ask their colleagues to do it, too. it quite that they're going to demand romney and obama do it, we reporters have to keep asking the question -- why not you? i think it's worth asking the question. it is developing in fairness to him. no one has asked that question as consistently as david. >> we are glad you can be here to ask that question. thank you for being our guests. >> thank you. >> he can what newsmakers with sander levin later today at 6:00 p.m. eastern here on c-span. >> it was clear that when that eighth amendment was ratified the death penalty was not

considered to be prohibited. the death penalty existed in all the states and was the only penalty for a felony. for somebody today to say that the american people have prohibited the states by ratifying the constitution, i do not know where this comes from. the american people never voted for any such thing. >> justice antonin scalia on his latest "reading law." >> timothy geithner was on capitol hill twice last week to talk on an interest-rate manipulation. he also talks about the u.s. economy. this was his first hearing before the house financial-

services committee. it is to 0.5 hours. -- is 2.5 hours. >> the hearing will come to order. the committee is honored to welcome secretary geithner to deliver the annual report of financial stability oversight council. as previously noted, under committee rule 3f2, statements are limited to 8 minutes on each side of the aisle. all members written statements will be made as part of the record. the chair now recognizes mr.

fitzpatrick for one minute for an opening statement. >> thank you, mr. chairman. and thank you secretary geithner for taking the time to be with us this morning. we are interested in avoiding the next financial crisis and i think we can all agree the best place to start is by doing this. the committee has examined the effect of dodd frank. it is the opinion of many that the law favors big banks and hurts small banks which in turn hurts small business. the more immediate issue remains lack of growth in the economy. and increasing marginal tax rates reduce economic growth by creating a strong disincentive to hard work, savings, and investing.

increasing taxes will do more harm to our economy. i hope the fsoc will adjust the pro-growth policies americans are waiting for, lower budget deficits, smarter regulatory policy and tax code simplification that lowers rates. we look forward to your testimony. >> thank you. the chair recognizes mr. duffy for one minute. >> thank you, mr. chairman for yielding. secretary geithner, i know you are here to talk about the stability of the nation's financial system. as i travel around the northwest corner of wisconsin, my constituents feel like the system is far from stable. they are concerned about the economy. i would like to hear today your commentary on the libor scandal, the american debt crisis, the american jobs crisis, the american economic growth crisis, the codification of too big to fail and dodd frank.

i want to hear your views on why you think this has been along best and latest recovery since world war ii and what we can do to turn this ship around. i yield back. >> thank you, mr. chairman and thank you, mr. secretary, for appearing before us. your work and comments about the fsoc are so important. i share the concern of mr. fitzpatrick regarding having a robust economy in the face of the new regulations being imposed as a result of dodd frank. the office of financial research and fsoc are working together to formulate the designation non- bank financial companies. i have a letter i would ask

unanimous consent to be introduced into the record regarding concerns in terms of the coordination between fsoc and the ofr. and the entities themselves so that we do not create a disruptive enterprise compromising situation through promulgation rules that may not be practically applied in the real world. you have advocated for global cooperation in terms of extraterritoriality which i think is very important and one i hope you will share with the -- with us. i do look forward to your testimony regarding how we go forward in a way that will be least disruptive. >> thank you. >> i would like to welcome secretary geithner and thank you for your extraordinary public service. this may be the last time that you testify before the

financial-services committee and i really want to make sure that my appreciation and the appreciation of many americans are expressed to you for steering us through the worst financial crisis in our lifetime. certainly in my lifetime. i would like to hear today about what it costs this country. last summer when we went up against the debt ceiling and the crisis that ensued because congress could not make a decision, the hundreds of billions of dollars, but it meant to american families. i would like to know what happened financially if we come up to that cliff again this summer. what is it going to mean for american families?

how much did it cost america during that crisis? i also want to know the statement made earlier today by the former ceo of citibank. he said earlier this morning on cnbc, what we probably should do is put up investment banking from banking. have banks be deposit takers, have banks make commercial loans and real estate loans. have things to do something that is not going to risk the taxpayer dollars. that is not too big to fail. i feel that that is a strong statement, strong than the volcker rule calling for the strictest rule possible, a return to class siegel. the goal of this committee and the treasury department is not to have this type of crisis again.

and the steps, your reaction to that -- i feel this statement is something we should act on. in libor, i'd like to hear your statement about what you could do or could not do. england is a separate, sovereign country. to what extent can our country imposed requirements on a foreign country? i would like to hear about the car industry. how is it that the treasury department with others were able to save 1.4 million jobs and turn an industry that was billing -- failing into an industry that it expanding, employing an exporting. that is a terrific story of success. thank you for your role and leadership in achieving that for american workers and in

other ways. my time has expired. thank you. >> thank you, mr. chairman. good morning, mr. secretary. thank you for being here and for your service. i look forward to hearing exactly what the fsoc has done to make our financial system stronger and more secure. one of the most obvious lesson of the plan at a crisis was the system had become too complex for banks and regulators. we have become overly reliant. instead of simplifying the system and reducing the amount of jurisdictional bickering between regulators, we decided to double down on a failed system instead of consolidating the number of regulators and providing clear responsibilities.

we rewarded the failure of certain agencies and added three more bureaucracies for good measure. i hope to hear from you what fsoc has done to strengthen our regulatory system. i would like to hear what has been done to end too big to fail. most importantly, i will like to hear what fsoc plans to do to hold regulators accountable for being asleep at the wheel during the financial crisis. i yield back. >> thank you, chairman. secretary geithner, thank you for taking your time to be with us. our bipartisan objective has to be to maximize private sector job growth and global competitiveness while also ensuring economic stability. regulations are obviously necessary but they must be sensible and balanced. the rules must be transparent, unambiguous and enforced. anything less leaves us with unnecessary and potential negative consequences. diminished global competitiveness, racket

enforcement, potential regulatory favoritism, higher costs and weaker economic growth and job creation. in many respects, our regulatory environment is not sensible or ballast. i do not think any of these are controversial points. president obama has called for rigorous cost-benefit analysis of existing regulations and proposed regulations. i am interested in how fsoc will contest a bird and regulations and adjust battles among regulatory agencies. i am also interested in whether you would recommend ways to simplify, and streamline regulatory agencies themselves. the new york times has called dodd frank's failure to do so a lost opportunity. i think we might also have some bipartisan agreement on that point. >> mr. sweichert of arizona. >> mr. secretary, almost the same thing you heard from other

opening statement, we are engaged in a project where we are building a flow chart of the regulatory mechanics and try to predict some of the world propagation. the chart is becoming ridiculous. to be becoming together to move towards a single point of contact, something much more simple and understandable. has dodd frank created a structure that is unworkable for the future? a personal side area, i would love to touch on -- bonds being issued. should we be moving much further up, back to the discussion of the super bonds? >> thank you. the ranking member is recognized for five minutes. >> mr.

chairman, as my retirement approaches, a certain amount of nostalgia is inescapable. i try not to indulge it. but i am overwhelmed with it today. it is 2006 all over again. when i was about to become chairman of this committee after the 2006 election, i was besieged by the wall street journal and the chamber of commerce that we deregulate america. that if we did not dismantle sarbanes oxley and cut back on the oppressive regulation of the financial community, everybody would soon be in england or hong kong. what then happened was the worst collapse of the american economy in a long time because of the lack of regulation. people seem to have forgotten that. i am hearing again that the problems of the american economy are too much regulation. ben bernanke when president george bush had an important economic

appointment to make, he sent for the usual suspects who were always ben bernanke. he appointed him to be on the board of governors to the federal reserve in his first full year. then he made you chairman of the federal reserve. he stayed at the most bipartisan person in this city. he testified before us and he listed the headwinds against the american economy. excessive regulation was not one of them. he said there are all kinds of factors but he said no, it is not a significant head wind. europe is a head wind. my colleagues on the other side have tried to retard the efforts of some to help with that. we are being told the problem is not enough freedom for the people whose irresponsibility cause this problem. we are being told to back off and that the regulations are too complicated for these poor people in the financial industry to understand.

they did not understand their own shenanigans. that is what got them into trouble. i do want to address this question of consolidation. people said we created these new agencies. there were to agencies that had similar functions. we consolidated those. so we got what -- the rate of one and created one new operating agency, the fsoc. it gets information. the can understand there are people who do not want us to have. but we did create one in new agency, the consumer financial protection bureau. we took from existing bank regulators the function of protecting consumers and make it their primary job. it has been working very well although at that we have had 11 hearings now in which we have complained there is not --

there is no oversight. that is not their complaint. their complaint is that we are standing up for consumers. i will acknowledge there is one major flaw in our structure -- we should not have a separate securities and exchange commission and commodities peter trading commission. the biggest single that we have in the american financial regulatory system was the decision to not regulate derivatives at all. we made a major breakthrough in the finance reform bill while regulating derivatives. we are just now getting those rules in place because 10 people have to be involved. five commissioners of the sec, five at the tsc. that split reflects a deep cultural and economic split in america. the commodities future trading commission was created many years ago to deal with protecting theoretically farmers. the answer to predict security exchange committee -- i would

like to get the consolidated. republicans talk about consolidation. they knocked about one out. i want to go back to the fundamental point -- the notion that the problem in america today with financial institutions is too much regulation, once a week we get a demonstration that that is not true. mr. dimon of j.p. morgan chase is a well-regarded executive, losing control of billions of dollars. they do not know how much money they have lost. capital one admitting that they

had vendors who were treating people and only an independent consumer bureau stepped in. there have been problems in the past. a controller was not a good regulator in the sense of the banks. we have a new one and i think you will see a great deal of improvement. but the notion that our problem is too much regulation, i am a step by the people who make that comment. it is coming from people who were born apparently sometime in 2009. >> thank you, ranking member. new york is recognized for one minute. >> thank you, chairman and good morning, mr. secretary. the american people were told when dodd frank was signed that they could -- these regulatory failures would be a thing of the past but over the last two years, we have seen massive scale regulatory failures. we have witnessed the collapse of mf global. we have seen the collapse of bfg commodities, close to $200 million in customer funds missing.

now i tremendous manipulation of the libor interest rates. i am very interested in hearing from you how do we get the american people to feel that these 400 new regulations will give them the comfort uncertainty they need to invest and come back into the markets? as someone nepalese like most americans that we have the strongest economy -- who believes like most american that we have the strongest economy, will dodd frank lead to more american jobs? i yield back. >> our last statement will come from the gentleman from texas. >> thank you, mr. chairman. the crisis of 2008 was caused by a number of factors. at this point, we can say with confidence that lack of authority by regulators was not one of them. instead of advancing age reform of our regulatory structure,

dodd frank double down on the failures of the past by elevating the influence of the same agency that missed the last crisis. this notion that a new super council regulators will predict the next financial calamity is a fallacy. it further distract regulators from their core duties, to police the financial markets. we have already seen an example of this with mf global. this is harmful for our financial system and i am eager to look into this matter further. i yield back. >> thank you. before i recognize secretary geithner, let me say that the secretary has indicated that he must leave at noon today. to accommodate as many members as possible, the chair announces that he will strictly enforce the five minute rule. members who wait until the final few seconds to ask a question of the secretary should be advised that it will be asked to suspend when the red light comes so we can allow other members to be recognized.

without objection, your written statement will be made a part of the record. you are recognized for five minutes, a summary of your testimony. >> i ask unanimous consent to say hooray. >> thank you. i know i have your cooperation. [laughter] >> mr. secretary, you're recognized. the only thing that will not be strictly enforced is the five minutes on your statement. >> chairman, ranking member, members of the committee, thank you for giving me another chance to testify today on the recommendations of the financial stability oversight council's annual report. >> i think it needs to be little louder. >> i am also happy to arrange

other comments and questions you raised in your statements. we have made in a bit of progress in the united states preparing and reforming our financial system. we have forced banks to raise more than $400 billion in capital to reduce leverage and to fund themselves more conservatively. the size of the shadow banking system that has fallen by a trillion dollars. the government has closed most of the emergency programs put in place during the crisis and recovered most of the investments made into the financial system. on current estimates, the tarp bank investments will generate a profit of approximately $22 billion. credit to the business sector is expanding and the cost of credit has fallen to the thinly from the peaks of the crisis. these improvements have made financial system safer, less vulnerable to future economic and financial stress, more likely to help rather than to hurt future economic growth and better able to absorber the impact of billions of individual

financial institutions. we still face significant economic and financial challenges the ongoing european crisis presents the biggest risk to our economy. the economic recession there is hurting economic growth around the world and the ongoing stress in financial markets in europe is causing a general tightening of financial conditions, exacerbating the slowdown and growth. here in the united states, the economy is expanding but the pace of economic growth has slowed to a last two quarters. u.s. growth has been hurt by the earlier rise in oil prices, the ongoing reduction spending at all levels of government, and slower rates of growth of household income. the slowdown could be exacerbated by concerns about the approaching tax increases and spending cuts and by uncertainty about the shape of the reforms to tax policy and

spending that will be necessary to restore fiscal stability. these potential threats underscore the need for continuing progress and repairing the remaining damage from the financial crisis and enacting reforms to make the system stronger for the long run. the regulators have made important progress over the last two years in designing and implementing the regulations necessary to implement the reforms to call dodd frank. nine out of 10 of the rules with deadlines before july 2, 2012, have been proposed or finalized and the key elements of all will largely be in place by the end of this year. we have negotiated much tougher capital requirements with even higher requirements for the largest banks. we now have the ability to put the largest finance companies under enhanced supervision and standards, whether they are banks or nonbanks and also the ability to subject key market

infrastructure firms to tougher prudential standards. the fcc is putting in place in new framer for derivatives oversight, providing neutrals and bringing the derivatives market out of the shadows. and the consumer financial protection bureau has worked to simplify and improve disclosure of mortgage and credit-card loans so the consumers can make better choices about how to borrow responsibly. this process of reform is very complicated. it is a complicated and challenging process because our system is complicated, the financials themselves are

complicated. we want to target damaging behavior without damaging access to capital and credit. we want the reforms to indoor as the financial markets -- endure as the financial markets evolve over time. beyond the reforms enacted in dodd frank, the council put forward a number of recommendations to strengthen our financial system going forward. reforms are necessary to address remaining vulnerability is in the short term funding markets, and to mitigate the risk of potential runs in the future on money market funds and to reduce interest date credit exposure in the secure funding market. the regulators should enforce strong protections for customer funds. benigno firms and regulators need to continue to improve risk-management practices, including strengthening capital buffers about complex trading strategies and other areas. the council recommends further improvement in the quality and availability of financial data.

the office of financial research will continue to lead this effort as it has done so over the past year. the council continues to support progress towards comprehensive housing pinelands reform that will be designed to bring private capital back into the housing market. these recommendations will build on the considerable progress made by the members of the council over the past two years in making our system safer and more resilient, less vulnerable to a crisis the stronger protections for investors and consumers. we have a lot of work ahead of us and we need your support to make these rules strong and effective. we need your support to make sure the enforcement agencies have the resources they need to prevent fraud and manipulation and abuse. i want to thank the other members of the council and their staff for the work they have done over the past year and want to underscore again that we look forward to working with this committee in congress as a whole to build a stronger financial system. thank you, mr. chairman.

