rush limbaugh are reaching on the radio. it is not as large as morning edition or google or yarmuth. what we think the --as the -- google news or yahoo. >> it is not so much the size as the process and whether or not our democracy is missing something with these other forces are marginalized. there really has been an explosion of media peter -- explosion of media. there is an enormous responsibility on the media today to ensure that the media is giving us a fax. unfortunately, over the last couple of years, things have gotten blurred.

it is not just facts and is not just news, but it his opinion. today, given what arianna huffington is doing, it is very difficult to get away with it. immediately, on the internet, there is a correction. there is conversation. there are the people. the people are speaking. i like this is news for that reason because it can be measured engaged. there is not as much room for opinion. frankly, i do not want to turn on the news and hear someone's opinion. i do not care. i have my own opinion. [applause] >> i think the problem is not opinion. is it opinion based on fact or is it opinion based on fantasy? that is the distinction for me. i do not have a problem with

opinion or faction. i have a problem with people making stuff up. our fact checking process is completely non-partisan. we will get republicans, democrats and everything in between. this is not a partisan issue. whatever the opinion, we recognize our reverence for fact. it does not always to be found in the middle. sometimes the truth is on one side or the other side. the earth is not flat. [applause] [unintelligible] the object is to stay in the middle and state your views.

>> you're looking like an american tourist in london, exactly the wrong way. he mentioned at this cable channels. if he were to add all of them together, you get on a typical night, 4.5 million or 5 million people. that is out of the country of 300 million people. why are you concerned about how the information and the right to talk on television allocated to the worst of the country? americans are much better informed than their parents and grandparents were. the hundred million worse

informed americans are much worse informed in the were a generation ago. you had to get out of your chair and walked over to the tv set and turn it off until the entertainment programs began a half an hour later. if he wanted to know whether a chicken was on special, you had to go back to the news about what the mayor or members of congress were doing. the problem is not media bias. the problem is that the public has dropped out of informational me altogether. [applause] we talked about the dysfunction of politics despite the proven quality of people participating in politics. why are the lobbyists more

powerful today than they were in 1965? were people better in 65? i do not think so. was the media better? we had different roles. it was not worth hiring 26 lobbyists. power was more concentrated. what would we have done every pursued a series of fixes that makes the problem worse at every turn? the driving idea that we have on how to fix politics or the wrong ideas. it makes problems worse. it is a very common error to make that when you have a big problem you must have a big solution. sometimes the solution is as simple as changing the rules of procedure in the house of representatives. sometimes it is as simple as

changing the balance of power. sometimes they are as simple as making sure presidential appointees to get through the senate as fast as they did in the early 1970's and 1980's. we are not to look at our problems, but to begin focusing on our problems and asking what the solution is we are going to pursue. the solutions are available. they are embedded in the problem. our problems are not overwhelming. we can do this job. >> of want to spend the last bit of time we have not talking about this. people are starting to declare they are running next year. you talk about sometimes the solution is as simple as changing the rules. the new speaker, john boehner,

talked about transparency. he would have you believe that republicans are going to change the rules and also all solved the problem. >> that is a perfect example of what i mean. we had this bias. president obama has said they are going to publish all the laws of every visitor to the white house. the me tell you what that means. if i have scheduled a meeting with somebody from group a few has an opinion on topic one, i have to schedule a meeting with everyone of his arch rivals. i cannot have a meeting in the white house. i have to have 13 more meetings. even at the only reason is to look at my watch for 50 minutes so i can ignore him and get back to work. what the transparency does is it causes them to choke and suffocate.

our government moved more rapidly when there was less transparency. it gives the individual members of the house is more power than the committee chairman. you get bigger deficits and less accountability. those are not the ways to think about those ideas. if we are going to think creatively, more of the things that are not working -- and >> do not applaud it, yet. honestly. the idea that it has been tried and failed is so pathetic that i can not really begin to answer it. where do i start? you want to go back to afghanistan? do you want to talk about transparency? the want to talk about the fact

that we tell the american people we would get out in 2011? now they are telling us that they do not know when they are coming out. >> if they did it in a classroom, you would not like it. >> it was done in endless ways that the american people were kept out of. we did not know a lot of the stop the government was keeping secrets from us. this is just one example. we could give you thousands of examples. the same week the president went to afghanistan in a surprise visit and told the american people we were winning, which was an absolute and liked it why -- which was an absolute

and blatant lie -- we are turning more and more people against us. americans need to know every time of their elected officials are lying to us. [applause] >> it has to do with the difference between the democratic and the technocratic. if all you are after is the best deal you can't reach -- every empire uses secrecy to hide and it can sell decisions they do not think are in the public interest. >> we chronically have not balanced the budget. >> why is that so? >> why were we able to balance the budget but had a chronically

unable to do so recently? there is one major reason. when you empower the 535 members of congress, that is the mood that is wrong. when power is put in place, the people need to understand it. the transparency create secrecy. the way we create secrets in washington is by having such overwhelming detail that only a few specialists have the patience to follow it. this is not a city of secrets, it is a city of mystery. [laughter] >> if you have to break that down. >> it does the same thing as the mortgage contractor you're complaining about. every detail of the contract is

there if you can read it. people would be better off if they had better representatives saying, "here is the contract, read it for yourself." what of the ways we become more unaccountable is the diffusion of responsibility. nobody knows who to be angry at. the one person whose name people now knows it gets blamed for everything. if there is an oil spill, he gets blamed. you cannot blame the people whose names you do not know. a big government with little accountability and a little name recognition -- that is the formula for what we have now.

>> you do recall dwight eisenhower's speech when he talked about the military industrial complex. it is so expensive that is a form of theft. why? it reinforces the permanent warring economy, the pentagon is untouchable. the deficit tripled. they could not get hold of the pentagon budget and the military budget was expanding. >> it peaked in 1986 and then came down. >> a triple. >> that is when we took control the health care budget. look it up. the medicare budget -- the line

>> all we talking about the defense budget between 1972 and 1988? >> i am not defending it. since 1986, we went through greater balances than 2001. as the defense budget begins to shrink after 2013, which i expect it probably will, we will find our difficulties in balancing the budget remain as chronic as they are now. this is not because we spend too much to defend ourselves. >> it may be archaic for some of you, but let me come back to something you said a moment ago. all one it is segue from u2 david brody first. what is good to happen about

politics over the next couple of years as we try to write this next chapter. we are at the halfway point of president obama's first term. we are just weeks away from a whole bunch of folks starting to line up and declare they are running for the white house. most all of them are going to be republicans. >> probably starting in march, you'll see some candidates get in like newt gingrich. you'll see tim pawlenty get in. sarah pailin is an open question. i think what you will see as relates to the republican field, i think there is an evangelical primary and a businessman primary.

you have people like pukka be -- huckabee, mike pence, and some other folks who will compete for the evangelical vote. they knew at the businessman primary. -- then you will have the businessman primary. i think as it relates to where the president may have missed that, most people will agree that this is a center-right nation. i do not know too many people who would disagree with that. you have a center-right nation and you have a president who went ahead and pass legislation related to health care. he was trying to shoehorn something. i think it woke up people -- it

will cut these tea party people who were sitting on their couch watching oprah and going to get a hot pocket. they were watching "all my children." [laughter] >> i am glad you said that. oprah was about to tweet you in about 30 seconds. [laughter] [applause] >> you are wrong about one other thing which is the center-right country. that is what i mean. the conventional wisdom kind of congeals and people begin to believe it.

this country has been on a journey for a more perfect union from the moment the constitution was written. every bit of progress we have made, they were all left-wing in his it is in a center-right nation? -- they were all left-wing ideas in a center-right nation? you are giving every progress that ever happened to the left. [applause] >> i think the polls bear some of this out. >> what impact -- you talk to the tea party tonight. we sell the impact in their -- in the midterm elections. what you think the and that will be in the presidential election?

>> as it relates to the house of representatives, they will make john boehner's live a real problem. he has 43 or so house republicans that are tea party yeariers. >> are you saying the deep -- the republican party made a deal with the double in the tea party? >> no. >> i am not being flippant. did the republican party make a deal with the devil with the tea party. they wanted these people to take over the house in november. >> here is the thing.

they were with the tea party on the overall philosophy. they attended hundreds of tea party events. to do a deal with the tea party -- it was there for the taking. the difference is in ideological purity. the tea party was ideological purity in the sense of constitutional roots and going back to the first principles. john boehner and mitch mcconnell are up there to cut a deal were to work on getting legislation passed. it is a much stiffer reality. >> -- it is a much different reality. >> this is always true. there's always a tension between what you have to do for your party to win the election and what you actually do when you are elected. a colleague was giving a speech

in 2007 in which he talked about global warming and dealing with the problem. the was a very intelligent and well informed person. this is going to be used to torment and torture him. this is a very difficult thing for him to get past. ms. romney is a very effective executive. he would make a fine, center- right executive. he supported tarp. the is like mr. death-panel now. we saw what just happened in the past 34 hours with tim pawlenty. the was the former governor of minnesota. he is a civic minded person. he is now saying it is going to

be a priority of this to repeal "don't ask, don't tell." david trimble is making eight -- >> >> you are making my case. if i am barack obama, i am thinking about your analysis right now. i am thinking myself, you cannot be somebody without nobody. >> i want to put that on record. >> that somebody is going to be somebody. i am thinking about who they are going to put up here.

i am also say to myself, you do not have anywhere to go. what are you going to do? [laughter] quite bear witness, brother. >> we have two years now. it is very clear that the two- party system is broken. you have both parties that are dominated by the same interests -- corporate and big business. you have physiological and racial groups that are relatively powerless. that can be the makings of a faction of we do not begin to come to terms with this. on the other hand, it also means

the tea party is going to become more and more upset with the establishment and the republicans because the business interests are getting more attention. at the same time, barack obama masterful, eloquent, charismatic in his language, in his policy -- you cannot bring in a geithner and call him martin luther king. he was anti militarism. he was against the american empire in terms of this -- of the presence around the world undermining the principle. that is why when he died, 75% of people were against them.

