replace the government's investments early and, therefore, our firms on most measures have less leverage, more capital, more the kind of capital you need against future losses. us a very strong position in those discussions. again, the best way for us to shape that consensus, to make sure we come to the table having acted to fix the things we got wrong in the united tates, and we are, i believe that the reforms congress will enact wiil be a good model for the world and will give us enormous credibility in trying to pull the world to those higher standards. >> are there other examples like capital where thh u.s. has to act to be a first mover if there's not a global concert on that particular area? >> again, we are going to try to make sure we're moving in pair less. derivatives is anothee example. anything where they can move quickly to evade the weakest pegulation. derivatives is a great

compamplet again, we want to make sure that all these firms and all these markets are operating under much more rigorous standards for disclosure anddtranspareecy. otherwise, again, the risk will move to the dark and will leave us more risk in the future. we will try to make sure that, you know, we are going to dramatically strengthen the competitiveness of the u.s. financial system. as we have done well in the %- past, make sure we put in high standards for protection for investors ndd in the u.s. marketplace and we are going to do everything we can to make sure the world joins us in that cause. >> thank you. >> thank you. we now bring to a conclusion our 21st hearing of the congressional oversight panel. we want to thank you, mr. secretary, for being here with us today. the record will be held open for any,

>> if i could take you through this. this is what we are going to try to do before noon. you have the colonel will head. they are going through this manifold. -pthey have 60,000 barrels. we are going to bring an

additional into this project. it comes into this manifold. they get a step to the 53,000 barrels a day production. that will optimize what we can do. comes up to the riser height. -- pipe. it will do that when they fifth on scene. -- when it gets on scene. >> [unintelligible] >> i will take you to the next chart. this is something called a freestanding riser bur!!r.

it is connected by a fixed pipe. it is connected to inflexible close. we will make a freestanding riser. it will close both ways. it to be the way the new system puts together. hopefully, i will not knock it off. we have to go to the standing riser. it allows us to maximize the amount of oil product.

it gives us a better capability. this kid sis to 60,000 barrels a day. it puts us in a better position. >> \ /[unintelligible] >> there are many concerns about that burd. it is in about a 3 mile area. you have to be very careful about safety. i know that is a concern for folks that are out there. we are dealing with oil. we need to be careful with the safety of the workers. at each side, you will see the

drillers. those are the relief wells letter being drilled. we had to actual drilling operations going on. this shows you the tww this loan will be within the next couple of weeks. >> is that more understandable? it is real significant. iturbis has is related to them. we were trying to put the riser in. it does dislodging itself.

every plan has been presented by bp. this is a very densely packed operation. we need to get the capacity. >> we are prepared to take questions from the phone. >> if you like to ask a question, please press star one. >> there were some trigger points above workers actually on the gulf floor. people screening them are private services hired by bp. do you know who is actually in charge? are you making sure you are getting fair data about what is going on?

you have authentic-said that is not -- data that is not being transferred. >> for the last several weeks, we have been operating under a memorandum of understanding. it includes the safety is and coordinate that. we report any time there is an incident that is more than just first aid on sccne, if someone is evacuate it, i get ttis personally. i am not aware about what you are talking about significantly. when there is a health issue, we have treated t quickly. if you'd like to give this

specific information, we would be glad to follow up on that. we have a pretty good working relationship with them. the cord nation on the ground is working well. >> your next question. >> thank you for taking my question. are you seeking that the driller ship three is down to about 10,000 feet? bp ssid it had been drilled down to 18,000 feet. does it not have to go all the way down to 18,000 feet? but it does not. i believe they will try to intercept somewhere between 16,700 and 17,000 feet. they will have to go clear to

the reservoir. -- will not have to go clear to the reservoir which is 18,000 feet. they will go to the will bbard casing. it will be above the level of the reservoir. >> thank you. >> the next question is from zack. >> there have been some reports that the first major storm of the hurricane season might enter the gulf of next week. could you walk it through what will happen if that happens next week? >> we are watching the hurricane season very closely. this week i talked to the fema administrator. we are informing each other of the respective operations.+

we do have fed depression that has been informed in the southeast and caribbean. how will we respond to a hurricane will be dictated by which production capacity we have on scene. by the end of next week, we would anticipate having preproduction out there on the well site. of the production capabilities, one of hem as part of the platform itself. there could be couplings for the vertical riser packages. we would need to disconnect and recovered to a safe harbor and return of around 10 days to accomplish that. you'd have to start doing that between three and seven days in advance of the hurricane.

we are discussing that with bp and the folks that are down a unified command in new orleans for the -- new orleans. if we notice a hurricane coming, we would know between three and seven days in advance of that to redeploy the equipment. >> what kind of storm would becoming your way for you to do that? can you give us more specifics? >> i have some folks working on the scale. it is a way for people to understand that. we will get them. the least capable platform in production to write the heavy of enterprise. anything that is working there are vertical riser will have a little more flexibility.

the large vessels that will be coming on have a much more capabilities. none of them are created. exactly when the cut of this will give you a 24-hours. >> advocate news. >> thank you for taking my call. we didn't get a copy of tte charts. will you be putting this on the web site? >> we will be happy to do that. >> why is the second relief well going so slowly? >> they did not start the same time. the second started several weeks after. the second to leave he drilling rig had a blowout preventer on it that they continue to use after capping the well. they decided not to use the proper venture because of the

uncertainty regarding the status of the wellborn. during that time, the developmmnt driller moved off station. blowoff was t the blowoff was the risk committee peter. >> los angeles times. >> can you talk a little bit about the worst-case scenarios going forward? what happens if the relief wells do not work out? how long could this go on? what kind of contingencies have a bben drawn up? what kind of conversations are you guys have been? >> we are mitigating risk by drilling the second tree leaf

hopefuuly, that willlnot be needed. there with a meeting in washington with other representatives. other companies are out there. we have identified a couple of platforms in the area. they may be capable of taking the platform out of the3 we are exploring that. it would give us an auction of controlling the flow without having the surface vessels there. it would not be the capacity we+ are looking for. we are in an exploratory conversation. we ask the industry to unconstrained their safety. we could use the all to thh production facilities. good>> i wanted to see if you cd

explain what you just talked about. give us a little bit of a sense of where this conversation with the but the production platform to drill a new well. >> that is the first time we have talked about it. their communications with bp. at the communications meeting, we were looking at alternatives to increase the capacity. there was an idea in the room. we brought people in to search for new and better ways to do this. they talked about whether or not the well was being drilled. there are other facilities we that is what we are looking at right now. that is a good question. it is all being looked after a series of information that we areeworking. we are looking at it.

it would allow was to continue production. it is problematic in a hurricane. >> would go to someplace else? >> it to go to a pipeline of an existing facility. a different reservoir. >> i [unintelligible] he said the conversation is not sufficient to protect workers. bp has said that these are the federal limits. have you talked to the director

about this? [unintelligible] >> let me see if i understood that. it is a little garbled. >> of these are typical exposures. >> the limits are out of date. bp has said those are the official limits that have been involved. >> al is not aware of this statement. we will certainly look into that. >> we a time for two more calls. >> actually, that is time.+ >> thank you very much.

