aig. mr. chairman, it's clear that american people never to be repaid these dollars. i'll try to--did you hear me okay now? you can't? okay. now -- okay. i will focus on this microphone this time. usually the problem is, i'm too well heard. right, mr. chairman? >> generally. >> today we will have an opportunity to ask questions and the american people will have the right, and i believe will receive, straightforward answers. so far, mr. chairman, this is what we know. enal role at some of today's in the decision to bail out aig rather than allow the normal bankruptcy procedures to run their course. we know that one of today's witnesses made the decision to pay aig counterparties at 100 cents on the dollar. we know that one of today's witnesses was the primary architect of the aig trust agreement, whereby, the taxpayers investment in aig is managed not in the interests of the u.s. taxpayers, but of the united states treasury department. that was from previous testimony, and we rely on that t

we didn't rescue aig. we intervened so that we could dismember it safely wrought it wre -- without it wrecking the country and the system. i think the big mistake we made as a country and there are mistakes that we have to reflect on deeply for a long time, were why the government didn't act sooner to limit risk taking, why the government didn't provide competent authorities with the ability to contain risk taking and why we didn't have in place the kind of tools we had for a long time for banks to try to deal with these kind of failures. i think those were tragic mistakes. the lesson of financial crises is if you don't act sooner, things get to the point where they can cause catastrophic damage. and if you let it -- if you stand back and hope it will burn itself out, correct itself, it will be a good healthy adjustment for the economy, that can cause enormous damage. and it will cause enormous damage not just to the american lives and people who will be living with for a long time, but to the revenue base

we didn't rescue aig. we intervened so that we could dismember it safely wrought it wre -- without it wrecking the country and the system. i think the big mistake we made as a country and there are mistakes that we have to reflect on deeply for a long time, were why the government didn't act sooner to limit risk taking, why the government didn't provide competent authorities with the ability to contain risk taking and why we didn't have in place the kind of tools we had for a long time for banks to try to deal with these kind of failures. i think those were tragic mistakes. the lesson of financial crises is if you don't act sooner, things get to the point where they can cause catastrophic damage. and if you let it -- if you stand back and hope it will burn itself out, correct itself, it will be a good healthy adjustment for the economy, that can cause enormous damage. and it will cause enormous damage not just to the american lives and people who will be living with for a long time, but to the revenue base

aig, correct?he insurance companies that were on edge, they weren't bailed out. >> that's not true. maybe this is helpful to go back a little bit. when aig came to us that weekend, remember the fed is not there regularly. they had no responsibility of authority over how they ran their business. that was the province of other regulators. it was inconceivable to me that this was a problem we would have to try to solve. we have all the people we could including the commissioner and his staff and other people could look at. >> did you bail out the life insurance part of aig? did you bail out the life insurance arms of aig? >> i wouldn't use that term. the actions we heard. >> did you bail out the health insurance part? >> the actions protected those companies from the risk of failure. >> the testimony we received previously from those looking at those arms was that they were substantially sound and the catastrophic effects that you list, we would have all been concerned about. >> i disagree kpleemtly.

so just four days after aig was drawn into that crisis the aig crisis, we extended aig a line of credit secured by its insurance businesses. in return, the taxpayer took about an 80% stake in the company and began the process of restructuring management and the board and the firm itself. that initial action helped stem the bleeding for a time but given the massive losses aig faced and given the force the storm moving across the global financial system, it was not enough. and we had to work very quickly, almost from the beginning, to design and implement a broader, more permanent restructuring. aig needed capital, not just a line of credit. and aig's vulnerability to future losses to the bleeding of cash had to be reduced. on november 10th, the federal reserve and the department of the treasury jointly announced a series of steps designed to stabilized company. the treasury invested $40 billion of preferred capital under the authority congress provided the executive branch under the t.a.r.p. and the federal reserve helped establish and fund two entities called maiden lane two and three t

they really did not seek aig coming. aig is a terrible illustration of how firms can exploit loopholes in our financial regulation. aig, which is a fascinating history of its own at this point is a series of very strong insurance companies on top of which has been built a casino and the casino is where people are betting on the default of other companies, and it turns out that they've taken a lot of bets that the house doesn't have enough money to pay off the people who placed bets. >> host: because they were counting on the good credit rating of the insurance company basically and when they lost that they were in trouble. this clause of the couldn't borrow money and they didn't have enough money, they hadn't set aside enough money, and they're our counterparties, the people who placed the vets where every big name in banking they could -- goldman sachs, deutsche bank, all of them. and from what i know, it was only on the friday before that weekend that they realized aig may actually be a problem, and i described in the

