taxpayerde had to contribute to aig to cover collateral calls on aig's derivatives, collateral debt obligations. a lot of that money went over ts direct pay over to goldman sachs at 100 cents on the dollar.ves, but i just wanted to, you know, hear from you as to the majority's assessment regarding the impact of derivatives on this, on this crisis. >> yes. very quickly let me be just say that ms. bourne, of course, cang speak in more detail on this. but we found there were threely, principle impacts. first of all, credit default swaps enabled the creation of a lot of the mortgage-backedpal securities, so that's one way in which they contribute. and, of course, aig wrote those with no capital behind them, and it created a huge wave of collateral calls. secondly, they allowed for the creation of synthetic mortgage securities which were merely bets, as you know, on real mortgage securities. so instead of having one investor, you know, investing or betting so to speak on a mortgage security, this was amplified many times over. the bets on the housing market were multiplefold because you had syntheti

taxpayer had to contribute to aig to cover collateral calls on aig's derivatives, collateral debt obligations. a lot of that money went or to goldman sachs, 100 cents on the dollar. but i just wanted to hear from you as to the majority's assessment regarding the impact of derivatives on this crisis. >> very quickly, let me say that ms. bourne can speak in more detail on this. we fund there were three principal impacts. praul, cred first of all, credit default swaps. that's one way in which they contributed. of course, aig and others wrote those with no capital behind them. when that market went south, it created a huge wave of collateral calls. secondly, they allowed for the creation of synthetic mortgage securities, which were merely bets, as you know, on real mortgage securities. instead having one investor investing or betting, so to speak, on a mortgage security, this was amplified many times over. the betsn the housing market were multiple fold because you had synthetic securities. >> the time of the gentleman has expired. could you please wrap upon your answer. >> in the end, there was

no one and aig had any idea what the exposure was. i guess that would no longer be the case. but for hedge funds in derivatives, many of us believe they were insufficiently, not just regulated, but we did not have much information about them. they were a blank slate. we have had funds with registration and monitoring with derivatives and financial regulatory -- entities regulated. but i take it to get the budget levels proposed in the bill that came out of the appropriations committee, neither one of your agencies would be able to do anything significant regarding new responsibilities involving derivatives and hedge funds. is that correct? >> that is correct. we would be involved in a large reduction of force, about 65%. they end users would not benefit from any transparency. >> i do not know what the reduction of force of technology would be. but we would certainly not be able to offer rationalize many of the rules that we are implementing project operational -- operationalize many of the rules that we are implementing. we were offered $1.4 billion. >> in 2012, to under $61

the money was aig was given to them 100% when everyone else didn't get there. we want to blame the bush administration, there was an excellent film "inside job" in which a person that back filled points out that none of the people in obama administration has been investigated for all of the fraud they committed, and if one looked a the political contribution of the goldman in the last election, it went mainly to the democrats and obama. what was the relationship? maybe that's the key question. what happened to money and politics in warburg's time in contrast to ours? >> well, i haven't seen the film that you mentioned. it's clear it will take financial historians a great deal of time to unravel the relationship between bankers, congressman, and members of the financial crisis. we already know from some books that the relations were too close for comfort. we also know thanks to the transparency of the political system, who gave what to who? i'm amazed to find in 2007 and 2008 on whether wall street or washington had caused the crisis. i was amazed to find the sc

before, it is better but it to make it safe for individual investors to make sure we don't bailout that aig or citigroup lowered jpmorgan next time was wrong. like i said, not that i fell in love with barack obama but seduced. maybe i was there maybe i was sent but i think you will agree it is hard to imagine anyone who is more progressive or intelligent and has a better handle van barack obama been president any time soon. he has given his background will the cultural, his experiences, the background of not only being harvard law editor bed a community organizer, it is a miracle he got elected president particularly when you consider his name. i began to try to figure out why when you have the circumstances in your favor, when the system was supposed to work to make good on the promises not only his campaign may but progressives have been working towards decades, why couldn't this is done deliver? why did the modern republican governance? financing is it is not simple. i don't know if you are like me in this respect, i have trouble watching real news shows. they make me want to plunge some