>> with a special web page with our coverage of the oil spill. all the briefings, speeches, and links. access to lie bp video. you will find it alllat c- span.org/oilspill. >> starting monday, what the confirmation hearing for elena kagan live on the c-span network and at c-span.org and is he replace every night and 9:00 eastern on c-span2. -- and see replay's every night at 9:00 eastern on c-span2.

>> president obama has oodered general stanley mcrae still to the white house -- stand in the crystal to the white house monday. in a few moments, robert gibbs tells reporters that his future will be announced at tomorrows meeting with the president. after that, reaction from senator john kerry followed by a state department briefing that in 40 minutes, president obama's comment late this afternoon about tomorrows meeting with general mcchyrstal. >> what is the president's reaction to the comments?

has the present spoken to the general about this yet? >> the president has not spoken with the general. as we all know, he is on his way back to washington and will take part in tomorrow's planned afghanistan meeeing. he was called back to washington to speak to pentagon officials and to the president about the remarks that were made. persooal reaction? >> suffice to say our commander does not usually for debate in meetings from washington. -- participate in meetings from washington the president asked for him to come back to explain those remarks. that is what he is on his way to

do. >> does he plan to fire him? >> first and foremost, if there bravest men and women in afghanistan. what we owed them is nothing short of our best efforts to get a new strategy in that country right. that is the president's focus. focus.hould be everybody's it was worked ouu in long confrontation. the president went aground to many of the people in the situation room tomorrow, asking

if they like this new strategy. that is what we owed the men and women who are fighting. but to me finish by saying the president will speak with the general about his comments and we will have more to say after that meeting. >> do you think his job is safe? >> we will have more to say tomorrow. will there be any changes in fiscal policy? >> he has served on a team that has face the greatest economic crisis that any president has

faced since the great depressson. it is an enormous task. peter has been instrumental in this year's plan to freeze none security discretiinaay spending for three years. he has decided to leave before we get into the creation of the next budget. he has been near four to budget. we will look for a replacement. >> can you talk about who the replacement might be? >> i know of no other departures. we are looking at a number of talented candidates. >> has the president considered the remarks from geneeal maker still -- mcchrystal as

insubordination? >> i think is a thing forward to speaking with im. >> can you characterize the reaction? [unintelligible] >> hh will have his undivided attention tomorrow. >> does the present dispute the characterization? >> the president looks for to speaking with him tomorrow. we know every member of this team from the commanding general to anybody who works in to the men and women who are fighting to implement the policies that each agreed to. without a doubt, general

mcchrystal has made an enormous mistake that he will get a chance to talk about and into tomorrow to both officials -- >> does the presence still have confidence in general3 war? >> wouldn't the president be the first person who would pick up a phone in he would apologize to? >> general mcchrystal hhs the call to the president. the president has not called general mcchrystal. the president as the general mcchrystal, and they will get an opportunity to talk about the article face to face some time tomorrow. >> you want to wait?

>> he is cominn back here to have that face to face . >> will they be alone? >> i anticipate that. >> he says that the disagreement is not over policies. he says it is over the personality and it would have a negative impact. does the president make a distinction? believes and i think most believe that personality differences asiie, we are here to implement a new strategy and put together over the course of

three months in the situation room. it is our job to implement it. the president does not believe that personalities whenever the disagreement are forward should distract from the strategy to get afghanistan right. the president talkeddfear out the campaign and time we created this strategy that the war effort in afghanistan is under resource. now there are four times the number of troops in afghanistan or will be on a pace laid out. it is incumbent upon anybody involved to put aside their differences. there has been disagreement here

at the white house and state departments. it is incumbent upon those in the policy-making world to set aside the differences and implement the decisions that the commander and chief has made the connection with both military and civilian. >> is removing the general at least an option? >> i am not 20 pre-a judge the outcome. -- i am not going to prejudge the outcome. >> is that not an option he is considering? >> i would consider all options are open. >> there were a series of leaks and do the president said that was a firing offense would this

be a firing offense? >> i think the magnitude is profound. the president to everyone for leaks that were coming out of the meetings. he said there is a reason to not have these meetings at starbucks and instead have been in the situation room. he takes this seriously because we -- he has made a buy for death decision to put people in harm's way. we owe it to those men and women, some of whom are serving their third tour in afghanistan, our very best. not so vital, would this be an

easy decision? >> i think that -- our efforts are working. there was a strategy that was the military and civilian side.h we said this about iraq and afghanistan. there is not a military solution. if you cannot hold an area oo create the type of governing structure to secure the area, you cannot [unintelligible] this is bigger than anyone on the military or civilian side. >> were you with the president when he reacted in any way? how would you describe it? surprised? angry?

>> i gave you the article last he was angry. angry. you know it if you sell it. >> has general mcchrystal offered his resignation? >> not that i am aware of. >> will the president accept a resignation? >> i think he ooks forward to talk to him. [unintelligible] >> i am not prejudging the outcome. he is calling him here to see what in the world to his thinking. >> is there a certain aspect of this to shame him? he could have listened to the

information by video teleconference? >> this goes far beyond the president. let's be clear. the meeting tomorrow -- there are a lot of people that are+ involved. we have a diplomatic corps that has to -- that is sending civilians to greet the governing structure. we have men and women at all levels of the military involved in this. these are discussions that i am sure general mcchrystal will have.3 him? >> i think he spoke clearly to that in his statement that it is taking care of largely. >> what bothered the present most about what he said? >> we are distracting from what

the president considers to be an enormously vital mission for our country. we are at an important time in crunchy we have been in for a number of years. we have dedicated more men and women to this effort than has ever been dedicated before. we have a lot of work to do. our focus should be on that work. our focus should be on implementing this policy and on creating the security and governing environment that allows our good men and women to come home. >> after the scandal broke in

the washington post, secretary gates fired the people involved. when the nuclear weapons were put on a bomber, a secretary gates fired the people involved. why would you want to have general mcchrystal in the white house and not have this handled by the secretary who was ssown himself willing? >> this is a decision that will be made by the commander in chief. this is an enormously important effort. we areeat an enormously important time. the president believes said general mcchrystal ought to have the opportunity to discuss the

article. >> general mcchrystal already had his meeting with the president. it is after london. how many title he the taken? >> we will know more about that tomorrow. >> you spoke about the people who are serving over there. what should people put in harm's way to make their commander taking these kind hot of the commander in chief about general jones? >> i'd think anyyne who reads the article understands what an

enormous mistake this was given the fact that mothers and fathers all of the country are sending their children out where across the world to participate in this. they need to know that the structure where they are sending their children is one that is capable and miniature enough -- mature enough in prosecuting a war as important as a afghanistan. i think that is one of the things that the president will be looking to discuss. >> what does this do to the general's credibility with the troops? >> i.t. that is a question better asked for those serving.

