john culbertson on states' rights. we will get an update from vermont senator bernie sanders on the financial regulations bill. this is "washington journal." . . .

host: and also with additional security stories here at home. we want to talk with you about that -- the evidence mounts and the car bomb plot. here are the numbers. our line for independents is -- this is the lead story always mentioning from "the new york times jet growing concern that pakistani militants will attack the u.s., partly because of the increased use of drones. the columnist on our program last week rights this morning in her column in the philadelphia paper, the new pressure on pakistan. she suggests here that all the

elements become clear that pakistan will have to clear no. waziristan of the jihadis -- before we get to your telephone calls, yesterday a big story on capitol hill with david obey, the chairman of the appropriations committee, announcing he would not seek reelection. "the hill" newspaper -- obey exit stuns the house. on the telephone with us is the editor with politics.com, out of wisconsin. is it also was a prize for the

state? guest: absolutely. he has been an institution for more than four decades. no one saw this coming. he expected a tough reelection fight, but was still favored. people did not see this one coming. host: we have a short clip from his announcement yesterday. >> but there is a time to stay, and a time to go in -- and this is my time to go. frankly, i hate to do it. there is so much that needs to be done, but even more frankly, i am the bone tired. i first put my name on the ballot for the state assembly in 1962, i was 23 years old and now 48 years later i will soon be 72. when i went to congress in 1969 was the youngest member of the house of representatives. host: wahhat was interesting was

"frankly, i am the bone tired." is that seeming to be the motivation? guest: yes, a couple of trends of thought. those who think yes, why would he not be tired? he has fought countless battles. he has achieved a major accomplishments. it has been a long time. some of his contemporaries or are leaving, or have died. but the other thought is, why is he retiring now? this is the middle of may, in a bad year for democrats. why didn't he retired back in december to give people, democrats a chance in wisconsin to rally around? this is the kind of seat with blue-collar democrats, the rural

democrats you think would be rife for being picked off by republicans and a bad year for the democratic party. it has been suggested that at he wants to retire after 2000, but stuck around after president bush. he has gone back and forth after that. he wanted to retire after the healthcare bill that was delayed until fall. he says that the congress kept screwing around, and now he wants to do it now. with the economy turning the corner and health care done, he thinks it is a good time to leave, but still leaves democrats and a bad situation for that seat. host: it has been getting national attention. give us a quick handicap. guest: it lets the floodgates open. anyone who wants to run in the congressional district will take a look at it. both democrats and republicans.

the seat has not been open for 41 years. if someone told me yesterday -- if you ever had a dream to run for congress, you better do it now. sean duffy has been the leading republican candidate for a while. dan was a long shot, lost of the last two elections. on the democratic side, everyone is focusing on state lawmakers. people like julia from the stevens point area. russ, the senate's majority leader in the wisconsin state senate. lawmakers like that would be the best jump in -- but i said there are district attorneys, attorneys, private-sector people. the race is wide open. it could be like the wild west,

kind of primary. host: it will be fun to watch for political fights. thanks very much. not only in wisconsin is a big deal, but on capitol hill. as you can see from this headline, prize chairmanship now open. this person was succeeded david obey. more junior members are also looking at the job. it is the money job on capitol hill with the committee having the power of the purse. let's return to the national security issues. i have a stack of stories here all connected to the times square bomb plot. our feed on this is from a number of papers.

the islamic hamamabad official s he received training. there is more about the young man who is a naturalized citizen who had a job with -- in new york city for quite a while. he was working in a conventional middle-class black. he then became radicalized. we will begin with a call from mark in maryland. caller: yes, i have a quick comment and then a question. my comment has to do with the politics of national security. what i do not understand -- we have seen this happen, the last

time, once again, with the previous bomber and the other terrorist from the african country, and this person. how is it in this country when the plot is discovered in the bombing avoided that the democrats are able to beat on the defensive backsand when the republicans, when 9/11 happened during the republican administration, they were not on the defensive. there is a pattern where the republicans immediately go on the offensive when situations happen. this plot was foiled. it did not happen. you can talk about the imperfections, but the bottom line is that it did not happen. so how do the republicans

managed to maneuver so that they always get the democrats on the defensive with these matters? host: in this particular instance was it foiled because of anything the government did? caller: that is a good question. the government did ketchum. the act was committed on a sunday, and he was caught on a tuesday. so, september 11 happened and the government has still not been able to catch osama bin laden. the fact is, the two plots that occurred -- the government caught the people involved. you can argue about the process -- hindsight is beautiful, but the bottom line is, the plan was turned around and he was caught. he was arrested. he is talking. they're getting information from him.

they are not torturing him. some of the politics of this always as the democrats on the defensive. host: ok, mark talking about the politics of national security. back to "the washington journal" -- the size of those two populations of pakistani descent is so large that makes detailed scrutiny of travel overseas difficult. there are more than 200,000 pakistani-americans, and more then 4000 britons of pakistani heritage. good morning, sammy. caller: that last caller does not nobody is talking about. he said the bomb plot was foiled and everything worked out. that is not true. if everything had worked in the

person who set the timer, and set up for a.m. instead of p.m., it would have blown up and killed thousands. democrats do not know what they're talking about, saying that it was foiled. it was not. the person almost got away. the democrats, they pour on the security. this is the third time -- the last, the bomber, the uh -- the underwear bomber, if his -- uh, uh, bomb had worked, it would have brought down airlines. host: more from "the new york

times." they were ordered to speed up their checks for a the no-fly list. the failed attack has proposed a flurry of other proposals to tighten security procedures. senator lieberman and republican scott brown proposed stripping terrorist suspects of american citizenship. next is a call from eugene, ore. on the line. caller: [obscenity [

host: one issues that officials are vigorously pursuing -- someone as financially sponsoring the man to buy the suv. the next telephone call is from connecticut, ruth, on the democrats' line. caller: what got me to make a phone call was the previous caller who said that the republicans always managed to get the democrats on the offensivdefensive. i think it is absurd. the taliban in pakistan, involved in trying to do damage -- but i think that we handled

it. the fbi, new york -- the whole thing, in an incredible way. the democrats have to figure out how to stop these republicans who win 9/11 happen, the democrats did not attack george bush for not stopping 9/11 when there was clearly information they ignored. it is just insane what is going on. the fact that for some years in a country we would not criticize the people in power when things happened to national defense. host: the twin stories, one of which follows up here -- a moment to celebrate. eric holder has been on rocky ground for months. that is since his decision last november to try ksm and the

federal court, manhattan which was quickly opposed by new york lawmakers. the attorney general will be up on capitol hill today, with live coverage on c-span3 and c- span.org.

the next telephone calls from baltimore, john, on the independent line. caller: good morning. it goes to show that the american public will believe anything and everything. we do not know what to believe. this story is getting weirder and weirder by the day. with the underwear bomber, there are already witnesses who said there was someone with him in a suit the got him on to the plane. host: so, you are skeptical of the whole thing? you just want to go on living your life? caller: yes, i am not afraid of terrorists. we have people here who are

preying on people who are not terrorists such as the oil drillers. host: the next phone call is from louisiana. dorothy, you are on the air. caller: yes, ma'am. good morning. i like to make a comment of belt all of this complaining and complaining, and constant blaming of each other. why can't we all just pull together and try to get along? they're not thinking about the stuff that happened during the bush years when 9/11 happened. that second plane was 20 minutes later. it did not come out of the club. they should have had all kinds of planes in the air to intercept it. nobody talks about that and i don't understand why not -- why no one talks about that. now they're complaining about obama because he was not 30 minutes, or what, earlier to get

where he was supposed to be? you know, we don't know what to do because nobody wants to help each other. it is always politics -- worried about getting in in november instead of worrying about what is good for the country. it is ridiculous. why can we just pull together? host: thank you. the new york tabloids have lots of follow-up story on this, as you can imagine. one is the photograph -- this was earlier, taken from cbs. there you can see the face of the suspect in the case. he partied in a tourist trap that became his target. "the york post" -- he"900 cop jobs.

that is how many cops would have been cut before his botched attempt at times square terror. back to the telephone calls, iowa, on the republican line. caller: i just want to make a comment on what i have observed. i am a retired army nco, and have been in combat in two different stores, both in afghanistan and in iraq. i have seen this kind of stuff before. what i see -- pretty much, the entire homeland security dropped the ball on this one. the guy had already set the bomb off. ages failed to detonate the to his own [unintelligible] -- just failed to detonate due to his own [unintelligible]

the weapon may have functioned. host: let me show you have done. you have a different take on this same concept from "the washington times" -- the lessons of gulf wars aid security at home. any comment? caller: absolutely, that is a good point. that kind of expertise is invaluable.

the fact remains that the bomb had already been set off. host: but for a watch full citizen, you are saying? ok, next up. caller: good morning. host: please go ahead. caller: well, i was wondering -- host: i'm sorry. the next phone call is from california, monica, on the democrats' line. caller: good morning. i do not understand as far as that fbi or cia having surveillance on the sky and they lost track of him. how did that happen? they are supposed to be the top guys.

somehow they lost track of this guy. he was already in the plane getting ready to taxi out. we had to call that the plane, back in. host: so, how would you voice our concern there? caller: as far as our people watching terrorist actions, as far as that, how can they lose track of somebody who lose -- is, uh, basically a suspect, about to take off on a plane? host: those are the articles that suggest changes in the no- fly list. it says that it is flawed -- and requires airlines to handle updates.