subsidiaries, protected policyholders in an aig bankruptcy, why was it necessary to bail out aig with taxpayers money? based upon the testament of the drug other national association of insurance commissioners. >> i respectfully disagree with them and i agree the biggest so you disagree with all his years of experience? >> i would say many people with years of experience have some regular response was with regard to energy, but this company was at a huge problem. and it is case number one on what is wrong with the regular tour system, there was no single regulator that had a line of sight on the total company. so the regulators that look that different pieces of it, and if the company had gone down, it would have been a huge mess? >> against the next he scares the public. we are all scared. he said, if aig was not built out, this country would have collapsed. he intimated our constitution would not have been able to be enforced. there would be a revolution in this country. do you think it is that extreme if we let aig go bankrupt we would've had that kind of collapse and revolutionary

aig. now, aig isn't a bank. it isn't even an investment bank. it's an insurance company. and what was the fed doing bunning in insurance company? i used to have a fantasy back when i was at the fed if somebody from the staff had walked into my office and said i think we ought to buy a large failing insurance company -- [laughter] -- what what i have said? >> guest: i think there was quite a bit of that at the fed at that time. so, they're stearns and lehman brothers are kind of second cousins of the bank and said understood the business they were in. they really did not see aig coming. aig is a terrible illustration of how firms can exploit the loopholes in our financial regulation. aig, which is a fascinating history of its own at this point is a series of very strong insurance companies on top of which has been built a casino and the casino is where people are betting on a the default of other companies, and it turns out that they've taken a lot of bets but the house doesn't have enough money to pay off people who've priced bids. >> host: because the accounting of the g

we did the same thing with aig. because or partly because we were under this systemic pressure. >> your limits on borrowing apply just to financial firms would insure depositories? or to the whole economy? and if so, what's the philosophical justification for the interference in the right of contract of a willing lender to loan as much money as he wants to, to a borrower? >> banks. the justification is that your right to lend o'barr on an unlimited basis and/or your ability to hold the entire economy hostage begins. multiplied across the economy borrowing without any room for error just results in nationalization. we saw this in the 30. we saw it again over the past two years. and we can't -- one of the lessons of the modern way of creating credit through securities is you can't protect credit from the excesses of speculation just through the uninsured deposits. we have to have some consistent limits across these financial instruments, because these are the instruments of credit. now you still have fluctuation, opti

on one occasion, aig ceo gave mr. geithner at that time documents containing aig's financial condition and his exposures to other financial institutions. we still do not know what treasury secretary geithner at that time did upon learning about the problems with aig or whether chairman bernanke knew about aig's meeting with the new york fed at that time. the fact that the fed may have known about the problems with aig before its collapse raises serious questions here about whether they ignored early warnings and failed to take action on the situation and became unmanageable without tax bailout. madam president, many have said that if chairman bernanke was not reappointed financial markets will remodel. the notion seems to be that continuity of leadership will be valued more by market than the assurance of responsible and accountable leadership of the side here at a buddhist perspective is shortsighted and wrong. it is more important, i believe, to find the most competent person available for the job to simply adhere t

some of the top people at aig are no longer there.ut i think i agree with your sentiment that probably they have not been held sufficiently accountable and most importantly, many of them have been able to still keep large amount of money based on results that they had in 2006 and to thousands 7, which worked -- 2007, which were disastrously reversed in 2008. >> in decapolis country over the united states, what happens if over a long. of time failure is rewarded and capital destruction is rewarded? what does it mean for the long run, mrs. minow? >> bankruptcy. >> for the country? >> for the country. >> professor stiglitz? >> it obviously has a very adverse affect what efficiency of the economy that is why i call the erzatz capitalism -- you socialize the losses and reprivatize the gains and that lead to distorted behavior and that is why a lot of what i've talked about going forward. it is not just dealing with the past, but going forward, that unless we correct the incentive problems at the organizational and individual level we are l

you go on to talk about the insurance arms of aig. this is not the first hearing they had or other committees and you know we are aware of the independence of the insurance arms of aig. we have morris greenburg and the ceo of aig said the problems that came to a head did not originate in the businesses whichry main fundamentally strong. they had the head of the new york state insurance department, superintendent eric daenalo said this. before i go further, i would like to make one critical point. it is important for everyone and especially policy holders in the insurance companies to understand that the insurance companies which are regulated by new york and other states are solvent and have the funds to pay any policy holder claims. they had reserves and you did not bailout the insurance companies of aig, correct? >> yes, but if the parent had defaulted -- >> we go through your answer that if aig had failed, the catastrophic effect of all of the insurance companies that were on edge, they weren't bailed out. >> that's not true. maybe