general mcchrystal has fought bravely on behalf of this country for a long time. nobody could or should it take that away from him. nobody will. but there has clearly been an enormous mistake in judgment to which he is going to have to answer to produce goods when they have the meeting, so many people who are targets of the criticism will be a round the table. will each one have a chance to talk? >> you may know more about the procedures are being made on this. they did already made on this. it is hard to speak about what the interaction would be like for the meeting. >> use said that the parents of

soldiers need to be ure that the command structure is capable. did i hear you correctly? this is not about whetherrthe general is capable?? >> you have a mind quote. >> he said he was angry. [inaudible] >> it would be hard to limit. i do not know that i would focus like a laser on particulars. you could get there are a number of points or anger might be your reaction. >> does it matter to the presence of a general mcchrystal

apologize? how will it affect the position? >> i think one of the questions -- the present to get an opportunity to speak to other members on the scene about the confiddnce in the structure. i do not want to prejudge the president's conversation that is the not fair to the president. ittis ot fair to general mcchrystal. >> as a factor in? >> says it issa matter that president cakarzai said that too is gingerly supported? >> it is important that the president gives the entire team

-- many people enjoy it at the number of different levels. >> it would not be inaccurate to assume that general mcchrystal's maturity is now open to question. >> there are open questions based on actions that were reported in the rticle. >> what -- one of the underlying themes of the article is the frustration that soldiers havv the rules of engagement and the frustration in dealing with the realities of dealing with counterinsurgency on the ground. separating general mcchrystal from the article, will he talk

to the president about that? are they being represented in this article? >> i have not spoken with the president or the team on that aspect. i would surmise that it is something that has been and will be discussed in the past and in the future. we know that civilian -- we know what civilian casualties' do. we know what happens. the anguish of knowing thatikend

innocents have been killed in the battles. we know the effect on the population that does not believe that the insurgency had their best interests in mind. i labels say that growth here has been takee. great care is being taken in prosecuted a war that does not create amongst the eneral population said the toward those we are trying to defeat. >> [unintelligible] >> i would sum it up by saying

that over the course of many weeks, the strategy was refined and developed. each member of the eam pledged to implement and agree with the strategy. that is we want anyone from the bat and commander of the combatant commanders to focus3 >> after the review last year, when the new stress -- when it the think you stressed was the consensus you reach going forward. given the sense of disagreement that the article portrays, are you convinced that conssnsus still exists? >> i can only take the word of

those that sat in the oval office person to person. >> that was many months ago. >> it happen to be at the point in which the president laid out a strategy and asked those involved do you agree with my decision? do you pledged to help? i am not speaking -- there are disagreements in this building every hour of every day of the but it is the president's job to make the decision. it is our job to implement it. it is not to move forward. >> that was many months ago.

there was a concern that something needs to happen to make sure they are on it. >> the president gets it from the ambassador's and the secretary of defense. no one has walked into any of those meetings. no one has said hat they disagreed with the decision that they agreed with last year. >> the brief anding he got -- i assume general mcchrystal had already departed? >> this is a wreck of a scheduled meeting.

>> -- egularly scheduled meeting. >> when he got angry, were you with him when he read the whole article? >> he had heard something. i do not remember who. about the assistance of this article. i walked to the article over to a residence last evening. he came back to the oval office on a couple of occasions. i was not in the room when he read it. >> who do you know -- who to talk to last night other venue about the -- other than you about the calls and e-mails? >> the chief of staaf and many members of the national security. >> did he hear from in the nato leaders?

>> i do not know. p> would he had expected -- general mcchrystal to try to call him by now? >> i think given the fact we have requested to combat -- come back -- >> [inaudible] >> i believe president kazrazi -- >> thank you very much.

he said he is angry and you would know it when he saw it. can you bring it back? >> i'm not going to live. >> just to clarify, you do double the general mcchrystal was in on that? >> he was either preparing for our underwear. >> if you have not had this big meeting, with the president have called? will be made to the present prior to the oval office? >> that is my understanding. i do not have the time for that. -pi did not have the full conversation. the impression i was given is that it would be sometime tomorrow. >> that portion of the briefing

-pfocused on remarks by general stanley mcchrysttl. senger john kerry remarked to this. >> i want to take a minute to respond to remarks in a magazine article. i had a conversation with general mcchrystal about a half hour ago. i emphasized to him that i think that obviously those are comments that he will have to deal with.

i have enormous respect for general mcchrystal. i think he is a -- to rid a soldier. as far as i am personally concerned, our priority is the mission in afghanistan and our ability to proceed forward confidently. it'll be up to the president of the uuited states to make the decision as to whether or not the national security staff thinks they can do that. all of us would be best served sttying cool and calm and not succumming to the normal washington twitter about to this. we have troops on the front line. we have a major mission we are in the middleeof. i think the priorities of the

mission areebest served by general have their connersation to make a determination of how we proceed forward. >> peter crowley says general mcchrystal has apologized to richard holbrooke. this is five minuues. >> richard holbrooke is in kabul today. he has meetings with afghan officials as part of his regular travel to the region from the i think he met with the president earlier today.

they talked about parliamentary elections. i know. i know. if they do. >> all three of those? >> yes. >> the present karzai meeting. >> [inaudible] >> that was a separate meeting of the security council. susan was in that meeting. >> richard holbrooke was in the same room? >> indeed. >> can you talk about the atmosphere there? >> my understanding is that prior to the meeting general mcchrystal reached out back to the embassadors to offer his apologies for the article. >> why do think the comment had

been so widely discussed? >> i think our focus is on the ongoing strategy. all members of the national security team feel that general mcchrystal has made a save the vacant mistake. he will be coming back to washington to attend a pre scheduled a meeting with the president on afghan and pakistani policy. he will talk to the president directly. >> the secretary appears to be the only one of ou who come sell looking good. >> she, as with every member of the security team, presented the present with her best advice on the strategy options.

she has read the article. >> shares doesn't anything to any person? ? >> know. -- no. >> given the fact that so much of the strategy is on the eight civilian as less military integration, what does it say about the fact that the commander on the ground has set a negative impression of his civilian counterpart? >> this is a very strong team. they do work effectively together. they are focused on both the military and civilian component of our strategy. that is why ambassador holbrooke was there this week prada --

there this week. everyone is focused on their respective aspects of this. we are doing the best we can.

