. today we will review the results of portions of the act, and we will attempt to ascertain what the next steps should be. keeping in mind the important goal of providing capital to small businesses on main street throughout america, an essential component of a job creation and economic recovery. what is clear today that lending has exceeded pre-recession levels from the final quarters of 2011. the jobs act alone initiatives led to the all-time high sba loan approval level and loans supporting over $30 billion in small-business lending, making the 2011 the most successful year in the history of the loan programs. as a result, some of the provisions that we had included

in the small business jobs act. also, as of september 22 this year, the department of treasury had approved more than $1.2 billion of low $1.5 billion for the program, led in large measure by senator levin and others. states can leverage federal funds to a variety of programs that help small business access credit. today, 50 states and territories -- 55, including the district of columbia -- have been approved with four states' pending bid the programs include capital access programs, loan guarantee programs, a venture capital programs, among others, that help private lenders extend more credit to small businesses. these businesses are not in the beltway here in washington, not on wall street in new york.

they are in rural, suburban, and urban areas and main streets around america that have been starved for capital because of this recession. many of these programs have just received funding from treasure, so a complete picture will have to wait. we will get initial did this morning from secretary geithner, and i intended to have a hearing in the second quarter of next year to have an estimate for a variety of state programs. the small business lending fund, a new and bold initiative, was a key element of the small business job act. under a barrage of criticism and publicly declared obstructionism by the senate minority leader, this lending program was born. it is a wonder it survive at all. while some of my colleagues to date no doubt will be quick to point out the gap between initial expectations and actual oending, i would like t read into the record just a few

letters from banks around the country that are participating in this program. the first, and i am not going to read the entire letter, i will submit them for the record -- the financial corp. from ellington, pennsylvania -- 612 main street is their address -- "the coley owned subsidiary bank serves eight counties in western pennsylvania through 13 offices. was nearly $500 million in total assets, we are able camilla areunity bank -- we rural community bank. our banks are the bank of choice for more than 40,000 local customers. four about banking offices are the only bank in town in markets where they are located. while we don't few government- sponsored funding as an optimal form of capital for our company and banks, both sblf program and

tarp capital purchase program have provided capital support during the difficult economic period, and both programs have supported a recent growth and in turn, the local economy where we operate. specifically, since receipt of the treasury sblf less than two months ago, we have funded enclosed, or will find enclosed more than 700,000 in qualified loans under the program. our commercial lending efforts, buildout around traditional asset quality standards, as planned in the coming years, have been organized around the program to ensure optimal utilization of the funding for programs and the best return for our constituents. from literally -- the name of the next bank is heartland, central avenue in iowa -- "dear senator landrieu and snowe, i am

heartened to to write you concerning our position in the small business loan fund. we are headquartered in iowa with operations in midwest and western states. let me begin by expressing appreciation for the opportunity to participate in the program to rid our company traces its roots to 1935, when our flagship bank was founded in the depths of the great depression. our purpose then as now is to make credit available and our businesses and serve as an economic engine for growth. it provides an added incentive to reach out to our communities. we provide affordable credit to agricultural clients, which will in turn increase employment and sustain economic recovery in the communities we serve." just two more. the people's bank from georgia. the people's bank was founded in

1890. it is a $30 million state chartered bank located in west central georgia, halfway between columbus and make acon. "we are the only community bank headquartered in the county or the two adjacent counties. funding from sblf boosted the bank's capital by 30% and allowed us to meet our plans to grow 10% annually for the possible future. thank you so much." finally, leader bank out of arlington, massachusetts. "leader bank is proud to be a participant in the small business lending fund to aid in september 2011, leader bank raced up approximately $12.9 million from treasury. using the allocated funds, leader bank has allocated $4 billion -- has led $4 billion to

qualifying businesses and has supported accretion of 113 new jobs." a variety of businesses have borrowed funds from sblf, including firms in the biotech industry, as well as a frozen yogurt franchises, a neighborhood convenience stores, and few companies. one more letter from the women's business initiative in wisconsin. that is not a bank, but because of my insistence and others', the lending corporations were included. she goes on to say what a tremendous shot in the army has been for her and the women businesses that she represents in wisconsin. today we will hear from -- with very tight time constraints from congress that treasure was able to distribute $4 billion from

the $30 billion available. it will lead to small business lending ranging from $9 billion to $16 billion over the next 16 years. i call your attention to chart that showed just how the large banks averaged there on a landing, and you can see from jpmorgan, citigroup, and bank of america, jpmorgan, $9.5 billion last year, citigroup, $5.8 billion, $5 billion for bank of america. even at the lower rates of lending, because it took so much time and there was some opposition initially, has done not too badly in comparison. they wilwe will hear that used some of the money they received to repay these loans. there is nothing here that is controversial. there is a reason to be included tarp recipients in the program. the independent community

bankers of america requested we do so. they requested this provision to add their testimony in front of the house financial services committee on may 18, 2010. all small business lending fund banks, whether they received tarp or not, must increase loans to small business to keep their rates low. if they do not keep a small business lending, they will be paying treasury back at higher interest rates. despite tarp repayment positions, we will see more than to small business. today we will hear that the process took too long to get loans out of the door, and i agree, but i remind everyone that this is entirely unique program. treasury did not have a readily available or not sitting on the shelf to take down and steer. -- did not have a readily available road not sitting on that shot to take down and steered it as the federal reserve chairman bernanke said, community banks are stubborn resilience, precisely the type of people we need to help our economy grow. i am pleased that during this

recession, american legislators came together to pass an innovative idea to help turn the tide when it comes to access to capital for america's small business. i am pleased to report that the fund could potentially increase the amount of small business lending by many billions of dollars. while we did not release as much as we had hoped, we had a degree of success nonetheless. i intend to take the testimony given today, as well as input from banks and small businesses, to develop the small business lending fund, too. until this recession is at a distance in the rearview mirror, i believe this committee has an obligation to take time tested and innovative programs and and time tested and animated programs. i thank you for your time. i would like to turn it over to

the ranking members now, and then we will take questions -- two ranking member snowe, and then we will take questions and her testimony. >> thank you for this critical hearing. certainly because it is the time of economic crisis portions, indisputably, mr. secretary, we welcome you here today is important to look at to the issues of job creation and the lack of economic growth, the lack of job creation overall, and what has gone wrong. your primary mission is to crack economic policy of this country, and at this point, it simply is not working. there is no doubt that there is nothing more urgent than creating jobs for the american people, because our nation has been plagued by a staggering unemployment rate for nearly three years.

according to the bureau of labor statistics, the average annual unemployment rate for 2010 was 9.6%. it translates into 14.8 million americans unemployed. for 27 of last 32 months, the unemployment rate has been at 9% or higher. about 45% of the unemployed have been out of work for a lease six months, a level previously unseen since world war ii. what is especially frustrating, i think ever more so for those americans who are unemployed or underemployed, this is not a new issue. it has been out there for three years. it is something that we have known. this catastrophe did not happen overnight. in fact, when you appeared before the senate finance committee in early february, i was describing to you the scenario and what i was hearing on main street as well as in my capacity as the ranking member of the small business committee, as well as members of the

finance committee, and he said that might be a -- you said that my view of the economy was dark and pessimistic. what i was relating to you, mr. secretary, was what i was hearing, because it is a clear ingredient of the relationship, understanding what is imperiling the ability of small businesses to create jobs, the people that we depend on to create those jobs for hard-working and deserving americans brought america has always provided -- parking and deserving americans. america has always provided the promise of a job, and millions of americans are missing out on that opportunity. that is what we have to restore. seven months later, since early february -- in february, it was about 9%, the unemployment rate. day 8 is 9.1%. the number of long-term -- today is 9.1%. it is the first time since world

war ii that no new net jobs were created in a single month. according to the bureau of labor statistics, total civilian employment was 132 million, a decline of 2.2 million jobs. that is what it is all about, mr. secretary. looking at the stock numbers, but who represents those numbers? as you well know, in order to restore any stability into our economy, not only to get the 100 beds in you need every month just to remain static, but to change to -- 100,000 unique ever met that test remains deck, but to change the levels, it required 280,000 jobs to be greeted every month for five consecutive years. a former colleague of ours noted in a recent column in "the wall street journal," had the u.s. economy recovered from the recession the way it bounced back from the other can assess since since world war ii, per

higher at gdp would be the pi than it is today, and 11.9 million americans would be aployed instead, we have 14 million americans who are still unemployed. we are basically facing the worst post-recession recovery in that history of our country. it requires a sense of urgency. the recovery during the reagan years, after that session, we would have had, approximately, almost 16 million jobs created when one remedy after another fails to solve the crisis, it has mushroomed into what is now a state of emergency. it is long past time for the alarm bells to sound. we missed the target in a systemic and serial fashion. one has to dig deeper to honor the the underlying causes great -- to unearth the underlying

causes. in my view, it has been a failure to focus on the engine of economic growth, the private sector, those on whom we depend to create those jobs. if you listen to those businesses, as i do on my main street tours and the conduct of roundtables and numerous business people in here and everywhere, they will tell you, loud and clear, that the two main issues are tax reform and fewer regulations. that is what is driving the problems that we are facing in america now, mr. secretary. it cannot be temporary solutions. there is no reflection of that emergency or the need to move into a direction to reform the tax code and overhaul the regulatory system. i know you said recently, in early october, that the idea that regulations affecting our economy is without foundation. but when you talk to business after business, they cited the

regulatory impact. 3000 federal regulations every year. 50 dozen since 1996. more than 407 come out of the administration this year to cost an additional, to $1.70 trillion. we depend on these businesses because they are the ones who have driven past economic recoveries. now they are asking the government to make the environment conducive enough to expand the private sector, not to simply grow our government. therein lies the problem. the jobs had been created, they have been created in the government sector, not in the private sector, essentially. the lending to find in the jobs act is a case in point. -- lending fund in the jobs act is a case in point. we started a year ago july. i want at that time that the lending -- warned at that time that the lending fund was a new

and expense of the federal program that closely resembled tarp. i remind everyone that the special inspector general for tarp stated that in terms of its design and application process, it would essentially be an extension of tarp. i know proponents of the legislation do not share that view. they did not heed the warnings, and certainly not of the special inspector general. they claimed repeatedly that the program would be immensely popular with the 7000 community lenders across our nation, requiring a fault $30 billion. in reality, we wasted an entire nine months on this program. nine months before a single dollar was distributed. only four killion will be utilized. -- wholey four million will be utilized. -- only 4 million will be utilized. with only $1.8 billion remaining

for actual small-business lending. "the wall street journal" pointed out, as depicted in a onrt, the program's failures october 6. where is the disconnect? $30 billion a year ago, and i know how urgent it was, and everybody said we had to have $30 billion. clearly the problems were anticipated. they were foreseen. here we are today dealing with less than what $1.8 billion out of the entire $30 billion for small business lending. prior to receiving the lending funds, a full 51% of recipients had already increased small- business lending to initially qualify for a low interest rate of 2% or less, because the baseline for increased lending was purposely set in the legislation. however, the administration epresents the senate

