former california treasurer phil angelides chairs the commissioner and former house ways and means committee chairman phil thomas of california is co-chair. >> good morning. the meeting, the public hearing of the financial crisis inquiry commission will come to order. there is a quorum present. welcome to our second day of public hearings. on the causes of the financial economic crisis that there gripping this country. as i said, and is the vice chairman also indicated yesterday, we are a panel that is going to do our level best on behalf of the american people to try to discern the facts and the causes of the current crisis, which has affected so many millions of americans. yesterday we heard from a range

that's former california treasurer phil angelides, echairs the commission. bill thomas is co-chair of california. witnesses today include top executives from gold pan sacks, j.p. morgan chase, morgan stanley and bank of america. an all day hearing, live coverage here on c-span2. >> my fellow commissioners, i'm grateful to all of our witnesses for giving us their testimony and sharing their wisdom. we've been given a critical mission. one that goes far beyond any party or even policy agenda. to conduct a full and fair inquiry in to what brought america's financial system to its knees. we're after the truth, the hard facts, because it's our job to provide an unbiased accounting of the actions that led to devastating economic consequences for so many american families. we'll follow the evidence, wherever it leads, we'll use our subpoena power as needed, and if we find wrongdoing, we will refer it to the proper authorities. that's what the american people want. that's what they deserve of. and that's what this commission is going to give them. some already speak

the chairman is phil angelides, co-chair is bill thomas, former california representative, just aboutto get underway. live here on capitol hill. on c-span2. [inaudible conversations] >> witnesses at the table include attorney generic holder, with cameras gathered around, and the committee about set to get underway this morning on capitol hill. >> good morning. the meeting, the public hearing of the financial crisis inquiry commission will come to order. there is a quorum present. welcome to our second day of public hearings. on the causes of the financial and economic crisis that are gripping this country. as i said, and as the vice chairman also indicated yesterday, we are a panel that is going to do our level best on behalf of the american people, to try to discern the facts and the causes of the current crisis. which has affected so many million americans. yesterday, we heard from a range of experts, and folks from the private sector. today, we have a number of people with us who are at the federal, state and local level, who have been involved. in grappling with the consequences o

born. >> thank you, chair angelides and i want to thank the panel for all your very helpful testimony i wanted to start by asking chair bair about her testimony. i gather from your written testimony that you feel that the over counter derivatives market plays some role in the financial crisis. and i would like you to elaborate on that. >> so i do. i think it is factored in the underpricing risk. it creates an illusion of people were hedged when they work really. i think the unregulated nature of it allows large institutions to take some significant risks with competition structures that front quite a long feel to them. but there wasn't a sufficient oversight at that. and that it also the losses once, you know, the underlying losses on the mortgage is actually going into default with one set of numbers here that was exponentially multiplied by the losses on easter of their contracts that were based on the performance of this underlying mortgages. so if it into the underpricing of risk by creating involution that people went ahead when in reality they weren't. and then when the mortgage

çhost:ç itçq is led by phil angelides of california.from california, and knowledgeable about financial issues as a public office holder and a financial business person, i think has given excellent direction, as has the co-chair, longtime former member of congress also the california, bill thomas, who was chairman of the house ways and means committee, essentially the finance committee of the house. so we have two knowledgeable leaders, one a democrat, won a republican, working very collaborative lee. host: we want to get your telephone calls. senator graham is interested in your comments from day one, what you watched it. here are the numbers -- host: before we get the calls -- you and i were talking, injured reserve list. i don't want people to be concerned. what happened? guest: a lot of good things about living in florida but one thing you have to be protective about is exposure from the sun. in spite of my wife's best efforts, i was derelict and had a little situation on my right cheek that i just had it removed. so i am now i hope

chairman angelides, vice chairman thomas, thank you for inviting me to address you and you the otherdistinguished members of this commission. these inaugural hearings, i believe, mark a critical step forward in better understanding the root causes of the financial crisis that has held our economy in its grip over the last two years. i appreciate the opportunity to participate in the commission's work, panned to assist in your inquiry. this morning, i am joined by lannie, the assistant attorney general for the justice department's criminal division. lannie spearheads many of our key he was in investigating, prosecuting and punishing financial crimes. he has submitted written testimony, which provides a comprehensive overview of the department's work in these areas. and he will be available to answer any additional questions that you might have. we must be vigilant in our efforts to safeguard and strengthen the american economy. our efforts to fight economic crime are a vital component of our broader strategy. a strategy that seeks to foster confidence in hour financial system, integri