the suspected terrorist boarding of a flight on monday exposes a security hold the government has yet to close after spending seven years and a half billion dollars to fix the problem. back to the phone calls, mark from manhattan caller: i'm just listening to everyone and it always seems it goes back to george bush and his responsibility -- he could not stop the planes going into the building. this was something that had never occurred before and the united states of america.

therefore, the body was on guard. also, -- host: mark, let me ask you a question. a car bomb did occur. we just celebrated the oklahoma city anniversary which was a fertilizer-based car bomb. caller: no, i'm calling about those who are blaming george bush not stopping the planes going into the buildings. a holmgren person who was mad at the federal bureau -- we could not stop that. -- a homegrown person. if clinton had done his job and taking out osama bin laden when he had the opportunity to do so, which was well publicized on ab c, and he denied it, just like he denied having sex without woman, this never would have occurred.

under his administration he dropped the ball. they have the opportunity to take him out and a botched it. so let's bring it back, the whole thing back to osama bin laden and clinton. not bush. host: we mentioned earlier that some looking at links with the taliban in western pakistan are suggesting retaliation might be a possible motive because of the increased use of u.s. runs. here is the leader -- because of the drones. here is what the writer is reporting.

the next telephone call is from east newmarket, md., charlene. caller: i wanted to point out the similarity between the car bomb and the timothy mcveigh bomb. how he built the bomb was shown

two weeks ago on a tv show. i think this guy is just a copycat. tried to force the connection with the taliban in pakistan, probably to increase our war effort there. but i think this guy is an independent actor, a copycat. host: in "the washington post" this morning -- for obama, weekly tutorials in terrorism. it is often on a tuesday. obama heads to a white house room to explore terrorism- related subjects in depth.

next is the phone call from philadelphia, sheila, on the democrats' line. caller: i just cannot believe all the questioning going on -- well, the bomb almost went off. the fact of the matter is, what you all cannot stand is three black men oil this plot. the first one was the vietnam vet who spotted the car. the next was the president and eric colder, who let the royal canadian mounties got their man. did you cracker's ever catch your man? i think not, goodbye. host: next, marcia, on the republican line. caller: thank you for taking my call and i will ignore the

person on just prior to me. the point of one to make is that it is next to impossible for the police departments, the cia, the fbi, or anyone else to track these type of radicals, be they from pakistan or cincinnati -- does not matter where they are from. it is next to impossible to track them because of the loss of our own country. we're not allowed to profile people. that is the way it is. as far as him getting on to the plane and everything, the police to parliament deliberately allowed him to get onto the plane. it was not a failure. -- the police department allowed

him. they let him sit there and let the plane taxied to see if anyone would make contact, to see if there was anyone else involved. then they brought it back when it was obvious that all the people were on the plane and there was no contact made. so, if people knew enough about the story that they had read enough, or listened to you -- which c-span carries a lot of very good information -- and if they would listen to you on a daily basis, instead of once per week, catching snippets, and just hanging on to what they want to, then they would understand that that capture when done exactly as it should have. and if the bomb had gone off, god forbid, but if it had gone off as he had tried to make a it, there was nothing anybody

could have done. there would have been hundreds if not thousands of people maimed or killed. so, if we're going to do anything in this country to stop this kind of stuff, the police department, the cia, and the fbi -- their hands have to be untied civic and do their job. if it takes profiling, then it takes profiling. host: we saw that the president frequently asks about what makes someone convert to radicalism. related to that this story -- he had a clear background. quiting but terrorism analyst who has been a consultant to the government -- "these people do not look like or act like

terrorists." the next phone call is from charleston, south carolina, joe on the independent line. caller: i am and iraqi war veteran. something important that i talked about before, recognizing how dangerous ied's are --so we should be thankful it did not go off. and also thankful for the veteran who noticed that there was a problem. and the follow-up thereafter. the thing i told people before was that it is really important to know how big this thiis. we're fighting a war over there,

but the bigger problem is what and when we start having these type of problems as far as vehicles, ied's put on our streets. many people here do not understand the terrorist outlook. thank you for your time. everybody out there, be aware of what is going on in the world, and do not be ignorant to possibilities of things happening in your own neighborhood. keep a close eye out and be aware of these type of things. it is not serious until it hits home. we're very fortunate this time to have that not go off. host: jacked is next, from texas. -- jack. caller: i heard the gentleman

speaking awhile ago about bill clinton and his responsibility and why he did not catch a some of the modern. if we're going to go back and point fingers at people for doing things that are wrong, or taking responsibility, then bill we have to go back to ronald reagan did. we? when 250 marines were killed when a terrorist drove a van into the place where the marines were sleeping. i believe that is where it all began. host: all right. we will be bringing in the british election coverage at 4:55 p.m. we have been televising here in this country the three debates. it is the first time ever. here is the front page of "the

guardian" -- cameron eyes the prize. hear, gordon brown scramble for votes. the prime minister is trailing conservatives. inside the washington post, they have one of the ways people are trying to tally the outcome -- three different types of beer on tap. it is anyone's guess on the eve of the british vote. also, in a book with the washington post" thursday's elections could be a harbinger of what is to come for america. new movements and even parties that shake-up the political system. here in "the financial times" -- the late scramble to convince

millions of the undecided. james, give us a flavor. guest: well, election day is looking pretty confused compared to general elections of the past. if you look at the opinion polls that came up this morning, there were six and the national newspapers. they all suggest that conservatives are in the lead with 36% share of votes to be cast. labor is second with 20%. the liberal democrats are around 27% him. if that is translated into seats of the 650, then david cameron would have about 310, the largest party, but short of the overall majority he would need to govern effectively. host: please explain our dynamic for americans. you have cabinet debates with

three individuals. then americans can go to the poles and one candidate. but with the parliamentary system you do not vote for the guy at the top, but for your local representative. guest: yes, which you have here is a constituency-based system. the united kingdom is divided into 650 territorial battles. each of those constituencies as a contest between the three main candidates from the three main parties, and a few others. the person who wins the seat and becomes the local mp as the person who simply gets the most votes. traditionally, this has tended to be in most constituencies, a contest between the conservative party and that candidate from the labor party -- the two main parties. but it is an unusual time in the

u.k. or people of disaffected and many are turning to the third party, the liberal democrats. that has created complications locally. people are not certain how the whole thing will go. sometimes they vote to for the candidate from the party they really support, but sometimes they take a harder look at the local battle. hang on, if i support the local party, the labor candidate has no chance to win. so, i will back the liberal democrat. you tend to take a tactical approach as to how your vote will get the best result. host: are there exit polls in great britain? guest: yes, there will be around 10:00 p.m. in the last election there were extremely accurate. they close at 10:00 p.m. host: when will the results

likely be known? guest:you have around 10 or 12 hours for the individual results in all these constituencies begin to come through. it is as they come through that you get a sense of where the country has gone. it is often not until 3:00 a.m. or 4:00 a.m. that you get the chance to get a sense of knowing who has won. host: where will you be tonight? guest: i will be at home. as ever for journalists, you have to get the bounce right between enjoying the evening, and having something to write for saturday's paper. host: stories today suggest whoever is in the majority will have a tough time ahead. that is because of a huge financial issues of great britain.

was the subject debated often on the campaign trail? guest: not enough, is the short answer. we face a major financial budgetary crisis. it is 12% of the gdp -- that is high for the u.k. the u.k. is under enormous pressure from financial markets to bring it down. for the next six months or so you will see very difficult decisions needing to be made by the new government, cutting many prized welfare programs. one of the issues is that to push that through you need a government with a strong majority and a large consensus across the country. the risk is if you get a minority government with david cameron, very much short of the majority, the deepe36% of the vt

-- that is a very, very small platform on which to carry three major fiscal and economic change. host: it sounds like an interesting six months ahead. thank you, james blitz for the view of election day in great britain. we will carry it at 4:55 p.m. eastern time here. thank you for your time today. he has a story with a byline -- you can find it canft.c -- you can find its on ft.com. we are pleased to have sheila bair here to talk about her views of the solvency of banks, particularly in light of the discussion on capitol hill concerning financial regulation. she will join us shortly.

a couple more minutes for your phone calls on national security. next, a call from texas, on the republican line. [dial tone] here is an interesting story from hartford. part of the investigation was from the junk yard where license plates were switched. there is a reaction there. the crackdown begins on vehicle tax. the state reminds the junk yards to give old place to dmv. the ease with which mr. shahzad found a different plate to use has authorities concerned that other place might end up in the wrong hands. next, a call from connecticut, patty on the independent line. caller: hi, i'm more concerned about the betting that goes on

to make a person a citizen. also, the visas that bring these middle eastern men here. for college -- and then they end up marrying american citizens. also, about the oklahoma bombing. if you read the book by davis, you'll find out there was iraqi involvement. host: we're talking about the pakistan connection, possible leads. from the internet we looked up direct and overt u.s. aid and military reimbursements to pakistan. here are the numbers. there are many u.s. dollars that have been going in that direction over the past decade. the last call is from dallas, cathy, on the democrats lying.

caller: good morning. i am not sure what can be done. i heard people call in saying profiling, but if you will profile, they do let a lot of foreigners in the country because they say they come over here as doctors and nurses, what have you. they love a lot of cubans in, a lot of mexican-americans in, but if you are of black origin, there are very few. i understand about the man as the bomber on the plane -- but most caucasians, they say they want profiling, but how would they like to be profiled? i was born in 1952. i have been through terror. i know what it was to have dogs sicked on us.

