guest: that's a fair question. i just didn't think the president should, you know, reinforce these ideas that the federal government is totally incompetent and can't make common-seps decisions. i don't think that's true. nor do i think the president putting freezes or freezing federal benefits -- it kind of enforces this idea that federal employees are over-paid, and i don't agree with that either. so i would like our president to come out more forcefully and address the arguments that we can get along better without government programs and that federal employees have to take not just federal but state, county employees, public employees across the board, have to take huge cuts. that this is somehow in the interest of our country and going to cure the deficit. host: john cage is the president of the f

>> tomorrow, on washington journal, mark zandi says as the republican-led congress and president obama is plans to jump-start the economy and create jobs. steve heydemann has the latest on each of and its impact around the world. and michelle garcia discusses federal stalking laws. >> >> welcome to "newsmakers." our guest today is republican north carolina.

>> there is a lot of concern about the position that states find themselves in right now with their deficit and their debt. i am curious about whether they will have to come to congress about a bailout. you have a subcommittee that will look at these issues. how you plan to approach that subject? >> it is important we understand the magnitude of the problem. the fiscal situation of the states and the municipalities. i want to make sure we have a series of hearings about the problem and the potential solutions. that is what i intend to do on the subcommittee. >> no one is talking about a legislative solution possibly? >> possibly.

we have this idea of state bailouts versus state bankruptcy. i do not think this can be boiled down into those issues. legislation has been filed that would force states to provide more transparency on the assumptions they make about their pension plans. that could be a potential legislative solution so that the bond markets could make better judgments about the unfunded liabilities at the state level. that is the type of thing we have to hear from experts about and get a baseline knowledge. >> to be more precise, the you envision having conversation about a state bankruptcy process to deal with those debts? >> i am not convinced it is the

right answer. i do not think there has been enough research done on whether or not bankruptcy would be costly to the states in terms of states that are in fine physical shape. they could pay a lot more lending costs because this is on the books. the bond market has already priced in that they are in bad fiscal shape whether, it is illinois or california. it will have to be discussed before we understand. this congress and the majority i have the pleasure of serving in has no appetite for a bailout

of any kind for the states. that is the only thing going into these hearings that we know the answer on already. >> just having this discussion before we get to the legislative possibilities raises concerns that it could create more jitters in the bond market. and how does that play into how you plan on holding these hearings? >> it certainly plays a role. i think we have seen markets not accurately price risk. we have seen credit rating agencies make mistakes in failing to accurately disclose risks. beyond that, just this week, we saw one of the rating agencies come forward and described the credit rating and mention unfunded liabilities of state pension plans. this discussion could originate in the private sector demand more disclosure rather than congress legislating it.

>> with those credit agencies say they are going to put funded and unfunded on the books, that could raise the debt up significantly for each state. do you plan on taking a look at credit agencies and what they are doing? >> if you look at the financial services committee in the house or my committee, the oversight committee, we will look at credit rating agencies. if you look at the dodd-frank bill, credit rating agencies certainly bear some of the blind or a significant amount of the blame for the last crisis or not accurately disclosing these risks. i do think they need to have a good look and i do think we need to hear from them as well,

as well as analysts who are saying the credit rating agencies are not actually pricing risk in the bond market. >> congressman, your committee will be looking at tarp. it has been in existence for 2.5 years now. what might you have to add? what kind of oversight do you look to do that has not been done so far? >> that is a good question. i have heard this discussion before. much has been written about tarp and much has been written about the bailout. if we look at the crisis inquiry commission report, it is fascinating that much of their report is a clipping service for the work that you all have done writing about that policy. so much of the product has been

written about in book form and in newspapers and journals across the board. there is a nice bass line. but there are certain questions that have not been answered and certain things that are ongoing that are of major concern. i will give you a couple of examples. the home affordable mortgage program, the special inspector general has called it a failure. even by the obama administration's our original measurement of helping homeowners get resolved and stay in their homes, it has fallen far short only helping about 500,000 people. it has been good for those 500,000 people. there have been over 700,000 who have gone into the program and have been hurt by it. they are worse off than if the program never existed. that is one example of a major failure in the tarp program. secondly, some of the decisions within tarp, for instance, the

new creation of the small business lending program. in essence, it will buy small banks out of tarp and take them into a separate program. by the design of this, the special inspector general believes it is simply a way to buy them out of tarp and tarp oversight so they can go and die somewhere else and it is not on the tarp books. that is one example of the intent of congress to get small business lending going to small banks that, by its design, is fundamentally flawed. we have concern and we need oversight of that. there is so much going on in financial services. >> we will talk about specific in a second. do you want to read litigate the basic questions of should there have been a financial bailout? >> i do not think we can relitigate that. i think everyone is pretty locked in on their perspective. i have had my opportunity of serving on the financial