>> thank you. the chair deal to sell five minutes for questions. mr. secretary, it is widely reported that you discovered in 2007 that the world's biggest banks were manipulating libor. your own recommendations made in may at 2008 indicated there was an incentive to miss report. that raises substantial questions about the honesty of the libor submissions and presence of fraud. when did you alert the u.s. treasury and justice department of the possibility that libor was being manipulated and to whom did you state those concerns? >> thank you, mr. chairman.

in 2008 as the financial crisis intensified and there were broader concerns about the financial strength of banks, european banks have libor -- banks. those libor rates began to rise. concerns were widely available in the market and were published in the wall street journal and other publications. at that time, this was in 2008, we took a careful look at these concerns. we thought they were justified. we took the initiative to bring those concerns to the attention of the broader u.s. regulatory committee, including the agency's responsibility for market -- responsible for market regulation and the peace. i've read the president's working group on financial markets. -- i briefed the president working groups on financial markets. the justice is not a member of that committee.

>> you are aware of the possibility of fraud? next we were aware not just of the reports that banks were under reporting or mis reporting but that the nature of the rate set in london overseen by the british bankers' association, a rate that has an average of estimates by foreign banks of what they might pay to borrow in 10 currencies of different maturities. >> we were aware 3 u.s. banks. >> 3 at that time. we were aware of the risk, that is created not just the incentive for banks to underreport but given the opportunity to underreport. that was a problem. >> i know that he went to the british regulators and -- but what action did you take > you were aware that they took no

action? >> the meet again explain what i did. our first instinct was not just to brief the u.s. community but to bring this to the british. i raise this with the governor of the bank of england and i sent him a detailed memorandum recommending a series of changes. >> let me ask you -- he has denied having any evidence of rigging or misconduct but according to what you supplied him, his testimony would not be correct. is that right? >> i felt that we did the important of all the appropriate thing which is to bring the attention to the people not just here but the british and not just the reports available in the public domain but the range of problems in the way this rate was designed.

bebop those concerns to their attention. -- we brought those concerns to their attention. we felt it would be on them. >> what action was taken at that time to address concerns that libor was being misreported? >> what the cftc did was initiate a investigation that ultimately took four years that resulted in the strong enforcement response esau announced earlier this month. -- you saw announced earlier this month. >> fleming ask you this last question -- you used libor to set the aig and the $100 billion -- now we know those are understated. >> we were in the position of investors around the world. in many cases, you have to

choose a rate. we did what everybody else did which is to use the best rate available at the time. we are all taking a careful look. this is a matter of litigation. to what extent the rate was moved up or down or actually affected. we do not know yet what the results of those discussions will be. i cannot speak to them but you are right to point out that we

had to take advantage of the rate available at the time. we chose libor at that point. >> thank you. >> mr. geithner, of what to get the context. what has happened here is that some of the financial institutions of the world behaved in an outrageous fashion. these were not bad guesses about derivatives. these were not over confidence about mortgages. this was conscious deception of their own self-interest done not just by individuals but an association that was given powers to self regulate in some ways. when i hear my colleagues talk about the need for more self regulation, libor comes to mind as a strong reputation. part of this that is troubling to me -- in the press, there has been an effort to blame you for this because you happen now to be the secretary of the treasury in the obama administration. you were an important but not one of the top officials.

i did not mean to denigrate you. it has been given more importance recently than it ever has before. people want to say you were running the world back then. you had a chairman of the federal reserve setting the libor to set the rates. you have the secretary of treasury paulson. this all happened under the administration of president bush. and the working group with mr. paulson, etc. i stress that because there was a failure to be tough enough with these private sector people doing this but the notion that it was all the department of the federal reserve in new york is striking. you reported this to the president working group on financial reform. who are the members of that group? give me names.

>> the chairman of the federal reserve, the chairman of the sec and the secretary of the treasury. probably the chairman of the fdic at that stage but those were the core members. but these were all bush appointees. i think this is a problem not of the regulators but of the private-sector and that the british because this was a burgess association. -- a british association. >> you are not a presidential appointee. >> no. >> so these were five or six people above you to whom you were reported what you found and maybe things were not done tough enough. so we have a situation where private banks formed in a british association but american bank participation previously misbehaved.

you hear about it, reported to the financial work group consisting of bush appointees, many of whom live value highly, and some people are dissatisfied that not enough was done to take a responsibility. but ask you this about too big to fail -- the legislation says that's a large part nestle institution cannot pay its debts, it is put out of business and no money can be spent by the federal government on the process of putting it out of business. these are the -- they were for big banks. the ceo and other officers have gone. the shareholders are wiped out.

that is what the law says. the law also said if there is any money that had to be spent to wind it down responsibly, you or your successor is mandated to recover it. what i read is, for instance the president of the federal reserve of dallas and his staff, that that's not going to work because it there was a failure, there would be pressure on you or your successor to provide federal funds to keep that institution alive. do you think that is likely? >> i would not have the authority. what congress did it change the law to limit the authority available to the regulators to protect institutions from their mistakes. >> they are then put out of business. there are some now who lament that. there is a new book out by mr. conrad, a managing director of bain, complaining that we have restricted the ability of the federal regulators to intervene to save an institution to much.

but i appreciate your point. if a large institution fails, you would have no option under the law but to have it fail and if anything had to be done to put it out of business, you would get the money back from the banks. thank you. >> mr. chairman. good morning, mr. secretary. i do not quite understand your answer concerning the fed's use of libor. i think you have said that we acted very early in response. we were concerned about it but it appears tt the early response was to keep using it which means it appears you treated it almost as a curiosity or something akin to jaywalking as opposed to highway robbery. i think i heard you earlier in your testimony say "it was our best choice." there are other interest rate index is out there. how can a number that you know has been manipulated possibly be the best choice? >> we were concerned about this

and we did the important consequential thing of bringing it to the attention of the full complement of regulatory authorities that congress had given responsibility and authority for market manipulation of use. >> but you were not obligated to use it. yes or no? >> of course not. but we had to make a basic choice among alternatives. i think that was the right choice back then. >> to include a manipulated number and a non manipulated number? >> i would not say it this way. it was a rate that was structured in a way that was vulnerable to miss reporting.

well we decided to do was try to initiate a reform of the process with the british but also make sure that the relevant authorities made use of it. >> we have a limited amount of time. i would like to ask another question. as i review the annual report, i see a lot of discussion of the european debt crisis. i see little discussion of the u.s. debt crisis. we know that on a nominal basis, this country has now racked up more debt in the last three years than in the previous 200. our debt to gdp ratio exceeds our economy. even the president's own budget after the tenure window states the fiscal situation deteriorates badly. the president has previously said that the major driver of long-term debt is medicare and medicaid, our health care spending. nothing comes close.

that was in 2009. i have yet to see a reform plan or entitlements spending out of this administration. you testified before the budget committee in february and this year -- of this year. he said paul ryan was right to say being ministration is not coming before you today to say that we have a definite solution to the long-term problem. what we do know is we do not like yours. that was in february. i assume i have not missed any of the news clips that the administration has come out with a plan. so if the president says this is a major driver, we know that the head of the federal reserve also spoke about are unsustainable spending driven by entitlement spending. i cannot find one mention of the word entitlement or medicare or medicaid.

yet your own budget says fiscal situations deteriorates badly. how can this not be sided as a major factor that could disrupt u.s. financial stability? when is the administration going to move on this? isthe fsoc's councils job not to recommend solutions to our long-term fiscal crisis. we agreed that our fiscal deficits are unsustainable. >> what is chapter 3 of this report all about? does this not impact the competitiveness and stability of u.s. financial markets? >> we identified in the report that these brought term long -- brought long-term risks are a significant risk to the economy

and therefore the financial system. >> you make no recommendation on what is actually driving according to the president of the united states, the debt crisis. >> i think it would be a strange thing to ask the fed to recommend a detailed medicare reform plan. that would be a strange thing. you are right to say it is a risk. the council is right to highlight the risk but i do not think it is correct to say the council should have laid out reform recommendations for restructuring -- >> perhaps next time you could help me with a highlighter. >> thank you very much. according to angelo, a professor at mit, this libor scan looks worse in the financial scam in the history of markets. i will like you to tell me if you think that statement is true. i would also like to know what

impact this manipulation had on our financial markets and what impact it would have moving forward. take time to tell us about your series of changes that you recommended. i would like to give you time and not take all the time so please go ahead. >> let me just say a bit about the broader question and thank you for giving me the chance to do so. in the detailed recommendations we gave to the british, we identified specific things that would make it untenable for this rate to be affected by the banks' incentive to lower their reported cost of funds. we keep them there is specific detailed changes for doing that. if those had been adopted,sooner, you would have limited this risk going forward. right now, let me highlight a few things we think are important given where we are today.

you will want to know what is next. let me just walk through that if he does give me a minute. the fsoc and relevant agencies -- the fed, the sec and tftc, are looking at how to address any potential implications of this remaining challenge for the financial system. these bodies are carefully examining other survey based measures of interest rates and financial prices overseen by private financial firms to assist in the potential there for miss reporting similar problems. they are carefully examining a broad range of potential reforms and alternatives for libor. there is a global effort led by the financial stability for which includes all of the world's major central banks and regulators together in a global effort to view potential reforms we are considering how to deal with the careful and delicate question of how do we

make it possible for an fourth agencies -- enforcement agencies that reveals behavior that could impact the financial system as a whole? how to make it possible for them to share that information with appropriate safeguards with the relevant agencies that have responsibility to the overall functioning of the system? a very important question. we need to take a careful look at parts of the system where we rely or the market allies still on informal private bodies run by financial firms like the british bankers' association that have some formal or informal self regulatory role. a very important question your colleague referred to earlier. we all need to make sure that these enforcement agencies have

the resources they need to do their job. you have a small town with a police department. the population of that town increases by 10, 100 times. you will need to increase the size of the police department. it is the necessary and responsible thing to do. if we do that, you will have a more powerful deterrent. in addition to the things, we will cooperate fully and be fully responsive for broader information on this and we will brief the congress on the progress of each of those efforts looking at applications and how to reduce the vulnerability of the system in the future. >> given those recommendations and the problems we have had with the economic meltdown in this country, what else can congress do to ensure that the interest rates that are being paid between the banks is fair and equitable and somehow will not negatively impact a person who is taken out a mortgage in

the united states? >> i think what you should do is what you're doing. you are conducting oversight of these agencies and you should ask for periodic updates from these agencies on the reforms under way to address that risk. that is fully a profit. we welcome that effort. we will be fully responsive to it. >> thank you. i yield back. >> thank you, mr. chairman and good morning, mr. secretary. i have a question about the president's working group on financial markets. there is an article that said that if the president's group was briefed on financial markets in june of 2008, i assume you are president of the new york fed --

>> it was actually in may that we briefed them. >> does that mean you did it or someone else from the fed? >> i went to provide -- i was not a member of the group but i occasionally went. my staff subsequently briefed officials of the treasury. theou're the chairman of group right now? >> yes, i am chairman of the council. >> in relation to that meeting you had and the meetings you have had sense, do keep detailed minutes of those meetings? >> we do keep minutes of the meetings and we put them in the public record. >> how often do those meetings lead to policy changes where you make a decision and it meant

changes? >> the congress gave it two different sets of authorities. one is responsibility for things like designating financial market utilities that have systemic implications. that is a specific responsibility the fsoc has. it gave a broader responsibilities to make sure you are not leaving large gaps in the system. agencies are working together, not against each other. >> not specifics. on libor, i do not want to get into the details of fraud and who committed crimes and who should be punished. i want to talk about the principle. the principle here is that people are complaining because they believe libor was fixed.