sometimes americans need to step back and be more careful about who they send into the country. they keep saying americans are so stupid that we don't know how to do this or that. that timothy mcveigh they say he was a caucasian guy. we do have a lot of terrorists. some ordinary people are terrorists. host: we will take a break and when we return sheila bair will be here, the chairman of the fdic. ♪

>> british voters are heading to the polls today to elect a new parliament and prime minister. learned about the candidates and issues online. watch what you want when you want. you can watch the election results this afternoon on c- span3. >> this weekend, the entrepreneur on his book "the business of happiness." his documentary about the 1937 nanking massacre. >> i am confident we can come up with a nominee to gain the

confidence of the senate and the country. >> learn about the nation's highest court through the eyes of those who served their ,'through,s latest book "the supreme court." it is available now in the hardcover, and also as an e- book. host: as promised, the chairman of chairmanfdic, sheila bair is here to take your calls. let me begin with all the news from the concessions announced yesterday on the $50 billion emergency pool. it says the revision would give the fdic the power to run the

dissolution of failed companies and force creditors to take a partial loss in certain cases, among other things. explain how this new process would work? guest: it is basically giving us the authority to apply the process we use for failed banks to other large financial intermediaries who are not insured. this is the problem from the crisis. the fdic has very good tools to wind down in an orderly way. the headline institutions that got into trouble, the options are either too bailout or to put into bankruptcy. so this gives us the authority to break them up and sell them off the way we do with smaller institutions, insured institutions. we can set up a bridge entity to find it temporarily as we sell it off.

that is where the funding comes from, working cap to break it up and sold off. the issue is whether you get it up front from the industry, or borrow from treasury, and if there are any shortfalls. in the kind of person who likes to get the payment up front. but it was important to get bipartisan support for the bill. so, we will use a treasury line for a piece of it. we have seen in too big to fail we have seen some rating agencies said this will result in some downgrades of larger institutions. they have gotten a government backstop. host: we want to get to your phone calls. many of you have been following this. many of you have seen sheila bair in her role of the fdic.

you have been talking and writing about another aspect of this that seems to be a hot button. the derivatives amendment. it is suggested there has been a re-interpretation of blanche lincoln's amendment. can you bring us up-to-date? guest: yes, chairman lincoln had the intent to require the derivatives activities currently conducted go to an affiliate. that is an important step in the right direction. it came up at the last minute. we have been strong supporters all along of giving the fdic and cftc across the board, no matter who is doing the derivatives. the suggestion was that banks

and bank holding company should not do any type of derivatives activities. we think that needs to be thought through. not all derivatives are bad. interest rate derivatives -- we want them to manage their interest rate risk. some of that needs to be customized. so, this is an important step. at least we would know the derivatives activity would remain in a more regulated than you, a bank holding company. the banks do need capability to hedge their own exposures. this is an example that we need to make sure we think through what we're doing. many people are angry, and so my, but we need to lead with our heads, not parts. much of the anti-derivative sentiment is justified, but centered on the credit default swap market where there were

abuses. in my letter to chairman dodd and chairman begin we would like that there be stronger rules regarding cds'. i would support a ban on the speculative cs trading -- on the cds trading. we don't want to do something disruptive that ends up being harmful going forward. host: senator lincoln was on the senate floor talking about her provision. >> my provision seeks to accomplish two goals. first, getting banks back to performing duties they were meant to. secondly, separating the activities that put big institutions in peril. this provision makes clear that engaging in risky derivatives

dealing is not central to the business of banking. under section 7, 16, the federal reserve and fdic will be prohibited from providing any federal assistance and funds to bailout swap dealers and major swap participants. host: to performing the duties they were meant to perform -- guest: right. you're again, when a bank makes a loan they should, but there is interest rate risk, especially through a fixed rate mortgage. there is a prime example given the current interest-rate environment, there needs to be some corresponding hedging of the risk exposure the bank is taking. i think this is where we need more dialogue with the committee. it is going into what is appropriate for a bank to do, or

not to do. managing interest rate risk supports their function of making loans. some of the abuses in the cds market which did not occur from insured depositories, such as not with a.i.g. -- but it's still ended up costing us a much money. bear stearns, lehman brothers -- the cases on paper did not involve insured deposits. it is important to differentiate. we're always supportive of anything that protect banks anythingundue risks. we are concerned about the tool and that it could be compromised with this type of approach. it was an important step to acknowledge --

host: yesterday, the inquiry commission heard from bear stearns. there was a surprise endorsement from the former ceo on the regulation of derivatives. >> reliance on ratings to figure out what somebody's balance sheet look like, and then won the ratings fail there was no other way to distinguish who was holding risky instruments, and he was holding safe ones. so, specifically to your question, i believe that in all the bills i am seeing a trend. the details are obviously and boredom. but there is a movement to get many of these products -- the details are obviously important. there is movement to get these products into clearing houses or exchange -- and i think that is important for balance sheet. host: your reaction? guest: bear stearns was not a

depository institution. we have been strong supporters of moving standardized instruments into exchanges or centralized clearing facilities. we support all of that. we have probably been the most forthcoming in the bank regulatory committee in supporting that. it is not to say that all derivatives are bad. there are typically large credit transactions that would need a customized page. on the other side, some of the smaller institutions need customized risk-management tools. the size of the contracts traded are too large for some of the smaller community banks. we want to move as much as we can onto exchanges. those will only be where the product is standardized. there will be more need for

customized products. they are not all bad. we must differentiate from the instruments that have caused problems, overwhelmingly in the cds markets. it is not all the same, and not all bad. host: the first telephone call is from vermont, on the democrats' line. caller: good morning. ms. bair, i was reading in "the new york times" a few days ago, the number of bankruptcy specialists that were required for lehman, or bear stearns -- i'm not sure which -- and went into the hundreds of millions of dollars in fees. and they're not even finished yet. have you the staff and the know- how, and does the staff have the

know-how to handle a so-called too big to fail company? guest: yes, we do, certainly for banks, and we will build up our capacity and expertise for non- bank financial intermediaries, assuming the legislation goes through. one of the reasons you see some much and the way of attorneys' fees and other costs associated with the bankruptcy of lehman brothers, is that the bankruptcy is litigated among creditors. we are somewhat of a more efficient mechanism. because of the unique role that financial intermediaries plea. first, we can plan several months in advance. when a large institution begins to get into trouble we work with the primary regulator. we can look at their liabilities

and assets months in advance, getting asset valuations, developing market plans. we can set up for bridge- operating institutions. so you do not have abrupt interference with credit intermediation. it is not litigated. so you would not see the attorneys fees. it is called a one-day bankruptcy. it is a very efficient mechanism. in terms of the dollar-amount of assets, it is nearly $600 billion. we ensure very large institutions. we have moved hundreds of billions of assets through our failed bank processes. we will need to build up expertise, and will do that. . .

their claim had been paid. they are still waiting for their

claim. i think it is an inefficient process, especially for all claims. we try to process them very quickly. we are equipped to do this. we have been doing it for a long time now. i think it is a good mechanism. we want to make sure that the claims are paid promptly. >> our -- host: our next caller. caller: i want to commend you on your performance. insurance premiums -- congress had given them permission to skip it. i was glad to see your plan.

guest: we raise the assessment on a stick -- insurance premiums. caller: [unintelligible] one person is under investigation for money laundering, selling worthless securities. you pretty much declared they were too big to fail. shouldn't they be considered too corrupt to survive? john on on on on on on on on on on on on on and we are completely destroying the fate of the people by allowing these corrupt entities to keep going. -- we should not allow these

corrupt entities to keep going. the process that we use now -- if you have a larger bank holding company with a lot of potential activities outside of this institution, our process does not work. with this amendment that was approved yesterday in the senate bill and i have a high confidence that it will become law, these institutions will be broken up and sold off. we do not want to do bailouts. we participate in some that are necessary at the time. we need the tools going afford to make sure this does not happen. later -- host: later on we will talk about that the auditing of

the fed. guest: this is something we will not take a position on. our process is good. we have 160 people, which is quite large compared to other regulators. i kind of like it. it keeps us on our toes. transparency is always a good thing. we want to make sure we are doing the best we can. host: the next call is from kansas city, kansas. democrats line. caller: gritty get your conclusions that some banks are taking -- where do you get conclusions that some banks are taking too much risks?

please answer that so the audience can understand it, i would appreciate that. guest: we have colleagues at the fed. part of upper job is to make sure banks are making prudent loans. -- part of our job is to make sure banks are making prudent loans. if a bunt -- bank has taken a lot of bad bets, it produces more costs. it is in the interest of the economy to make prudent loans. we had a lot of unaffordable mortgage lending going on. we have seen the devastation of making loans to people who

cannot pay. host: after the market crash, there was a temporary raise in the amount of insured deposits made. and you anticipating that that will sunset? >> it is anticipated to sunset at 2013. this is something that depositors need to be made aware of. there is a chance this will not be extended in 2013. host: scranton, pa., independent line. caller: i have a question. [unintelligible] host: a call from fairfax, virginia.

caller: how much did the mortgage-backed security play in a financial meltdown, specifically the quality of the underlying assets. can you comment on that? guest: i think that is right. some perverse economic incentives -- a lot of the volume generated with fees being paid upfront. the mortgages were sold off to investors. there was little interest if it would keep performing, because they were being paid up front. that is a core problem. it must be properly structured to be a good thing.

banks need to maintain good underwriting quality even if they securitized the loans. the sponsor has to take 5 cents of that loss. these are all things that need to be done going forward. it needs better regulation to make sure origination standards remain high. an important source of funding through the population. host: you are keeping your eye on europe. here is a headline this morning. what are you watching? guest: it is a situation that

will not lead to dire consequences. europe understands this problem and will take all of the steps needed to deal with it. we should be taking a lesson from this in the longer term. many governments have become overextended. it is important to look at a deficit reduction plan. we have to be a responsible government and have a long-term fiscal plan that is a stable and prudent. we need to watch this carefully.