services committee and the financial oversight committee to ask those questions. we have heard from them all. people have pretty well made up their minds. >> it sounds like there is an effort to relitigate dodd-frank. how is that going to go forward? >> i do not thinking it is re- litigating it. it is now a question of the implementation. you have hundreds of regulations that are yet to be written. you have this financial oversight council with their third meeting. you are outlining their judgment on what is systemically important and you have the inspector general for tarp issuing a report of the citi bailout. secretary geithner is saying, when the next crisis coming, we will have to make a guess

decision. what we are fighting with their initial findings with this first meeting and secretary geithner's candid comments, it is entirely possible that this financial stability oversight council will not be able to judge what it systemically important and they will go back to and ad hoc bailout and we will know it when we see it. that is what we face in the last crisis and what dodd-frank was intended to avoid. i am saying a lot. the concern is that the implementation is correct. when you get down to it, we will not further restrict lending for individuals and we will have a competitive and vibrant financial market. >> we are not talking about dialing back derivatives regulations? >> the derivatives regulation is worthwhile. there can be some discussion about bad in the way you implement this derivatives regulation.

it is pretty significant and can have a pretty significant impact. the cfpd, or whatever they are calling it today, there is a concern there. elizabeth warren has quite an operation she has created for ourselves in treasury to get this up and running. structure of that. there has not been much disclosure about it. >> you mentioned h.a.m.p. you introduce legislation that would prevent treasuries from continuing that progress. this would help with further modifications for troubled homeowners.

most people agree this did not work out as it was intended. the question is, how do you help these troubled homeowners who cannot make their mortgage loans? if this isn't the answer, what is? >> the reason why we filed legislation to end the h.a.m.p. program is that the legislature has not listened to criticism that this program is a failure. i mentioned the impact this is having on individual homeowners. it has been largely negative. indeed it is the first step. when you get down to home ownership, the reason most americans are not able to keep their homes at this point is

based on the economy. with close to 10% unemployment, much higher in my district, that is the root cause of folks losing their homes right now. the economy moving forward is going to be the best net plus for housing and home ownership more than one government program. >> the predictions are that we are going to see high unemployment rate for a while. what is the alternative? >> that is what we need to have discussions about. going in and realizing this program is a failure and stopping the wrong direction is the first step. then we can work out what is the proper -- >> do you have some ideas? you are in charge. americans want to hear what the alternatives are. >> working with servicers has been with the treasury has done. they have not put the proper incentives into the marketplace

to gets [unintelligible] going. when you get down to it, you are still talking about a contract. that has been the sticky wicket of making this program work. i acknowledge that. how you work out an individual's mortgage who does not have a job? there is no way with reasonable underwriting standards to said, we will fix your mortgage if you are not able to meet any obligation because you have no income. when you get down to it, the largest causes for losing your house has been losing your job or a change in your living situation, whether it is divorce or something else. beyond that, what we have seen

in this last crisis, most of the fraud has been worked through the system. the foreclosures we are dealing with now are not fraud-based or lending that did not fit the individual. it was lending that -- >> do you think people who cannot afford their homes should go into foreclosure? >> it is an awful way to think and there are better ways. if you do not have a job, no program is going to help you as much as a job would help you. that is what we have to say. beyond that, there are ways we can work to make sure this program does work going forward. >> do you envision looking at the question of how were these companies are dealing with borrowers?

>> we will look at who has been helped and who has been hurt. we are going to go to the crisis centers and we are going to hear from folks firsthand. there are positive cases. there have been 500,000 people helped by this program. it is not a large number based on the fact that we have got close to 3 million foreclosures this year and last year. there is a lot more going on out there. certainly, they bear enormous responsibility for the failure of this program. the treasury is still writing the checks. the companies are now falling through. >> back on dodd-frank and the regulatory reform legislation that passed last year, some on the left would argue that what republicans are trying to do is

make it easier on banks and give the financial industry more of what it once and a softer touch out of regulators. how do you rebut that criticism? >> if you look at what the banks wanted, they wanted the tarp and the banks wanted the bailout. i a voted against that. this idea that republicans are in favor of the banks and democrats are in favor of the little guys isn't the truth. the reality of the situation for me is, i am not as concerned about the regulators or the institutions. i am concerned about my constituents and their access to credit. as you talk to a small real- estate developer who has little debt and what debt he has, he is paying on time.

