recession, we can see that institutions greatly affect the economy. the have affected each and every american taxpayer. it has been nearly two years since the financial crisis hit. today, we convene the second of our to hearings to consider president obama's proposal. tarp helped keep the financial

sector afloat, and there is a decent argument that the financial sector receives more benefits from tart than just the dollars -- from tarp than just the dollars. he explained who had received funding and who would probably be able to pay the money back. our first witness, secretary geithner, will describe president obama's proposal. he can discuss different ways that the banks could be structured. our second panel includes a cross section from the financial sector. it is no surprise that institutions are not enthusiastic about the proposal. we look forward to learning how they think -- the specific concerns. the best way to design a tax --

we to understand who should pay the tax, and what effect it would have on small businesses and the economy. we need to know if the banks will pass the tax on to their customers. we need to understand the effects of the bank tax on small business lending. small businesses suffered when credit dried up. we want to make sure that banks do not harm small businesses, and the banks pay back the american taxpayer. we want to learn how a bank tax will affect the economy, the ability of financial institutions to compete, and we need to learn what kinds of banks -- bank levies other countries are considering.

but as consider the responsibility to bear some of the fiscal burden created by the financial crisis. i understand the best way to assess most burdens and figure out the way that is best for the american economy. senator grassley. >> thank you for a very important hearing. first of all, i want to thank to people that i've come to be on the second panel. the president and ceo of iowa bankers, and the chairman of the cedar rapids -- he also happens to be the last chairman of the american consul of life insurers. the statute decorated tarp says that the president is supposed to compose a plan to repay tax payers for any losses from tarp. earlier this year, three years

before he was supposed to, the president proposed what he called the financial crisis responsibility fee. the president's top tax official admitted that the proposal is actually an excise tax and not a fee. in 2013, we will have a much better estimate of the projected losses than we have right now in 2010. the president said that one of the purposes of the tax is three pay tax payers for any losses. i completely agree that taxpayers should be paid back every penny of sharp losses. any losses will increase the deficit which has ballooned under this administration. therefore, to pay tax payers for any losses, any money raised would have to be used to pay down the deficit.

if a tax is imposed, the money is simply spent, it does not repay taxpayers 1 cent for any losses. it is just more tax and spend, big government while the taxpayers foot the bill for washington's out of control spending. i've heard that the majority is looking to use the money raised to spend it under the arbitrary rules. these are the same pay go rules that inspire -- expiring tax provisions do need to be paid for. that is inconsistent until you realize that it leads to more taxing and more spending with results in bigger government. i hope you, mr. secretary, will ensure us that the president means what he says, and he would repeal in the top tax that simply spends the tar tax money without paying down the deficit.

looking at the park -- tarp tax proposal, gm and chrysler are responsible for about $30 billion of projected losses and not subject to the president's proposed tax. and also, fannie and freddie are not subject to the tax. in hedge funds, like the one involved in a recent scandal are not subject. companies that did not take money are subject to a proposed tax and companies that were not eligible to take any money are subject to the proposed tax. when asked to bear the burden of the tax, they said that one of the groups that would bear the burden would be consumers.

one of the purposes stated by the president was to reduce risky behavior by financial institutions. however, the cbo stated in their letter to me that the tax would not have a significant impact on the stability of financial institutions or significantly alter the risk that government outlays will be needed to cover future losses. one area i am concerned about, the tax on small business lending. cbo stated in that same letter that it will reduce small- business lending. this comes at a time when the president and everyone else in the congress are trying to increase tax rates on small business at the end of this year. the nonpartisan joint committee has written that 47% of all flow through business and come will

be hit with the president's proposed tax rate hike. i have yet to hear administration officials acknowledge this fact. i look forward to hearing the testimony today about the proposed tax and the impact on small businesses. thank you very much, mr. chairman. >> secretary geithner, your statement will be included. make it five or six minutes. >> thank you for giving me a chance to talk to you today about the president's proposed financial crisis responsibility fee. the cost in this economic crisis has been and continues to be

enormous. it has had americans harder than any downturn since the great depression, millions have lost their jobs, businesses, homes, and their savings. the loss of revenue has added a national debt. the purpose of the responsibility fee is to make sure that the direct cost of park are paid for by financial institutions and not by the taxpayer. when your colleagues in congress gave us the authority to put out the financial fire, you included a requirement that the president put forward a plan that it recoups from the financial industry an amount equal to the shortfall in order to ensure that the program does not add to the deficit or the national debt. this is a simple and fair principle. banks, not the taxpayer, should pay for bank failures. this is a principal with ample

historical precedent. congress changed the law to require the fdic who imposed a fee on bank to recoup losses from -- the same principle is adopted in both the senate and house financial reform bills that requires the industry to repay the government for any cost associated with the resolution of a failing finance the land -- a financial institution. i want to take a minute to walk you through the key elements of the proposed approach. first, the fee would be set at a level to ensure that the costs do not add our national debt. a year ago, we estimated the cost could exceed $500 billion. we have been successful in repairing the financial system at a fraction of those estimates, and the last estimate was that the cost could be as high as $117 billion. second, we propose to assess this fee on institutions that have over $50 billion in

assets, and that are eligible for the emergency programs put in place to resolve the crisis. these firms are u.s.-based, bank holding companies with certain broker-dealers. we call them primary dealers as well as companies that control insured depositories and certain broker-dealers. only those that are eligible for the emergency programs. third, we propose the size of the fee on individual firms be determined by the proposed financial system. the combination of high levels of risky assets and high levels of leverage were key contributors to this financial crisis. under this proposal, firms that take on more risk -- managed more conservatively. there are other -- it will help

discourage activities that pose the most risk to the stability of the financial system. finally, the fee is designed to limit the risk of any adverse effect on lending. it will be assessed over 10 years. it excludes 99% of u.s. banks. i want to emphasize this point. the fee will not apply to credit unions, only the largest firms that were directly eligible for the emergency programs, firms that were not eligible for that assistance are not covered. if first -- try to pass on the effort -- the fees to borrowers, they will lose market share. the proposal would improve the competitive provision of small and medium-sized banks leading to some increase in the share of the loan market. we're working with governments

around the world that consider other efforts so that there are level playing field for the firms. we believe it is a good complement for those under consideration on the senate floor. it will provide better protection for businesses, stronger limits on risk-taking. enacting this fee now will show the american people that don't have to shoulder the direct loss of part, and it will help protect the economy from future financial failures. we recognize that there are a number of possible approaches one could take to protect the taxpayer from the cost, and we look forward to working with you and your colleagues to design a fair and sensible approach. >> thank you, mr. secretary.

in designing this feat, to what extent is it designed to read to taxpayer funds, and to what degree is it designed to deter unnecessary risk? >> the purpose is to meet a legal obligation to recoup the funds. we looked at a variety of forms of the tax levy. there is a benefit, this design is like thinking of it as a too big to fail tax, a tax on risk. the primary purpose is to meet the legal obligation to cover the fiscal loss of tarp. >> how do you define risk? >> the way this is designed, you would pay it in proportion to assets to justify risk-the capital that you hold and you're insured deposits. they can take more risk with more leverage, and you find that

risk with more unstable sources of funding, not with insured deposits, and you pay more. if you are more conservatively funded, take on less leverage, you rely on deposits to fund your fending -- to fund your landing -- lending. it will allow the established framework of u.s. regulators to apply to divide assets. there is a long establishment for doing that, and the judgment is that it does the best job of capturing risk on the balance of banks. >> these are u.s. regulations. they are imposed under u.s. law, they are, for reasons you understand, related to the importance for institutions to compete around the world. they are negotiated in a national context, but

regulations often differ from and are more conservative from those that are negotiated internationally. these are regulations defined by supervisors under u.s. law. >> basically, the committee of the terminations are not relevant. -- of the terminations -- of the terminations -- determinations are not relevant. >> they will try to bring the world to those standards. the authority to design those are under u.s. law regulations designed by supervisors, and we tried to make sure that we are pulling the world to a similar approach on capitol hill. >> the degree to which this tax is going to very, because it will vary according to what u.s. regulators say constitutes risk

for the purpose of the tax. >> that is a strange, not a weakness. as we have seen, it is difficult to capture risk any balance sheet for financial institution. the fact that this framework for measuring risk in banks involved -- evolves over time as a strength in this proposal. in an established framework, there are rules, they are publicly available, and they can disclose what the assets are. >> to what degree might risk a change the assets? that a bank might have to pay? >> if they take on more risk overtimed -- >> what about the definition changing? >> if, over time, the framework has to be a better job of capturing risk.

