somehow, the media get their shots. a few voters get close. no one gets trampled. . . .

mr. brown can personally greet voters. >> it is great to be her. >> the next stop on his whistle stop trip on the last day of voting is here in carlisle. they argued to big machines rolling into town. last night it was david cameron, and in a few minutes, it will be gordon brown. between his arrival and scheduled speech, there is time just for a live interview for the 6:00 news. today, there was no such thing as downtime. >> reduce the deficit by half. >> after the interview, there are a few more inevitable hands

to shake. it is trite to the car. >> how are you enjoying the last day of the campaign? >> energizing. talking to lots of people. our plan for the future is the only serious plan for the british economy and public services. people are seeing that. >> you will keep on trucking? >> i will keep campaigning. i have been round the whole of the country and have talked to lots of people. people want to know that they have a strong economic future. they see the event happening around the world and they know that we are a force of stability and a force for economic growth and jobs. >> one more campaign stop before bed and tomorrow, well tomorrow, mr. brown gets to vote like everybody else. >> finally, we are in sheffield

with nick clegg. >> i must say that nick clegg still seems bright and cheerful. he says he would be happy to fight the entire campaign again he enjoyed it so much. he may have to do just that. if it is impossible to form a government after the election. it has been an extraordinary campaign for him with an incredible surge of support. his opinion poll ratings have fallen a bit recently but still, he is still able to draw a decent crowd. when this campaign began, there was unprecedented public anger against the political class. in other countries, that may have expressed itself with the riots or the rise of a dictator. not here in britain. hear, we go liberal. the lib dem leader is making the most of his last day of

campaigning. first a tory seat and then an assault on one of labor's northern towns. the latest polls show a split in support. the question is, what he can actually deliver. even if they get as many votes as labor, they are only like -- there are only likely to get one seat that every three labor gets. how this nick clegg think his campaign has gone? >> would you describe yourself as a revolutionary? >> no. i would not make such statements.

i am a very passionate reformer. >> my own view is that you cannot turn the clock back. you cannot return to the loss of patronizing culture where you have a red team and a blue team. that has changed. let's see what happens tomorrow even if the tories cut a small majority -- >> you have 24 hours to wait. just wait. we are off on the clegg battle bus. [inaudible] the reporters believe he will transform politics.

>> he is very clever but trying to pin labor of the old parties. >> their heyday was a century ago. " exactly. >> and has a substantial portion of the popular vote and a number of states but if that happens, they could easily fade away if the conservatives get an open majority. things will move so quickly that this may fade away. >> nick clegg's tore and in sheffield, home to his constituency. also where a fateful rally was staged in 1992. is this your victory rally?

>> he is staying positive till the last. >> do not let anybody tell you it cannot happen. it will. >> the truth is, only a hung parliament would enable the lib dems him to deliver on their promise of change. >> if anybody is in doubt of house -- of how high the stakes will be tomorrow, only has to look to greece. the measures necessary to sort out the mess have generated such anxiety and anger that there were riots on the streets which took the lives of three people in athens. as we report, the stakes are rising all the time.

>> four weeks, the greeks have -- the ashes smolder and today it caught light. three people burned to death. the streets of athens released in teargas. -- wreathed in tear gas. the bailout bill was designed to put an end on the sovereign debt crisis but it has not. although the deal is bigger than initially designed, few people believe that the greek people stand for the levels of austerity demanded. the bailout gives them access to $110 -- 110 billion euros. under the deal, greek vat rise to 23%.

there will slash bonuses, public-sector say to the tune of 5.4 billion euros. the greek economy will shrink 5.8%. to get the bailout money, they have to get this to parliament by the end of june. the greek parliament was visibly shocked at it. the p.m. said this is where violence leads. this is where political responsibility takes hold. for the market, even if the unrest blows over, a bigger problem remains. >> this package will only survive their needs for the next couple of needs and then there is still a huge mountain of debt and interest burden to pay and it will probably not have much growth, if any. it is more likely the recession will continue. if i think the markets are also looking forward to putting this over for the next year or two but then what happens? >> global markets have been falling as the details of the bailout filtered through. if it can push breeze into

recession, it can do the same with portugal, spain, and ireland. people say spain is what frightens them put it is too big to save even if the political willpower can be found. its deficit is smaller but their growth projections are considered to be rubbish. that spread is the highest it has been since the era was formed. the credibility of the euro itself is under pressure. the greek bailout will cost the german taxpayers. the german chancellor has to sell the deal. >> this is needed to secure the financial stability of the gyro. we are protecting our own currency when we act. >> if it is not stopped in the very near future, you can see more problems developing in the banking system and throwing the euro zone back into recession.

that could make the whole government situation a lot worse. >> britain stands outside the arose own but our guess it will be bigger in percentage terms than that of greece. the danger facing them could push the country into a double- dip recession. it is worth remembering that the greek prices were restricted with the incoming government discovered but the national accounts or wrong. >> there was one remark which all the main party leaders came out with today. it is what they say toward the end of every election campaign. there is only one poll which counts and that happens tomorrow.

it is no less true because it is a cliche but the only evidence we have of what the public will say is a series of opinion polls conducted throughout the campaign. " let's look at the polls going back to the start of the campaign and see whether david cameron can have any confidence that he could get an overall majority and go to the door at number 10. you can see the conservatives on 38% with labour with 31% and the lib dems lower. look at this remarkable ramping affect on the lib dem vote. this second -- it is suddenly a tussle for second place. 28% for the labor and 27% for the lead dems. -- lib dems. where does that leave david

cameron? does he have any chance of keeping all the way to downing street? here we have downing street. at the far and is the door of number 10. he needs paving stones. here they come. each paving stone has the name of a seat on it. these are the 116 seats that the conservatives need for an overall majority in the house of commons. will the hamptons southwest, conservative for decades, tony blair took it in 1997, they need that. as you go down the street, it gets harder to win. where have the former minister standing down.

can the conservatives get them? the poll suggests they come down as popular. they do not get the extra ones they need. there is an additional problem for conservatives. as they came down the street, there were a number of lib dem seats they needed to take. cornwall north. richmond park. normally, as they advance, they would be taken but the lib dem surge may protect the seats against the conservative advance. david cameron needs more labor seats to get further down in this direction. as he tries for those six early receipts, there are better protected against the conservative advance but the thrust of all of this is david

cameron does not have enough to come to the doorstep of #10 and go through the door with an overall majority. this extraordinary election takes place with nobody knowing how it will turn out. the talk is of a hung parliament. we have not seen anything like it in a generation since harold wilson. the man who was his principal private secretary wrote to this confidential account of what happened. he is in westminster now. lord armstrong, if a gordon brown or not to get the largest number of constituencies, could he remain as prime minister? >> he could explore whether there any means by which he could make a coalition or an

understanding or of arrangement with the liberal democrats such as to give him an overall majority or an understanding which would give some assurances to carry on. >> how long would he have to do that? >> as long as it takes. it is up to him. he remains prime minister until he resigns. >> where is the justice of that? >> the justice would be, i suppose, that as he himself has been saying, was a conservative majority. he would be putting that at the head of affairs in the house of commons. >> constitutionally, could david cameron be at the same time trying to assemble some sort of group sufficiently large

to give him an overall majority? >> he certainly could. he could be talking to the liberal democrats or other groups to see if he could conjure up or put together a package that would enable him to have a majority or, i suppose, if he had the largest number of seats, he might decide that he would do what mr. wilson did in 1974 and run a minority government. i hope that he could make arrangements on each particular issue to enable him to get through. >> this is a very british way. it comes down to the queen and what she is asked to do. given the sensitivity about involving her in politics, how do you keep her out of it? >> the prime minister remains the prime minister until he resigns. if he does resign, it is his duty to recommend the queen who

she should send for as his successor. she is not bound to accept that recommendation but he has a duty not to put a recommendation forward which is unlikely to reach a working success. >> what i am getting at, is the suggestion being made that nick clegg would not necessarily want to do any deal or ad hoc arrangement but he might consider such a thing if another person were to be leader of the party. >> it would be up to him. the queen would be bound to leave it to him to sort out what that position was. he is the prime minister and so long as he stays there, he continues to be the prime minister. he would need, no doubt, to consider with his colleagues whether to stand down or make

another arrangement possible. in 1974, mr. heath would not have been prepared to do that. >> from the civil servants point of view, are there any advantages to dealing with parliament or an ad hoc arrangements? >> i should say that there are more disadvantages and advantages because it means that arrangements have to be made on each issue. we had the arrangements in 1977 to 1979. it does not make fort the size of government or a clear line. -- it does not make for a decisive government or a clear line. what is your instinct about the result? course the big problem we have is there are so many uncertainties, particularly, as

you saw in my package today, when the large number of voters that are reporting have not decided yet. we also do not know the effect of all these mps who have stepped down because of a crisis. i think it will be a very patchy election. i think we are going to find that there is not the uniform swing we have seen in other places. we will see a lot of surprise results. we will see how they were managing to hold on. as an example of a possible surprise, we have been hearing from both labor and conservatives that the chief nick brown is under a lot of pressure from the liberal democrats within the newcastle seat. at the end of the day, david cameron will become in the next

