auditing the fed could encroach on that. there are some limitations on auditing of the foreign holdings kept in the fed, foreign central banks to keep their holdings there. they are watching closely what happens. outside the u.s. they are concerned that if there is much interference from political authorities that their holdings could be devalued in put at risk. host: from north carolina we have nancy on the the republican line. welcome. caller: good morning, one of my questions was answered earlier concerning ron paul who i back 100%. guest: i am sorry? caller: have they [unintelligible] financing at all? guest: i do not know. i hope not. host: what is that kind of financing? caller: it is islamic-backed financing. they mix their religion in with financing. i hope not. guest: i don't think so. host: on the democrats' line from houston, texas. caller: but mine. how are you doing? i like to say something about what is happening to the economy. on october 29, 1929 we had the depression, don't you remember? from oklahoma to cal

caller: i really despise the fed. it is now even the fed, but the private central bank who controls of the thing. many people do not understand the history of the federal reserve and the reason we had the depression was because of the fed regulating interest rates. they artificially set interest rates. that is exactly what happened in the 1990's and why we had the economic boom because alan greenspan lower the interest rates. when you artificially contrived to control money it will backfire. the market will correct itself. the main problem is that people do not understand the history. that is my observation of the solution is to go back and look at what abraham lincoln did. i do not like the gold standard, either. but abraham lincoln has the best idea to have a public bank their prints money debt-free. we do not need to issue bonds to private bank and have them give us money. we need to print our own money. guest: there are few. there were taking up. one, the fed is a very difficult institution for people to understan

and i think that you have certainly been an activist fed. do you see in the descriptions as we look at these e-mails and i think cases can be made that there was a certain feeling of intimidation at b of a and at the same time they tried to leverage their best game. do you see how you got involved here if something extraordinary in the sense of you felt the system was collapsing or is this going to be a repetitive pattern of the fed? obviously we -- >> could you talk directly who into the microphone. we are having difficulty hearing you. >> several other times, whether it be the asian flu or various mini-crisis, had you been fed chairman taken this aggressive a role? >> the past two years has been the worst financial crisis since the 1930s, threatening the stability of the global system and global economy, extraordinary actions have had to be taken. we have learned a great deal and as i said in my testimony, i hope the congress will take actions to ensure the system remains stable and that no such actions will be needed in the future. i very

of the corporation by the fed and the treasury commitment of e federal@@@@@@@ @ @ @ @ @ @ )@ @ what is the reference to and what is the nature of the commitment? >> the treasury and the fed informed the nation about the commitment to work with the bank of america for the stabilization of the company, and i can say that the other agencies were trying to stabilize the company, this was the transaction that was on the table. there was no shade or structure of the transaction. >> my time is about to be up. when did you learn that mr. lewis threatened to back out of the merrill lynch deal merrill lynch deal and to what extent were you concerned and did you have conversations with secretary paulson that that would sort of unravel a lot of things therefore we had to accelerate the t.a.r.p. funding for b of a and did you take it or did secretary paulson take it as an implied threat if i don't get that line going to go public and let everybody know we are pulling out of the deal? >> when i first heard about it on december 17th i took that as a possibility i was concerned about but subsequently

new e-mails we have obtained from the fed indicate that fed officials may have attempted to keep other agencies in the dark about what was going on. k-fed e-mail discusses not telling the office of the comptroller of the currency what is happening. others discuss how to minimize the amount of information given to the sec. in a remarkable exchange, fed officials note that an sec official can be counted on to be discrete. i am not going to prejudge the issues. at this point, we are not even close to finishing this investigation. bank of america ceo ken lewis gave us his story. now it is dead chairman bernanke's turn to give his side of the story. next, it will be former treasury secretary hank paulson to give his side. we need to get all of the facts out on the table before we are in a position to say what happened and when it happened. but, i promise you this. we will follow this investigation wherever the road leads, and we will do our best to make sure the facts get out on the table, where everyone can see them by subpoena if necessary. let me stop and thank chairman bernanke for comi

i think it is remain very clear, the credibility of the fed in that bernanke is crucial here. if as i do have the markets believing that the the fed will be quick enough and technically should i say able enough to retreat the moment the private credit creation starts working again, it is the market's keep on believing that we won't see major increases in long-term interest rates because then of the markets believe that the actual situation that we have will not generate into inflation. if the markets are to believe that, for example, due to political pressure the fed and will not able to do what it has to do in a timely way, then, of course, inflationary expectations will start to go up and certainly in the bond market to the demand to put your money on a longer-term basis will go together with higher interest rates, no doubt about it. so it is crucially dependent on the credibility of bernanke and the fed the taken under the present situation without creating inflation giveback that reminds me of something in your book where you are talking about, the imperial personal rule o