he said he's got the love for the steelers, specifically goldman sachs, aig, citibank. [ laughter ] ion't know if you guys saw this, in an interview yesterday egyptian president hosni mubarak said that barack obama doesn't understand egyptian culture. man, get off your high camel, right? [ laughter ] this is nice. i heard that charlie sheen is paying the "two and a half men" crew's salary while he's in rehab. [ light laughter ] it just goes to show, right, despite all the scandal and the drugs, at the end of the day, he's actually a very rich guy. [ laughter and applause ] and get this, charlie sheen's estranged wife brooke mueller is reportedly in talks to go on "dancing with the stars." yeah, even charlie was like, "yikes, embarrassing." [ laughter ] whateve. whateve. hey, facebook celebrated its seventh birthday today, you guys. [ cheers and applause ] yeah. cool. i have to be honest, though, i only remembered its birthday, because i saw it on facebook. [ light laughter ] this is cool. senator joe lieberman is busy writing a new book about the jewish sabbath called "gift of rest."

aig... - and they bailed out the banks, and the did everything they could, and in fact i even heard itaid that paulson, the secretary of the treasury, in a private conversation said, "we're going everything we can". this was when it was collapsing. "we're not even sure if it's legal or not. we're just doing it because we've got to stop the system from crashing". - they were scared too. - so now they've pumped all this money back in again, and they've got the stock market going, they've got commodity prices going. it looks like we're at the beginning of possibly another boom-bust cycle, so we've got the rollercoaster going again. but if you go back over the last 30 years, we've had a whole series of these boom-busts, and the point i make in the book--and i've been worried about it for years--is that each cycle gets to be more dangerous, scarier and scarier, debt levels get to be higher and higher, and the central bank and the fiscal authorities have a harder and harder time bailing it out and getting it turned around again. and this is very true over the last couple of years. they're st

a private bank, or when the federal government would own the largest insurance company in america, aig, or the fact that the federal government essentially just a full ownership of fannie and freddie, and those are not just crazy aunts and uncles up in a room somewhere, in the cellar. the federal government owns 50% of all privately owned mortgages, so anyone listening, half of you who have a private home mortgage, the government under home right now. about it, and the government also for the first time owns the largest car companies in america. it also own 100% lock stock and barrel the industry, and i think the final thing that was the frosting on the cake was the federal government taking over the health-care industry, because that is what it is. they will eventually realize their goal of collapse in the private health insurance industry, and then they will take it over -- of collapsing the private health-insurance industry. that is the federal government, a provider of health care, but that is not the system that brought us to this country. we have always been about free markets. t

it safe for individual investors so that we can be sure that we're not going to be bailing out the aigs and the citigroups and jp morgan next time was lost. now, like i said, it's not that i fell in love with barack obama or that i was seduced by barack obama. and maybe i was and maybe i wasn't. but the fact is that i think you'll agree it's hard to imagine anyone who's more progressive and more intelligent and got a better handle on things than barack obama being president of the united states anytime soon. and given his background, his multicultural background, the experiences he's had and the background he's had in terms of not only being a harvard law review editor and being a community organizer and so forth, it's kind of miracle the guy got elected president especially when you consider his name. so i began to try and figure out why when you had all of these circumstances in your favor, why when the system was finally supposed to work on behalf of the -- to make good on all the promises that not only his campaign made but that progressives have been working towards for decades why

i assumed he was mainly a living to aig come is correct? >> yes, but also i think it helps accelerate the bubble. >> just remind us all of the record, in march of '09 ahead of the ots, testified to a question that i asked again in retrospect it wasn't the lack of authority, it wasn't the lack of resource, it was at the lack of expertise. you just flat-out made a mistake. is that a correct assessment? answer, yes or. in 2004 we failed to assess how bad the mortgage economy, the real state of the economy would become in 2000 a. so at least the regulator in question thought they had the authority and expertise. i peeked into the testimony come into the testimony of the panel the following year. so to some extent i want to try to bust a bit of the conversation here. we'll hear from a gentleman, craig reiners, with the miller tours company. and that his testimony a requirement for end users like miller tours to post margin to its counterparties we have a serious impact on our ability to invest in and grow our business. go in user on a truck is s

