the fdic.mately was persuaded b of a's condition is created a risk and the transaction would mitigate that risk and the risk to the deposit and insurance fund in a cost effective manner. the transaction limited the fdic's risk to a small portion of the covered exposures recognizing the fact that most of the exposures resided with the investment bank and not the insured depository institution. on january 16, 2009, the plan treasury capital infusion and the treasury fed fdic transaction were announced. in early may 2009, b of a asked the ring fest transaction not be completed. moving forward we have work continuously with congress the treasury and the financial regulators towards creating a more resilient, transparent and better regulated financial system. one that combines stronger and more effective regulation with market discipline. one of the lesson swres learned over the past few years is that regulation alone is not enough. we need to establish an effective and credible resolution mechanism

the fdic. risk to the small exposures, recognizing the exposures to resided in the investment bank and not the insured institution. january 16, 2009, the infusion and fdic transaction were announced. . . moving forward we have work continuously with congress the treasury and the financial regulators towards creating a more resilient, transparent and better regulated financial system. one that combines stronger and more effective regulation with market discipline. one of the lesson swres learned over the past few years is that regulation alone is not enough. we need to establish an effective and credible effective and credible resolution mechanism t ensure that market players will actively monitor and keep a firm handle on risktaking. we commend you and your colleagues in the progress you've made in moving towards providing the regulators with the tools to effectively deal with future crises. thank you and i will be pleased to take any of your questions. >> thank you@@@@m@ @ @ @ >> we want to re

the fdic was continuing to analyze how much the exposure was, and how much this was impacting the fdicthere were ultimately persuaded that they prevented a systemic risk and that the transaction would mitigate the risk, and the deposit insurance fund in a cost-effective manner. this also limited their risk to a small portion of the exposure. fdic's risk to a small portion of the covered exposures recognizing the fact that most of the exposures resided with the investment bank and not the insured depository institution. on january 16, 2009, the plan treasury capital infusion and the treasury fed fdic transaction were announced. in early may 2009, b of a asked the ring fest transaction not be completed. moving forward we have work continuously with congress the treasury and the financial regulators towards creating a more resilient, transparent and better regulated financial system. one that combines stronger and more effective regulation with market discipline. one of the lesson swres learned over the past few years is that regulation alone is not enough. we need to establish an effecti

the fdic didn't think they should be allowed to repay and two the reason why they were so eager to repay was so they could increase their executive compensation that could be offered to the successor and it would not inappropriate for me to do that. on the second question, i think you are absolutely right to compensation restrictions would be put in place for firms. they are very tough restrictions and they were properly tough restrictions, and for that reason, but for many other reasons, and again because you can do it in stronger in the eyes of the market. deese thanks rigor to, rhee pay and i think we should welcome that and encourage it and i expect to see it substantial bit more that ahead. >> i'm not going to press you to reveal perhaps what you feel is compliments but it strikes me as a matter deep concern at the fdic does not agree with along the repayment because the bank is too weak. my time is about to expire so i'm going to express further thought then pressing e1 this. effectively, the strength of treasury and the regulators sense that the premature repayment on these banks

safety net, the creation of the fdic. lot of good things came, the marshall plan. 20 years after that when we built the country that it bombed this comet doing well and of course germany and japan our world as trading partners and their political allies. less statistic you have 100 billion jobe's needed right now on the middle east over the next decade. so they calculate 60% of the population will be under the age of 25 at the end of the decade with the need for 100 million new jobs. how are you going to create 100 million jobs and money are losing 50 million jobs? as you said you don't know the ceo who is hiring so there's nothing more dangerous in the world than someone with no hope, no skills, no economic opportunity into much time. do you follow me? the real driver for the taliban, the recruiter is not the ideology. it is economics. so what i have said is we have

view the bill in the house to try understand the administration supports that that bill provides this fdic model quasi bankruptcy process with no provision for aig-like provisions other than to transition a field for into an fdic like resolution process? is that -- is that a fair statement? >> that is a fair statement. >> let me just say that this issue that has just been gone through is great concern to me. i've looked closely at that bill. i thought earlier drafts were inadequate in respect of this and did run the risk of another aig. i think the bill in front of congress today is the right one and i think your leadership on this has been very helpful. let me return to the broad discussion about panics and bronze and so forth in the context of aig. i want to understand better the argument and you are making. are you saying that the reason why the counterpart to aig had to be made whole was not because the threat or the namib holding would fail but because of the threat that if anybody was not made a hole in a crowded derivatives transaction then there would be a broad disintermediation i