few did he begin in the next few days. >> there is some in the soil behind you pulling funny faces and doing funny walks. i think he has gone away now. >> i think david camry will probably become prime minister and the next few days with the caveat of all the unknowns i mentioned earlier. >> for the possibly less time in this election, the panel is considering every political possibility. do any of you have any idea what will happen? >> it is a good story. it is going to be a bad day for the labor party. they have held up the campaign

reasonably well but they will lose a lot of seats. the swing would not necessarily justified. the liberal democrats may do less well than it seems they would to a week ago and vote terms but a lot better. >> are you surprised it is so close to call at this stage? that is the surprise of the election. given 13 years of labor and the mistakes and the sentiment against labor. i am surprised there is any doubt. >> it is closer than it should be. >> i want to ask you before these people cut you off, is there any remote possibility of

a liberal tory deal? >> i.t. thank -- i think that the will of the nation will be revealed for us. it will give us something to go on. personally, when i looked across the country and see how many councils are working together, there is a fight to win on and london to wrest control from labor and what will probably end up will be an alliance. there are some sticking points and it will always come down to policy in the end. there is no point in it being based on personality or emotion. you have to get these very

rigorous policies that you want. nick clegg it off with the policy pledges and they're there for a purpose. >> he said the package is full. >> all or nothing? >> it may well be. >> you do not really believe that. >> i think if you look north of the border and how it is in scotland, there are incredible packages that have to be delivered on. it was on the basis of policy. >> in 1974, labor and the conservatives came very close to each other. that is not going to happen. there is going to be a very big gap between the conservatives

and the labor party. they will likely get more than 300 seats in the liberal party made it more than 200 but there would not get a huge number. i did not think it will necessarily produce a coalition situation. they will have to make concessions on policy. it is unlikely they would -- >> why should the tories go with the lib dems? i did not think there is anything in it. the question is when and if there would need a majority. >> as its strategic matter, if i were a liberal democrat, i would prefer the conservatives to win a small majority. >> that is the interesting thing. it will not be a majority. it is roughly just over one- third were under one-third. that is not a majority. >> one area of speculation, what happens to gordon brown if the

labour party comes third or second? >> if david cameron is and number 10, normally what happens is the leader -- >> can you consider him the leader of the party if he comes in second? >> the chance they could do a deal with the liberal democrats then he might hang around. i cannot believe, he has been in power for 13 years. i would want to go anyway. >> but to deal with things we know about. i would like to look back on the campaign. what was the highlight for you? >> i think it has to have been the bigot comment because it was like an episode of "the thick of it." it was clear that what influences elections much more than we thought was the expenses which meant the conservative party was running against the feeling that you are all the same and that was not change.

nick clegg seized that. he has not necessarily capitalized on that as he could have. >> besides the ballroom dancing which was a treat, this whole election, my basic view is whatever the polls were in january would not change and i thought this would be the same. nick clegg popping up in this first debate and suppressing everybody is clearly what made this election) that it took away from david cameron who was relying on the fighting. it was suddenly taken from under him. everybody had to recalibrate. i do not think it can burn cut it right after that. i think nick clegg has not had a response to doing so well put it shocked the liberal democrats. >> my highlight was the

extraordinary sense after the leaders' debate. we nick clegg all nick clegg but the nation did not. -- we all knew about nick clegg, but the nation did not. for me, it was this sense of young people registering to vote. >> i thought that was really striking. and whatever happens, they grow into it. >> they engaged in politics for the first times in their lives. >> there are 100 students completely engaged in the debates. >> the debates were critical but i think the beginning of the debate was very interesting. a feeling of tremendous alienation against politics. >> all of these parties are refusing to talk about, in any detail, what they will do about this ridiculous, glaring deficit.

>> that is going to be an extremely serious problem. the point made after the third debate, they did not seek a mandate for economic changes. that is going to be a problem. >> if i were a conservative, i would make that a very big issue. everybody relaxes tomorrow. what the conservatives want to say is to get constitutional issues, that democrat deals, we challenge everybody to support us. >> i think all three parties have been open and saying we have only felt a bit of the black hole and we know more. they have all played the game as far as they can. >> those are the questions --

coming through an e-mail all the time for every program being run on the bbc. they are asking about the budget deficit. we want to hear some answers. i do believe there is a genuine danger of anchor because there is no mandate. >> we ought to be calling for politicians to have more detail. >> it is a different election. >> it will all be revealed, maybe it will not be revealed. thank you. now to the last of our memos to the minister. politicians have droned on endlessly how about how the media is too interested in personality and not engage in of the policy.

they do this by refusing to tell us how that are going to solve some of the most difficult problems. they have gotten their up twopence -- comeuppance. sir humphrey gets to grips with the labor manifesto. >> it is always a pleasure to read party manifestos, especially if you have a taste for fantasy fiction. they are a remarkable example of creative writing. such a pity that you have to convert them into tv's legislative documents. still, that is our job. what does the labor party have to say about immigration? budget? no. numbers?

no. it takes? no. so unpoetic. people need to know that immigration is controlled. excellent. after all, the rocket in the stratosphere is controlled. what have we here? at the heart of our growth plan is the commitment to a high- speed rail line. i think we have a figure for that some more. hear, yes. $30 -- 30 billion pounds. where will that come from, i wonder? the scheme is due for completion in 200032. i must book a ticket on it to celebrate my 80th birthday. the department has noted the government's bold and imaginative commitment to a new high-speed rail network and will be conducting pulmonary

investigations for engine tisane, financial structures, and our mental safeguards, commercial abridgments and health and safety considerations with immediate effect. freedom of information. oh, dear, dear. we strongly support measures that improve the transparency of parliamentary institutions and government. they cannot say we did not warn them. i think there is a way to clip its wings. we fully support the government's commitment to transparency but we should point out that meeting with information has already cost 30 million pounds.

given the critical state of the u.k. finances, we recommend it be capped to say 2 million pounds per year to be allocated by the department of committee. which i shall chair. house of lords reform. it is so nice to meet an old friend. it was promised 13 years ago for until i wonder when it will actually happen. i bet it is on a dead heat with a new high-speed rail line. the biggest budget deficit and britain's history and a forecast that getting onto 1.5 trillion pounds. they say table salt but not exactly how. -- they say they will solve it but not exactly how. you do not want to spoil it, do you? which you can see all three demos on our website. if you want more, it is at a theater until the 13th of may. the candidates have been making

their final push is for both. the volcanic ash cloud from iceland has cost thousands of two plays. hundreds of flights have been canceled. flights from dublin and belfast will remain grounded. attenborough airport opened earlier this evening. engineers working for bp have succeeded in blocking one of the sunken oil rigs and the gulf of mexico which is caused a massive oil spill. a plan by the potential to ask for $14 billion pounds and extra cash. the crew needs the money because they want to buy the asian operations of the insurance group aig. the dow jones also closed down.

whoever emerges the victor tomorrow night or friday, we know one person who has had a good time and he is not trying for anything as volcker as votes. -- anything as a vulgar as votes. signs his name the dark lord. he often seems to think he can do a lot better than the chosen. ♪ >> not for the first time, boy george is sailing close to the wind.

you know what a shrinking violet i am? i hate hawking the limelight. i'm quite okay. thank you, very much. thank you. [inaudible] >> i just hate hogging the limelight. do you know the prime minister?

>> you do. >> i do indeed and i know the truth. >> i am afraid you're have to go -- i am afraid you are just going to have to wait for the answer. >> i just hate hogging the limelight. thank you, very much, indeed. >> the sun goes with a version of the chemist obama poster this time with david cameron. apparently our only hope. cameron is the prize is the front page of "the guardian." he is not endorsing him. the have come out with complicated suggestions about

the left of center arrangement. "the daily telegraph" shows a shot of david cameron. "the independent" the people's election. it is a summary of what has happened. "the daily mirror" goes to david cameron. that is all from news night. there is no program tomorrow but we will be back on friday. good night. >> british voters had to the polls tomorrow to elect a new prime minister. and learn about the issues online at d.c.'s ban video library. watch what you want, when you want. you can watch election results

tomorrow afternoon just before 5:00 eastern on c-span3. >> a debate for the special election in pennsylvania's 12th congressional district. they are running to serve out the remaining term of john murtha who died in february. the debate is being held and richland high school and is co- sponsored by the johnstown "tribune democrat." this is one hour. >> good evening and welcome to this debate that features candidates for the may 18, special election to fill the until term in the house of representatives. i will moderate tonight's debate with my partner who is editor of the johnstown newspaper. we are happy and proud to be

able to co-sponsor tonight's debate. the debate will be one hour and it will feature opening and closing statements from each of our candidates as well as questions from both the moderator's and members of the audience who are submitting written questions. our candidates drew lots to determine the order of opening and closing statements and questions. we also want to point out that we did invite the libertarian party candidates to join us. he indicated he would be here, and he is here, but not quite sure we -- what we are going to do now. [laughter] quite sure we -- what we are going to do now. [laughter] i am sorry, sir. if you just wait for a second.