>> the default by aig. >> not the ones you bought, but the ones that aig was originally covering, whate they? were they, as people call them, toxic assets? were they cbo's? >> they were a lot of assets, and somebody doing business with aig, other parts of aig, including other things -- but to a point, i think the main part of it, cbo-like things. >> you are holding these? >> again, i do not want to get too far over my skis. >> but you answer these in writing afterwards? >> yes, but i believe that we had -- protection to another counterparty, and a squad that protection from aig, so, in effect, we had no kind of equity risk, but we did have a credit risk to aig -- protection to another counterparty, and we had protection from aig. >> since goldman was regulated by the sec, which, again, i think was about 2004, your leverage increases substantially, from 2004 until about 2008. why would deleveraged increase after you became regulated by the sec? -- why would your leverage increase? >> the way we did deleveraged, the way we looked at it, under our regulatory regime -- the way we did lever

to risk that aig.e under% on the dollar? -- 100% on the dollar? >> i never got a request by self -- myself about taking less. it did not come up in any conversation that i can recall. subsequently, somebody in my organization who was going back and forth with -- this was after the ad shi'a, a couple of months later, at the time whenever closing out -- when they were closing out the maiden lane ii, that these contain the inference that he drew, would you be willing to take less? and he said he could not answer that question now. himself, at his level. he then said that it never came back up again to him. and it never came back to me. >> did he further that question up the chain of command? >> i can say that i did not get it. he might have told his boss. >> could we talk a little bit about your interactions with the regulators, in particular, when you think back on the events of 2007-2008, there were obviously a lot of people that participated in risk-management either internally or a externally regulato

chairman, i don't want to take any more time, but the fact of the matter is, aig, aig was 80% owned at that time. by the federal government. >> i want to say, it let me say, and i disagreed with my friend and colleague from kentucky about the conclusion. but i've got to tell you, mr. chairman, going through that period at the time with all the headlines about $168 million in bonuses that went out to aig, and virtually no reporting whatsoever, the counterparty issue. and the fact of the matter we allowed $0.100 on the dollar, with little or no negotiation, i have raised issue with others before. i don't understand that all. most americans don't. that was billions of dollars. and it's just hard to accept the notion that we couldn't negotiate with the counterparts at that time. >> we had no leverage. if we didn't pay off, they would say you're bankrupt. >> but we wrote a check to aig. if we hadn't done that they would've been a troubled. >> to aig but not the counterparty's. >> the counterparts would've been in trouble also. >> that's true, but most of the firms were born. we had no autho

>> i want you to answer elizabeth's question but on h -- but on aig, why shouldn't aig if you are going bay took a greater risk. >> what about fannie and freddie. >> we believe this thing is structured based on the size of the institution and is positioned at those that have seen their institutions become healthier faster in a way that allows us to recoup this money. in terms of fannie and freddie, they are not at an economic health standpointç yet that wod allow us to do that. >> on health care, on the timing of the next couple of days, there seems to be some evidence or suggestion from the hill that maybe this could bleed into the first part of next week but that the white house would like to see some sort of broad outline of a deal done by friday. did you talk about the timing and what's going to happen? >> they will be here at 2:15. i do not honestly know if the could you want to see something done by friday? >> by last august. >> you blew that one. >> in the event, i think that speaks for whether it is friday or monday. >> how -- i want to leap on bonuses. >> back to haiti. who is

aig and included another thing.but to the point, i think the main part of it were cdo-like pools of securities. >> okay. so you were holding such as investments. these were not -- >> actually, we had and, again, i don't want to get too far over the tech technicality -- >> but you'll answer these in writing afterwards? >> yes. but they were, i believe we had given protection to the another counterparty and acquired that protection from aig. so in effect we had no real kind of equity risk, but we did have a credit risk to aig because we were required to perform on one side -- >> sure. >> and we needed them to -- >> so you hedged yourself with aig, is that what you're saying? >> correct. >> okay. the -- since goldman was regulated by the sec which, i think, began in about 2004, your leverage increased substantially from 2004 until about 2008. why would leverage increase after you became regulated by the sec? >> you know, i don't have -- the way we did leverage, the way we looked at leverage under our regulatory regime