and that it benefited somebody financially. i do not think there is a big argument on that. that is what barclays was penalized for it. but isn't this like what the federal reserve does? are today fixing interest rates all the time for the benefit of special individuals -- aren't they fixing interest rates all the time for the benefit of specific individuals? if banks get into trouble, interest rates are lowered. right now, interest rates are like zero and banks get a lot of free money. they turn it around and put it back and earn interest. they are doing quite well. it seems that there is a tremendous amount of manipulation of interest rates for the benefit of some individuals but as manipulation of interest rates harms people who save money. they are retired and cannot earn anything, it seems like -- in

the sense of morality and economic policy, our monetary system -- everybody is as guilty of what we are accusing of libor of doing. the fed may be protected by rules and laws but isn't there something we should question about the manipulation of interest rates for the special benefits of some individuals at the fed does ts? >> i would not make any comparison. i do not think they are remotely similar. the fed with authority congress gave it to maintain -- >> i am not talking about the authority but what they did. >> but the fed is doing is with the responsibility congress gave it to keep prices low and stable over time. and unemployment low over time. it is using a set of tools in the public interest to achieve those objectives. i would say it's a fundamentally thing from the behavior of individual banks to misreport the price they are paying to borrow --

>> i do not think we will resolve that because i have another quick question. we support change in policy -- will you support change in policy with the fed can buy debt directly? wouldn't this be better for the american taxpayer? >> for the fed to directly finance? >> why can't they buy treasury? the fed buys these bonds and bond dealers make money off this. >> let me be careful answer this question. i am a strong defender of to strong principles, one is to make sure the fed has a full independence and to make sure there is nothing in this relationship between the fed and the treasury that would raise concern that the federal reserve is directly financing the fiscal deficits of the united states.

that would be something very damaging to the fed's independence and to the fiscal credibility of the united states. i do not think that is what you are implying. so maybe i should talk to you in more detail about your specific questions about the market function issues. >> thank you. >> mr. maloney, five minutes. >> thank you for your service. it is f. lee huge -- it is huge that sandy has called for the breakup of the big banks. i would like a detailed answer on what this means to the financial crisis in investment- banking and banking have been separated, what would that have meant for aig, lehman, wachovia, all of the big banks? i want to use my time on crises now which is libor. and the debt ceiling crisis and

what is meant and financial loss to the american families last summer and what it could mean in the future. specifically on libor, was this a british problem or a united states problem? >> it was a rate set in london that has implications far beyond london. not just the united states but financial markets around the world. >> was it set by an association in the united states or elsewhere? >> it was said by a group of banks in great britain. >> for you aware of any other members of the president's working group following this issue? -- were you aware of any other members of the president's working group following this issue? >> the cftc started at that time -- went to their credit. >> did the new york fed have enforcement authority in any way?

>> the new york fed has a range of authority. the enforcement powers of the bed rests with the board of governors in washington, not with individual reserve banks. the other agencies that are part of our system involved a range of other authorities for things like market manipulation and abuse. >> could you have taken any action against barclays? or the head of the new york fed? >> i do not think the secretary of treasury has strict enforcement authority. congress has given that to other agencies.

>> at the new york fed? >> i have thought a lot about this. i believe we did the appropriate thing barry early in the process. >> could you put this in context in terms of the other things you were working on in 2008? i was getting calls from my constituents screaming that there was a run on the markets. there was a fear of a complete financial meltdown. what was it like for you? what were you working on in 2008? can you put this into context of what was happening? >> pimm it got much worse later. at that time, at the pressures on the financial system. they were creating the real risk of a broader collapse on

the financial system. the recession was many quarters old. we are seeing economic spirit it was certainly going to get dramatically worse. we have a lot to do with that. on libor we were concerned about this. that is why we did what we did. >> could you comment on the debt ceiling crisis this country separate through last summer? what would happen if we had yet another debt ceiling crisis? increase of unemployment, can you explain what the impact was?

>> the threat of default of the u.s. economy in june-july of 2011 was very damaging. it caused economic growth to slow at a vulnerable time of the recovery. it caused stock prices in the u.s. and around the world to drop dramatically. it caused a precipitous drop in consumer confidence, magnifying the reduction in growth. it was larger than you see in a typical recession, very damaging, very substantial, completely avoidable, not necessary and it would be irresponsible to put the country through that again. >> my time has expired. this may be the last sunday testify before us. -- the last time you testify before us.

thank you for your service. >> mr. chairman, thank you very much. mr. secretary, thank you for being here today. i have said many times in my district and here in washington that the two worst votes i have made were the iraq war, which was very unnecessary, and the repeal of glass-steagall. i was here with many of my colleagues when president bush and secretary paulson called on the congress to bailout those who, in my opinion, where gambling on wall street. with the taxpayers' money. and we bailed out those in trouble. i didn't vote for it then, so i will take the blame on that one. but it seemed like every time the financial institutions get the in trouble, they come to the congress and the taxpayer and say, we need for you to help us out. well, mr. dimon admitted that they made a $2 billion mistake

in investments. then it became $10 million. -- $10 billion. and the american people are tired and sick and fed up -- and i think a lot of it, if i could vote today to create public financing, we might bring some sanity to this issue that we're talking about, the financial institutions, and really have oversight that we should have. but we will not change the way we finance campaigns in you cannot change it if you wanted to. but my question to you is isn't it time to have a discussion and a debate about the reinstatement of glass-steagall? >> congress thought about that very carefully in the context of the dodd-frank discussions. that is inappropriate thing to do. -- that is an a proper thing to

do. -- that is an appropriate thing to do. but they forced banks to hold much more capital against risk. that is a very important thing. they limit how large large banks can get as a whole. that is a very important thing. and as your colleague said earlier, they deprive the institutions of government the ability to rescue a bank from its failures. all we can do is try to protect the economy from the failures banks willie bennett -- will and a -- will inevitably make. our job is to make sure that, when they make mistakes, they don't imperil the broader economy and the safety people's savings and make it harder for businesses to borrow. and this law was the toughest, most far-reaching, most comprehensive set of protections against that same concern than the u.s. has ever

experienced or contemplated. should we keep looking at what more we can do to make it safer? absolutely. you should always go back and examine the judgments in this case. but i think it is a very tough set of constraints and we should give those reforms it chance to take effect and to work. >> mr. secretary, i appreciate your comments. for too long, we continue to -- i mean, i was one of the few republicans to vote for dodd- frank. it was a decision that i made -- there was more good than bad in that legislation and maybe it would do what was necessary to bring some honesty and integrity to the markets. so therefore, i hope that most of my colleagues will get that chance. maybe it needs some aspects to go through you.

-- through review. but i would hope that we would take a serious look -- i joined in the h.r. 1489 to reinstate glass-steagall. i'm not trying to interpret your words, but it seems to me that if would benefit to at least have a hearing from experts, you being one, about the possibility of reinstating aspects of glass-steagall to turn -- to certain types of banks. with that, mr. chairman, i thank the secretary for his answer to my questions. >> mr. gutierrez for 5 minutes. >> thank you very much. first of all, i would like to

go back. how did you find out about the manipulation of barkley's and -- of the barclay's and the libor manipulation? how did you first find out about it? >> as i said earlier, there was a lot of concern in the market and a lot of talk in the financial markets, much of which was ultimately published in major newspapers of record, about not just the potential that banks could misrepresent what they were paying to borrow, but they were actually doing that. so we first learned about those concerns -- at least i first learned about those concerns in spring of 2008. >> and you learned about it through published news media reports? >> no, we learn from a variety giveaways. -- a variety of different ways. one of the things that the new york fed does is spends a lot of time talking with people in the fire might -- in the financial markets about what is going on.

>> so what did you do as a consequence of that publicly? or privately? in order to respond to what you're seeing were manipulations in the libor rate. >> first, we took a very close look to see if there was any basis for those concerns and we thought there was. and then we briefed the relevant members of the american financial bodies, the treasury, the fed, the cftc, and others. and then we brought this to the attention of the british. >> europe the may memo, didn't you? -- you wrote them a memo, didn't you? >> we wrote them a detailed memorandum with a very set of detailed recommendations on how to fix it. there responded affirmatively to those recommendations, said they shared the concern, supported the recommendations, and would pursue them pierre >> to the best of your knowledge, the investigation that led to the $453 million fine against barclay's and the investigation begins where? >> that is a question you

should refer to the ftc -- to the cftc. but i believe they said it was in april 2008. >> if we look at the investigation, it begins at the moment in which you were made aware as head of the new york reserve and carried out your responsibilities. then you informed the secretary of the treasury of this situation. what was the response of the other major stakeholders in our markets, in the protection and the oversight of our markets to your comments about this and your inquiry? >> i believe they share our concerns. as i said, the british, too, share our concerns. and the concerns we had were a sufficient basis for the cftc to instigate this far-reaching investigation. >> i want to ask about the

annual report, which i am sure your dying to get to. identify risk of financial stability of the united states by eliminating expectation of government bailout, respond to emerging threats to the u.s. financial system tell us how you're doing? how is the council doing? you agree those are your three major goals. how're you doing? >> i would say it is a little early stillpoint i will tell you what i think the main challenges. we have a very complicated system of oversight that involves a lot of agencies. they are writing a set of rules that are very complicated by definition because the problems are complicated. we have a huge interest as a country to make sure they do that stuff carefully with all the necessary speed, but do so in a way that they're not creating new opportunities, new gaps in the system, new incentives for people to move risked. -- move risk.

>> can you give as examples of measures to have taken to protect and to ensure that there are not any -- >> i think you have to step back and look at the scale of the changes that have been put in place in our system, not just by the measurement -- the measures it took in the financial emergency, but in the reforms. we moved much more aggressively than any other country than in any other time of modern times to hold these banks to hold much more capital. the derivatives complicated challenges, these agencies have

made major progress in laying out a sweeping comprehensive reforms and give them new tools to combat manipulation and abuse. apart from the u.s. efforts to bring supervision -- from the new efforts to bring supervision, they have made mortgage and credit-card forms easier to understand so that individuals can compete for better terms and are much more aware of the risks of borrowing providing those are the best examples. the fdic has put in place a very innovative framework with a huge amount of global support to implement this important objective of the law to make sure that, when firms make big mistakes, we put them out of their misery with no cost to the taxpayer, with as little damage as it can to the rest of the system. they deserve a huge amount of credit for it creative and very

innovative framework using the authority that congress gave them. those things in bank capital coming derivatives oversight coming consumer protection, when what some people call for large -- those things in back capital, derivatives oversight, in consumer protection, when aret some people call fo large dome banks, those things are very consequential reforms. we still have a lot to do. the housing system still needs a lot of work to do in that context. >> the difference time has expired. >> thank you, mr. chairman. thank you, mr. secretary for being here. which regulator dropped the ball with regard to aig? which regulator was in charge of regulating aig fp, which is

the division that is engaged in the risk management of the default swaps trading and led to a near collapse? were insurance regulators in charge of that or the holding company? >> i don't think there was any competent authority that was responsible and accountable for the broad entity of that complicated global system. you're right to say that both yes -- that ots had a broader responsibility, but their authority did not extend to the comprehensive oversights that would have been -- that was necessary. >> who is regulating a id right -- aig right now? earlier this morning, the tarp special inspector general released a damning report about aig oversight, saying that it has had no consolidated banking regulator of its non-insurance financial business. and the otc is now responsible for regulating the aig's savings bank, but not the rest of the company.

the federal reserve did not regulate aig before the bailout and has not regulated it since. but the fed could take over if ctarp -- but they do not think that will be in existence for too long. i take that back. the treasury -- until the treasury holds less than 50% of the, maybe -- of the aig, maybe the fed could take that over. the proponents of dodd-frank said it was about avoiding too

big to fail and regulating the financial industry. but in fact there is no regulator for aig. house as possible? -- how is this possible? >> dod-frank gave the united states the authority to designate a non-banks financial institution, which could cause broader damage to the system, like aig, to give the council the authority to designate those firms and give the fed the ability to provide that broad comprehensive oversight you refer to. and with that authority, the council and its agencies are now carefully examining which of the firms out there that present that potential risk need to be brought within these broader and tougher constraints on capitol and leverage.

the council is in the process of doing that. two weeks ago, a set of market utilities for the same reason and it is looking very carefully -- >> they really haven't done anything about -- there is no oversight. who is in charge of regulating aig right now? >> we are moving to put that in place -- >> but there is no regulator now. >> under the laws of the land, right now, that is true. that is why we ask for the authority in dodd-frank to move carefully. as you know, when you think about how to apply these rules to insurance companies and other types of institutions, you want to do it carefully. but aig is a dramatically different entity than it was in 2007. >> tarp said that there is no

plan to ween aig off of tarp. could you submit the plan to tarp and to congress? >> a would be happy to, but i would say briefly that we ha a minimum financial exposure inequity. we have to absorb a large chunk of that. we plan to sell as much of that as soon as they can because we won nothing to do more than two -- we want nothing more than to recover the taxpayers' money. on current estimates, the taxpayer will burn a substantial -- will earn a substantial positive return on the full scope of tens of billions of dollars in exposure that we took with aig. >> the gentle lady's time has expired. >> i am happy to respond and lay out what our broad view is of how we get out of our

remaining exposure. >> the gentleman from new york for five minutes. >> thank you, mr. chairman. and thank you, secretary geithner, for your service. some stakeholders -- as you know, community banks are significant source of small business lending and we have dealt with this issue since 2008. the access to capital for small businesses and, as a result, we have a small business lending bill. some firms have estimated that u.s. community banks sustained $448 million in damages for that year alone. my question to you is how does an artificially low libor rate hurt small banks that operate on thin profit margins and rely

more on interest income than large banks? >> that is an issue which a lot of people are taking a very careful look at. and it is a matter of litigation and an ongoing review by a bunch of agencies that should be taking a look at it. and i think it will take a little time to present to you a good answer to that basic question. but i would be happy to do that. >> loans on index to libor affect a lot of financial products. what impact will be libor scandal have on lending for small businesses? >> i don't think it will have any financial impact. >> how do we restore public confidence in the financial sector?