there is capital against those risks, and as the bank takes on those risks, it would be higher than a fee that was managed more conservatively. the regulations and determinations -- >> the virtue of this approach is to say that you pay the feat in proportion to the risk and the exposure. by capturing derivatives and complex financial problems, it captures the rest of those exposures it tries to measure the risks alongside other risks banks take. the basic principle is, the more risk, the more capital you have to hold, and the higher share of

feed you have to propose. chairman, there are other ways to look at this, but by measuring it against risk, it provides the best balance -- >> the other question i have is the degree to which banks can game this. i'm no banker, but they get pretty clever. we have seen that the last several years. there must be some ways to game this formula. >> this is an established framework. with enormous experience over time, they add that it as they try to adapt behavior to get around these risks. it is a thoroughly available, published a definition. the risk is how much capital they hold against that, and it is better than the alternatives. our judgment looking at

alternatives is that they would be both less effective in providing incentive for risk- taking and would have other disadvantages. >> why this level of tax? >> the -- >> why not hire? >> the legal obligation -- >> one of the criticisms is that they give all this money to banks, and the small business -- they just bought treasurys. they paid the money back very easily because they made a lot of money. >> you are exactly right. banks benefited enormously from the actions that congress authorized. the legal obligation is to make sure that we're covering the direct cost. we proposed a fee that over 10 years, to raise enough money and

to answer your direct question about how large it would be, in terms of the size of the feet, it would be roughly the same as the fee paid by banks. roughly the same dimensions. >> thank you, mr. secretary. regarding the tax, the president has stated, my commitment is to recover every single time that the american people are owed. there is a statutory requirement that the president proposed a plan that recoups losses from tarps so that it doesn't add to the deficit or debt. in light of that, would you assure us that the president will veto any bill containing the top tax that does not go towards paying down or paying back the taxpayers? any bill that doesn't use the

tax to pay down the deficit? if he can't give us those assurances, why won't you? dodge the president believes very strongly that resources raised from this he should go to cover the tarp costs and reduce the deficit. i completely agree with that position. he strongly believes that. >> the point is, if congress would say that we want this money to be used to offset this program or to, you know, for offsets or set up a new program, it is not being used to pay down the national debt. with the president to veto a bill that wasn't used to pay down the national debt? >> for the reasons he said, he believes very strongly that the proceeds of his feet to go to reduce the debt. >> would you suggest to the president that he veto the bill?

>> he feels very strongly about this, i agree with him, and i believe it is the right policy for the country. he didn't really answer my question. the statutes that created tarp requires that the president propose a plan -- a plan in 2013 instead of waiting until 2013, he proposed a tax this year, 2010. what of the cbo have a better idea in 2013 rather than 2010? >> it is a very good question, and let me try to respond. why now? we are still uncertain what the ultimate cost would be. we made the judgment now for the following reasons. this was an expensive financial crisis. it caused a lot of damage to the long-term position. we thought was responsible to

make it clear now that we're proposing a way to get out of this mess and to make a substantial contribution. we thought was responsible to do it now in a time where people are looking for signals that we have the political will to start to bring down the deficits to a more sustainable position. it will also thought it was helpful to underscore the basic principle and financial reform legislation that banks should pay to the cost of bank failures. proposing it now would add credibility that many people support on both sides of the aisle, banks should cause -- pay the cost. we think it helps reinforce the broader reforms that are designed to limit risk taking in the financial system, and by proposing a fee that is a tax on leverage or risc, we thought it would help reduce risk in the financial areas going forward. >> he still would have to admit that we are going to know more

what the loss is in 2013 than we do today, and the purpose of the taxes to recoup that, and only to recoup that. no other purpose. >> as you have a knowledge, the direct cost does not capture the full damage to our position caused by the financial crisis. nor do they really measure the benefit to the financial areas provided by emergency programs. for those reasons, we think it is responsible to propose a way to dig our way out of this whole. >> after this committee's april 20 hearing, we learned that gm took a lot out of an escrow account to reap a taxpayer loans. a letter i received from the treasury last week says that after the home repayment, $6.60

billion was left over and that this money was available for gm 's unrestricted use. it was my understanding that $6.6 billion was -- the bottom line is, the strong business performance has put us in a performance -- in a position that we don't need these funds, referring to the cash in the escrow account. in light of the statement, why should they simply simply return -- or shouldn't they return the money to the government. taxpayers do need those funds. >> your right to point out that gm is in a much stronger financial position today than any of us expected. that has enabled them to repay a portion of the assistance provided much more quickly than anybody thought. it is also true, as i always

emphasize, that we have substantial equity left in gm. we're going to work very hard to make sure we get that money back as quickly as we can. this program, as a result of the restructuring program, gm was forced to undertake bankruptcy. this firm is emerging stronger and more quickly than any of us expected. >> senator bateman. >> thank you for being here, mr. secretary. nyu professor thomas cooley says that we should also create an ongoing charge for insuring against risky behavior. what you had described as a way to pay back the taxpayer for the tarp funds that would have the

effect of discouraging risky behavior. why don't we consider both the feet that you have proposed -- the fee you have proposed for tarp outlays, and a levy to deter risk taking at the expense of taxpayers going forward? >> there are a lot proponents to the fund. financed by a levy on financial institutions as a fund that would go to cover the future cost of bailouts. . .

that could add the moral hazard. that is the argument against it. >> that would send that the money would be put into a fund that would be specifically for this purpose. you could take the fee you are talking about as a way to pay back tarp funds and still add to that another 3fee so that the government would be more capable of doing what it had to do in the future, whether dealing with an oil spill or a hurricane or whatever -- problems the

government encounters down the road. >> you are exactly right. there may be crises in the future to provide banks to help cover uncertain future costs. there are a lot of opponents to that approach, too. we are trying to meet that narrow legal requirement to cover the tarp fund. i understand the merits of that approach. there are some risks in it, that frankly that money to get spent on other programs that would not be there to protect the government from future financial crisis. >> but it could go to reduce the deficit. you say that this is intended -- the feet are now proposing is intended to reduce the deficit. there is no reason why we are in favor of reducing the deficit and reduce it even more if we had more of a fee.

>> that is exactly right. we're trying to cover the narrow requirement in law but we understand that that does not fully capture the cost of the crisis. >> part of this banking crisis, part of what has come out as we try to understand is banking crisis -- this banking crisis is that many banks have off-balance sheet assets and liabilities. is it your intention that this fee would be part of the taxable base for these large institutions? >> yes, and that is one of the virtues of the design. unlike the conventional accounting books that does not capture those sort of things, the new deposition -- definition would capture those assets include zinc of sheet

derivatives. >> how would you see this applied to insurance companies, particularly one that owns a thrift, for example? it would seem it would make sense to treat insurers differently from banks sense that has always been the approach we have taken in the past. how would they be treated and it is? >> their many different ways to do this. -- there are many ways to do this. one is that you have to be larger than $50 billion in assets. very small numbers of countries and -- of companies in the country meet that. you have to be directly eligible for the emergency programs, and that means the treasury capital purchase program, a temporary guarantee program, and the federal reserve's primary credit facility.

firms that were eligible for those programs and more above $50 billion, we think they benefited from the emergency program even if they did not take from it. some insurance companies were structured as holding companies and own threats before the crisis -- on the threats -- thrifts before the crisis would be eligible for that. >> my time is up. >> it is great to see you here, mr. secretary. we want the finish too big to fail and other books on the left of the past couple. you look well, i do not mean that to indicate you of --

president obama scolded large financial institutions by saying, "they are suggesting that it is unfair." he said, "by some twisted logic is more prepared for the american people to bear the cost of the bailout that -- rather than the industry that benefited from an even though they are giving themselves huge bonuses." let's talk about fairness for a moment. is it fair to apply this tax to companies to not only -- not only to companies that have repaid tarp, but the companies that have not taken money from tarp at all? i know the administration believes that they have benefited from tarp and other ways. >> the american economy benefited, all americans benefited, all financial institutions benefited, all the customer's benefit it.

we thought the fairest way to do this was to apply did fee to the firms that contributed most to the crisis, and that were eligible for the emergency programs. even if you did not apply for the program, eligibility for them conveyed a substantial financial benefit. mr. senator, i understand that it is not going to seem fair to everyone and there is no perfectly fair approach. >> it is not fair to everyone. this proposal does not apply to the companies that benefited the most, betty mae -- fannie mae, freddie mac, gm, chrysler. some of these firms have paid out bonuses to their executives have met some of the bonuses paid by the largest financial institutions. i do not want to go into those, but you can look at them. their names and dollars in those

bonuses -- you do not believe that there should be an exemption -- tell me why you do not do this to fannie mae and freddie mac and gm. >> of very good question. we thought about this very carefully. and fannie and freddie, it would be one hand of the government paying the other. we would be paying the fee. >> they are a separate entity. >> as you know when congress authorized my predecessor to put them into a form of conservatorship, that put us into the position where their gains are our games, their losses are our losses. if that were to pay for the fee, we would be paying for the it. >> you're simply saying they are vulnerable. >> no, i don't think that i am. congress did the right thing in

keeping them a stable to the crisis so that we can reform them. the audit companies are a different case. i think it's fair to say -- the auto companies are different way -- a spirit they did not caused a financial crisis. there challenges were made substantially worse by the financial crisis. not the institution that we put to bankruptcy, and we did not think it was necessary or appropriate for them to bear -- to be covered by a fee which is designed to help us make sure that we are reducing risk in the financial sector as we cover the potential loss of tarp. >> there are others out there that did not cause this problem. >> but gm and chrysler are unique in that we put them for bankruptcy. they did not cause the financial crisis. as a slightly different approach. we are not covering 99% of financial institutions in the country.