he was to left-wing. when you love working people that much, that makes you the most feared man in the country. you are also the biggest threat to both the republican and democratic parties. i can only call for it because i do not control history. the whole system has a rottenness running through it. [unintelligible] we are still working on this thing together. >> what is martin saying every day he wants in? >> what makes you think the war in afghanistan does not have the

same set up as vietnam? the problem is this -- these are part of the lines of the mainstream. people have reached the conclusion that barack obama is the fulfillment of king's dream. that is not true. [applause] it is a fulfillment of king's drain, he is not the fulfillment of king's dream. [applause] not just black people, martin was that kind of a dreamer. we have to be honest. >> if you get back and look at what the president of the campaign manager wrote about the campaign -- it was a campaign of audacity. in that book, you see again and

again they talk about the middle-class. they talked about the people being told there is a very clear foundation to the campaign. there are two quotes. the president said, "our task is to constantly widen the circle so that we bequeathed the american dream to future generations." that is what cornel is talking about. that is what america has always been about. including more and more people. this has to be a share, a national agenda. [applause]

the second part is from fdr. the is releasing the same thing in different words. he is saying debt of our whether we provide enough for those who have nothing. when newt gingrich gave his first speech in 1994, he said that fdr was the greatest american president. was the right or left? we need to stop this debate conversation. i was in brazil recently. i interviewed the conservative president of july. -- chile. he said his greatest priority was in an aching poverty in chile.

you have the conservatives this policies were more progressive. why? because they realize you cannot have a successful, a thriving country if you have people falling out of the middle class. [applause] >> if you notice, tavis, both cornell and i danced around your question. there is nothing they can do about it. tuck with this president. they are going to support him. there were not be any serious challenges to the president. -- there will not be any serious challenges to this president.

at the same time, you see the potential for some real fratricide in the republican party. i think it is fair to say that this president reached his low point on november 3 and the republicans to reach their high point. -- and the republicans reached their height point. we are looking at the 2012 election with a 2010 mind-set. once they added millions of jobs and people are feeling better, it becomes a very different equation. you have a more satisfied electorate, at a less angry electorate. quite the thing that is likely to happen? >> of course. you never know what is likely to occur.

>> where are these jobs coming from? >> last month we added 100,000 jobs. >> there are massive amounts of foreclosures in the pipeline and massive amounts of shadow inventory. >> if the economy does not broke, all bets are off. >> if my hon. had went to college, he would be my aunt. [laughter] the economy is not improving in a way where working people and the middle-class -- larry summers has convinced the president that the economy had turned around. larry summers has convinced the president that when et came to

the midterm elections, unemployment would be down to 8%. i remember being with them on a television show. he said there would be growth in the spring like chancey gardener. [laughter] >> all this conversation does is take us back to the issues. i want to press this once more. for those who support president barack obama when he ran, who bought into this hope and change, to believe things were going to get better and that there was another way, why should we believe that anything is going to get better if you

have nowhere to go on the one hand, and on the other hand, this is divided government means there is going to be more compromise, or capitulation, anything to get points on the board. you are not going to get what you thought you're going to get. you do not have anywhere to go anyway. what are you going to get for the next two years? >> you are absolutely right. the is much to let you down. he is going to betray you. i would also say, i was there for conversations like this in 1982 with ronald reagan. what conservatives thought of ronald reagan in 1982 -- he is a

sellout, he is not delivering. presidents are compromises. that is what the political system does. you take what you can get and decide what you like a little bit more. it goes back to my point about judging these things by the wrong metrics. people need to understand the way people do their work in the assembly. the people who will make john boehner's life a misery, -- if he is able to bend the curb on government spending, prevent tax increases, major new regulations are not imposed -- those will be

used tryouts. if the does by what any reasonable definition is a huge tryouts, people will see him -- people will see him as a sellout. >> we get so caught up in barack obama acting as an independent to get the presidency. what this is about is the message, whatever that message is. it people believe his policies or not centered -- are not centered, he has to convince the american people that they make sense. the conversation of the ideas in this country -- that is what republicans will have to do to win the white house. whether be met ronnie, tim pawlenty, or whoever, they will have to get down and dirty and

explain why free-market principles of the right place for america. you cannot just go on talking points, you got to go deep in the playbook. explain it.o if you do not explain it, it will not work. >> we make the tea party as this use movement. they are the squeaky wheel. they did an excellent job of making sure that they put in the congress. it is not what barack obama is going to do for us, but the majority will hold barack obama accountable. it creates a space that make sure our representatives are ready to be accountable. i do not want to pick up my marbles and go home. it is our accountability to make sure we are putting pressure on our government.

[applause] >> it is a powerful point. i wrote a book on accountability. my question is, how do we hold the president accountable and help push him into greatness? specific in the black community -- and give you an example -- everybody knows that the most loyal constituency in the president's stage are black folks. they are the most loyal constituency. the enthusiasm, excitement about barack obama at two years ago brought people al that had never voted in their lives. he was on every black radio show.

he was talking and begging black people to vote for him in the midterm elections. what happened? all the excitement of two years ago disappeared even amongst the faithful. he needed them to do that to move forward his agenda. the excitement and the symbolism is not going to do it. iraq to accept it. but how do you do it for the next two years? >> i do not think this is going to be worked out in washington. i think we have too much faith in what people are doing around the country. it is important to talk about that. as i travel around the country promoting my book, i am asked again and again by the people

who may have given up on politics, but they have not given up on progress. they are using social media to come together. there are fascinating examples. a concierge in portland, ore., could not get another job. the brought together and other unemployed people -- unemployed lawyers and unemployed accountants were helping each other. they were taking their passions and their hobbies and turning them into a way to make a living. they are swapping things they have and they need. they are not talking about his role or promising it. it is not just what is happening in washington, but what is happening around the country.

we are bringing these people to prominence and encouraging others to get involved. for me, that is really the battle. there are forces of cheer and forces of tremendous economic anxiety. people are demonizing and turning on each other. >> once we perceive the limits of the electoral policy, people either disengage and just followed the weapons of mass destruction -- television, video, internet -- it is a world of make-believe. you organize poor working

people, those who love them and what their situation to be better, and put pressures on the political system. it is so broken that even the organization does not have and that, then we are in a world of problems. >> it reminds me of allen barnett. the first time people organized said they did he not want people to compare slaves in america to the people of israel. that is the blues. what they said was, do not think that just because you have been emancipated they will not come get you. do not think that because you elected a black president that after his eight years, we will not have more black residents.

i am not just concerned with black people, but i start there. what that means is, how do i deal with the desperation? do with their hopelessness? -- deal with their hopelessness? we almost lost it in the 1860's. >> if you go back to march 1965 and the famous meeting that dr. king had in the white house with lyndon johnson, lyndon johnson told him about the voting rights act. a. basically went al and staged the selma -- he basically went out and staged the selma march

and then we had the voting rights act. instead of constantly looking for the leaders in washington -- they are not there. [applause] >> to invoke john mccain for a moment on this stage, the straight talk here is the president has invested in political capital. you cannot just at an event. we had the beard summit. that was pretty much the media highlight in the first two years. it did not address anything as it relates to the african- american community. unless the president is going to invest political capital -- what happened to the responsible fatherhood initiative? that could have brought evangelicals from the moderate

and conservative standpoint and the african-american community together on something like that. it was pushed to the side. >> if you say that the highlight for black votes was the beer summit -- >> i am talking about the media perspectives. >> black folks celebrate the health care package and "don't ask, don't tell." i do not think that the black folks think that the highlight of the past two years was summit.beethe beer >> the media portrayed it as a black issue. health care was not proven as

an issue for african-americans. >> tell me why, given all that has happened since to the obama was elected -- the tea party, people showing up to rallies with guns, losing the house in november -- tell me why i should not believe that all of the top in this country about stability that this is not going to be the ugliest massive campaign for the white house in the history of this country. >> i would not be able to do it with any confidence. we just had an announcement this evening before we came up that democrats the republicans are going to sit together during the

state of the union address. [laughter] >> are they going to hold hands? >> hopefully they will hold hands. >> sing "kumbaya" and all that. >> it feels like these might be different. just from experience, i find it hard to believe that will occur. i did a column recently on the person in charge of the budget for house republicans. he wanted to take it and litigate it in the next election. we every state point where everybody has basically given up on the hope that they can stop each other from doing anything. there is not much they can do. they cannot actually achieve anything affirmative so they have given up and are throwing themselves into a bitter, nasty

campaign. >> i want to check back in about a year, david frum, and ask you the same question. democrats and republicans are saying this is not about republicans and democrats, we are all americans. tell me why i should not believe this will not be the ugliest, nastiest, maybe even the most racist campaign for the white house ever. >> you are going to have 55% to 57% of the population of voting. when you have a bigger electric, you have a less partisan electorate. i struggled in 2008. it was a personal election. not everything is controlled by the campaign organization.

there was a lot of restraint shown. mccain should have sent signals about barack obama's race. that did not happen. it did not happen partly because of the character of the people involved. john mccain is a man of very high character. pragmatic strategist working for both parties will not work. negative advertising, especially on the democratic side where you grab younger voters, negative campaigning is going to be counter indicated for years. all the republican side, if anything has any a trickle -- any attributable, that will be radioactive. they will be super careful about it.

>> there are a number of people in this country that have alluded to this conversation that if between now and the election in 2012, the job picture in this country turns around massively -- we do not think that is going to happen -- but if it changes significantly, barack obama will win. people say that because we vote our personal interests. it the economy turns around, there is some reason to believe barack obama will be reelected. do you believe that, number one? and, is there anything related to the meeting with china this week that the president can do to aid and abet that particular effort? >> first off, i now understand

the definition of moderate. [laughter] that said, if the jobs it turned around dramatically and any history of any regime has told us that the president -- that the present administration will continue. it will be easier to talk about the future than bringing up the past. that, i think, favors the incumbent in this case. if i were in the administration, the most important thank for american business -- american business does over 50% of revenue in general. this is now the biggest country

with a fixed economy. our issue is, we do not always think that way. i'll put it in simple terms. we have to make sure we leave the invitation open. in order to do so, we need to reciprocate. we also need to help them to create more jobs. right now, policy lies an attitude lies on both sides, it is preventing free [unintelligible] our allies are getting their fair share plus some more. the first thing i would do if i was president obama is to make sure we have sell policies to open up the markets, selling

policies to integrate ourselves -- sound policies to open up the markets and sell policies to integrate ourselves. we decided we're going to buy all the solar panels made in the united states. that is not the most helpful thing. we may be buying solar panels from france. i think we should let the product and the technology and the pricing and the market when. -- market win. >> i believe it will be about the economy. if the market turns, it will be a shoe in. -- shoo-in. people who are operating

businesses are feeling that they had a lot of expenses coming out because of health care. they are unclear about the regulatory environment. they do not know how deregulation will look. they have new regulations coming at them. that is keeping them handcuffed in terms of adding new heads into the payrolls. that will be an issue for the president. 50% of all mortgages are under water. we need to see policies in place that will encourage businesses to create jobs. the extension of the tax-cut plan could be a game changer for entrepreneurs. small business managers who may see it as a positive to create new jobs -- >> it is a purely political, partisan point of view -- if marie and john r. wright that

this election could turn on the -- if maria and john r. wright, this election could turn on -- john are right, this election could turn on the economy. >> my biggest concern is not that. my biggest concern is this white house is prioritizing jobs. i am writing a column -- >> you are telling me that the white house still does not get that it is jobs, jobs, jobs? >> if you go back to the last state of the union, he actually said, "jobs are going to be my primary focus." that was the last state of the union.