>> we do it by making sure we put in place tougher rules. we give people the resources and authority to enforce those rules. and where the responsibility finds evidence of bad behavior, they should be punished for it appeared that is what it will take. i would just say the obvious. the financial system of the united states and those institutions that dominate it obviously have a long way to go in restoring the trust and confidence of the american people in their ability to protect consumers and manage the risk they face. >> ok. thank you, mr. chairman. >> the chair recognizes the gentleman from california for five minutes. >> we sent you a letter in mid- june and would like to ask you some of the questions we put to you in that letter.

when do you expect the for will conclude the study? >> the important thing to do in part because the council has to figure out what to do with their designation authority for that mix of institutions, if anything. what they're doing right now is taking advantage of all the public information available about the risk, construction of institutions, what it means for the system, and there will be able to take advantage relatively quickly with the new exposure requirements. but they're making progress and i welcome your attention to it. i would be happy to give you responses to that letter. >> dodd-frank requires fsoc to coordinate with international regulators. what are you doing to ensure

that the oversight -- and if there is not global coordination, what impact does that have on the u.s. economy? >> with your colleague is referring to is the requirement that we negotiated globally to put on the largest firms higher capital requirements against the capital they hold pared their forced to hold more capital against their risk that a smaller institution. we were forced to negotiate uniform rules. that is not enough. you want to make sure they are enforced on a common basis and that is a very challenging process to have a level playing field. so what the fed is doing is

trying to work out with other supervisors and central banks ways to make sure that the rules are enforced in a consistent way. >> are you apply that to foreign regulators as well? >> yes, everybody wants there to be a level playing field. >> if we don't, it will be a detriment to our economy. >> exactly if you end up raising standards in the united states and leaving them lower and weaker outside of the united states, risk will shift to those markets and that will ultimately hurt us, too. >> recent rulemaking by the fed insures the fed ridges capital standards -- reaches capital standards. it has been criticized for being bank-centric. that is a major concern, that they're getting into an area that there were never authorized to get into. it looks like it will enter

replace it should not. >> we are aware of that concern. the federal reserve recognizes that, if they were in a position where they had to apply these brought standards to financial institutions including an insurance company, there would have to make some changes to to recognize the specific differences in insurance businesses from banking. they understand that and they're taking a careful look at how they would need to be adapted. if, in the end, the council

decides to designate, for example aig. >> do you agree that capital standards need to be appropriately recognized and the difference between banks and insurance companies have to be defined where they don't splash over and one in compasses the other? i have been meeting with more and more bankers and the insurance sector is concerned that the splash over there seeing out there will have a huge impact on their services and they have not been prepared for it. >> i agree have to be adapted and modified. i think the fed shares that view, too. i'm much more confident though that they will be -- if they are faced with that need, that there will be able to do it to mitigate those concerns. >> you agree with -- you agree that the concerns need to be mitigated. >> absolutely. >> high understand your statement and i agree with that. but i want to make sure that it is implemented. i yelled back. >> thank you. mr. secretary, you have gone a lot of questions about libor and i think that is important. this obviously affects rates and the ability of people to get loans.

but i want to dwell on that. i actually went to bill on two other things that are significantly important -- i actually want to focus on two other things that are significantly important in my community. i want to reference page four where you said that the council recommends a set of reforms that address structural older buildings, including short-term lending markets, such as money- market firms appeared to allow my constituents have money invested in money market firms. will you just and send me or tom or i can access these recommended reforms so i can look of that. i won't dwell on that either, but i find it important also. but i do want to talk about

automobile dealerships. the special inspector general for the troubled asset relief program came out with a report. i've understand you're disputing some of the conclusions that they reached. but the fact that -- but there are facts that are hard to dispute. june 10, 2009, general motors had terminated 789 dealerships. i'm sorry, chrysler had terminated 789 dealerships and general motors had wound down 1454 dealerships.

that is a significant impact. i want to approach it from a minority perspective because the statistics indicate that the number of ethnic minority dealers was disproportionate in the number that were terminated. and the african-american-round automobile dealers were hit the hardest with a decline of 50%, from 523 dealerships to 261 dealerships. a number of those were in my congressional district when i was practicing law -- congressional district. when i was practicing law 25 years ago, i had five african- american-owned dealerships in my district that i represented. they don't exist anymore. so my question to you is what leverage, if any, do we still have with these automobile companies to leverage them into

being more aggressive in rebuilding those minority-owned or at least in the new dealerships that are being opened, giving some preference as they had been a starkly -- had been historic way to -- had been historically to minority dealerships? >> i would be happy to think about that question more and come back to you on it. i endorsed and your concern with it. i ended -- i am understand your concern with it. as part of our effort to save the industry, in this crisis, we ended up owning a significant amount of common equity. we have been very careful not to get in the business of running those institutions.

>> i and stan that. -- i understand that. i am not criticizing. i think it was wonderful that we bailed out the automobile industry. we would not have a domestic industry if we had not done that, in my opinion. so i am not questioning that. the inspector general says the government had quite a role in pushing the termination of these things. i guess what i am asking for is you to give some thought to how we can now go back and help to restore -- and we can talk more offline could i think i have 10 seconds left. so we can talk more. i just want your commitment to brainstorm with us to brainstorm -- to address this problem. >> you have my commitment.

>> i yield back. >> the chair recognizes the gentleman from new jersey. >> mr. secretary, on the libor situation, you cannot have your cake and eat it, too. you have been before this committee callous numbers of -- countless numbers of times since 2008. if this is the crime of the century, never once did you ever come and mention it as being a problem. never ones to come here and say that this is what you about it. never once did you say that these would be the new regulations that you propose congress to take. you tried to pass a dodd-frank piece of legislation. never once did you say that this should be a part of it. now this comes up that this is the crime of the century and something needs to be done about it. knowing these problems, knowing the falsifications, why did to set up these bailout programs with the aig's situation, where

we use libor in there, where we use the benchmark? and your answer is, you know, we're just -- we did what investors did elsewhere. we are just like investors around the world in mr. -- around the world. mr. secretary, you're not like investors around the world. you're the secretary of the treasury of the united states of america appeared for four years, you did not do anything about it been the banks may have made problems, but we're looking to the secretary of treasury to do what every other regulator has done and that is to point the finger at someone else. you also said that, when people do wrong things, they should be published appeared in the private sector, that occurred. -- they should be punished. in the private sector, that occurred appeared someone lost their job because of this.

what about the new -- when will something happens when the regular is -- when the regulators did nothing about this? will they be fined? will any regulators from the top down lose their job, mr. secretary? >> congressman, in my judgment, the regulators did the necessary and appropriate thing in this context and they started that process very early. >> did you talk to congress about this? >> we did not. again, what we did -- and again, these concerns were in the public domain. it is a matter public record. having looked into these concerns and believed they were a problem, we took the initiative to brief the broader regulatory community so they had that information, even though it was in the press, and we pushed the british to resolve it. we did that very early and very quickly.

>> the the regulators implement any changes in the banks in this country, the difference between their trading and the reporting -- when you set these programs, that you were sure the problem had been solved? >> the two things that happen, as i said in my other remarks, there will be more that has to happen. the british set in motion a set of reforms -- >> i am not talking about the british -- >> i am coming to that. and the cftc said at that time a very far reaching a comprehensive investigation that included the ftc and justice and sought tougher enforcement reaction. >> the same justice department was not at the table and you had not notified them. i am taken aback by the fact that there is so much finger- pointing after the fact. so we have the designation with

regards to the banks. so those with over $50 billion of assets have been designated to big to fail. we have seen a doubling down in this. we have seen a consolidation in the industry. it they're too big to fail, they will find they're finding cheaper. i think it is the wrong way to go. i will dropping less insulation -- i will be dropping legislation in trying to avoid this. allow them to get cheaper funding because of this, allow them to swallow up their lesser entities -- why would you want to do that? >> we have no intention of doing that point the law does not allow us to do that. and we would not want to do

that for the reasons you said. and -- i respect your concerns -- i do not think you're right to believe that the designation itself will confer a financial advantage. let me just explain why. the purpose of this authority is to make sure that institutions that could threaten the broader economy are required to hold capital against risk and hold more capital against risk than other institutions. if you listen carefully to the markets now, i think you will find it hard to justify the view that designation is something firms would welcome. in fact, many of your colleagues are spending a lot of time trying to prevent us from designating firms because they are afraid they will come with constraints that will be tough on them. i've understand your concerns and i respect your views on this.

>> the chair recognizes the gentleman from california for five minutes. >> i am trying to understand what is going on here. british banks lied to the british banking association. the bank of england and other british regulators screwed up and did not catch them pen even though they got extraordinary outside help from an ocean away. since some british bankers like, some british regulators screwed up, the solution is obvious. we have to blame america. in particular, we have to find an american weaken blame, -- an american we can blame, preferably one of the other party. i for one am not part of the "blame america first" crowd. what happened in london has caused an awful lot of private contracts, adjustable-rate

mortgages, etc., to be off by half a dozen basis points. that is not a huge outcome for anyone individual -- any one individual consumer. if anything, the consumer benefitted and some consumers and individual investors were hurt. today, we have american attorneys who have forms. they have mortgage forms. they have contracts bid and they all got plugged in their -- libor. and it is natural for them to want to have a dollar- denominated interest-rate sensitive adjustment mechanism in their contracts. but now most of them would prefer to have one that is not a result of a few private actors acting privately could they -- acting privately. they prefer to have a

government-released rate or maybe one that is tied to a public market, auction market, that is so broad that it cannot be manipulated. a few in my own party have suggested that i return to the practice of law. when i go back to my old forms and they say libor, what alternative benchmarks are available? >> we are taking a look at that question. there is lots of potential alternatives to this. the challenger though is not finding -- the challenge though is not finding a rate that captures the government cost of funds. the challenge is finding a way to capture the credit risk and exposure to a bank. since people are looking at that question, they will look at all of the factors and review the process. >> it would be great if you could release this -- and there

will be court cases where people will seek modification of contracts or prospectively or retroactively and it would be great if judges could turn to the secretary of the treasury and say, when the parties agreed to libor, they did not agree to something private and subject to manipulation. and the thing that is not subject to manipulation, the closest is a report that i look forward to getting from your department. in your opening statement, you said, as we move forward, we must take care not to undermine the housing market, which is showing signs of recovery, but is still weak in many areas. a few suggested that, while there are a -- if you suggested that we could eliminate the mortgage deduction and the property tax deduction. that would no doubt drive

housing prices down. i wonder whether a decline in housing prices would be bad for the economy, that for the deficit, but particularly bad given the fact that today we are not just the government. you happen to own a couple of large companies -- fannie and freddie -- and obviously, if home prices go down, foreclosures go up and the cost of these foreclosures go appeared so losing -- go up. what affect would it have on the federal government through its effect on the economy and fannie and freddie? >> i think you are right in describing the effect and it is important to remind people that we have a very long way to go to repair the remaining damage in the housing market. i think our overwhelming obligation is still to do everything we can to give

people a who cannot -- the people who can afford to make their payments to stay in their homes and repair and heal the damage that is out there. we will continue to use the authority we have and also encouraged congress that we consider legislation that makes it easier to refinance, if you are under water, for example of course, as we do those things, we want to make sure we're not making long-term problems worse for the economy and the taxpayer. and we will be very attentive to that, too. >> thank you. >> the gentleman from texas for five minutes. >> mr. secretary, good to have you back. i want to go back to april 2008. i think that is when you were president of the federal reserve bank in new york. you first addressed the issue

of libor. were you aware in the fall of 2007 that some in former e- mails were coming into the new york fed saying that there's something up with libor? >> congressman, i do not believe that i was aware of those specific concerns before the spring of 2008. but we are going back and looking at the full range of things available and make sure that you have that. >> i was looking at your response, back to the bank of england, about this disclosure. basically, i thought what you made in five or six bullet points, some recommendations for how libor could be more reflective. but here is my issue with that.