>> welcome. we have a fantastic line of this morning. we have a very critical topic to discuss. let's get into it.

ng to the congressional oversight panel with secretary timothy geithner talking about tarp. [captioning performed by national captioning institute] [captions copyright naaional cable satellite corp. 2010] .

>> strain in the ability to lend to small businesses. finally, it seems clear, the treasury's efforts to reduce mortgage foreclosures is not working.

approaches,d date the panel must know if potential risks have been assessed. we must also evaluate if the impact has been measured, using credible metrics to measure the success or failure of programs. has the treasury department targeted the highest degree of accountability and transparency. reasonable people might approved or not approve of the plan, but no one questions that the progress should be measured against clear benchmarks for success. reasonable people might define financial stability in different ways, but everyone agrees we can best gauge the stability by measuring the stability of our banks. treasury has called for additional stress test. reassnable people might disagree

about how to help small businesses gain access to loans, but no one doubts that the solution must begin with a clear understanding of the problem, yet treasury has collected only sparse data on the small business credit crunch. without more handedness -- handedness, the shape and depth of the risks facing our economy remains hidden. without a willingness to separate the programs that have worked from those that have not, it is not possible to build the best defenses. the problems in commercial real estate, where mortgage foreclosure -- home mortgage foreclosure, they grow worse by the day. your office will lose the capacity restructure programs, or deal with the programs. i will be very glad to see tarp

end, but i realize that the time is running out to make sure that we have used the money to assure the stability of our financial system. time is also running out to make sure that tarp money is used to help families and small businesses the way it was so quickly used to bail out wall street. counterparts on the penultimate opening remarks. mr. mcwatters. >> thank you, elizabeth warren. it is my hope that secretary timothy geithner will assist the panel in addressing a number of significant questions, inccuding the contemplation of the application of additional tarp funds to new programs, or the application of additional tarp funds to existing programs?

will they be applied to any financial or non-financial institutions such as aig, gm, chrysler, or anc? will the investors received dividends in cash? what is the exit strategy with respect to these institutions as well as the other tarp recipients? has tarp enshrined into our law of the concept of too big to fail? have established an implicit guarantee for the benefit of our largest financial and non- financial instiiutions? will the pending legislation ratify and codify the existing standdrds? we will treasury yet again allocate additional funds to goldman sachs, citigroup, bank

of america, and a group of other significant firms if they notified treasury today that they were experiencing a severe liquidity and solvency crisis? p+how would the answer change if the date approached treasury and the new york fed after the financial legislation is enacted? would the ftse liquidate these institutions -- would these institutions be liquidated? is this not what we were told%- with respect to goldman, aig, citigroup, bank of america, among others, that simply certain institutions were too big to fail, and could not be permitted to liquidate? is a resolution of 40 included in the pending financial reform

legislation -- is the resolution included in the pending financial reform legislation, dressed up? aig was regulated by approximately 400 regulators. most professionals completely missed the best systemic risks that were percolating. how will the addition of a systemic regulator proposed under the pending financial reform legislation help to solve this problemm where did treachery, the fdic, the sec, and the cftc expect to find these super-regulators who are competent to call out systemic risk that others have missed? even though systemic regulators have timely call about risk, how will they convince other

regulators, the global financial -- the global financial community and congress that the worries are significant and could be a great cost to taxpayers and the financial community? why it former federal reserve chairman paul volcker in an interview state that the resolution authority provided in the proposed financial package is a "workable proposition for anything short of the biggest banks." does chairman volcker believe it will be all but impossible to liquidate in an effective manner? does he believe that tarp, too, will be required? why did treasury released a press release and pine that the tarp program has been profitable, -- implying that the tarp program has been

profitable, even though the congressional budget office expects taxpayers to lose approximately $109 billion. why it had whitaker implied that gm has replacedd all of its tarp funds, even the taxpayers have yet to receive payments in cash? the congressional budget that tl lose $34 billion of the tarp- fund investments in gm, chrysler, and gmac. thank you, mr. secretary, for joy in the. and look forward to our disk of -- discussion. >> thank you. damon silvers. >> i wish to express my appreciation to secretary

geithner for his willingness to appear before this panel and a regular basis. today, i think the treasury department and secretary geithner deserves considerable credit for the overall performance of the assets the government has acquired through tarp. as my colleague, mr. waters, pointed out in a different tone, the cost of -- mr. mcwatters pointed out in a different tone, the cost of tarp continues to fall. while it is hard to know exactly the full cost, the public should be aware that the real cost of tarp is not at this $0.700 billion, or even the three and a billion dollars that it was thought to be. it is falling pretty consistently. however, there remain three significant questions that have been with us since the inception of tarp. the first is, is tarp working to

achieve economic goals, reviving credit markets, stabilizing the economic system, and providing relief to homeowners facing foreclosure? projections of long-term -- digit unemployment suggest that we might not have prepared our credit system or are will housing market. are we continuing to manage tarp's assets effectively? i am here, particularly addressing aig, citigroup -- i am accused from -- i am recused from ottawa. -- auto. i am particularly mindful of the lessons of our panel's detailed examination of the collapse of aig in our june report.

that report is a powerful brief for the wisdom of kkeping government-insured liabilities away from highly risky assets, and for the need of a strong resolution of 40, and need which you have championed much to the public's benefit. it is a challenge to evaluate tarp in two different metrics, which are both important. tarp is literally a set of investments in the financial institutions and certain other firms. the second is really the purpose of tarp, which was to ensure the financial system did not take our economy down.