the banks are coming in and saying they have to change his loan terms. large businesses are trying to get landing in the marketplace and the banks are saying one thing. the regulators are saying something else. i do not know if i believe either one of them. i constituents don't care which one it is. they just want an answer. what i am looking for is a vibrant than the market with real competition against banks, credit unions, financial institutions of all shape, form, and size. when they compete and there is a vibrant credit marketplace, my constituents win and small businesses win. that is why we have hearings.

i know you guys have covered the hill. cspan covers the hill. what i would like to see is to ask real questions and see what the facts take you. to not go into a hearing and say, i have structured the hearing where i hear x answer. but to go in and say what is the problem? what is the answer? and let the facts take you where they may. >> you are a vocal member of the house and into services committee. both of these committees are

investigating similar things. how is the coordination going to work. you are having hearings to explore these topics. there are not just 12 hearings on tarp. how is the coordination going to work? >> just in the first month of the congress -- there is plenty of room in this financial- services segment. so much of what is happening from the last two years is related to this issue. the fed to services committee -- chairman max baucus has indicated he wants to go through the dodd-frank bill. we also have the state bailout question and the larger question of whether states and

municipalities are going to come to the federal government and ask for our tax dollars. i want to set the stage for that and understand the situation before that happens. secondly, we have the question of securitization. what does it do for small banks for accessing credit. there are questions about the credit rating agencies. these are things we can get into the meat of, the substance of, in an in-depth way. >> will you do the same on fannie mae and freddie mac? >> certainly. on the financial services committee, we will try to understand what is happening within the home ownership market place and understanding the cost and losses to the taxpayers from fannie mae and freddie mac and the legislative

ethics. much of that will be dealt with with the financial services committee. we are going right into writing the legislation for that. i want to take some of these wider range issues like securitization and state bailouts and get into the nuts and bolts of it. >> one thing that has hung over a lot of these answers is the weak economy. if the economy were to get better, that would help the foreclosure issues and the state issues. gdp has gone up 3.4%. what is the republican congress going to do about the economy and jobs? is there anything you guys have for these next few months to try to address these problems

directly? >> we believe the massive expense of the federal government has hurt the economy and hurt job growth. we could do more quantities in easing. what we want is a long-term sustainable growth. we believe that happens by constraining government and cutting spending in washington, which over the long term will keep interest rates lower and give folks better access to credit. and over the long term, it will reduce our tax burden as well. the extension of the 2001 and 2003 tax cuts was beneficial. you also see the regulatory burden of this administration. over the last two years, we have had hundreds and hundreds of new regulations written that have had billions of dollars of

impact on the economy. the implementation of dodd- frank and obamacare. we want to look at those regulations and make sure we alleviate and remove some of the burden on the private sector, which we think will help with job growth. report on thursday. people took different directions and got to the same end point. it is a lost opportunity to get to the root of the financial crisis. is there anything you can do on the oversight committee to fill in gaps? >> the analogy of when this commission was created was to the investigations of the

1930's where it was a unified narrative of what caused the great depression. that narrative persisted and still persists to this day, over 70 years later. what we say about the great depression is what that report outlined. as a result of those recommendations, you have the securities and exchange commission. you had glass-steagall and implemented. this is going to be a meaningless blip. 70 years from now, i do not think we are going to be talking about the fcic report and the phil angelides narrative and the six democratic appointees and the three dissenting republicans who wrote one report. to me, it was a missed opportunity to truly understand the crisis.

i think that is what the american people want. that is the type of inquiry i would like to have on the state bailout issue on securitization where we can actually have some agreement. these things are not republican versus democrat issues. it is really what is best for the average person in this country today. their ability to access credit and insure their taxpayer dollars are safe and secure and we will not have bailout going forward. it is a missed opportunity. >> time for one quick question.

the majority, what does it mean to have a greater stake in what your party does? >> being a minority in the house, you are reacting. this first month of being in the majority as a lot of work trying to figure out what you will be doing over the next six months, the next two years. it has been great. on my subcommittee, i have a ranking democrat. we have had good conversations about the work we would like to do on this subcommittee. there are real opportunities. it is an exciting time to go into the majority. the challenges for the country are enormous. the thing is, we have one full capacity. the folks serving in washington want to do the right thing. my hope is that we can. >> congressman patrick mchenry, thanks for being our newsmaker.

>> we are back. i want to begin with this new subcommittee on tarp, financial services, and bailouts of public and private programs that mr. mchenry is going to be heading up. >> he was certainly interested in mortgage issues and the h.a.m.p. program. this program has not worked out, but they are looking at this issue to see if there is any kind of safety net. >> the other issue is state finances. states are in a lot of trouble. it sounds like the republican congress will not be enthusiastic about giving money