if they were having structural problems, i thought your e-mail was appropriate. but what was being disclosed year was flawed -- was fraud, that this rate was being manipulated. the special counsel for the financial crisis inquiry committee, making a criminal referral if you suspect a crime had occurred and how manipulating even live board -- manipulation libor didn't rise to the level is a little puzzling to him and a little puzzling to me. >> i thought about this in two different ways. you had a rate set in london overseen by the british bankers' association, which, because of its design, created not just the incentives to underreport, but the opportunity to do that. that was a problem for a lot of different reasons. opportunity it created for manipulation, not just and

reporting. -- not just under-reporting. so it was very important that there would be an effort to fix those problems in the rate and it -- and, of course, our first instinct was to go to the british and they said, we agree with you, we are on it. now, we didn't know if that would be sufficient or not. so we also did the appropriate thing. again, we did it at an early stage, even though these concerns were in the press. and we briefed the relevant authorities with enforcement authority and responsibility for fraud and manipulation. so that they would have the ability to choose whether to act on those concerns. and we thought the combination of the concerns in the public domain and the efforts we took directly with them provided more than enough basis for actions, not just to reform the structure of the rate, but to pursue the behavior that was

obviously so, the question. -- so consequential. >> i spoke with mr. ginsberg current he said the information received was not from the new york fed, but from "the new york -- from "the wall street journal" article. but this was not just the british problem. you know. you have been involved in the financial markets for a long time. your very knowledgeable. you should have known that manipulating libor, with the small impact -- i mean, they are on the buy side and the sell side print some people benefit in -- some people benefitted and some were losers. the outcome of that transaction is based on that. there were domestic u.s. banks who were a part of that. >> i agree with you. this rate had implications for

not just the united states, but for financial markets around the world. that is why we did what we did. we did not do this as something that was a small isolated incident. and you're exactly right. so we tried to push them to fix it, reform act -- fix is a bad word in this context -- and to make sure that the u.s. enforcement agencies and authorities were able to focus on -- >> i will interrupt to -- after the june memo, did you ever follow-up and say, hey, what have you done since our last conversation or our last memo? >> our colleagues did good the -- our colleagues did and the bankers association, at three

separate points after we acted in this context, announced some changes to that process. but, obviously, we don't think they went far enough. >> the gentleman's time is expired. the chair recognizes the gentleman from new york for five minutes. >> i want to go back to something that mr. sherman was talking about. i am understand and i agree that the libor is very important. but what i see a continuing divide between wall street and main street and you touched on a previously that there is a lot to be done for those individuals who are under water in mortgages and that whole area. i believe we did the right thing when we did tarp. but there are a lot of questions. here is what main street says. you helped out others. why not me? why can i not give a lift up? an article in "the new york times" about out of the box- type proposals, whether

government had used to the legal doctrine of eminent domain -- using eminent domain to purchase underwater mortgages at a fair market value then have private investors -- then homeowners would no longer be under water and be able to repair their credit rating so that they would not likely default. thus, new investors would be repaid and the taxpayers would not be involved, nothing added to the budget. i first question is, to me, out of the boss -- out of the box thinking -- have you and the treasury thought about that proposal? what other out-of-the-box thinking the have for underwater homeowners? >> we're looking at that proposal.

it raises a lot of complicated legal and policy questions. i do think it is important to recognize that there is a broad range of other tools available for states, probably because we have provided the money. within existing adored, to -- w ithin existing authority, provide reduction for those who have mortgages under water. we have been supportive of those programs in the programs we administer and we encourage the other agencies to take advantage of those things. we'll continue to do that and we will continue to look at those proposals and the implications. >> hemp has been a good program, but not too many people have been able to ticket at the jet and too many are still suffering. -- able to take advantage of it and to many still suffering.

part of that piece is banks lending money. an article talks about an effort to get banks to lend money again and the central banks in europe cutting their interest that they pay on excess reserves to 0%. many banks have to pay the central bank to keep reserves with them could and this was a powerful incentive to leave their land or -- to have the banks either lend money or put money into the market appeared you -- into the market. you work closely with the federal reserve. would that help our economy?

>> i want to be careful about the authorities that the fed has. i will tell you my general view on this. the economy is not growing fast enough. unemployment is very high. a huge amount of damage left in the housing market. americans are living with the scars of this crisis. the institutions with authority should be doing everything they can to try to make economic growth stronger. that is an obligation we all share. congress, under the constitution, has the authority for the most powerful tools we have available for economic growth. we would like congress to use those tools now in this context. and, again, we will keep supporting anything practical and sensible to get more people back to work, make credit more available to more people, not just to buy a home or to refinance the mortgage, but to make sure businesses can expand. we made a lot of progress doing that, lending to small businesses is growing. but we have a lot of work to do.

given the damage remaining from this crisis, the obligation we all shares to do as much as we can to make sure we're getting growth stronger. >> of the gentleman's time is expired. the chair recognizes the gentleman from north carolina. >> just a note for the record, the questioning of the libor issue, it was about three months later after the libor issue came to note and you -- taxpayers are on the hook for that, $85 billion. mr. secretary, the unresolved eurozone debt crisis, obviously, a severe consequence for the global economy. do you agree?

>> absolutely. >> that has an impact on the economy -- on the american economy, does it not? >> it has already had a significant impact, slowing growth around the world. >> you say, concerning the spanish fiscal performance, fueling doubts of adhering to strict budget targets amid a deepening recession. as a result, the euro zone area finance ministers provide assistance to recapitalize its troubled banking sector. market reacted adversely to this. it seems to me that spain has proved positive that relaxing fiscal targets and spending more money does not work. would spain be better off had they maintained and adhered to more austere fiscal targets?

>> my own view is that the actions of the spanish government is taking is moving in the right direction. let me just explain why. you are right to remind us all that, if you have unsustainable deficits over time, if you leave them on addressed, they will -- leave them unaddressed, they will hurt you. absolutely. we agree with that. but when you are in recession, as europe is a more when you're in it, growth that is still slow, you want to be careful that, when you're putting in place reforms to address those long-term questions of sustainability, and they're not -- you have to make sure that you put in reforms overtime and that they do not make the challenges worse. >> do you believe that the issues in the eurozone will get worse before they get better? >> it depends on the choices they make and can afford. they are doing some important

and necessary things on the form side to make their economies better and more competitive. but they ought to make sure that the institutions of europe, over time, create better fiscal discipline and better management of their financial system, which could very big and very risky and very leveraged. but in the near term, they will have to do more to make sure there is confidence in their markets and banking systems. and the countries that are doing this face lower borrowing rates. >> there might be a parallel or not, but the u.s. public debt percentage of gdp is greater than it was in spain when the sovereign was jacked up to 7% and all this action took place. do you think that the markets are already discounting the address consequences of the -- the adverse consequences of the

eurozone crisis on the world economy? >> there is no way to know that. you cannot tell what markets do. >> you can only tell looking back. >> even then, the only thing you can do is make a new ways -- new assessment every day>> there is no way to know that. you cannot tell what markets do. >> we can tell in looking back. >> all you can tell is the market every day is making a new assessment about weather european leaders are going to do enough to hold it together. they have committed to do that. they said that is their intention. they have the ability to do that. >> my question to you is what is the obama administration's plan? i know there have been numerous summits. you're spending a significant

amount of time on this problem, are you not? ok. so you have any plans, large action by the world to take on this issue? what is the obama administration's plan? what is the significant plan you are putting forward to take on and to show some leadership on this? >> as the european leaders have said in public, we have played a role in encouraging them to move much more aggressively to contain the damage from this crisis. we have been careful to where we have the ability to help that context mitigates the pressure on us. we have done that. we have also been very supportive of the imf coming in providing some assistance in that context. we will continue to do that. but the solution to this problem will have to come from the europeans. they will have to finance it. it has to sit with their politics and economics. we cannot want this more than that. what we can do is try to put -- as much pressure as we can on them to move more quickly and credibly to adjust this. >> the gentleman's time has expired. the chair recognizes the

gentleman from massachusetts for five minutes. >> thank you, mr.

responsibilty of this by the end of the executive branch is to make sure -- we are going to work against that because we want to make sure these reforms are tough. but you need to not does have good design and tougher rules and protections.

blogs do you think the word hypocritical might be appropriate? >> i will leave that to others to say. but we need the support of this committee and congress to put these rules of dental plates and make sure these agencies have the resources they need to enforce them. >> do you agree with moody's comments that they made in june of this year when it downgraded 50 financial institutions on page 14. "we believe the fdic remains committed to achieving the goals set out including ending bailouts of too big to fail institutions." do you agree with their assessment? >> i try never to comment on those reports for obvious reasons but what they point out is to remind people that under these reforms, congress has limited its and evidently the ability -- the ability of the government to in the future, in and protect an institution from its failures. for that reason, if you look at the financial markets today, there's much less confidence in

markets. this is a good thing fundamentally. that congress in the future will come in and protect them from their mistakes. >> it is also another matter that some of the same people that voted to repeal the act and the ones complaining that some banks are getting bigger today, i happen to agree with them. i voted against the repeal. the libor matter cannot be ignored today and i do not intend to ignore it but i am not interested in rehashing history. but nonetheless, since we passed dodd frank and in the last year are so, we have had the mf global issue, capital one having a significant find -- fine and now barclays with a $450 million fine. that is about 1% of their annual revenue.

it is a good number but not the kind of will change anything. yet on page 9 of the executive summary report, you point out that the boehner abilities in the financial system can be broken -- grouped into three clauses -- classes. the incentive to take too much risk. i understand you are working on that and we will continue to do that but those are not in place yet otherwise these instances would not have happened. they took too much risk. maybe a different type of risk. but i would ask a simple question and i know this is by your place. as a member of fsoc, do you

think it would be appropriate for fsoc to be in touch with the justice department to inform them -- do you think the markets would be well served if individuals were held liable for criminal activity? if there is criminal activity here. barclays has indicated there might be criminal activity in this libor situation but it people are doing something wrong, some point some individual has to be held as possible. i would like to hear your opinion on the matter. >> i want to be careful not to respond directly to the question you raised about these enforcement actions but i will say the following -- it is very important to this country that we have in place a very tough enforcement regime so that people who violate the law are held accountable for their actions so that they are not as held accountable the we are deterring others from engaging in that behavior. we have huge institutions try to restore a powerful enforcement mechanism and part of that is good will against manipulation and the pews. a big part is to make sure there's adequate resources available. if we start them of resources, they cannot do an adequate job

of protecting investors and consumers. we will keep working very hard to meet that test. >> thank you. >> the chair recognizes the gentleman from new mexico for five minutes. >> thank you, mr. chairman. and mr. secretary for being here. as you respond to the questions about separation of investment banks and the independent community bankers, of a like to be included in the written response. -- i would like to be included in that written response. i have to say you have an impressive and resume.

secretary of the treasury. chairman of the new york fed. one of the colleagues is try to make some choirboy with the terrible bush appointees. you have got a really strong resume and you have accomplished a lot. there are critics the city did not have the next -- have enough experience for the new york fed. i think the estimation is the work with the bush administration to minimize the policies in 2008. people question whether not the actions did that or not. we can accept the fact that there discussions. i do not know that the policy. i did the congressman from the mexico. we do not have a big banking

institutions. i will not sit here and give you some questions that will reach orient your thinking about the country but i have an obligation to those people who elected me to represent them. we have got the whole idea of the administration came in with, a definite change for the country. it was pitched that this is the hope for the peter -- for the future. we have financial difficulties that are erupting everywhere and pension system that are going to file trillions of dollars short that will make the debt in europe look small. it looks like you are not going to stay. if you do not believe in the

path with you have laid out -- i am just going by what our friends on the other side of the aisle said. i am not on the inside. so if you're going to go or even if the state, why should people of new mexico -- they're all 99%. why should they believed in -- in you or the policies he said in place? >> let me say a few things in response. i believe very strongly that this country, this economy is a much stronger place than it was when the president took office. by every measure, we are in a dramatically stronger place and much better position to deal with the challenges still ahead of us. not just on our fiscal deficits and the remaining problems people face getting a job or keeping a home. i also believe the policies we have laid out in before the congress are the best way to make the country stronger, not just go back to living with and are means of making sure we are making the economy more competitive in the future. i am committed to those things. you are right that i am in

public office terry i have a privileged and making lots of decisions. those decisions will be controversial decisions. i have taken a lot of criticism for adjustments i have had to make on both sides. all i can do is what i think is in the public interest and to help president deal with the country. those adjustments will be viewed -- those judgments will be viewed and i fully respect it. but all i can do is make sure i am doing things i think are in the public interest. >> i appreciate that. on page 4, you talk about the budgetary trends are unsustainable. in your written testimony, you talk about the fact that the budgets are being cut in government spending is being

cut causing a week is to the economy. the report talks about budget trends being unsustainable, it is talking about the debt and deficits or the cutting and spending occurring? >> it is to the government spending is falling across the american economy and that is making growth weaker. it is also true that our long- term deficits are unsustainable and would be good for the country for congress -- the deficits are too high and if left unaddressed, our debt will grow to be too large. >> let me finish up here. i does have a second.

you spend a lot of time talking about the debt discussion but almost no time talking about that and i think that is a huge indication -- if you could give that in writing, that would be great. >> the gentleman from missed -- from massachusetts. >> mr. secretary, i want to thank you for help with this committee with its work. there has been a document refer to a number of times -- referred to a number of times. this is regarding your response back in 2008. there were a series of articles that came out in the british press about a possible manipulation of libor by some of the british bank. he had an opportunity. he responded --0 your responded. -- you responded. back then, it was secretary paulson, ben bernanke at the fed, chris cox and cftc. >> there are other agencies represented but the -- it was the head of the agencies. >> after you informed them, i have a document that has been mentioned a few time -- a memo dated june 2008. it is the cover page that says it was delivered the previous tuesday, i just to mervyn king. was to the governor of the bank

of england at that time? >> yes. >> and is from you. can i have somebody -- i want to put a fine point on this. you talked about your response but it seems to be ignored. i want to make sure this goes into the record and that we have a clear understanding of what you actually did when you are at the federal reserve bank. it has here a -- recommendations for enhancing the credibility of libor markets and research and statistics group. do you recall what the recommendations that he may wear? this is unfair, i have the document, you do not. that would help. thank you.