structure program. the banks are a great deal, paying off one taxpayer-funded credit card, tarp, with another, the lending fund. is that a wise or appropriate use of taxpayer dollars? it certainly was not effective in addressing the unemployment crisis that we are facing in america. we should contrast that experience with this program with the other initiatives that were extended in the jobs bill, which i authored or supported and therit was authored by others. increase the sba loan guarantees, which would read this all in sblf -- lending which would result in lending reaching an all-time high. i am deeply concerned that this administration failed to create the conditions that were warranted in the surgeon times,

mr. secretary. something has gone terribly wrong. what i hear over and over again is that there is no tepco, a tempo of urgency, that there is an emergency out there. if you are proposing more tax incentives only for a year, that is the problem. we have temporary solutions, 1- one-sharesolution -- tender rate solutions are not going to be sufficient to extricate ourselves from the worst post-recession recovery in the history of this country that is why we need reform both on taxes and regulation. we have 150 tax incentives expiring at any of this year, 11 out of 12 in the jobs bill that expire at the end of the year. they are all expiring. that is the point, and small businesses recognize that. beyond one year there is nothing, and that is the point. that is why we need on a man of reform right now, and requires

the presidential leadership -- that is why we need fundamental reform right now, and requires a presidential leadership to join with the congressional leadership to get it done now. >> thank you, madame chairwoman, ranking member snowe. the biggest challenge facing small business today is the demand for the goods and services at they produce is not growing fast enough. the less important thing we can do for small businesses is -- the most important thing we can do for small businesses is to strengthen the overall rate of economic growth. we of the proposed a strong set of tax incentives to increase economic growth and help put more americans back to work. these proposals, according to independent estimates, not ours, would increase economic growth by between 1% and 2% and add more than 1.5 million jobs. if congress does not act on these measures, then taxes will go up for virtually all working

americans. taxes will rise for most businesses, large and small. unemployment rates will rise, not fall out there will be fewer jobs for veterans and the long- term unemployed. the housing market will be weaker. our damage infrastructure will lead america's businesses with a growing costs. cities and states will have to cut back further on a critical services, laying off more teachers and first responders. enacting the proposals in the american jobs act will not, of course, solve all the problems we face as a nation. we need, as senator snowe said, copper heads of tax reform that improves incentives for investing in the united states. we need to sustain a substantial program of investment to rebuild america's infrastructure. we need the education system to produce better results. we need to expand exports, building on trade agreements

congress passed last week. we need to get deficits back to earth as the economy recovers to make sure we are living within our means. as you work on the long-term challenges, we need to get the economy growing more rapidly. to do that, we need congress to act, and that means democrats and republicans are working together. we cannot pass tax cuts for working americans and businesses, we cannot rebuild america's infrastructure, we cannot get critical help to save local governments without the support are the republicans alongside democrats. i provided in my written testimony a full update on tax incentives and credit programs we put in place the last 2.5 years to help small businesses. because of these programs, the tax burden on small businesses is lower than when the president took office. among the range of the specific tax cuts enacted over the past 2.5 years, we made it possible for businesses to police by of investments and capital limit. we have -- to fully write off

investments in capital equipment. because of these small business credit programs, credit terms of east for businesses. small banks that are in solid shape but are unable to raise capital in the private markets are able to take investments from treasury, so they can increase lending to small businesses we have provided $15.5 billion in capital in total, including roughly $4 billion under sblf, to a total of 713 community banks across the country perhaps we are $14 trillion at the economy. -- we are at $14 trillion economy but it is a very substantial number of banks assisted through these programs. they are not designed to help banks, they are designed to help banks' debt capital they needed to extend credit. cdfi's have been getting support from treasury to help communities urban and rural across the country, some of the

communities hit hardest by the recession. governments across the country have been able to access resources from the treasury to put into innovative credit programs. businesses have been able to access all loans through the sba's guarantee programs, and these programs have been among the most cost-effective programs we have available to us to help economic growth. they work alongside the private sector, mobilizing substantial amounts of private capital alongside investments in taxpayer resources. cbo estimates that the investments we've made in banks will produce billions of dollars of gains for the american taxpayer. those investments provided the oxygen that is essential for economic growth. it they or critical resent the economy started -- they were acquitted present the cardeconoy started recovering in 2009. there were not enough to insulate us from the full damage

caused by the crisis, but they are a very good model of how to combine tax incentives with credit programs to ease some burden on businesses. i appreciate the support many of you have provided to these programs, and i hope we can continue to work together on any steps to help small businesses access to credit and the capital they needed to meet needs of business customers. i would be happy to respond to your questions. i am grateful for the chance to do so. >> thank you, mr. secretary. i would like you to reiterate the initiatives the administration has taken in reducing the tax burden to small business, because i think that is important. i do agree with senator snowe, although we disagree on other aspects of the bill before us -- i do agree that giving long-term stability and relief in the tax code is important. we don't have in the small business committee to jurisdiction. that is a finance issue. but we have provided ideas along those lines.

but reiterate again some of the accomplishments of lowering tax rates to businesses, and what you intend to continue to do in that regard. >> let me just say that i completely agree that the tax system we have today for businesses, where you have tremendous uncertainty year by year about what the basic tax rates you are going to bed, and a system that is riddled with -- you are going to pay, and a system that is riddled with special privileges, is a system that needs reform. as we focus on these short-term things to get the economy more rapidly, we should keep our eye on long-term imperatives for exactly the reason that you and senator snowe said. we need more research be about the environment on the tax side and -- we need more certainty on the environment on the tax side. but we're not going to do, even at the super committee is

tremendously effective in this process, final tax reform in two months --. fundamental tax reform in two months. as we saw today the foundation for a broad critical consensus on tax reform that the was the corporate rate, it broadens the base, makes investment in the united states more competitive, we need to be doing things now to get the economy growing more rapidly. in my testimony i listed the full array of temporary snoweives and senators is like to say they were temporary. the two that were most powerful are zero capital gains for investments in small businesses, good for start-ups, a very compelling case for that, and that has had broad bipartisan support for gatt we did a whole range of other things -- that has broad bipartisan support. we did a whole range of other things that makes it much more likely that businesses investing today will meet the demand will come later. this is the broadest, most

sweeping, and i think, pretty creative mix of taxes that congress has ever considered for small businesses in short period of time. again, i want to emphasize again that we should think about this as a bridge to bottom and a long-term tax reform, not as a substitute for a period -- a bridge to fundamental long-term tax reform, not a substitute for it. >> i want to remind everyone that the hearing is focused on the jurisdiction of our committee, small business lending. but since it has been raised, i do also hear a lot of criticism about over-regulation. could you comment on the actions you are taking with other members of the administration to review that, and what your initial findings are in terms of reducing regulation from small business? >> the president and cass sunstein, who runs this effort at omb, have undertaken a comprehensive review of the existing body of regulation and

announced a series of changes to regulations, designed to get regulations smarter and reduce the burden where we can. i am completely supportive of that, and i am sure there is a whole range of work we can do in that area. it is absolutely true that because if health care reform -- because of health care reform, financial reform, the changes we are making, we are changing basic protections that americans depend on, and business depends on, across the country but change in that context is things that people just to, but if you look at the evidence -- senator snowe, when you quoted me last week, i was quoting your republican economist chris barlett -- it is hard to find evidence that regulation is having material effect on growth at all. the evidence he cited -- is worth looking at this -- if you look at profitability, employment, in the sectors of

the economy where there has been the most reform -- in mentioned -- i mention three of those areas -- if you look at the american economy today, profitability across the business sector is at historically high levels. having said that, it is very important that we put a much greater burden on all of us to make sure that as we are changing the rules, designing stronger protections, we do so in ways that are sensible, that we get regulations smarter, not just more of it, and we will continue to look for ways of doing that brought the biggest problem facing the economy -- if you look at every pole facing businesses today, they say their overall, and challeng -- their overwhelming challenge is they don't see enough demand for their products. they have other concerns, too, but those are way, way down the list, and a smaller fraction of businesses, if you look at surveys, what would regulation as a meaningful challenge to to the broader challenge of economic growth.

i don't think there is good evidence in support of the proposition that is regulatory burden or uncertainty that is causing the economy to grow more slowly than any of us would like. >> one final question, and i will extend the time equal to senator snowe -- one of the criticisms of the sblf, despite the fact we will get between $4 billion and $9 billion in lending out, is that it was too tarp-like. could you explain all the criticisms of tarp, that it looks like from the lending of tarp, it looks like the taxpayers will make money? >> you have to look at the independent assessments of cbo and others. the conclusions they reach, and it is with them at the supports, is that those programs will are a substantial positive return to the taxpayer. current estimates are over $10

billion, but that is not the most important benefit they had. the most important benefits investments at banks is that it helped take an economy that was up falling off a cliff when the president took office, and economic growth began again in the second quarter of 2009, just three months after the president took office, because of the scope of the measure that congress helped the president enact, including the programs put in place to make sure that banks were more stable, deposits were more stable, statements were protected, and we did not face the catastrophic collapse week had in the great depression. these capital programs, and it is true sblf, cdfi fund, tarp- related investments in banks, are set by any measure it the most efficient use of taxpayer money we have had, because every dollar of capital you make available to banks that cannot get it from other sources is were the summer between $8.10

dollars of lending capacity. if you have that dollar of capital, you have less need to cut lending and more capacity to expand lending. these are very effective, very successful programs. where i would like to talk about this in more detail, when i want to get your concerns about -- where they have been slower to get off the ground, it is because we have been very careful to make sure these investments came with the strong protections to protect taxpayer interest. >> i will allow 7.5 minutes to senator snowe, five minutes on the first round. >> the point is on that question is the fact that many of the recipients would have made those investments in small business haveng and to m -- would made those investments in small business lending and away. that is the point here.

it was all recognized at the time it it was identified as one of the major issues, that they did not need that incentive. 1%, 2% interest rate, that is what it was. that was the minimal all lending. -- that is the minimal level of lending. >> senator, i respect your concerns about the program, but i do not agree with that. what we tried it to do and what we were successful in doing was combined investments in banks with incentives to improve the chance to land paid for every bank that capital in this program, they have more capacity to lend than they otherwise would have had. i am not aware of a more effective way than this, of long said all the other agencies -- alongside all the other agencies, that can get more credit to small businesses.

i am supportive, as you are, of sba damage is, but those were not enough. -- sba guarantees, but those were not enough to it not all banks desert capital or are eligible for capital, but 10% of community banks across the country, there was a good economic case for giving them an investment with a return to taxpayer. the evidence shows a very good return to the taxpayer. >> 1.8 billion out of -- those are the facts -- 51% of recipients were going to increase their lending. >> could i respond to those -- >> those are the facts. >> what congress authorized was a $30 billion program, ok? banks applied for 1/lee of the capital in the program. -- 1/3 of the capital in the program. we cannot force banks to come. only half were eligible.