last fall the fdic in the gated we call mod in a box. earlier this year the fdic applied as practical experiment and low modification and working with treasury and other agencies on recommendations for the home affordable modification program or hamp. the fda supports hamp as part of the solution. in addition, we continue to remain open to new approaches that may be necessary to respond to the scope and changing character of the mortgage problem. our loss share and agreements for failed banks require either the fdic model program or we have to continue to push for responses. for example, we burst temporary forbearance for borrowers that lose their jobs in recession. we also will provide gloucester in finance to support principle breakdance to the guys that values. the ftse's experience has provided a number of lessons learned that we would like to share with the community. i would like to emphasize one key points. laws that make good business sense and help consumers maximize recovery on troubled mortgages. first, and foremost early comm

a more difficult apoach would be the analogy to what the fdic does now, make the premiums risk based. that would depend on things like the riskiness of the positions that the bank takes that affects the fdic premium. the fupding might -- might be affected by the funding mix. the complexity of operations. a variety of things. i think that would be a complicated thing to do. my first guess would be to try to find a formula that exempts deposit funded or community sized banks, for the most part. and puts most of the weight on firms that do a lot of proprietary trading and riskier types of activities. doing it based on uninsured dep sits. >> my time the up, thank you very much. >> thank you, senator. let me turn to senator gregg. >> am i it? >> you may be. my colleague ma have a thing or two to say. you're not the last person. >> i want to say thank you on behalf of people that live on main street new hampshire. if you had not been there and willing to take extraordinary action last fall and into last winter and the early spring, along with the secretary paulson and geithner, this country

would not have any effective without the guarantee but in fact without the fdic and broad measures ofthe financial squeeze by the fed and without the recovery act itself things did not turn. things did not improve, did not bottom until you have that full arsenal of policy responses in parallel. it wouldn't have worked without t.a.r.p.. t.a.r.p. was necessary and it was a part of the basic strategy. t.a.r.p. cannot claim the credit for all of the things improve in this case but it wouldn't have been possible without it. >> welcome you know, the recovery act as a whole nother issue and i don't have time to go into that one so i will leave that. there's two things i want to bring out. one is you are discussing nonbanks come on banking firms, would ever before. i do have to know many of them feared better than that huge banking institutions that had regulators and examiners living in their offices day after day. >> for symbol? >> hedge funds and others have less leverage, 221, three to one, than other sorts -- >> i need that point a lot that is in part because we were actually quite effec

last fall the fdic in the gated we call mod in a box.arlier this year the fdic applied as practical experiment and low modification and working with treasury and other agencies on recommendations for the home affordable modification program or hamp. the fda supports hamp as part of the solution. in addition, we continue to remain open to new approaches that may be necessary to respond to the scope and changing character of the mortgage problem. our loss share and agreements for failed banks require either the fdic model program or we have to continue to push for responses. for example, we burst temporary forbearance for borrowers that lose their jobs in recession. we also will provide gloucester in finance to support principle breakdance to the guys that values. the ftse's experience has provided a number of lessons learned that we would like to share with the community. i would like to emphasize one key points. laws that make good business sense and help consumers maximize recovery on troubled mortgages. first, and foremost early commun

i think the fdic should play a significant role. the treasury should probably play a significant role as well just to represent the political end of the decision making. the fed is not interested in being part of this process except insofar as congress views temporary liquidity provision as part of the winddown process, as being appropriate. let me say this as strongly as possible. we don't want anymore aigs or lehman brothers. we want a well-established, well-stated, identified, worked out system that can be used to wind down these companies, allow them to fell. let counterparties like the aig counterparties take losses, but without completely destabilizing the whole economy as can happen. >> as a part of all this, i'm concerned that we will not re-establish the kinds of proper approaches and the principle of moral hazard until we end t.a.r.p., provide an exit strategy from the recent government guarantees and decide how we'll proceed with fannie mae and freddie mac. would you agree with that? >> i do agree with that. fannie mae an

or that the fdic which is already in tough condition will have even more losses. none of can afford that. >> woodruff: a word of warning. karen shaw petrou, good to see you and matthew gambs, we appreciate you joining us. thank you both. >> brown: now, for the other news of the day, here's hari sreenivasan in our newsroom. hari. >> sreenivasan: the end appeared in sight today for the us senate after 25 days of debating health care reform. newshour health correspondent betty ann bowser reports. >> reporter: it was the news debate-weary senators had been waiting to hear for weeks. majority leader harry reid announced late today, the final vote on the democrats' health care reform bill is set for 8:00 am on christmas eve. >> the yays and nays are mandatory under the rule. the clerk will call the roll. >> reporter: the word came hours after democrats prevailed again on 3 more test votes by a 60 to 39 margin on each one. following those votes reid addressed the rancor that had grown as debate moved closer to christmas, urging both sides of the aisle to "try and get alo