let's at least stop here and tell you what is going to happen. we will be asking you a series of questions. we will be posing those questions, some of them will come from us and some of them will come from members of our studio audience who are submitted questions in writing. the candidates that is the question will get two minutes to respond and the other candidates will have one minute to respond. our opening and closing statements was -- opening order -- order of the opening and closing statements was predetermine. we will begin with their opening statements. >> thank you. thank you for putting us on. this is wonderful that the people around here get to hear

the views of the candidates. i have to commend richmond school district. this is a beautiful auditorium. i am happy to be here. i have been traveling this district throughout this campaign. i have been traveling this district for many years working with people and talking about different things and trying to bring people together to solve problems. what people are most concerned about, what people are talking about, is jobs. what is going on but the economy? is the economy going to improve? will my job still be here in the next year or so? will my children be able to stay here? that is why i have a job plan which means ending unfair trade agreements, giving tax breaks to companies that pay little boy wages, ending tax loopholes for companies that ship jobs overseas -- companies that pay littlvable is.

i was born and raised in our when comeuppance of an epoch of my mother is from canonsburg. my father is from uniontown. i went to iup and graduated which is where i met my wife who has a speech pathology degree. we live in johnstown. my wife is a teacher where my twins go. there are fifth graders. you can see, i am western pennsylvania all over. it is in my dna. my problems are your problems. my issues are your issues. what i am talking about is the issues. this campaign is not about washington d.c., it is about washington, pa. it is about johnstown. that is why i am running for congress. thank you. [applause] >> thank you.

>> thank you. thank you for hosting this event. it is great to be here. as you know, this is my home town. i worked in my father's photography studio. i delivered newspaper for the "tribune democrat." i worked at a busboy at surf and turf. it is the work ethic i learned right here in johnstown that allows me to start a business that ultimately became a success. i have never been in politics before but i believe this country is in a fight for its very life. the entire country is now watching this election because of what it now represents. this election represents a battle that is between bigger government, more intrusive government, more regulation, higher taxes, and balanced budgets, fiscal responsibility, and a bright future for our

children. the choice you have before you could not be more clear. it is a choice between a career bureaucrat who hopes to attract a job to the district and a proven job creator who knows how to create them. you have a choice between spending away your children's future or fiscal responsibility. you have the choice between somebody who supports nancy pelosi's health care bill and somebody who will go to washington and fight to repeal it. let me be clear. if this bill stands, this is what it will mean to you. it will mean 500 -- half a trillion dollars in new taxes. it means taxpayer-funded abortions. and if your interests truly live with this district, why will you not support in repealing this bill? >> thank you. the first question is determined

by lots and goes to mr. burns. the that congressman was a staunch supporter of the johnstown area. as you campaign for the right to replace him, when you carry on the legacy of that support, regardless of whether you agreed with murtha on policy? >> first of all, neither one of us, whoever is elected, nobody will be able to replace john murtha. he was chairman of the defense appropriations committee. of that being said, i will fight to create jobs in this district. we talk about some of the earmarks, like most americans, i am against wasteful spending. it is hard to say that bulletproof vests for the troops is wasteful spending. it is hard to say that armor plating for humvees is wasteful spending. if the earmark process is going to survive, it has to be open,

transparent, and the american people can support it. there is currently a moratorium on earmarks and both parties. that is because it is still not a process the american people can support. we need to come up with a process that is open and transparent. i would fully support continuing to work to continue the defense industry. you have to keep in mind, neither one of us will be able to replace john murtha. we have to send somebody to congress who is not only looking to attract jobs but has a real world experience in creating them. i happen. [applause] >> you have one minute to respond. >> thank you. will i go forward with

congressman murtha's legacy? absolutely. what i see as the job of a congressman is to advocate for the people of the district on every issue as much as you can. as my opponent has said, neither one of us is going to be congressman murtha. he was able to do things that many people will never be able to do. what he had was a fire to support this district. he gave his heart and soul to this district. what i can promise you is when i go to congress, i will do everything possible to create an environment that brings jobs, that creates economic development engine like he did and to carry on the things that he did because it takes a lot of work and people working together. thank you is very much and i will do everything i read everything in my power to carry on what john murtha did. [applause] >> you have 30 seconds to rebut.

. . i oppose the health care bill. there is a provision the was not in the bill, the average wait effects. but that it, our hospitals are in danger. immediately let the to congress, i will go to work on.

my first party is always jobs. it is about economic development. mccurdy would be to work and my proposals to revisit nasa and the most favored nation status to make the environment by care -- back here it usable by american workers. the best workers in the world, if they create a livable jobs -- jobs that pay a livable wage, because the time -- it is time to start building the middle class of the weakened live the american dream, and unless you are -- it we have the coal industry here and solar power companies down and mt. pleasant, we have when the energy of band

have been spurred, and we have nuclear power. western pennsylvania could be the energy capital of the world going forward, and we need delicate that and take care that and work your heart because that to be the jobs in the industry of the future for our children. thank you. [applause] >> one minute. >> and a priority has to start with creating jobs in this district. in addition, we need someone to go to congress that can help put the brakes on this liberal agenda. i can tell you that even over the summer there is a very good chance that an amnesty bill will be brought up in congress. i would be opposed against amnesty for illegals. they are bringing up the whole idea of cap-and-trade that would not only be terrified -- terrible for this company -- country but devastating for this

district. and i would be working hard to do everything i could to repeal the health-care bill and replace it with true an incremental reform. [applause] >> mr. critz, you have 30 seconds if you like. >> i am opposed to cap-and- trade. i was working in west virginia talking about how devastating it would be with the coal industry. it is a reason why the united mine workers and the coal industry are supporting my candidacy. [applause] >> next question goes to mr. burns. i plan on making the twelfth congressional district appealing to the younger district to keep them -- under generation to keep them working here? >> they are only leaving because they do not have adequate

employment. in addition to the few things that i mentioned about a better infrastructure, we need to stop punishing job creators. in this country and this administration, any old time we have job creation occurring with corporations, small businesses, we seem to punish them with our tax policies. we need to give tax breaks to job creators. whenever i meet with people across this district and and the industry, but of the farming industry, the energy industry, the banking industry, they all tell me that they are the most regulated industry. every industry is overregulated. we need to reduce the regulations across the board to allow these businesses to prosper. the last thing is -- we set on a gold mine right here. we are sitting on a gold mine

with huge reserves of coal and natural gas. we have the two largest coal mines in the world in this very district. and we set on so much natural gas, we could power the country for 100 years that is right here. the best thing we could do to promote these industries is to get out of the way. our own senator casey has supported the bill that would give sweeping new regulatory authority on this industry. it would be terrible. we have to be allowed to take advantage of these vital natural resources and we literally can be the energy capital of the world right here. and when we are, there will be thousands of jobs created and as long as we have jobs, our young people are not going to want to leave. [applause] >> mr. critz, you have one minute. >> i will talk as. yet to create an environment and

work for people to stay here. you have to work in your educational institutions. we have st. francis and others. we have a multitude of higher education that these kids can go to and we want to keep training them so they will stay here. a lot people are talking about quality of life. we have to support things like that trails, but water, we have for necessity. i could not read that, i'm sorry. 30 seconds -- i am sorry. this is a multifaceted issue. you have to come at it from all directions and that is what we have been working on for years. it is not just jobs but other things and quality of life plays a huge issue for young people. you have to keep supporting all these different factors. thank you. [applause] >> mr. burns you have 30 seconds if you wish. >> the last few questions that

come from the audience and we thank them for providing them. >> we go to mr. burns. >> he chose not to use that. the next question goes to mr. critz. >> that sounds like a loaded question. one of the things that i proposed and talking about the federal budget in the issues of the federal budget is that i think agency-wide, every federal agency, the american people are hurting right now. the economy is hurting right now. people are worried about their jobs and their happening -- having to tighten their belt. i propose not to pick and choose which agency but every agency in the federal government should start looking to be more efficient. one of the things that things

they should do -- during the clinton-score years, they were able to shrink the size of government through attrition for it when someone retired, they did not replace them. they had to do more with less. this is one way to shrink the government we're not giving out raises but saving money at the federal level. another way that i propose is that i think the u.s. congress should share in spain. i propose every member of congress, every house member, every senate member, which should cut our budgets by 5%. we should feel the people's pain. this is how we can start shrinking government. talking about social security, i made a pledge that there would be no schemes to manufacture the privatization of social security. i'm going to stick to that. [applause] >> 60 seconds, mr. burns.