they were only eligible because we had to be careful to make sure that the taxpayers' resources were going to banks that were viable. we were not going to take too much risk. we were going to take some risk, but not too much risk in the resources that were wasted. banks only apply for 1/3 of the 30. only roughly half of those banks were eligible in the eyes of the supervisor -- >> but mr. secretary, you should have known that to begin with. they did not get responses as to why they were ineligible -- >> we never -- we cannot force banks to come -- >> i am saying that you should have been out in advance how this program would work -- should have known in advance how this program would work. we have an urgent issue in america, and putting your eggs in that basket, you are forewarned about it. >> cbo scorza this initially as

making money for the taxpayer. the idea that we put resources in this program -- >> i am talking about job creation. there was a whole issue as to whether or not it would ultimately do that, given the impetus for these banks to turn it over from tarp to a lending fund. even the special inspector general for tarp indicated a. those are the facts. unfortunately -- >> we don't disagree that the banks were allowed by congress to refinance tarp money. that was congress' intent. there was a good case that, because the capital they get on this program comes with a better incentive to lend. congress made that judgment knowing that people would say -- they do that knowingly and for good reason -- >> the inspector general for the department of treasury said it, in this report, at may 13, that

some of the tarp banks, small business lending funds, simply replaces the bonds is made under tarp -- >> that's right, but there is no inside out of the observation, because that is, as -- insight in the observation, because that was congress' intent. >> expanding the lending of this program into the 2011 leveraged law in 2014, 2016 -- people cannot wait. there have been too many faulty assumptions and the stock additions. -- faulty assumptions and miscaluclations. whatever economists you are talking to, i suggested they go to main street, because 74% of the american people think we are going in the wrong direction. what is it you are not hearing? i would love to take you on a street tour.

i have invited you before. i think you need to listen to the average american and what they are facing on main street, which is the decimation. these are all temporary -- that is the point. when-year tax policies are not going to make a major difference. some of those initiatives are worthwhile, but the bottom line, given the mixed message coming hard this administration on tax and a regulatory policy, they don't dare -- i am hearing from everybody, regardless of the side -- i am not making it up. i did not make it up in february, i did not make it up last year. i am trying to get the administration to concentrate on jobs, jobs, jobs. i don't know who you are talking to, i don't know who the president is talking to, but you need to talk to the average person, unfiltered. what they are talking about is we don't dare make a move,

because given the dynamics of this economy -- even jeffrey immelt, ceo of ge, but also president of the president's job council -- he said in dayton, ohio, may 13, "the final priority is improving collaboration between government and business with regard to regulation. decades of uncoordinated regulations create hurdles and increased burdens for businesses large and small across this country it." the point is, that is what is happening. tax reform and regulatory reform. i was in tax reform panel with you back in february 2009 at the white house. we talked about it, we said we needed a. "we cannot do it in two months." why not? president and congress together, both branches. i was here when president reagan was elected, and he would say

that these are severe circumstances and we had 10.8% unemployment rate guess what? he had a democratic house and republican senate did we work hand in glove -- he had a democratic house and republican senate. we work hand in glove to get it done for the american people. rome is burning, we are facing decimation of our communities, and they want help and they don't think they are getting any deference from the administration and congress to work together. if you are talking about policies in 2014, 2015, 2016, we have had three years of virtually the same unemployment numbers as we do today, mr. secretary. that is the point. this is nothing new. we need to get ahead of the curve at some point and make long-term fundamental, unpredictable changes in our tax and regulatory policies. i am hearing it from everybody, from fortune 500's, companies

with three, one -- everybody is saying the same thing, they need a certainty and stability. i uncertainty has a huge price tag, and that is being born right now by the americans unemployed, and that is what we have got to correct. i am not here to find blame, i am here to get the job done for the american people. >> we are on your side on tax reform and it super committee vote as a chance to begin the process now. as we are working together on the long-term challenges, don't lose sight of the near term and narratives of the economy not growing fast enough. realistically, we have to focus on things that matter now and that action right now. not just the long-term reforms we think are important. i agree with you about tax reform and i hope we have a chance, given the parliamentary procedural it manages that the super committee has, to do it more quickly than it might otherwise be the case. >> i know everybody has strong feelings about this, and the

secretary is wonderful to give us his time. we will go in order of appearance, with senator lott and reid hour hearing is about that -- with the senator levin. our hearing is about the sblf and credit. these issues are important to small business. senator levin. >> thank you for calling the hearing, thank you for the extraordinary leadership in getting this bill passed. it took your laser-like determination to get it passed. you had to overcome a filibuster, which is almost a year long. now i see r -- now i hear the complaint that it is not being implemented fast enough. a year filibuster against this bill, which was so desperately needed by small business, supported by community bankers, still supported very strongly by main street bankers? we have lots of kane streets -- main streets in michigan, too,

and they talk about two things -- lack of demand, the economic situation generally, and the availability of credit. this bill is aimed at providing credit, and was filibustered by republicans for a year. now the complaint that this is not being implemented fast enough -- if the republicans had their way, it would not be in the books at all. chamber of commerce tells us that lack of demand -- the economic situation is the number-one problem for businesses. regulation is not at the top, taxes are not at the top. as the secretary of the treasury just pointed out, small business taxes have gone down under this

administration. what we are desperately trying to do is provide support for small businesses. we are trying to get collateral support for small businesses. one part of this bill which has not yet been talked about, but which i want to focus on, is something called the state small business credit initiative. 44 states and a number of territories have made use of this initiative. i don't know whether every member of this committee has been used, -- i don't know whether every member of this committee's state has made use, but it is a way of getting support to the collateral that small businesses provide. i hear this from small businesses, probably more than anything last year, by the way,

that is the lack of availability of credit, because the value of their collateral had gone down because the value of all our collateral has gone down. almost all of our homes are worth less now because of this recession than they were before the recession. the same thing is true with assets of small businesses. same thing is true with inventory value, with the building and equipment value. they have gone down because of the recession. when small businesses go to take out a loan, the value of the collateral is less. that does not mean less customers, by the way, it does not mean they have not paid their bills at all. the complete i got more than any other complaint, far surpassing any thing about taxes or regulation, is the collateral support problem, the collateral issue. it community banks had given them loans all their lives and now could not give them loans because of the requirement of the regulators that the collateral be a certain

percentage. if the value of the clou collateral went down, it is more difficult to take out a loan. community bankers came to us, folks. these are not the big bankers that to us, these are community bankers, to support a bill that would help them lead to small businesses. we have to overcome a filibuster for a year, get it done. parted that we are all frustrated -- we are all frustrated that it is not moving more quickly, by the way. i share senator snowe's frustration with that part of it. but to suggest that this bill is a failure because part of it is being implemented too slowly, when if the republicans had their way, it would not have been there at all -- that is not ironic, that is kind of counter to tip. -- counterintuitive. now i want to talk, if i at any time left, and i don't think i

do, about the small business credit initiative. i want to ask two questions. is it a fact that this initiative is producing the intended effect this is the collateral support program, which is the states, by the way -- we are using the state's -- michigan led the way in this -- we are using the state's funds, adding to them, offering them support, almost all of our states and territories are taking advantage of this bind, and in their view, this is a success. >> i agree, and you are exactly right. as a complement to the federal programs put in place, we would work with a whole range of existing programs, not just in michigan but across the country. we thought it would be quicker if we worked with the states and sometimes they have a better feel for how programs work. 54 states and territories submitted the notice of intent to apply to 47 states, five

territories, and d.c. submitted applications, five municipalities, 46 states, three territories, approve or nearly 1.3 $5 billion in fines. we are well on the way to getting the money -- $1.35 billion in funds. we are well on the way to getting the money out the door. >> i would suggest to members that a test of the value of this bill, they talk to two people -- their states, their economic development people, talk to their states to see whether or not they have applied, and if so, why they have applied. talk to state governors and economic development people, and to test the value of that part of this bill. the other test would be to talk to community bankers. they always say that the either got support, and in some cases it they did, not enough, but where they did, they sure would

have liked it, they wish we would have taken a look at these regs to see if we cannot modify them, by the way, to make it available to more banks. that is the complete we get, that it is not more banks and got it, not that it is a bad program, but that it was implemented in a very conservative white, as you put it, to protect taxpayers, that it made it less available to banks. that is the complaint i get, not that it is a bad program, but that we wish we could have more banks get the benefit of the program. that is what we ought to focus on. >> thank you. i'm going to recognize senator bidder for a minute, but we want to submit for the record the timing of this bill. we received the bill in june, were on the floor of july, cannot overcome a filibuster. republican members did not support the bill in the senate. the president signed it

september 27. there was a lot of resistance bringing this with the lending program, but we will get it for the record -- >> well i want to correct my statement for a year if it was an actor - -- inaccurate -- >> it came to the floor in july, and that the august recess, and it passed september 16 in the senate and became law -- >> still had to overcome a filibuster. but i do stand corrected on the year. it was a matter of months it was filibustered -- >> it was not a matter of months -- >> it was a matter of 60 votes -- >> we will look back at the record, not just the discussion on the senate floor, but with the idea came for the small business committee as well. but we will get it in the record, ok? senator vitter. >> i want to focus first on the small business lending fund.

you said a few minutes ago that every bank at received the money had more capital and was in a better position to lend. if they traded at that money dollar for dollar for tarp money, they did not have more capital, correct? >> that is correct, but the sblf was designed so that the capital they got, even if the was intended to replace capital, is structured in a way that they are more likely to lead the capital. that is the purpose of the >> live coverage of secretary to tim geithner. we will leave this for a moment to go live to the u.s. out force a pro-forma session. the speaker pro tempore: the house will be in order. the chair lays before the house a communication from the speaker. the clerk: the speaker's rooms, washington, d.c. october 18, 2011.

i hereby appoint the honorable andy harris to act as speaker pro tempore on this day. signed, john boehner, speaker of the house of representatives. the speaker pro tempore: the prayer will be offered by the guest chaplain, reverend andrea martin, st. patrick's episcopal church in washington, d.c. the chaplain: let us pray. god our governor, bless the leaders of our land that we may be a people at peace among ourselves and a blessing to other nations. to the president, to governors, mayors, and to all in administrative authority grant wisdom and grace in the exercise of their duties. to senators and representatives and those who make our laws, give courage, wisdom, and foresight to provide for the needs of all our people and to fulfill our obligations in the

community of nations. to the judges and officers of our courts, give understanding and integrity. that human rights may be safeguarded and justice and honor served. and finally, teach our people to rely on your strength and to accept their responsibilities to their fellow citizens that they may make wise decisions for the well-being of our society, serve you faithfully in our generation, and honor your holy name. amen. the speaker pro tempore: the chair has examined the journal of the last day's proceedings and announces to the house his approval thereof. pursuant to clause 1 of rule 1, the journal stands approved. the chair will lead the house in the pledge of allegiance.

i pledge allegiance to the flag of the united states of america and to the republic for which it stands, one nation under god, indivisible, with liberty and justice for all. the chair lays before the house a communication. the clerk: the honorable the speaker, house of representatives. sir, pursuant to the permission granted in clause 2-h of rule 2 of the rules of the u.s. house of representatives, the clerk received the following message from the secretary of the senate on october 17, 2011, at 12:26 p.m. that the senate agreed to senate concurrent resolution 31. with best wishes, i am, signed sincerely, karen l. haas. the speaker pro tempore: without objection, the house stands adjourned until 10:00

>> so on tarp accounting, that is not counted as repayment? >> we try to show both numbers. all these programs that are about to come to the treasury to get capital, on overwhelming

positive return. no. today of $10 billion in total. we talk about a total front of tarp repayment, we show the tarp the payment alone and then we account for it to show with the estimates are. >> so it is it that no? it is counted and then you have up but no? >> when you see the new numbers after the program that just closed on september 28th, we know how many banks came and you will see when we next show it, the full picture. you will see when we show it that the overall return of the american tax payers of these banks was overwhelmingly positive. >> thank you, senator vitter. i want to submit this for the record. you have a "that appears from "

the wall street journal" and i have a letter showing the opposite. the hearing is to get this in the record. does the gentleman want to go by his letter or his quote in the paper? , the record to-- i want the record to show the truth. it was designed by those of us that designed this program. it was not a program to help small banks lend or to help. this program was designed differently. while the numbers were not as high, it seems to work for the banks to step up and managed to use it. >> thank you for holding this hearing.