>> i think the one with the most experience is the fdic. they would say a significant role. the fed is not interested in being part of this process except insofar as congress sees temporary liquidity as part of the wind down process. we do not want any more aig's or lehman brothers. we want a well-established system that can be used to wind down these companies and let creditors take losses, but without destabilizing the whole economy. >> i am concerned we will not reestablish the kinds of proper approaches and principle of moral hazard until we end tarp and provide an exit strategy and decide how we will proceed with fannie mae and freddie mac. would you agree? >> i do agree. they have to be addressed, but under the current situation, the tarp was used to bail out companies and make them whole under a well-designed resolution regime. many creditors should lose money which would create market discipline going forward, which is what is needed to avoid the moral hazard. >> the recent quarterly report states there is $317 billion of uncomplicated tarp funds available. do you su

last fall the fdic in the gated we call mod in a box.arlier this year the fdic applied as practical experiment and low modification and working with treasury and other agencies on recommendations for the home affordable modification program or hamp. the fda supports hamp as part of the solution. in addition, we continue to remain open to new approaches that may be necessary to respond to the scope and changing character of the mortgage problem. our loss share and agreements for failed banks require either the fdic model program or we have to continue to push for responses. for example, we burst temporary forbearance for borrowers that lose their jobs in recession. we also will provide gloucester in finance to support principle breakdance to the guys that values. the ftse's experience has provided a number of lessons learned that we would like to share with the community. i would like to emphasize one key points. laws that make good business sense and help consumers maximize recovery on troubled mortgages. first, and foremost early commun

and the typical overdraft not exceed $78 in the fdic study. the small loans come at an astronomical cost one. with bank fees up to $39, the highest we found the most recent survey of banks pylon extra fees to the don't repay in a day or two. the majority of the largest banks charge sustained overdraft fees. you can be charged $35 for your first 5-dollar overdraft. if you don't pay that back in five days it now costs $75. these overdraft loans are taken out of the next deposit in consumers' bank accounts making the banks the first creditor gets paid out of their next paycheck warrior social security check deposit in your account in these loans are extremely expensive. for the fdic's typical 20 dollard devitt overdraft, if the fee is just $27 you get the whole two weeks to pay it back that is 3520% apr. which leads us to describe draft lending as pay day loans as done by banks. these loans, a balloon payments. you don't get an affordable repayment schedule. these get paid first which can cause the other checks consumers have written to bounce an

that's what the fdic fund does. while there is a level of moral hazard that comes with this support, insured deposits are only a small portion of our financial system. here it extends far beyond that. this bill gives that type of government support to the vast majority of our capital markets. it is a fundamentally flawed approach. it is what economists call morale hazard for a reason. it is a hazard. we need to scale back that government safety net under our financial system not expand it to every possible institution. and we need to signal to markets that the federal government is out of the business of bailing out failed firms. that is the only way to officially put an end to the two big too fail problem. this legislation fails to take that critical step. and i urge my colleagues to oppose this rule and oppose the underlying legislation for a second reason as well. that is my concern with the consumer protection agency, also known as the credit czar. it weakens our regulatory model. every one of our banking regula

i think the fdic should play a significant role.he treasury should probably play a significant role as well just to represent the political end of the decision making. the fed is not interested in being part of this process except insofar as congress views temporary liquidity provision as part of the winddown process, as being appropriate. let me say this as strongly as possible. we don't want anymore aigs or lehman brothers. we want a well-established, well-stated, identified, worked out system that can be used to wind down these companies, allow them to fell. let counterparties like the aig counterparties take losses, but without completely destabilizing the whole economy as can happen. >> as a part of all this, i'm concerned that we will not re-establish the kinds of proper approaches and the principle of moral hazard until we end t.a.r.p., provide an exit strategy from the recent government guarantees and decide how we'll proceed with fannie mae and freddie mac. would you agree with that? >> i do agree with that. fannie mae and

our amendment establishes a council of existing regulators which we know is treasury, fed, fdic, etc., instead of an entirely new agency and bureaucracy with all the costs and intended bureaucracy that would be involved with that. utilizing a council balances power instead of using a single politically apointed administrator. i would hope that everybody in the chamber would support this change by the gentleman from idaho. i think the underlying legislation has some problems. there's some cost issues, probably some job issues and other things we have to worry about but i think this particular change, which is in this amendment, is key to progressing in a way that would protect consumers but make sure we are not distracting from the world of business in terms of commerce and banking in the united states of america and i yield back the balance of my time. the chair: the gentleman yields. the gentleman from massachusetts is recognized. . mr. frank: one of the speakers, maybe the gentleman from oklahoma said we don't need a new agency. well, you probably didn't get too far into the bill. t