in the case of aig, nobody got a haircut.nstead, they were given a piggy bank full of taxpayers' dollars, and said, help yourself. let me just say plainly that i think just about every american would say the government should have forced aig's counterparties to take less money evidently major decisions were made by combination of the federal reserve, the federal reserve bank of new york and the bush treasury gept. tod definite. today we will hear from tn

some of the top people at aig are no longer there.but i think i agree with your sentiment that probably they have not been held sufficiently accountable and most importantly, many of them have been able to still keep large amount of money based on results that they had in 2006 and to thousands 7, which worked -- 2007, which were disastrously reversed in 2008. >> in decapolis country over the united states, what happens if over a long. of time failure is rewarded and capital destruction is rewarded? what does it mean for the long run, mrs. minow? >> bankruptcy. >> for the country? >> for the country. >> professor stiglitz? >> it obviously has a very adverse affect what efficiency of the economy that is why i call the erzatz capitalism -- you socialize the losses and reprivatize the gains and that lead to distorted behavior and that is why a lot of what i've talked about going forward. it is not just dealing with the past, but going forward, that unless we correct the incentive problems at the organizational and individual level we are

let's say you had a member of congress who wanted to make sure that we helped aig accounting. let's say we had a member of congress that wanted to hold another big wall street bank accountable and they decide that this legislative effort to protect the public good ran contrary to their interests, their pocket interests. you could have an ad and again we're looking through this. but the consequence of this decision, you could have an ad run directly against that candidate paid for by aig. this will house those corporate treasuries? >> unlimited number of ads? >> unlimited number of ads and unlimited amount of money anywhere they want in the country. >> so somebody's fighting the drug industry. and they decide to make an example of this candidate. they put $50 million of ads against this person. he loses. how many others are going to go oppose the drug industry? it's poisonous. it's poisonous to our democracy. and you know the court is very cute here in a certain sense. oh, you can't say don't elect smith. but you can say smith's a horrible person. call him up and tell him not t

but the treasury department is not hundred what aig thinks.eaking with the lobby on capitol hill daly, if not hourly. they will always have a connection. it is theçóÑiÑjr mid-list corporations, smaller nonprofit corporations. they do not have enough people in their organizations to fund the pact and make it viable. the chamber of commerce, 96% of the united states chamber of commerce are entities that have 100 employees or fewer. that is not an organization that has existing opinion. if they could ever get money together to speak directly about who should be elected and who should not. host: that rouge, louisiana, republican line. chris, a good morning. caller: this is very complicated from first amendment standpoint, because they are giving corporations the right to do with they do, and the second thing is the ability to spend money, free speech. how can you, both of you, i guess, as individuals, give us your opinion on that point. and the second thing is, if you compare the ability of corporations, especially large ones, to spend, versus the

. >> what about your role in the aig bailout? >> i -- >> sean: only in san francisco a city supervisor vows to drop the "f" bomb at every meeting. >> helen thomas wants to know why the terrorists hate us. >> put away hats and gloves global warming will be here, any day now.ís >> sean: president obama gave no specifics yesterday about what enhanced screening methods airlines are going to use going forward. 1% of those surveyed believe full -- 71% of those surveyed believe full body scanners should be used at all airports. 59% think profiling should be used to identify potential threats. only 26% say profiling should not be used. . >> sean: looks like there is more trouble on the horizon for the democratic party. the "new york times" reporting that democrats are scrambling in massachusetts thanks to the emergence of a dynamic republican candidate in that state and the man responsible for the gop's high hopes state senator scott brown joins me from the people's republic of massachusetts. thanks for being here. >> i'm happy to be her

>> the default by aig. >> not the ones you bought, but the ones that aig was originally covering, whatds of assets were they? were they, as people call them, toxic assets? were they cbo's? >> they were a lot of assets, and somebody doing business with aig, other parts of aig, including other things -- but to a point, i think the main part of it, cbo-like things. >> you are holding these? >> again, i do not want to get too far over my skis. >> but you answer these in writing afterwards? >> yes, but i believe that we had -- protection to another counterparty, and a squad that protection from aig, so, in effect, we had no kind of equity risk, but we did have a credit risk to aig -- protection to another counterparty, and we had protection from aig. >> since goldman was regulated by the sec, which, again, i think was about 2004, your leverage increases substantially, from 2004 until about 2008. why would deleveraged increase after you became regulated by the sec? -- why would your leverage increase? >> the way we did deleveraged, the way we looked at it, under our regulatory regime -- the