>> thank you for it when it comes to social security, i am glad the question was asked. the first thing i would like to clear up, because my opponent is making more all south -- accusations saying that i was for privatizing social security. those accusations were completely false. but there is a pattern here and he apologized last week for all specifications. another topic. let me be clear -- i am not in favor privatizing sells a security. -- in privatizing social security. people are concerned and rightfully so about any social security money going into wall street. and we've seen what happened in wall street the last couple of years. i can understand that. i think social security needs to be shored up. we need to ensure that the people on social security and expected to go on to social security are protected and that we make a bipartisan effort in

congress to solve the social security problems so that it is there for future generations. [applause] >> mr. critz, 30 seconds if you wish. >> just to clear things up, i was up for last week hosted by a democrat and he answered a question saying that all options are on the table. to me, that means that privatization is one of them. he had a fund-raiser with new kaine -- who was the architect of privatizing social security. i think my opponent should sign this pledges i did that privatizing social security is off the table. [applause] >> next question goes to mr. burns. this is another question from

the audit. do you believe we deserve better than smear campaigns? why are why not? >> let me take 15 seconds to address this mere campaign that is coming from my partner here. [applause] [blooing] >> i want to be very clear to everyone, i am not familiar with the pledge that he is talking about but i pledge to all of you that i will not support privatization of social security. just so that is clear. [applause] and that is consistent. i think the interesting thing about this campaign is the accusations that come from my opponent based on complete lies.

i never once said that i was for privatizing social security. i never once said that i am for 23% tax increases on the middle class. factcheck.org already said that that was a lie and he already apologized for it. i grew up company in western pennsylvania. i created jobs and employed people in western pennsylvania. i sold the company and it still exists in western pennsylvania. most of the jobs -- many of the jobs i created are still in western pennsylvania. i never shipped any jobs overseas and i would never intend to ship jobs overseas. it is one more light coming from the other side. -- one more lie coming from the other side. [applause] >> mr. critz, you have one

minute. >> he talked about smear campaigns. i have been under attack this entire campaign with smears and innuendoes. it is one thing when you talk about calling someone a liar and telling the truth, tim burns said that he did not support a fair tax, the so-called fair tax. let me read you this -- in may of last year's, he did an interview and said, "i would like to see that their tax ultimately implemented." exposing that is not a smear campaign. that is the truth then that is what my campaign is doing. >> mr. burns, you have 30 seconds. >> i am glad he brought that up because that "was taken out of context. that i would love to see the fair tax implemented.

over the current irs structure, the current tax code is broken, but i do not believe it is practical and i do not support it. if you would finish reading the rest, i very clearly say that i do not support it. [applause] >> beginning wit mrh mr. critz, what is more important, the environment or protecting it? >> industry and the environment has to work together to create an environment where we are not creating jobs to save the environment. we have to work together. we want to live on this planet and have a plan that left for our children. earlier i talked about the different things, quality of life, the trails, the water -- these different things that young people looking to do.

but there times where the federal government and the statement government had moved too quickly. that is why i propose the cap- and-trade bill, because the government is moving too quickly and it is going to cost us jobs. that is why i came out against the cap-and-trade bill and why i support the entry industry in western pennsylvania. if you think about it, the united states is not only an energy issue but a national security issue that we are so dependent on foreign sources for our energy. we need to get off of this, accusing foreign sources for all this energy. like i said before, we have so much resources and intellectual property and southwest pennsylvania and many did capitalize on that. that is the industry of the future. i think that could be that jobs for our children, our grandchildren, and going on. thank you. [applause] >> one minute, mr. burns.

>> it is safe to say that no one in the room is for a dirty environment for it certainly i am not and i do not believe that any of you are either free we want to protect the environment -- no question about that. but we do not want to prevent industry from being able to prosper. especially in this region. here is what we really do not want. we do not want people in california like nancy pelosi dictating to us what we can and cannot do in this district. there is a radical agenda going on in washington -- when you talk about cap-and-trade and other extreme regulatory burdens that they want to place on pennsylvania and on this district. there is a balanced but i can tell you that the state of pennsylvania are the ones that should be regulating this. they are the ones that are closer to the industry and they understand the issues. we cannot let washington dictate

to us what we can do in this district. [applause] >> 30 seconds, mr. critz. >> i have heard nancy pelosi in this campaign so frequently that -- [applause] i want to remind my opponent that this campaign in the 12th district of pennsylvania -- is in the 12th district of pennsylvania. we keep on talking about washington d.c.. i am worried about washington, pennsylvania. i am worried about the towns and people here. i will be the independent voice for the people back in western pennsylvania, not worried about what is in washington, d.c. [applause] >> mr. burns, this question goes

to you. are you willing to work with the opposing party in congress? would you vote with the opposing party on legislation? >> i would love for the other party to come to my way of thinking. i would absolutely work with them. every time that that occurred. that being said, i can tell you that i will not compromise because of my principles. but there are areas where i believe conservative democrats can certainly help solve some of the biggest problems and social security is one of those. i think i will not rollout working with conservative democrats just because they're democrats. i will not compromise my conservative principles. let me address one thing about the po -- pelosi issue. she is now working to get marked critz because she is a nice

person. she is working with president obama and she is raising money for him because she knows once he is elected, he will be one more vote for liberal agenda. do not kid yourself. she is not doing it because she is a nice guy. [applause] >> mr. critz, you have one minute, sir. one minute. >> tim, you do not know me very well. nobody tells me what to do. i do what i think is right, and you'd better believe that i am going to work with everyone in congress, i do not care if they are liberal, conservative, democrat, or republican. it is of the best interest of

the 12th district, that is my job. that is why you sent me to congress. that means working with everyone. that is how we solve problems. you do not draw a line in the sand that you are in this room or in that room. we have to work together. that is what makes this country strong. and that is what i am going to do for you people, i promise you. [applause] >> 30 seconds, mr. burns. >> i would like to point out that if you are truly a man of your word and you will not let other people tell you what to do, i wonder why you are strangely silent when you said you were against the health care bill because he did not tell anyone about that until after the bill was passed. i believe that the request and nancy pelosi, because she was working so hard to get it passed. >> the next question goes to mr. critz.

the question is don't ask don't tell has captured the nation's attention. what is your position, and why? >> add mall in who is the chairman of the joint chiefs of staff has said that it be repealed. i defer to his judgment. >> don't ask, don't tell has been working for the last number of years. we're fighting multiple awards. there is no reason that i can think of why we would want to change this policy right now, and change the policies of our military. i think it would be distracting and i am not in favor of changing don't ask, don't tell. >> mr. critz, you have 30 seconds if you want. >> from my perspective, the chairman of the joint chiefs of staff, admiral mullen, he loves

his country and he loves his military. i would defer to his judgment. [applause] >> the next question starts with mr. burns. both set -- both candidates have said you are pro-life. what are your plans to reduce or eliminate abortions in america? >> first let me explain how i got to this position. my mother was 16 years old when she had made. she dropped out of high school, and it was very difficult. they did not get a tremendous amount of support from either one of their parents when they got married. they have a difficult life. i can tell you that they made it through and they always taught me the importance of life. i am pro-life. that being said, i think we need to do everything we can in order to preserve life. i would support overturning roe

v. wade, and i think we need to continue to support organizations that support unwed mothers and programs like that so that we can show women that they're all our tentative store version -- there are alternatives to abortion. [applause] >> one minute, mr. critz. >> i think we have reached the watershed. we've actually agreed on something. am i allowed to say debt of -- ditto? i also would support the overturn of roe v. wade. like him, i think there are alternatives. i do not think abortion should be used as a form of birth control. [applause]

>> will move on. we have numerous questions from the audience concerning cap-and- trade. this one is the most blunt. would you promise on camera to never raise my taxes? [laughter] [applause] >> let me tell you something. part of my jobs plan is the elimination of a tax loophole for companies that ship jobs overseas. [applause] the bush tax cuts for the very wealthy are about to expire. in this economy, we have a government that needs revenue streams. i think they should expire. what i can promise you is that i will fight like heck to never raise taxes on working men and women.

>> mr. burns, 60 seconds. >> let me answer that question very directly on like my opponent. i will pledge to never raise your taxes. [applause] in fact, early in my campaign i signed a taxpayer protection pledge, and this loophole that he talks about, i can give you a copy of that pledge perino where does it talk about any loopholes whatsoever. i will not raise your taxes. [applause] >> back to mr. critz for 30 seconds. >> i can promise you i am not going arrays any of your taxes, it just says. -- i am not going to raise any

of your taxes, just hehs. -- just his. >> the cost of education is rapidly increasing. what will you make our students dreams are reality? >> college education costs -- just like cost in virtually every other thing -- has been going up across america. one of the things i think we need to be very careful about is in this latest health care bill for it the government is actually taking over student loans. and that is a bad thing. we need student loans to be available. we need this money to be available so that the students can borrow the money in order to go to college. that process has been in place and it has worked. there may be some improvements made to it but the government

takeover of the student loan process is a very bad thing. i would like to repeal that as well. >> one of the issues at hand is that pell grants, which of a lot of students including me relied on over the years, have not kept up with inflation. i think this needs to be addressed. if it had not been for programs like the pell grant program, i probably would not have been able to go to college. what we're saying is so many students coming out of college now with huge amounts of debt, it is crippling them for the first couple of years of their white, maybe the first decades of their life. we have to work to find ways to make college more affordable, whether through scholarships or whatever. though france is a key issue. they have to keep up with --