the fdic offers a parallel for what we propose here. if a profit sharing plan invested its azides and, even though they were held in the name of the plan trustee, the fdic would cover each plan participant out to the fdic limits. we had been asked by congressional staff in the spring whether it was possible as a matter of policy to extend sipc protection to individual participants, and not also extend such protection to in the individual investors of feeder funds to invested with mr. madoff appeared with great compassion to those individual investors, and great compassion for ms. langford, we believe that the answer is yes, as a matter of public policy, a distinction can be made. but we support any relief they can be given to the individual investors in feeder funds. the result -- erisa's situations differ. they are not prevented by a federal investigation from investing directly in their own names. nor is their investment governed by the public policy of encouraging worker savings. for these reasons, if the distinction must be made on

the fdic offers a parallel for what we propose here. if a profit sharing plan invested its azides and, even though they were held in the name of the plan trustee, the fdic would cover each plan participant out to the fdic limits. we had been asked by congressional staff in the spring whether it was possible as a matter of policy to extend sipc protection to individual participants, and not also extend such protection to in the individual investors of feeder funds to invested with mr. madoff appeared with great compassion to those individual investors, and great compassion for ms. langford, we believe that the answer is yes, as a matter of public policy, a distinction can be made. but we support any relief they can be given to the individual investors in feeder funds. the result -- erisa's situations differ. they are not prevented by a federal investigation from investing directly in their own names. nor is their investment governed by the public policy of encouraging worker savings. for these reasons, if the distinction must be made on

it's important to remember that banking isn't le any other buness because we back it wh the fdic and with other supports through t federal reserve. so when bas take risks we as tax payers te risks alon with the rt of the economy. and the present, i think, recognizes that to courage more lending needs tbe very carefulldone so that banks don't go o too far and expose themsels to losses which they can't absorb. >> woodruff: is thatomething that a bank like yours is ab to do? >> i think tt never before, u know, i think you've found in the last o years who is good at this and who isn't you know, it is a risk business. i mean thas why we charge terest. that is the elemento it. but when you have ner had a situation where so my people are failg at once and if there is not a place forhese loanto go, i mean you're caughtn a situation now where you' identified the problebut there's not a reme to that problem. so now that'where we're kind of stuck. given those choices think what the president is king us to is to accomplish, i mean, he said it ithe top of the piece of his statement. never has the

my amendment would give the fdic authority to make additional assessments to these same large firms whosessive risk taking caused the current financial crisis and use those assessments to pay off any tarp shortfalls and ensure that the taxpayers are made whole. my amendment gives the american taxpayer certainty that all tarp funds will be recouped from the large financial companies that caused this financial crisis. it would allow congress to show that we have the -- a plan in place for the recooperate of any shortfall consistent with the promises made during the debate over the emergency economic stabilization act. it will also ensure that the american public understands that we are not turning the page on tarp, but instead that we have a clear and decisive planner for making sure that taxpayers are made whole. i reserve the balance of my time. . the chair: the gentleman reserves. for what purpose does the gentleman from texas rise? helkshelks to claim time in opposition. the chair: without objection, the gentleman is recognized for five minutes. mr. hensarling: if this body really cares

a more difficult apoach would be the analogy to what the fdic does now, make the premiums risk based. that would depend on things like the riskiness of the positions that the bank takes that affects the fdic premium. the fupding might -- might be affected by the funding mix. the complexity of operations. a variety of things. i think that would be a complicated thing to do. my first guess would be to try to find a formula that exempts deposit funded or community sized banks, for the most part. and puts most of the weight on firms that do a lot of proprietary trading and riskier types of activities. doing it based on uninsured dep sits. >> my time the up, thank you very much. >> thank you, senator. let me turn to senator gregg. >> am i it? >> you may be. my colleague ma have a thing or two to say. you're not the last person. >> i want to say thank you on behalf of people that live on main street new hampshire. if you had not been there and willing to take extraordinary action last fall and into last winter and the early spring, along with the secretary paulson and geithner, this country

i have alluded to cooperation with the fdic and other domestic and other authorities in an effort tosystem. which verged on collapse following the extraordinary events of september and october 2008. we took strong measures independently or in conjunction with other agencies to help normalize key financial institutions and credit markets disrupted by the crisis. among these were the money market mutual fund industry in which large numbers of american households and municipalities make short-term investments and the commercial paper market which many firms tapped to finance their operations. we also established an extended special arrangements with other central banks to provide dollars to global funding markets, as we found disruptions in dollar- based marketss abroad or spilling over into our own markets. we have played an important part to restart markets for asset backed securities. by working to revive these markets which allow banks to tap the broader securities market to finance lending, we have helped banks make room on their balance sheets. in addition, we have supported the o

