estimate that if you look at all of the financial investments, and all the fed special programs, all of those will be profitable. that is the first statement. it the second is that the fed has committed $125 billion to the treasury. it comes from the programs. it also comes from our securities. >> after all the wailing and gnashing of teeth, you just earned the american taxpayers 20 $500 billion? >> that is correct. >> i was stunned.

apparently, we were just borrowing money away. that turned out not to be true. i know there is a little back- and-forth plastic as to what you said. on the basis of the $60 billion in cuts to the federal government, did i hear you correctly that the real disagreement was not of whether we cost jobs but how many? you are in the 200,000 trained in? >> yes. the debate is whether they will cut 200,000 jobs vs 700,000 jobs. we do not think cutting jobs is a real smart thing? >> i would like to see job creation.

we have to keep our eye on deficit reduction. >> i agree with that statement. those were the two most interesting statements that have been made all day. i have lots of other questions. i want to talk about the growing gap in this country. i want to talk at some point about the role definition of how many people are really unemployed. it bothers me we do not count discouraged workers. we do not take any account for the participation rates.

stop the corporations are holding on the books. hmm $2 trillion. that is cash. a lot of that is overseas. >> their holding at? >> yes. >> who do you think no the good -- you think it would be good if it was meant to hiring people? it would be better if it was invested. they make their own determination. >> do you think it would be a reasonable thing to do to look at ways to encourage them to move that money around and get it back? >> that is one of the ways qe2

works. it makes it more expensive. think of a good thing for the government to do. >> as you know, i have suggested at looking at the corporate tax code. if you or allow them to bring it back, without additional taxation, there might be more incentives for them to bring it home. >> excellent. he had answered all my questions appropriately. i want to thank you for being honest. >> good afternoon. one question has to do with trade.

in connection with the trade gap with china, and in despite the fact that the currency depreciated, what share can be given to exchange rates as opposed to more structural issues like high corporate taxes, which will soon have the highest corporate tax in the world. >> exchange rates are certainly playing a role. most have to do with the saving and investment patterns. in china, the savings rates are extraordinarily high. the investment is also high. they have a lot of extra savings to send abroad. a savings rate is much lower at

the government level. we need to borrow abroad. i think those factors by the most important. there are other issues related to the goods that we produce. there are components they used to assemble. >> we still have a lot in manufacturing. my district -- housing and financial services are key. both have been hit hard. until 2008, and they were making loans.

what can we do where we are right now in this economy to incentivize of banks to start making loans again? >> as referring to some of our efforts earlier. we have to strike the balance. i think banks are increasingly willing to do that. they are a little less shellshocked.

they talk to the banks and businesses. i think we are making some progress. the think there may be some situation where the loans are not being made. i'm hopeful we will see some improvement. >> it is becoming more neutral? >> we are only one of several regulators. as we are working hard. >> may i yelled 30 seconds? >> i like to thank the gentleman from pennsylvania. sometimes i do not get to ask questions. why would lead to a fall of on your answer.

allen led to a year your thoughts on things that are there. i hear from a lot of consumers about prices. gas prices just went up 10%. miti prices are up. food prices are up. how often do you look at the baskets of goods? >> they are weighted. prices are weighted according to how many people saucepan. housing gets a heavy weight. >> how often do your beof look t

it? the updated every few years. >> thank you. >> thank you. get back to me. >> thank you. i want to ask you. there is been a lot of discussion about qe2 and decision to go ahead and purchase long-term treasuries and the impact it has on interest rates going forward. i realize the funds rate is so low that you cannot do more on that side. is there any way to quantify the benefit of that? would you be able to make an assessment of what would have been without it?

>> the question as what has happened? you can never know that was certainty. we have done extensive analysis. there is a paper published that estimated that the six and a billion dollars would provide an additional 700,000 jobs. if you get all of the efforts, there would be several million jobs. there also be efforts together that would add a percentage point to inflation.

i was agnostic in my testimony. perhaps the banks are saying that they are lending less. arhat there is the willingness. if that were true, it provides liquidity to businesses that do not care that confidence. it is not necessarily create 700,000 of. of their issues related to regulation. it works by changing assets.

there are corporate bond yields. of the is the lack of demand. how we have seen is the is in the began to pick up. there are lower interest rates and factors that make it more attractive for the consumers to go out and spend. it appears so that it is affecting that. >> assisted in by the members.