a private bank, or when the federal government would own the largest insurance company in america, aig, or the fact that the federal government essentially just aull ownership of fannie and freddie, anthose are not just crazy aunts and uncles up in a room somewhere, in the cellar. the federal government owns 50% of all privately owned mortgages, so anyone listening, half of you who have a private home mortgage, the government under home right now. about it, and the government also for t first time owns the largest car companies in america. it also own 100% lock stock and barrel the industry, and i think the final thing that was the frosting on the cake wa the federal government taking over the health-care industry, because that is what it is. ey will eventually realize their goal of collapse in the private health insurance industry, and then they will take it over -- of collapsing the private health-insurance industry. that is the federal government, a provider of health care, but that is not the system that brought us to this country. we have always been about free markets. that is wh

when the government says we are going to let lehman brothers fail, but not goldman sachs, aig, we are going to bail them out. why? if the companies are in a position to fail because they were not run properly, i hate to say this, but maybe they need to fail. maybe good companies and better run company should rise to the occasion in come to the top. i have heard all the arguments from republicans, the hand- wringing, the sweating about the economy collapsing. i think the economy will collapse in the future because we set a precedent that is impossible to keep, that if you fail, the government will bail you out. that is the equivalent of enabling a drug addict who continually messes up, but his family always rushes in and saves him and rescues him. there are some tough consequences of getting on drugs. you are going to hit bottom before you ever start climbing back to the top. what we have done as the government is decided we are going to bail these folks out without ever letting them experience the consequences of their own reckless actions. >> it was president bush and the secretary o

we were rescuing companies like general motors and chrysler and aig when companies go under and fail, it hurts the employees, but it is good for their employees. general motors has no debt. it has absolutely nothing to do with the obama administration. host: good morning, republican line. caller: good morning. first-time caller. i started listening to c-span over the last several months. thank you for inland need to be reality. i am a little bit nervous, but i appreciate you. you know, since the obama administration has come into office, the over and down the number of regulations, deregulation that have been placed in all industries has done nothing but increase paperwork. i come from martin silda, va., one of the largest furniture- producing counties in the country. now it is the poorest city in the state of virginia, probably one of the poorest cities in the nation. might address to you is, when is the country going to wake up? he addressed where he won in this country to go come and i do not think we need government spending, i think we need to cut back on regulation. need to let

sources of the crisis in 2008 was a very substantial gap in the oversight of the many large firms like aig for the didn't have the strong consolidated oversight and i think the task doing the best we can to try to identify the firms which most likely pose the risk. >> what does do the best we can mean? >> we don't want to be arbitrary, as you point out, and so we have already put out the fsoc with the cooperation on the folks at this table had already put out a request essentially for input, but what we would like to do is provide the but if we clear guidelines about the criteria that we will use to try to identify firms that are potentially systemic. admittedly those will not be exact numerical guidelines for example, but i do think it's important that the fact that each institution, each agency of the table has a specific set of institutions for which it is responsible, that we don't allow that fact to create gaps where there are important firms that have no serious consolidated oversight. so i do think it is useful to do this, but i acknowledge your concern that will never be a perfect

a private bank, or when the federal government would own the largest insurance company in america, aig, or the fact that the federal government essentially just a full ownership of fannie and freddie, and those are not just crazy aunts and uncles up in a room somewhere, in the cellar. the federal government owns 50% of all privately owned mortgages, so anyone listening, half of you who have a private home mortgage, the government under home right now. about it, and the government also for the first time owns the largest car companies in america. it also own 100% lock stock and barrel the industry, and i think the final thing that was the frosting on the cake was the federal government taking over the health-care industry, because that is what it is. they will eventually realize their goal of collapse in the private health insurance industry, and then they will take it over -- of collapsing the private health-insurance industry. that is the federal government, a provider of health care, but that is not the system that brought us to this country. we have always been about free markets. t