that is for me, the fundamental problem. the white house is not looking at the urgency of the job market. i was hoping there would be somebody coming to the white house to single-minded priority was the creation of jobs. when i say that, i mean that there are so many tools in the toolbox we have not used. we have changed from something small -- right now, we are not allowing foreigners to come into this country with ideas and money to create jobs because of this instinctive anti- immigration visa. -- view. >> if we believe the situation for working people has the same

sense of urgency and sang state of emergency -- the same state of emergency -- that is a state of emergency. what if we really believe that the situation is a matter of national security as it is in afghanistan? >> americans have such intelligence and ingenuity, the public sector and private sector will come together and say the future of american democracy depends on treating people with dignity. >> it is more than just jobs. i do not think a turnaround in the job market is necessarily a shoo-in for the president. people want to feel the freedom

and the independence and the aspiration to move out the economic ladder that they believe america can provide. >> how will they do that if they do not have a job? [applause] i am not being very simplistic, but i have two daughters in college. so many other friends are graduating and they cannot get jobs. [applause] these are kids to read all the right things. they went to college. they are graduating from college. that is the sense we need to bring to our national conversation. >> as you mentioned, one of the biggest issues that president obama has in his back pocket to stimulate the economy right now, today, is immigration. the way you do it is you have individuals who can actually compete on the global scale in the technology sector, but you

also bring out people that raised the level where they are competing for fair wages. these individuals have to pay taxes to ensure that they have a path to citizenship. we talk about the dream act. it allows citizenship for individuals who have graduated high school who are ready to go to college or go into the military. we are the only country that thinks about deporting a valedictorian. that is absurd. [applause] there is the issue of national security. we actually need to know who is living within our borders. we do not know right now. >> we have one minute to go. you and i talked often over the years about the difference

between optimism and hope. we have to write this next chapter, even for those who have no reason to be optimistic. there is something we can see, feel, or touch the issue a reason to believe in hope. even when people are not optimistic, why after all this can we remain hopeful about our future as a country? >> because as a people, anyone who has not lived with despair has never lived. we are wrestling with despair in the midnight hour. i wrestled with despair everyday when i look at people's

situations. i do not hate these folks. i know they are doing all right. that last moment is one of love. that is what it looks like in public. i am just passing through. [applause] >> >> please commit bank c-span for covering this -- thank c-span this.ver i thanks for being with us tongiht.

let me ask you to thank you rselves for being a part of this. -- by thee in late way, thank george washington for having us -- and missed any part of this, next week over three nights parts will repeat on pbs. 18, 19, and 20 of january. god bless you. have a safe ride home. [captioning performed by national captioning institute]

[captions copyright national cable satellite corp. 2011] [captions copyright national cable satellite corp. 2011] >> in a few moments, an

update on the condition of gabrielle giffrods. then today's white house breeding with secretary robert gibbs. fourthlater, the head of the transportation and demonstration on balancing privacy rights with security. >> tomorrow they elect their new chair. what the process life starting at 10:30 a.m. eastern purdah >> it is time to of plague -- it is time to upload your video for the competition pitta prevent

for complete details, go online. >> doctors for rep gabrielle giffords say she has open your eyes and is moving her legs and t. >> good morning. thank you for coming here and participating. thank you to do rescinding messages in the goodwill panet.

we have one patient that remains in critical condition bah. one of the patients will be undergoing a planned surgery's today to prevent. she remains in critical condition. it is true she did have spontaneous i opening yesterday. more alert.coming much

today we are doing aggressive physical therapy. we got her out of bed and dangling on the side of the bank -- bed. >> she is still holding her own. she is starting to open her eyes prevent. i was there when she is surrounded by her friend.

they let us away from sleeping. she is starting to become aware .f her surroundings panet this is all very encouraging.

going forward, we want to make sure she does not backslide. we worry about potential turns back -- we always worry. we are always vigilant. even outside the windows, inpatient the breathing tubes we worry about other complications. it is a major milestone. >> this is great. we will open of four questions at this time.

>> the breathing tube is the next major milestone. we may or may not take it out in the next several days. we will be able to get it off. when we examine patients, we oftne have to wake them up and give a stimulus. they may open their eyes. that is different in their opening their eyes spontaneously.

they have aster barrel of a king's credentials is using her hands to -- they have asked her very specific of kings. she is using her hands to communicate ho. we have seen the eyes beginning to track. we are starting to see those signs. its reflects on alertness. >> when the breathing tube is out, will she be able to talk to at all?

>> hopefully tomorrow we will give her up in a chair. >> it is like the morning. she is yawning and rubbing hereyes. before she would go back to sleep right away. she is aroused and the e yes stay open. you can tell she can see. >> is it too early to tell? >> this is out of her left

eye, yes. we do physical therapy. her legs are off the side of the bed. this is part of the rehabilitation process. weare -- are able to asses the strength in the legs. she is able to move them to command. >> she is sittin gup on the bed? sh e will 0-- she will lieft them both up.

>> they know her personally. >> he can see her becoming more aroused. within a couple of seconds there was no doubt. people were there that she might not have expected to show up. >> there are intelligible as in medicine. we can not quantify the component that family and friends bring.

>> doesn't ever feel like a miracle prevent. >> miracles happen every day. we like to attribute them to us, but a lot is outside of our control. >> he said it was her left eye that she opened it? >> yes. >> can she moved her right arms?

>> i do not want to get into those specifics for t it is nice in a there is an outpouring. this is a wily guide into medicine. >> i was talking to my kids about this. it is an appreciation of the big part of life.

it is humbling. we are appreciative about a prevent. >> the sponsor of several planes being able to opener i spontaneously. >> how long is he keeping her eyes open? >> i was there for at least shree to five minutes to the every exertion and milestone and

exertion. this is what we expect. >> she has moved both her arms and legs and thighs -- eyes. >> what does all this mean? quite a means to is making the progress the we can hope for her. what is the next thing you but ford? -- look for? >> we look at whether or not they open their eyes spontaneously and t heir fertilization.

>> the breathing tube is the next major hurdle. i think we are starting to get out of this window. and now we are moving in the ecumenical window. -- out of that medical window prevent >> thank you very much for a cunning this morning. >> lawmakers gathered to pay tribute to gabrielle back giffords. see what members said thonline.

>> whopper it gives -- robert gibbs says the state of the union will include two sons. >> good morning. >> get any sleep? >> about three hours. charitably i'd say -- i'd round

up to three hours, how about that? but i know some of you all got less than that, so -- as the press charter was in a little bit later. let me do one quick announcement before we go forward. president obama will meet with president zardari of pakistan here at the white house tomorrow. the two leaders will discuss aspects of the u.s.-pakistan strategic partnership, including our mutual commitment to economic reform, support for democracy and good governance, and joint efforts to combat terrorism. the meeting is closed press, and we're going to do some still stuff out of it. with that, take us away. >> thank you. >> how are you? >> why is that meeting closed press tomorrow? >> that's just -- that's just the way we've decided to do it. he's in town for holbrooke's service, and we thought it was a good opportunity to add a meeting with president zardari. >> do you think with the speech last night the president

accomplished what he wanted to accomplish with the speech? >> look, i think in -- i talked a little bit about this on the plane on the way back -- i think the president had thought about this on many different levels since we all got the news saturday of the horrific and senseless events. i think he thought of this as the president of the united states. i think he thought of this as a friend of the congresswoman. and i think he thought, as you all heard him talk about in the oval office on monday, i think he thought of this as a parent. and i think we've all probably gone through -- many in this country have gone through thinking about this at many different levels. i think what the president had

hoped to do last night was to speak both to the community of tucson and to the nation. and i think his message of ensuring that our enduring way of government moves forward in a way that best honors the memories of those that were victims of this tragedy, as well as those that we look forward to seeing recover. >> when he called for better discourse last night, did he specifically have sarah palin in mind and her comments about "blood libel"? >> i would point you to many things in the president's -- in venues that the president has discussed this, the notion of civility in our public discourse -- dates back to his time in the state senate in springfield, at the university of michigan, at the commencement last year. i have heard him say for as long as i've been with him the notion of disagreeing without being disagreeable.

those are aspects i think that he has tried to live his public life by. and obviously the speech -- the president added a pretty hefty notion of empathy in the speech that, again, i think he's spoken on on many different occasions. >> robert, what is your view on sarah palin's choice of words with the phrase "blood libel"? >> i think there are plenty of people that can render opinions on that.

i'm not going to do that. i'm happy to talk about what the president said last night. i think that's the role i best play in this. >> shifting gears to the china visit next week, what does the president hope to accomplish? and can you talk about the format for the press conference? i know that you pushed hard for that. are there going to be more than one question each side, or -- >> i will admit, i'm a tad behind. i believe there will be more than one question, but i will double-check on that. obviously there will be an opportunity for question. i think the issues that -- that the president wants to discuss are many of the issues that you have heard us as an administration talk about for the length of our tenure here. it's an important bilateral relationship. obviously there will be discussion on global economic issues, as well as security issues like north korea and iran, and important issues of political reform and human rights. our hope is -- and again, i'm still working out some of the details on this -- but we will

have -- likely be joined in some manner tomorrow by our national security advisor tom donilon to walk through some of what you'll see next week and some of -- additional things that we hope to discuss and cover. yes, ma'am. >> back on last night and the idea of unity, the president has talked about and campaigned about bringing the country together in 2004 and 2008. in what way has he not been able -- why has he not been able to bring the country together in the two years that he's been president? and is there some way in which his behavior is going to change after tucson? >> well, look, ann, i think that what the president would tell you on that answer is that -- i think -- and i think this was conveyed in his speech last night -- that we are not going to remove disagreement from our democracy.

and we shouldn't. that's the underpinning of the notion of our self-government. but the tone and the approach that we take in those debates i think is what we all hope changes because of both the events of the past few days, but i think anybody would say that -- and, again, i think you see it in the president's remarks, that our civil discourse has become more and more polarized. and i think the president hopes that, again, we can have disagreements without disparaging and being disagreeable toward others. and, again, i think you're going to see plenty of opportunities in the next few years where you have those disagreements.

i think that, again, the tone and the approach on both sides -- and this isn't just a one-way street, it's for us too -- to ensure that we're doing this in a way, as i think the president so eloquently said last night, is befitting the memory of those in tucson. >> did governor palin's message yesterday, the overall message, head in the wrong direction? >> again, i think there are plenty that can -- >> she's a public figure. the white house could have an opinion on her overall message. >> and, again, i'm happy to speak to what the president said and how he came about saying it, but i'll let others opine on that. >> has he seen her video, robert?