we have moved from an environment where the threat was a cute, too, i believe, where the threats are chronic. that is what i hope to take up today, in addition to the other two subject to i'm mentioned. again, my thanks to the secretary for appearing beffre us. i look forward to a testament. >> thank you. dr. troske. >> thank you. i would like to start by thanking the treasury secretary dieter for appearing before us. as the newest member of the panel, i am looking forward to hearing your thoughts about the crisis we have been through, and what we couud expect going forward. i would like to focus on why financial markets have not paid%

eight -- not behaved, as i believe they should have if they were a well-functioning competitive market pared their -- market. there are several aspects that i find thatt both surprising and confusing. i would not have expected to see the events if they truly were a a well-functioning, competitive market. while i have not closely studied the sector, you, secretary geithner, have played a key role in dealing with the crisis, and try to understand in preventing a similar crisis. i feel one of the purposes is thh effect of tarp on limiting the financial crisis. and the aspect -- one aspect of the financial crisis that i find confusing is the existence of

too big to fail firms. the arggment has been made repeatedly that the government had to bailout firms because the standard bailout process is slow and destructive. had they been able to enter, it would have resulttd in enormous disruption. numerous companies, both large and small, have entered bankruptcy. the participants should have been well aware. they should have faced increasingly higher costs of capital because of the cost of potential bankruptcy rest. by imposing higher costs, there would have been a limit placed. instead, it appears that the large financial firms face both -- face lower costs han smaller

firms. this allows them to purchase riskier assets. in a well-functioning market,%- they should not have%% occurred. another aspect that i found surprising was that while the market was sending clear signals that the mortgage-backed securities were risky, as basic financial theory teaches us that there is no such thing as a free lunch. it is a formulation of something mothers tell their children. if something seems too good to be true, it is. unfortunately, they ignored that. since these securities were

earning an above-market returns risk, people purchasing thhm should have realized that the historic returns were not supportable. over time, people learned these assets were risky. many of these assets are now worth much less than what was paid for them. in addition, managers seem to have done a poor job of assessing the risks, yet few of them have been penalized. they're essentially purchasing boxes with residential mortgages, boxes that were stamped by the rating agencies. they through the boxes in the corner, and what it to cash dividend payments. it is not apparent that they opened any boxes to see if there was an accurate representation of what was that

-- stamped on the box. in other sectors, these managers would be out of the job. in the financial sector, they seemed to still be working. this is hard to understand. this all leads me to conclude that it is not a well functioning, competitive market i'm trying to understand why the government h. the government has long backed.+ >> thank yoo, dr. troske. superintendent neiman. >> thank you for being here, again to speak to the public on important issues. it has been over one year since our first hearing with you in%%

april of 2009. it is sticking to take stock on where we stand in comparison. first, it goes without saying that progress has been made in restoring financial stability. although difficult challenges remain, the crisis levels of last year have receded, and%% capital markets are beginning to function more normally. second, a significant amount of tarp funds had been successfully repaid. this is impressive, as many banks have been able to privately raise capital and increase earnings in a market that is constrained by recession. finally, many of the causes of the crisis that put many taxpayers on the hook on -- in the first place, are beiig addressed in congress, as we speak. however, in other areas, needed change has not come as quiikly as desired. unfortunately, these are some of the very areas where americans are hit the hardest.

i may be the virtual broken record on foreclosure prevention. it is clear that families have% auctions at work. i am equally concerned -- particularly concerned that there are more families whose trial modification has been canceled rather then converted to long-term further, i think we all believe small business lending is key. we continue to hear the viable small businesses are unable to access the credit they need. this was a recurring theme. the house recently approved a fund that will provide capital to regional banks that are at the heart of small-business lending. our like to explore small business access and other

lending issues with you this morning. finally, with a financial reform work near completion, the united states finds itself in a unique and precarious position. as you are more aware than anyone, there are challenges we face in the global community between balancing our role as a% leader of financial reform with the future of our international competitiveness. time permitting, i would like t% discuus this challenge with you so the public can gain your perspective. i look for to your testimony. >> thank you, superintendent neiman. secretary geithner, i would like to recognize you for five minutes. secretary geithner. >> thank you. thank you members of the panel.

as you know, in the fall of 2008, as we confronted the worst financial crisis this country has seen in more than 70 years, congress and the previous administration mobilized extraordinary financial response. their action started the process of stabilizing a system that was on the verge of collapse. when president obama came into office, he took the necessary steps to start to finish the job, to start to save the economy from what could have been a second great depression. last december, outlined an exit strategy. i want to uudate you briefly on the progress and the ultimate cost. first, because of the actions we took, alongside actions of the fedeeal reserve and the recovery act, the economy is growing again, exports are rising,

manufacturing output is rebounding, businesses are investing, and so far, this year, the economy has treated half of 1 million jobs in the private sector. economy is in a much stronger position to the cost of credit for homeowners,,consumers, and businesses has fallen considerably rates for all those up -- of all loans, for which it considerably. rates for auto loans, for example, are considerably lower. second, we are now in the process of ending our emergency programs and recouping our investments. as you know, we have shut down most of the programs that characterized+ that initial phae of the of emergency response -- the capital purchase program, treasury's guarantee for money markets, and the federal reserve has wound down the vast majority of its lending programs. all of those programs are on

course for significant profit for the taxpayer. more than half has been repaid. when president obama took office nearly $240 billion had been invested into our nation put the banking system. today, we have recovered -- recovered three-quarters of that money, and we are making progress getting out of aig, gm and chrysler. third, the overall cost of car continues to fall. last august, we projected potential losses at 340 billion -- $340 million. it is expected to fall further. the present is expected to

impose the fee to insure that the largest institutions bear the cost, that way the american people would not have to pay one penny of their hard-earned dollars to cover the losses we might still face. we are on track to shut this program out as scheduled, and we expect to do so without using hundreds of billion dollars of authority. we will return it to devote to the medium and long-term needs of the country. it is important to recognize that they did what they were supposed to do. there is no job growth without economic growth. no economic growth without access to credit, and no access to credit without a stable functioning system.