the fed did nothing. now the fed under your watch has hired black rock, a firm owned 49% by bank of america, headed by a man who invented the subprime instrument when it first bought them and later as black rock who traded billions of dollars of these securities to freddie mac and fannie mae over the last decade. i quote a sentence and will place in the record from bloomberg news "rocket like rise when at first boston was largely a result of his creative work with mortgage-backed securities, slicing and pooling mortgages and selling them as bonds and he took his concept to freddie mac where he sold the companies board on a billion dollar package." that was just the beginning of it. chairman bernanke, what material can you provide this committee and to the record that will explain how the fed will avoid conflicts of interest and self-dealing by that firm and its c.e.o. in the execution of contracts you have signed with black rock? >> we'll provide you with the contracts and with a letter explaining how it

caller: hr 1207 to audit the fed. considering they have not been audited since 1913, considering they have taken trillions of our dollars and refuse to tell us where they are at, sir, i want to know two -- signs of things, and want to stay in line and i know your disingenuous answer will not answer my questions. one, do you back 1207 come auditing of the fed, and, two, i would like to know why we need the fed. they simply have taken the right to print our money and they learned back to us at exorbitant interest rates that a loan shark would love to have and not one penny that we paid in and come tax goes to one single service but pays for the debt that they are laying on us 40 owning us our own money. so, sir, could you answer those two questions? i would like to stay online because i would like to come back after you did not answer this one. guest: i would be very happy to try to answer both. i think the idea of having more transparency, if you like, however you would want to do that, through auditing or just providi

but i want to ask did the fed know about those accelerating losses before the fed approved the merger at the end of november? >> no, i don't think we did. >> may i introduce into the evidence this e-mail which is from the new york fed to autrey of merrill lynch dated wednesday, september 17. it says hope this gets to you. our management, that is the new york fed, has asked to continue the flash report on a daily basis and i am sure with the sec. so the fed was receiving detailed information by which they could have concluded that the overwhelming losses at merrill lynch were more than problematic and that the fed could have done something if they chose. now, are you familiar with this e-mail? are you saying that there is no -- >> we are certainly involved in a lightweight in the oversight of those -- of merrill lynch since we began to lend to them but we are not the formal supervisory and information about their losses -- >> but mr. chairman, the fed knew what think america knew. you were saying earlier with respect to bank of america as a matter of fact you put on them the responsibi

to audit the fed, to say that it will break it up is disingenuous. we do not know who runs these entities. we don't know who is the fed. we know that alan greenspan did it and been bernanke is in there now. but you had a gentleman on last week from a petroleum company who at the end of his time on the show was known to be the president of the texas fed. we do not know who these people are or what their objectives are. they are controlling all we do in this country. they control the money, the businesses. we do not know who runs it. i think that 2 of it is not to dispose of, but to find out what is going on. thank you. guest: i was certainly not suggesting that auditing the fed would break it up or disturb its current structure immediately, but the concern is that given that the gao is under, that congress can request such a review, that could lead to some political interference. that is the concern. on some questions the caller raised, we do know the accounts of the fed. the fed releases a balance sheet statement every thursday afternoon. we all look

guest: the fed is

city fed, st. louis fed, the richmond fed, shockingly, find in agreement with you, an unprecedented agreement, where you agreed to absorb any losses that would be incured by the fed. the treasury actually signed that agreement. my first question is yes or no, do you support the concept of having the presidents of each bank be confirmed by the senate? >> no. >> thank you. for the record, before this month is out, how much t.a.r.p. money will aig, can you provide for the record before this month is out, how much t.a.r.p. money aig has disbursed since january 1st of this year and who are the recipients? >> i think so, but i can't do that here. >> can you do it within the month? >> i think that information is in the public domain. >> how many of those and which contracts were paid at 100% on the dollar and which were not? >> i wish there was a legal contract, there was no bankruptcy allowed. we need a system where we can renegotiate those things, but we don't have a system like that. >> well, we are go