>> your own presence here, have you decided how -- >> yes. have i or has he? >> the president. >> i don't know the answer to that. >> your own presence here, have you decided on a departure date? >> i have not. i don't have any news on that. yes, sir. >> can i follow on ann's first question about tone and tenor, and whatnot? >> sure. >> since we've got the state of the union coming up, the president in the last state of the union talked about reaching out more to republicans, wanting to have regular meetings with them. and he seemed to be honest and frank after the midterm elections in telling them, the republican leaders in private, look, i need to do a better job on this. he was upfront about that. so my question is, with a new state of the union coming up, there's been some speculation that maybe the president will use the state of the union to build on last night. how do you see him -- whether or not he really is going to build on last night in the state of the union, will there be the similar tone and approach? and then how does he actually take the action to follow up on what he said in last year's state of the union about reaching out? like, how does it become a

reality instead of both sides saying, we're going to do it? >> well, a couple of things. and i think you're very correct, ed, in -- obviously elements of what you heard last night, improvements in our civil discourse and how we debate issues, will certainly play a role in this year's state of the union. again, this is something i think if you go back and -- whether it's in the campaign or -- you certainly can see it visibly in the 2004 convention address, but obviously speeches throughout his career where he talks about this. and i think you're right -- the president was very candid with those republican and democratic leaders after the election that he had to do better. the country was successful in getting things done in the lame duck session because of that very notion. and i think you'll see a greater effort on our part in a much more systematic way to do

the types of meetings that we had here before. again, i don't think anybody wants to take -- or i don't think anybody believes that we're going to simply remove the disagreement from our democracy. that's the very definition of it. but i think the way in which we do it, the tone, our approach, is something i think we will all -- we all should be much more mindful of, and i think that's -- i think that was in large part -- >> so it seems like that will be a big part of the state of the union in some way at least.

>> you know, i have not, obviously, looked through a ton of the drafts at this point, but i think there's no question that it will play a role. >> just a quick follow, then. how does bill daley play into that, since we haven't had a chance to talk to you to brief this week, in terms of he's taken over officially? there's been a lot of talk about his ability to work with republicans. the chamber of commerce and others immediately said this is a great pick. moving forward, what kind of impact do you think bill daley will have in terms of that relationship with republicans but also moving the president's agenda, et cetera? >> well, look, i think obviously bill is somebody who brings vast experience working with both sides of the aisle. i think that was true when he was commerce secretary and i think that's been true in his endeavors in business. and i think, as you said, it's reflected in the statements that were made upon the announcement last week that he would assume the job of chief of staff. i was in tucson yesterday, so i was not here yesterday, but he began yesterday at the 7:30 a.m. senior staff meeting.

and, look, i think that -- again, i think he brings a vast amount of experience in working with others, but, look, i think it also, for all of us, has to -- the truth is, it's all of us. it's everybody that works here, it's everybody that works in government and public service, and it includes the leaders of our country. >> keeping with that general much lighter note, given the solemn times, have you decided not to put toilet paper on the white house because of your wonderful auburn victory? >> i think it is a wonderful tradition probably best reserved for toomer's corner in auburn, where there's -- there are many rolls currently hanging in a beautiful tree there now. >> how about in front of your

house? >> my son is quite excited that we're going to do that for the third time. i realize i might have unwound something that might be harder in the end to wind back, but -- yes -- >> so to speak. >> right. but i think it's entirely possible that we'll do that. >> you mentioned earlier that

there was a lot of empathy -- >> what a lovely tradition. >> a lot of empathy inserted into the speech. how did the president come to that? because in the past it's been noted that perhaps he wasn't as forthcoming with empathy as some of his predecessors. was it new staff advice? was it the five-day period which he had to think this thing over before he spoke? >> well, first and foremost, look, again, i think -- i've heard him discuss and i think many of you all have heard him discuss over the course of many years the notion that -- what it's like to understand and -- understand other people, people we don't agree with maybe in a political sense. one way of saying it is to walk a mile in somebody else's shoes, so to speak. i think that -- that's animated much of his public life. again, i'd trace that -- probably the first time you heard it on a bigger stage

obviously is the 2004 convention speech. look, this was -- and i did a little of this on -- last night and you've seen the gaggle. i think last night was a speech that was very much the president's and he spent a great deal of time going through his thoughts on this and spent a lot of time working on what he wanted to say, including making edits even after the plane had landed in arizona last night. >> well, the empathy seems to adhere more to his comments about the victims than it did about the political discourse. he's said those things before, the political discourse. >> right. no, no, i meant the empathy in the sense of -- i guess i'd point you in that sense to the -- those sections of the speech talking about these individuals whose lives were celebrated remind us of our mothers, our grandmothers, our brothers, and just the notion of using their example in a way to lead our lives in a better way befitting their memory. again, i think that's something the president has spent a lot of time thinking about and talking about over the course of many years, including, as you mention, and i've talked about

here, our civility and our civil discourse. yes, sir. >> robert, was there much study of previous presidential speeches following a national tragedy of this nature? >> mike, let me see if there's any information on that. i'm not entirely sure what he might have read before this. again, i think a lot of the process of this was in personal reflection, was in -- i mean, i think, again, when we all heard the news, it was hard to understand. it still is. it's senseless. as you heard the president say, we may never truly know why. and it gives you an opportunity to reflect. it is hard to read some of those stories, the lives that people led, what they were doing on

that otherwise beautiful day in an exercise in our own democracy shattered by the events. >> in terms of trying to change the tone a bit, you have last night's speech, you have the state of the union coming up. is there thought of maybe a presidential event that could -- >> well, i think in the near term, obviously, i guess i would point you to the state of the union. but, look, i think the president will continue to look for opportunities to build on what ed talked about and what the president has talked about, which is how we reach across the aisle, how we have that more civil debate and discourse. and, again, to go back to the michigan speech, it was -- said a little bit of it last night,

but i think the notion that -- what we lose in a debate that is overly charged and overly personal is the ability at some point to all sit together at a table and come to a good conclusion on solving some of our most serious problems. again, i point to i think the -- some of what happened in the lame duck session of congress, which was -- whether it was the tax cuts, whether it was the start treaty, whether it was "don't ask, don't tell" -- all very important achievements in the sense that we had been struggling with their -- those questions for quite some time and found some bipartisan answers. and i think that provides --

hopefully provides a roadmap for how we can get some stuff done this year. >> last one for me. is it hard for you guys to -- after such a national tragedy -- to know when to get back to business full-time in terms of full steam ahead with the agenda when the nation is sad? >> well, look, i think that -- again, i think we've all had time -- and i think you guys, too -- i mean, i think everybody in the country has had some time to reflect on this. and i think all those that were -- remember, they were there to, again, see the exercising of the way we govern our country, and i think that while we will continue to celebrate the lives of those that were lost and hope

for and pray for the speedy recovery of those that were injured or some that are and some that aren't in the hospital, i think you'll see -- because they would have wanted that -- us getting back to the business of, again, how do we solve those problems and how do we do it in a way that lives up to the thoughts and the aspirations of those that were involved in the tragic events. yes, sir. >> robert, talk of civil discourse, of sitting down and talking together. much of the course of the last two years, republican leaders for a time were up here on a weekly basis off camera. there was the trip to baltimore. there was the blair house trip. and what ended up happening is people would walk away from

that, instead of emphasizing areas of agreement, would emphasize their areas of disagreement in order to score points with their various -- varied political bases. so, my question is, voters respond to red meat. voters respond to the differences. how can the words, no matter how eloquent are spoken by the president or anyone else, change the political incentive towards vitriol? >> well, i think we have to separate out differences and discourse, because, as i said, i don't -- we're not going to -- we are not going to take differences out of our democracy. look, the founders had some very different ideas amongst themselves as to how to construct the union that we call america now. we have taken occasion in more

than two centuries to build off of some of those debates and create something more toward the perfect union that we strive for. so i don't think you're going to remove difference from democracy and self-government. but the way we approach and the way we talk about those differences i think is something that all of us -- the president, leaders of both parties, members of both parties -- have to work hard to strive to make progress on. the description that you laid out at the beginning of this is the easiest -- it's the easiest thing. and we have to resist the temptation, because this is hard. changing our discourse, as i said -- and, again, i'd point you back to the michigan speech where the president talked about the fact that this isn't discourse just for the sake of better discourse. inre's a means to that end the sense that if you and i so violently disagree that we, in

order to make our arguments, tear each other down, it is impossible at some point to sit down and construct a solution that moves our country forward. i don't doubt that just as in a town meeting that the president might do, that there were people that disagreed with the political views of congresswoman giffords that were at that meeting to ask her questions. that's the great experiment of self-government. but we have to strive to have our discourse played out on a plane that does the discussion of our big problems justice. >> where the rubber might meet the road in terms -- we're talking rather philosophically, but in terms of a concrete policy issue, gun control seems to be -- you can't touch it, especially if you're a democrat

or a democratic leader in this town. the assault weapons ban is expired. apparently, the sort of extended clip that this individual was able to obtain he would not have been able to obtain had it still been in force. where is the administration on gun control generally, the extension of the assault weapons ban in particular? how hard will you push, considering it's now considered to be a political loser by democrats? >> mike, let me say this, that obviously we are and have been focused on the important healing process. we will have an opportunity to evaluate ideas and proposals that may be brought forth as a result of circumstances and the facts around this case. the president, again, since i have been with him in 2004, has supported the assault weapons ban, and we continue to do so. and i think we all strive, regardless of party, to ensure

that we're doing everything we can to reduce violence. we'll have an opportunity to evaluate some of the other proposals. yes, sir. >> one of the conclusions of the president's commission on the bp horizon oil spill -- and i find this a little alarming if it's true, in light of the predictions of $4 gasoline by memorial day -- one of the conclusions was that the administration does not have a comprehensive energy plan. it said that there are a lot different programs, grants, et cetera, but no overarching strategy. would you agree with that? >> well, i think that i would agree with this notion -- that