pell grants is a key issue. they have to keep up with inflation. >> 30 seconds. >> mr. critz, it is likely that pennsylvania will please -- lose up to two seats. political experts believe that that 12th district will likely be the first to be wiped out. assuming you when the special election and again in november, why should anyone believe that your effective if you only serve one term? >> my goal is not to serve one term. the message i have been talking about, and jobs, working for the people back here, it will serve me well in congress and serve the people of this district very well. if we are unfortunate enough that this district is move or taken away -- and i don't think anyone argues that the line to going to change no matter what

happens. my goal is really something i've been talking about frequently, trying to solidify any sort of rectangle out of this district so that ndf -- so that this is a rectangle and weaken solidifies said that there will always be a congressman from this area. we cannot predict what is going to happen in the future. all i can do as did the best job that i can for the people of this district and then rely on that going for it. -- going forward. >> mr. burns, one minute. >> i think the realities of redistricting are such that it looks like the republicans will control the state house in that will control redistricting. i think that if a democrat would win this seat, it would be a very good chance that the district would be eliminated. however, i believe that a republican wins the seat, that nbc lost would probably occur

somewhere else. i am hopeful that this seat and this district will remain for many years to come. >> mr. critz call you up thirty cents $3 i've heard this argument and i find it puzzling part where mr. burns lives is the stone's throw where tim murphy lived. my perspective is is that if he wins, this district is gone. [applause] >> next question begins with mr. burns. how would you represent the district in tackling the national immigration issue? >> the immigration issue, i think, is one that needs to be addressed immediately. we have to stop giving incentives for people to come here illegally. what are the incentives? first of all, illegals know that

if they stay here and they can stay and other radar, eventually we will give them amnesty. we need to stop that. we need illegals to understand that illegal means they not -- they are not allowed to be here. they should not be here. the other thing we need to do, we need to eliminate this idea where if you come here illegally and you have a child, that that child is automatically a u.s. citizen. we are giving people an incentive for coming here. that has to change. i looked at like someone breaking into your house, all of you here this evening, if someone had broken into your house, that is illegal. what the law stated that now that they are in, you cannot keep them out. you have to give the mostly. and if you have the -- and if they have a child, you have to send that child to college. that would not make any sense. [applause] that does not make any sense for your household and it certainly does not make any sense for the

united states. >> one minute, mr. critz. >> certainly we have a major issue in this country. we have approximately 12 million illegal immigrants in this country for the first thing we have to do, we have to seal the borders. let's stop the inflow of illegal immigration. the illegal immigrants that are here should not be supplanting those who are following the rules. the illegal immigrants that are here have to be moved out so that they can follow the process the right way. thirdly, employers -- if there are no jobs for these illegal immigrants to come into, it will be a little bit different 3 they will not be coming in here because there is no place to work. the employers -- there has to be some sort of sign or retribution to the employer that employs the illegal immigrant. this is not a one-sided argument.

without the employer, the immigrant would not want to come -- the environment would not be so bright for them to come and. -- to come in. >> mr. burns, u.s. 30 seconds. >> i would agree. we do need to get tough on sealing the borders. we passed a bill -- we said we would build a fence. we actually need to do what we said we would do. we need to use the structures and technology. we need to get serious on border security. [applause] >> next question comes from the audience and goes to mr. critz. are you in favor of term limits for congress? >> there are term limits. they're called elections. [applause] >> you still at one minute and 50 seconds. >> i could saying.

-- sing. >> i guess the thing that you could just vote them out. that was before i actually decided to run for congress. since i have run for congress, i come to learn that the special interest groups in washington, the large special interests, they do not give the republicans are democrats depending on how they feel, because they have no ideological souls. they give to both parties the same. they tried to keep the incumbents in office. we do have a two-party system. it is not republican than democrat. it is incumbent v. the challenger. the system that we have in place to date makes it nearly impossible to challenge a sitting incumbent. that is why all parts of 95% of incumbents get reelected. i think it is essential that we have term limits. it is good enough for the

president of the united states, it should be good enough for congress. [applause] dollar next question. -- >> next question. mr. burns, the special election will require the winning candidate to spend more than $1 million per a lot of that money is coming from outside the district. why should the voters believe that if you win, you would not be beholden to the powers that are providing much of that money? >> i can tell you because of the reasons why i got an this race. i am not a career politician. i am not spend my career in government. i'm a businessman with two children. i got into this race because i believe that this country is facing significant challenges and we need people from outside of government assistance based

on what is best for the district and what is that -- in the best interest of the country, not necessarily the best interest of getting reelected. i have no desire and intent to retire from congress. that is why i am ok with term limits. i can tell you that i got into this race because i know that i would not be of a look my children in the eye and let them go up and tell them i did nothing about it. that is why i got into this race. how can make one promise to you, and i only make this one promise, and i know i can keep it. i promise that every decision i make in washington will be done with my children and your children and grandchildren in mind. [applause] >> mr. critz, you have one minute. >> i am thankful that i have been receiving widespread support from both democrats and

republicans, liberals and conservatives. the reason i receive the support that they know they i'm going -- that i am going to beat the independent voice for western pennsylvania. the work i have done all over the years has shown people that i am on it. i have worked hard for it what i say is what i mean. have been a working man all my life. what you see is what you get. people know that and i appreciate their support. [applause] >> i really think in these trying times, but the challenges that we face, but the out of control spending in washington, we have got to send people that are from outside the system. we have to. we know that this does not work. we have tried it for so many years. we have to give people that have basic business principles, basic home finance principles like you all have big you cannot spend more money than what you taken very you do not and the government should not either.

>> this question is for mr. critz produce stand on the proposed employee free choice act? >> when i go to congress, i am going to co-sponsor it. [applause] can i get another water? >> you have one minute 50 seconds. >> i have another minute? >> you have another minute and 50 seconds left if you wanted. >> i think you are right. >> you know. the middle-class has been squeezed of the last decade and longer. one thing that i know growing up is that if it were not for unions, if it were not for the democratic party, many of the

things that we enjoy now, minimum wage, 40-hour work weeks, health insurance -- we would not have them now because corporate america is only concerned about profit. they're not concerned about working men and women. that is why i will always be a supporter of the working men and women of this nation. [applause] >> mr. burns. you have one minute. >> i fully support the right of workers to organize. us fully supported. but i can tell you, i also support the right to a secret ballot. every single one of you have the right when we're going to vote, hopefully for may, on may 18. i fully support the right of a secret ballot when it comes to union as well. i think it is important, and this idea where mr. critz seems to want to punish corporations

and talk about corporation. i can tell you that there are plenty of corporations right here and johnstown that are employing hundreds of people here in this town three corporations employed people. we need to not want to punish them, but to support them. [applause] >> are you done? >> we're down to our final two questions. that will come from the audience. thank you for sending out fantastic question this evening. this will begin with mr. brant candidates said that they would create a "good paying jobs." would you consider a decent living wage? >> i consider a decent living wage of wage will you can raise your family, if you can hopefully work hard, and save your money if you want, and spend it however you want -- buy

a home, by car -- but i do not think it is for the federal government to determine what your living wages. -- what your living wage is. the beauty about america is that if you want to succeed, if you want to work hard, then you can achieve anything you want. and that is the spirit of america. that is what we need to preserve. those of the principles that we need to fight for, not government punishing people because they want to do well, because they want to do better. those things -- those principles do nothing but hurt america. we can do better. i believe that we can do better, and i believe it is the right of every american to achieve whatever they want to. that is the duty of this country. -- the beauty of this country. [applause] >> i'm ashley told that this is the final questions about i

apologize that. you have one minute to answer that question. this is the final question before closing statement. >> the way that i will say this is that there was a time in my life before it came to work for mr. murtha that i work on temporary jobs. there were times that i had to work five or six jobs in a week. you would work two days here and nights there and days here, because i needed to do all of that to pay the bills. my wife and i were young. we had some bills to pay. that is the type of thing that i think we need to protect against. when small business creates jobs, you can work one job and support your family and you can buy your home and maybe get to go on vacation. that is a livable wage. that is the american dream. that is what i support. [applause] >> gentleman, thank you for your

candor tonight. we're going to deviate from our format just the bedford we're going to allow the libertarian candidate three minutes for his statement through there was a mixup in scheduling that caused him to be late tonight. but he did agree to be here so he will have three minutes to an effective his opening and closing statements, and then we will go in the prescribed orders as we chose before with our closing statement. you have three minutes. >> my name is deemed 0 agoris -- demo agoris, i am your liberty candidate. the way to do this is to read contain our out-of-control government. it is totally outside the bounds of our constitution, and when i first took this obligation of running, i the lot of thinking.