the committee amendment and the revised amendment was originally a suggestion of the fdic to get at one of the most infuriated episodes in the entire financial crisis and the best example was the collapse and the rescue of a.i.g., which was not about a.i.g. but the counterparties to a.i.g. and we have now heard the counterparties, morgan stanley, deutsche bank, refused to take anything less than 100% on the dollar of what a.i.g. owed them. according to the special director general from the tarp program, they did that because they had gained collateral of their debt in the last days of a.i.g.'s collapse so they knew they could get paid in full, even if a.i.g. went into bankruptcy. the fdic says it believes it is better to take over company, to take into resolution companies that are failing sooner rather than later so they don't arrive and find that every asset of the company has been pledged as collateral which leads to a more expensive resolution, a resolution that inevitably is more disruptive of the economy. it gets at two problem, one the collateral -- where the company was insolven

the sipc offers a proposal -- apparel -- the fdic offers a a parallel. they would cover eight -- each plan participant up to the plan limits. we have been asked by congressional staff in the spring whether it is possible as a matter of policy to extend sipc protection to cover the losses of individual participants of pension plans invested with madoff, and to extend other investors of feeder funds. with great compassion for those individual investors, and in great compassion for ms. lankford, we believe that the answer is yes, as a matter of public policy, a distinction can be made, though we support any relief that can be given to the individual feeder funds. erisa prevents individual plan participants from participating. individual investors are not prevented from investing in their own name. for these reasons, if it is station must be made on a policy basis, we believe that it is possible to provide sipc coverage for the losses of erisa, but again we do support relief for investors in feeder funds. thank you for your time and attention and considerati

it has worked well for us with fdic. nothing more that we're doing here with the system with these large firms that are above $50 billion in assets or hedge funds, than assessing them a simple insurance fee. if situations arise? which they become a systemic risk and have to be dismantled, then the taxpayer shouldn't have to pay for that. let the financial services do it in that industry that is causing that problem. that's the american way. let us go to the issue of executive compensation. which know that one of the major reasons why we're in the situation we're in is because of incentives that required risk and encouraged executives to take awesome risk as a feature for their bonuses or their compensation packages. are we saying the government now will determine their salaries and bonuses? no. we're incorporating the plan to this problem within the free enterprise concept, by telling the share holders that allowing them to have a say in that pay, they own the company, why shouldn't they be able to have a say-so in that

they should greet a new resolution regime currently used by the fdic that will permit the government to wind down systemically important firms in a way that protect financial stability and also imposes losses on shareholders and creditors of the failed firm without cost to the taxpayer. imposing losses and creditors -- to systemically important firms by restoring market discipline and levels the playing field for smaller firms while minimizing the destructive effect of the failure of the financial system and the economy. third, our regulatory structure requires a better mechanism for monitoring in addressing emerging risks to the financial system on a whole. because of the size, diversity, and complexity of our system, that task may be bigger than the capacity of anyone regulatory agency. the federal reserve, therefore, supports the creation of systemic oversight council made up of principal regulators to identify developments that may pose systemic risks, recommend approaches for dealing with them, and coordinate responses from the agencies. to close, i will again note that in the f

i have alluded to cooperation with the fdic and other domestic and other authorities in an effort to stabilize the global banking system. which verged on collapse following the extraordinary events of september and october 2008. we took strong measures independently or in conjunction with other agencies to help normalize key financial institutions and credit markets disrupted by the crisis. among these were the money market mutual fund industry in which large numbers of american households and municipalities make short-term investments and the commercial paper market which many firms tapped to finance their operations. we also established an extended special arrangements with other central banks to provide dollars to global funding markets, as we found disruptions in dollar-based marketss abroad or spilling over into our own markets. we have played an important part to restart markets for asset backed securities. by working to revive these markets which allow banks to tap the broader securities market to finance lending, we have helped banks make room on their balance sheets. in addi

the fdic offers a parallel for what we propose here. if a profit sharing plan invested its azides and, even though they were held in the name of the plan trustee, the fdic would cover each plan participant out to the fdic limits. we had been asked by congressional staff in the spring whether it was possible as a matter of policy to extend sipc protection to individual participants, and not also extend such protection to in the individual investors of feeder funds to invested with mr. madoff appeared with great compassion to those individual investors, and great compassion for ms. langford, we believe that the answer is yes, as a matter of public policy, a distinction can be made. but we support any relief they can be given to the individual investors in feeder funds. the result -- erisa's situations differ. they are not prevented by a federal investigation from investing directly in their own names. nor is their investment governed by the public policy of encouraging worker savings. for these reasons, if the distinction must be made on