you have seen presidents date back many, many, many administrations discussing our need to take concrete actions to reduce our dependence on foreign oil, to look for and embrace a clean energy economy. we still have a lot of work to do -- and when i mean "we," i mean the country -- in taking some of those very important steps. i think if you look at the investment in the previous two years in -- continued investment in wind energy production, in windmill turbine production, in solar, in, as you've heard me discuss on a thousand occasions, increase advanced -- advances in investments in electric batteries for cars, the steps that we've taken with business and with industry to increase fuel mileage standards not just

for cars and not just for light trucks but even for heavier-duty trucks. but i don't think anybody would disagree with the notion that there's still much work left to be done. we still have progress that we need to make so that we don't find ourselves 10 or 20 or 30 years from now continuing to have the very same debates about how we reduce that influence of foreign oil and our dependence on it. that's going to take many forms. our administration made the first investment in building a new nuclear power plant in more than three decades because there isn't one thing that we're going to do that's going to fix all this. there are many different approaches. you've heard the president -- more specifically as it relates to oil, we have to -- there are

certainly -- there's drilling in the gulf, there's drilling in other regions of the united states, and we have to ensure that all of those activities are done with the utmost safety and care. >> as you know, if gasoline does indeed get to $4, that's a threat to this fragile recovery, it's a big tax on consumers. is there anything you can do about that? >> well, look, there are obviously -- and there are many people that would get upset at me if i started to opine on oil and gas prices, so i won't. but i would say -- you know, look, we are -- we have to continue to take steps to impact the medium and the long term even as we go through the cyclical adjustments that you see year in and year out that are reflected in fluctuating prices. the question is whether or not

we're going to get about doing that now or we're going to continue to punt some of this year after year after year and find ourselves having this debate and discussion repeatedly. >> when you talk about the need to reduce imported oil, are you referring specifically to the middle east or our biggest supplier, which is canada? is canadian oil so bad, or who are you referring to? >> look, i think you've heard the president -- and i'm happy to dig up some of the quotes. i think that having our fragile economy dependent upon energy that comes from any other place is -- presents its own inherent risks. and there's a way of increasing our -- adding to the number of jobs that we have in this country and dealing with our

energy problems, are all in the same action. and i think that's our hope. mark. >> robert, what did the president think about the pep rally aspect and tone of the event last night? >> well, look, i'm not a tucsonian, obviously, but i think that having been there for a day before the president got there, you could understandably feel the weight of what had happened. and i think part of that -- i think part of the grieving process is celebrating the lives of those that were lost and celebrating the miracles of those that survived. i think you've all probably by now read the transcript from the two members on the plane last night about their personal experience with the congresswoman in her hospital bed.

it's an emotional thing to read. again, i think -- i will say that the speech -- i read the speech several times and thought that there wouldn't be a lot of applause, if any. i think many of us thought that. but i think there was a celebration, again, of the lives of those that have been impacted, not just those that -- not just at that grocery store but throughout the country. and i think that if that is part of the healing process, then that's a good thing. >> can you share with us any words the president said to the parents of christina? >> i was not in the room for those, and obviously he had an

opportunity to speak with them on the phone a couple of days ago. i think all of us who -- i don't think this is reserved for parents, i think this is anybody that -- i think anybody that reads that story, it's a tough story to read. it is a tragedy sort of -- it's a tragedy beyond any real description. >> can i follow up on the atmosphere? i just want to ask, why was the reason for choosing the arena as opposed to maybe a church or a smaller venue? >> well, i would point you to the university on that and i think it's important to

understand this was -- we were invited to and accepted quite happily the invitation of the university. i think having that many people there and being able to include people from the community was -- again, was and is an important part of that healing process. but in terms of logistics and things like that, i'd point you to the university as they'd probably be better to answer your questions on those sorts of things. >> robert, going back to china and the answer to caren's question, you listed some of the items on the agenda, and it's quite a full plate. can you talk about whether there are any expectations for decisions made or agreements signed as a result of those talks? >> yes, roger, let me -- again,

i would point you to a few things. we'll have a chance to talk to tom tomorrow on some of this. i'm not going to get ahead of the official events of next week. i'd point you to what secretary geithner said obviously yesterday. i know secretary clinton also is going to speak on the topic of china tomorrow. so i don't really want to get ahead of that process too much. >> but for now, based on what you know, can you talk about the -- >> i can reiterate that based on what i know, i'm not going to get ahead of -- and based on what i don't know, i'm not going to get ahead of the official events. >> one other thing, the president's schedule is fairly plain today, with the exception of meeting with advisors. can you talk to us about what else he's doing? for example, staff appointments, going over -- >> i don't have his schedule with me. he's got a number of meetings today. i haven't looked at tomorrow's schedule. the president spends a lot of

time here in meetings. i know there's a regularly planned long nsc meeting later today as well. mara. >> robert, you said that he has always been for the assault weapons ban. one of the other gun control issues that's come out of this is seeing if there's something that could be done to prevent mentally ill people, like the shooter, from purchasing handguns. i'm wondering if the president thinks it's possible. and has he directed anyone to look into this? >> well, again, mara, i would leave the legislative proposals -- obviously, as i said earlier, we'll have an opportunity -- i don't know if that evaluation on specific proposals that have been introduced thus far has been done. but we will certainly look at -- >> well, sure. but last night he talked about the importance of like examining our assumptions about issues. i mean, he seemed to almost invite a discussion about this.

>> look, i think what the president said was it is important and it is required of us to look at all the facts and the circumstances that surround these events. and i know that's what law enforcement and investigators are doing on the ground. and i think we all look forward to learning more about what happened and try to explain the why. >> but he specifically said in order to prevent this from happening again. >> again, mara, i don't have a lot more than the fact that this is -- evaluation of the facts and how we got to a tragedy like this i think requires us to look at everything. >> robert, i'd like to ask you about the president's meeting yesterday with the lebanese prime minister, which occurred just as his government was collapsing. does the president believe that the actual statement of getting an indictment in the hariri massacre of -- the hariri

assassination in 2005 is more important than what comes after, whether it's a collapse of the government or -- >> well, obviously, look, i, first and foremost, would point you to the readout from the president's meeting yesterday. again, i was not in the building yesterday. i was in arizona. i'll reiterate what part of that readout says, which is that i think the resignations only demonstrate the fear and the determination that the hezbollah-led coalition has to block the government's ability to conduct its business and, most importantly, to get some much-needed answers and justice on the assassination inquiry. our support is for the sovereignty of the lebanese people, and we'll continue to strive toward that.

>> robert, one more about last night's speech. i know you talked about the personal nature of how the speech was constructed. but what do you think of some of the comparisons that have been drawn between that speech and bill clinton's speech after the oklahoma city bombing and other tragedy speeches? are those comparisons overdrawn, or do you think there's something to it? >> look, obviously there are historians that will weigh in on these topics. mark, i think there are moments in our history -- oklahoma city, the challenger accident, what happened in arizona -- that are important for the president to talk to the nation about, and to help be part of the process

of celebration and healing. approachedt's how he -- that's how he approached this. and obviously we've had -- we've had, and every president does, has unfortunately far too many examples -- a mining accident in west virginia, a shooting at fort hood certainly immediately come to mind as things that the president has had to do. but, look, i think he approached it as -- in his role as president, as somebody that might help to further that healing process. >> what do you think of those who say it might have been a turning point in the president's -- >> well, i think it was an event, as i said, that affected

all of us as americans, in all reaches of our country, because of the just truly shocking nature of it. and i think our -- i think anybody that holds that office would tell you they'd gladly give up the idea of having to do those speeches if somehow we could figure out how to make sure that senseless tragedies or accidents never happen. that's probably not going to happen, but i think the role that any president can play is to work -- help the country work through questions that -- some of which have simply no answer. . .

of the important challenges that lie ahead. it's time to reflect olt strength of our country, the resilience of our citizens, tough times of either war or economic turmoil. but more importantly, to chart that course forward. i know that's the way the president is approaching the construction of and writing of that speech. >> i'm wondering, it's been -- i'm wondering if you can say anything about how the

president has personally addressed this. >> truthfully, i think that deflection is in -- >> i know he gets -- i don't know if there's been additional stuff. i'll find out. >> i wonder if there's been a moment when the president has offered counsel to his own staff. >> let me find that out. >> robert, the president has made many speeches about stability and elevating the level of discourse. but the thing that seemed to resonate this time obviously was the personal aspect of this tragedy, particularly the story of this 9-year-old little girl. do you think his ability to connect on that particular issue has been enhanced by the

nature of this tragedy, or did his speech last night reflect a new approach to sharing some more of his emotions in public? >> again, i think you can go back and see -- when we as a country are forced to confront the realities of a tragedy like that, it provides, as i think you heard the president discuss, it provides an opportunity for us to reflect on the past, on the present and on the future. and i think he's taken an opportunity to once again do that. i think his hope is that those moments of reflection and our actions that come from it won't

simply be governed by doing so in times of -- in times of unspeakable tragedy, but will hopefully govern more of our actions on a day to day basis. >> in speaking to the american public, you've read criticisms of him in the past in terms of not really being able to empathize with folks and the comparisons of himself and clinton. those went by the wayside last night. this speech had a tremendous emotional impact. do you think that that will -- >> i don't want to get into political prognosticating. i think that -- i think the president, over the course of his career, has done a pretty good job touching on the hopes and the aspirations and the dreams of many in this country. and, again, i think yesterday provideds us an opportunity to

reflect. yes, sir. >> thank you, robert. i think there seems to be agreement across the board about the president touching on civility and healing in his remarks last night and bipartisanship. is he aware of, and does he have a reaction to some of the comments made in the last week by members of his own party in the other direction? notably congressman cly born making a speech and others suggesting arizona is unsafe for people who are republicans. >> i'm not going to -- there are many who can comment on all this, an i would simply point you to what the president said last night. it was a message that was not reserved for, or intended for

the whole country. >> are you aware of those comments? >> i am. >> when he first heard about the congresswoman, did he decide right then to put it in the speech? how did that work? did he have a printout? how did he decide where and when? >> just to go through the arkansas of it -- we talked about this drk through the arc of it. his first stop was in i.c.u. spent about 10 minutes there with members of her family, with her husband, and then goes on throughout the hospital, seeing other patients, doctors, nurses, other staff, thanking

them for what they had done. i don't know the exact time and have the exchange, and there's the miracle of opening her eyes and of responding to their voices and their memories as they're talking allowed to her. the president ended by seeing the trauma team that had first received those in the shooting on saturday and then got into the car for the very short drive to the mchale center. in the car, along with the first lady, was her husband and her mother.