our emergency plan started that process. the damage caused is still in affecting the lives of millions of american families and thousands of businesses across the country. those struggling to find a job, making mortgage payment, or divans their jobs or education -- or advance their jobs or education. we will continue to promote and maintain stability in the housing market and improve access to credit for families and small businesses. that is why we are working with congress, and are quite close to getting congress to adopt a small business lending facility. we are urging the congress to enact quickly to -- to act quickly to enact financial reform. taxpayers should never again be

asked to bail out a financial system crisis. the house and senate are close to enacting the strongest sst of reforms we have seen since the great depression. i would be happy to talk about those in more detail. it is time to provide clarity and detail. that will help make sure thhs financial system does a better job of meeting the needs of main street business and families. it will help restore confidence that our finaacial system will be a source of stability, not3 you began with excellent questions. i will be happy to spend some time with you walking to the challenges ahead. >> thank you, mr. secretary. the point about the accomplishments of tarp is quite .ignificant your emphasis on the importance

of a stable, functional financial system is what i wwuld like to talk about. we have made an enormous progress. tarp oversight is where the problems still lie. in just over three months, treasury will no longer be able to initiate or redesign programs. what we do not not -- what we do not now, we cannot do in the future. i wanted to start with small bankss this panel has written about the upcoming troubles in the commercial real estate. about half of the $1.40 trillion loans held by banks will be held by -- will be held under water. that will make lending almost impossible. about 3000 of the 8000 intermediate and small banks have portfolios that are heavily concentrated in commercial real

estate. we estimate that banks could be facing a $200 billion or $300 billion in losses on these loans. it means that hundreds or thousands of more -- more small banks could capsize. what is treasury doing to prepare for this coming problems? and do we need to be reworking any of our ppograms? >> that is an excellent question. we will be living for a long time with a lasting effect of this crisis. the damage was extraordinary. it reached car and brought across the country. if you are in the real-estate business, parts of the country that have been exceptionally high unemployment rate, if you run your business on access to credit that washed out, it is still an enormous the challenging environment. you are right to point out that small banks came into this

crisis, much more conservatively managed and their wall street competitors, but many got into a position where they had an exceptionally, regrettably, and unacceptable high levels of exposure. they face difficult adjustment ahead. we have a set of programs stiil in place. that will last beyonn the expiration of tarp. my view is that the most effective thing which could do for the credit problem still facing small businesses and small banks is for congress to enact this set of credit programs for small businesses. the way these programs are designed, they do two important things. they provide a modest amount of additional resourcessto states

pcross the countryythat have programs in place to provide support to small banks and small businesses, but, alongside that, we ppopose a new lending facility that small banks will be able to access. the more they increase lending, the lower the rate they pay on those investments. >> mr. secretary, if i could stop you there -- emphasized -- i want to emphasize a different part of the question. the question is that 3000 of our 8000 banks across the country have heavy concentrations in commercial real estate as i read the new initiative on small business lending, that is money that is not designed to go into banks to help them repair balance sheets. it is money to go to healthy

banks that do not face the serious problems. the question i want to sk, and press on, is when you talk about the stability of the american banking system, we have a 3000 banks at serious risk that they might not survive. what is treasury doing about that, or is the answer, we will let them go? >> as you know, i cannot associate myself with your basic nuubers. that is an issue where the fdic's basic framework is the most reliable resource we have had. >> so we are all clear, the numbers come from the bank's examiners. they're not numbers we generated. >> i am a great about the

challenges, i just did not want my agreement to be about the numbers. we have a very elaborate the country for dealing with the challenges facing our nation of 9000 commmnity banks. that process was designed in the wake of a series of past crises. that gives it government the ability to help those banks manage through, and help facilitate the restructuring ahead those banks that are uuder pressure have a lot of options. they can raise capital. they can shrink lending. you also have to point out that the programs we designed from the beginning are only available for banks that we believe would be viable. these are important programs because they will help the

banks face less need for shrinking balance sheet. >> i am over. i just want to make sure that there is no reason to change anything, we will stay steady on the same course? >> i am a very careful, pragmatic person, and i am open to any ideas, but, at this stage, i believe that the programs we have within the tarp, and the existing programs with the fdic and the new small- business lending initiative is the best mix of solutions that we have found. >> thank you, mr. secretary. mr. mcwatters. >> i will start with an easy question. a soft ball over the plate.

does the administration plan to test congress to extend tarp beyond october, 2010? >> no. this hearing should be a eulogy for tarp. we're working very hard to put this program to rest, put it out of its misery. it will not solve all of the problems facing the country. it was not designed to. we will not use it that way. we use it carefully. it has come the essential thing we designed it to do. -- it has done the essential thing we decided to do. you said one thing in your opening statement that i wanted to correct. you eferred to a press releass where we implied the overall programs would be profitable current we have never done that. we were explicit that the latest cost estimates were in the hundred billion dollar range.

for the bank piece of the program -- for many americans the program was defined by the incredible act of the commitment of the united states putting capital in banks that represented three-quarters of our nation that was a focus of the deep outrage where we had t% put money in the hands of destitution that played an important role in the crisis. it ii hard -- and every estimate that i have seen, they will return a positive investment for ppthe american taxpayer. every time we said that, i always make clear to say, and our numbers always show, we still face a substantial risk of loss on a range of other programs, including the ones we inherited from the previous administration i want to make

sure that we never made that mistake, and i will never make that mistake. we are still exposed to substantial risk. >> but, but export sort of curious -- but the metrics were sort of curious. to a lot of people it looks like you're trying to say there was safe for the million-dollar profit, when at the end of the day, there is it $500 billion loss. >> one of the important things about the way we have done these programs is that we put out regular estimates, including by independent analysts, of the potential costs. it is hard to find any country and around the world that has explicitly identified and provided regular independent%- estimates of the ultimate cost the taxpayer. i ammcommitted to that.

judgments. life is uncertain. these programs will cost a fraction of what the critics feared and what the architectss of the program thought was likely. a very small fraction. the best way to measure this is to look at the projected costs relative to, for example, the crisis in the 1990's, which was simple to solve, still more%- devastating for the communities effected, but dramatically higher costs from a much smaller crisis. >> at the end of the day, $105 billion is a lot of money. >> a absolutely. -pthat is why we're working so hard to bring those costs down. >> let me as to the. is treasury contemplated the allocation of funds to any new

ppograms before october 3? >> at this stage, we are not contemplating any new programs using this authority. we have an obligation of care and prudence. we are very reluctant to do things unless we think there is a very, very high return on the taxpayer's investment. we think this is a set of programs today thht strikes that balance. >> how about additional tarp funds to existing programs? >> no. we have no plans of adding to the current estimates that we have put out. again, first of all, for perspective, most americans think we went and spent $700 billion, and we will never see again. in fact, we actually put out half of that, we got more than half of that back already, and we have substantially reduced the estimates that we started with about how much these

programs would ultimately commit to. >> ok. my time is up. >> mr. silvers. >> mr. secretary, i hope i conveyed in my opening remarks my sense that the analysis you went through is ethically correct, and i think you and your team are to be commended for getting where we have gotten. with that introduction, i want to shift to the question of the interaction of tarp with a larger. i will ask our staff to give us an updated loan level measure. as our chair noted, we think there is some deficiencies. my question is this -- given that datt, at a time when i