thank you for being here, mr. secretary. could you comment on what you think about occupy wall street? >> i have been asked this a lot, as many of you have. my general view, if you look? the challenges that the country faces today, very high unemployment, a huge increase in inequality, alarming rise in poverty, a deep sense of economic insecurity, a loss of confidence of faith in the public institutions, there is a huge amount of frustration and concern across the country about the challenges that we face which is why we're trying to work so hard with the congress to get more things in place to make the economy stronger to put in place protections about the financial system and heal the damage caused by this crisis and

by any measure we have a lot more work to do. >> i think a lot of people are frustrated that they think the big banks get access to capital in about 10 seconds and it has taken nearly 10 months for these small businesses to get access through community banks. i know in my state the banks that got access have proven that they have increased lending to small businesses. it was a success. people are frustrated still that main street cannot get access to capital. are you for reinstating a program like this to get more capital to small businesses through community banks? >> i am a big supporter of those programs and i have said that from the beginning. we have been designing more of them, trying to improve them, and i am willing to work with

you and your colleagues on new ways to do that going forward. >> and you would provide some level of transparency about why on whys were signed certain banks were denied access to capital and why they were not given reason? he would clean up the transparent to problem? >> on the question about why this takes so long, and want to address this. we designed a system, and i do not know with different way to do it, that requires the bank supervisors to make a judgment to was that there were a viable and eligible. it took them a long time to do it. one other thing. in the laws of the land, we have legal protections with criminal sanctions for the disclosure confidential supervisory information and we were prohibited in the long to share

reasons with banks about the niall, but i can tell you today we have worked out arrangements for the supervisors and banks are now getting concrete communications, approved by the regulators come on the reasons why they did not meet the standards of the law. the reason this took so long was because we were careful and we relied on the regulators to approve applications. the reasons why were unable to talk about the reason for denial was because of the criminal sanctions for sharing confidential information. we have a fix that now. >> i did not even know if you could capture the level of frustration that america deals with the fact that big banks did not have to jump through any of those hoops and get got access to capital. the small banks seeking to loan have been frustrated about not knowing answers are having their questions about programs out

there. a continual line of frustration and non-responsiveness. i want to clear up one last point. you stated the reasons for things the administration was looking at doing to try to change this economic equation and you talk about a demand for goods and services as your number one issue. do you think, mr. secretary, there are small businesses out there that have demand? >> the economy now is growing, as most economists think, around 2%. to% growth is not strong up to bring down the unemployment rate. some businesses are growing faster, some less. if you are a small business in retail, growth is still very weak for you, but those are the averages. they just are not strong enough. >> i would beg to differ on this point. there is demand out there by small businesses.

it may not be as a luminous as the resources given to the large banks, but these small businesses can create jobs. they just need access to capital. >> i agree with you. 100%. >> i would hope the administration, instead of just saying we need to create demand, would say we also need to give capital to main street where demand has been seen and get those businesses growing. 75% of the job operation in america. >> i 100% agree. >> thank you. senator paul. >> thank you, secretary geithner for coming. you said lowering marginal tax rates is good for economic growth and it could not agree more. under kennedy and reagan when we lowered tax rates, and we did significantly lower unemployment. it seems to be rising and the

current administration's policies. your statement saying that lowering rates would encourage income growth seems to conflict with the policy of your administration and the current majority party in the senate. for one, the president's budget would increase marginal tax rates. for two, the democratic jobs plan, or a variation thereof, would also increase marginal tax rates. i did not know if you have had a chance to read the republican jobs plan, but it would lower tax rates and simplify the code by getting rid of loopholes. i'm wondering if i can assume today that your testimony is in support of the republican jobs plan. >> sorry to disappoint you. on the broad strategy of the thinking about fundamental tax reform, we will disagree on fundamental pieces, but the general strategy of lowering rates by broadening the base, that is what will guide our basic strategy.

>> it you will go back and tell the president that i will meet with him about this, it is a part of the republican plan. lower the rates, broaden the base among get rid of loopholes. what do you think caused the housing bubble from 2001-2007? >> without being too technical, a long time of very low rates and a terrible erosion in underwriting standards. of those two things together caused a huge over investment in housing and americans were allowed to borrow a huge amount relative to their income on their housing value. >> who do you think in the country had more influence over anyone else over interest rates? can think of a body, maybe in new york something with bankers involved? federal reserve may be? maybe the new york fed it?

maybe the open market committee? >> i was vice-chairman of the fomc and president of the fed for five years in fall 2003. >> here's my point, and i hate to interrupt you, but interest rates, i see that as the price of money and they should fluctuate based on demand. if government controls the interest rate and you obscure the market forces, as an economy heats up, the price of money goes up and you get a dampening effect. if you do not do that, if interest rates are not allowed to rise, then the economy keeps going, but it is an illusion. it is a bubble and it bursts. that is that policy, but we are still in that today. we want no interest rate but we want to spur growth out of nothing. we want to create the illusion, but the illusion is gone. >> do you want long rates to be higher? >> i want the market to control

rates. the soviet union failed because they could not determine the price of bread. we are in a failure now is a country because we're trying to determine the price of money and we should not have individual central bankers determining the price of money because when they do they make mistakes because they are human and fallible. this is not an insult to you, but people think they are smart enough somehow to tell us what the price of money should be. >> on this basic question, the fed does not have the ability to affect all interest rates across the economy. i'm commenting on monetary policy now, but the effect on the short-term interest rate. they cannot control the loan rate, but some amount. they cannot do what you fear they are trying to do. >> so why you think interest rates were low? was it a market force that kept them low and it had nothing to

do with the fomc? >> i tried to comment on monetary policy to protect the independence of the fad, but i think most economists look back over the time and would say because in 2001-2002 we had a recession, rates were low, and as you know, you had a huge set of global forces causing a huge amount of investment to keep long-term rates down over that time. as i said, the reason why we had that boom in housing and elsewhere was because been a long time of low rates and a terrible erosion of underwriting standards from a complete breakdown of basic controls on risks and safeguards. those two things were very damaging. >> thank you for coming and i congratulate you for inadvertently supporting part of the republican jobs plan. >> i do not think there is much in there are support except tax reforms.

>> lowering marginal tax rates. we can agree to some of your plan, you can agree to some of ours, and we can move forward. >> have to be willing to raise some revenues because you cannot balance the budget unless you are willing to see some modest increase in revenues. we may disagree on who should bear that burden, but we think the wealthiest americans can afford that burden. >> lower loopholes and rates. >> senator hagan and then senator brown. >> thank you, madam chairman. i appreciate your holding this hearing. thank you for participating, secretary geithner. we are here to talk about the small business lending fund. in north carolina, eight banks have received over $155 million in the capital assistance for small businesses, so there is no

doubt that is helpful and positive, but i think the hopes for this program where much, much higher than that. while those banks that were approved to participate were obviously ultimately pleased with the program and started lending, more were also frustrated with the communications from the department. i heard from community banks to said that after they applied to the program that they did not hear back four weeks. i have also heard back from others that there was little explanation about why they were not approved. if you to comment on that. was there a standardized process for the department to respond to applicants about the small business lending fund application? was there any formal way to appeal or seek some kind of rebuke from the treasury's decision not to approve their application? i think the timing of it was obviously very, very late in the game or the process.

there has been an incredible amount of frustration. >> i share that frustration. why did it take so long to approve applications? it is to put in place to protect taxpayer resources a system where we rely on the primary supervisors and the committee of bank supervisors to make the judgment for us about whether banks were viable or not to benefit from this program. that took them some time, more than the estimated, more than we hoped. legislatee months to the bill. we did not get the first approval back for application to recommendations of approvals until really early june. the timeframe between when we started to get approval from regulators was actually very short. i would have loved to accelerate the process, but we are not in a position to design a program or we can make judgments about how to look at applications from hundreds of small community banks.

we have to rely on the supervisors. why did we not tell them why they were eligible? we have legal protections on the sharing of confidential and permission for lots of good reasons, to protect the system as a whole. we were not in the position as the treasury to tell banks why and it has taken us four weeks to work out a system whereby we could let them now and that is happening right now as we speak. we finally approved a way consistent with the law and protecting the system to let them understand why they did not meet the requirements of the program. i wish it could have been different, but we have been careful with taxpayer resources. we cannot force banks to apply for credit and we cannot lower the eligibility standards unless we risk putting an end level of risk to taxpayer money exposure to risk.

we wanted to look for ways to support these programs in the future. >> but the intermission could have been interpreted in a different way. >> that is not quite true. you apply. the treasury gives a application to the primary supervisor. the primary supervisor looks at application. >> and the primary supervisor is -- >> the federal reserve or the fdic. they provide an assessment of the application to a committee of supervisors. we wanted to have checks and balances so that they were being too tough or too soft that there would be a second glance. about allow for a pretty careful review. were they had confirmation from

their banks and they were able to reflect that in their process. i do not know where we could have appealed to someone besides me a judgment by the supervisor. i do not think he would want to be in a position where you would have to do with the judgment of an individual supervisor but a committee of their peers to make sure that they were not being too tough or too soft in evaluating the merits of an application. i agree with and share your frustration and if they apply to only one-third of the money and it took us this long to put these safeguards in, but once we started to get assessments, we moved very quickly. >> is there any opportunity 4 cents dollars billion was allocated to apply for more? >> that is in the hands of congress, not without changes to the law. >> the fact that it took so long, now the timing, the way it is now, it may be a catch-22.