then there is the ci that i voted in. i asked about other measures. you are thinking about cutting $60 billion -- do you think getting $60 billion would translate? >> the proposal gives a couple of growth. i do not know why we get smaller numbers.

we have to do n.l. with of what the cuts would do. >> we are borrowing the money from the chinese and from the saudis. i'm not assuming if we are borrowing it. >> thank you. i had to slip up for a little bit. this kind of implementing -- there is kind of conflicting information.

member's question as, is this phenomenon of companies investors holding their assets -- isn't large by historical prospectus? is it lowered? >> it is have the overall existing wells is. burns said taken advantage of this. there is an awful lot of cash to relatives to longer-term norms. >> in terms of job creation, it is going to create more jobs and more expansion of our economy. i am from west virginia. a lot of our investors are hunkered down because of the regulations.

there is the uncertainty of where we are going to go with that. the dc this as a problem in terms of the rule maker? -- do you see this as a problem in terms of the rulemaking? will they hundred down on their cash and not breaded out? >> they will get further information. the act has some pretty tough deadlines. we are looking at the better reserved. we would like to get them done by -- get them done right.

>> i ask if you can ask a question to your members of congress, what would it be? normally of a lot of different issues. it is a very simple question. what do you doing up there? and is not understanding the process. the federal debt has risen. we look at you is doing the debt. china is holding a lot of our debt. we are creating debt.

what would you tell somebody in a simplistic way how it is going to affect our national security and our trade it? >> as you say, we are borrowing and giving ious. at this point, they seem pretty content to hold that. this shows that there is still in willingness to hold treasury security. we deado need to provide confide

that will control the deficit over time so that the needs will not explode. if we can, the risk caretaking is that they will spike up. then we will be in a bad said jubilation. it'll add further to the deficit. it is just like borrowing. >> thank you. they said the federal government has great urgency. a decade ago, the government was

running a surplus. alan greenspan was worried. it did not seem to be an urgent concern. if there is one thing they saw it, it was paying off the national debt to quickly. my party can claim no credit for that. it was the republican congress the solve that problem so dearly. the tax cuts did seem to skewed dramatically. 65.5% of the tax cuts went to the top that. 14.7% of the top 1/10 of 1%.

it just the hint of $40,000. we saw in december how important it was that republicans protect the tax cut. the people with the riches will spend the least. to pay for that, we are setting funding for education. it allows middle-class kids to go to college. there are head start programs. he said he wanted to solve the

deficit problem. this does seem to be the long- term framework. the question i wanted to ask about what about housing. he said the sector was weak. that seems to be a fair statement. overhang of existing homes on the market have 10 to 11 million units. the home values continue to go down. he has said the biggest problem sees demand more than anything else. businesses are sitting on $2 trillion of cash but not increasing their operations.

declining home values seems to be affecting people. what affect is that having on our demand? >> you just said it. first, it is probably that people are buying housing and there is no demand. did the construction industry is quite reduced. the other at that is -- the other if that is that people are thinking about their retirement and savings. we will take into account their equity and home. if a significant number of people are under water. did they do not have any equity.

they have to save rather than spend. that has an effect. >> it appears to be foreclosed. they cannot get out. they cannot sell their house and refinance. they end up losing their homes. neighborhoods are pulling down the home ballets for everyone else. there is a price to sell. how urgent it would you put it dealing with foreclosures? >> you are right. it is a major problem.

it is a very high priority. we have had some success. it is a tough problem. it is hard to figure al hunt to keep them in the home. it to be terrific if we could reduce foreclosures. it is a difficult problem. >> thank you. thank you for being here today. a quick question with regard to interchange fees. they were speaking to us. you are on the other side of the building. we were led to believe that you were considering extending the date for the ruling of pricing and interchange fees. have we thought about that more?

are you still thinking about extending the date? >> we have just the gun on the comments. there is some of the issues were make the proposal. we work as quickly as we can. we are moving forward as quickly as we can. >> are still considered fixing the time? >> we are not extending the time.

today to get more comments. who have to take a such time as many. what you say to them and their income has bar at? >> -- what d.c. to them when their income has been cut? >> we are looking at the lack of income. water you going to say? -- what are you going to say?

some of it could be made up by other fees or charges. >> the services have to go away. you have to keep your door open. >> we are filing the statute. >> with regard for what is going in europe? >> there is a lot faculty with the economy over there. of our banks have 1.2 trillion sellers worth of loans. -- $1.20 trillion worth of loans.