it was a political response to aig, but was poorly written. and the senate has never taken up the bill and the last time i looked, the democrats controlled the senate. they realized it was a bad bill. >> as the gentleman yield? >> my time has expired. >> the german from new jersey is recognized for two minutes and 15 seconds. >> i thank the ranking member and chairman with regard to this approach request -- i appreciate the chairman's explanation as to why he thought we should segregate the panels in this matter, but that does not go to the, that i think the gentleman from texas made, that not one up here can remember the last time that they're a minority requested someone to come to the panel to be a witness and the majority refused that appropriate request. as of now, the chairman has yet to fully explain why they refuse the request. as the gentleman from texas point out, they differ from these. they are under government control. the chairman of this committee has recently stated that they are "basically public policy instruments of the gove

especially in the aig case, the famous aig case where they agreed to pay everybody out of power on the cbs's -- sorry, for the job and basically agreed to bail out all the people who were inhofe to aig at 100%. i think they could've easily given them 50%, for example. and it turns out the golden was one of the big beneficiaries, so that's caused all this conspiracy theories. i just don't know if there was a conspiracy. it was a bad financial decision by the government, i think. >> in the more? sure. >> bernanke is being blamed these days for not having seen all this and forestalled its occurrence. after march of this year, barney frank and paul were a dialogue in the kennedy library, and each person's opening statement was comical, i didn't see this coming. which is something to conjure with. and i asked mr. frank if he could rerun the tape, what would he have had in place. and he said well, we didn't have the regulate the things that went awry, cause all this. with those things that were lacking for mr. frank's observation, would they be forthcoming? >> well, to some extent. i think w

gone to aig and union and green initiatives. it's just been a transfer from those productive with it to those unproductive it with. >> stuart: mike, go at it. >> i don't know what history book jonathan is reading but we have a lot of precedent to show us it's the opposite of what he is saying. by definition, for every dollar that government spends, it's a dollar in increased gdp. government spending is a component of our economy. it's part of gdp. you can go back to just in 2008, when we saw the stock market really tank and then we had the stimulus passed at the beginning of this year. guess what? we started to grow again. you could go back to the 1940s when we were spending enormously. far more than what we're spending now. wait a second is. as a percent of gdp. it created vast welt that was passed along for generation. you could go back to the reagan period when spending ran up as a percentage of gdp. >> stuart: that was private money -- >> it wasn't private money. it was deficit spending, stuart. where was it private money? d

the weekend when they let lehman brothers fail and bailed out aig. then you go back to the runner-up of the crisis and proceed more or less chronologically through the whole step-by-step thing, until last summer. now your basic judgment, as i get it, is that many people, including ben bernanke and his predecessor, alan greenspan, should have seen the potential for the meltdown. that happened in the financial system, and acted to head it off. but they didn't. and oncesis happened, bernanke was the right man in the right place. he's something of a hero of this, of this volume. so let's start by talking a little bit about ben bernanke, and why you think this was true. what did he learn from being a scholar of the great depression, for example? >> guest: well, ben bernanke, when he was a student of economics at harvard and mit, became very interested in the work that the great economist nona friedman and anna schwartz did, that basically pin the blame for the great depression on the federal reserve. that the federal reserve was too tight with credit, at

aig lost 17.5 years of its profits in the last 18 months.reddie mac lost in them and .5 of profit. a little bit more than a year. the point of trying to make is the ridiculousness of what's going on in the leverage that was in the system, the key problem of the system is the leverage. we must regulate that leverage. my third point that i will talk about briefly here is an entry. with five and half trillion of outstanding debt and mortgage-backed securities, the quasipublic are now in conservatorship fannie and freddie have obligations that approached the total amount of government issued bonds the u.s. currently has outstanding. there are so many things that went wrong or are wrong at the so-called gse's that i don't know where to start. first, why are there two for profit companies with more shareholders charitable foundations, and lobbying arms ever given the implicit backing of the u.s. government? the chinese won't buy them anymore because our government won't give him the explicit backing. the u.s. government cannot get in the explicit

we will have live coverage on c- span3, oversight of federal aid to aig.go-ahead, independent line. caller: please, i am a little nervous. give me a chance to explain myself. i would like for the president to come out and not ask any more but to demand that the republicans and a republic -- democrats pass the senate health bill. we, the people, we need it. you have not had any help from the democratic party. in fact, so many of them ran for president and lost, they don't want to see you succeed, either. please tell them if they don't, we the people -- they will not be there the next. massachusetts, massachusetts sent a message back to you, mr. president, they love you. they sent a president to your own party that if you did not think enough of ted kennedy's seat to come out and fight for id g-8 -- fight for it, that goes for senator kerry who wanted to be president and couldn't because he cannot have a backbone. host: the line for democrats, north carolina. w3caller: i would like him to hp people who is retired -- or retired. i can hardly live. he can addr