of those 9000 banks and thrifts credit unions, they may have benefited and people may argue for a broader fee about our judgment was to capture the largest that benefited the most. >> let's say there's a bank that may be approaching the threshold of $50 billion in assets. they are $49 billion and they are almost there. they're thinking about expanding into underserved areas in utah or elsewhere. in such a case, what and this tax serve as a disincentive? >> you are absolutely right. the fighting in the threshold, if you have to reduce the rest of that kind of impact. i would be happy to work with you and your colleagues to design this in a way that the threshold is sensible. for banks that take deposits to

fund loans to their business customers, they would not be bearing any material fee as part of the way we design is. we would be happy to design the threshold so that it would be fair. >> thank you, senator. next is senators that a number -- senator stabenow. >> i had some thoughts about the auto industry and welcome. i wanted to follow up on the discussion because i think it is important, the fact it you made that the auto industry did not cause the crisis. it was not there reckless effort in terms of investing that caused where we are, but the frozen credit market that affected them has that affected everyone else. and when we add to the fact that normally in a downturn, the

individuals that could not get credit for vehicles, we have almost a 50% reduction in vehicle sales, which is huge. normally if there is a reduction, they can go into their markets and get all line of credit, they could get a loan, and that was not available to them for but -- because of the frozen credit market. they were in an extremely difficult situation. it truly is apples to oranges when you talk about it not that other businesses were not in the same situation, but the reality is that in all the manufacturing, for every one job in all manufacturing, there are nine other jobs somewhere in the economy impacted. this is a fundamental part of our economy in terms of middle- class jobs and the economy as a whole, which threaten to undermine jobs in the economy even more. i also would set that they are

still undergoing a very fragile recovery, and they are not out of the woods yet. we need to make sure that they are back on their feet, and frankly, that that would help us from the taxpayer standpoint as they go into the marketplace to sell their lot of stock. i wonder if you might expand on your feelings in terms of the negative impact from a taxpayer standpoint that jeopardized as a recovery in the industry at this point, when we have yet to be fully paid and will not be fully repay until they are able to go into the marketplace. >> i like the initial rationale for including them and i would emphasize, that these firms, again, because of the extent of the restructuring that they went there as part of bankruptcy, they are in a much stronger

position today than anyone expected. they are emerging stronger and more quickly than any of us would of hope. our judgment as to whether they should be covered or not had nothing to do with their current financial session. we made the judgment that because they did not cause the crisis, and because they went through restructuring, it was not necessary or fair to ask them to be covered by this fee. it was that simple judgment. >> and if i could follow up on my colleagues to talk about community banks, because they did not cause this either and they have been hit on both sides, being told that financial regulatory system is tightening up for them, they are trying deland and others are telling them not to land, and they are in a difficult situation. businesses that did not cause this either, they find themselves in a terrible situation. i wonder if you talk -- if you could talk more about there is an analysis on the economic

impact proposal as it relates to community banks and small business lending. >> as i said in my remarks, at this proposal is good for community banks. the fee does not cover community banks. it only covers these institutions that are less than 1% of the total financial institutions. if the larger institutions try to pass on fee, and they do not have to, as the cbo says, we think that we designed this in a way that is good for small banks and community banks, and therefore could for their small business customers. >> thank you, mr. chairman. >> bank you, senator. -- thank you, senator. >> i'll like to follow up on the

question that senator grassley "earlier. -- asked you earlier. you said that the tarp law requires the coup -- the administration to submit a plan to congress forces -- for recouping our losses. you failed to say that this should come after zero in these amidst a report on tarp loises -- after omb release is a report on top will -- tarp losses in 2013. why did i think they did that rather than 2010? >> i suspect that they wanted to be confident that the financial industry was in a stronger point that the fee would come into effect, and it is in a stronger position than anyone expected. >> with they also want to know more about -- what they want to

know more about how much the losses would be after three years? >> yes, we are early and we are early because we thought it was the responsible painted it. >> can you understand why a look suspicious that the administration is submitting a plan now when the tarp losses are not fully known? can you understand why this looks like a political stunt to distract the public from a very unpopular tarp program and a transparent attempt to make it look like the administration is not in the back pocket of wall street? >> i cannot understand that. we're doing the responsible thing, which is in the face of a crisis that caused enormous damage to our fiscal position, we thought it was responsible, prudent, and reassuring to the american people to tell them how we're going to protect them from the losses. we could have waited. >> in waiting, you would've known more, exactly what the

tarp losses would be? >> yes but there would banal level of uncertainty about the losses. >> balal makes you cover them. -- balal -- the law makes you cover them. >> it's not desirable when people are worried about this country, to date are as a way out of the physical damage caused to the country. >> concerning the amount of tarp losses, it does treasury expect to experience any losses from the aig's experience? >> we published twice it -- twice a year estimates across the full range of investments that we take redella latest estimate, i think, is relatively old, down at the end of september 2009. in that estimate you will see that we still expect to be exposed to substantial risk of

loss from our investment in aig. much less than we thought but some loss. >> were you at the new york fed when the aig derivative counterparties were paid off at par? part of that was from aig, which received tarp funds, and part was from the fed. doesn't it follow that aig counterparties had not been paid off at par, at that in the infusion of taxpayer money would have been smaller, and there would have been fewer tarp losses? >> note. >> i am sorry. let me finish the question. doesn't the decision of the new york fed to pay the full value lead to a tarp loss? >> no, senator. uni have talked about this many times and i would be happy to talk about it in the future. if we had not stepped in to prevent aig fell years --

>> we have a difference of opinion. you saying one thing is not going to make any difference in what i believe. let's pass over that. answer my questions about the tarp funds. >> it would have been larger, not smaller if we had not helped aig. a higher burden on the american people. >> time will tell. >> no, i think time will not tell. >> right now we are at a loss of aig. >> it is a fraction of what these estimates were, but i can say with complete confidence that if we had not acted the way that we acted, those losses would have been dramatically higher. >> last question. been here last appearance before this committee, several members submitted written questions for you. i understand that we just received the answers to those questions late yesterday. the you believe that three

months is a reasonable period of time for members of this committee to wait for answers to their questions, and if you have not been testifying today, how much longer we would had to wait for those answers? and if we submit questions based on today's hearing, how long do we expect to wait for an answer? >> i believe this is my 33rd time testified before the committee and congress did my time in office. >> you did not have to take the office. >> you're right. but we tried to be responsive as we can and meet those responses as we can. we have a lot of problems that we inherited and we're trying to do our best but we will try to be as responsive as we can as quickly as we can. >> thank you. >> secretary fact, continuing on the same line of -- secretary geithner, continuing on the same

line, we were talking about for a payment from tarp and the fact that you view it as somewhat of $1.6 billion, and this is a proposal to death out collected between $115 billion, the federal assistance program, it is somewhere around $10 trillion. that is what some experts are saying. every time we put more paper route, it reduces the value of the dollar. if you look at the $900 billion in, to ensure money-market funds, fannie mae and freddie mac, $550 billion for federal loans, to ensure fbi deposits, $300 billion for fha mortgages, the number here is $10 trillion.

you're probably going to say that we're going to get some of that money back. the issue is -- we still do not know what the fed is doing. we do not know how many toxic assets the federal reserve has purchase. we do not know how many are going to default. in the future. so why can we not get in -- access to that information? and if we do not get that affirmation, are we taking a stab in the dark has to the cost to the american taxpayer? >> the tarp program is subjected to an independent analysis about independent loss at least twice a year, and as you saw in my opening statement, the direct cost of that program is in a range of $100 million currently estimated overtime we also right that the government did all whole range of other things and putting out this financial fire. i wrote to the leadership of the congress a few weeks ago to

provide our best sense -- updated estimates of losses to these programs, that full set of programs. those losses and actually looked very small overall as measured by independent experts. the fed reserve programs -- i am not the one to testify on this -- but they are tens of billions of dollars to the american taxpayer, and they have already done so. >> i am glad that you brought that up. you'd think that the american taxpayers should deserve access to that information? to see exactly what is happening at the fed? >> i completely agree and the chairman of the fed has been very supportive of changes that provide more information about the risk on the fed balance sheet. there is an enormous amount of the permission available in the public domain today to allow people to make those estimates.

all of those estimates show that the federal reserve will provide the american taxpayer tens of billions of dollars on those programs because it was designed carefully to protect the taxpayer. they're going to show an enormously substantial return to the american taxpayer, as with other programs. >> i think their number is roughly $10 trillion. without information access, we do not know if you are right or not. >> the virtue of this information is in the public domain. i am sure that the chairman bid -- would be more supportive of more information in this area. i completely agree with you that the american people should have full disclosure and transparency about the commitments still outstanding and the risk on those commitments. >> i do not think that we have that today. we absolutely need it.