your colleague at the philadelphia fed, charles foster, and i've spoken to other fed presidents, and they seem to concur. the economic forecast relies too heavily on measures of the output gap as a predictor of inflation. the forecasters argue that inflation will remain low for some time given the large current output gap. he notes that other indicators, more forward-looking economic models, suggest a much higher risk of inflation over the medium term. are we looking at the right indicators to gauge the risk of future inflations, goals and inflation compensation spreads in the treasury bond markets are rising? so, what indicators are you using to measure inflation, and why are they the right indicators? >> well, congressman, we look at a whole range of indicators, absolutely. i do think that when output gaps reach the level that we're currently seeing, that it's no longer the case that we can really debate that the output gap exists. i think there clearly is an output gap and the experiences that in previous recessions that inflation has tended to fall after the recession, that -- i

guest: it will definitely beat the fed. the federal reserve, despite criticism of the past year is probably the best in terms of staff and capability. there are best positioned to take on the role of a brand new regulator. they would prefer to go with something they already have. host: in this extensive piece you have a time line of the history of banking and financial regulations over the years. we get a lot of questions about these. the banking act of 1933 which created the fdic also -- it established the provisions, and then, in 1909 it repealed the glass-the goal act. guest: the act basically had separated financial institutions. banks were not allowed to move into purchase other institutions. that is the glass-steagll act. it was to do their best to make sure that nothing would happen again. the idea in 1999 was that is essentially glass-steagall was choking off innovation. they thought the company should be allowed to spread into the larger institutions. it repealed the act and allow bank holding companies to purchase

this is the linchpin of clarifying whether you were threatened by the fed or whether the fed was tough with you because you were threatening to be irresponsible. i want to direct your attention to an e-mail response from the fed's general council to chairman bernanke's e-mail which i previously disclosed. mr. chairman, says, i don't think it's necessary or appropriate for us to give lewis a letter along the lines he asked. first, we didn't order him to go forward. we simply explained our views and what the market reaction would be and left the decision to him. second, making hard decisions is what he gets paid for and only he has full information needed to make the decision so we shouldn't take him off the hook. by appearing to take the decision out of his hands. i'm entering this into the record. >> without objection. >> mr. lewis, is it still your testimony that you don't recall asking for a letter to absolve you of your responsibility for a acquiring merrill lynch's huge losses? >> congressman, what i do remember is calling chairman bernanke and asking him if he could give us someth

but the e-mails from the fed tell a different story. tim clark from this fed said that you're claim to be surprised seemed somewhat suspect. the federal government wrote this claim is not credible. and there are more like this. it's clear the fed think that you either knew or you should have known about these losses sooner. i have to say, everything that was happen manager the financial market last fall, your claim that you had no idea about merrill's losses until september is remarkable. the fed either seem to think you are not being forthcoming about that, or you were completely clueless about the merger and the situation on wall street. when exactly did you know about these losses, and why didn't you know about them sooner? >> thank you for the question. the financial marks in the fourth quarter of 2008 suffered a massive credit meltdown. something that probably had not been seen during -- had not been seen during our lifetimes. we saw that happening in september, and october, and we knew that that was -- we saw things that was evide

in response the fed formed talf in 2008. with backing from the treasury, talf provides loans to investors to finance chair purchases of highly rated asset backed securities with the securities themselves as collateral for the loans. and backing was from the treasury, so the tarp funding was instrumental in our ability to be able to do that. as conditions evolved, we modified the facility along multiple dimensions, even before it began its operations in the beginning of april. the first markets targeted by the facility were those for securities backed by relatively simple assets. the securities were familiar to market participants and their pricing was relatively straightforward. then we moved onto more complex and long-lived instruments. initially the only eligible securities were those backed by newly and recently activated auto credit card and student loans and small business loans guaranteed by the small business administration. in april other securities were made eligible, backed by servicing advances, leases of business

and in order to do that the fed has to be independent. techically it's a creature of congress, and they could stimulate the supply growth.ak >> it jsut will, to get them -- just will, to get them past the next election. we constantly have loose money. when the fed is allocating credit when we make this a public ul-- utility, the cost and supply of which is determined in washington, i don't think the fed should be independent. >> how do you feel the economy is going right now? >> so little of the stimulus money has been spent. has been spent, 10%, it can't be blamed on the stimulus. markets go up and down. in the early years of the last century someone saw jpmorgan on the street, and said, mr. morgan, what will the market do. and he said fluctuate. and it's down now and it will be back. my worry is this, stimulus money, they are throwing trillions of dollars into the system, is like a defibrillator, it will restore the pulse of the country. but you can't live on a defibrillator. and the problem of throwing all of this money will cause infl