>> banks had a long time, too long frankly in my view, to get exposure to this program and decided they wanted to apply. it is possible if you were to do this again, you may see a few more, but there was a huge national effort by members of the congress and administration to get the word out. it was not a secret that this was out there. >> i guess i was to meaning to the people who did not receive funding. >> abruptly half of the banks that applied did not meet the standards of the program. it is not fundamentally a surprise to them. i do not know whether more time of increased what had been

improved, because we cannot change the fundamentals of their eligibility. >> thank you. senator brown and dan senators szczecin -- shaheen, rubio. >> some of the misinformation usually does not start with cooperation going the right way, so i appreciate you correcting the record that it took weeks, not a year to push this through. we checked our files and i know there was guidance from the treasury saying 7000 banks coming forward 930 applied in only a fraction were approved. listening to the conversation, you asked why senator i vitter was concerned, basically because they could use additional money to refinance their tarp debt and very little of it went out to main street.

it was a slam dunk easily done. they got the money and then they were ok with the smaller banks ultimately the main street bar were was nothing, very little money out there. -- main street borrow more had nothing. >> it went out to more than 700 banks. but the worst by the mistaken in your numbers. it was designed to be "up to $30 billion." that was an abundance of caution. we cannot force them to apply. >> from what we have heard, there is a tremendous amount of red tape and not having any idea why. i know you address that the rally. >> if you were in my shoes, okay? if you would want to be very

careful that we're using the taxpayers' money carefully in this context. judging the health of a bank is complicated. we have to rely on the supervisors. you would have done the same. the fact that not all banks were eligible should be no surprise bid as our economy is still facing a very tough time coming out of the worst financial crisis since the great depression with 7000 community banks still under pressure. we will not meet eligibility. the reason why we have a smaller yield than expected and the reason why this took time was because we were careful to protect taxpayer resources. >> with all due respect, i do not think you can guess what i would do if i was in your shoes. as i travel around my stay in the country, contrary to what you said earlier, the number one thing that i find is the lack of regulatory certainty for every business. in massachusetts, there is a wet

blanket over their efforts to create jobs because in the last year we have had 488 regulations deemed significant buying did administration and costs by imposing the new rules. $88.90 -- 88.9 million hours of annual paperwork burden. these of the things i hear not only from banks as a result of the new legislation but individuals and businesses say the lack of certainty and stability not knowing what is next. the banks do not want to go in and take advantage because of the over-regulation. the people who are borrowing to not want to because of the strings attached. there is a complete disconnect between getting the money out the door in an effective and timely manner. >> cash offer two contrary

explanations. -- can i offered two explanations? if you look at the body of regulation proposed compared to the average in the bush administration, it is roughly in line. gunnoe material increase in the intensity of roles proposed in the bush administration, so it is unfair to suggest that there has been "dramatic sweeping changes" that could account for this. business is always complain about regulation. they want less of it, lower taxes. >> they just want to be streamlined and consolidated. >> they won less or more favorable ones. >> they want to know where they can walk in the door and get a sheet of paper dealing with the fda, epa, and they want to understand what the processes. i have time for one more question that has been bugging me and many other people. the 1099 3% withholding tax

issue. you have extended the deadline. clearly a cost more to implement than what we get back. why are you recommending this to him? just get rid of it so we can move on to something more important and not have that uncertainty, that lack of predictability. all these people say they will not hire because they need to pay a 3% withholding come january 1st. >> we would be willing to work with any of you on any idea to help strengthen the economy. happy to take any ideas. we have a substantial body before the senate today and there are a pretty par paulson of incentives for job creation. >> there are plenty of ideas. we all made them in the gang of six, some symbols, everyone has made them. -- gang of six, simpson-bowles.

to have you in the end ministration going around saying, "pass this bill. pass this bill." it will not pass, but in reality, we need to take the best of both bills whether there is the repatriation issue, which senator hagan talks about, whether you talk about the 3% issue with employer tax deduction, hire a hero, these are all things we all agree on. why cannot get them done? >> it cannot legislate without both sides. you need a bipartisan consensus and that is a challenge in such a divided country, but the proposals put before the senate on taxes, infrastructure, their proposals that have had an overwhelming bipartisan support in the past. that is not the answer to our problems and there are things we can do beyond that.

>> thank you, senator brown. i just want to remind this committee, and i know everyone is frustrated by regulatory reform, but we do not have oversight of regulatory reform. we will do our part. thank you to the secretary for his patience and thank you to senator brown for expressing his views. >> thank you, madam chair and thank you to you and ranking member snowe for holding the meeting and to secretary geithner for being here. like my colleagues on this committee, and you, have expressed this. i share the frustration for how long it has taken to get the small business lending fund up and running, the disappointment with the number of banks that have participated in new hampshire. having said that, i support the program. there is now $9 billion out there to lend to small businesses that was not there

before, so i do think it has helped the situation. i continue to hear from small businesses in new hampshire not so much that banks do not have money to lend, but more that they have been reluctant to take risks. when i talk to some of my friends in the banking community their response to their reluctant to take those risks because of what they hear from the regulators. i wonder if you could comment on that and the challenge that presents as we're trying to get this lending going? >> you are exactly right. if you talk to banks across the country, if we just talked about the small banks, when they still say is that they feel under tremendous pressure from their examiners to tighten lending standards more than they think is necessary.

if you look at lending standards, they are much looser than they were six, 12, 18, 24 months ago. they think examiners are being too tough on them, but you're right to say that they do say that. they say that more than the banks do that the concern is with the forthcoming reforms, because most of the reforms in dodd-frank mostly touch the big banks. the chairman of the fdic and others have been looking at ways to put out a series of guidance to examiners to try and tempered the risk of excess caution, but i suspect there's more to do. what always happens in the aftermath of a big credit boom is that standards were too loose and then they over correct the market. sometime supervisors can reinforce that and we want to work against it which is why these capital programs are so important.

is banks have capital, they will be more comfortable taking the risks that they can take. >> the other issue, and this is a little off topic, i know, but i think it is so we important to the underlying concerns that we all have, which is to get the economy moving again. we still have a housing market that is not functioning. the number one constituent concern i have had since i have been elected as been hearing from people in new hampshire facing foreclosure. the difficulty is not with the community banks but with the big banks that are still not willing in any real way to engage with homeowners on modifications and looking at how we can keep people in their homes. some people are able to do that for a variety of reasons, but there are a lot of people who

are. i find when we get involved with them that, very often, we can get some of those big bank's attention and they are willing to look at the mortgages and make modifications, but it should not take calling our congressmen or senators opposite to do that. i just wonder if the administration has any other efforts or initiatives that you would expect to take to help address this situation because we need to get some attention to this. >> it is still terrible out there. there is no other way to say this than that the major servicers, having built this business, are still doing an unacceptably bad job. if you look at the total number of modifications happening over the last 2.5 years, it is between three and 4 million, and that is a pretty reasonable number of people taking advantage of lower interest rates and are now in homes

again in these programs we support directly and indirectly, but there are millions more americans at risk of losing their home that, if given a chance, they would be able to keep their house for a period of time. we want to do as much as mccann to reach as many people as we can, but as you have been reading and the president said in a statement to the congress, we are in the process of working with the fha to put in place a program that will allow many more americans to refinance to take advantage of lower interest rates even if they have a very high loan to value ratio. our hope in the coming days is to lay out the details of a program to make that possible. that is one thing that would help, too. q. can lower your interest rate, you can lower your monthly payment, makes it likely your job is affordable, which is a good modification.

it would still indirectly reach three or 4 million americans. >> thank you. senator rubio. >> good morning. thank you for being here. all these issues we're talking about whether it is the lack of revenue, crisis, at the root of all of this is joblessness. is that right? >> and weak economic growth. do you do not have jobs without growth. >> ultimately people are not working. someone does not have a job, they cannot make a mortgage payment. i think most would agree that if you left this building and asked with the number one problem facing our country would be the lack of jobs, jobs not paying what they used to, the employment problems. >> for the 90% of americans to have a job, they fear they will lose their jobs. if you do not have a job, your main concern is being able to get a job soon enough. >> right. jobs.

the issue of jobs. i think you'd agree that it will be very difficult, quite frankly impossible, to turn around the joblessness issue. the 9.2% unemployment rate, without robust, significant, sustained private-sector growth. >> absolutely. >> of any plan, whether it is the one we're talking about today or the one parof the president is proposing, it all needs to be judged by what effect it will have on private- sector behavior and job creation. >> i agree, although there is a very good case as a complement to that for public investments with two basic facts. one is to help rebuild america's infrastructure to leverage private capital and the others to reduce some of the pressure on states and cities across the country to reduce first responders and teachers further. growth will overwhelm it come

from the private sector. >> even with infrastructure and all the designs to help the private sector create jobs and growth. >> but the president and senator reid's plan called for a surtax on millionaires to generate revenue. that would hit about 30% of small business income. >> let me say that differently. under the tax proposals we have suggested, it is true that we suggested to allow the marginal tax rates for the top 2 percent of americans which affects 3% of small businesses -- to revert back to the level that they were before the bush administration. in addition to that, we have proposed to raise the bird and further on the most fortunate americans, but i think if you look at the growth affects about, they're likely to be very, very small. what we are all trying to do is balance very difficult things.

we want to do more to help the economy now and are restoring fiscal responsibility. >> the marginal rates will go up to about 35.6% and then under the president's plan another 5.6% surtax which of the top marginal rate at 45.2%. >> at the very small portion of americans >. >> your testimony is that you think the top marginal rate up 45% when you add the marginal rate would have no impact on job creation? >> very, very, very little. if you look at the cbo's judgment, look at them as an independent arbiter committee will find a set of tax proposals would have a very small impact on growth. we have to look at the alternatives. if you leave the economy is

unsustainable fiscal issues or you cut spending further to support those low tax rates for upper-income americans, over time would be more damaging and less fair. >> what about the people who create jobs, for example the nfib. they call this a job killer. are they wrong? >> yes. we have difficult choices and we have to govern. >> the manufacturers say the same thing. they say this is a job killer. they are wrong as well? >> any business that faces a proposal from congress will oppose the proposal and say it will kill jobs. that is their job. >> "the last thing you want to do is raise taxes in the middle of the recession which will put businesses in a further whole. >> that is one reason why this

jobs tax is so important. q. do not act on these proposals and taxes will go up at the end of 2011. >> of the president stood behind the concept that raising taxes in a recession would hurt business. what has changed since he said that? >> a good question, but give me a chance to respond. the proposal before the congress today would lower taxes on all americans that have a job and virtually all businesses across the country. if you do not enact those proposals, the taxes will hop -- will be higher. this would only take effect at the end of 2012 and only apply to a tiny fraction of americans. we're open to other ways to make sure we paper the things that government has to do, but we will not be able to dig your way out of these deficits without thinking about tax changes to raise revenue over time.

>> the statement that the president made was in the context about not raising taxes on any one. we are not raising taxes, but what has changed? that is what he was bragging about. are we now doing so much better economically that we can afford tax increases? >> this is a very tough economy and i would differ not at all from how you characterize how tough this is. the difference is what we should do about it. the president has always proposed, and i fully support, that at the end of 2012 we allow what are pretty modest changes that apply to a small fraction of americans to go into effect. without that, you have asked me to go out and borrow $1 trillion to finance the tax breaks. >> said the surcharge will have no-impact.