[unintelligible] there are entered -- interconnections to be aware of. banks must understand that pulling back unilaterally is not good. we must keep up our hands and evaluate the situation for what it is. this problem is manageable. host: a key vote to marshal the german parliament regarding a bailout plane -- plan for greece. we're speaking with thsheila ba. she has been at the heart of the financial response. next is a call from lake city,

texas. caller: the fbi, president -- one organization is doing the same thing. they are doing it with lenders. [unintelligible] i have a loan by fannie mae and one by centrust. guest: i think this is something that one person could address. they have strong lending

standards and underwriting standards. i cannot really respond more specifically. those are not agencies where the fdic gets involved. as always, if you have a question or issue with an insured bank that you do business with, you can file a complaint with them or the bank regulator. you can go to our web site and it will instruct you on how to file a complaint. we can get you to the right to regulate to. i wish you luck in your endeavors. -- richard to the right regulator. i wish you luck in your endeavors. host: a financial regulatory bill. if the housing giant and a lover

subsidizing or become small enough to fail, it will affect people that cannot pay them back. guest: i think one group was part of the problem. wall street was part of the problem. fannie mae and freddie mac did buy a lot of the mortgage-backed securities that funded these high-risk loans. i think fannie and freddie are good examples of too big to fail. they were allowed to operate in a way that was highly leveraged. they got into trouble. this is an initiative that needs to be dealt with. i would not put it all on them. there is plenty of blame to go around. there needs to be a fix to that. there is only so much you can do.

it needs to be tackled. this is an example of too big to fail. host: last call, sarasota, and again . caller: did you bring a list of the stockholders of federal reserve? host: what is your point? caller: our money supply comes from the federal reserve. they are in control of the monetary policy. you do not even know who the stockholders of these corporations are? that is amazing. everybody wants to hold goldman sachs responsible. they are nothing compared to what the federal reserve has. you wonder why the money is not on main street. it is because it is that the

federal reserve which is where they are stealing it from. guest: we are a government corporation. we are financed through the health insurance premiums that we assess on the industry. any losses we have -- we are governed by the tax payers and are very cognizant of that. we have insisted that the banks pay enough in premium income to us so we do not have to borrow from treasury. host: a big front-page story here. are you concerned about the stresses on the gulf coast economy caused by this? guest: this is an area that we are watching and we have ongoing

concerns. in situations like this, it is impossible for banks to have compassion for their customers whose businesses have been impacted by this terrible situation bo. we encourage banks to show flexibility. at this point, i do not think it would have a huge damage on the economic recovery. it is hard to tell what impact will be. host: birmingham, alabama, republican line. caller: i just had an issue to be cleared of or to be made clear to me. local banks and a number of a

circuits that do business -- when we made loans three years ago, the real-estate market was not quite as contracted as it is now. my local bank -- i keep getting surprises as well as everybody else. the response each time is the fdic is auditing everything we do. even though you have never been late on a single payment, your credit score remains high, if we cannot bring the collateral or pay down on certain loans into a certain range, the fdic is putting pressure on us to foreclose.

if we do not, they will put us in a sub-prime category. it is cause and foreclosures. i know some people presently the ted cash flow positive properties and have done a great job with them. because what the bank says the ftse is imposing on them, they will walk away from those properties when they make those payments on time. guest: we have a very explicit policies that we instruct our examiners that they follow. it says that if the loan is performing, it should not be criticized because the collateral has gone down. in power has -- borrower has the capacity to continue payments

on as long, they should not be penalized. we did not -- anytime a collateral falls, even if they have the repayment capacity, we will not criticize the loan. we do not do that. i think the policy statements are publicly available. you can go to ever website and access them. if they have a specific issue to deal with, they should contact our investment office in washington. host: please explain the implication of your decision to

approve the six month extension of one program on business loans? guest: it is part of our systemic powers. during the crisis, we sell smaller banks to small business lending. they typically fluctuate. a lot of instability was seen in those accounts. the market perceived there were large institutions. the smaller ones will not be bailed out. we work afraid that it would have liquidity failures. we instituted this temporary program.

the larger institutions working through the issues. the smaller institutions work through the aftermath of this process. we will review it again at the end of the year to determine if we will extended for another 12 months. there is an effort in congress to improve its we have up until perhaps 2013. it is better for congress to make these decisions. i think the program is needed for the committee banking center. we need to make sure we do not have unnecessary the cuddy failures. host: boston, democrats line. caller: i do not want to put you

on the spot. the kennedy library honored you and someone else about warning regarding a bubble coming. women think different lead -- differently than we did. you may be a little more cautious and look at the entire picture. i was wondering if you can comment about women and, do you know how many women are on the federal reserve? >> i do not know about the regional banks. some have been nominated, a couple of them. that is a good representation.

there are academic studies that show women are more risk averse when it comes to managing issues. diversity is always good and different perspectives and life experiences are good. host: massachusetts. a couple of questions are asked. guest: that is a good question. we are still untangling that.

let's talk about what it means to be bailed out. when an institution is built around -- bailed out, investors and creditors take the losses. we provide capital infusions and the preserve value for the shareholders and the bondholders are completely protected. a lot of that did happen during the crisis. i do not know the institutions you are referring to. some of them had small depositories. it is difficult to know the relationships in that. that is being looked into. host: they continue to ask

this ask guest: some are legitimate. there are many troubling things in the credit default swaps market. hedge funds have been around for a long time. there is not much oversight of hedge funds right now. getting back to the derivatives issue. in terms of some of the customized derivatives activities, i am sure they would

like to pick up some of that business. there is that in a sector that is still not there. it is important to understand in doing something, we forced inactivity. [unintelligible] you have to differentiate and hope for tighter regulation. host: new york, independent line. caller: thanks for having distinguished guests. i have some simple questions. in watching the hearings, and noticed there has been confusion over the fdic and the

oversight and o.p.s.'s/ . i am curious about separating your oversight and regulatory abilities. my second question is, does this new bill going through congress -- instead of having a new bureaucracy, will it put this under your jurisdiction, which i would strongly in favor of. you seem to be the only one that knows what is going on. i will take your answers off the air. guest: thanks, that is nice of you to say. they are the primary regulator for institutions. we are the primary regulator.

state-chartered banks are not members of the federal reserve. we are back of supervisor for all of them. we have the ability to be a second set of eyes and be able to come in and take a second look at areas where we think there may be some risk. that is our role. the hearings that were held, this bill moves toward strengthening our supervisory abilities. these are large and complex. they have the potential to have a broader impact on the rest of us in how they are conducting their business. host: the last call is from

cincinnati, republican line. caller: i buy properties. i am a realist a person. we want to get rid of speculative out of the market. that is what real-estate finance is about. we cannot regulate success. at what point, is it lot of the draw? -- luck of the drawback? guest: all speculation is not bad. there are some areas writ is inappropriate. and the credit default swaps market is problematic, because it creates purely economic

incentives. you are taking a bet that you want the housing market to get in trouble. that is what the incentive is. you may have an economic incentive for some to get in trouble, because you will get paid on that position. i believe credit default swaps need to be tightly regulated. we need to crack down in areas rear we have seen abuses. host: you are feeling encouraged by the state of the u.s. economy? guest: we are seeing positive

signs, especially in the banking sector. there are raising significant amounts of new capital. we have more bidders and the pricing is getting better. certain categories of assets such as certain mortgages -- the bid was 50-50-year. pr, three banks had to close. that was unfortunate. the consolidation will help moving forward. we had losses that were less than what we predicted. we think this is reflective overall of this. host: we will close on that encouraging note.

thanks for being here. we will take a break. our next guest is a congressmen i, a republican from texas. ♪ >> british voters are heading to the polls today to select a new prime minister. visit our c-span video library.

you can watch what you want when you want. you can watch election results this afternoon just before 5:00 p.m. eastern on c-span3. >> this weekend, he has a documentary about a massacre and what it means to own a professional sports team. this is sunday night on q&a. >> i am confident that we can come up with a nominee who will gain the confidence of the senate and the country. >> as the president considers potential nominees, the and about the nation's highest court through the eyes of those that serve them. the supreme court is a new book with interviews, photos with all of the justices, active and retired. it is available now in hardcover and also as an e-book.