to save time, maybe you can look at the document and say exactly what it is rather than me asking you these questions one at a time. >> there are s -- six recommendations. strength in government and establish a credible reporting procedure. increased the size and brought in the composition of the u.s. dollar panel. add a second u.s. dollar libor fixing for the u.s. market. specify its transaction size. only report the liable maturities for which there is a net benefit. eliminate incentives to misreport. each of the subheadings, we gave a series of specific suggestions. what that goes to explain as -- is in significant detail, the range of potential boehner abilities in the way this thing is being run. >> exactly. mr. chairman, i would ask unanimous

consent that this memo from the head of the federal reserve bank of new york to the governor of the bank of england be accepted into the record. >> without objection. >> thank you. secretary, there is also an article that came yesterday in the press and i cannot lay my hands on that but it talked about the fact that a lot of the requests for manipulating libor came from traders who were asking to lower libor as opposed to coming from lenders asking to raise libor to enhance their loan portfolios. in this article, it talked to the fact that for berkeley's and other banks, two-thirds of their depository assets were invested and used in their trading portfolio of and only

one-third of their depository assets were used for making loans. so there was a bigger upside if they could lower libor and enhance their trading positions as opposed to raising the interest rate to enhance their low performance. this goes back to what the volcker rule is trying to get at. i just want to know, do you think that that fact that banks -- this goes to what was talked about this morning that maybe we have to go back and look and what banks are doing. and if we're going to have the

taxpayer supporting their conduct and the performance of their basic businesses tackle the gentleman's time has expired. >> is it better to separate the risk-taking versus the traditional lending? >> good question. in response to have to think about the volcker rule in this context, i am happy to respond more to the numbers question. >> the chair recognizes the gentleman from pennsylvania for five minutes. >> thank you, mr. secretary for your testimony and time today and for the report. i want to follow up on the question asked regarding annual

budget deficits and a growing national debt. in the report, page 8 entitled potential emerging threats to the united states financial stability, you read that threats to financial stability like threats to national security are always credited. a couple of years ago, admiral michael mullen when he was chairman of the joint chiefs of staff said the greatest threat to our national security is our national debt. its stock to allow the people. do you agree that the growing national debt is a significant threat to our economic and financial security going forward? >> if left unaddressed, our long term fiscal deficits would damage the american economy. i agree if left unaddressed,

that would be true. >> honey morgan jr. secretary treasurer under franklin roosevelt. he has often been quotes recently. he said, "we are spending more money than we have ever spent before and it does not work. i want to see this country prosperous, i want to see people get a job. we have never made good on our promises. i say after eight years of this administration, we have just as much unemployment as when we started and an enormous debt." what's different between then and what is happening now in light of secretary's comment? >> good question and context. at. worth looking back chairman greenspan and others have said this crisis was caused by a shock, a storm much larger than what caused the great depression but because of the things we did, and we were able to get the economy growing again much more quickly. the economy is much stronger than was at that time in history that you refer to and much stronger than it was when we came into office. the fiscal challenges we face -- you were right to say they are unsustainable but these are manageable challenges for our

country at this time in history. there are much more manageable than what is faced by many countries around the tree -- the world. the challenge reface -- we face is to decide how to do it. we have to balance the obvious concern. we need to have growth stronger but also we have to protect our national security interests and make sure we protect the basic safety net for retirees and low-income americans. we will have to make tough choices about what we do for education, infrastructure, incentives for investment, so we make both stronger over the long run as we figure out how to make sure we make those commitments to retirees and low- income americans more sustainable over time.

i think that is the challenge. that is what separates us. not a recognition that it's unsustainable but a debate about what's the best composition of spending, savings and tax reforms to return sustainability. >> normally is a budget resolution. would you agree to bring this back down to manageable levels -- wouldn't passing in budget resolution in both houses put this on a path towards getting the deficit under control? >> i know where you are coming from but you are right, congress has to act. it will not happen on its own. it is not enough for us to propose things. congress has to come together and negotiate remarked that brings these reforms in place. -- negotiate framework that brings these reforms in place. >> section 112b2 of dodd frank requires a sign pavement indicating what reasonable steps such member believes the

government should be taking to ensure financial stability yet neither the annual report or any individual member has recommended the senate democrats pass a budget resolution. >> that is true but it would be strange if you ask the fdc to tell congress how it would restore fiscal sustainability. there is nothing standing in the way of congress taking more action or some action to reduce these deficits. except that you need both sides to come together on some agreement. >> yield back. >> the gentleman's time has expired. the gentleman from north carolina is recognized for five minutes. >> secretary geithner, you have said today and previously that you and others at the new york fed became aware in 2008 that there were concerns about libor

and it was vulnerable to manipulation. it was essentially an honor system. there were incentives to misreport and there were rumors that that was in fact happening and the new york fed conducted investigations and decided there was a basis for those concerns. and passed along the concerns to the fsa and bank of england as well as the members of the president's working group. but among the documents released by the new york fed is a transcript from a telephone conversation on april 2008 between an employee of the fed and an unnamed barclays trader in which the trader said they were reporting about 20 basis points lower than what it would really cost them to do it. that when it posted an honest libor rate, there was an article that they were coming in higher than the other banks. there is an implication the other banks for also misreporting.

but when that happened, there was an article in the financial times the raised questions about barclays. barclays stock went down so they decided they were not going to report accurate libor any more. he said we know that we're not posting on and on his libor and the reason they did was not to have questions about barclays financial conditions. this was a month after bear stearns and jp morgan chase. did you know of this conversation? >> congressman, i did not believe i was aware of that specific conversation but i did not need to be made aware of that.

the concerns about the structure of the rate and the brought concerns across the market about what could be potentially happening, we saw a sufficient basis to do the things which was -- >> this conversation is not just about the vulnerability of libor to manipulation but in fact, an admission that it was being manipulated. that there were false reports being filed by someone involved in it. i asked chairman bernanke last week, is there any element of criminal fraud that is not committed to in this transcript? >> there is a set of lawyers double answer that question and

you can be confident they will do that but on the basic point, we had a sufficient basis based on what the market was saying was happening. and the way this thing is designed, on which to take the actions we took. >> i understand that. what were you told this conversation or others like it that not just -- it was not just theoretically possible but participants in libor admitted they were misreporting. were you told it was not just a theoretical vulnerability but in fact it was happening? >> i believe that's -- that this was not, we were not concerned of the theoretical vulnerability. we were concerned about the range of different reports that are out there with upper credible. that things were actually misreporting. it was not on the basis of its

theoretical concern that we did the things we did. those reports were plausible incredible and that is why we took the steps we did. >> you said the justice was not part of the president's working group. so you did not report this conversation or any others like it to the justice department? >> i want to be careful about this. my colleagues at the fed are going back to the records but i do not know what the new york fed staff did in terms of who will stay informed about. >> but you did not? >> i did not. >> mr. secretary, you also said earlier that the litigation was certainly possible and they contemplated various lenders to had filed suit or contemplated litigation against the libor banks are having -- got paid too little in inches. are we pursuing claims to get back some of the money that we did not get because libor was artificially low did during that time? i do not know whether we were disadvantaged by this practice. obviously we will take a careful look at that. we also do not know what the net effect was of this behavior

on the prices. as many of your colleagues have said, some people believe that those who borrowed money generally benefited. people who lend money generally did not benefit. it is not clear that is the case but that is subject to a very careful and extensive be viewed by a lot of people. it will take some time for them to figure that out. >> the gentleman's time has expired. to honor our commitment to make sure the secretary gets out on time and to make sure we are getting as many questions as possible, the chair will recognize the gentleman from michigan for three minutes. >> thank you. i would like you to expand and revisit -- i was watching squat box this morning and then saw the crawler. he did go back and revisit it.

i do not know if you had a chance to see it or -- but i would like to get your reaction both here and in debt. if you have any reaction or comment. >> i have not seen those comments to know what he meant. but on the broader question about laying out to this committee the extent of the actions congress has authorized and taken to limit this risk, i would be happy to walk you through that as much as he would like. it struck me that maybe he was getting at the too big to fail element and the question of whether some the ordination -- organizations are too big. >> that is a widespread and against the risk they take. we have forced a dramatic restructuring of the financial system.

congress put in place limits on how large they can get and deprived the government of the ability to rescue them from their mistakes and that is significant ways. if you look at the net impact of those actions on how the market perceives the risk of too big to fail, the market's perception is diminished significantly. i am not saying that is the end of the story. >> i want to touch on the reserves here in the remaining time. you talk about $400 billion increase in reserves and the cost of credit has fallen. it strikes me that whether it is denmark, switzerland, countries out of the eurozone, the united states is color -- is gulliver. it's now we're doing so great but maybe that everyone is such a mess.

i had a very prominent economists who put out an e- mail today to its clients -- his clients regarding those reserves and he was saying reduced access to reserves by the fed was $100 billion and that means there is $100 billion less. i e-mail him back looking to hear his answer but it does seem that his argument is that it runs counter to a lot of the goals, some of those reserve requirements. on one hand, requiring additional reserves yet on the other hand, lowering interest rates for quantitative easing and other things. is it truly a liquidity problem or do we have other issues? >> i would be happy to look at his concerns if you want to share them with me. i think those are combining to different things.

there is $400 billion more capital in the financial system than there was before the crisis. it makes the system safer. >> is that because of the reserves? >> that is the differencing. i think you are referring to a question about access reserves in the banking system and what that does. but i would be happy to take a look at his concerns. >> i appreciate that. people may be put that down in writing. thank you. -- we will maybe put that down in writing. thank you. rex secretary geithner, there has been a request from some of my colleagues to see if we can have an equal number of members on this side ask questions. we would like to ask you to stay for an additional three minutes. the chair recognizes the gentleman from texas. >> thank you, mr. chairman. you indicated that the economy

is in much better shape now than when the president took office. i am bringing this to your attention notwithstanding libor and fsoc because if you're not very careful, the fatuous will be perceived as fact. i think it important for you to reiterate the condition that this economy was in when we took office and juxtapose that to where we are now so we can move forward with a much better opportunity. i would like to yield time to you to please -- do not allow the fatuous to become fact. >> we have a long way to go. we have to be honest and open. the u.s. economy was shrinking at an annual rate of 9% in the last quarter of 2008. we are on the verge of a plausible chance for the

american financial system to collapse at that time. trillions of lost well in six months later -- lost wealth and six months later, the economy was growing. the economy has been growing for three years since. not fast enough. the reason is because of this combination of concerns you are all aware of. europe is hurting us, spending is declining, not increasing by the government, and people have been bringing down their debt and try to fix some of the problems that got us into this mess. we have a long way to go but we are definitely in a stronger position. >> to be more specific, we have incredible people say incredible things and i'm sure you're aware of the statements. we were about to lose the american auto industry. i think you agree.

do you agree that the auto industry is in a position now that it is coming back? >> i do. >> at that time, the president came into office, the financial system was almost in collapse. do you agree that it has been stabilized and that it is now in much better shape than it was when the president took office? >> absolutely. >> when the president took office, the you agree that economic uncertainty -- do you agree that economic uncertainty was to the extent that banks would not lend to each other? >> that is true. >> which is why you cannot structure a deal with banks to save the auto industry. because the banks would not lend to each other. there were not about to salvage an auto industry when they were trying to salvage themselves. true? >> true. there is no private market

solution to a financial crisis like be faced. >> for those who want to lay all of this at your feet, i have heard the term black swan that debt. >> absolutely, yes. let the debt, has expired. thank you for your time and testimony today. some members may have additional questions which they may wish to submit to you in writing. this hearing will remain open for an additional 30 days for members to submit written questions to secretary geithner and for you to replace -- to place responses in the record. this meeting is adjourned. [captioning performed by national captioning institute] [captions copyright national cable satellite corp. 2012]

>> tomorrow, the cato institute will look at the origins of government and how policy is created. coverage starts at 9:30 a.m. eastern on c-span two. tomorrow, the white house drug control policy director

discusses obama administration efforts to combat drug trafficking in the americas. the white house shifted strategy in 2010 to focus on prevention and treatment and less on law- enforcement. our live coverage begins at 10:00 a.m. eastern on c-span. assistant attorney general for civil rights testified on the justice department's approach to enforcing civil rights laws. in the past year, the civil rights division has filed suits against a number of states for new voting requirement including florida for perching the voter rolls and pennsylvania for a new voter i.d. requirements. this is just under one hour. >> good morning. we welcome you to this civil rights division oversight hearing. without objection, the chair is authorized to declare a recess of the committee at any time.

last year marked the 150th anniversary of the civil war. it was a chance not only to reflect the horror of institutionalized slavery, but a reminder to all free people never to cast doubt on the humanity of any of our fellow human beings. and, to take solace in the least one reading and recognition that we fought our bloodiest war to end that tragedy. today, and soldiers risk their lives for human freedom, beyond our borders. as election 2012 nears, the division voting section must ensure that those defending democracy abroad can participate at home. there are approximately 2 million military voters, many in combat zones with limited access.