. >> you have a member of congress that wanted to make sure that we hold aig accountable. maybe another big wall street bank. they decide that this legislative effort to protect the public good ran contrary to their interests. you can have an ad, run directy against that canned it paid for directly by agi. >> any number of that. >> on a limited number of ads and on limited amount of money anywhere they want in the country. >> here is another example. somebody is fighting the drug industry. if they decide to make an example of this candidate. they put $50 million of ads against this person. he loses. how many others are going to oppose the drug industry? it is poison. it is poisonous to our democracy. the court is very cute here in a certain sense. you cannot say to not allow it to this person. but you can say that they are a horrible person. who are we kidding? it is the same exact thing. it can be done no longer 60 or 90 days prior to the election but up to the day of the election. this will dramatically change the structure, and the way campaigns happen. at a time when p

to risk that aig. anyone ask you any point to take anythin >> but never got a request myself about taking less. it did not come out in a conversation i can recall. someone in my organization, after the aig, a couple of months later, told me he got a question containing the inference, would you be willing to take less, and he said he could not answer the question, and he then said it never came back to him, and as i said, it never came back to me. did he further that question up the chain of command? >> i can say that i did not get it. he might have told his boss. >> could we talk a little bit about your interactions with the regulators, in particular, when you think back on the events of 2007-2008, there were obviously a lot of people that participated in risk-management either internally or a externally regulators, there is internal auditors, and external auditors, people wonder board, did any of those in that these are individuals raise the issue of the quality of the assets under balance sheet? >> w

bloomberg news reports that the new york fed crossed the line out in a filing detailing how aig paidyer money to a wall street bank. geithner, now secretary geithner, was head of the bank at the time. he is already facing very tough questions before congress on the bank bailouts. president obama speaking just a few minutes ago on the economy. but the job front still is very much imperfect. we'll talk to "fox news" sunday anchor chris wallace what the white house says is doing. and he'll probably be mad at me about something which is always fascinating. we'll be right back. host: does charlie daniels play a mean fiddle? ♪ fiddle music charlie:hat's how you do it son. vo: geico. 15 minutes could save you 15% or more on car insurance. is enjoying it together. and right now, a complete seafood dinner for two is just $29.99 at red lobster. you both get a fresh salad and irresistible cheddar bay biscuits... two entrees from a menu of classic favorites and new creations. and your choice of either an appetizer or a dessert to share. your favorite seafood with your favorite person. just $29.9

i mean we do knothat aig got 85 billion dollars and then the companies thahad t on them and taken this crazy bet were reimbursed 0 percent. they didn't ke a haircut anything. and we don'tnow how it happened b we know the people who did it are prospeng, walked away, and are untohed. so i think there is an ang that is still lookg for a target. >> wdo know one thing that happened. we just n out of time. thanyou both very much. >> woouff: now, the debate over whe to hold the trials of suspects aused of mastminding the terror attacks on t world trade center and the pentagon. maaret warner has our report. >> tre are places that would less expensive for the taxpayers, andess disruptive fonew york city. warner: in a sharp reversal mayomichael bloomberg spoke t this week against holding thtrial of khalid sheikh mohammed, the allegeleader of the 9/ conspiracy, in lower manhattan. >> it would be phenomenall exnsive, and it is very disrtive to people who live in the ar and businesses in the ea, so that the economic imct is detrimental. and nody knows how big. and it would be bettero do it elwhere,

and they took the money from aig and pay us back with it, so they paid us back with our own money.y main point is to say we ought to do what the british did, which is to tax the dickens out of those big bonuses host: -- big bonuses. host: thank you for your call. secretary of state hillary clinton getting set for a trip to asia. her trip gets underway today. to portland we go, alex, good morning, on the republican line. caller: thank you for c-span. i just want to say of course the bonuses are too generous. the government should not be giving subsidies for bonuses or any kind of money to any company. this country has been having problems since we instituted the federal reserve in 1913, charter totally -- there were three members of congress and the house when it was passed. it was passed during the week of christmas. the only reason why it was passed was because woodrow wilson took campaign funds before he was knowledgeable about what he wasçç doing, frm the people whoç instituted the federal reserve. it is a private multinational corporation of owners like rockefeller, rothschi