we question aig about its sole-sourcing of the kandahar power initiative to black & veatch. this past december. at the last hearing sigar said it had an investigation of the kabul power plant coming, and what i understand to be a preliminary inquiry of the kandahar power award. and that i have questions about prior projects because if that project had been completed, black & veatch might have problems in the competition due to a history of unsatisfactory past performance here so, let me start with one of the energy projects that interests me. which was, mr. van, about your unsatisfactory past performance on aids project to assess a natural gas deal. for those trying to follow this, a.i.d. formally rated you after a year of the project over all as unsatisfactory, which is the rate on a scale from zero to five, and they rated it zero. i come in particular, they said my understanding is the position was that over all the contractor has to date that an unsatisfactory job in getting the project started. delays were due to unsatisfactory planning, about various things, and that th

one or more of the states as it bailed out financial as the stations like fannie mae, freddie mac, an aig during the recent financial crisis. i believe that both of these alternatives are deeply problematic and that congress should enact a bankruptcy law for the states, not as a first resort, but as an absolute last resort in the event everything else fails. the claim that we do not need a bankruptcy law strikes me as a little bit like saying there is no need for a fire department because most homeowners have never had fires in their houses and if one starts, the homeowner can probably stop it before the crisis gets out of control. age of these things are true, but we still need fire departments for the rare case when the fire does run out of control. i would like to make three simple points. first, bankruptcy would provide several enormously important benefits that we do not have a in the absence of bankruptcy. second, it is constitutionally permissible, in case you are concerned about that. the law could be tailored to address any particular concerns you may have about things like it be

called derivatives in the air timebomb waiting to go off and in some ways that occurred, certainly with aig. so you had a perfect seat red for bubbles to form and void wicked bubbles. we got a housing bubble, a commodity bubble. we got the energy bubble. we went to $100 a barrel. so we didn't just have a housing bubble. we do whole series of bubbles in which we'd really laid the foundation by loose monetary policy, loose fiscal policy, unable to get them at the same time. that's another whammy to the economy. and here we are cleaning up the economic wreckage. >> morgan stanley has a nice report with this very low-interest environment. i'm sure he can send it to you. you should look at that, senator sessions. the point by the way the two of you are making strike me as just incredibly parallel to the debate we have in the united states between 1907 and 1913 for the kind of federal reserve. it was nelson aldrich was making points to you, senator sessions, worrying about fiscal inflation that would be facilitated. on the other hand there was of the committee and senator brandeis, senator conrad

, private banks, or when the federal government would own the largest insurance company in america, aig, or the fact that the federal government essentially just took full ownership of fannie and freddie, and those are not crazy aunts and uncles in a room somewhere or down in the cellar. that's the federal government that owns over 50% of all private home mortgages today, so for anyone listening, half of you that have a private home mortgage, the government owns your home right now. think of that, and the government also for the first time owns large car companies in america and own 100% of the whole student loan industry, and then i think that the final thing was the frosting on the cake is the federal government taking over the health care industry because that's what it is. they will eventually realize their goal of collapsing the private health insurance industry, and then they'll take it over. that's their goal. president obama said from the beginning, he wanted a single payer system. what's that? that's the federal government. that's the federal government as provider of health ca

financial as the stations like fannie mae, -- financial institutions like fannie mae, freddie mac, an aig during the recent financial crisis. i believe that both of these alternatives are deeply problematic and that congress should enact a bankruptcy law for the states, not as a first resort, but as an absolute last resort in the event everything else fails. the claim that we do not need a bankruptcy law strikes me as a little bit like saying there is no need for a fire department because most homeowners have never had fires in their houses and if one starts, the homeowner can probably stop it before the crisis gets out of control. age of these things are true, -- each of these things are true, but we still need fire departments for the rare case when the fire does run out of control. i would like to make three simple points. first, bankruptcy would provide several enormously important benefits that we do not have a in the absence of bankruptcy. second, it is constitutionally permissible, in case you are concerned about that. third,the law could be tailored to address any particular conce