accordingly, in 2009, the empowerment act was passed, which requires states to mail absentee ballots and least 45 days before a federal election. at april 18 hearing before the committee, experts testified that inadequate enforcement of the move act in 2010 disenfranchised thousands of service members. this year, it is imperative the justice department address them negotiate strong settlements that deter repeat offenses, and work with the defense department to insure recruitment centers and bases offered the opportunity to request ballots as required by law. unfortunately, the justice department seems unconcerned about legislation rates, even though it is aggressively suit states where they think welfare offices have been insufficient registration.

similarly, in north carolina, there are 110,000 active-duty military and spouses, but only 1860 requests for absentee ballots have been processed. 110,000 active-duty military spouses, but only 1860 requests have been processed. in virginia, there have only been 874. height of the military voting rate averages 1%, or there is a systemic problem of the end the almost certainly falls on the civil rights division. the justice department should also insist on express mail where necessary to ensure that the returns in time.

the voting section regularly imposes far heavier costs on jurisdictions, for example, demanding bilingual ballots for naturalized citizens even who identified as speaking english well. it must be the first priority to protect service members rights to low -- to vote. indeed, it is seeking headlines opposing voter i.d. laws that an overwhelming majority of americans support. the civil rights division is so desperate to block these laws it has in. itself in accord. the department of justice case against the texas -- in. itself in court. the department of justice's has a case against the texas -- the state of texas, that the trial, shock was expressed in counting military ideas -- id. there is no excuse for failing to except the government-issued military i.d., and the public

deserves an answer for this today. further partisan bias is clear in the national voters registration act enforcement, aggressively suing states for now -- for not aggressively enough registering voters at welfare offices, but not a single case to fight fraud. when ford tried to comply voluntarily by removing non- citizens from its boulder roles, and the department of justice rushed to course -- rushed to court, and lost. over objections, the department of justice forced dayton, ohio, to lower the passing score on the police recruitment exam to increase diversity even though federal law prohibits altering

the results of employment-based tests on the basis of race. it appears the division is breaking the law. further, the civil rights division requires taxpayers to pay for costly bilingual ballots, even though it really exempts motors educated in pr from once prevalent -- voters educated in puerto rico from once prevalent literacy tests. i could go on. with that, i will now yield to the ranking member for his opening statement. >> thank you, chairman. today, the subcommittee continues oversight of the civil rights committee of the department of justice. with the authority to enforce civil rights laws, the division is the guardian of fundamental values -- freedom of religion, the right to be feeding trivet, the right to a job, a home, and education, and the right to live one's life free from the threat

of violent hate crimes. it is auspicious and we are meeting on the enactment of the disabilities act anniversary. that notes the work of the disability rights section. as our subcommittee has documented, they were equally troubled during the bush years. career civil rights attorneys were routinely overruled by political appointees. hiring was illegally politicized, and in some areas grossly neglected, and morel was as bad since anytime in the division was established. president obama signaled a new era by appointed assistant attorney general tom pariahs. he is a career civil rights lawyer and has worked -- attorney general tom per -- thomas perez. he has been rebuilding a decimated and demoralized office, and has done so while dealing with fundamental test such as redistricting. the division as an important

story to tell. whatever the policy, the justice department has worked hard to meet the civil-rights challenges today. some of the same people undermining the division while they are there have now made a career of making false allegations, all of the same subtext, that they are favoring minorities to the detriment of whites. the division is making an effort to enforce laws they really do not like it is a willie horton campaign, care and simple. -- pure and simple. we see the enactment of various devices having the purpose and effect of preventing people to exercise their right to vote under the pretext of protecting

the integrity of elections. this is not without precedent. in the past, literacy tests have been used to keep people out of the polls citizens whose voices those in power did not want to hear. in our day, -- the requirement of particular voter idea that we know some segments of the population are less likely to possess and other devices being implemented around the country. the pretext, and there is no word for it, has never stood up to scrutiny. even when now where a voter i.d. law is challenged in pennsylvania, the state has admitted there had been no investigations or prosecutions. the parties do not have direct personal knowledge of such investigations. the parties are not aware of the in-person voter fraud in pennsylvania and not have personal knowledge of voter fraud elsewhere. pennsylvania will not offer evidence that it has happened in pennsylvania or other.

the commonwealth will not author -- offer evidence that it is likely to happen in 2012 in the absence of the voter i.d. law. i like to enter that into the record >> without objection. >> thank you. >> why have the voter i.d. law at all? the answer comes from the recent commenting that voter i.d. will allow governor mark -- governor romney to win pennsylvania. boater idea, which will allow governor romney -- voter i.d., which will allow governor romney to win pennsylvania. could we go to the video? >> we are focused meeting obligations. pro-life legislation, don. voter i.d., which is going to allow governor romney to win the state of pennsylvania, done.

>> so, i do not think it goes too far to demand the civil rights division gives close and careful scrutiny to any voting changes likely to disenfranchise voters. there is a strategy to disenfranchise voters for partisan, political purposes, and it is the most widespread campaign since the jim crow era. if civil-rights laws mean anything, and i know not all members voted to extend the voting rights act, we have an obligation. to many americans have given their lives for us to allow it to be taken away. the police must use all the tools available to make communities safe. i can report that new york's finest does an outstanding job, but they must obey the law and the constitution and respect the rights of the communities they are sworn to serve. policies seem to crossed the line.

the vast majority of individuals are stopped when done nothing wrong are sent on their way. these are disproportionate for communities of color, who fear they are under siege radin being protected. the settlement was announced the new orleans police the park. it is to the division's credit we have seeing this through to this resolution. i hope to hear from the assistant attorney general thomas perez about efforts to ensure that those charged with enforcing the law, around the country are themselves complying with it. i join you, mr. chairman, in welcoming assistant attorney general thomas perez. >> thank you. without objection, of the members of opening statements will be made part of the record. assistant attorney general thomas perez is here today to

testify. thank you for being with us. >> it is an honor to be. >> mr. thomas perez became the assistant attorney general on october 8, 2009, prior to becoming -- 2009. he served as secretary of the department of labor legislation. he served as a career prosecutor in the civil rights division. he went on to serve as director of the office for civil rights department of health and human services. his extensive -- in addition to his extensive service, he asserts the special counsel to the late senator edward kennedy. he is a graduate of the harvard law school and holds a bachelor's degree from brown university and a master's in public policy from the kennedy school of government. he resides in maryland with his wife and three children. assistant attorney general, we look forward to hearing your testimony. again, i welcome you to the hearing. mr. thomas perez's which instead will be entered into the record in his entire the, and i would ask you to summarize your

testimony in five minutes or less. there is a timing light on your table. when the light switches from green to yellow, you have one minute to conclude testimony. when it is red, you're five minutes have expired. before i recognize the witness -- [inaudible] >> before i recognize the witness, it is tradition that he be sworn. if you would stand. >> sure. >> do you solemnly swear the testimony you're about to give is the truth, the whole truth and nothing but the truth, so help you god? >> i do. i recognize mr. thomas perez. did not forget the microphone but did >> thank you, chairman franks, ranking number nadler. in the years since i last. before the committee, the civil rights committee has continued

vigorous informant -- enforcement of civil rights laws. it is fitting on the 22nd anniversary of the ada, a land mark bloc. 20 -- law. 22 years ago i was working in the civil-rights division as a career attorney. i want to thank you to the former chairman of this distinguished committee of wisconsin for his and his wife's on wavering commitment to disability rights, and i commend him for leadership in the reauthorization of the voting rights act. civil rights as a bipartisan history in this committee, in this congress and across america. thanks to the talented career attorneys and support staff to work in the division, we continue to achieve great successes in protecting the civil rights of all individuals. the me give you a few examples. two days ago, in new orleans, doj announced no sweeping police reform case in the department's history, which

serves as a country as a blueprint for sustainable reform, and we are handling more cases of this nature than any time in our history. the last fiscal year, the division filed hate crime charges the result in the been the conviction of 39 defendants, the largest number in more than one decade. we brought more human trafficking cases than any other four-here. in the department of history. -- four-year period. we can build 27 new voting cases in the last fiscal year. we have never handled more cases until this fiscal year, which is not yet done, in which we have handled 36 new cases. in the last three years we participated in over 40 disability matters in over 25 states to assist people with disabilities to live in community-based settings, working with republican and

democratic governors in georgia, virginia and delaware to dramatically expand opportunities for individuals with disabilities to thrive in committee? the settings. we achieved the largest recovery in the sexual harassment act. we resolve the the lending settlement was cut to ally financial, a one of the $75 million -- a $175 million settlement with wells fargo. we reached an agreement with colorado to provide interpreter services in court proceedings with -- for individual a limited english proficiency. we're working with other states on this issue as well. we are protected the rights of the diligence to worship and assembled in accordance with their religious beliefs. last week, we obtained a court order under the

institutionalized persons act and the directing rutherford county, tenn., allowing moscow to open. a few weeks earlier, a grand jury indicted an individual from making a threat against that mosque. we aggressively enforce the rights to protect service members, filing 39 cases, which exceeds the 32 cases filed under the previous administration. we have obtained records released for service members who have been victims of unlawful foreclosures. we protected the voting rights of service members to the enforcement of the move act. we filed more cases in the 2010 election cycle than any other time in the enforcement. 14 matters, either lawsuits or settlements. this year, we have filed four more -- alabama, california, wisconsin in georgia for noncompliance with the move at, and legislative proposal we have offered to strengthen those. i'm proud of these accomplishments, which represent only a small fraction of our work.

these cases are about real people in communities who have been denied access to real -- equal opportunities. it is about the students in school district in minnesota, where a south philadelphia high school who were victims of pervasive bullying. when the basic rights of every parent and student is that their student should be safe in school and have a safe learning environment. as a result of our a landmark agreement, the students can now feel safe and focused energies on learning. is about helping the worker who was fired after telling her employer that was wrong to deny jobs to u.s. citizens and workers with permanent work authorization and give those jobs instead to temporary workers -- two people with temporary work visas. in some cases the weeks and opportunity for a few people. and others might be hundreds of thousands or more. this job is a sacred trust and i am proud of the work of the dedicated career professionals in the division. we have made great strides in expanded opportunity and a

number of critical ways, but civil rights remains the unfinished business of america. we will continue to use all the tools in our arsenal so that all individuals enjoy the rights guaranteed by the constitution and laws of the united states. thank you for this opportunity to be here. i look forward to your questions. >> thank you, mr. thomas perez, and i appreciate your testimony. i will begin questioning by recognizing myself for five minutes. >> protecting the rights of those who protect us to vote seems to be something the american people strongly support. some states consistently failed to give balance to military members in the elections, systemically disenfranchising military voters, breaking federal law, and disenfranchising again those who protect us. in 2010, 14 states and counties

that failed to get ballots out to their states deployed military. new york alone failed to meet the deadline for 43,000 military voters. the settlement doj reached the state's only perpetuated the problem, since they did not provide sufficient time for the balance to be received before the election and mailed back in time. worst, mr. perez, you have opined that ballots filled out after the election, which is when many military members received your ballot are invalid. this the administration has continued to disenfranchise voters. is that perhaps because the military tends to vote heavily republican? i would think you suggest not what is your staff doing to ensure all states is meeting deadlines for getting deployed military voters their ballots in time to come? >> thank you for your question. i categorically disagree of

your characterization of the work we have done. when the move act passed in 2009 we immediately went to work off, and when you look at the work done in the play 10 cycle that was the most aggressive enforcement of laws protecting military and overseas voters in the history of our division. there were 14 matters we brought either through lawsuits or through out of court settlements. in some cases, there were dozens of people who were deprived, in your, as you correctly point out. there were tens of thousands. it did not matter. every military and overseas boater has the right to receive their ballots in a timely fashion, and we were able to get that released. we continued the work because this year we have already filed four additional lawsuits, and we'll continue to aggressively enforce those laws. after the 2010 cycle, we had a productive.

in another committee of the house in which we debated lessons learned from 2010. >> what commitment to you give the subcommittee that you will take proactive action against jurisdictions who fail to meet deadlines for getting baluster deployed service members who requested them and are at the mercy of the state to receive them? >> we have been working proactively on the issue and we will continue to do so. we will also work in partnership with the voter assistance program and the department of defense, who plays an important role in ensuring that military and overseas boaters can exercise their right to vote. i completely agree with what you said, mr. chairman. this debate in this country, what we should be doing in this country is continuing to have this debate about the future of our nation, and then when we should be doing is making sure that every eligible person has the right to vote. that is why we put so much time into the move act enforcement, and when somebody says somebody is a republican or democrat,

that is offensive, irrelevant, and it will not play into the work that we do. >> but there is a systemic issue. let me move on, if i can't i will read an opening paragraph from october, 21st, 2011 -- "top justice officials invited lives on this -- invited his longest -- islamist advocates who lobbied them for a legal definition of racial discrimination. the civil rights lawyers on top of the line. i say this with potter honesty. i know they could come up with a way. to redefine criticism as discrimination says a female egyptian american lawyer, you then responded "we must continue to have the open, honest and critical dialogue you saw in a robust debate."