think the administration's view is that we re unit and economy mode, it appears that the private credit system is acting assa light on the growth of the economy. that would appear not to be what we are trying to get at. can you give us an analysis of that and what steps you think need to be taken to address it? >> it is a complicated question, and it is gephardt of heart of any evaluation. at the if you look at most measures of the cost of credit of overall financial conditions, they do not suggest the the financial system today is a source of weakness for the overall economy. in fact, i would say the opposite there is not a chance that this economy would have started to grow again in the%% second quarter of next -- of last year, and this early a

return into a the economy started to add jobs again, without the dramatic actions we talk, however unpppular to bring down the costs of the fed and stabilize the system. this is not something we can know for certain. it is absolutely the case in the housing market. in the context of small businesses that were unlucky in their banks. i do not think that on the available evidence today, you could say that the financial sector itself is operating as a significant drag on the%% i will finish quite quickly. one of the reasons we decided we decided -- was wanted to make

for that the system would be able to finance recovery. i think we are in a good position to achieve that outcomee a notch in there is still a lot of damage out theee. >> -- acknowledging the there is still a lot of damage out there. >> i do not think you are confronting what i asked head- on. i do not disagree with you that we could have been much worse. the situation in 2008 and 2009 is significantly worse than today. my concern is thht the situation today is not what it should be at this moment of economic recovery in terms of the behavior of the private credit system. that is not so much in housing. it is clear we have a private credit system in housing at the moment. it is more on the business side, where the job growth needs to come from. that brings us back to my opening statement about a

chronic problem replacing an acute one. >> the best measure we have about whether the financial system is a constraint on growth is what is the price of a loan?? if you look to the price of municipal borrowing mortgages, business credit, in almost any sector, there are very low. another example is if you look at the balance sheet, how much cash businesses have on hand across the american economy, the business sector as a whole haa very, very strong balance sheets and is sitting on a lot of cash. i completely agree with you about the basic risk. we did not want to have a recovery constrained by credit that is too tight, and it is still too tight in significant parts of the economy.

on those measures i would say i do not believv e face the risk of a chronic, although i don't think i would use that word, but we are continuing to make sure that the economy is growing as fast as we can. >> i think most economists would say that the fact that businesses are sitting on a lot of cash is not necessarily a good thing in relation to our recovery. >> that i would agree with, but as a measure of financial had once, it is a good measure. -- head winds, it is a good measure. we still have roughly 8 million americans out of work. people are still living with a basic level of financial insecurity that they had not experienced in decades. you are absolutely right about that. we are still at the early stage of fixing what was broken in this economy. >> the chair was kind enough to

give each of us the same time she talked, so i'm going to use -- what i am pushing on is if you look of those reserves in %ash, i believe they are weighted toward the companies that have access to markets where the recovery has been more -pdramatic. if that is not so, i would appreciate hearing about that. our reports suggest that if we have to deal with the banks as your source of credit, you have a much tougher situation as a business person. the testimony we have heard from pmall business people is that the bank might post a rate out the window, but it is not available to them at that rate. that feels like a serious problem turned >> i agree. that is why we have asked congress to enact legislation

that would help mitigate that problem. i would say that on your basic question about whether on the available evidence you ave a financial system today that is a source of restraint, i do not believe that would be a ffir evaluation. in parts of the country, in particular sectors, that is the case. it would be surprising if it was not the case appeared >> thank you, mr. secretary. dr. troske. >> thank you. i'd like to start off by getting your thoughts or having you respond to concerns expresseddby many that the large financial institutions and their creditors, for themm the federal government has publicized profits, and privatized rest.

>> you are absolutely right. market discipline failed. %%the market failed to constrain risk-taking by financial institutions. that had two causes. one was classic moral hazard risk -- the exppctation that the government would insulate private creditors from losses. that was acute and conspicuous .n the case of the gse's the crisis had another cause that was much more powerful in a moment. the market had financed a huge growth in leverage in a set of institutions that were allowed to operateeoutside of the constraints of capital leverage. for example, in many of our investment banks, in a vast

range of non-banks and venture companies, some of which call themselves thrifts, those institutions were able to operate without a history of government support. that is not something you can attribute to moral hazard. that was a classic act of judgment that we might face a recession withha huge losses. -- with acute losses. we have a set of reforms that will address that risk? this is important. those institutions, that essentially operate like banks, whatever you call them, and take risks like banks, are important to the functioning economy. we will coostrain their risk- taking. whether you call them aig, goldman sachs, or j.p. morgan,

we will constrain the leverage and risk that the take on. if they get to a pooition where they couud not survive on their own, we will step in and dismember them safely. we will minimize the risk of loss to the taxpayer, and make sure they can be broken up in a quasi bank like mechanism. that is what this does. the absence of tools is what forced us to take those exceptionally offensive measures in the fall of 2008 and the first half of 2009 it to put up >> the example of long-term capital management will be one where that was not a bank, and the government came into backstop. they did arrange a rrscue that

would lead one to think that that is what the government is quick to do for the other ffrms. rescuing became an exxected norm. there are zero entities out there, presumably credit holders' equity holders that are supposed to be regulating these firms. the creditors, who did not experienced the upside, were the ones that had the most to lose. it is not a large stretch to think that they were failing in that role because they felt they were a point to be guaranteed a return regardless of what happened. >> i think you're right that all financial systems have this risk of moral hazard, this expectation in the extreme event that it is possible the government will act. that is the job of oversight, policy, and government, to make

sure that because of that risk, you have tough, well-design constraints on leverage that are enforced across the system ahead of the crisis none of us run the system, and no country runs the system on the expectation that market discipline alone is adequate to constrained rest- taking. all companies -- all countries restraint risk. some do better than others in some parts of the system, but did it partly -- poorly in large parts of our system. that is what we need to change appeared . you mentioned the systemic risk regulator, or whatever you want to cut.%% under the current system, we're supposed to be assessing systemic risk to the economy. you would know more about it than me. what is the difference between what we are setting up going

forward -- because it is the same players -- what powers to have that were different than they have currently? >> that is an excellent point. we are not we to design a system that depends on the foresight and wisdom of officials sitting in washington in those agencies to come in and preamp -- preempt, act preemptively to diffuse future crises he's. we hope that will happen, but that does not the promise. what we are doing is making sure there are clear, public, and forcible constraints on the types of risks that could imperil a system. we think that is the most realistic way to make sure the system runs with much greater cushions against future sources of lost stocks and distress.