so we will hold you at encouraging disinformation. i think some of my colleagues will work on the legislative process to get access to the affirmation. otherwise, we do not know what the american taxpayer will get rid paid for. i want to ask you one other question. you will hear about 90 days ago and i brought up this question about access to capital for small businesses and community bankers at the time you said you -- we should take swift action to help community banks get credit. it is 90 days later and we have not seen a proposal. i think the ninth bank in my state close last friday. small businesses are not getting access to capital. where is the proposal? >> we have been working very closely with the majority leader and his colleagues in the house on tax incentives for small businesses and a small business lending facility to help small banks and an expanded

program. that legislation, which has been crafted very carefully over the last five months, i think it is very close to being brought the consideration both in the house and the senate. the majority leader is working with his colleagues in the senate to make sure he can bring that to the floor quickly. i agree with you about the importance of this and at that time we last book, we had already provided a broad outline to the proposal and we're working very hard to meet the broad concerns of the members of the senate. >> i would say that swift and deft action has not been taken and i am not seeing this proposal although we had very -- various conversations about the challenges. i would be very delighted to see the administration proposal. >> let me be clear -- we provided the proposal early this year. we worked it for five months and we shared it, we have taken a lot of consideration and comments by you and your colleagues. we think we have a strong package of programs and we would

be happy to talk through it and make any suggestions about your concern. >> secretary geithner, i want to shift gears with you. we have the financial regulatory reform legislation on the senate floor. as we are holding this hearing, i like to take this opportunity to ask you about that legislation as we deal with that on the senate floor. it has already been pointed out here in committee in this hearing that the bank tax you are proposing does not apply to fannie and freddie. neither does the bill on the floor of the senate. my question is this -- the public has focused on the taxpayer bailout of banks, automakers, and insurance companies, and we can go through the scale of the support that has been provided there. nowhere has the support been higher than with fannie and freddie. right now we're looking at estimates that ultimately they will cost the taxpayer about $381 billion, the most recent

estimate. that estimate may be optimistic. of all the bailouts that we're dealing with, the problem of fannie and freddie seems not only to have been at the core of where we started this, but also is at the height of the cost to the american taxpayer. and yet last christmas eve treasury announced it was less -- lifting the $450 billion cap on losses and we would see nothing but the full faith and credit of the taxpayer. it is not included in the legislation on the floor of the senate. can you tell me why? >> you are exactly right. we made a choice, given the complexity ahead, that we would not move immediately to propose broad reforms of the future of fannie and freddie. we decided to do this and two phases. we thought we'd get a better outcome, a more thoughtful commitment to reform if we were

further ahead in the process of repairing the damage to the housing market. but we have begun a process we laid out the broad principles and objectives, we're conducting congressional hearings, we're looking at alternative proposals, and we look forward to working with you on a strong reform that will fix what is broken in our housing and financial market. it is not just fannie and freddie. with a lot of things in the housing market that we need to reassess. many of those days contributed to this. [unintelligible] you met a lot of comments about this in the past. there are range of things we will have to change in that process. the bill does to the necessary essential things, that would leave us vulnerable in the future, and it includes the securitizations find that is helpful. but it does not attempt to take on a broader challenge now because we thought fundamentally we get a better support for ambitious reforms if we

deferred repairing the very damaged housing markets. >> i understand your rationale but i do not agree. i like to spend more time with you on that. let me ask a couple of quick question. still focus in on the financial regulatory reform bill -- according to news reports, sheila bair has urged lawmakers to the scrap section 716 of that bill which would force banks to sell off their derivatives businesses. she says that could drive this into unregulated parts of the sector. in her letter, it echoed reservations of federal reserve officials as well. there was a memo that said this would impair financial stability and be highly costly to banks and their customers. could you comment if you agree with sheila bair and federal reserve officials? >> let me emphasize that the

package of reforms that relate to the derivatives markets in the bill crafted by she chairman dodd and chairman lincoln is a sweeping, very strong comprehensive set of reforms. it would bring standardized product on the clearing houses. it would force essentially clear products to be exchanged on an exchange or five trading platform predict what the capital requirements on major swapped participants. it would give toasted the cftc to police and deter fraud and manipulation in these markets. this is the most comprehensive reforms -- a revolution for the markets as a whole. we strongly support a bill that incorporates a comprehensive set of protections and oversight over these more it -- these markets. senator dodd and senator like in a working through this provision -- senator lanincoln are

working through this provision and they're working to the -- three concerns. >> you are not expressing your opinion on that today? >> i have not taken a position on that now, but i would like to emphasize the following basic strategy that underpin this reform process. to make the system more stable, you need to make sure that we're doing a better job of limiting risk-taking by core institutions that are so important in these markets. you would not make the system more stable by taking functions that are integral and essential to banking and separating them and putting them somewhere else. that would create a less able still some -- less stable system, and that basic strategy underpins the entire approach that chairman dodd and their counterparts in the heart -- and

the house have brought to the set of reforms. >> i appreciate all the good comments that you have made. i voted against tarp when it came up because i did not think that it was specified what the money would go to. we kept hearing that it would go to toxic housing things, and it did not. and the money that has been long to the banking industry -- alone to -- loaned to the banking industry, is that where the money was lost? >> you are exactly right. investments that my predecessor made in the u.s. banking system -- and when i came into the office, he had made investments and 75% of the banking system. they are likely to result in a positive return for the american people are likely to make a

positive return on the money. we have much money already replaced by private capital. we are still exposed to substantial risk of losses on investments that the previous administration largely made in aig and that the program president bush initiated, those are the most likely source of further risk going for a brief you are right to point out that in terms of fannie and freddie, they are still supposed -- exposed to substantial risk at all. >> i appreciate that you're trying to put that back on the other in ministration, but we're talking about recouping that money, and not from those that lost the money. that is what is puzzling to me. you're assessing a tax of $50 billion or more in consolidated assets. and excluding the insurance

policy reserves. there are a lot of reasons that have been cited as the impetus for the administration's proposal. is it your belief that one of the reasons is that we need to eliminate risky transactions on the part of those large financial institutions? >> know, this is to protect the taxpayer from losses in part. that is the legal obligation. you can do that a lot of different ways. we decided to recommend to the congress of form of a fee that would seem fair to was, making sure that it was paid in proportion effectively to the risk that you took. if you're conservatively managed, if you paid less. you would pay more with more risk. that seemed a fair proposition. >> i am told that the riskiest loans are those that go to small business. is it the administration's proposal to force these people to avoid these high risk loans? >> i don't think that -- i

apologize. for the reason that i said, you pay in proportion to the risk that you tabret the more risky things that are funded and less stable way carry all larger potential burden. this applies to less than 1% of american and financial institution. for that reason, it is very unlikely to have any impact on the ability of small businesses to get credit at affordable rates from the american financial systems. >> i have some serious concerns about the unintended a potentially devastating effects of the consumer financial protection bureau having on consumers, small businesses, and the general health of the economy. in addition to this, the administration and some members of the senate are pushing to add another burden to debate that will punish consumers, the bank tax, the topic of today's hearing.

given the push to add this into the reform bill, how will the traditional tax impact capital reserve for lenders who would be required to increase capital reserves to reduce leverage, and hold a percentage of all loans on the books? >> i think it will have no negative effect on consumers and their access to credit or small businesses for the reasons that i said. it applies to only 1% of american financial institutions. i think they can afford and handle the burden. you're right to say this can substitute for the additional efforts that are part of the reform proposal to make sure every put in place more conservative leverage requirements, liquidity requirements on the institutions. they are important but i do not believe this carries any significant risk, making it harder for americans to get credit at reasonable rates for the simple reason that it leaves untouched 99% of american

financial institutions. >> with that statement, if you are sure that it will not negatively impact consumer credit and availability? >> i am very confident that it does that have the risk. -- that it does not have that risk. if they try to pass it on to the consumers, then they list -- or risk losing that business to other banks. 99% of those banks are left out. >> i have a question that will follow up on that letter in writing. thank you, mr. chairman. >> mr. secretary, thank you for being here today. there has been some concern expressed about the scope of the proposal and the fact that it covers institutions beyond banks. i want to get parochial, if i can, for a moment. we've heard from some institutions in massachusetts that are concerned that they're covered by the fee, because a

small amount of their assets are in a thrift or with a broker- dealer. there is a successful property and casualty insurer. it does not -- its sells auto, homeowners and other property casualty property -- policies. it does have a small broker- dealer in a small section, and it is limited to product offerings for mutual fund shares, variable annuities, variable life insurance. the broker-dealer does not provide any kind of investment advice to investment companies or insurance companies. it does not buyer sells securities. it does not hold customers' securities are funds. and because of the limited activities as a broker-dealer, it is exempt from securities investor protection and it generates less than $1 million

in revenue per year, based on assets that are tied to all retail activity that goes back more than a decade. the question is -- since you have roughly less than 1003%, but that the included in the fee? >> it would not be covered because the broker-dealer is not a primary dealer. we included primary dealers because they are eligible for the primary dealer credit facility. it would not apply to other institutions that did not own primary dealers or his broker- dealer was not a primary dealer. >> and that would be a clear delineation. >> yes. >> a mutual fund company has a

thrift and they did not do any banking activities. they take no customer deposits, made no loans, but they need to have a thrift because they have to customize their 401(k) programs. the insured depositors are use slope -- solely for trust purposes and not for any commercial investment. is that institution covered by the fee? >> we have not quite figured out how to solve that particular problem. there are limited number of companies large enough to be potentially captured who on what we called depositary institutions but they do not take deposits, really. they have on that institution for trust purposes. -- they have to own that institution for truck purposes. this was not designed to capture them.