aig was bent on taking a lot of credit risk. they took it out in the derivatives market and by writing insurance against credit even spirit they took it by holding securities. it was a failure of risk management, of colossal proportions. and there were derivatives in there, but it was -- those were merely mechanisms of taking credit exposure, to get paid for that exposure, and they took multiple vehicles and could have substituted other vehicles for them. >> do you think -- how would having a clearing house and having exchange trading of standardized derivatives reduce systemic risk? >> to the extent that you have -- the clearing house, to the extent that you are having the clearing house, the issue that you had within aig, or settling all over what mark to market should be for the smooth transfer of margin, we would have avoided. we got margin but it was hard to get out of them. in a clearing house context, that would be easier to do. anything that is liquid enough and can be priced easily, to go through a clearing house, shoul

the government stepped in to rescue aig. >>> it is tim kaine's last speech as the virginia governor. he noted for jinnah landed five corporate headquarters during the worst economic slide in 70 years. he said no state can recommend. economic edge with a jammed highways. >> i believe the biggest challenge is the decades old gridlock. >> he called for more investments in higher education. his successor will be sworn in this saturday. >>> 5:16. your traffic and weather together every 10 minutes. we continue to fall this breakingtory in bethesda. >> we have a huge truck fire that is raging. >> you are looking live at montrose road over 270. this truckhas been burning for over 30 minutes. it caught on fire. authorities have not been able to get close enough to determine the contents. the belief it to be a tanker carrying a highly flammable liquid. 270 northbound is closed, according to callers. southbound 270, only the local lanes for now are closed between falls road and the beltway. they may have to close all lanes until they get things under control. this is on montrose road over 270.

of saying put limitations on baiuts so the bailouts don't our in the future, so we don't ha to see aig situation or bear strns situations or fannieae or freddie mac whh is probably going to be more moneypent on thostwo institutions than the congress spent othe tarp program. >> woodruff: we' going to have to leave there. representative scottarrett. we thankou very much. >> i appreate the chance to be with you aga. thank you. >> lehrer: t ravaged people of haiti struggled on today-- faci hunger and disease ter last week's earthquake. more mass graves were g and re aftershocks rocked port-au-prince. but there was more help, wh 12,000 u.s. troops now on th grnd and offshore. weegin with a pair of reports from "independent televisi ne"-- first, jonathan rugman. >> reporter: u.s. rines landed on thihaitian beach, west of the capital, this morning. the americans aren't just protecng convoys, but distributing food anwater in thcapital and beyond. d although the haitians and the u.n. are offially in charge of th crisis, a new reality has daed: only a full scale army can lift haiti of its knees.

committee wants some answers from treasury secretary tim geithner about his role in the bail-out of aig plans to question him about news that key details of the bail-out were surprised by the federal ereserve bank of new york, while geithner was its president. geithner office and the new york fed say he was unaware of the push for secrecy. stocks finish the week on a positive note. the dow was up 11 1/3. the s&p 500 gained 3 1/4. nasdaq finished ahead 1 a17 and change. benchmark crude oil finished higher to settle at $82.75 a barrel. gasoline is selling for average of $2.73, up 8 cents from a week ago and dollar from a year ago. we will tell you the story behind one of sarah palin's most unforgettable campaign lines. and is a healthcare reform compromise possible over the uncompromising issue of abortion? will everyone with constipation please report to gate 17? thank you so much. constipation's uncomfortable enough, so why take a harsh laxative? phillips' caplets work naturally with your colon... for overnight relief without cramps. phillips' caplets. >> bret: there is perhaps no more

all the people who had money for aig for example is in the dannel supplier of the future? that all these people -- all these incredibly bad decisions and guess what? we are putting money again. can you comment on that cycle? >> let me say that the federal reserve views itself in an enviable position. okay are we just by maintaining a very low interest rates and ample liquidity are we allowing this process to continue or do we run the risk of tightening and making this gambit more difficult but at the same time run the risk of derailing the recovery? that isn't an enviable position to be in. moral hazard. i have to bring up moral hazard which is squarely in i think if we go anywhere with any kind of regulation that is meaningful meaning that it has teeth it has to deal squarely with a moral hazard and what do i mean in english? blanket guarantees. we have seen an incredible amount of government guarantees, and that induces, this goes back to the question of risk taking that the gentleman asked earlier. so, i don't see an easy -- it's easy for me to conjecture yeah you want