i agree very much with the promise of the -- the premise of the question where if we designed the system to work only if regulators are pre-emptive, that is not the reform we are supporting. i grieved for skepticism. -- i agree with your skepticism. >> ultimately, if the government is faced with another crisis in which several institutions are facing simultaneously -- is there anything that will prevent them from enacting a tarp two? nothing that i have seen what change anything from what happened in the past.. >> excellent system. that issthe system we had.

that ii what put the government in the outrageous situation of having to commit an extraordinary amount of resources. that was necessary given the system we have pared the reforms that are not -- that are on the verge of enactment help to fix that problem. did did not have the ability to constrain risk taking because they did not call themselves banks. it fixes that problem. it also make sure that ii in the end, and individual firm gets itself in the mess, we will be able to let them fail, ensure they fell, dismember them safely, and not give them a chance to operate again, putting them out of their misery without

the taxpayer being forced to uxor these losses, or -- aasorber these lossss, or left with the liability. you want to be able to make sure you can draw a line around that fire. that is what this reform does. >> mr. secretary. thank you. >> too wet. -- thank you. >> thank you. superintendent neiman. >> in the treasury report from just yesterday, trial modifications nearly tripled from march to may. the number of families that have received permanent modifications has now surpassed -- been surpassed by the number that has been pushed out of the program.+

it is deeply troubling that the homeowners relied and trusted this government program, that they might be left out of the -- left out in the cold. over 70% of those individuals have been making timely payments for six months or more. first, we need to really understand why these hundreds of thousands of modifications were canceled. . . >> they were unable to prove their income, and there is a conscious choice last summer in putting this program in place, that we would do everything that we could to maximize the number of families who were potentially

eligible for this program to get the immediate assistance, and because f this strategy, we had 1.2 million americans benefiting from the temporary loan modifications. we let them do this on the stated in come. we understood that we would have to go back and demonstrate that they were truly eligible. by making a mistake on the side of speed, we were in the position where we were all marble to the possibility that many people who said they were eligible was able to prove their income. and now we are cancelling some of those modifications right now. and more than two-thirds of the people -- with the canceled modifications are benefiting from the other programs that

their banks offer and we are not supporting. benefiting from other modification programs that banks and this will temper the consequences of not being part of this program. we are making certain to develop these resources to the people who are able to prove that they're eligible. we're devoting these scarce resources to people who are able to prove their eligibility for the benefit. >> what kind of verify ability or compliance can we provide?3 about the arguments being lost and errors being made in processing documentations. how can we be assured that servicers are acting properly. -- properly? >> i think servicers have done a terrible job of making sure they are doing everything they can to meet the needs of their customers who are facing the

possibility of losing their home, and most importantly, there's financial security. they still have some distance to go to try to make up for that. it is a series of basic -- how should i say it? ppmistakes, inadequacies. what we try to do is to simplify and reduce document burdens. we have put out. each of publlic metrics of performance so that people can judge themselves -- we have put out very detailed public metrics of performance of the people can judge themselves who is doing a good job. and we continue to put as much pressure on them as we can to improve their crops -- their quality of service. >> you have said that the majority of those who dropped out of the program were offered these proprietary modifications by the servicer. but isn't it true that the true

test will be whether the bar work is better off? until we see the statistics -- about the borrower is better off? until we see those statistics, isn't there a question whether those are truly sustainable? unlike the situation two years ago before the governmeet poured out this basic system for standard modifications, most did not meet that test. they left the ball as dead as coming in. but since then, the government has raised he standard of those modification programs. >> do you expect that the public will be seeing any data? has the treasury requested, even if on a voluntary basis, some of those key elements of of the

modifications? >> we are continuing to do that and we're happy to be responsive about what we think is achievable in other areas. >> another thing we are surprised to find, with his grounders -- with its grounder -- scrogginbarrwere short in thm is been that there about -- they are loved with the inadequacies in the program -- the other thing we arr surprised to find it with borrowers in this program is that they are left with the inadequacies of the program. one element, a provision that i think would be extremely helpful and have been calling for a

while for, would be an extreme measure with the treasury. i would hope what administrative reports we -- but administration supporter we would see something like what senator menken has been working on. >> we have been working alongside the excellent people of huddy, led by sean donovan. -- excellent people of hudd, led by sean donovan. >> have a process that people can reach out to treasury would be very important, in my opinion. thank you. >> mr. secretary, i want to go back to this question about a stable functional financial systems. we talked about these potentially dangerous

concentrations in commercial real estate. i want to look at the top end. six of the 19 stress tested banks hold real-estate loans that are a big percentage of their capital. with the commercial real estate losses, because of the way they are set up, they're likely to be much larger in 2011, 2012, and on into 2013. how can we be confident about the stability of these financial institutions without rerunning the stress tests to account for leeding troubles in commercial real estate lending? >> as i said, these loans and law sets -- losses and assets are board to be a challenge -- are going to be a challenge. i think it is fair to say that

actual losses on the books -- again, this is a question that weelook at all the time on a regular basis. based on what we have seen so far, the losses are bett and this is even better -- therefore, the capital is even better than what we thought we had achieved. >> we know the loss is on commercial real estate. those are coming up in 2011, 2012 and 2013 for a major reset. i'm glad that you think the numbers look better than in 2010.

are you running in many stress test? >> -- a mini-stress test? >> what our supervisors have done is put in place a much higher level of disclosure on the u.s. bank system of detains. you are seeing countries move to adopt the basic framework. the virtue of this approach was, we pushed a lot more capital into finances at the early stage. the best way to look abroad whether the market is jjdging relative to potential risks -- and i think again, a relative to expectations, it is still better. but there are challenges ahead. >> let me try this again with second loans. big banks are still carrying

second liens on their books. many analysts who believe a large portion of these should be written off. as of march 1, 2010, theefour largest banks held $434 billion in second mortgages and had total capital of only $505+ billion. do you have any concerns about what this means? now we are moving from commercial real estate on to second mortgages. >> of course, banks have on their balance sheets still -- even though they can produce assets to some extent -- they still have challenges. how much they will win against -- how much assets are they holding against the hallenges?

the general sense is the projected losses are less than they expected, and therefore, more capital is now held against those assets than we thhught would be their year ago. >> let me try one more. the fannie and freddie are pushing mortgages backe to these financial institutions because they say the mortgages sold to penny and freddie are not of the quality that they were represented. fannie does not disclose po requested -- danny does not disclose requested by? -- fannie does not disclose requested buybacks. arethere requests from these larger institutions