perez responded, i have concrete thoughts in the aftermath of this." what were the concrete thoughts after the meeting with among others the leader of an unindicted co-conspirator organization, after sharing a blatantly unconstitutional proposal to destroy first amendment free right speech of americans by outlawing criticism may be religion? according to the article, and no one at justice including you objected to this call to abrogate free speech. americans would be shocked to learn that you discussed ways to take away americans freedom of speech. will you tell us today, and i apologize for having to hurry, that this administration's department of justice will never again entertain or advance the proposal that criminalizes

speech against any religion? >> i am not familiar with the context you described. >> you are not familiar with the meeting? >> i would need to read the article to understand the context. when i can tell you is the department of justice aggressively his forces all of the civil rights laws, including laws that protect religious freedom. >> point of order, mr. chairman. >> my time has expired could >> the gentleman state his point. >> we have not seen that article, either, and we think it behooves us before accusations are made, or at least the same time yet physicians are made we see the article, the context, and we know the -- we are talking off. >> fair enough. i would place in the record

without objection. the "daily caller" article. i will place that in the record without objection. with that my time has expired. i would recognize the ranking member. >> thank you. mr. assistant attorney general, the new york civil liberties union conducts an annual analysis of the new york's police apartment stop and frisk procedures. last year, the nypd stop and interrogated over 685,000 times, a more than 60% increase since 2002, when there were only 97,000 stocks. nine out of 10 people were innocent, and neither arrested or ticketed, and 85% were black or latino. they were the target of a hugely disproportionate numbers of stocks. past month, advocates and elected officials advocated for review of these policies. do we expect federal review of stop and frisk practices and of

their alleged, and i was a definite and systematic violations of the civil rights of people in new york city? could we expect federal review? >> ranking member never, we are aware of those allegations. -- nadler, we are aware of those allegations. i was in new york and we have received requests to investigate this matter not -- and are in the process to review these requests. we have been at the police practice program. we more civil police practice investigations that are currently under way than at any time in our division's history, and i mentioned new orleans >> i noted you mentioned new orleans -- new orleans. >> i know the you mentioned new orleans. last december, we urge the investigation. do at the time frame as to when we may hear about that? >> it remains under active review.

i cannot give you a specific response date. obviously, there are a lot of components in the department. >> thank you. a number of years ago, four or five years ago, we held many, many hours of public hearings on the question of the renewal of the voting rights act, specifically section 5 of the voting rights act. some people said and the congress decided to the contrary that section 5 was not necessary because states and localities did not discriminate, and it was unfair in that it only covered certain local jurisdictions they stem their record is commission prior to the voting rights act and did not cover others. this was all ancient history with no current relevance. i note that there are a number of people saying the same thing again.

of course, after those many hours of hearings we came up with a voluminous evidence of current discrimination and congress in both houses passed the reno and president bush signed it. could you -- a renewal, and president bush signed it. could you comment on the current necessity of section 5, and on the fairness of singling out some but not all jurisdictions? >> sure. thank you for your question. at the outset of my testimony, i acknowledged of this testimony -- on this anniversary of the ada important contributions of the former chair of this committee, and i have read his testimony in connection with the reauthorization of section 5, and if my memory serves me he said something like it was one of the most luminous records ever developed in his 25-plus year history of serving in the united states congress, and that record that the congress for early developed is a record

the continues to be borne out. in short, section 5 continues to be necessary. i look at the time since last september, where we have interposed 14 objections, whether in the context of an administrative review process, or in the context of cases that were filed before a three-judge panel. some cases involved state-wide, and in some cases may involve local jurisdictions. it continues to be necessary. the other thing, congressman nadler, that is important to underscore, is that not only is it necessary, but if there is a jurisdiction that believes there is no longer a bailout -- i believe there have been 36 since 1984, and 18 have been in the last three years.

>> i one more question. it is the 22nd anniversary of the enactment of the ada and i tremendous -- i applaud the tremendous work for making it a reality. in the past several congresses there have been proposals that would require notification of public accommodations before bringing a lawsuit under title 3 of the ada is the justice apartment point of position -- ada. the is the justice's -- justice department's position? >> as you correctly point out, we are very committed to protecting the rights of people with disabilities, however in those particular cases that are giving rise to that legislation, we believe that it would burden people with disabilities seeking full access to the courts. title 3 of the ada is the public accommodation provision, and as currently written we think it strikes the right

balance, so this particular proposal is not necessary. >> thank you. i yield back. >> and now yield to mr. jordan. >> thank you, mr. chairman. i would be happy to yield to the chairman. >> thank you, sir. i apologize in trying to beat the clock. let me recap on that one. will you tell us here today simply that this is administration, the department of justice will never attain or advanced a proposal that criminalizes speech against any religion? >> as i said before, you referenced as context -- >> let me ask a new question. will you tell us that this is ministrations department of

justice will never entertained or advanced a proposal that criminalizes speech against any religion? >> again sir -- >> that is not a hard question. >> actually it is when you make threats against someone. >> i am asking you, will you tell us this department of justice will never entertain or advance a proposal to penalize speech against a religion? >> again, sir. if you have a proposal you are considering, we will actively review the proposal could >> ok, i'm asking that you -- proposal. >> ok, i am proposing that you answer this question. will you tell us the department of justice will never entertained or advance a proposal that criminalizes speech against any religion? >> again, sir, if you give us the context. >> i will not yield.

>> you are not interested in an answer then. >> i if i rephrase the question coming you might get a answer. >> i appreciate that, but i will ask my questions, and you will ask your. >> i'm trying to get an answer to a fairly basic answer here. if the department of justice cannot answer the question of whether they will entertain or advance a proposal that criminalizes speech against any religion, then it is pretty late in the day. i will change questions here. mr. perez, this house passed the federal hit crime legislation in october, 2009. how many hate crime prosecutions has your division brought since the passage of the act?

>> since the passage of the act, 11 cases have been brought, involving 38 defendants. 16 have been convicted. 22 are awaiting trial. >> all right. that seems to contradict information we got from cra. >> i'm happy to work with you to provide -- >> could you give us a report including ongoing cases including short summaries of each? >> i would be happy to do so as soon as possible. >> any estimation? >> again, we will do it as soon as possible. >> all right. i will tell you that our staff did staffcrs to get this information in advance of this hearing, and the doj representative said there were

approximately 300 cases brought, but they refused to give the information to crs. this must be correct or incorrect information, but it is public record, and they urged us to ask congress to conduct oversight. that seems outrageous to me. do you think this was an approach response to that request? >> our staff would be happy to work with your staff to the hate crimes prevention act is critically important -- staff. the hate crime prevention act is critically important. we have had many investigations. we are proud of those cases. we would be happy to work with your staff to get you the necessary information, so that you can make assessments based on the facts. >> thank you for coming, mr. perez.

i yield to the ranking member of the full committee, mr. conyers. >> thank you, mr. chairman. here,ry pleased you are mr. assistant attorney general. i will yield to the ranking member of the subcommittee, jerry nadler. >> thank you. i want to rephrase the question the chairman asked differently. first of all, hate speech and hate crimes are different topics. i assume the department would make a commitment, that you are not going to offer a proposal to criminalize protected speech, criticism of the religion, or of anybody else, other than in the context of a direct threat. >> we will do this working the

way that we have always in a way that is consistent with the constitution. >> which means you can not criminalize hate speech, other than with a direct threat of violence or something like that? >> as a matter of fact, the hate crime laws whether by force or threat of force in candidates or intends to intimidate someone on the basis of color, class. >> so, short of intimidation and threat of violence, you are not endorsing the concept that says you cannot criticize someone's religion or anything else? >> we strongly support the first amendment, and at the same time we strongly support the prosecution of people who used threats of violence to on their mind and tear to communities apart on racial lines, sexual orientation lines, religious lines. >> thank you, and i yield back. i think the gentleman. >> you are welcome.

this is an important discussion. we started off on this rapid- fire back-and-forth, and sometimes more -- some of the finer and more substantive parts of what we are talking about get lost. i would like to talk to you about two areas in the few minutes that we have, for me, mr. assistant attorney general, this is an ongoing discussion that we are heading. and in not racing to get all of my questions in to you -- i am not racing to get all of my questions into you. your office and the whole department have been available to me, and i assume other members of the committee, for whatever purposes that we want. this is not a race against the clock to see how many questions and answers we can get in in a

five-minute period of time, when we are talking about constitutional rights. my subject issues, the boater issues, and the attempt on state levels about making voting more difficult. i would like to give your impression -- get your impression of what is going on in this climate leading up to the important november vote of 2012. could we discuss that a bit, and give me an idea of how you're part of the department and the whole department of justice is approaching this

subject? >> sure. again, our philosophy and our approach here has been very straightforward. we want to enforce the laws, we are enforcing the laws and we are doing so in a fair and independent way. as i said to the chair before, there is a robust debate in this country, and we welcome that debate. that is the essence of democracy. we continue to have that debate and we make sure we do our level best to make sure every eligible voter on the first tuesday in november could cast his or her ballot and have access to the ballot, and that is why we have done more work than ever on behalf of overseas brokers. that is why when the facts call for them we will interpose objections on the voter i.d. laws in texas and south carolina because in our judgment the facts supported them.

i agree wholeheartedly with the views of the former attorney general who talk about voter identification laws and said earlier this year the supreme court referring to indiana adopted the department's views that voter ideologues are not unconstitutional -- id laws are not unconstitutional, and held many say flaws. the same time, the court acknowledged the undeniable fact that they could burden some citizens' right to vote. it is important for some states to implement and administer such laws in a way that minimizes the possibility, and it is important for the department to do its part to guard against this possibility. we will not hesitate to use the tools available to us including the voting rights act if they are used to improperly denied the right to vote out. i completely and utterly to

agree with him and evan bayh is our approach. >> i will contain -- and that in bodies of our approach. >> i will continue that discussion. >> thank you for your time. >> thank you, mr. chairman. >> thank you. mr. scott, you are recognized for five minutes. >> thank you, mr. chairman. mr. perez, when southern states hospitals were segregated, and were integrated because president johnson conditioned the receipt of medicare and medicaid on a policy of nondiscrimination -- is a policy of nondiscrimination without exception as a condition to receiving federal money still a good idea? >> i am very familiar with title 6 with prohibits nondiscrimination on the basis of race, color and national origin.

we have a section that aggressively enforces title 6. >> what about religious discrimination? >> as we have discussed before, the administration continues to be committed to insuring that the partner with organizations in ways that are consistent with both the law and our values. we will continue to evaluate issues that arise on a case-by- case basis. from 1965 until 2001, there could be no religious discrimination when receiving federal money. was that a good idea? >> we respect the judgment of congress in we enforce the judgment and the laws and regulations that are in place. that is the job of the department. >> it is a good idea to discriminate, do you agree? >> i think we have had this conversation a couple of times.

we will continue to have this conversation. we will make sure that we enforce the laws in a matter that is consistent with both the constitution and our values. we will continue to evaluate these questions and they are important questions can challenging questions and we will continue to evaluate how the fact apply. >> if a faith-based organization were running a government program, could they have we do not hire catholics in jewish people? >> again, we are -- we have had many conversations about anti- discrimination laws and we have been forced cases involving discrimination based on religion and the appointment context and in the other contexts where we -- other contexts. >> i am confused.

can an organization have a policy that they did not hire catholics in jewish people with federal money? >> we are having this conversation with you about how to treat the issues of ensuring that we partner with faith-based organizations in ways that are consistent with all of our laws and values and -- >> to the laws that you are in forcing prohibit discrimination or allow discrimination with federal money -- could an organization have a policy we do not hire catholics and jewish people with federal money? >> every situation is specific. we have prosecuted -- brought civil suits involving discrimination based on religion and we will continue to evaluate specific facts -- >> faith based organization with federal money has an articulate

a policy we do not hire catholics and jewish people -- >> we will evaluate the full context of every case that we have and we will make the appropriate judgment. when the facts demonstrate that there are instances of discrimination, we will take action. >> is it true that your policy is that if faith based organization can have been articulated policy not to hire catholics and jewish people but still receive federal money? >> we look at particular situations and we evaluate the specific facts and make the appropriate judgment as to the application of the fact. >> are you ashamed of saying yes? >> every case is specific. just when the chairman asked me about other cases, every case -- >> what is the barrier to discrimination by a faith based

organization? what is a lot that prevents them from discriminating? >> do not understand. >> if a group is taking federal money, what blocking you apply that prevents them from discriminating from having an articulate a policy not to hire catholics in jewish people? >> we would have to look at the circumstances of the case to determine whether there is a -- whether an agency of that particular office might be able to take a look at that or whether there is a lot of more general application. >> thank you. i recognize the gentleman from iowa. >> thank you. i appreciate being recognized and i appreciate your testimony. i cannot help but reflect back on some dialogue that took place in this committee between a

former member from new york when he asked along the lines of the gentleman from virginia is there a particular christian way to ladle soup? i said yes, there is. he is kristin within the context of the gentleman from virginia. i know he takes that in the vein is delivered. i would like to take this opening video that you viewed the was delivered and the statement that if there is voter identification, romney wins the presidency. make this poinsettia that what that says is you have an election -- make this point that this says that these are legitimate 0 voters in the republicans win and the democrats lose. that is how i heard that video. that is my statement. i will not ask you to comment, but i ask you to comment on something else that we have

seen. that is the video of the young gentleman going into the polls in virginia and asking for the attorney general's ballot. did you see that video? >> i have not. >> -- >> i read about it in the newspaper. >> does it trouble you? >> again, i believe it is is in the district of columbia. you referenced virginia. >> happily corrected with the detail. does it trouble you that a young man can walk in and be >> the individual did not vote, and the question presented is what is the extent of voter fraud in the united states. in the context of the litigation, i cannot comment too much -- much --