he mentioned to me -- we ended the meetings >> unless you want to follow up on -- >> no.

why it does not seem all that incomprehensible, at least from the outside. it's all about freedom, unless you want restrictions, unless you want a different role for the government. >> let me do this. look, i think there's an investigation that's going to go on. let me take my time back, just for a second. i think there's an investigation that's going to go on. i think as it goes on we will learn more and more about what happened. i think as the president was clear last night, we may never know fully why or how. we may never have an understanding, as the president

said, in the dark recesses of a violent person's mind do actions like this spring forward. i don't want to surmise or think in the future of what some of that might be. but i think it's important to understand, as i said earlier, the event that was happening that day was the very foundation of this country, the freedom of speech, the freedom to assemble, the freedom to petition the government, democracy or form of self-government by and for the people. all of -- all very quintessential american values that have been on display along with a tremendous courage and resilience of those in that community and throughout this

country that have had to deal with this tragedy. >> but this is what i was talking about, exactly this. this is america. the democracy is the freedom of speech, the freedom of assembly , and many people outside would also say, and the, quote, unquote, freedom of the deranged mind to react in a violent way is also -- >> i'm sorry, what's the last part? >> the quote, unquote, freedom of the deranged mind to react violently to that, it is also american. >> no, it's not. >> no, no, i would disagree vehemently with that. there's nothing in the values of our country, there's nothing on the many laws on our books that would provide for somebody to impugn and impede on the

very freedoms that you began with by exercising the actions that that individual took on that day. that is not american. i think there's agreement on all sides of the political spectrum. violence is never, ever acceptable. we had people that died. we had people whose lives will be changed forever because of the deranged actions of a madman. those are not american. those are not in keeping with the important bedrock values by which this country was founded and by which its citizens live each and every day of their lives in hopes of something better for those that are here. thank you.

>> president obama speaks tomorrow at a memorial service for the late richard holbrooke. other speakers include former president bill clinton and secretary of state hillary clinton. mr. holbrook, the special representative for afghanistan and pakistan, died in early december. our coverage is on c-span2 at 3:00 p.m. eastern. in a few moments, a forum on small business and the u.s. economy. panelist include federal reserve chairman ben bernanke ben. after that, the head of the transportation head involving rights and security. and a forum on america's future hosted by tv and radio host

talk show tavis smiley. >> a couple of live events to tell you about tomorrow morning. secretary of state hillary clinton talks about relations between the u.s. and china. that's on c-span2 at 9:45 eastern. and here on c-span, we'll bring you live coverage of the republican national committee winter meeting. the r.n.c.'s agenda includes electing a chairman. there are four challenges to the current chairman, michael steele. our coverage begins at 10:30 a.m. eastern. >> this weekend on c-span2's "book tv" on "behalf words," former advisor to dr. martin luther king jr., with a behind-the-scenes look with the weeks leading up to the march on washington and the "i have a dream" speech. also, a critical assessment of stereotypes and a new biography of our first president. sign up to get our schedules

emailed directly to your inbox with our "book tv" alert. >> i believe that the best way to carry on dr. king's work is to reach out to someone in need and to make an ongoing commitment to community service. >> on the 28nd anniversary of dr. martin luther king jr.'s birth, use the c-span video library. there are hundreds of programs on the life and legacy of the civil rights leader. find a program, watch it, clip it, and share it. >> now, a forum on small business and the u.s. economy, hosted by the federal deposit insurance corporation. participants include federal reserve chairman ben bernanke, fdic administer sheila bair and representative spencer bachus, chairman of the financial services committee. this part of the event is a little less than an hour and a half.

>> good afternoon, i'm steve liesman and i have the honor to be here and introduce a distinguished panel to talk about the issue of small business and lending and getting small business back on our feet so we can get the economy back on its feet. and i just want to give a very personal note that it's not only an honor for me to be moderating this panel, but to do so at the -- excuse me one second. i want to just take that out of my ear -- to do so at this center. it was more decades ago than i want to admit that as a reporter at the "st. petersburg times" i began covering bill seedman and his work with the resolution trust corporation. two decades later i got to work with bill again at cnbc where he was a valued contributor and helped people, really guide them through the financial panic that we had. and he was a very dedicated public servant. i'm happy to be here at the

seedman center. i want to introduce now our panel, beginning with federal reserve chairman, ben bernanke, the junior senator who you'd never -- sorry, the senior senator from virginia, mr. mark warner, senator mark warner. the chairman of the u.s. chamber of commerce, tom bell, and then we have skipped here, leaving the best for last, the chairman of the fdic and our host this afternoon, sheila bair. join me in welcoming our panel. [applause] >> good afternoon and thank you for being here. we are all here today because we share the same concern -- what more can be done to kick-start a tepid recovery and

a weak job market? as the biggest employers of american workers, small businesses may hold the answer. some small businesses are saying they are finding it easier to get loans and expand and hire new workers. surveys do confirm that standards for business loans have improved in recent months. but many small business estill complaint of tight credit conditions and the inability to get loans, indicating that we're not quite out of the woods yet. so war the obstacles of small business -- what are the obstacles and how do we overcome them? by the end of the day, not only will we have a list of obstacles, but we'll also have concrete solutions. fortunately for all of us we have the right person in the right place at the right time to get the ball rolling. there is no greater advocate for small business than our first speaker, chairman spencer bachus. he has been named the guardian of small business by the national federation of independent businesses and he received the spirit of free

enterprise award from the u.s. chamber of commerce. we worked closely with chairman bachus over the years on a number of regulatory issues, including important reforms to the deposit insurance system. and i know we'll continue to work closely in the months ahead. he's a good friend. in addition, we are like minds on the urgent need to head off the next potential financial crisis by restoring fiscal responsibility in washington, both spending and debt are way out of control. as the new chairman of the house financial services committee, he will be in a unique position to tackle these issues as well as the credit problems facing small businesses. i'm certain that awful us will be most interested in what the chairman has to say. but before we get started, let me first ask him a very important question -- which are you more happy about, winning the chairmanship of the house financial services committee or your beloved auburn winning the national championship? thank you very much. please welcome mr. bachus. [applause]

>> thank you, she la, for that -- sheila, for that kind introduction and particularly for that war eagle. we had to rehearse the war eagle. and i thank you for organizing this forum with important stakeholders on addressing the question of how we can promote lending to small businesses. and as the chairman said, it's important to do that, because small businesses create most of the jobs in america, and job creation, i think, is the challenge that is facing our economy as well as our financial institutions. i talked with a banker from arizona the other day and he said what is hurting our bank is people losing their jobs, or not having jobs. as we address the issue, it is important to be clear about the principles that should guide us.

in reading recently i came again across the phrase "american exceptionalism." this encapsulate what i believe about our country, our economic system, and most importantly, our people. we do things our own way and it works. as we craft policies to remote economic recovery and create jobs, we need to remember that free markets, the capitalist system and initiatives have made the u.s. economy the largest in the world. twice as large as that of china, japan, germany and great britain combined. government planning and government control is not how we got here. individual initiative and free markets have long been the recipe for our prosperity and dynamic economy. unfortunately, the new regulatory structure of dodd-frank will redefine the

way our economic system and our financial services system operates in the future. constricting jobs and punishing mainstream businesses that did nothing to cause the crisis. during my conversation with employers, i am constantly told that one of the biggest obstacles they face right now is obtaining financing from banks. a search for sufficient capital is a struggle, even for companies with good credit history and long-established relationships with local banks. the majority of small businesses depend on their community banks for credit. this morning chairman bair said that while failures peaked in 2010, the fdic's losses were down because smaller institutions were failing. the fact that smaller community banks are failing can be partially traced back to government policies that gave our too big to fail

institutions, in my opinion, a competitive advantage. the fact that community banks are failing will have disastrous impact on small businesses going forward, because these small banks are more likely to extend credit to small businesses than their big bank counterparts. as the federal reserve study said, the findings suggest that an important role may remain for community banks who have an advantage over large banks and extending loans to small businesses. their local roots and knowledge of the local community and the entrepreneurs who run local businesses may be critical in providing the type of relationship-driven loans that many small businesses need. we all know that inadequate underwriting and loose credit standards contributed to the financial crisis. but the pendulum has swung too far toward regulatory micromanagement. we can't allow arbitrarily

applied regulatory standards to affect lending. i applaud the six regulatory agencies all represented here today, led by our host, the fdic, who, back in february, issued joint guidance, telling their examiners to stop second-guessing banks' loans. the guy that said, "prudent small business lending will not be subject to supervisory criticism." sadly, that guidance is not always filtering back to the operational level. as indicated by the constant stream of comments, i and my colleagues, both republicans and democrats receive from community banks and their small business customers, the guidance is being offset by examiners and other regulators in the field who have not followed the policies promulgated by their agencies in washington, but have continued to be overly restrictive when evaluating the credit decisions of those they

regulate. this has become so commonplace that it has become known as the mixed messages problems. instead of focusing on patterns and practices that suggest poor underwriting or lax risk management, some examiners are micromanage the daily activities at our community banks. all of us in washington both at the congress and at the agencies represented at this forum must continue to examine the mixed messages being sent to community banks which continue to create uncertainty and impede recovery. under my chairmanship, the financial services committee will focus this year on fashioning policies that encourage, not inhibit, job creation and facilitate a robust economic recovery. our folk culls be to ensure that hundreds -- that over 300 of new federal rules mandated by dodd frank be written in a

way that does not further impede job growth by burdening american small businesses. in a sea of bureaucratic red tape. this time of economic and regulatory uncertainty requires all of us to work together in a spirit of cooperation to avoid policies and regulations that prevent critical investments by our small businesses. we all recognize the importance of consumer protection and the need to avoid the kinds of mistakes and malfeasance that led to the financial crisis that culminated in 2008. nonetheless, we must take great care to ensure that we are adopting policies and regulations that grow our economy and create jobs. in order to do this we need to look at the way regulations are being implemented, especially now that regulators are writing over 300 new rules.