>> they have limited this to the government. >> we are watching this very carefully. at the moment, my expectation is that europe will solve their problems. elena put that in the top. >> do not have that as a ball that? it is right in the meadow.

>> one quick concern is with regard to the qe2. was a lack of the extension of an income tax rates. i would talk to manufacturers. orders started to pick up. there is concern about inflation. how would you address trying to talk to some of the business folks? how do you address that? >> i would say consumers have come back to spending. we see some pretty strong purchases.

i think you'll overcome uncertainty. >> thank you. let me ask very quickly to follow up on the previous question concerning interchanges. i would urge an extension of time to make sure we have on hand this complete issue. their love of conflicting reports coming in. there is still the issue of fraud. there is some dispute over what impact did the -- impact it has.

they are actually getting the check to clear. there are a lot of issues here. i would urge that the fed take a little more time on this to make sure. i want to ask about the corporate tax rate and what implications and how impact will this is in terms of our companies to compete on the world stage. ours is the highest with about 38%. i think only japan is higher. it is all put this on an impact. will you comment on that? >> you are correct. our tax rate look soon to be the highest. ia good tax code would have a

broad base. this speciallot deductions and extensions. by getting a broad base coming you can lower the rate. that provides greater incentives for firms to locate. do you tax based only on profits earned in the united states are blow for profit? but at what rate to you think we

should aim for that would put this in the best position in terms of competition on the global stage? >> i did not have a single number in mind. there are is the number of deductions. we will certainly get it down if we can. >> part of the charges to keep prices stable.

on the one hand, we have to pay down the debt. to what is this a faulted the economy? it is still volatile or week. athere is a $1 billion cut we passed around. why is the discrepancy in the figure of around 6005000 to 700? that is a huge difference. who do you believe here? we have a number of questions. we are trying to understand the

reasons. >> would you say that you estimates at really? do you feel that is worth it? do you feel that is collateral damage? we need to address the deficit. that is very important. it to be more effective if we get over a time frame. >> thank you. >> thank you for your appearance today. as i said, i represent a very rural part of virginia. of -- we have

dozens of small businesses and banks that provide capital. we all would agree that their success will drive our future economic recovery. i wanted you to comment on your view of the atmosphere for lending by small banks. i was wondering if you could talk about that in the context of the regulatory structure that they have to deal with. i agree with you that small businesses are very important. they create a lot of jobs. we do not have really get data. the avp numbers showed a lot to

the situation is smaller. confidence is still pretty low. the need for credits for small businesses is obvious. we know that small banks are often the ones that are situated. they know the community. we use that very much. we cannot solve all the problems. we can ensure that all the banks have enough capital to make more loans. it is not unfairly penalize

lending or discriminate against firms that are potentially profitable but temporarily week. >> are there specific things that you can speak about that address the proceeds micromanagement by regulators? are there steps such being taken to avoid micromanagement and allowing the smaller banks? >> absolutely. we provided guidance to the banks. we have provided extensive training to try to get them to understand and create a detailed what should be taken into account. we have had meetings all over

the country. we have been in line. we take this very seriously. we have at it a new community banks council that will have a member from each district. we will meet with the fourth three times a year. we understand this is a serious problem. we are doing all we can to eliminate artificial beria's.

>> do you think that the costs that will accrue will make it more difficult for them to survive? and thereby be subject to mergers and thereby create the to big to fail problem that i think that they were reported being designed to avoid? >> their focus on the larger banks. very few of the rules are aimed at this. there is the regulatory burden on small banks. to the extent we can tighten up the supervision, they may see that they have a more level playing field.

>> thank you. >> thank you. thank you for appearing. i heal from wisconsin. i am very concerned about that economic development conditions. i realize he did not have the budgets that you submitted. i have some sketches from the administration. i will not expect you to respond in detail. as a backdrop, i do want to ask you some questions about your role in monetary policy and what makes it there. a notice from your comments that you started out immediately

talking about the importance of consumer confidence and spending. and about the importance of bringing down the unemployment rate. i want you to start out by giving me a brief overview of their dual role for maintaining prices for monetary policy and how reducing unemployment fits into that equation. >> as you noted, we have a dual mandate from congress. it includes a maximum employment and price stability. we try to help the economy return to improve employment situation.

to the level of unemployment, in the current situation, we are trying to help the recovery. >> thank you. i am from wisconsin. the strategy that our state currently has is to do try to attract investors to create 250,000 jobs. we are establishing an exclusion for capital gains. we are spending $5.7 billion. we are reducing burdens on our local governments. we are ending our recycling program.