talking about securities and exchange commission, commodities and futures trading commission, the fdic, and a much strengthened federal reserve bank that has played a far greater role in the regulation of the economy and intervenes more regularly, we hope more rationally, and economic events of the day. on top of that, we have safety nets that simply did not exist in benjamin roth's time. unemployment insurance, food stands, job training programs, social security, medicare, medicaid. all of these things that did not exist in the late 20s or early 30s make it so that the economic effects of downturns are mitigated, we hope. but this is not an argument for complacency. quite the contrary. one year ago in a six-week period the dow jones industrial average lost more than 28 percent of its value. six weeks. just wiped out. and of course we're talking about much larger sums than we were talking in 1929. some of the largest, oldest, most prestigious financial institutions went bankrupt. and had to be rescued by federal loans or taken over outright by the federal government. and in addition to

the congress should create a new resolution urging analogous to the regime currently used for the fdicor failing banks that would put that the government to want them a troubled firm in a way that protect financial stability and that imposes losses on shareholders and creditors of the failed firm without cost to the taxpayer. imposing losses would help address the yoo big to fail problem. -- tooo big to fail problem. third, a regulatory structure requires a better mechanism for monitoring and addressing emerging risk to the financial system as a whole. because of the size, diversity, and complexity of our financial system, that task may exceed the capacity of anyone financial regulatory agency. because a reserve supports the creation of a systemic oversight council made up of the principal financial regulators to identified developments that may pose systemic risk and recommend approach to dealing with them and to court made the response of its member agencies. to close, i will again note that in the fall last year, the united states indeed the world, confronted a financial crisis of a

if the fdic, tomorrow, decided that we do not ensure the accounts. . . . . . . test test r. clear clear >> i think for reasons connected to this style i'm talking about. >> the second case is nato expansion. here we have a very powerful consensus against the idea. this wasn't the exception. i do recall a lot of historians, not at all shy. it was said, i have never in my life met a policy decision by the government met with more powerful disagreement than nato. if we pushed them into central europe, that russia would align with china. russia democracy would collapse. overall that it would result in a very significant cost to the united states. >> this is a sit u wages where you have the power inevitably balanced. this is featured prominently in the argument of historians. this was to a different setting. the world was not by pole ar. although russia did take a cour course. everyone if you take today's russia and say, that's why we have today's russia. it's a vague dispute. finally in the 2:00 i have left, a very interesting case of iraq. here we have a buildup and a short win

fdic insurance fund is now depleted.o we are still in a crisis mode simply because we have not addressed fully the concerns and the challenges of those consumers who are going to foreclosure. as long as we continue to have millions of foreclosures every year, we continue to have a real negative drag on the economy as well as sending more toxic products to the banks. host: what is the role of fannie mae and freddie mac and refinancing? guest: they are planning a major role in refinancing now. they are part of the administration's new refinance program and it started off working really well. ñrit is a well thought out progm on refinancing. it allows you to refinance if you are as much as 125% upside down, meaning your mortgage is valued as more than 125% of the actual cost of your home. that is a solid program. the problem we are facing in this market is not so much refinancing, but it is the loans in imminent threat of default or are actually already in delinquency heading to foreclosure. host: you mention the second wave

and the typical overdraft did not exceed $78 in the fdic study. these small loans, with astronomical costs. and bank fees up to $39, the highest we found in a most recent survey. banks pile on extra fees if you don't repay in a day or two. the majority of the largest banks charge of sustained overdraft fees, you can be charged $35 for your first 5-dollar overdraft if you don't pay that back in five days. at no cost you $70. and these overdraft loans are taken out of the next deposit consumer banks account making the bank of first creditor who gets paid out of your next paycheck or your social security check deposit into your account. and these loans are extremely expensive. for the fdic's typical $20 debit overdraft, if the fee is just $27 you get a whole two weeks to pay it back, that is 3520% apr. which leads us to describe bank overdraft lending as payday loans as done by banks. these loans come with balloon payments. if you don't get an affordable repayment schedule, these get paid first, which can cause other checks consumers have written abo

. >> do you blame bank regulators like the fdic for the trend of tightening credit? >> we work very closely with all of the regulators. we were just talking to the fdic trying very hard to work and a pair banks and make sure the crises in dislocations we've had which are very bad for small business are put to rest and that we move forward with a strong and viable banking system. from our perspective, we have enormous faith in our banking partners right now who are stepping up and partnering with sauce. one of the benefits of the sba guarantee is that portion of it doesn't have to go against their balance sheet so at the moment it is a very good way for banks to partner with us, stretched out and make some of the credit available said they know the marketplace needs. so we have very good balance at this time. >> what conditions need to occur for the administration to consider making direct loans to small businesses? >> once again, i want to mention we have a network out there as banks that we work through so for us to be in every corner of every state as we are now, w