the board defect we need to clarify that, and should we perhaps just prophylactic leaaly exclude them? >> we would be happy to work with you and your colleagues to do that. should be clear in a lot that the regulations provide, it should be crystal clear who is covered and who is not. what we're trying to hold to his "i said at the beginning. the firms that were above $50 billion -- will not touch mutual funds at all, but were above $50 billion and were eligible directly for the emergency programs, we think it's a matter of principle they should be covered. i agree with you that we have to clarify about coverage. >> that would depend also on what kind of assets you count. >> and to make it clear, you would not count the mitchell

funds. >> if we could continue that dialogue, i know that you will. one last quick question -- in response to ranking member grassley, the cbo indicated that the proposal was likely to increase the availability of credit to small businesses. can you speak to that for men at -- for a minute? i am hearing from small businesses that they have suffered enough. >> i do not have that report in front of me. let me describe again what our attempted and -- our attempt is. it only covers a small fraction of the american financial system and leaves out most of the institutions to provide most of the credit to small businesses. for that reason alone, we think it will have limited risk of any adverse effect on small businesses. the firms covered what have a choice about how they pay for

these costs. they can reduce compensation, they can lower their dividend payments, or they could try to pass it on to the customers. if they try to do that, that would face the risk that they would lose that business because the other more than 99% of the american financial system not covered by it would be able to come in and take that business away. >> and i know that my time is almost up. you already said that. i am concerned that however works in practice, it may not be that clean-cut. and small businesses may be impacted. i do not know exactly and i want to analyze how cdo came to that conclusion. -- cdbo came to that conclusion. >> we would be happy to work with you to make sure that it is assigned in a way to give us reassurance that it does not carry that risk.

>> thank you, mr. chairman. to follow up on my question, mr. secretary, there is a concern from people that will be testifying subsequent to you that it clearly could be an effect. although it applies to only 1% of the institutions, they hold a disproportionate amount of the assets. if the fdic insures deposits, they may try for those deposits as a way to avoid that tax liability. that is going to come into play for competition for those deposits. that could affect the banks. there could be a potential spillover, not to mention the fact that the overall impact on the economy, there's no way to excess that at that point. isn't that true? it could aggravate the lending

supply and the credits applied to small businesses. although it is 1%, it is a true impact because of the size of these institutions that hold a considerable amount of the assets in this country. >> i agree with you and because of the concerns, we propose to design that the in exactly this way. i would be happy to work with you to meet this obligation in a way that is fair and does not have that impact if you have to look at the alternatives. the alternative ways of doing this would carry greater risks. it would not be fair -- but we would be happy to work with you to limit its risk because we want to make sure we're not making it harder for small banks and small businesses. i quoted in my opening statement that conclusion is said that this is likely to increase market share for small and medium-size bank. that is not the intent of this proposal but that would be a

positive effect. the lawyers on what basis did they make that decision? >> only on the basis that it covers a small fraction of the firms in the financial system. if they try to pass on the shared these calls, this is a modest fee. this is a very small, berries modest fee -- very modest fee. their risk losing customers. that should balance the risk that you cited. in putting the fee on risk, you help reinforce the broad objectives that we have a limiting risk in the system taken by large institutions. that is the benefit of the street -- and a strength, not a weakness, of the proposal. >> that is something we have to be reassured of in terms of the unintended consequences. most especially between the

small business sector. they hold 70% of all the assets in this country. that is an issue. we have to be concerned about the potential for spillover. >> i agree about that important objective in designing this in a way that reduces the risk. i think that our proposal does that. one thing about our financial system -- we have 9000 banks and our country, they only provide half the credit to businesses that businesses rely on, that the economy relies on a whole. the rest of that is provided by the broader capital market. only a very tiny number of the banks to provide that credit are covered by the speed. it is a much smaller share of overall credit provided to the american economy. >> the follow up on some of the questions that have been raised with respect to small business lending and the availability of credit to small businesses, which clearly is a dire

situation. nfib released a survey back in mid april that i think is an indication -- if you look at these charts and the optimism and the out given time to expand -- these are all 25-year lows. that is significant from the standpoint of job creation. we've had to you had a meeting last year, but on this committee, and in your department. the question is -- when? it has been five funds and another the administration has had initiatives out there. why it would not coalesced around an agreement on the small business jobs program? it is really dire. i think the death of the despair within the small

business sector and among the american people in terms of jobs, when you think about the longevity of the unemployed now, it began long ago with our respect people are now unemployed, 40% are unemployed for more than six months. that is significant. when i look at these charts -- this indicates confidence is about as low as it has ever been. that is what they said. i think we all concur -- when we visit main street in our respective states, what are we doing about it? i think this has been a very lethargic effort when it comes to small businesses. everyone talks about it but nothing is being done about it. that is why there is a desperation across the american landscape, and it is affecting on main street.

i do not see this impetus to get this done. >> center, we felt very strongly about this, -- senator, we feel very strongly about this. we have a strong range of programs. we have a small business lending facility that would give capital to community banks across the country. they can use that capital to expand lending. we have programs to the sba that we think will be very helpful, and a special program for states to give the resources to support state programs that are directing to that purpose. i agree that it is time and the senate has been busy. i wish it had not taken this long but it is something the senate had to back on. it requires legislation. it should command strong bipartisan support. >> i hope that there is some energized initiatives on all sides here. we can talk about jobs, jobs,

jobs, but it is not materializing. that is why you see a 9.7% unemployment rate remaining static for three consecutive months. not to mention the people who are out there who are unemployed for such a significant period of time. so when can we expect some capitals blowing from the lending facility? that is something you have been arranging a treasury. for many months now. >> when enacted in legislation, it would be very quick. but quick this program in the market that you can have, -- i think it is the quickest way and it would have the highest return. the potential costs are very modest, and of course we will propose way to cover those costs to be fully deficit neutral. it is a good program, it is time for it, and we would welcome

your support. >> senator we're working up with small business legislation with you and senator kerry very quickly. >> sorry, tom, but i would be delighted to go ahead. i am next on the list and now would be more than honored to address the honorable secretary. and i thank the chair. mr. secretary, thank you for coming. i know you are an extremely busy man. despite your very vigorous assertions, i still have serious concerns that have been brought up by all of my colleagues about this bank tax and its

potential impact on consumers and small business. it's the reason i am so terribly concerned, because in kansas we have 66,000 small businesses and they employ over half of our employees. whatever happens or what ever could happen is a big deal. i understand that taxes targeted at the largest financial institutions and you have certainly stress that. that is where the money is. i am convinced that this tax will ultimately harm small businesses through higher costs for borrowing or reduced access to credit or that the tax will not be passed on and paid for by consumers. i am not going to ask you to respond again because you have done that. i hope your assertions are correct. by some estimates, the bank tax could remove up to $1 trillion in spending. do have concerns the remaining

this capital from the system, reducing lending to consumers and small businesses come out will reduce the economic recovery? >> i do not have concerns and if i did we would not have proposed this. i just want to make the following observation. i understand why the institution that do not want to pay this tax do not want to pay it. and i understand that in making arguments against it, they will threaten grave economic damages to small businesses if they are forced to pay this tax. but we have a legal obligation to cover of a cost of tarp. we have to propose a way that is fair. we are open to suggestions to doing it. but i cannot actually imagine other proposals that would carry less risk of damage to the landing in this country. it is only less than 1% of the institutions -- the vast bulk are not covered by this tax.

their competitive position would be improved by this. if there are other suggestions in no way that is more fair, we would be open to them. >> if it does happen, rest assured this committee will be eager to suggest various ways to you. i don't know about any threats that anyone has been making. that is the subject of another hearing. what happens down the road for tarp? it is set to expire in october for any tarp-related programs that will continue to operate beyond this? >> know, we are putting this program out of its misery as quickly as we can. we're going to return hundreds of billions of dollars to the congress, and used. much lower cost, saving the american taxpayer hundreds of billions of dollars, and that will provide resources to help reduce our long-term debt.