>> no material impact. -- no negative impact. going toou're either confine assets to unstable deficits for a long time or you're going to ask us to cut spending to damage the economy. that is our judgment. >> i have been very liberal and have been giving latitude. this hearing is about small business lending programs. this is all important and i thank senator rubio, but as a supporter for the surcharge amount to get one thing right for the record. the members of the senate that support raising taxes on families or individuals making over $1 million is not the same as raising taxes on millionaires. those are people with $1 million worth of assets. many people have that much, but

their income is only $100,000. these are individuals and families that have an income of over $1 million. i just want to get that straight for the record. it is important not to confuse the two. many americans are millionaires. and many of them have made their own millions. contrary to believe, the have not inherited it. we have represented a lot of people who come up your hard work, have amassed over $1 million, but the proposal is to raise taxes on income over $1 million. the marginal rate at 45%, you could argue that, but it is a portion over the first $1 million. over $1 million they would pay a second rate. >> the millionaires' tax is not my terminology but the president's. >> he has a different view, but for those of us supporting the

tax, the one i am speaking about, is not a tax for millionaires but a tax on family income over $1 million. i just want that to be straight. >> may i add one thing madam senator? >> i have one more senator. >> i want to add one thing. >> can i offer another way to think about this? if you want to keep the tax rates low where they are today for the most fortunate 1 or 2% of americans, in either have to ask me to go out and borrow $1 trillion over 10 years to finance them, which i cannot do, or you have to figure out a way to find $1 trillion in savings from medicare, medicaid, to do this. unless you want to assume peace breaks out around the world, you have to make choices in this context. we do not relish the prospect of

letting this tax cuts expire. we do not like the choice we have to face by reducing tax expenditures for the top 2% of americans, but looking at choices to preserve the core functions of government, that is the trade-off which base. >> i am not arguing, but i do not want to support anything that will hurt job creation. this is not protecting anybody, but not doing anything that will hurt job creation. >> madam chairman, thank you. thank you for being here. on what to follow up on senator hagan's of line of questioning. she addressed what i wanted to address on the inability for bankers to another reason for the outcomes. mr. secretary, at least in visiting with our bankers, they were told by their primary regulators that they qualified, that the application would be supported, and the regulators then when the denial occurred, you were the one delivering the denial, not the regulator, and

they could not get an answer from the people who told them that they would be receiving these bonds. my understanding as of this morning is that the treasury department has notified those who were rejected to have an opportunity to sit down with a person, maybe at the treasury or a regulator, to explain the denial. the other complicating factors that the stage at which the denial occurred, so close to the end of the program, that there was no effective way to appeal even if he could have sat down and spoke to the regulator. at this point, it is just too late because of the statutory conclusion of the program. am i missing something? >> you're basically right. as of today, we are forming the communications approved and the reasons why banks were denied. we did not rely just on the judgment of the primary bank

supervisor. we provided the judgment of a committee of their peers. because they wanted to protect banks from the risk that individual supervisors were too tough or too soft, and the balance is not perfect. we were trying to be careful and i think we got the balance as broadly as good as we could have. >> i have a couple of other questions semi-related to the topic and i will try not to wander as far as some of my other colleagues have gone, but the president said something about the consumer financial protection bureau that caught my attention and was troublesome to me. in regards to the cfbb, of the bank of america would not have been able to raise the charges upon its customers as has been so prevalent in the news. is there something in the consumer protection financial vera that allows a regulator to make a determination in regards to the fees charged by a bank?

>> i would draw your attention carefully to the statements made about the basic issue and i will tell you what the church directions are. we want a system where there was a system for lebron and abuse and make sure they have a better understanding about what they pay for financial-services which requires much more transparency and simplicity in the basic fees. we are making some progress, but we have a ways to go. the basic approach is to get consumers better capacity to choose and to try to encourage banks to be more explicit from clear, and simple about the charges that a mortgage loan, credit card loans come automobile loan, checking account, etc. >> is the cfbb granted the authority to determine what a

reasonable fee is to charge? >> i do not believe so. that was not the intent of the law, but i would have asked my lawyers to tell you any more detail. >> in part from that statement bothered me because it seemed like a threat to banks. did not do what we wanted you to do, so we will get you on the regulatory side, and it bothers me that we are again creating another opportunity for a regulatory agency to be, in my view, price-fixing the relationship between a bank and its customer. the final topic of wanted to raise is that i have a worked in opening markets to keep above since 2000, food, medicine, agriculture, commodities, and the result in part of those efforts has been the passing of tesra. they have the ability to develop regulations and a generally we

have had some success in those markets. this is related to job creation in the sense that it goes back to the administration's support for trade agreements with south korea, panama, colombia. the more we export, the greater opportunity for job creation, i have always thought. i thought we had a silly policy with regards to cuba, particularly when it comes to food and medicine, agricultural commodities. we're the only one enforcing the sanctions and they will buy from someone else. we worked to get a lot change and we were successful. regulations were there to make those sales more difficult and there was an entrenchment of 20% fewer sales after that and i would highlight the sales for cash up front. we were successful in adding to the financial-services in the fiscal year 2012 amendment to allow for direct payment.

cash up front, but get rid of the letters of credit that the current treasury regulations require. the challenge now is, among other things, the politics always paul -- troubling, but they have objections including this amendment as written. all i am looking for you this morning, mr. secretary, is that we're working very closely to try to modify the language that is will -- that will be ultimately be satisfactory, and i ask for your continued commitment in working with me to find the correct terminology that they will not include any opposition. >> i am happy to be the commitment to work with you on that. >> thank you, madam chairman. >> thank you, madam chair, and thank you secretary geithner for your work. we are all frustrated that the

$30 billion program did not generate more interest. i think senator levin's point about the republican delay is very much on point. there was a significant delay in considering legislation. we should have moved in a faster manner. we have anticipated a much larger interest in reality and there was not the interest we thought. i agree with senator snowe that the need is out there and it is trying to generate jobs. we need to anticipate the realities of the banking system in this country. it is interesting that we put out a lot less money for the state programs. i can speak for maryland, but not the rest of the country, but those funds were put out quicker and leveraged very well and have produced concrete

results in our state, and i am sure other states around the nation. i am pleased that we included that in the administration supported those funds being used for state programs. we can be proud about the manner in which they were used and i applaud governor o'malley for the ways in which maryland stepped up. there was another suggestion made by me and other members that did not receive the same enthusiasm from the administration which was direct loans. rather than going to the banks, let's try a direct program. we pointed out that in emergency circumstances there has been capacity by the government to make direct loans. there is a concern about whether you could gear up for that and make the proper evaluations. i mention that because the results on the $30 billion program less than we anticipated. should we be reconsidering the use of direct loans for a way in which to generate the type of

activity that we want recognizing full well the evaluations of loan guarantees gives you the same risk factors as if we made a direct loans? >> we have talked about this in private, and i think he knows my views on this. i would be very concerned about the capacity of the federal government to design a national program for direct lending, both because of the time it would take and because the risks that government officials are not the best people to make judgments about credit. i understand the merits of going around banks in this context, and i think there are special cases where it would make sense to do that. i would be happy to talk to you in more detail about this, but based on the experience across other countries i think there is

a risk that, in those programs, you would get less of good results and it would be much harder to get the balance of care for the taxpayer aligned with the amount of risky what the government to take in a crisis. >> i expected that reply and it does not surprise me. let me just urge us to perhaps rethink this based on the experience that we had in the bank participation program, based upon the fact that we currently evaluate loan rest because the government is guaranteeing effectively the entire loan. third, the competition factor of having this source available might intrigue and the banks to get more aggressively involved in the basic program itself. i would just urge us to perhaps to rethink this, because it may help us do exactly what senator

snow and landrieu wants done. >> i am always happy to take another look at these things. >> thank you for your leadership on this issue. the final question will go to senator snowe and then i would do a quick wrap up. >> thank you, a l chairandriue -- thank you, chair landrieu. we have ranged on a number of issues including the jobs act because all this is small business, bottom line. taxes, regulations, and all entries into the fray in terms of how we will reconcile major impediments to job creation. this is what it is really all about in being precise. we have to focus like a laser, but we now have to get it right.

we are 24 months into a recovery. we have spent $800 billion in a stimulus, $700 billion in tarp, quantitative easing, so we have had the maximum when you consider all the stimulus and monetary policy initiatives. when you think about the calculations that i have read, 40 months from the start of the recession, and generally you get average 7.6% to indicate on four of the greatest recessions since world war ii. we are at 0.1%. so the trial and error period has to be over now. we are in a new norm that we cannot cut -- that we cannot

accept. 9% unemployment. it is not working. people are hurting. we are hearing the same things over and over again. i wish we could tackle tax reform and regulatory reform. i do not know how you measured its success given the limited amount of money. how do we know? do we know how many jobs have been created with this program? he mentioned the president's jobs act was going to create 1.9 million. >> that is the average high range of views by independent economists. what we try to do it is it give congress a range of independent estimates. can i respond to your central point? the economy is much weaker than any of us would like. it is slower today than it was

in the early quarters of the recovery for the following reasons, and it is important to understand the reasons. oil hit a very damaging shock to oil prices. we hit a disaster in japan, we have a crisis in europe which is having a huge impact on growth globally, and we have an economy still reeling from a long period that we took on too much debt. we built too many homes. there was too much risk-taking in the financial sector. those factors give us a weaker economy that grows more slowly than any of us would like. what can we do about it? apart from tax reform which i share your views -- we should not be living with a tax system with this much uncertainty. for regulatory reform, we are going to disagree, but we completely agree that there are

areas where we could get regulatory burden lighter. apart from that, what can you support? those things alone -- tax reform and even where we can agree, regulatory reform -- they are not going to get the economy growing fast enough given the pressures we are facing global 8 bang bang that is why we are focused on long-term infrastructure investments to help rebuild the economy and why we are focused -- i agree that they are temporary. going ahead through the end of this year, and for an additional 15 months or so, the average american has a lower tax burden than they have to. without congress acting on that front, and the economy will be weaker. i agree with you about tax reform and that there are things which can do on the regulatory burden, but that is not going to be enough to help the economy.

>> the president is calling for a comprehensive tax reform as you are reiterating at the same time calling for tax increases. he has eight in a package with temporary incentives for business for one year, and then you have tax increases that will affect small businesses. why can we do tax -- why can we not do tax reform right now? right now, -- >> because if we do not, the economy will be weaker. >> you just said that on the stimulus. we need to bridge the private sector. we need predictability and certain the. one year is not going to create this certainty. you need a larger picture now. i am talking to everybody, a lot of people that you talk to. i talked to a range in the

private sector. we need to be growing the private sector. they are not going to take those risks. the chamber of commerce is not getting better. they are asking their members -- if they are going to add more employees next year. 17% said they would. it is going in the right direction. you could make a fundamental change if we work together as a team on the key issues. if everyone is talking about it, i do not think we should shift the conversation. >> i think we have a chance at -- >> that is what counts. you have to work with them because they are the ones that we depend on. let's do it now. i have been arguing regulatory reform since march. kept saying it was going to get on the floor. it is now october? we have not done anything.