they see gm and gmac and aig under government control they are worried. the president has not taken the kind of action you need to stimulate the private sector, he has frightened it. >> greta: if you did what you say, strike that again. is what the president is doing is that going to hurt the economy or a slower recovery than you would like to have or any of us would like to have? >> well, slow is hurt. when you have an extra -- >> greta: totally wrong direction is it totally the wrong direction or just not as effective or epidemic means to achieve a goal? >> when you throw money out of the airplane window are you going to stimulate the economy below the plane? yeah. he is not going to net/net help the economy it would have hurt the american people who will have lost their jobs needlessly and delay their rehiring that is hurting american people. that's the problem with this stimulus. it is going to be a burden on the economy for many years to come. the right course instead of passing a new stimulus which would add additional burr on financial markets and

lehman brothers, aig. we thought everything was going to go off of the cliff. that didn't happen. we had -- yes, stimulus and maybe a budget you think may have been too lauded by the committees and congress. but the entire saving of the financial system was huge. i do think that when you are in a recession it is a great time to tackle the unmet social net issue of our time. which is health care. the fact that most most americans are insecure and fear if they lose their job they are not going to have health insurance, this is big and has to be tackled and the fact that he has gotten it past the 80 yards -- you know, down the field, 80 yards so far, is pretty amazing. >> but it is -- isn't it fair to say that it is -- more than americans might have bargained for when -- when they elected him? it is -- i mean, it is something no democratic president has been able to get past in the -- you know -- >> sure. it was -- i was on the show. not too long ago with peggy in an an. we were worried he was trying do too many different things. >> trying to do too many -- no, it was all genius. >>

bailed out companies aig and citigroup, among the biggest donors, bill gates charity which has contributedore than 25 million dollars. the helicopter crew rescuing an ice climber from a frozen ledge after he fell almost 300 feet. it happened in little cottonwood canyon close to salt lake city, an area very popular with climbers. the sheriff's office says the 37-year-old climber broke his leg and maybe his pelvis. the sergeant says witnesses saw the guy fall and called 911. >> they gave us probably a 30 minute head start to get on scene with the appropriate equipment and personnel and make some discussions on how to get him off the canyon. >> gregg: now, that's the fourth rescue in this very same spot in less than a year. major news out of iraq that involves the lives of american troops. coming up, we're going to tell you why it's being called a significant milestone and a revealing look at just how combat troops are preparing to leave the war zone and head to another. plus, the death toll continues to rise after a mudslide rolls over an exclusive beach resort, the urgent rescue effort in t

at the height of the financial crisis, the federal reserve-- working with the treasury-- loaned aig $85lion. a.i.g., in turn paid more than $60 billion to banks and companies such as goldman sachs. goldman held contracts with the insurance giant to protect against losses worth billions. as the financial crisis worsened, total government aid to a.i.g. swelled to $180 billion dollars. at the time of the initial loan, geithner was president of the new york federal reserve. >> more than a year removed from that terrible week of september 2008, i believe that the government strategy, and it was the government strategy, was the best of available options. >> reporter: the oversight committee also criticized the government's decision to allow a.i.g.'s creditors to be paid in full-- even though a.i.g. was insolvent. and members from both parties expressed anger that the public initially was not told about those payments. >> were you involved in any discussions with a.i.g. or was your staff involved where you discussed what a.i.g. should or should not disclose to the public? >> i had no role in m

especially in the aig case, the famous asg case where they agreed to take everybody out of power on their cbs -- sorry for the jargon but they agree to pay the people who were in hock to the ag at 100%. i think they could've easily given them 50% for example and it turns out the government was one of the big beneficiaries of that caused all of these conspiracy theories. i just don't know the answer to whether it was a conspiracy but it was a bad financial decision by the government i think. anymore? sure. >> mr. bernanke is being-- blamed these days for not having seen all this and forestall this occurrence. after march of this year, barney frank and paul krugman four and a dialogue at the kennedy library in each person's opening statement was quote, i didn't see this coming which is something to conjure with. i asked mr. frank of he could run the tape, what would he have had in place and he said well we didn't have the ability to regulate the things that by the rye and costello this. no, well those things which were lacking for mr. franks observation, will they be forthcoming? >> to some