fdic insurance fund is now depleted.are still in a crisis mode simply because we have not addressed fully the concerns and the challenges of those consumers who are going to foreclosure. as long as we continue to have millions of foreclosures every year, we continue to have a real negative drag on the economy as well as sending more toxic products to the banks. host: what is the role of fannie mae and freddie mac and refinancing? guest: they are planning a major role in refinancing now. they are part of the administration's new refinance program and it started off working really well. ñrit is a well thought out progm on refinancing. it allows you to refinance if you are as much as 125% upside down, meaning your mortgage is valued as more than 125% of the actual cost of your home. that is a solid program. the problem we are facing in this market is not so much refinancing, but it is the loans in imminent threat of default or are actually already in delinquency heading to foreclosure. host: you mention the second wave in 2

the fdic should have declared an emergency and claimed all depositors protected and should have used the emergency power to restore capital in banks. that wasn't done in time. even now we need to restore prudent banking -- separate prudent banking from speculation and restore and strengthen normal banking regulations and not depend on the overpublicized treasury department. yes, we have to increase capital, and eliminate cyclical rules and increase congressional oversight with the financial accounting standards board while strengthening the fdic. i have some other bills including recan you pleasing the bonuses, the over $140 billion in bonuses that wall street will take and another bill to authorize the f.b.i. and s.e.c. to be fully funded with investigators to prosecute the white-collar criminals responsible for this fraud. i have another bill to give each region in the country equal voice so the new york fed doesn't overwhelm the rest of the country. america needs more than rhetorical flourishes from this administration or the last to restore sanity to our financial markets. it's t

the fdic study looked at a cross-section of large and small banks that they supervised. they don't have the big money center in the big national banks into their field of supervision. but if you look at banking across the board, it is low to moderate income consumers who have a bank account. they don't have enough money to make ends meet. and the banks are not helping them avoid fees. >> we have problems but i think that one of the things i want to point out, one of the ideas of letting someone know they can opt into an overdraft coverage, but they need to make sure that when these fees are not going to be excessive which is a point we made earlier. and also that there are alternatives such as lines of credit or link accounts that i can citi does but not everyone does. but they are important as well. consumer awareness about what is available to them rather than just do you want to have a few charge or not, but what else is available to me ought to be critically important that senator merkley? >> thank you. mr. carey, i want to ask you about the type of conversation your

. >> do you blame a bank regulars like the fdic for the trend of the tightening credit? >> we work very closely with all of the regulators. we are just talking to the fdic who are trying very hard to work and repair banks and make sure that the crises and the dislocations that we've had, which are very bad for small business, are put to rest. and that we move forward with a strong and viable banking system. from our perspective, we have enormous faith in our banking partners right now who are stepping up and partnering with us. one of the benefits of an sba guarantee is that portion of it doesn't have to go against their balance sheet. so at the moment, it's a very good way for banks to partner with us, stretch out and make some of the credit available that they know the marketplace needs. so we have very good, i think, ballis at this time. >> what conditions would need to occur for the administration to consider making direct loans to small businesses? >> well, once again, i want to mention that we have a network out there of banks that we work through. so for us to be

and a large majority of households, 93% according to the fdic data they released earlier this week, do business with a bank or credit union so that they do have access to savings options. but until recently, a significant barrier to saving was the way that savings accounts were structured. with relatively high balances to open an account and avoid monthly fees. typically $300, sometimes a lot higher. receiving monthly teller deposits and amazing monthly statements preceded their yields on investing funds that were less than, say, $300. but not a savings marketplace has started to change in a way that can benefit, in my view, both banks and their lower income customers. the key here is automatic savings made possible by automatic funds transferred from paychecks or checking to savings. this is a significantly reduced bangkok to the point where i'm at autosave's account, offered by many banks and credit unions, and account can be open for as little as 25 or $50, and maintained without fees as long as there are automatic monthly transfer -- transfers that are typically 25 or $50, but some

the help of government support but smaller banks don't fail at nearly unprecedented rates and the fdic is in the red for the first time in 17 years. perhaps most disturbing of all t.a.r.p. create an implicit government guarantee for major financial institutions. a guarantee that has not shared by their smaller counterparts. the unprecedented government actions taken to stabilize the system have created a huge more hall -- moral hazard that makes our system riskier and that affects the pricing of assets. we welcome you here today mr. secretary to engage in the constructive process of evaluateing the t.a.r.p. and assessing whether it is serving taxpayers in the manner that was intended. i look forward to your testimony and a productive discussion. and with that i call on mr. atkins for two minutes of remarks. >> all right. okay. thanks. thank you madam chairman. welcome secretary geithner. milton friedman once said that nothing is so permanent as the temporary government program. yesterday we learned what most of us had already suspected that t.a.r.p. will not die at the end of this year