with prudent and careful attention to unintended consequences, rules can be written that achieve the consumer protection and safety and soundness needed by our society, but does not slow economic activity or prevent job creation. each of us understands that any robust job creation must come from the private sector. our small businesses will be key to that recovery, and washington should do its best to set strong guidelines and let our small businesses flourish so that they can create jobs. as larry kudlow said in an introduction to a recent book, taxing capital and prohibitive rates is akin to have capitalism without the very capital that makes it run. how does the average worker get a job when businesses cannot create jobs because they're starved for capital? many economic thinkers understand that -- do not understand that capital and

labor work together. what he said about overtaxation is also true of overregulation. it, in a way, is a form of taxation. thank you, chairman bair, for convening this important forum, and i look forward to working with you and chairman bernanke and my senate colleagues as well as other interest groups, including the chamber, in promoting job creation, something that we all agree is so important for our country and its future. thank you. [applause] thank you, congressman bachus. to my panel the list is long and the time is short, so let's get right to it. a recent survey, 33% said the

number one problem is weak sales. i think that's sort of the elephant in the room here. before we dive into these issues of regulations and how to make lending easier, let's talk about the economy. mr. chairman, to my immediate left here, what are the prospects that the economy steps forward this year and solves some of these problems that we're talking about? >> first of all, you're absolutely right about the sales issue. the sales come, that will make these businesses stronger, make them more credit worthy and it will be a virtual circle. we see the economy strengthening. it has looked better in the last few months. we think the 3% to 4% growth number for 2011 seems reasonable. now, that's not going to reduce unemployment at the pace that we'd like it to, but certainly it would gb to see the economy growing, and that means more sales, more business for companies of all sizes. >> does it then become easier for small business to get loans? >> more cash flow and also higher collateral value makes businesses more credit worthy.

gives them more credit demand. allows them to expand and hire, and it's a virtuous circle. >> chairman bair, your outlook? >> i think job creation is key here. as sales pick up, as small businesses strengthen, their demand for credit will increase and the banks's willingness to lend, it will be a virtuous cycle. i think the collateral value question still is a key one. according to cleveland fed study, one in four small businesses have financed themselves either through equity lines or home-equity loans. there's still a question about the housing market and home prices, so that would be a note of caution. but the more we can do to get the economy going again, the more we're going to help small businesses and bank lending. >> senator warner, instead of your economic forecast, would you comment on the danger here

that the economy comes back, solves some of these problems, but government remains proactive, perhaps too proactive, and does things that economy can and should be doing for itself. >> we have to hit that balance. and there's one thing, even not economy is recovering, i don't think any of us are going to expect the american consumer to continue to kind of carry the whole burden on their backs. one of the hidden good things of this recession has been we've been cutting back on personal debt levels, which longer term is important, short term gives us some burden. one of the things we're going to have to continue to do to grow the economy is look for export capabilities. unless we can continue to seek not only domestic growth but export growth, i don't think we're going to see the level of recovery we'd like. and certain things that we have been doing are around the edges, and particularly in small business, the legislation that was passed last fall should have been passed a year earlier, that was helpful around the edges, whether it's the increase at the s.b.a., the capital access program, the banking community actually has

been very supportive of and certain other things we can do around the edges to help credit for small businesses. >> i don't mean to put you on the spot, but that's exactly what i'm going to do. given your fellow panelists here, on balance, would you say government is making things easier or harder for small business to create jobs and propel the economy? >> well, thus far i think over the last couple of years, both from a legislative and an administrative standpoint it's been a little more difficult. uncertainty creates an environment in the business community that's hard to make decisions. when it's hard to make decisions it's hard to invest. can't underwrite, can't invest. but i think things are getting better. since the elections we've seen a change, certainly, of sort of a mutual commitment to figuring out how to get the job done, and the job is creating more jobs and in an environment where small business can invest, re-invest and succeed, and i agree with the other pammists. by the way, chairman, i

appreciate you inviting me to the panel to talk about where we are as opposed to where we're going. the next panel talks about the solutions, right? we just talk about the problem. i was hoping the case anyway. and i have high expectations for the next year or so. >> ok. chairman bair, you talked about this issue of collateral, which is something that i have a whole list of questions from the audience. a very key issue here. let's just describe what that is. that people cannot get loans because the value of their collateral has declined. and good, viable businesses incapable of getting those. is there a role that the fdic can play here? >> we have, with the fed's leadership, this is one of the things we tried to address in our guidance, at least with regard to the financing or restructuring commercial real estate loans, that we do not want our examiners criticizing a creditworthy loan. even if they're underwater at

that point, if the borrower is repaying the loan, they have to continue to repay that loan. we don't want that loan criticized. a policy that requires that criticism of additional capital is required is highly cyclical, an we've tried to address that. that said, it is a higher risk when it is collateralized. home equity has provided the collateral in home real estate, which those valuations are down as well. this is a continuing problem. we've asked the owners to focus on the borrowers' ability to pay. >> has it helped? >> i think it has. we get mixed input from banks, and i know there are some banks and there are some borrowers out there that it has not worked as well as it should. if you have a situation where you don't think that policy has been applied, i want to know about it, because we're trying very hard, particularly in washington, to make sure they're followed. >> i just want to jump in on

this. and i would agree with what chairman bachus said on this. we are sending mixed messages. on one level we want the banks' balance sheet to get better, and then the other hand we're telling them to go out and lend more. human nature-wise, that pushes you toward more conservatism. what we're seeing in this recession is we've gone way past the normal washout of small businesses that normally get washed out in a recession and kind of help the capitalism. we're cutting into businesses that have had long-term track record, and as everyone has mentioned, you've got your trailing cash flows down and your collateral value is down, it's tough, short of some of these incremental s.b.a. and other things that can help around the edges. one of the things i want to compliment chairman bair on is something we talked about a couple of months ago and she's kicking off today and hoping the fed will join as well -- and i get this kind of calls or

letters every day. i got a borrower saying their community-based bank is saying they can't make the loan because the regulator is saying no, and the fdic has set up a help line, toll-free hot line that you can call and if you're a borrower and if you feel like the regulator is overbearing, and this may put kind of an incentive back in place for the regulators to back off a little bit. >> do you want chairman bernanke to -- >> i'd like him to join on that as well. >> first of all, the federal reserve has had an ombudsman for quite a while. it's on our website. if you're an -- if you have an issue and you're bank and you don't think you're getting fair treatment, then call washington and we'll respond to that. and borrowers can call the ombudsman and we'll make sure the issue is followed up.

>> if he get a call, we'll make a referral to the fed as well. so directly or indirectly, we can reach all the bank regulatory agencies with this mechanism. >> to a certain extent we're trying to, and we should, try to regulate human nature. on the one hand if you're a bank, you almost lost your franchise, right? and you're a borrower, an you almost lost your business because you overleverage acknowledged yourself and your collateral -- overledged yourself and your collateral has collapsed. so you're going to be a more careful lender and a more careful borrower. so we have to sort of work that system. it's just not about what happens here in washington. it's about a mindset that exists out there in the business public. >> one thing is that collateral can be a substitute for good underwriting. you've got collateral. you don't have to do a careful job of understanding the business and so on. with collateral values down and you have to look at cash flows and the prospects for the business, then you have to do a lot more work.

but that's what we want people to do. >> but i'm the guy who has to report on these interagency memos that you two guys put out. and a bit of the hair that i've lost is a result of trying to understand these interagency memos here that say, on the one hand lend, on the other hand, conduct prudent banking. and i've always wanted to pick up the phone and say, chairman bernanke, what do you mean by that? can you help me out? >> well, you've got to have a balance. >> right. >> we got in trouble in the first place by making too many bad loans, right? so you've got to make good loans. we have to have creditworthy borrowers. but we can do that if we put in the effort. we talked about community banks, right? so one of the advantages of community banks is they have long-standing relationships. they understand the business better. they know the people. that means -- that's one reason why community banks have stepped into the breach where bigger banks have pulled back. there are substitutes for lazy lending, which is the hard work of understanding the business. >> i don't think they're

inconsistent. a bank with a strong balance sheet is going to do a better job lending, an we've actually seen that. the lion's share of the lending through the crisis, the large banks' balances were down almost 11% during the crisis. the community banks, they wept up by 4%, and the lion's share of that was by the healthy community banks. having a strong balance sheet helps your ability to lend. but ignoring bad loans -- that's what japan did. if you have troubled loans on the balance sheet, you can't ignore them. they have to be worked out or written off and you're going to add to your capital base as part of that process. they're there and can't be ignored. having prudent, well-written loans, an ben's right. it's harder, but this is a better way to do it. look at the creditworthiness of the borrower and the ability to pay, not just the underlying collateral. but you need a strong balance sheet to lend. they're not inconsistent.

>> senator warner, lori carter from springfield, virginia, writes in "i have a government contract and i've been denied loans from six banks because i do not have collateral." what do you say to a person like that? is there a role? >> give her my number. >> i think that is -- and you get a little bit of blame-passing, you know. you get the blame-passing from the loan officer, who's nervous getting the pressure from the management that we need to be tighter on our lending standards, and the loan officer is easy to put the blame on the regulator. tom, you're right a little bit, we are trying to rebalance a little bit. human nature. everybody went way too far with the pendulum the other way, we're trying to move it back. but the notion simply that there is a -- i don't think any of us -- myself included -- would say just because you got a government contract we're going to give some level of implicit guarantee and that means you're going to get a loan.