>> "washington journal" continues. host: we have a republican congressman from texas. he is here to tell us about a new task force that house republicans -- the 10th amendment task force. i will remind people what the 10th amendment says. here it is. what are you trying to do with your new book? guest: to restore state sovereignty and individual freedom. we are so concerned about the direction of the country, the uncontrolled spending we have seen under the obama regime with the help of speaker nancy pelosi, the budgets have created

more debt from george washington to george bush. they have driven the level of national spending to put us on an unsustainable financial path according to the congressional budget office. we are headed in the direction of greece. we are deeply concerned about the financial future of the country and the intrusion of the federal government into our lives and taking over a whole segments of the economy. it is happening in an unprecedented way. if you apply core republican principles from our constitution, the knot will always untie itself. the constitution provides that all powers not delegated to the federal reserve.

a great way to illustrate the way our federal constitution works if you think of the water -- all of the rights and privileges that we as free people are given from the hand of god. and then we think of this second bottle. the water is the rights and privileges given by the hand of god and we the people, we use texas as an example, when we the people of texas created the government of a r-texas, we agreed to only give the

government only about that much responsibility. we reserved the remainder to ourselves as the 10th amendment tells us. it begins and ends with we, the people. it was a barrier between us and the federal government. we only gave them a little -- a limited amount of authority. when texas became a state, under the constitution of limited federal government, texas only agreed to give the federal government's -- that is too much power. this is the concept of the founders had. the federal government could only exercise those concerns trade the constitution was designed to make us one as to others in the world but several

to ourselves. the assassination of abraham lincoln, the radical reconstruction of congress, the new deal that loved to pass laws and say i am protecting children, we are fighting crime and are tough on crime. we need to take over general motors. we need to build the banks and take over the mortgage and automotive industry. we will require each american to buy health insurance. the federal government has become omnipotent. there is nothing left. there is no freedom that the government cannot take away from us. congress has become omnipotent. the path was left to the state and weave, the people, is self evident. there is a terrible abuse of power in congress under this

president and administration. they have gone into areas they have never gone into before. we want to restore the individual freedom of americans, the 10th amendment, which is there to protect our freedoms. in conclusion, what the congress can destroy by statute, we can restore by statute. it is our goal to pass federal laws. we will repeal and restorer -- we will repeal obama care and restore the americans' right to buy their own health care that is affordable. there are a variety of things that we can do. what congress can destroy a bylaw, we can passed several laws to return the power to the state. that is the purpose of the 10th amendment task force.

i will be drinking by the federal glass. host: new had a steady hand there. we are here to take your phone calls about the 10th amendment task force. the lines are running away. that begins with a call from cleveland, independent line. caller: in two dozen one, $5.70 trillion of the u.s. national debt. by the time bush got out it was $10.60 trillion. the whole economy was in a disaster by destroying the government from the inside. police defend that. guest: i am sorry the caller did not talk about -- there is blame in the bush a administration.

i am a fiscal conservative. i voted against $2.60 trillion of spending under bush. i voted against no child left behind. the state's reserve the right to troll public education. -- to control public education. you cannot simply focus on president bush. he spent too much money. the first bailout passed under him. i voted against that. we as conservatives in the house are working to elect a majority this november. voters are fed up. they are sick of government intrusion in our lives.

we are -- we need to lay the blame where it needs to be. it is not just president bush carried this president has created more debt from the time of george washington to george bush. host: which order users. guest: the power has gone to washington not the capitalists. the federal government is passing a law requiring us to buy health care. that is an intrusion of our personal freedom. it is not been done before. if the government can tell us to buy health care, there is nothing left. there is no area of our lives where the government cannot come in and take over. the democrat leadership of the house admitted that they pass

laws all of the time that are not authorized by the constitution. they said they make the rules up as they go along. it is broken. we need to restore the invention of the constitution. a key part of it is the 10th amendment. host: for our radio listeners, he has water bottles that you cannot see that he is. to represent the people and the state in the federal government. we have in the next call from the democrats' line. caller: i am confused about everything you are talking about. it seems that we, the people are forming a more perfect union. this goes back to let the civil war was fought about. the union was like the united states.

the constitution is based on a union of the states. what is better about this constitution versus the articles of confederation. the 10th amendment was the last amendment of the bill of rights. that is how important it was. i think he should rethink everything. you're undermining the entire country. guest: the founders' design to the constitution so that the only powers given to the federal government's was explicit in the document itself and the parent in the debates. even john marshall, who was one of the strongest proponents of a powerful, a nevada federal government -- powerful, federal

government said that all powers not specifically given to the federal government is reserved to the people and the states. this is self evident in the debates and the constitution itself. it is as clear as it can be. james madison, john marshall, thomas jefferson all worked hard to ensure that this power was not given specifically to the federal but to the people and the states. the war between the states which resulted in an omnipotent congress, the radical reconstruction congress, the new deal, we have a long history of congressman that love to pass laws saying they are helping education or getting tougher on crime. even the democratic leadership a admitted that they pass laws all

the time. most of what they pass a not authorized by the constitution. that is our concern. we want to avoid what is happening in greece. to preserve our independence, we must not let them load perpetual debt. we must make a choice between economy and liberty or profusion and servitude. we must follow the constitution and republican principles. no matter what the problem is, the knot will always under tie itself. no state can secede from the union. it is not possible. that was settled in 1865.

that is not even an issue. texas did reserve the right to join the union again to pay off all the debt that they had occurred. we kept all of the publicly- owned land, which was a good deal. there was oil underneath, which works to the benefit of our higher education. in one to allow -- divide into more states, up to five. texas chose to do so, it would require the majority of the legislature and the approval of congress. we get six new republican senators added to the u.s. senate with one stroke. there would probably beat some democratic senators from the valley.

the other three states will likely elect republican senators to the u.s. senate. texas can split into five states, but no one can see th s. caller: individuals like this is the reason why mainstream republicans are fleeing the republican party. he is choosing to inaugurate civil war again. guest: that makes no sense. i am talking about the preservation of the constitution as the founders intended to preserve your freedom and the right of your local elected officials. we advocate the preservation of the constitution and following it as the founders intended. that is all.

caller: that is not what i am receiving. the fact that you would flirt with the idea of breaking texas into five states. guest: i do not advocate that. it can be done. that is a fact. no one wants to reduce taxes in size. caller: [unintelligible] the fear of this president's, and i understand that change is hard and difficult. you are proposing these radical initiatives. you need to get over it. you are hurting the country.

guest: i am sorry you misunderstand. there is nothing radical about enforcing the constitution or limiting the power of the federal government to intrude into the lives of the state or your individual freedom. the federal government is in treating itself into areas it never did before, taking over our entire sectors of the economy. it is driving the country into an unsustainable financial past. you will see tax rates that cannot be afforded. the national debt will be 90% of the gdp in less than 10 years. we as a nation have unfunded liabilities. we are concerned about putting controls on the size, power of the federal government in ways that are rational. the response regarding the tea party is a grassroots movement out of concern to protect individual freedoms and put limits on the exploding size and

cost of the federal government. if you follow the constitution, the knot will untie itself. that is not radical. it is an important way. the tools are there. restoring state sovereignty and following the 10th amendment, we can make the government more effective. we can save a vast amount of money making the locally elected officials deciding what will happen with the schools and handle most issues that to deal with. you can hold them accountable in ways that you cannot hold congress accountable. our constitution begins and ends with week, the people. host: what about this question? guest: 75% of the stimulus plan

-- we want to get a handle on the national debt and deficit. it is at unprecedented levels. unspent stimulus money should be returned to the taxpayers. we should have all of the turkmen -- tarp manninoney. we would do everything we can to eliminate redundant programs. there are areas that by simply following the constitution and returning power to the states and those areas where they were designed to control on public education, the government's role should be limited and not interfere in ways that state and local communities design

curriculum and run the public schools. they should fall of the constitution. we are changing any debate the state legislature has given. all of the stimulus money that is available, it does been rejected. [unintelligible] host: we are talking about the 10th amendment task force. houston, independent line. caller: i am from houston. i am disappointed in our elected officials from texas.

you talk about education. texas is trying to influence by trying to rewrite history. the texas board of education has gone through and tried to rewrite history, american history, not texas history. he talked about the debt. what are we supposed to do when the republicans have the majority? we have some debts. the top 10% have more money and the bottom 9% have less money. if the government does not step in between the top 10 and the

regular people, who is to do that? guest: the disagreement that you have with the way texas has designed its curriculum, you can deal with that through the local elected officials. you would get more influence with a local official or at the national congress -- more influence with a local official then with the national congress. the designers of the constitution intended areas like public education, which should be controlled by the state of locally elected school boards. you will have far more impact and influence for your vote through the local school board and the state legislature then we can on congress. that is the entire idea here. we have to put the brakes on

uncontrolled federal spending, which we have seen under this administration. it began under bush. i voted against overt trillions of dollars of new spending. that is under president obama. it is far better for you to control schools locally than through congress. host: columbus, ohio, a democrat line. caller: you keep saying we need to get the stimulus back to the people. to do that, we need to pay this money to things that people use not others like iraqis or the military. the people care about health care.

obama spent the money on the people, where as the republicans send it over to iraq to rebuild iraq. guest: that is not accurate callere. caller: republicans this roman government but then say government ruins everything. -- ruining government' governmey government ruins everything. god did not bless america any more than he blesses any other country around the world. guest: it is a fact that the

congressional budget office reported and this is evident to any objective observer that the obama administration, harry reid, and nancy pelosi have created more debt in their first 18 months of power than was created from the time of george washington to george bush. there is excessive spending under president bush. that is why fiscal conservatives like myself voted against a lot of the new spending. today, we are on an unsustainable fiscal path. america, if we are not careful, this is a headline on "the wall street journal". we have as a nation burdened our children and grandchildren with an affordable level of debt and spending that they cannot repay. as mr. jefferson pointed out, americans in order to preserve our independence, we must unite

against those that an us with perpetual debt. we are bringing the control of federal power back under the balance of the constitution. we want thoughtful legislation that was designed to put a reasonable restraints on the powers of the federal government and return power to the state and the people as the founders intended. .