i did a lot of investigation. i have come to have a great respect for our founding fathers. they established a form of government that should be contained within our constitution, and the reason why is out of control is because our government officials have gone and outside the bounds of the constitution. we have to put them back within the bounds of the constitution, and the only way that you can do this is to vote for liberty candidates. i came across two short videos, 18 minutes long and the other 10 minutes long, please go to my web page and click on them. you will start to understand where we have to go. let's say. and if we do is start

containing our government, not only will be able to not increase the taxes but we will be able to lower the taxes. [applause] and when i started this process of analyzing our government, i came to the conclusion that it has to be an educational thing for me and for the people. one minute? and i remembered my mother, i was at 24/7 caregiver to my mother, and i went into the room one time, and she was a schoolteacher associate tried to educate me on everything. and then one time she started talking to me about the birds and the bees.

i went to the education on the birds and bees. i'm going to start to try it teach you about bad government and i wish all of your mother's a happy birthday and happy mother's day. and that they mothers are super people. they should have a whole month, along with our farmers, and the farmers that are the producers of food. thank you very much. >> and now we will go to our closing statements. mr. critz, you have two minutes to close. >> again, thank the richland high school. i think this was a great form for use it to hear our ideas. i tried to relate what my beliefs are, what the issues

are, and i think the one playing that i think you can take home with you is that regardless of who you agree with, you support, you should know that i care. i care about the people of this district more than anything. i have been doing that for many years with mr. murdoch. i want to do it for you as your congressman. talking about creating an environment for jobs, helping people live the american dream. when i started working for mr. murtha, one of my regrets is that i did not get into public service earlier. i love this job because i love the people here. i want to do the things that are needed to make the environment better, to make life better, and that is what the congressman is supposed to do. he is supposed to be your voice in congress. as i listen to the arguments and the spirits from, it all comes down to -- the house of representatives is the people's house.

this is your voice in congress. i want to be the voice for you because i will listen. i will work for you. what you're from the tea party, what you are a liberal, whether you're conservative, i'm going to do to think to make -- i'm going to do the things to make things better backyard. i'm going to listen to the people come through that door, no matter what their beliefs are. i promised to represent everybody in my congressional district. that is what i can promise you. i ask for your support on may 18. thank you for your support. >> mr. burns, u.s. two minutes. ladies and gentleman, please. mr. burns. >> this evening we heard some different opinions on complex issues, but i think this race is rather simple. you want someone who has worked in the real world. you want someone in congress to

-- who knows nancy pelosi and president obama or do you want someone who will stand up against them? if you think america is on the right track, and this is all that this district has to offer, then i am not your candidate. i refuse to believe that this is the best that this district can do. we have to use the natural resources, we have a natural resources and a great work force, and we have the willpower to literally become the energy capital of the world. i believe that this administration is taking america in the wrong direction. i do not believe that congress should be focusing on taking over the greatest health care in system -- health care system in the world, they should not focus on cap-and-trade and giving amnesty to illegal. mr. critz believes that this is the best that this district can do, because he did that. i think we can do better but it takes a different approach.

remember, we do not want to send someone to congress who hopes he can attract a job. we want to send someone who brings to congress -- send someone to congress who understands what it takes to create them. i appreciate it. i appreciate being here. thank you so much for hosting this event. god bless you remember, on may 18, you can vote for me twice legally. i would appreciate the support. and thank you again so plunge -- so much. >> mr. burns, mr.

. .

[captioning performed by national captioning institute] [captions copyright national cable satellite corp. 2010] >> this was a low number compared to the other measurements that we were using, and this is something that we could track. but frankly, this was less important than the other measures, because they seem to be more realistic. this is more of a stress test, where instead of going through some statistical model, to see this 98% of the time and you will not lose more than a few million dollars, this seemed like this was less valuable to us. that having the head of the risk management group, and the unit

within risk-management say, if we have a decline in this particular area, in 98 or 2001, this is much more valuable than being told that this is 3.7 to $3.9 million. we had both of these. this is the more easily- understood and more easily- managed -- >> you have the scenario analysis, and this is a firm that is heavily exposed, to the housing and mortgage markets. what kind of scenarios did you use? obviously, you were caught on the downside. how do you explain a firm that is so heavily in one area.

and they were adequately prepared on the risks. >> we would frequently talk about running these models at the worst of these events, wherever the crisis was, and we were attempting to run the real- world scenarios that we have seen. the fundamental flaw in the industry, this is certainly an industry problem, is that this is difficult to think about the scenario that has never been observed. where are the parameters of this and the boundaries of this discussion? and so, when we have this analysis based upon the worst- available market issues, we were hoping to manage the risk profile to mitigate these kinds of things as well as the other things that the people running the risk managers might have

reason to see. >> did you ever have a scenario where the price of housing fell? >> not to the degree that they ultimately fell. >> i guess -- i just find this amazing, that we are in the distance -- we are facing the upside, and you do not contemplate the downside. >> we had many people in the firm who were experts, many people in the organization, that were seen as experts in the industry. and i have to say that i cannot recall any dialogue when there was a concern about the nation- wide issues with housing prices. there may have been regional issues, issues in the subprime market, specifically. the depth of the decline -- we

did not model clothes and we did not foresee them. >> let me go to a couple of other things that you have mentioned. you see that you built of financing model, and this was durable, over the financial cycles and surprises. what are these? >> there have been several. in my experience, we have the stock market crash of 1987. this was very surprising and we studied the way that the financial markets responded to this, and the way that we were able to finance. we look at the crisis of confidence that took place from 1987, to see how the financial markets were responding. 1998, and another similar, stress said area. how did the financing markets respond to those issues?

if we had a crisis of confidence, market stress for some time, if this was generic or specific to us, where the market, the access to commercial paper would not be there. we thought that the securing -- the secure markets would be there. >> and you were both in on this decision, with the nature of the short-term finance. what did you see that was coming to change this? >> this was an area of ongoing focus. this is an area that we -- this is not something that we did, every now and then. we were trying to balance this liquidity and in 2006, after a robust time in the market, and

we relied on the securities strategy, and we would pledge them. and as the business was growing, it was more difficult to be able to negotiate. the banking loans we thought the market strategy would fail. and we were securing the secure financing in advance of this situation so that we would not have to shift into this in a time of stress. >> there are some pieces of this that concern me. if this became a crisis, you think people would accept the collateral that we would have for the banking loans? >> we do not think that anybody

would want to stand up on that environment. >> regardless of the quality? >> most of the ice--- highest- quality collateral is out there, we would not want to have the corporate bonds and corporate securities, to borrow money at that time. the fear was that the lenders would be more comfortable with the collateral in their hands, and they are making more money doing it this way. and this was a much more sustainable model. and many other institutions in the industry, the independent investment banks, would have a similar model during this time. >> i will yield. >> another issue i have just been confused about. he would use these treasuries with people who were unwilling to do this with you.

>> this is a question that we were asking ourselves. we were surprised by the way that this was happening. looking back at this, i think many institutions that were involved in the overnight market were getting a lot of pressure about why we are taking this position, if there is a problem. even if there is the remote chance that there is a problem. and if the crisis will pass, we will get back. i think i alluded to the fact earlier about the investment banks and what happens when they get in trouble. the prospects for the overnight lender to be involved in the bankruptcy situation, where they will liquidate, i think this is something that most people do not want to deal with. >> why should they care about this? >> there will be a massive

liquidation and everybody will be doing this at the same time. >> you have described your spending strategy, matching the liquid assets with a long-term funding. and we have the concept of cash capital. how did you judge the liquidity of a particular asset? this thing that you are matching to find out that you get everything right. at the end of 2007, you had $20 billion in level-3 assets. and you have about 59 billion in the long-term debt. does this raise a significant risk of being able to finance your assets, and did the structure surface in time? >> two answers to the question. the level-two assets are corporate bonds.

these are not securities that trade on the icon exchange. they are very difficult ascertain the value. this is not really where the issue was. the assessment that we made about the underlying assets was based upon the collective understanding of people inside the organization that we're dealing with this on a daily basis. they were the experts in our firm, that understood the volatility of the assets. >> i want to turn to the hedge fund. why were you not aware of the problems in the fund, and why were you not able to take action against the collateral. >> let me think about this. first, we did become aware of the problem as soon as -- and as

soon as we became aware of the fund, and the problems, we began to take action. we received a monthly report, and so -- >> we had a report every month about how each of these funds was doing. and when the first bad news came out with the price decline, in the mortgage market, and this was dropping in different industries, the index, one of these questions that i cast around the firm was how hard these funds doing? we got the report that one of these funds was profitable, and the other was not profitable. and the quality of their assets with the positions that they had

-- this was successful. this certainly did not set off any alarms. and eventually, by some time in may -- and certainly in the spring, it became clear to us that these funds were, -- they were suffering losses. and investors were looking. diem and ultimately, as i have said before, the counter-parties began to call. the firm took a series of steps, to try to remedy the situation. we were asking the members of the firm to advise asset

management. and we ask mr. friedman to help on any of these issues, with repossession agreements, and the leader of the mortgage department to help out with the mortgage positions, where he could be helpful. we were talking to the portfolio management team, and the ceo of bear stearns asset management about actively reducing the leverage. >> i yield the commissioner and additional two minutes. >> what we have discovered when we talked to the people in asset management, is that they were able to reduce some of these positions very quickly. they simply put out a list which was the vernacular for the securities that they wanted to

sell. and they were selling them. this seemed like a good first step. they were continuing to do this. they came back and they said, we have put out another business. but we do not have enough bids just yet. we will sell more securities. and we are having a problem. what is the problem? we cannot actually get anyone to give us finding on the street. and this was a phenomenon that was surprising. and the more that we investigated, the more that it became clear that these securities that they were holding were in structured it, complex deals. and they were incapable of pricing in making bids in a matter of minutes or hours, they needed the extended amount of

time. and because the market was in disarray, prices were falling, they were not able to get their prices. they simply could not sell their positions. it became clear that the problem was much more significant than any of us have ever believed. and at that time, we shifted into meeting with the executives almost every single day. with the mortgage department asset management. we moved people over from the treasurer's office, and the legal department. we were moving people in, and ultimately, with all of those people, we moved away. they kept demanding the margins, and the prices that it -- that were put on these securities did not go down by the small increments, but this

was enormous. there was something that was 98 or 99, and then this was 80 or 70, were lower. there was a scramble by all of these creditors to get as much collateral as possible as quickly as possible. >> i would like to enter this report into the record. >> lindsey gramham? the microphone is on. >> you have said that bear stearns had given a lot of attention to the mortgages that made up their security portfolios. can you elaborate on what you did, to try to make certain that these portfolios had quality underneath?