that he and other top execuves at goldman dinot receive bonuses last yea commission chairman phil angelides, aormer democratic treasurer of cifornia, sharply questioned him about goldm's practice opackaging risky mortgages anselling them to investorat the same time the firm took fincial positions tting against those troubled assets. >> what we do is ris manageme. cause we had this risk, becauswe were accumulating positions-- which, by the y, we acqred from clients who wanted to sell them to us-- have to out ourselves and provide ansource the other side of the transaions, so we that can managour risk. these are all exercises in rk management >> well, i'm jusgoing to be blunt wi you-- it sounds to me a little b like selling a car withaulty brakes, and then buying an insurance policyn thbuyer of those cars. it doesn't seem to me th that's a practice that inspis confidence in the market >> every pchaser... every purchaser of an asset here ian institution, probably professional-only investors dedicated in most cases to ts business... >> holman: ... reprenting pension funds who ha the life saving

chairman angelides, vice chairman, members of the commission. would like to thank you and the members of the committee to share my views with you today. as you consider the cost of the recent crisis as well certain changes that must take place to avoid or minimize future crises. i believe i have somewhat of a unique perspective with regard to this crisis as my firm and i were fortunate enough to see parts of it coming. hayman is a global asset management firm that made several billions dollars of subprime and alt-a positions and we remain an active participant in the marketplace today. i realize the primary objective of the hearing today is to provide basic information on current state of the current financial crisis, in my opinion no single bank or group of large institutions single-handedly caused the crisis. while i will address each participant structure and problem independently later in my testimony, the problems with the participant and regular structure needs to be considered more holistically and order to prevent future systemic breakdo

çhost:ç itçq is led by phil angelides of california.rom california, and knowledgeable about financial issues as a public office holder and a financial business person, i think has given excellent direction, as has the co-chair, longtime former member of congress also the california, bill thomas, who was chairman of the house ways and means committee, essentially the finance committee of the house. so we have two knowledgeable leaders, one a democrat, won a republican, working very collaborative lee. host: we want to get your telephone calls. senator graham is interested in your comments from day one, what you watched it. here are the numbers -- host: before we get the calls -- you and i were talking, injured reserve list. i don't want people to be concerned. what happened? guest: a lot of good things about living in florida but one thing you have to be protective about is exposure from the sun. in spite of my wife's best efforts, i was derelict and had a little situation on my right cheek that i just had it removed. so i am now i hope i

. >> chairman angelides, vice chairman thomas, a commission. i appreciate the opportunity to testify on behalf of the federal deposit insurance corporation. i testimony will focus on the failure of market discipline and regulations that led to the financial crisis and suggest reforms to prevent a recurrence. the last major financial crisis, the thrift and banking crisis of the 1980's, resulted in enactment of laws designed to improve the financial regulatory system. these laws significantly strengthen bank regulation and provided banks with strong incentives to operate at higher capital level with a less risk. at the same time -- unintended incentives for finance and service to grow outside the sector in a show called -- so- called shadow banking system. at the onset of the crisis it is estimated almost half of all financial services were conducted by institutions not subject to provincial regulation and supervision. products and practices today net -- originated by the shadow banking system has proven particularly troublesome. many of these no

. >> chairman angelides and members of the commission i appreciate the opportunity to appear before you today and described activities of my office, much smaller office and generageneral magic and. in the midst of an in response to our country's financial crisis. i've had the honor and pillage of serving as colorado's attorney general since january of 2005. that means i came into office just as we were starting to hear rumblings about problems to come in the colorado housing market. in my view, which is largely hindsight, the states were not well equipped with legal tools to deal with much of what has transpired. over the ensuing five years. like many states, colorado had passed legislation in 2002, dealing with so-called predatory loans, model in part after the federal home ownership and protection act of 1994. unfortunately, like its federal counterpart at the time, colorado's limits on balloon payments and prepayment penalties and its prohibition on negatively amortized in mortgage loans apply to such a small subset of the highest cost loans that it proved to be very little deterrent

six democrats and four republicans is required to report to congress by december 53 this year phil angelidesrs the commission and former house ways and means committee bill thompson is the vice chair. >> the meetings of the financial crisis inquiry committee will come to order. there is a quorum present and so we will now proceed with this first of our public hearings. good morning to everyone and thank you for being here. i am honored to welcome you as we start this series of public hearings into the causes of the financial and economic crisis that has gripped this entire country. i thank vice chairman thomas for his extraordinary cooperation and partnership. i applaud the dedication of my fellow commissioners and i am grateful to all of our witness for giving us their testimony and sharing their wisdom. we have been given a critical mission, one that goes far beyond any party or even policy agenda. to conduct a full and fair inquiry into what brought america's financial system to its knees. we are after the truth, all hard facts, because it is our job to provide an unbiased accounting of t