we are going to increase our unemployment rate. we are going to fire 21,000 state workers. then we will lower wages for other state workers. we will and collective bargaining help benefits by $725 million. even those who receive recipients, we will reduce the welfare check by $20 and make them pay copayments to medicaid. we are going to reduce spool age a total of $20 billion. it is a tune of $636.9 billion.

this is going to increase unemployment and reduce the ability for these folks to consume. this is all over the course of a two-year time. this will make our bond market's strong grip. do you think that the the investments will override the damages that we are doing? wisconsin had a requirement.

note the last couple of years, would have them laid off. there are tough decisions being made. >> does that help but come purchases? >> there is a lot more information. we have known whether the private sector job gains are offset. >> thank you. >> you will be prompted up in

six months when chairman bernanke comes back before the camera a. by that time, we will have a balanced budget. there will be a different group of questions. other members are free. >> thank you so much for your time. very last one as well. on the rulemaking and supervision, one is a defined these systematically significant non-bank institutions to work better regulations. kenya updated on that process? can you give us some assurances that this process and will not be arbitrary?

we talked to many insurance companies that are in the casualty business. they feel they will get lumped into this progress. aig was involved with this. we know it was really not a problem. it is more of a derivative shot. can you comment on that? a @ >> it is the responsibility to set rules. we have put in public, a proposed rulemaking that would put them back for what criteria should be used. we are looking forward to those comments. we will begin to make designations by the end of the year.

the process is moving forward. there are different views about how broad this should be. i think c-span.org the agencies will need to discuss it. the federal reserve indicated that we will have our hands full. we do not want to over extend our this definition. we want to include every firm. i do not know the exact answer. we should have some authority for the next few months. >> are they going to wait? i net -- i now fosc has not been appointed yet. will we wait until after? >> that is a good question. it would be desirable to have the insurance recommended.

i think we will have another position as well. you are correct. >> with regard to the method ology, what methodology to the federal used to determine that it is the correct amount of money to deploy it for the open market treasury? >> we have been able to get the impact of purchases to divide the rough the equivalent between purchases and points on the federal funds rate. our rough equivalent of something like it is roughly the same as the cat in the federal funds rate. it is roughly a 75 basis point cut. it took a significant but not unprecedented.

additional stimulus was needed. we seem to be seeing the kind of response we've would get. that is roughly the analogy. >> what would you consider the standards for determining success or failure of open market purchases? >> the first question is efficacy. it looks like it is. it has the effect on markets that we would anticipate. i think there are two criteria. we've would like to see the recovery and a self sustaining peace. we live like to see the private sector leading. i think we have succeeded in

moving the economy away from deflationary. we want to make sure we do not allow patients to go above what is consistent with our mandate. be >> thank you. we have a $14 trillion debt. we talked about a lack of confidence. there is a fear of tax increases. are you able to quantify the effect. >> it is not so much in ongoing of that that we had today. it is a shock that it might become less confident. it is more of a risk.

>> they are concerned >> is going to cost 200,000 jobs. you can not quantify the jobs we have saved? >> i was talking about that looking directly at the effects of demand. if you couple that with a long- term plan that shaves the deficit the overall effect could be more positive. >> you are not saying hour auctions will cost us 200,000 jobs. >> i would like to address the deficit on a long-term basis. >> thank you. i want to close by saying youth and ranking member frank and i

have said unless we demonstrate a strong commitment to making critical plans for long-term reductions in our deficit, then we will have neither financial stability nor healthy economic growth. that is something we can do. it seems there is agreement. hopefully in six months we will have some credible plans to demonstrate that commitment. some members have additional questions for the chairman. they may wish to submit it in writing. the hearing record will remain open for 30 days to submit written questions and place their responses. this hearing is adjourned. thank you.

>> thank you mr. chairman. c-span3 = = [captioning performed by national captioning institute] [captions copyright national cable satellite corp. 2010]

>> the federal reserve board of congress is required to report

twice a year on economic developments. you can read the latest report online at c-span.org. on capitol hill this morning, homeland security official secretary, janet of peloton know, will testify. also, this afternoon at 4:00 eastern, the mexican president calderon felipe >> in a few moments, this morning's headlines and your calls live on "washington journal." and the house of representatives in -- is in session at 10:00 eastern for more debate on a bill designed to reduce the amount of paperwork required of small businesses. small businesses.