caller: which radical government are you talking about? you went in and out of different eras. are you talking about the radical government that just left office, the previous congress? guest: the discussion today is not about what happened in the 19th century. we're looking forward it to the 21st century and beyond and

tried to prevent our children from being overloaded. if you are over 65 and on medicare, there is no money to pay your hospital bill in five years. social security and medicare are headed for bankruptcy. we will become like grease or argentina if we do not -- greece or argentina if we do not stop the out of control spending. this congress is ignoring the constitution. we had clyburn said that most of the laws they are passing are not ok with the constitution. we are advocating to return the federal government that within the bounds.

it is a proud legacy that we have as a result of the civil war. that is not about the 19th century. the purpose of the water bottles is to illustrate the rights and powers invested in us as free people by the hand of god -- all the legislation from the time of the civil war being fought until today has been to concentrate power in washington. the tea party saies have been a response to that. the government has been intruding into our lives, taking over the automobile industry, health care, and other things. we have been ordered to buy health insurance. we can fix the problem of affordability without destroying individual freedom.

host: what do you hope to do tactically? guest: we will be pursuing legislation in a number of areas. first to begin to educate the public on the importance of following the constitution. the whole design was determined it to limit the federal government to the few areas set out in the document. most authority was intended to be left in the hands of state and local officials. individual freedoms such as freedom of speech and religion -- those are inviolate. our individual freedom has been invaded in ways we have never seen before. that is why you have seen the election and massachusetts with the republicans got brown elected. it is the instinctive reaction

of americans telling them to buy health care. you have seen the election of conservatives in areas they never have been before. it is a deep concern for us. we want to get the nation back on a sustainable financial path. make sure that we are leaving the country more prosperous for our kids. the best way to do that is to follow the constitution. host: next for mr. culberson is lynn on the independent line. caller: i am wondering why the senator no longer has faith in the supreme court to bring in congress, especially since we have the most conservative supreme court we have in decades. i also take issue with his statement that the constitution was created to limit federal government. the articles of confederation already did that.

the convention was put together because those articles did not take power into such a limited area to allow us to regulate the states. the states could not even trade between themselves. therefore, they're more concerned with making sure the executive power was reined in. they were scared it would get a monarch. under the bush administration, dick cheney expanded executive powers more than any other time we have seen. nobody stood up to keep that from happening. guest: the supreme court -- i have faith in it. that is one of the great bulwarks of our system. you had jim cliburn yesterday

say on "meet the press" most of the laws they pass on not authorized by the constitution. the supreme court can only roll on the case in front of it. they can only roll up or down on the constitutionality of a law that is challenged. it happens only in a narrow every of cases. i am astounded by all of the callers' refusal to question the unprecedented power grab of this administration and congress in taking over the automobile industry. no congress, president in history has ever attempted to take over the healthcare system as this one has. it is unprecedented. to tell you you have to buy health insurance.

it will alternately result in the collapse of the private insurance market. that is unprecedented. there is no basis for the congress or president to require you to buy health insurance. we want to return sanity and fiscal restraint to the government. host: on thursday morning we get the jobless and productivity numbers. productivity growth posted a better than expected gain in the first three months, while labor costs dropped more than expected. the combination is good for corporate profits, that means household budgets continue to be squeezed, putting the recovery at risk. the job market is slowly improving. applications for unemployment benefits dropped for the third straight week.

economists believe that april jobless number to be released friday will show unemployment stuck at 9.7% for the fourth straight month. guest: we're glad to see improvement in the economy. the bolt has been in government jobs. -- the bulk. the unemployment levels are stuck at near 10%. the answer of the democrat majority in congress is unfortunately to continue to spend money. we never hear them discuss cutting taxes. we understand as fiscal conservatives that if you simply cut taxes and spending and allow people to keep their own money, they will invest and spend it and create jobs.

we think it is fundamental and common sense that if you leave money in the hands of people who created it, that people will invest it wisely. there is no better social program than a job. host: lakeland, fla., james on the republican line. caller: before we talk about bush, let's get everything straight. i have been a republican and voted for every republican since dwight eisenhower. i loved goldwater. but when ronald reagan ran up the deficit and left it for george bush, a senior, and then got it down to bill clinton who had to raise the taxes -- but he balanced the budget. he ran on the surplus. he left george bush in the best shape anyone has ever been left in the. then bush left a mess. do you think obama wanted, just

decided to spend the money? every economist says we have to get some money in circulation to get rid of this deep recession. it is the worst thing since 1930. guest: well, no question that george bush spent too much money. that is why fiscal conservatives like myself are trying to return to control the budget. if we don't put the brakes on, america is headed towards an unsustainable future. we could become like the country of greece, or argentina. we have to stay focused on preserving america's prosperity and restoring a balanced budget. the only way to do that is to

stop spending money. it is as if we have a second mortgage on the house and all the credit cards are talked out. we as a nation need to pull together and stop adding to the deficit. or we truly will face a bleak future. but i am always, i have always been an optimist. i am confident the country will respond this november and elect common sense, fiscal conservatives to the majority in congress to be a check and balance on this administration. the best way for the long term is to follow the constitution. host: here is a message by twitter.

guest: well, if general motors had simply been allowed to be reorganized under the bankruptcy laws, you would not have had the u.s. taxpayers and the government intrude themselves into the middle of management decisions. today the federal government has inserted itself in areas of the economy we have never seen before. it is absolutely unprecedented. they jammed through a health care build the nation did not want. even massachusetts rejected obamacare. we as a nation simply need, if we would just follow the constitution, that is why the state sovereignty task force was created. not only will we be able to balance the budget, protect our children from an affordable tax

rates, but also have a more accountable government run by locally-elected, state -- who better? who will you have more influence over? or the congress? that is fundamentally where we are coming from as the task force. host: let me read this -- these are the people on the task force. the last call for mr. culberson is from trenton, new jersey. caller: good morning.

i like to argue two questions. host: do you believe in change? guest: we as a nation will have to change. medicare and medicaid will go bankrupt. we will be overloaded with spending we cannot pay, but with tax rates that are not affordable. we have to get back on the path of fiscal restraint or our children will be crushed with tax rates they cannot afford. yes, sir, i do believe in change. that is what we are advocating. to follow what the founders so wisely created for us. education is first and foremost. to make sure that people understand all the tools we need to balance the budget have been given to us by the founders.

they designed a government of checks and balances, of limited authority on the federal level. it divided responsibility between three separate branches of the government. they intended there be a division between the federal and state governments. they did so from the beginning of documents, the most important being the constitution which begins and ends with "we the people of." -- we the people." all the people not explicitly given to the federal government was reserved for the states and people. the founders all understood, as mr. jefferson so eloquently expressed, if we will but follow the constitution and limit the federal government to responsibilities set forth, and preserve and protect the ability

of our locally-elected officials that control things that affect us within the state, that will protect individual freedom. it will keep the federal government from overloading us with an affordable levels of debt and spending. we will be laying out awful legislative proposals designed to restore the power of locally-elected officials and protect the liberty of we the people. host: mr. culberson was one of the onearly twitterers of congress. we will take a break and return with senator bernie sanders of vermont.

>> british voters are heading to the polls today to elect a new parliament and prime minister. search, watch the c-span library. watch what you want, when you want. you can watch the election results just before 5:00 p.m. eastern on c-span3. >> this weekend, this author on "the business of happiness."

his documentary about the nanking massacre. >> i am confident we can come up with a nominee who gain the confidence of the senate and of the country. >> as the president considers potential nominees, learn about the nation's highest court through the eyes of those who served there. c-span's new book "the supreme court." it is available now in hardcover and also as an e-book. host: center bernie sanders is our final guest this morning. he spent a lot of time on the floor yesterday debating his amendment to the financial regulation legislation that would require an audit of the

fed. why would you do that? guest: at a time when you have the fed lending now several trillion dollars of taxpayer money to the largest financial institutions in this country and not telling the american people who received that money, with these large institutions are doing with the money, i think the american people have are right to know. we have major debates on the floor of the senate, about $10 million, whether we should spend it or not. you have the fed controlling and spending huge amounts of money, and the american people know little about where that money is gone. about a year ago i asked mr. ben bernanke to tell the american people who received the money. he said he would not do that. on that day we introduced legislation to bring transparency to the fed. it seems to me, and this is what the gao must determine -- that

there are huge conflicts of interest within the fed which operates with a great deal of secrecy. for example, you had lloyd blankfein, the ceo of goldman sachs, sitting in a room arguing that a.i.g. should be billed out to the tune of $182 billion. when that bailout took place, it turns out the goldman sachs gets $13 billion. that is 100 cents on the dollar, as a result of that transaction. is that a conflict of interest? i think so. there are many other conflicts of interest when you have the heads of the largest financial institutions making decisions which benefit themselves. i will tell you, i made the point yesterday, the funniest thing i have ever seen in terms of an amendment, is we have the weakest group of political bedfellows coming together.