>> there is the home of affordable modification program i keep thinking about, $50 billion. what exposure risks does this expose the u.s. taxpayer? if we keep going with hamp, that is the acronym. everything has to be an acronym. >> it is a terrible acronym, i agree with you. it is a very good program but it will cost taxpayers money. if we ultimately commit the $50 billion that we're prepared to commit, then all of that money will be at risk of loss. >> does that come from the tarp program? >> yes. >> down the road there is another $50 billion worth of exposure. >> it is an existing program that we put in place more than a year ago. we said we would not spend more than $50 billion.

that money would be at risk of loss. but this program is providing a very substantial benefit in helping stabilize house prices and helping right now more than a million americans they and their homes with much lower monthly payments. >> in testimony before the committee, neil barofsky outlined the losses and tarps -- in tarp. we've talked about this a little bit. any plans to recover these losses from those tarp recipients? if so, how would that be accomplished? >> these companies are going through wrenching difficult restructuring plans that are designed to help us recover as much of those investments as possible. i think that ultimately we are going to recover a substantial fraction of those investments, much lower -than expected.

they have much higher risk of loss but even end pointing out this being lower than we feared, there still substantial risk of loss, and every six months from now until any investment is back, it will provide estimates of what the losses are. >> that is why some of our committee members want to wait until 2013. at any rate, i am over time and i would like to submit a question for the record to the secretary. .

mine understanding that most if not all of the banks have bought back their preferred stock. in a number of instances, they will be able to exercise

warrants. this involves may be $1.5 billion net gain to the treasury. can you explain how this works? >> we have had roughly $200 billion come back from these banks. all of the major banks with over $20 billion in dividends and proceeds from the sale of warrants. independent analysts look for the return for the taxpayer and this is a very high return. we were very effected in stabilizing the system. when i came into office, my predecessor had investments in banks representing 3/4 of the entire american banking system.

we came in and forced banks to get private capital to be paid the american taxpayer so we got the money back at a substantial return. >> the money that was not received, some have not bought back their preferred stock. have we executed warrants? >> no, on we have a substantial number that have stock outstanding. the additional terms, they have five years before the payment went out. >> it goes up from 5%-9%. we have substantial repayment ahead of us and warrant proceeds. the broad numbers are the most important ones. we have more than 200 billion

backing potential dividends. if you look at the fed programs, other treasury programs, those have the characteristics of showing substantial positive returns. the ultimate measure is how quickly do we bring down the costs of borrowing. the cost of credit to businesses across the country is a fraction of what it was when we came into crisis. even recognizing how difficult it is for businesses across the country. >> talk to us about aig, they sold a large number of assets they recently sold one of their foreign units for maybe $35 billion. do i understand that money has

gone to the fed? is there further obligation that they have to the said? >> those transactions have not yet been concluded but when they do they will return roughly $50 billion to the american taxpayer. of course, an aig is undertaking a series of other transactions that will make sure that we get as much of those transactions back as possible. what is important to emphasize is that the part of a i.t. that took on the enormous risks that brought the firms to the edge of collapse, we have been successful in bringing the fund's down dramatically -- the risk down dramatically. we have been able to step in, reduce the risk, sell the businesses as much as we could. >> we have major reform bills on

the floor that have provisions obviously involving taxes and regulation. i am interested in the transparency to american consumers and institutions. do you believe that a buyer has a right to know that their banker is selling them a product that they are betting against? >> i think it is very important that we strengthen disclosure requirements across the financial system. that the sec has stronger authority to impose stronger requirements and stronger obligations on institutions that sell products to their companies.

we would be happy to work with you on any proposals to make sure we are achieving that objection. >> i filed an amendment on this, you has banks trying to sell products to clients, products that if the banks are betting against without telling the client that the bank is betting against the product. i would like you to say yes or no weather you think the buyer has a right to now that a product is being sold to them that the bank is betting against. >> i have an almost perfect record, i generally do not endorse them. and i would say the following, i completely agree that firms should have access to information about not just the

risky in the investments that any conflicts that might apply in those contexts. >> you share the objectives that the buyer has a right to know. on the question of the buyer having the right to know that a bank is selling them something they are betting against, you think that they have a right to know. >> on the basic principle that the buyer should have access to information they need to make an informed decision about the risk they're taking, absolutely. >> clearly, access involves knowing that a bank is actually betting against them. people are shocked about this proposition. i happen to think that this is pretty complicated. that is why we give the oversight board a lot of discretion in writing the rules but this is a fundamental in

passing the test in respect to basic fairness. i hope that we can work this out. we have done a lot of work together. one other question on the reform package. i think that there is a sense when you look at the housing bubble, the bad loans, the shoddy oversight, all of the elements of the financial calamity that the country has suffered, there has not been a sense of accountability and oversight needed. under the legislation, you would be chair of the financial oversight council. i would like to ask whether you would be willing to report to the congress and certify each year that their rules of the road on wall street are sufficient to protect the financial stability of the economy.

i think it would be helpful to incorporate some kind of certification requirement that would come from you on this issue. >> i agree. we should also have a judgment whether the protections are adequate. >> i am trying to sort out how they will deal with this. part of this looks like it could impose a unilateral fee on some of our financial institution.

>> this is designed, you would have less c m less risk. you could adapt. we are working closely with other countries where u.s. firms compete with other foreign banks. >> thank you. i want to talk directly about the financial crisis responsibility for the fee payable.

we are debating comprehensive financial reform. and we've set out to rescue financial institutions on the brink of collapse or risk another depression choice but to tell where we can and should prevention any more taxpayer bailout but we need to close the book on last one so people are that we mean what he said. can we can make sure that the taxpayers get every time, real thing: to the legislation. -- to every time that they've paid into the legislation. this is something that we said

at the time. this is a piece of legislation that required the president to submit a legislative proposal that recoups from the financial industry and amount equal to the shortfall in order to insure that it does not add to the national debt. some argue that it should be proportionate to what each bank got. i sat there when many of these major companies called up and said unless you do this, we will be gone. every company should be grateful that this happened and not quibble if they should do this or that. the financial crisis responsibility sends a message to taxpayers that we mean what we say. when the law requires them to pick up the tab for rescuing the

economy created by the problems of the financial institution, we follow through and get our money back. there are legitimate details as to the specifics of the plan. the first thing, i think it makes common sense to put this in the banking bill, in the regulatory reform bill. that is not the majority opinion. i think it makes sense >> i agree with everything you just said about the rationale for the sea have to get it passed as well we lead to the majority. we are open to any suggestion. >> you would not say, i thought that they preferred it to be in the bill. >> of course, we would like it

to become law. we want to work with you to make sure that we could in place with the best design possible as quickly as we can. i think that this is a good case of doing it as financial reform. >> thank you. >> as you noted, the current estimates of the losses are going down, it is 109 billion to 117 billion parent of the purpose of this is to be repaid not simply to impose a new tax. if the losses keep getting lower, would you recommend that the program and early after every nickel and dime is repaid? >> you are right that the current costs are estimated

between 100-117. we have built-in some recognition. that is a question that we have to work with you all on to figure out what is fair and just. we want to reassure people that we will be responsible in repairing the fiscal damage. we think it is sensible to say it is 90 billion over 10. >> what about the inverse? >> that is an interesting question. because the chart did not cover the fiscal loss, we think that it should be raised 90 over 10. >> thank you.

>> i was glancing at an article which outlines the imf suggesting that the poorest countries contribute to. it looks like some kind of reserve fund. it seems that it would be structured on income, profits, bonus payments. and what is our government position on those negotiations >> in analyzing a range of possible approaches to cover the cost, it made two recommendations.

they proposed a fee very much like ours to cover the cost of the crisis had. they also suggested that the government would like to consider putting a broader tax on profits against the potential contingency. our judgment is that we have an obligation to cover the costs of this crisis and we want to meet navigation. the best way to do this is what we have proposed. we did look at a broader profit tax and financial transaction taxes. from we concluded that this was the best made to meet that obligation.

>> is there a risk based proposal? >> the imf made two recommendations we are trying to need a more limited objective which is to cover the tarp. >> we will be enacting laws that will prevent this catastrophe from happening again. you think about all of this, what are some of the areas that we need to focus on to minimize

the recurrence of this kind of meltdown? >> the four essential things we have to do in these plans are to protect consumers against the kind of abuse they faced, to limit risk and leverage by the major institutions whether they look like a yankee or wells fargo or citigroup or lehman groubrothers or whoever can tell whether they look like aig -- whether they look like aig, citigroup, lehman brothers. we want to make sure that we can put them through a formal bankruptcy without the taxpayer being exposed to loss. we think that this is essential to deal with the cause of this crisis and to make our country

less vulnerable to future crises. we will face some risk of crisis in the future. with these reforms, we can dramatically reduce the risk and make sure that if people make those mistakes again, they will not cause this kind of catastrophic damage. >> you said that the tax will cover derivatives off of the balance sheet. how much are the derivatives hall off the balance sheet. is there a footnote reference?

how much are they held a fine institution even though they are off the balance sheet? >> the virtue is that they have to disclose every quarter the risk they have whether it is in derivatives or other types of fancy products. whether they have risk or exposure to those products. they have to have more capital against those risks. >> what about those institutions not covered by the sea? >> what the senate is considering would require those kind of disclosure requirements across the american financial system. >> so, we will not see a lot of off balance sheet problems? >> what happened in our system

is people engaged in borrowing money short and taking risks and lending the money than they were able to operate outside of the constraints of regulation. this bill will fix that problem and make sure that those institutions, regardless of whether they are exposed, they will come within a set of constraints. >> how will these be shown on the balance sheet? >> they will have to disclose the economic risks. this will bring about a very important set of reforms to make sure that that stuff comes out of the dark and is exposed properly, standardized products are essentially cleared.