in some ways, that occurred, certainly with aig. you had a perfect seedbed for mobil to form. -- for bubbles to form. we got a house in mobile, a commodity but full, and energy bubble -- we got a housing bubble, a commodities bubble, and energy bubble. we really laid the foundation by loose monetary policy, lose a fiscal policy, unusual to get them at the same time. and here we are cleaning up the economic wreckage. >> morgan stanley has in as report on the so-called global power trade. i do not have it with me. the points that you are making strike me as just incredibly parallel to the debate we had in the united states between 1907 and 1913 before the founding of the federal reserve. nelson aldrich made similar points to you about the inflationary financing facilitated by an overly a loose thread. louis brandeis articulated a concern like yours, a financial sector without assurance that it would be arraigned in a regulated and controlled, financial stability would be the ruin of us all. those individuals were right. >> i would agr

we question aig about its sole-sourcing of the kandahar power initiative to black & veatch. this past december. at the last hearing sigar said it had an investigation of the kabul power plant coming, and what i understand to be a preliminary inquiry of the kandahar power award. and that i have questions about prior projects because if that project had been completed, black & veatch might have problems in the competition due to a history of unsatisfactory past performance here so, let me start with one of the energy projects that interests me. which was, mr. van, about your unsatisfactory past performance on aids project to assess a natural gas deal. for those trying to follow this, a.i.d. formally rated you after a year of the project over all as unsatisfactory, which is the rate on a scale from zero to five, and they rated it zero. i come in particular, they said my understanding is the position was that over all the contractor has to date that an unsatisfactory job in getting the project started. delays were due to unsatisfactory planning, about various things, and that th

we question aig about its sole-sourcing of the kandahar power initiative to black & veatch.st december. at the last hearing sigar said it had an investigation of the kabul power plant coming, and what i understand to be a preliminary inquiry of the kandahar power award. and that i have questions about prior projects because if that project had been completed, black & veatch might have problems in the competition due to a history of unsatisfactory past performance here so, let me start with one of the energy projects that interests me. which was, mr. van, about your unsatisfactory past performance on aids project to assess a natural gas deal. for those trying to follow this, a.i.d. formally rated you after a year of the project over all as unsatisfactory, which is the rate on a scale from zero to five, and they rated it zero. i come in particular, they said my understanding is the position was that over all the contractor has to date that an unsatisfactory job in getting the project started. delays were due to unsatisfactory planning, about various things, and that the contra

we were rescuing companies like general motors and chrysler and aig when companies go under and fail, it hurts the employees, but it is good for their employees. general motors has no debt. it has absolutely nothing to do with the obama administration. host: good morning, republican line. caller: good morning. first-time caller. i started listening to c-span over the last several months. thank you for inland need to be reality. i am a little bit nervous, but i appreciate you. you know, since the obama administration has come into office, the over and down the number of regulations, deregulation that have been placed in all industries has done nothing but increase paperwork. i come from martin silda, va., one of the largest furniture- producing counties in the country. now it is the poorest city in the state of virginia, probably one of the poorest cities in the nation. might address to you is, when is the country going to wake up? he addressed where he won in this country to go come and i do not think we need government spending, i think we need to cut back on regulation. need to let

sources of the crisis in 2008 was a very substantial gap in the oversight of the many large firms like aig for the didn't have the strong consolidated oversight and i think the task doing the best we can to try to identify te firms which most likely pose the risk. >> what does do the best we can mean? >> we don't want to be arbitrary, as you point out, and so we have already put out the fsoc with the cooperation on the folks at this table had already put out a request essentially for input, but what we would like tdo is provide the but if we clear guidelines about the criteria that we will use to try to identify firms that are potentially systemic. admittedly those will not be exact numerical guidelines for example, but i do think it's important that the fact that each institution, each agency of the table has a specific set of institutions for which it is responsible, that we don't allow that fact to create gaps where there are important firms that have no serious consolidated oversight. so i do think it is useful to do this, but i acknowledge your concern that will never be a perfect pro