i am one of the most progressive members, and work with some of the most conservative. you have to move on doric, all these progressive organizations -- you have moveon.org, and other progresses, and then some of the most conservative organizations such as the eagles forum -- we have brought together a strange coalition of grass-roots organizations to say, let there be transparency at the fed. host: and you think there might be a vote as early as today on this? last night i was telling the center that i saw on cnbc with demint -- but one important constituency that does not agree is the white house. why are they pushing back? guest: it is true that tim

geithner has been on the phone lobbying against this. you have to ask them. one of the arguments we have been hearing which is simply not true, is that as a result of the amendment congress will not be involved in the monetary policy, determine whether or not interest rates go up. the language in the amendment is very clear. it is not only the white house. it is obviously the fed itself. ben bernanke was visiting senators the other day. we have wall street lobbying heavily against this. let's be clear. in an amendment like this, we are taking on some of the most powerful people not only in the country, but the world. people who led us through their greed and recklessness, and in my view, their illegal behavior, into this terrible recession which has devastated

the middle class. out of the rules of the wall street collapse they are now paying out huge bonuses to their ceo's. and they like that. they like a system that allows them to continue in secrecy, plan with trillions of taxpayer dollars. on the other hand, not only have we brought together a strong left/right coalition, was strong grass-roots support, but you have to bloomberg news among other media having gone to the federal court, arguing information about who received these headlines should be made public. and the federal court of green that it should be made public. the house led by ron paul and a conservative past language which is now incorporated into the house bill. this is not a radical idea.

i hope that our friends in the senate can stand up to the huge money and pressure. host: this is west palm beach, fla., debbie. caller: yes, senator, thank you very much for helping to lead the battle against the federal reserve. it has taken us over a decade to raise awareness. i think we have turned around but in the last couple of years. people are finally understanding that the federal reserve is a private banking entity. thanks to you, alan grayson, and ron paul who represent an escalation of parties. i am very concerned that they are trying to bury the secrets with this a.i.g. scandal. there are rumors that [inaudible] and one of the reasons aig was targeted for takeover is that

banks were re-submitting the same defund loans and bad derivatives for insurance claims multiple times. i think that they are trying to bury that. i hope it comes out. guest: you have best reasonable questions. that is what you thata gao audit for. there are many unanswered questions. host: the law prohibiting thegao from looking at several key areas even though they do look at some areas of the fed -- under existing law it audits a wide variety of programs, but the non-prison gao since 1978 has been prohibited from looking at several key areas of transactions. do you know what the thinking was? guest: no, i do not.

as a result of the financial collapse, the role of the fed has been significantly expanded. they are into new territory. host: what are you proposing to do with the transcript? guest: we want to make it clear that the fed must remain as an independent institution. but at a certain period, the transcripts should be made public. host: next, norwalk, conn. caller: thanks a lot. i have never been on the show before. there are so many issues. number one, the reason i'm on the republican line is because i have been a 37-year plus registered democrat, about to change my party. i am very dissatisfied with the

way democrats have been handling everything. we have people from the 1960's including bill ayers were partners with obama. i am originally from chicago. first of all, i agree that we definitely must do something with the fed. ok, so we have that point. now i am also going to be joining the tea party because i believe one of the things i want to point out in this conversation is that the the tea party people are not just republicans. they're not happy with the way the administration is running the country right now. obama, all these different organizations alu, and the

unions are running this country. guest: in fairness, people are unhappy with what is going on in the country for a good reason. the middle-class is collapsing and poverty is increasing. we have a huge national debt. we are fighting two wars. we're not addressing climate change. the gap between the very rich and everyone else is growing wider. but to blame all that on barack obama is simply unfair. you had it for eight years the bush administration which largely ignored the most important issues facing the country. one of the reasons obama is getting a lot of criticism is because whether or not you agree with what he is trying to do -- but at least he is saying that we cannot allow the most important issues in the country to be swept under the rug. you have to deal with the fact that we end up spending twice as much per person in healthcare

than any other nation. you must deal with that. you must deal with climate change. we can create thousands of jobs and transforming the system. in general, i am supportive of the obama administration. it is unfair to blame him for all the problems and ignore what took place before. host: the independent line. caller: i agree with you about not blaming everything on obama. but there are still many things you can blame on obama. i am part of the tea party. i don't think they're well- represented in the media. many people would want to end the federal reserve. it is an illegal institution, basically a counterfeiting agency allowed to print paper money. you said you do not want to get rid of the federal reserve, but

i am on board if you would. we need to return to a debt-free money system that we had when abraham lincoln was in power. that the treasury was in charge of the money. guest: albert, you raise an interesting question. my amendment is pretty narrow. let the american people know what is going on. i should also mention, in addition to trying to bring transparency to the fed, we're working on a couple of other very important amendments. the financial institutions who own credit card companies are performing outrageously when they're charging people 25% or more on their credit cards. one amendment we will bring is a cap on credit-card interest rates. similar to what exists for credit unions which is 15%, except under extraordinary

circumstances. i get phone calls every week from vermont, saying i paid my bills on time every month, and they raised me from 15% up to 30%. that is not acceptable. i will work with other senators on the issue of right now having four and a job institutions which owned assets of over $7 trillion, more than 50% of the gdp of this country. i think at the end of the day if we're serious about never again having a huge bailout of wall street, you must break these guys up. it is wrong when only four institutions issue two-thirds of the credit cards in the country, and half of the mortgages. as long as you have institutions that large, when they begin to teacher, you will have to bail them out. i also worry about a competitive

economy when so few controls so much. host: and there is an article today in the business section of the newly times -- "the new york times." it would impose caps on the deposits the big banks can hold, and other liabilities. guest: this has not gotten the attention it deserves. the four institutions are bank of america, citigroup, wells fargo, and j.p. morgan chase. those four control more than 50% of the gdp. teddy roosevelt a good republican 100 years ago said to break them up. host: next up is asheville, n.c., on the democrats' line. caller: i'm glad that you are

trying to do something about getting the federal reserve audited. something needs to be looked into. everyone keeps talking about transparency. what does it do? we do not know what is going on. everyone keeps talking about transparency, but i do not see it. guest: it is a simple issue. i gave the example about the head of goldman sachs sitting in on a meeting, arguing for a bailout from which his own company benefit. there are other examples, a fellow who was head of the new york fed arguing that goldman sachs should become a bank holding company rather than just an investment company, giving them access to cheap loans at the fed window, while he is investing into more stocks at goldman sachs which then go up because of this transaction. it looks to me like there is a

conflict of interest. you need a gao report to monitor that. the fed is a very powerful institution, and the american people have a right to know more about what has happened in the last several years than we do. host: one of the facts of this wall street journal q &a, says it is different from the house bill said that it would allow to be published within 30 days all the details on loans since 2007, including the identity of borrowers, repayment terms, etc. -- here is a reaction from the fed. the fed has objected to releasing the names of borrowers out of fear they will avoid using the central bank's lending facilities when necessary due to concerns about their identities been revealed to the markets. they say that banks shunning the lending program would cause wider market instability.

guest: that is absurd. do you really believe -- and i don't know who, but i would assume the largest ones in the country who would receive hundreds of billions 18 months ago -- i think that is absurd. let's be clear what the fed is saying. the taxpayers of this country have lent out we believe over several trillion dollars to the largest institutions in america. the fed has just told you that you the taxpayers do not have a right to know who received it. that is absurd. host: michael, on the republican line from michigan. caller: my question is simple. who would you feel would be more to blame -- as far as the direction of these problems with the laws as written, who would be more responsible for the losaws that allowed these things

to happen? is it more of a democrat or republican issue? guest: thank you, michael. in an independent. -- i am an independent. i think that bush will go down in history as being a very poor president because he ignored most of the major problems facing the country. but you cannot blame them all on him. there is enough blame to go around, but more probably rests with republicans in this sense -- there is an argument out there we heard during the 1990's, led by people like alan greenspan, but also democrats like robert rubin -- that is, the government has got to get out of wall street. let's get government out of the

hands -- although wall street, let them do what they want to do, merge insurance companies with commercial and investment banks to create wealth for all the american people. michael, you remember that rhetoric? i thought that part. that is the laissez-faire rhetoric. the other is the unfettered free trade. you do not want the government regulating trade do you? if the company was to shut down and move to china, that will help everybody. was led by republicans, but had democratic support. i do not believe in that. i believe in a democratic and civilized society, government has a strong role to play. it is wrong to be the only country in the industrialized that cannot guarantee health care, but spends twice as much per capita on it. it is wrong to have unfettered free trade so that manufacturing

goes down and loses millions of jobs, and you cannot buy job manufactured here. it was a disaster to d deregulate wall street. the idea that a group of people on wall street whose only function in life -- all the do, is to make as much money as they possibly can, will do right by the american people? when you get government out of that, when you do not regulate them -- that was an absurd proposal and we are here today because of that. i believe the government has an important role to play to protect the middle class and working families of this country. all family should have the opportunity to send their kids to college whether rich or poor. if you are rich, you have to pay your fair share of taxes. we should produce products in the united states. will hold laissez-faire attitude to get government out of what business does was a big mistake

led by republicans, supported by too many democrats. host: this is andrew on the independent line from charleston, south carolina. caller: in a big fan of yours and agree on nearly all of your positions almost all the time. i enjoy senator but house as well. i hope that he hangs around a while. -- senator whitehouse. there is another in joy, and others i could name. i agree with you nearly all the time. i have followed you for a long time. i hope that you'll find some agreement with me. i wish that something would be considered next time on the supreme court -- another issue is retired -- that she is retired -- brooksley moran.