they put the exchange where there is the price recovery. >> what about non standardized? >> there is an important benefit in hedging products for companies that make things across the country. we preserve the capacity to do that but you have to disclose transparency on those products and that the firms that hold those commitments to hold firm on those. you cannot do this without the capital to meet those commitments. >> how will that be shown on the balance sheet? they will have to show every quarter the risk in the assets whether it is on balance sheet and off the balance sheet.

they will have to disclose those. >> all right. >> i meant to say enron, not exxon can tel. there has been virtually no discussion and i take this to be the house proposal could tel. you very much do not favor taxes on banks and income. >> i would not summarily dismiss. we are open on how to do this on a way that is fair and sensible.

this would have the additional benefit of not just cover the loss but also limonene the risk and leverage. the fee we propose would have that benefit. >> would this reduce the american competitiveness? >> we have a legal obligation to cut these costs and we want to do this in a way that minimizes the risk of loss to competitiveness. we want to encourage businesses to put in place a similar fee. i think that is probably true, i cannot be sure that the level

playing field objective is best served by a tax on risk. quarks i think new zealand, australia, canada already torpedoed this effort. they will make sure that they stay competitive. i think that they see some of the intellectual dishonesty of trying to lessen risks. taxation has nothing to do with the risk. gm's filing states that the taxpayers loan and interest rate is 7% and ran in 2015. the filings also lists a loan to gm.

they still owe their auto union health plan. in light of the statement that they of the -- that they don't need the escrow fund, can they use this so that way we are not subsidizing their debt? >> we will be guided by what we think is the best way to recover these investments as quickly as we can with the lease amount of loss -- with the least amount of loss to the american taxpayer.

the fdic does incorporate the concept of risk based pricing. this is in proportion to the risks they're taking. this is a fundamentally sensible principle. this is already in practice in the u.s.. many countries would like to replicate that practice. we have a good chance of getting support. we have an obligation to do what is necessary and appropriate for the american taxpayers. >> if you can pay off a 7% on out there, there's a difference

for 27% lawn and a 9%. you testified last week before the appropriations committee that you had not seen the gm at. in that ed, the ceo claims they have repaid their government on. you know that the taxpayers loaned gm over $19 million. that loan was certainly not repaid in full, have you seen that advertisements since your testimony was the same misleading advertisement? can >> i am not seen that advertisement. we want to make sure that they are not in the position -- who

want to make sure they are in the position of running their companies. we have made it clear to lay out the full scope of our investments in these companies. we still retain a substantial share of equity in these companies which we hope to reduce and will reduce overtime. those investments carry some significant risk of loss. it was president bush and my predecessors who made the judgment to rescue these companies. our obligation was to finish the job. we wanted to do this in a way that puts them in a much better position and we face a much lower risk of loss because these plans were so ambitious. we are very encouraged by the improvement that you have seen in these companies and across the american economy. >> thank you, mr. chairman. thank you, mr. secretary. we thank you for taking the time

to come here. thank you very much for taking the time. >> a pleasure to do it, happy to be here. of course i will respond to any of the questions that have been submitted in writing. [captioning performed by national captioning institute] [captions copyright national cable satellite corp. 2010] >> this weekend, a discussion about the nanking massacre. also what it means to own a professional sports team. eric holder says the attempted attacking york city was a terrorist attack.

>> good afternoon. as many of you know, faisal shahzad was arrested late last night in connection with his alleged role in the attempted car bombing in times square last saturday. shahzad a naturalized citizen born in pakistan is in federal custody today. he has been and continues to be questioned by federal agents. as a result of those communications, shahzad has provided useful information to authorities. we anticipate charging him with inactive terrorism transcending national borders, 10 duties of a weapon of mass destruction, use of a destructive device during the commission of another crime, as follows assorted explosive charges. i want to emphasize that this

investigation is ongoing and we continue to pursue a number of leads as we gather useful intelligence related to the terrorist attack. based on what we know so far, it is clear that this was a terrorist plot aimed at murdering americans in one of the busiest places in our country. we believe that the suspected terrorist sectioned a bomb from rudimentary ingredients, placed it in a rusty suv and drove it into times square, with the intent to kill as many innocent tourists and theatergoers as possible. make no mistake, although this car bomb failed to properly detonate, this plot was a very serious attempt. if successful, that resulted in a lethal terrorist attack, causing death and destruction in the heart of new york city. it is a stark reminder of the reality that we face today in this country.

the reality that there is a constant threat from those who wish to do us harm simply because of our way of life. they are organized terrorist networks that are targeting a. there are lone terrorists here at home and abroad who are targeting us. as months, even years go by, without a successful terrorist attack, the most dangerous lesson that we can draw is a false impression that this red no longer exists. it does. and the department of justice and our partners in the national security community have no higher priority in disrupting those attempts and bringing those who plot them to justice. in this case, that is exactly what the dedicated agents and prosecutors from the department of very fun person agencies have achieved through exemplary investigative effort. over the last two days, men and women from the fbi, the department of national security division and u.s. attorneys offices worked with nypd, dhs and state and local partners to doggedly tracked the evidence in

this case. the quick action from fbi agents was critical to alerting customs and border patrol agents of alternately arrested him last night at jfk airport as he was attempting to flee the country. fbi agents have been able to link additional evidence from searching shahzad's current home. they work with their state and local counterparts in new york, connecticut and other jurisdictions to gather evidence and intelligence related to this case. we are also coordinating with other members of the president's national security team to ensure that we use every resource available to bring everyone responsible to justice or these agents and prosecutors or the back one of our national security affairs. any of them doing their jobs outside the spotlight of the media. i want to commend them for their results in this case and their unwavering commitment to their jobs. we owe them our gratitude and our respect. finally, i want to take this

opportunity to remind all americans how important it is to remain vigilant. the suv and time scare was first outed by an alert bystander who reported it to authorities. by being aware of his surroundings and by thinking quickly, he helped save lives and forwarded a potentially devastating attack here at as always, anyone who notices any suspicious site tbd should report it to the appropriate law enforcement agencies. i would like to turn it over to secretary napolitano. >> welcome to thank you, attorney general holder. as you know, late last night u.s. customs and border patrol agents at new york's jfk airport apprehended and detained faisal shahzad, a naturalized united a citizen in connection with saturday night failed bombing attempt in times square. due to the vigilance of the cbp officers working with all of our law enforcement partners and relying on enhanced dhs security

measures, cbp was able to quickly identify, apprehend the subject. i want to express my gratitude to all of the federal, state, local law enforcement personnel whose cooperation and hard work on this case led to the swift identification and apprehension of shahzad. this was a great team effort and one person at work in this case was truly exemplary. in particular, i'd like to thank the dedicated men and women at the department of homeland security whose work on the case was instrumental in apprehending the suspect. customs and border protection successfully apprehended the suspect after its agents and analysts have been tracking outbound flights for potential suspect for the past three days. immigration and customs enforcement agent served an important role in the joint terrorism task worse in new york, as the levon forstmann agency on the international

aspects of the investigation interviewing witnesses and running down leads. the transportation security administration was contacting targeted operations at regional and international airports designed to identify and apprehend the potential for it. i would also like to give special thanks to the alert citizens in new york city whose crucial tips helped authorities prevent what could have been a deadly explosion. what happened on saturday shows the critical role that the american people play in the security of our country. if anybody ever had any doubt about it, this failed bombing attempt barely shows the value of the same, if you see something, say something. thank you and i'd like to turn it over to the director john pistole. >> thank you and the secretary and good afternoon. i also want to commend the men and women who worked around the clock literally sent saturday to

find those responsible for what could have been a deadly attack. a host of agencies, departments and individuals working together toward a single goal, a collective success under ivan s. comes down to using traditional law enforcement techniques such as federal court authorized search warrant along with intelligence-based authority to maximize our evidence and intelligence gathering. using these techniques, we were collectively able to identify mr. shahzad as the person who purchased the 1993 pathfinder depicted in the back of the room. cbp identified his extensive overseas travel which lead to expanded investigative steps, enabling us to fully identify and locate and eventually arrest shahzad. a key step in this process occurred yesterday when shahzad was played on the no-fly list and as the secretary mentioned, cbp did enough to any job

identifying him as a jfk flight last night. georgie's and house for its agents agents with nypd interviewed mr. should start last night and early this morning under the public safety to the miranda rule. he was as the attorney general not a cooperative and provided valuable intelligence and evidence. he was eventually transported in another location for memory and burning dyson continue talking. so we in the fbi, without one forstmann and intelligence partners here at home and around the world continue to investigate this matter. we are correcting a forensic examination collected by nypd at the scene. much of this evidence has been transferred to the fbi laboratory in quantico, virginia 17 test the individual debacle composition of material in the explosive device. we also want to test the potential impact of the device to ascertain what would've happened had it worked as intended good and we are close similar to what the one forstmann intelligence partners to cover all possible ties, this

particular individual has or may have had to radical extremism or terrorist organizations come up oath at home and overseas. and were pursuing every every lead in that regard. and that's always, we are seeking out those who would orchestrate these kind of attacks. prevention will continue to be our endgame yet so i too would like to add or thanks to the said offense like the vendors who first noted suspicious vehicle. this investigation like others rekindled in the past year once again reminds us that our work is not finished and we will continue to work with our partners and our citizens across the country to find and stop those who would do us harm. thank you an alternate over to the commissioner. >> thank you, john. at the new yorkers can rest a little easier today and that's due in no small measure to the investigative muscle of fbi agents in new york city, police