>> senator, i agree with you on a comprehensive tax reform. let's think about the following think. if you do not do anything now in the next three months, then taxes for everyone with a job in this country go up substantially and for every business. the reason why you need to extend a temporary tax measures because if you do not, the economy will be weaker. i agree with you that there are some fundamental long-term things that we need to get right. we are happy to move as quickly as possible. >> why cannot we do it in tandem with other committees? >> of course we will do that. >> let's have conversations and get this done. >> we have to get the near term stuff done, too. >> madam chairman and senator snowe, thank you for holding

this hearing, and secretary, thank you for being here. i just have a few questions. thank you for hanging around and taking my questions here. first, i have a letter from liberty bank shares from arkansas. i wanted to share this with the committee. the liberty bank of arkansas as a goal to provide for the needs of small and medium-sized businesses. the small business lending fund allows us to have additional capital to better serve the needs of small and medium-sized businesses in our community. liberty bank continues to serve the needs of small businesses. we are experiencing an increase in the volume of loans to small businesses. we are hopeful to continue to seek increases in teacher months. he says, "we complement the u.s. treasury on the handling of the consummation process of sblf.

for our organization, the process was completed with minimal difficulties, which we view it as quite an achievement given that the sblf program was new." some people are happy with some of what you are doing at least. that me ask you a few small business questions if i may. this is called the small business saving account. i am not sure if you are familiar with 8 bang bang what is it allows people to do who are dreaming -- familiar with it. what it allows people to do is set aside tax-free and that numbers cost about $80,000 or so to start a new business. to me, it seems that that is a good approach because people are using their own money. they will probably go to a local

lender if they can help them, and do 8 bang bang do you have any comments on that legislation -- and do it. do you have any comments on that legislation? >> again, i think there is a very good case given the fact that we need stronger growth now to look at a mix of both temporary and permanent things that we can do in this context. we are open to ideas. >> the second thing you are probably talking about is the american opportunity act which is a 25% tax credit for angel investors. that can get us over the hump. i would love to continue to work with you on. i just read this letter from liberty bank or part of its from liberty bancshares in arkansas, a great and into institution that is doing well even though it is been a very difficult

time. they still continue to be strong. when i talk to banks in arkansas sometimes, what they say is sometimes there is a lack of demand for small-business loans. one i talked to small businesses, what they say is the banks are not lending to them. when i talk to both of them sometimes they say that the regulators have made it more difficult on borrowers and lenders. could you help the committee through that and tell us from your standpoint how that is really working and what we can do to get this part of of our economy out of neutral? >> lending demand fell a lot in the recession, and it is still slow to recover because economic growth is relatively slow and because many people borrowed too much. by any measure, overall demand up. been slow to pick

if you look at the broad measures of credit availability, they are dramatically being improved since the crisis. the cost of credit is much lower and lending terms have come back down to more normal miss. but still, small businesses have gettingen hard time access to credit because against the debt now -- because of the value of their assets. it is harder for them in that context. if your bank was under a lot of pressure, the bank may have cut your credit off and you might find it harder to find a new bank. as i said earlier, there is obviously some risk that examiners are being pretty tough and maybe for some banks in some parts of the country, some businesses, being very conservative in a way that adds to those pressures. i think the best thing we can do

to mitigate that is to make sure banks that are reasonably strong in financial shape have access to capital to make it more likely that they can lend. there is a whole range of things that we can continue to do and work with you on. >> one last thing, and this is from homeland security. this fema issuse. one of the cases has been turned over to the irs. and so, we called someone at treasury last week to have a meeting on this with you, and we have not heard back. if you could talk to the right person and make sure we get a meeting this week if possible with the right person there we would love to do that this week. thank you. >> thank you, mr. secretary. you have been very patient, but you are also a very popular witness. >> i do not think "popular" was

the right word you were thinking of. >> i really want to thank the members, both republican and democrat, for coming and participating this morning. in addition to the testimony that you submitted, i would really like for you and your staff as we consider what the next step might be on the sblf to tell us the five, six, or seven, or three recommendations for improvement if we were to go to sblf too, etc. i have a few suggestions myself. secondly, i want to underscore the point made about banks reassessing collateral against small business loans because if we do not come up with a way to address that, and i do not have all the answers, we may go through another round of devaluation and a very softening of lending.

you know the extent of that. many of those loans are coming due. we are going to submit some ideas. the positive thing i will say is given that we have discussed tax reform relief, regulatory reform, and the price of bread, we now have all the arguments we need to ask for more money for our committee and the staff to cover all of these issues. god bless you all. thank you so much. thank you, mr. secretary. [captioning performed by national captioning institute] [captions copyright national cable satellite corp. 2011]

>> live coverage of tim geithner testifying about jobs and small business this afternoon. if you missed any of his remarks, you can see it all at the c-span radio library. also, the senate is in session -- the c-span video library. you can see that debate live right now on c-span2. coming up tomorrow, we will hear from another cabinet secretary. we will hear testimony from home and security secretary janet napolitano on a number of issues.

live coverage of that starts at 10:00 a.m. eastern right here on c-span tomorrow. and we have more live coverage coming up here on c-span. federal reserve chairman ben bernanke will speak in boston and is expected to talk about the great recession and how it is changed policy at the central bank at about an hour from now at 1:15 p.m. eastern here on c- span. coming up shortly on c-span3, the administration's opposition to part of the defense authorization bill dealing with the detention of terrorist suspects. you can see that live at 12:30 p.m. eastern on c-span3. as we mentioned, we will have ben bernanke a live at about 1:15 p.m. eastern. until that gets underway, a

look at the occupy wall street protests happening in the u.s. and worldwide. guest: this is one thing that left wing of service had said as well. there is no unifying theme. these people are just ticked off, some for legitimate reasons. one of the most emblematic examples was a guy that had a sign up that said, "i hate

stuff, too." what do you mean? well, trying to come up with something that unifies everyone's position. the only thing i could come op hate stuff "i too." guest: i think that he is a wonderful man. i think that is an incredibly

high pile of nonsense to use a friendly word. almost every single thing in there is based on false premises. about what caused the financial crisis, about obama's role in supporting the bailouts. if you go back and check the tape, barack obama kept on tim geithner, got more money from wall street than any other politician in the last 20 years. moreover, while there was definitely bad actors on wall street, this narrative that it was all driven by wall street greed and all of the rest really does not track very well with the actual history. the main reason was that starting in the early 1990's, of the government encouraged the

getting of bad mortgages to good people over time lending policy by government became more and more of a social program, so vast amounts of bad paper were being held by fannie mae and freddie mac and other institutions which created a bubble in the housing market, a bubble in that paper that shifted into wall street. people like barney frank and chris dodd are far more to blame than ceo's on wall street. he said the simple demand for economic justice. these are one of these trojan horse phrases. it is a word that actually has -- that sound reasonable but is in fact incredibly radical and difficult to define. they are not out there demanding a simple idea, that economic justice is something you can demand from washington and it

will deliver. it is the kind of thing that carries with it a lot of radical left-wing, marxist, socialist ideas with it. if you say economic justice, it sounds like they are all being reasonable when in fact they are not being reasonable. >> he goes on to write about the politics and popularity of the movement, saying -- guest: again, this is a lot of

contentiousness. are you really mad at wall street? i am really mad at wall street. i should say that i think he raises an interesting point. the occupy wall street has gotten such favorable treatment compared to the tea party. the occupy wall street thing has saint ore-boa dashboard reasonableness. the reality of these people on the ground -- i think eric cantor and a lot of other politicians are wise to say there are legitimate concerns of there. the 99% who run through all of their grievances -- some of them are legitimate, honest to

goodness hardworking people who have been caught in a really bad a economy. is perfectly legitimate to say we are with you for being upset by how bad the economy is. on the other hand, the reality of what the occupy wall street people are actually saying is very different. the problem with comparing the occupy wall street guys and the tea party guys is a fairly simple one. of the tea party people -- of the tea party people -- the tea party people compared to occupy wall street is tea party was against bailouts first. they were against those they left because they were the taxpayers of funding them. the occupy wall street guys are

not the ones funding them. host: did the tea party movement start out organized? guest: no, it did not. this did not start out organized eve there. i think part of the problem is -- and in many ways the tea party is still not organized. i have not known a lot of leaders of the tea party. but to say that one starts out organized and the other does not does not mean the same thing. host: here is the cover. taking a look at the occupy wall street movement. and that is the cover. inside, "the dreamy anarchist." you write -- what did you mean there?

guest: there is a pretty good piece in today's wall street journal making this point. the democratic party, contrary to all this nostalgia that we get in movies, was terribly hurt by the 1960's and the radicalism. for nearly two decades, they had to keep swearing that they were not as radical as the students for democratic society or the black panthers or any of those kinds of groups. we have seen this narrative and extended. bill clinton had this problem. john kerry had to disavow the anti-poor groups he was associated with. -- anti-war groups he was associated with. hese occupyv have t wall street guys that are out

there that are decidedly serious, left-wing types. all you have to do is patrol around you to for a half hours looking for their videos. -- all you have to do is troll around youtube for a half hour looking for their videos. the second day appear because of liberal tea party n.v. and their general and nostalgia for the 1960's, they are falling all over themselves trying to endorse this movement. it is all great because it is free expression and all the rest. it is going to get them into trouble. my prediction is the whole thing will fizzle out. host: let me show our viewers what president obama has said

when he was asked about the occupy wall street movement, if it had the potential to be a tea party movement in 2012. >> what i think is that the american people understand that not everybody's been following the rules, that wall street is an example of that, that folks who are working hard every single day who are loyal to their companies, they used to be the essence of the american dream. that is how you got a head, the old fashioned way bank these days, a lot of folks who are not doing the right thing are getting rewarded. that is going to express itself politically in 2012 and beyond until people feel like we are getting back to some old- fashioned american values in which if you are a banker, you

are making your money by making prudent loans to businesses and individuals to build plants and equipment and hire workers that are creating goods and products that are building the economy and benefiting everybody. host: how would you characterize those comments? guest: i think they are wise politically and trying to cast themselves as a mainstream guy who shares the same frustrations. i think there is a lot of truth to how he characterized as i it. we saw him at the martin luther king ceremony gettinembracing i. there is some irony here. barack obama also said after the scott brown victory, after some

tea party victories, he said the same people who supported me in 2008 are the same people who are forming the tea party now. host: let's get to phone calls. you are on the air. co-head. guest: i really enjoy your book but i have to disagree with you saying that wall street is going to fizzle out. i truly believe in the power of the internet, that people of occupy wall street are going to form together. guest: this is a long-sought dream of a certain branch of libertarianism, that they will be able to perfectly thread the needle between left and right and joined the both sides in an anti-government movement and all

the rest. personally, i would love it if the last could get co op by libertarians --. i do not see that happening. i do think there is some interesting crossover. but the problem is while their support is growing, it is going to eventually hit in this incredibly high dogmatic wall. the ron paul people do not want a lot from the government. the core of the occupy wall street people is they want the government to do as much as conceivably possible. host: new york, matt, a democrat, you are next. caller: thank you for c-span.

your guest's dishonesty is quite unbelievable. he looks like a nice, young fellow, but i think your intellectual capacity could be better used to discuss the the wall street occupiers more honestly. i know you will have a fancy rebuttal to this, but even alan greenspan admits now that the banks and wall street can not self-regulate. for you to start putting in language like marxist, those people down on wall street are not about that. for you to be on television like this to just throw and cast out these kinds of statements to characterize these people is really, you know -- wall street, the banks, they write their own legislation, they hire the

lobbyists, they give it to the politicians. the legislation to dere gulate the banks. and you have the wall street banks basically writing their own ticket, writing their own legislation. host: have you taken part in these protests? color coat not yet. i work part-time. i am stuck as a result of a down economy. it is not just about jobs. there is something larger going on in the political system, and i wish that both sides would approach this matter and look at the problems that go on systematically more honestly, the legislation, the lobbyists, the deregulation into account.

if we deal with the subject matter more honestly -- and of course, a campaign contribution. host: we got your point. guest: if you hear something that you disagree with, you should probably not start with the assumption that the person secretly agrees with you. i have no problem with you thinking that i am wrong, but i find the arrogance of people who automatically assumed that if they hear something that they disagree with, it must be because the other guy is aligning. that is what you keep coming back to. that is your hang up. he makes a perfectly fine points. i think that the lobbying, government and wall street, it is outrageous. what do you think bailouts are?