our amendment establishes a council of existing regulators which we know is treasury, fed, fdic, etc., instead of an entirely new agency and bureaucracy with all the costs and intended bureaucracy that would be involved with that. utilizing a council balances power instead of using a single politically apointed administrator. i would hope that everybody in the chamber would support this change by the gentleman from idaho. i think the underlying legislation has some problems. there's some cost issues, probably some job issues and other things we have to worry about but i think this particular change, which is in this amendment, is key to progressing in a way that would protect consumers but make sure we are not distracting from the world of business in terms of commerce and banking in the united states of america and i yield back the balance of my time. the chair: the gentleman yields. the gentleman from massachusetts is recognized. . mr. frank: one of the speakers, maybe the gentleman from oklahoma said we don't need a new agency. well, you probably didn't get too far into the bill. t

a similar path is available to retirement plans for funds in the fdic insured banks. the portion that would be required to reimburse within 60 days would benefit all plans. it to be accomplished by returning assets or paying benefits to retired members. funds that were affected by the backs of 30 madoff are facing insolvency. the securities and exchange commission was not able to defy fraud in a timely manner which led to significant losses. the pension protection act of 2006 requires funds to a more tight debt area. i would ask for consideration of the tension protection act, allowing the plan to immortalize the losses at a 30 year rate. fthe plant could recover and naturally. it may lead to the plan being turned over to the guaranteed. is john a consideration for multiple investor groups or participants or any multi employer. i strongly urge the pension plans be allowed the proper time frame before the pension protection act to a more a ties -- amoratize losses. >> for we will hear from a professor at columbia university law school. >> thank you. i am pleased to be

many don't qualify because of their fdic ratings.n discussion for ways to take a well-run bank that has run into difficulty right now and to try to give that opportunity to survive in this economy. >> [unintelligible] >> to the president talk to you about the financial regulation, what you would like to see? >> he did. we talked about the regulatory reform bill. obviously, from the community bankers' standpoint, we are concerned about any more over- regulation in our industry. but we certainly do need something to take place for too big to fail banks and the unregulated. >> did the president make any additional assurance about tarp money? >> he did not. >> [unintelligible] >> he did not. that is something that we are going to be looking at. >> anything in the new program to encourage lending -- are they talking about approaching lending through less restricted capital -- [unintelligible] >> no, it was not. >> from the community bankers' perspective, to you think is wise at this juncture for giving money to the banks? >> i think the c

love to make these loans but the overly broad regulations and ininconsistency together with higher fdic insurance premiums has restricted family and small business access to capital. this house should be more focused on the credit crunch and helping institutions cut through the bureaucracy and lend money, not creating more layers of regulation. among the provisions i oppose within this regulation is to create a permanent tarp bailout authority. this will shield firms from their mistakes and pass their costs onto the american taxpayer. the regulation takes an approach disrupting markets that have performed well and placing regulatory burdens in the places where they are not needed. one of the changes that this legislation would make is not the overthe counter derivatives markets. in the wake of last year's collapse, these markets performed relatively well under the regulatory regime. they allowed regulators to adapt their regulatory approach. rather than recognize the success, this legislation replaces those core regimes with a rules-based structure that has failed. this legislation also

fdic insurance fund is now depleted.o we are still in a crisis mode simply because we have not addressed fully the concerns and the challenges of those consumers who are going to foreclosure. as long as we continue to have millions of foreclosures every year, we continue to have a real negative drag on the economy as well as sending more toxic products to the banks. host: what is the role of fannie mae and freddie mac and refinancing? guest: they are planning a major role in refinancing now. they are part of the administration's new refinance program and it started off working really well. /g#%7n::::::zzga:::zy)s::::+,$gz deceptive products and mostly at households who really were not sophisticated about the market. so when they were told how the mortgages work, which is not accurate, in terms of how the housing market worked, we did not all of the sudden wake up one morning and find 3 million of 4 million people just reckless in america. something happened systemically. a lot of bad products were entering the system. mo

what is leading us to take what has traditionally been the responsibility of the fdic and the sec and probably the irs and place it with the secret service? >> to your point, sir. i can't say that i'm happy that this occurred. >> i'm sure you are not. >> i do a grow that there will be some good that comes from this. we are a duel mission organization. we were first founded to discov discover counterfeit currency. we have about 3500 agents. 2200 agents are out in the field. they do support our protective mission. it's my believe what our agents learn make them that much better in our protection evaluating people and dealing with various types of situations. the investigative mission revolves around the financial times. those are access to advice or credit card fraud and as it relates to cyber related issues. we do do some work for missing and exploited children. a lot of that is because of the cape abilities we have. that's not full time for every agent. we have a small number of agents assigned to that. we believe that our job is to make an impact on the community. we believe this is