detect this, not to mention the eagle at work of the custom officials on duty last evening at jfk airport. particularly also want to commend paris barajas, the u.s. attorney for the southern district of new york and although he's a very able assistance, would look very closely with the u.s. attorney and of course not just on this case, but every day tunic certain criminals in the southern district. now this nissan pathfinder in times square had a license plate from another vehicle. that the number on the dashboard had been removed. the break in this place took place on the new york city detective was able to go under the deal call and get the hidden bit number. this identified the owner of records who in turn has been able to sell it to the suspect who drove it right into the heart of times square. now this is déjà vu because the world trade center attack in

night t. 93 had similar set of facts, where a detect it was able to get the venom number off the ryder truck that had exploded there. and if you recall, the bombers were arrested when they returned to get their deposit. but they would've been no engine block to examine if it wasn't for the heroic work of the new york city bomb squad days. it was a very hot evening. he suited up in a very oppressive keyer, which i'm sure everyone saw and they worked tirelessly through that evening, all through the next day. so if you look at the component, the timer, the gasoline can, at the end pda, the propane tank, the gun box, put all of that together, that lethal assembly really made a very big hurt

locker. and it wasn't until all of the part of the bomb were taken down so we were able to tow their field-goal to a forensic garage. now by my calculation, from the time faisal shahzad drove the vehicle. perino that it can be done in 24 minutes. -- we know that they can be done in 24 minutes. 53 is pretty good. i want to congratulate everyone who had a role in this very important investigation and the fact that it was done in record time. new york is america, the datheyt

to come back to kill us. >> you said that they provided useful information. can you tell us whether he has acted alone or in concert with others? >> the investigation is ongoing and i would not want to reveal any information other than to say that he has been talking to us and providing us with useful information. >> hhas to confess to being involved in this? >> yes, he has. >> there has been arrested pakistan, how many? do you anticipate more in this country? >> we are looking to see who was involved in this matter. are involved to justice. i'm not aware of what the exact situation is with regard to the

facts he talked about in pakistan. >> you're not aware of any rest in pakistan at this point? or mac i've heard reports about it, but i'm not in it positioned to comment on it. [inaudible] >> the investigation is ongoing. i would want to talk about what we have been provided. >> how did he get on this plane and had the plane departed from the gates when he was faced from the no-fly list? >> i don't want to get into details of timing and no flies, but the way she was apprehended was that since, particularly since christmas, cbp has been instituting a number of rules that enable us to further check against new data or information that is provided, even very recent information against passenger manifest on planes. and they have been working, as

you might imagine, around-the-clock on this one. and so as new data was supplied, over the course of the investigation yesterday, they were able to match it once the plane manifest was complete, go on the plane and arrest them. >> undersecretary, he sang at if this had happened before christmas, that plane may have taken off? >> no, i'm not saying that. what i'm saying is in this particular case, the news entre new rules were particularly useful in allowing us to rest in before it took off. [inaudible] [inaudible] have you found any of that and there was talk about 26 and the travel overseas? league is looking into whether he may know about some military training for contacts with [inaudible] >> were examining a whole variety of things in connection

with the questions being put to him in the questions he's answering. we want to know as much as we can about his background, where is gone, what he's done. so although things are being explored. >> no comment on that. i believe at this point there is no connection. >> do you believe the suspect came to the u.s. with the intent of doing this? >> i would want to comment on that. as i said, the investigation is ongoing and we will need to continue our interaction. >> was the suspect under surveillance and did there come a point when he smacked off the radar yesterday? >> a number of individuals have not been this investigation and mr. shahzad is one we identified as someone who would like to find out more information about. so during the course of the investigation from saturday night we identified him as a person we would like to talk to. we were able to locate and, away

from his house, which you saw on the news, richburg, connecticut there. and that we were able to provide that information as the secretary mentioned the cbp for proper handling and other agencies in case he was stopped in another context. the bottom line was we were able to identify, locate and then detain mr. shahzad. >> one quick follow-up. in terms of the travel of people to other areas were known terrorists are known to congregate, can someone talk about the u.s. government is consent to track though, the types of people and what more can be done in that regard when they turn to the united states? >> i can comment from the fps perspective and part of the agency there a number of steps taken to identify potential terrorists, whether that's the country from which they originate in terms of terrorist training camps or the individuals they associate with. and obviously to go into detail,

which make it into a source of the methods of how those individuals might be identified would not be appropriate. >> when you returned from pakistan he went under some secretary screening and the last of the mass continued in some way to his arrest? why was he screamed when he came back and what was learned? >> without getting into a lot of detail, he was screamed when he came back because some of the targeting rules apply. he was subject to secondary screening. she is a naturalized u.s. citizen and i'm just going to leave it at that. >> can you give us a diagram of the bonded cells. looking at this, what is your professional assessment? is this an example of somebody's who's had lawmaking training or is this kind of winging it? >> there are a number of opinions on that. it does not appear from our

opinion to be the most sophisticated device. there are a number of opportunities for the device to fail. they're actually 33 different components that could have been operational, but as was noted, certain portions such as the and 88 ignited, but not the main gasoline or the propane tank. >> is that not as operational as someone once that? >> welcome equally have the intent to do harm. it's a question of whether his training and knowledge of material that he had to the initial assessment is that it was probably not efficient great to cause a type of explosion such as we saw the ammonium nitrate fuel in oklahoma city. >> how one with the question under the public safety to miranda and if somebody could walk us through the decision to determine that and who made that

decision and why. >> from the fbi perspective, we'll go into detail in terms of how long. that's on the significant issue right now. suffice to say that t. provided valuable information and evidence during that time and then as attorney general noted, he was verandas later and continue to cooperate and provided a label information. >> how close were you to losing them? >> well, i think there's high confidence in cbp and their ability to the job. they went beyond what i think most people would expect in terms of just checking -- is that what you're asking? [inaudible] >> i think you mentioned earlier you had identified by saturday night you're saying, correct? >> no. >> could you answer the question about how close you were to losing them? >> i'm not sure to what you were referring to. >> how close we to losing him

when he was on that flight? >> yeah, they pulled him off -- they pulled the flight back, as you know, to decay. they also have the authority of the flight actually taken afterward at the plane plane to turn around and come back. >> attorney general, yesterday and through much of last night. and was aware of the track and i was going on. and i was never in any fear that we were in danger of losing him. >> could you tell us whether or not new york is so under consideration for holding other terror trials? and if so, does this incident give you pause in that respect? >> welcome i think unfortunately new york and washington d.c. remain targets of people who would do this nation harm and regardless of where particular trailers, regardless of where particular event is going to occur that is going to remain true and why we have to be

especially vigilant in new york as well as washington. we are considering a number of options with regard to where the trial might be held. [inaudible] >> commissioner kelly, could you address whether this incident highlights any additional vulnerabilities in midtown should there be more cameras, should there be more resources put to work. inadequate a lot of police officers and today have on patrol in times square. this individual drove his vehicle up very quickly and left it very quickly. the police officers arrived immediately on the scene there. so to that extent, we were present. would we like working with their? gas, as a matter of fact we have a program that we would hope to have funded, where we will take our lower manhattan security initiative, which consists of about 3000 cameras in my growth of program to midtown manhattan

from 30 district to 60 district. that's our goal. we have plans to do that, but sure would like more cameras. >> are you giving any more credibility to the claims of responsibility by the taliban and? >> i would refer that to other people on the panel here. [inaudible] and a heightened state now, we have the underwear bomber case, the zazi case targeting the subway system and for eight years it didn't seem like we have this be seen as terrorist attempts that were inserted the final stages. >> in new york city, we have had now 11 plots directed at the city since september 11th. so we always see ourselves at a fairly high pace, you know, to a certain extent nothing has changed in that regard of people

coming to new york are planning to come to new york and trying to kill new yorkers. >> a talk about the cooperation between the fbi and the new york police department? >> it seem less. glass that question and the answer is the same and it's true. we're working extremely well together. >> attorney general, you refer to this as a terrorist plot. can you give us any idea of whether we're talking about three people or more, for example, and a terrorist group being part of this? >> at this point, i think i'm going to say no more than what i have said in that regard eared thank you all very much. [captioning performed by national captioning institute] [captions copyright national cable satellite corp. 2010]

>> president obama also talked about the attempted bombing. he also talked about the financial regulation bill. this is a half hour. >> good morning. we have a set of excellent speakers. i am looking forward to a very productive two days. it is my pleasure to introduce our first speaker. i want to thank the president for taking the time to join us.

the topic of improving the economy, the competitiveness, focusing on taxes, the deficit, is really focus -- the focus of the meeting. please join me in welcoming the president of the united states. [applause] >> thank you very much, thank you. please have a seat. thank you. thank you for the introduction and your leadership. i would like to give the american people a brief update on the investigation into the