you are 100% correct about all these financial matters. the public is so uninformed. this comes at the public and it is hard to digest, especially for those without the time to put in. over the years, if you look at the sec, faa, almost everything -- the regulators are pressured heavily to promote the industries which they regulate. i think that is a mistake. i know the term hostile to business will not fly in this country anymore, but regulators cannot be in the business of promoting. that is plain good cop, bad cop. guest: you make a good pint -- brooksley played a good part and

tried to fight against the regulation. while the richest people in america became richer, while wall street went wild, out of control, you have the sec basically going to sleep. you had greater concentration of ownership in area after area with nearly no antitrust activity under bush. it was because it bush's philosophy was to let them do whenever they wanted to do. at the end of the day, the regulator will reflect the philosophy of the administration. i believe it is in the best interest of the american people that when you see the incredible concentration of ownership in any industry, you need strong regulation to protect consumers and ordinary folk. host: this is loss angel angele.

caller: what is the relationship between goldman sachs and the bankers in the country agrees. isn't the right wing trying to blame the social programs that greece has? guest: my understanding is that goldman sachs dealt with the greek government in issuing them derivatives, helping them to mask the expense of their deficit -- the extent of the deficit. the deficit was much higher than the greek government let on, the previous greek government let on. that was unable by the derivatives that goldman sold to them. host: i have a "wall street journal" editorial -- fannie mae reckoning.

that they will stop lending money to people who cannot afford to pay them back, and in turn, stop endangering taxpayers. guest: you have to take a look at fannie mae and freddie mac. the president indicates he wants to deal with that later in the housing context. those issues need to be examined. i'm not sure that i agree with "the wall street journal" editorial, that fannie and freddie are the cause of the subprime mortgage crisis, but is an issue that needs to be examined. host: this is jake on the republican line from greeley, colorado.

caller: i truly believe the market is the best regulator of itself. guest: i kind of already made the point that i do not agree. when you have -- what is the function today of wall street? it is the function of our major financial position to be part of a productive economy, to lend money to small and medium-sized businesses producing mill products and creating real jobs. it is not what wall street is doing. in recent years, the wall street institutions have earned 40% of the profits in this country. that is huge, because they are not all whole lot of people. they had segregated themselves from the job-creating, productive economy, and become a huge gambling casino monopoly producing anything of worth.

let's leave these guys -- they did leave these guys alone, and that is what deregulation is about. when you leave guys whose only goal is to make as much money as quickly as they can, you should not be surprised that they engage in reckless and greedy behavior, and even illegal behavior. you should not be surprised that they don't give a damn about the rest of the country. then they want to build up, then give themselves millions of dollars in bonuses. so, i do not agree. many of these on maastricht are literally like heroin addicts -- on wall street are literally like heroin addicts. you should not be surprised. if you give them free rein to do whatever they want to, they will. if the result is wrecking the economy for the middle class, that is no surprise. host: so this message by twitter

-- what is the function of wall street? guest: to provide credit to the productive economy. in vermont and all over the country you have small and medium-sized businesses who want to grow and add employees. they cannot get affordable credit right now. wall street is engaged in the gambling pursuit in the most esoteric way. it is designed only to make the money will you have small and medium-sized businesses crying out for credit they can i get. i am probably very conservative. in vermont you have small banks, and when you walk in for mortgage they actually know who you are. if you are not employed and in debt, they will not give you a mortgage for a large house they know you cannot afford. if you are businessman who has no good credit, they will not help you out.

because they know people in the committee. in many ways we need to return to that type of banking with the function is to enable people to own homes in a reasonable way, if they can afford it. and businesses to get the credit they can, so that they can expand. host: this is a rhode island. we will have to move on because your tv volume is up. next, this is burlington, vt., on the democrats' line. caller: good morning. i really do believe that the robber barons are back. you know, rockefeller, card again, the rest on the list -- and i believe with the sherman antitrust act of the past -- these guys just diversify -- rockefeller, carnegie. carnegie told rockefeller that you are the most jaded people in

america right now because you tried to have institutional monopolies. what they did is diversify, and they started foundations and all these non-profits. i believe these non-profits are truly a crux of huge problems. now they are allowed to lobby congress, make studies that support their monopolistic means. that is truly a problem. guest: let me say this -- and many ways, these guys are worse than the robber barons. whatever you say about carnegie, he produced steel, and rockefeller produced oil. they produced real products, and created jobs, as greedy as they were. but i am not sure quite what wall street is producing except for esoteric paper that enriches only themselves.

let me talk about law deism. after the deregulation was made in the 1980's and 1990's by alan greenspan and others, wall street and the financial institutions and insurance companies and those who benefited spent billions and lobbying and campaign contributions to help congress to deregulate. i voted against it. but it carried heavily in the house and senate. last year alone the financial interests spent over $300 million in lobbying just to make sure that congress does not pass wall street reform. there on the hill right now. people who make huge sums of very sophisticated money, tried to make sure we leave wall street alone so they continue to do what they have been doing. host: do you think glass-

steagall will be re-enacted? guest: i hope that it is. or else we will continue to see a situation where commercial banks merge with investment companies and the taxpayers and of having to bailout reckless, irresponsible behavior of people. so, i hope that glass-steagall is reinstated. caller: god bless, you, bernie sanders, foretelling so much of the truth. one thing is that i see it wall street as a kind of las vegas, yemen the money, but betting against the american people. it is obscene. first of all, i would like to see you and ron paul run on an independent ticket.

we need someone who represents us, and i don't feel we have anyone. is there any way you are c-span could put together a list of politicians who except money from goldman sachs and all these firms? guest: it is right there on the website. it lists which candidates received campaign contributions. just look on the campaign financing. host: one is center for responsive politics. next is a call from fort worth, texas, on the republican line. caller: good morning, senator. i have been listening, and yes, you are right about the federal being watched. we need to watch wall street, see what is going on there. it is all linked together. it is one big mess. bush got a handful of 9/11 and spent a whole bunch. obama has done really well with

what he has spent. we need to keep our eyes open. [unintelligible] they are still getting bonuses, and for what? guest: you ask a simple question. here you have people as a result of deregulation from the year 2000 on under bush making huge amounts of money so that we end up having the most unequal distribution of wealth in america. people on wall street making hundreds of millions, some making over $1 billion per year. they take our financial system to the verge of collapse. we build amount. and the penalty is to continue to give billions and bonuses. that is why the american people are truly outraged. that is why in my view we need to strengthen the wall street reform bill to among other things, bring transparency to

the fed. it is an amendment that i expect will be up to date, we break these large financial institutions, protect consumers, and put a cap on the interest rates that people are paying for credit cards, among other reforms. but the bottom line is, these people on wall street whose only concern is enriching themselves -- frankly, i have a hard time understanding that everybody in the world wants to make a good living and take care of the kids and leave money to the grandchildren -- i do not understand what people need to make billions and billions. despite what it does to the rest of the country. host: here is a peek inside of the senate and house works. it cites the bipartisan support of people like vidder. -- vitter. it has the white house and

senator dodd scrounging for ideas for a so-called side by side amendment. an alternate proposal on the fed that would give the senate something to support while offering them cover to vote down the other. guest: yes. and my shocked? -- am i shocked? no. the pair caamerican people need to understand we need to do something. people can say they voted for transparency, but when you look at you can see it is weak. they tried that in the house. we have a strong commitment, a proper amendment. i hope that senators will be able to withstand the pressure. host: can you verify a piece of information that the european central bank does post its minutes? guest: having been on the

program i have heard it as well, but will not verify it. host: this is george on the democrats' line from trenton, new jersey caller: i appreciate your independent thoughts on many of the discuss matters bernie sanders,. i would appreciate your comment on what you can do as a senator to make morbanks more competitie nationwide. you talked about breaking up big institutions. the banks need investors to operate, and also need people to put their money into the banks. however, when people put their money into the bank, there are some many disadvantages for individuals from the interest rates to the way the rules and regulations come down to monopolization. as far as what they can impose on investors. and on people, as far as interest rates. what can make banks more competitive with wall street?

we have a computerized age now and can figure out different methodologies to help small investors like myself who have a few bucks but would like to get something in return. guest: that is an excellent question. i don't know that i can give you a definitive answer. all i can say within the context of financial reform -- it is very dangerous for the economy when you have the four largest financial institutions controlling 40% of the deposits. and issuing two-thirds of the credit cards and half of the mortgages. by breaking up these institutions -- you ask how we provide incentives to committee banks or credit unions so they can be part of their communities? and people can get good returns. but at the same time we have banks lending money to productive sectors within the

communities -- that is the issue you raised. it is the right question even if i cannot give you a definitive answer now. host: you are on with senator bernie sanders. we can hear you, edward. caller: an interesting sidelight on the federal reserve first. in the past, i one time can the principal executive officer -- canned at a significant international corp. his next job after being fired was vice chairman of the federal reserve. i want mention his name, but you can go back in time and find it. with respect to your bill on auditing the fed, basically i have no objection to auditing the fed except from the standpoint that i feel any such

audit should only be available to people who can understand it to. host: ok, guest: thank you well, i do not agree. i think everybody in america -- you do not have to have a an m.b.a. from the wharton school of business or harvard to understand to dollars trillion and a taxpayer money and where it went. i think the american people have a right to know. sometimes people argue -- and deep in the heart people like me admit this is pretty complicated stuff. we get out all this information to average americans. i disagree that it will hurt if it gets into people who are not sophisticated. i think if the sun