i think that -- >> well, you talked about this idea that the market has to run its course. does this seem like a market that should be about to run its course, or in your opinion in, that particular instance, is there a real for government to, i guess, grease the wheels or make something happen that probably ought to happen? >> the government is notoriously slow pay, so i'm not sure -- [laughter] i don't think that's an either or situation. [laughter] >> your advice is to get out of government. >> i think, you know, it's hard to change this inherent feeling that the lending officer or his superior has that we need to be awfully damn careful, because look how close we came to falling over the edge. now, we made it, we're survived, but we're not going to make those same mistakes again. the biggest issue i see where the government could have a very significant impact, and

they've been slow to act, is to do something about this continuing -- and i mean continuing well into the future , real estate issue that we have. and it's not been dealt with. if you look at a lot of small business loans, real estate is the collateral. the underwriting, as the chairman suggests, was not done. the collateral is no longer good and it's not getting better. >> that's great. let's ask the chairman of the federal reserve, who we happen to have right here. is there anything you can do about the real estate crisis in solving that collateral problem that's out there? >> well, we're working hard on lots of different fronts. we bought a few mortgages, for example. [laughter] we're trying to get the economy going. we're working with our colleagues in the agencies here to try to improve our workouts, bank workouts of troubled mortgages, both residential and commercial. in fact, we did a survey of commercial real estate workout practices before we did the

commercial real estate guidance, and then we did a sort of before and after and we've seen the improvement. we've seen increased workouts, faster workouts. so that's part of the process. but it's not going to happen overnight. the economy has got to come back, confidence has to come back, we have to see higher utilization rates, more people can qualify for mortgages and so on. so it's a slow process, but certainly that's one of our key goals. >> chairman bair and for chairman bernanke, there's been talk about whether or not both entities should do more work in the secondary market. there's no place to unsell these loans once they come out. is there a role for either the fdic or the the federal reserve in helping restart or even start again the secondary market for loans? >> as you know, the federal reserve did have a program, which was really an attempt to get the secondary markets going again for commercial real

estate, commercial mortgage -backed securities as well as other types of loans, including small business loans. so we have worked on that. all the agencies are working with the dodd-frank provisions to try to help restore the functioning of the secondary market. obviously the biggest problem in some sense will be the fanny and freddy reforms which have to come at some point, which will be critical to re-establishing the sounds necessary of the residential mortgage markets. >> yeah, i would agree with that, and it would have been a lot worse if they hadn't stepped in and you were the only buyer of spall business loans in the secondary market, which virtually evaporated. so for small business loans, it's particularly challenging. agencies are working together now trying to come up with better standards to bring the securitization market back in a way that will ensure high

quality and transparency for buying those securities. but i think that's going to take a while to do, i do. >> senator warner, another issue that is raised time and again is dodd-frank. the regulators to your right are busy every day creating new rules, and we're uncertain what those rules are going to be. to what extent to you feel like dodd-frank has made banking more uncertain and, therefore, actually inhibiting the granting of loans to small businesses? >> i felt, while imperfect, and i was a big part of writing title one and title two of the bill in terms of systematic risk and the rest -- systemic risk, i thought we struck a pretty good balance. i think we got as many credit to the left that banks didn't go far enough and let the banks off way too eyes as i did criticism from the right that it went too far. a lot of the tough questions have been pushed to the

regulators. i would add at the request, actually, of the financial industry -- because i'm not sure you necessarily wanted congress writing the specific regulations on derivatives and so forth -- but i think, again, as we talk about this particular area, as we think about smaller banks, a lot of the tougher parts of dodd-frank exempt -- particularly on consumer protection. those banks under $10 billion in assets. by having some of the requirements from some of our larger banks in terms of contingent capital, in terms of funeral plans, higher capital standards, we do, in effect, if we do it right -- and there's still -- the jury's out whether we'll do it right -- can level the playing field a little bit so those community-based banks have a -- don't have the kind of inherent disadvantages that the large cap center banks have. so i think dodd-frank is a work in progress. i aa lot of it -- if you look at our european and asian

partners in terms of their response, they're glad america went first. i think you'll see they'll go as far, if not further. at the end of the day if this is appropriately implemented and tweaked where it overreaches it's a pretty good framework going forward. the alternative, and, again, for the audience that doesn't know my backgrounds, i spent 20 years in the capital markets, i've been a business guy longer than i've been a politician. but until i got into the belly of the beast on the banking committee and saw how close we came -- and i think history will show this -- with the amount of excess within the financial system was outrageous. and the notion that quattuss kuo could have been continued i don't think would be acceptable to anyone. >> he practically fell off his chair. >> it's a bad bill. with never-ending, unintended

consequences, in our view. >> status quo was fine? >> no, it wasn't, obviously. as you know, we, four years in advance of that, put together a bipartisan group to try to figure out what to do. we weren't suggesting to do nothing, but, look, 300 rulemakes, maybe as many as 500 rule makesings will go on well into the touch with unfunded mandates. if the three people to my right had been allowed to sit in a room and write a piece of legislation, i think we would have ended up in a good place. but this is a smorgasbord, you know. and i just think it's a big mistake. you talked to bankers, and i've talked to several, and i've been on several bank boards before this meeting, and they say we don't know. we don't know what impact it's going to have on our business and we won't know for sometime. that's got to make them somewhat reticent to invest in their future and to make decisions that are long-term, because they don't know exactly

what the environment is going to be. >> chairman person napping, it's fair to point -- bernanke, it's fair to point out that you're not responsible. what is your response to the criticism that all these rules that are coming out could right now be putting a damper on bank lending? >> well, you know, i think it's really important, as senator warner said, it was important to address these problems of the they had to be addressed. the too big to fail issue is obviously one that created all kinds of moral hazard and led to some really bad outcomes, as you know, so we had to fix it. maybe it was a case of fixing -- operating on the patient while he was still running around. a little bit difficult in that respect. so there's really no alternative but to increase capital, apply additional rules and so on. we're doing our best to be, first of all, sensible, to be balanced, and to make rules that will work, but will not impose excessive burden. in particular, i do agree with senator warner, that the thrust of the bill is at the largest

so-called too big to fail banks. it's my view that we should do everything we can to minimize regulatory burden on the smaller banks which don't pose any kind of systemic risk inevitably it's going to take time to implement these and so on. but the faster we can do it, the more accurate and clear we can be in our communication, the better we'll be off in terms of getting rid of the uncertainty that he's concerned about. >> senator warner, then chairman bair's response. >> we can have a long conversation on it. again, let's remember where we were. we came to the precipice of not just american economy demise, but worldwide economic demise. we had over half the financial sector totally unregulated. every industry has a percentage of black magic in it, but the percent of financial alchemy that was created over the last decade alone, that even the financial leadership, including the regulators, were not aware

of the current state of risk exposure. all that has to at least have some level of oversight. should it have been -- lord knows i wish we could have done it in a more increment tal way. when a taxpayer writes an $800 billion bailout bill, we want to have that not repeated again. we have not had a major rewrite of our financial rules since the 1930's. i hope this will stands the test of time. there's going to be parts of uncertainty, but many of these parts of uncertainty were because, frankly, even if the congress had tried to get to more -- for example, certain derivatives, we didn't have the expertise and to certain degrees we needed more expertise from the regulators, which i'm not sure they even had at this point to set those new rules in place. >> karen bair, if you could respond to that, as well as that other minor thing going on, which adds additional uncertainty.

>> well, three is geared towards the larger institutions. i would echo almost all of this is geared toward the larger institutions. the regulation, proprietary trading, securitization, these are activities with the lion's share being done by the larger institutions. to ben's points, working hard to make sure there is no negative impact, i mean, small business loans and community banks are extremely important for support and credit for small business else. we are very cognizant of that and wants to make sure to level the playing field and remove some of the competitive disadvantages that smaller institutions had faced, with too big to fail doctrines. i would also say the pain that entire economy, including small businesses, have suffered as a result of financial crisis and ensuing recession is so much

more dramatically profound than any kind of increment tal uncertainty there might be as we work through these regulations to provide for a more stable financial system. at the end of the day you'll always have cycles, but i never, ever want to see what we just went through in 2008 and 2009, and that's really why we're here today. if it hadn't been for the crisis and the recession we wouldn't be talking about cred ability and how much small businesses are hurting and how it's impeded job is. so we need greater financial stability, which will protect us all. >> chairman bernanke, the federal reserve did 40 meetings around the country trying to get at the bottom of the issue of small business lending. you had a 20-page report, which i recommend to anybody who's i objected in this issue. it's actually readable of the it has plenty of anecdotes in it about individual businesses. >> we'll rework it for you. >> no, it's great. leave it as it is. how much more stuff have you

put out that's readable? if there's one thing out of that report that you could change right now that you think would make small business lending take off what, would it be? >> that i could change? well, the report was really about outreach. we went -- we had 40 meetings -- more than 40 meetings and we had a capstone last july. we listened to businesses, lenders, the trade association, legislators, etc., and we tried to look for recommendations and ideas. i think it was very, very helpful. there were lots of specific recommendations, like helping small businesses get more technical assistance so they could provide a more complete and understandable application. so that was just a communications and a way of getting more information and making the process a better one. so it wasn't really a set of new proposals. it was really just our listening. and i think that's one of the most important things we are doing is listening to those meetings.

we have a program called "ask the fed," where there's been call-in by banks and bank supervisors. thousands have called in to listen and hear about our various guidances and programs. we have added a new council of small bankers that comes and meets with the federal reserve board directly three times a year. so listening is very important and that's what we've been trying to do, and based on that we are, again, going for this objective of getting that right balance, which is, on the one hand -- you know, we don't want banks to make bad loans. nobody wants that. but we do want businesses that are viable and have good business plans and lots of experience backing them up to get loans, and that's the balance we're trying for. >> tom, do you just want to take a crack at that question? is there one thing that you think the forces should concentrate on that would really make a meaningful change for this issue? >> i think there are three things that you could do immediately. one is pass the three pending trade agreements that are

coming before the congress. you know, that's the number one market expansion opportunity for small business, and frankly, for all business. so if we could get that done -- and i know senator warner's in the right place on those issues, and i think you have more and more in the congress that are moving in that direction. i think that's one. the regulatory tsunami that we're facing, i think, is very difficult to -- you know, if you want to create certainty in the business environment, they have to know what the rules are. you can't underwrite risk without rules. so we have to limit that to the degree that we can, and we've got to keep the tax rate as low as possible on -- particularly on that small business community. >> senator warner -- >> i actually agreed at a macro level on the regulatory burden. i've got a proposal out there called the headline of regulatory payout. you've got to take one away of

similar size and shape. before we say it can't happen, the u.k. has started to implement this. the u.k. has passed america in terms of international competitiveness right now. and we have done some things around the edges. again, this legislation i referred to. the f.b.a. today is different than your grandfather's f.b.a. $12 billion in loans since the ends of september. there's a program that we worked with shawne merriman bair on, the capital axis program that about -- with chairman bair on, the capital axis program for some of the more marginal loans, not administered to the government, but the states and the banks. but there's a bigger issue that i don't have the answer, but i would love to come back and have another session on, and i say this is somebody who used to be in the venture capital business. as we move towards more and more financial engineering and the ability within the banking

sector to make money through financial engineering as opposed to lending to companies of value, who really wants to take the tough job anymore? that's why it's been pushed down to a lot of our community-based banks of doing early-stage lending. i mean, even the venture capital business has gotten so large that no one does early stage capital very well. when we cite these statistically, the firms grow rapidly, and until we can think more creatively about early stage capital formation, i'm not sure we're going to see the kind of job growth recovery that we need. >> there was an op-ed in the "wall street journal" that said it's not small businesses that creates jobs, it's new businesses that create jobs. if the emphasis is misplaced and it's about venture capital