>> i am not certain that i can testify to that, exactly. but i will try to answer the question. there stearns was in the business of securitized and a variety of different mortgage loans. we made secure the loans from the very high-quality borrowers, with tight credit scores. generally ones that would be too large for fannie mae or freddie mac programs. we made security mortgages that would be one step below the credit curve, all the way down to the various kinds of subprime loans. the most important aspect of doing this, and certainly one of the important aspects of doing

this, was making certain that there was full disclosure, but exactly what was the nature of the underlying loans. the market had an appetite for purchasing the different loans through the different yields. and the more credit exposure was riskier to the underlying collateral. this was managed by the investor. and we have the subordination levels that were required that would be higher. there are substantial differences between the different securitization. and our job as the underwriter of the structural transaction, and the loans and the transaction, was first and foremost to make certain that the loans that went in, they

were fully disclosed, and all the information was made available to the investors, and that this was able to match the description of what they were receiving. and we have the extensive diligence team that made certain that the information was correct. >> and what were some of the principles with the items of disclosure to the investment? >> i will do my best to answer that question. i want to make it clear to you, that the last time that i worked in the mortgage department of bear stearns was 1992. i have a general understanding of what was disclosed. and i do not think i can give

you a comprehensive answer. >> do you assume that the disclosure list was more or less the standard for the industry? or was this less expensive? >> i would assume that there was a standard. >> do you know, several years later, if your mortgages were of the same original estimates, did they stand up better or worse, or about the same as the similar portfolios that were issued by your competitors? >> i do not have any idea. >> you said at one time, i think in 2007, you advocated that the firms should secure more equity. and what was the reason for

that, -- >> we were hearing this from some of the lenders. people thought that we were meeting this, and this seemed like a logical approach. i was not involvei was in meetie executive investors, and i was reaching out to the executive investors. i was reaching out to find out how seriously this was affecting things. >> do you know -- and were you aware that there was, within the firm, some advocacy for increased equity, and what was

the argument about whether to pursue this? >> there was no discussion prior to my departure, -- >> bears stearns has based much of their conversation -- compensation around a return on equity. was there any consideration of whether to expand the amount of equity, to dilute the position of the current holders of the equity, a reflection of that method by which compensation would be handed out. i will be directing you to whoever can comment on this. >> i would say that we spent a great deal of time trying to design a compensation method and

this was not only for the most senior people but the senior members of bear stearns. we're focused on the profits for the shareholders. not only for the senior management, but the senior- managing directors. they have a significant amount of stock, going into these plans. all of these senior people had five years' worth of the stock at any given time. if we thought the best interest would be a race in the equity, this is not a factor about how the compensation was designed. >> what is the level for the highest level -- with the annual returns.

>> the compensation plans for the most highly-paid people in the organization was half of the total compensation coming in the form of stocks, that had to be held for five years. and the people that were also the senior managing directors were below this. many of our officers in the company, this compensation level is 25%. >> this came in the form of stocks and escalated. >> there is one clarification for the record. if you look at the letter from the center, the compensation was for the executive committee, and this would be based on the

companies adjusted after-tax returns. mr. wallace, thank you very much. >> thank you very much, mr. chairman. >> at this time, this is not certain to me whether bear stearns and the investment banks in general, and the banking system in general is a cause of the financial crisis. were a victim of the financial crisis. we have commented on some of the things that were said right here, and what -- but my view is about how we should look at this question. this is true that the banking

system is unregulated. but the results were not substantially different from the results in the regulated banks. we should not forget that although bear stearns had problems, they had terrible problems also existed with wachovia. both of them had some very serious problems at citibank just as the investment bankers had been having and other past members of the shadow banking community. there was some fundamental underlying cause that affected the regulated system and the banks are very heavily

regulated, as well as the unregulated system. this is for all of us to keep in mind. the estimation, this is that bear stearns was solvent. and they were rescued with government assistance, by j. p. morgan chase. and also, you expected that he would have a profitable quarter. this was in the quarter that you were rescued. in the first quarter of the new year, you were going to be profitable. >> this is true. >> in addition to this, you had billions of dollars and this is in the government securities and treasurys, this was getting hard

to finance. you have the billion dollars of treasury securities. were you aware of anyone else on the market. >> we are not certain of the treasuries would be financed, but we are certain that the market was growing increasingly difficult for most of the investment banks. this is in the repossession markets on a daily basis. i do not believe that this would be cut from the general plan. what's the you were able -- you think that you were able to finance the treasuries. >> i do not know. >> bear stearns is significant because this was rescued when this was solvent, and when this

was profitable. the implication of that is that any other very large financial institution was also going to be threatened. and this is not something that we can ignore. for the time at lehman brothers, there was the moral hazard by the rescue of bear stearns. that they were certainly going to be rescued, also. and when this did not happen, this is very shocking, and some people would identify this as the beginning of what we may think would be a financial crisis. the entire episode when bear stearns is rescued and this is

solvent, and they were having a profitable quarter, this is an interesting thing for them to be looking at. i would like to return, to what may have caused this problem. everyone who has spoken about the problem in the market has spoken about the mortgage problem. there was a huge bubble, in late 2006. and this began to come apart. and the mortgage-backed securities market began to disappear in early 2007. and this became almost impossible to deal with the mortgage-backed securities. we're getting very distressed prices in the market. i would like to ask you, first,

that you have some experience in the market. this ended in 1992. were you aware, as a member of the top management of bear stearns, of the size of the bubble that had developed in the housing market, by the middle and late part of 2010. this is discussed around the management? >> i would like to say a couple of things. >> you have said that you described the mortgage market as being extremely liquid and things were only trading at the distressed prices. i would describe this as only being accurate for a small percentage of the workforce. there is the vast majority for

them to function. and as we go through 2007, more parts of this became distressed. i know what happened after august. this was functioning and we were able to trade in the market. and virtually everything that we had -- >> including the subprime mortgages? were you aware of the time of the number of subprime issues that were in the market at the time? and what was the explanation going to be? >> i cannot estimate how good that this market was. i was generally aware of the growth of the subprime markets. and the growth of the overall mortgage market. >> there is affirmation that was received, about half of all the

mortgage markets. this was subprime or all day. and they were, you would agree, susceptible to failure, much more readily. then the sign mortgages were going to be. >> i would like to yield an additional three minutes. >> and certainly, the subprime mortgages are more susceptible to these problems, and all the more acceptable in general, and this is a little bit complex when you deal with some of these mortgages -- mortgages. this is something that the online bar wars are going to have to deal with. and i would suggest that with this commission, he would identify with subprime markets and the other markets. i do not know the percentage,

combined, because subprime -- this would have been much smaller. >> what i understand is that this is not an issue that was considered in detail. this is from those who were concerned with the kinds of risks in 2007. >> the size of the mortgage market -- and the delinquency rate, this was not something that was discussed in detail? >> in general, there is the level and in the business unit, this is the constant basis. i think that this is important to recognize that as we describe

the billions of dollars that were on the balance sheets, bear stearns also had billions of dollars and i cannot tell you exactly what the exposure was, but this change rather substantially. we had a very large, active and well-regarded mortgage research team, they did not talk about what happened in the marketplace. there were issues that were on the island, to the mortgage traders and the mortgage managers, all going to the executive committee.