why do you think the fact that obama got more money from wall street than any candidate in the last 20 years? where do you think that comes from? it offends me with that kind of collusion with republicans as well. people look at the amount of money that go into washington, lobbying, the campaign donations and all the rest, and they say what we have to have is more government regulation, more government oversight, more government control, more involvement, and then they are shocked when these businesses give money to washington. the way you solve these problems is by creating a high wall of separation between business and government. what you cannot do is simply say -- have businesses give money to politicians. you have to say that politicians need to get out of the business

of running business, and until that happens -- if a corporation has its bottom line dependent entirely upon what washington does rather than the market or what the consumer wants, then its business model is going to change to dealing with washington rather than the consumer. it is the essence of mainstream liberal politics. although i do think the caller is completely wrong when that stuff is going on down there. you should listen to what people are actually saying and what speakers are saying. you can swing a dead cat without hitting someone who advocates socialism or marxism. regardless, when you need to do is get the government out of the business of business. until you do that, it is inevitable that businesses are going to get involved with the

government. host: we did have one group involved with the protesters on our show this past saturday. if you go to c-span.org, you can go and listen to that video. eric is an independent. go ahead. caller: good morning. i appreciate what the last caller had to say. the gentleman who you have on now can of is the speak a lot of double talk. there maybe some things that can be learned from all different types of government. we do need a national health- care policy. we do need affordable health care. i find it difficult to deal with the fact that out here we have electronic companies whose ceo's fail in four months and walk away with millions of dollars. that is 200 times the $70 an

hour wage in less than a few months. you see the ceo of mobil oil make $400 million the year that oil hit $100 a barrel. that is a tipping point for the economic collapse in 2008 -- host: what are you calling for? caller: i am calling to say that this is what these people are talking about. host: so, economic justice. caller: if it is out of whack. guest: i think it is perfectly legitimate to say is out of whack. the culture of the ceo's pay not based on performance is nonsense. i think we went off track which was caused by government regulation when we switched from giving ceo's salaries to the stock option plans which then

blew up their compensation even more. i think those are all legitimate reasons. i am not a huge fan of the ceo culture in this company. because i do not like something does not mean i think government meddling will fix it rather than make it works. the high oil prices, -- it is amazing. every few years, oil prices get very high. we have conservatives and free- market types who are saying let's find more oil and get more supply, and liberals and the rest say we cannot do that because it would be 10 years before any of this will become available. 10 years later, we are having the same argument. host: harry is a republican in pittsburgh, pa.. guest: mr. goldberg, i watch you and loud.

-- a lot. what if we propose a 1040 holding tax. pay 40%. warren buffett would owe approximately $32 billion -- $32 million. holly would have [unintelligible] russell simmons, about $40 million. host: let's get his take. guest: i would have to look more at the actual proposal. i do not go into discussions of tax reform, figuring out how we can slice off greater portions of millionaires and billionaires. this whole idea that if only millionaires and billionaires paid their fair share and all the rest does not hold a lot of

water with me to begin with. i am not in the business of -- warren buffett annoys me these days, but i am not looking to punish him. host: this tweet coming in -- guest: i think they are justifiably angry. what do you want to do with your anger? if you are angry, you can kick a kitten or you can dig a well. it depends on what you want to do with your and there. to the extent that the occupy wall street guys are these young and rugged individualists building their own water reclamation systems and biodegradable and whatever else, more power to them. it is when they start demanding sweeping government intrusions into the free market and all the

rest or when they start of violating private property or exporting violence and all the rest is where i draw a line. host: what do you make of this headline? guest: i think it gets to what i was talking about. a lot of people understand -- i think this is true of the occupy wall street guys. you cannot talk about wall street mistakes without talking about government. you cannot talk about the government without talking about what has been going on at the private sector. host: a democratic caller from tampa, fla., arthur, good morning. what is your question or comment? caller: i respect that

gentlemen's viewpoints and everything, but he is not talking about what the movement should be about. they need to take the money out of politics in general. ok? washington is basically corrupt. --puts these people in office, and they get the lobbyists and special interest groups to approve their agenda. we had the economic collapse. a lot of people lost their jobs, 401k's, their homes, and now republicans and democrats want to say well we need to cut spending. do not cut it at a person's expends that is on disability deck gets less than a thousand dollars or just over $1,000 a month with huge dramatic medical problems.

go to the people that got these bailouts that have trillions sitting in the banks offshore in the cayman islands -- host: all right, arthur. guest: i feel for the caller. he has a reason to be mad. this idea about money and politics -- the money gets into the politics because there is profit in it, or people want to support politicians that support their views and the rest. the idea that there are villains behind the scenes is one of the great mental pickups and a lot .f these debates been bee you hear this all the time. talk about what the occupy wall street movement is really about. if you ask 10 people what it is

about, you will get 11 different answers. if i've repeated them on air, people would be saying i am slandering the occupy wall street movement. a third of the people at the protest in doors of violence or something like that. -- endore of violence or something like that. overwhelmingly, they are the typical left wingers who have found a really interesting marketing tool. when i say that, it annoys a lot of people who are sympathetic with the movement. i understand that, but they are projecting upon the movement something that the people in the park who are actually a occupying wall street do not just believe in. they want to make it into this mainstream thing by projecting their hopes and dreams upon 8. host: you also write in the

october 31 article on this movement -- guest: good, serious, honest p eople, they have been looking at the tea party success, a vast movement, decentralized movement. the koch brothers came in. they have been watching all of that and moping like a big dog whose sued dole has been moved and are outrageous that there are protests not coming from the last. obama and the democrats have been hurt to some extent by the

quiet of the hard left in this country. they basically supported obama rather than complaining and whining about how liberal president are not liberal enough. one of the benefits you get from that is when your extreme fringe it makesellos at s at you, you look morae extreme. host: here is an e-mail from a viewer. have you been down to talk to the occupy wall street protesters? i am curious if you have gone to the source. guest: i have been to the one in washington. i have five or so colleagues that have spent days and days down there. i just do not watch the ones put out on tv and by the national

review also they are entertaining. i have also watched the ones put out by the left wing channels on youtube as well. i would also like to see a kangaroo, and i am pretty sure they exist in australia even though i have not been there to see them myself. caller: good afternoon. i am going to confirm what you are saying. i go to school in brooklyn. i decided to stop by the wall street protests in that little park. i saw thousands of thousands of people with healthy attitudes. i saw maybe 40 to 60 people who were absolutely disheveled, nobody that i would be associated with, camped out.

i cannot prove it but i suspect that this movement is being pretty much funded by left-wing outlets in their being supplied water and tents. it would've gone away three weeks ago if it was not supported. i also like to agree with what you are saying is that the irony is all of these peace movements -- these people are not coming to grips with the fact that the government caused a lot of these issues. if you go on youtube and look at the videos about how the republicans are trying to investigate fannie mae and all of these people are saying everything's fine, the housing allet's fine, -- people have to do is go on youtube and look at the debates. they all right there.

that is what the banks did. host: all right. guest: i basically agree with the collar. if viewers want to read a pretty concise breakdown of the narrative, peter wallace about four or five days ago had a fantastic piece in the wall street journal. host: john r. goldberg is a visiting fellow at the american enterprise institute -- jonah gold bird is a visiting fellow at the american enterprise institute. john, you are on the air. caller: why is it that mr. goldberg gets all of this play on c-span? who does he know? he does not have the experience

to state his opinions about nothing. he was a kid who was born with a silver spoon in his mouth. host: how do you know that? caller: because of his name. guest: [laughter] caller: when you are talking about getting corporate money out of politics, you are talking about public campaign financing. there is no solution making sure that all people have skin in the game. host: let's take that point. public financing. guest: i am against it, not because i am outraged by some of the things that would necessitate. i do not think it would work. it is worth pointing out that it simply would not work. the reason why corporations get involved in politics is because washington all ranges the

economy in such a way that is in their interest to get involved in politics. wal-mart had no lobbyists in washington until politicians started going after wal-mart. now, those guys, it's lik;e the green zone of lobbying in washington. it is because of the fact that washington got involved in their bottom line. a fantastic book that explains this is "the big rip-off." the problem with campaign finance, even though it would have impacts on free speech issues and all the rest, that at the end of the day, people whose of vital economic interests, never mind their vital principles and all the rest, are going to find a way to express

themselves and politics. the more you try to get that out of politics, the more clever they will get. all of these weird groups that we have right now and all the rest, these are all the result of honest and decent people who, for a mixture of reasons, felt a burning desire to express their point of view in politics. that is going to happen the more government gets involved in people's lives. period. all of the rest. people are going to get -- the more government gets involved, the more involved people are going to be in government. host: a republican in new york. caller: he want to get the government out of business, saying there is too much regulation, but do you know something? businesses would not need regulation. sometimes it takes a disaster in

order to bring new regulations. nothing happened in 2009 when the banks burst and left a disaster across the united states, and people lost their jobs and amounts of money. what we need is more regulation. it took the [unintelligible] to bring about regulation of businesses in industry and bring about labor laws that protected women from the kind of abuses they were suffering. host: i am going to add to your comments from a tweet that says -- guest: this gets asserted a lot. i am not a radical anarchist libertarian kind of guy. i am all in favor of all of the

rest. that is all well and good. but there is a certain logical problem. some government regulation is good and beneficial so all government regulation is good and beneficial -- that does not work. in 2009, the obama administration and democrats run in washington overseeing -- it does not like they turned around the bailout. moreover, we got laws like sardine oxley. host: you mean dodd-frank? guest: dodd-frank, sorry. all of these people are protesting problems and that barack obama and nancy pelosi and harry reid claimed to have solved a year and a half ago, that they claimed to have responded to. i am in favor of mor smart regulation.

it is a solution to the things that they are a solution to. host: washington, new york. good morning. caller: i would like to really argue with the gentleman that this movement has nothing to do with the left wing movement. for me, it looks like the 1960's movement. it is very hard to call them this very peaceful crowd a left- wing group. that is completely wrong. guest: i am sorry you feel that way. i think if you go and look and listen to the people that speak at this movement, of the communist party speaking at the chicago one, the people of the oakland one, you look at what they actually say and the free library that they have down

there and the literature that they are handing out, and the vast majority of the literature they are handing out is all hard-core left wing stuff. you might say that the 51% americans that are -- to any stretch of the imagination, i do think they have legitimate reasons and gripes. part of the problem is you have this incredible double standard in the media, where the media went nuts looking for a handful of racists and crazies at teap party rallies. and no;w the media is going nuts not covering the crazies at the occupy wall street movement. people are willing to project upon it but in certain facts

that are not relevant. host: good morning, darren, pittsburgh. you are on. caller: i want to agree, that the idea should be getting the government away from regulating business. i think it is silly to expect -- i think is appropriate for people to place the blame with the government and not corporations and wall street and different firms in society. i think most of the problems can be traced back to the government. guest: thank you. it is a very interesting mix of callers. it is a nice change of pace. host: we will get one last call for you. caller: i have a lot to say. one of the first things i want to say is my son was one of the

ones that got arrested in boston. i am a republican, and i was an original member of the ron paul revolution that started the tea party in 2007. i find it so ironic that the hypocrisy is not being shown because it is the george soros, the mdia matters, being co-opted by at leats a third down there. the racism -- the black woman calling about the anti-semitic stuff. i agree that corruption and the greed has taken over. that is what the whole thing has come down to. the honest people that are down there -- they want to get the corruption and the corporatism out of politics.

guest: i agree with the caller. again, i will try to be a uniter. i think there is legitimate anchor on all sides of the spectrum, but it is what you want to do with the anger. the solutions that are being proposed -- oen sign says "we demand bold swee -- demand unspecified sweeping change right now." specify the sweeping change because otherwise it is not that productive. host: thank you for talking to