we question aig about its sole-sourcing of the kandahar power initiative to black & veatch. this past december. at the last hearing sigar said it had an investigation of the kabul power plant coming, and what i understand to be a preliminary inquiry of the kandahar power award. and that i have questions about prior projects because if that project had been completed, black & veatch might have problems in the competition due to a history of unsatisfactory past performance here so, let me start with one of the energy projects that interests me. which was, mr. van, about your unsatisfactory past performance on aids project to assess a natural gas deal. for those trying to follow this, a.i.d. formally rated you after a year of the project over all as unsatisfactory, which is the rate on a scale from zero to five, and they rated it zero. i come in particular, they said my understanding is the position was that over all the contractor has to date that an unsatisfactory job in getting the project started. delays were due to unsatisfactory planning, about various things, and that th

sources of the crisis in 2008 was a very substantial gap in the oversight of the many large firms like aig for the didn't have the strong consolidated oversight and i think te task doing the best we can to try to identify the firms which most likely pose the risk. >> what does do the best we can mean? >> we don't wan to be arbitrary, as you point out, and so we have already put out the fsoc with the cooperation on the folks at this table had already put out a request essentially for input, but what we would like to do is provide the but if we clear guidelines about the criteria that we will use to try to ientify firms that are potentially systemic. admittedly those will not be exact numerical guidelines for example, but i do think it's important that the fa that each institution, each agency of the table has aspecific set of institutions for which it is responsible, that we don't allow that facto ceate gaps where there are important firms that have no serious consolidated oversight. so i do think it is useful to do this, but i acknowledge your concern that will never be a perfect process.

we question aig about its sole-sourcing of the kandahar power initiative to black & veatch. this past december. at the last hearing sigar said it had an investigation of the kabul power plant coming, and what i understand to be a preliminary inquiry of the kandahar power award. and that i have questions about prior projects because if that project had been completed, black & veatch might have problems in the competition due to a history of unsatisfactory past performance here so, let me start with one of the energy projects that interests me. which was, mr. van, about your unsatisfactory past performance on aids project to assess a natural gas deal. for those trying to follow this, a.i.d. formally rated you after a year of the project over all as unsatisfactory, which is the rate on a scale from zero to five, and they rated it zero. i come in particular, they said my understanding is the position was that over all the contractor has to date that an unsatisfactory job in getting the project started. delays were due to unsatisfactory planning, about various things, and that th

of the states as it bail out financial institutions like bear stearns, fannie mae, freddie mac, and aig during the recent financial crisis. i believe that both of these alternatives are deeply problematic and that congress should enact a bankruptcy law for the state, not as a first resort, but as an absolute last resort in the event that everything else fails. the claim that we do not need a bankruptcy law per se strikes me a little bit like saying that there is no need for a fire department because most homeowners have never had fires in their houses. if one starts, the homeowner can probably stop it before the crisis gets out of control. each of these things is true, but we still need fire departments for the rare case when the fire does burned out of control. the remainder of my discussion, i would like to make three simple points. first, bankruptcy would provide several enormously important benefits that we do not have in the absence of bankruptcy. second, it is constitutionally permissible in case you are concerned about that, as well you should be. third, the loss would be tailore

the crisis in 2008 was there were very substantial gaps in the oversight of many large firms like the aig for example. didn't have strong consolidated oversight. i think our task is to do the best we can to try to identify those firms which, you know, most likely pose a risk. >> what is do the best we can mean to us? what does that mean? >> well we don't want to be arbitrary as you point out. >> okay. >> so we have already put out the fsoc with the cooperation of all the folks at this table, has already put out a request essentially for input. but what we would like to do is provide relatively clear guidelines about the criteria that we will use to try to identify firms that are potentially systemic. admittedly those will not be exact numerical guidelines for example. but, i do think it is important that the fact that each institution, each agency at this table has a certain specific set of institutions for which it is responsible. that we don't allow that fact to create faps where there are important firms that have no serious consolidated oversight. so i do it e think it is useful to do