>> what would you attribute, to the panic that developed in the market. in 2008. this is what bear stearns was facing. what did you attribute this to? >> ever since i left the industry, in 2007, and i put this going forward, i stopped paying close attention to the things that i needed to pay close attention to. i do not have an explanation for what happened. >> what about you? >> i yield the gentleman an additional one minute, to finish up the question. >> i do not think that there is

any question that the difficulties in the u.s. housing market, that these played a large role with bear stearns and other firms in the industry. >> faq to the witnesses. -- thank you to the witnesses. i would like to ask a couple of questions, and focus on something that is more specific. we have heard from the witnesses, aware they're talking about the worst-financial crisis of our lifetimes.

all of these witnesses seemed to hold onto the bathetic analogy that this happened without anybody doing anything wrong. without them doing anything significantly wrong. and they served most of their professional lives with bear stearns, which is an 85-year-old firm that was profitable for each of the three years of its life. until this was eviscerated in 2008. you have had two years to talk about this, to try to help us do our job, by showing what contributed to bear stearns. what did you personally do that you wish that you had not done, and what you wish had done, that would have saved money for bear stearns.

>> i would guess that there is barely a day that has gone by. at the level of what the firm could have done differently, this may be obvious but i tend to think in terms of money. i cannot imagine envisioning the situation that we have had, starting in the fall of 2007, when we were talking about borrowing money. they said that they thought that we were here to lend them money. i want to say that i wanted to

envision the world financial system, with a major financial institutions that are in the business of lending money. we're getting each other into the highly-rated financial institutions and i would like to say that i would think this was coming. i do not know how we could have done this. i am the believer that this is a significant portion. we have the growth of the subprime lending, and all of these things that contributed to this. >> the liquidity problem says that you cannot finance the assets on the balance sheets, and that this can be financed. and this will be landed again. >> this is a much larger issue.

this had nothing to do with bear stearns. we have the major, international banks, and they were not lending this to anyone that did not have money. this is very difficult for someone who was not there, living there to appreciate how this resonated through the markets. and this created a feeling of panic -- that is to hard of a word. there is the unwillingness to purchase the securities, and there is a general design in the markets. this is there as well as the lending markets. >> and there are the doubts about the quality of these securities.

>> someone has seen these references, that someone -- if some food is infected, you will not purchase anything. >> you have the nature of the assets, i do agree with this. >> and how involved were you? >> this is not what i did for a living. >> mr. specter? >> i was involved in this business in the late '80s. and from that time forward, i was involved with senior management. >> let me ask you, is there a report with the securities and

exchange commission. we will hear from them later on in the day. are any of you familiar with this. >> i am not familiar. >> i have never read all of this. >> do you believe that you were adequately regulated? this program has been abandoned by the sec. do you believe that government regulation -- the capital and liquidity, and the risk assessment is assisting bear stearns in surviving? >> this is a very difficult question. in dealing with the sec, the route this process, they have a knowledgeable people, with the

question and they showed knowledge of this issue. they were dealing with us for a great amount of time. this is difficult to see what they could have done differently. this is not that they were recommending us to do other things. we do this as a failing on their part, but they were generally comfortable with what we were doing. this is part of the issue that was spiraling through in out of control. >> part of the issues with the securities were suspect. this is all along the way. this goes back to the financial crisis. a number of the securities that

we have seen, under your direction, they were either mortgaged-backed securities were collateralized debt obligations, with the mortgage- backed securities, that were miraculously cut up, for these related securities. there was not enough to turn this through. do you believe that -- you should have known that the underlying elements would, at some time, come to everyone's attention to create the impression among everyone that the securities were worth less than represented. and that this eliminated the liquid people. >> the time is up.

>> we can do this very quickly. >> i was the chief financial officer of the company. this would not have been something that i would represent. >> some of these issues that we held, these were aspects that people would not lend against. this led to your liquidity. this is part of the liquidity lost. this is part of the mortgage securities, and others. >> only a small portion actually subprime, and these were the subprime loans. these were the prime majority of the loans, -- >> i cannot talk about what happened in 2008, obviously.

but this is consistent with my recollection. this is that the firm's and the market share was dramatically lower in the subprime area. this was great with the other primaries of the mortgage markets. >> and these were also broken down. this did not impact on the capital. all of those things -- nobody had any way to talk about this, in the end game. is this what you mean? >> the fact of the matter is that none of us saw the problems that exist in the housing market. and how rapidly we would see these defaults rising, and how quickly the home prices would

subside. we were missing this like many others but we did not foresee this at the time. >> i guess that i am batting cleanup. >> we are rotating in the commission. >> this is second to last. >> i am not certain that this is the right hearing. this is the shadow banking market and i think that this should be a hearing on what happens when there is too much leverage, and too much reliance on the short-term financing. for this to be a story of the difference in regulation between the different kinds of financial institutions, we have to understand what happened, relative to washington mutual and wachovia.

and they just failed in a different way. let me -- i will go to my question, because i am helping to teach a class at a business school, and we are talking about the financial crisis. what i have done is try to write down this story, of what i think happened to bear stearns. i would like to ask all of you to comment on this explanation of what happened here, and tell me correct this story. bear stearns was not one of the biggest investment banks. they tried to grow quickly to be much larger. they did this by increasing their leverage in the range of 35-one, were 40-1. they did this largely by betting on housing derivative assets. this was coming off of one sector. this was related to the housing

investments of this country. they relied on the overnight financing, with the short-term financing that was significantly cheaper than the long-term financing. the short-term financing is also riskier than the longer-term financing. there was a shift from the unsecured commercial paper, going to the secured overnight repurchasing. you have the added risk. there was the reduced risk from having the secured issues. there was a concentrated that in the housing market, and relying on the short-term financing. even after the housing markets pekaaked, they were not

deleveraging significantly, and they were doubling down on the vet's. this issue with the mets was failing, even though the financing was secured. bear stearns argues that they were profitable, some of them made adjustments that this was a credit risk and they would not roll over the purchasing agreements. whether this was substantiated or not, this runs against bear stearns. they argue that the liquidity, rather than being specific -- there is something that differentiated them because they're stearns came first. neither of them -- say that this was the firm-specific credit risk.

or bear stearns was more vulnerable. what ever reason is true, they are not prepared for the scenario in which they could get back with the financing. there was the intended liquidation, and they can do this only if the transaction was subsidized. if we could start with mr. mollen are zero and then mr. spector. -- mr. molinaro and mr. spector. >> i do not want to be critical of your assessment of this situation. i think that this is much more complicated, and i think that this is not a simple issue. this is not simply an issue of the shadow banking system.

we have to look at what was happening in the housing market. we have to look at the policies that were being adopted. they would facilitate the more robust housing markets, with housing ownership and the mortgage origination activity. this is from 2002 into 2007. and you have to look at the list of -- the use of the balance- sheet vehicles, and the factors that played into this issue. some of this is true. bear stearns was a relatively large investment bank, though was the smallest of the five biggest investment banks. this had a $400 billion balance sheet. and we were touching many other -- many other areas in the market. we touched many people who were buying the long-term debt.

the preferred stockholders and many other constituencies. >> and you said that i left out issues and elements of the story. and we see this level as incomplete. >> we did not double down, and we were pursuing the business strategy. we had a very diverse organization, and we saw this in 2006 with $9.5 billion in revenue. this is from the prime brokerage and other issues. >> it is indirect to say that there was a concentrated bet on these leverages, and that the housing crisis was declining. it is unfair to say that you could maintain the concentrated debt.

>> it is unfair -- and we have the large interest in the fixed- income markets. this was an industry leader for many, many years. this is one of the top forms in the business. this market came on, and should we have seen this coming? should the whole industry have seen this happening? and i guess that in hindsight we should have seen this. these were the issues that nobody could have envisioned. >> mr. friedman? >> if the gentleman will yield, briefly, is it possible to structure this so that he would respond to the question from the commissioner, and could you

find -- could we please talk about the additional questions in writing, because clearly, some of these questions are far stronger, and need a more complete base to get the answers that we need. can i put this question directly to you. can we answer these questions directly, in writing. there will be three minutes. >> i started to take notes in the middle of what you were saying. >> you will get these in writing. >> he made the statement that bear stearns made the decision, you see that the adjusted leverage, this is part of the loans and the other things that we had, this has been fairly consistent if not going down.

more importantly, the issue of bear stearns and their reliance on the overnight issues that have been used tonight, the reliance was to rely on the short-term financing only for the liquid assets. we were asking if they could finance bear stearns in the final week. i did not feel that this was appropriate. the last issues were able to be financed, even on the long-term basis. >> the issue here is that liquidity was tightening up across the board. why was bear stearns failing and

not the other firms? >> i believe that what you saw began with bear stearns. this was the issue with -- bear stearns, followed by lehman brothers. bear stearns was the smallest and this went first. lehman brothers went to second. this was the same effect that came through six months later. >> and you believe that there were no specific factors that led to the failure of bear stearns, either then the small investment banks? >> there was the perception that the mortgage-backed securities market was important for both of the firms. and this is a belief that is not particularly founded in fact. the idea was that these markets would destroy the firm. it was not known if they were

going to provide financing to the banks, and they were making an adjustment, that they did not want to loan money to this firm. >> they made this decision about these firms, they made this decision about morgan stanley and merrill lynch, and goldman sachs. >> this is not a generalized the quality problem. they are taking them back to the large investment banks. >> i would say that the lenders were doing a large degree of triage. they were starting with the firms that were most concerning. >> following up, i would like to submit a story that i told, and ask you if you could help me