>> the fed isn't involved in the day-to-day management. that's the responsibility of the board and management. we are involved in evaluating the capitol, the assets, liquidity and management of the corporation. we have had concerns about aspects of the management and we have asked the board in particular to add independent directors which they are in the process of doing and will continue to be careful and monitor the management situation but we do not take daily decisions. that is not our job. >> mr. chairman, let me ask you when the government invested heavily in aig, fannie mae and freddie mac management was actively replaced. why was the fate of mr. lewis so different in this instance? >> well i think in this case the merger was undertaken in good faith. it was at that time looked like a reasonable combination. a lot of firms suffered severe losses in the fourth quarter. it was one of the worst quarters i think in history in terms of financial losses. ever judgment at the time was that he could continue to lead the company and we have

at the fed. . . fed. its regulation of systemic risk needs to be subject to congressional oversight. its interventions in markets to recover from the current financial crisis need to be audited by the government accountability office as i proposed in a bill and an amendment adopted by this committee. we can afford to make the fed a super regulator as some have proposed, without also increasing its transparency in the hallways that this committee has proposed to the kucinich amendment. wanted thank the chairman for the opportunity to work with you on this hearing and i look forward to mr. bernanke's testimony and i want to thank testimony and i want to thank you search for being here today. >> i thank the gentleman from ohio. we will now yield five minutes to the ranking member of the policies of committee, congressman jordan of the way. >> thank you for holding today's hearing on the government's involvement in the bank of america deal to purchase merrill lynch. i appreciate chairman bernanke's dance

meaningful conditions to the money because the fed requiredà consequences, then the fed's remedy andthe bank of america/merrill lynch case amplifies the case posed by poor corp. corporal leadership because it signals that incompetence practice by the management of a very large financial institution will be subsidized, not punished by government regulators. the fed bought decision-making process and the bank of america/merrill lynch merger makes the case for a significant increase in accountability at the fed. its regulation of systemic risk needs to be subject to congressional oversight. its interventions in markets to recover from the current financial crisis need to be audited by the government accountability office as i proposed in a bill and an amendment adopted by this committee. we can afford to make the fed a super regulator as some have proposed, without also increasing its transparency in the hallways that this committee has proposed to the kucinich amendment. wanted thank the chairman for the opportunity to work with you on this hearing and i look forward to mr. bernanke's

and the independence of the fed. that's why we are going over this. there has been a lot of back-and-forth today but basically what the facts are is that merrill lynch got into trouble very early in '07, it was a very difficult situation, there was a merger proposal that you supported quite strongly between bank of america and merrill lynch. there was an agreement to enter into that merger and then the sub -- at some subsequent time, there were major losses, there were early losses, 8.4 billion that occurred in '07, looked like an additional 12 billion discovered by mr. lewis ong december 14, 2008, and then he announced his desire or his intention to invoking the m.a.c. then we have a difference of opinion and that is that on the one side some folks are saying that you or mr. paulson threatened mr. lewis, other people say it was simply iron-physicianed encouragement to have him stay in the deal. in any event he did that, he stayed in the deal. there is an interesting e-mail from you and i'm interested in the taxpayer

' will be gone here with the fed.and a born economist of the there, holding the crank. host: sanford, n.c. on the democrats' plan. go ahead, you're on with peter. caller: good morning. have you read -- read a book called "fools of gold," written by julian tett? guest: no, i have not. could you give me its basic thesis, briefly? caller: starts back when tim geithner was the head of the treasury in new york. j.p. morgan -- jamie diamond and a bunch of the regulators, they concocted this entire mess. guest: there are many theories. some people don't have to look for a far off to place the blame. i can see that the congress is spending too much money without asking how we will pay for it. but the 19 center banks did a lot to create the mess. it went unnoticed and unregulated by mr. geithner while he was president of the new york federal reserve. people as far as him repulse and did not see it coming. i think there is a search and promiscuity in nor, the notion of too big to fail means they can do anything they like. host:

at the same time, i think that the credit risks to the fed itself are quite minimal. >> as the fed implied to what extent we will have to borrow from those savings pools? in order to meet debt requirements in the future? >> we certainly look at that. an interesting point, even though the federal government's borrowing has skyrocketed, the current account deficit, a measure of what we do from abroad, is lower than it has been in some years, suggesting that the increase in federal borrowing has been substantially offset as banks and households we leverage. in the sense of availability, there is the availability to meet the needs of u.s. governments and other governments. as i mentioned in my testimony, to make the lenders willing to finance us at reasonable interest rates, we must persuade them that we are serious about returning to a more balanced situation going forward. >> thank you for your testimony, mr. chairman. >> let's talk about the deficit and debt. 5.4% in 2019, debt rising. medicare and social security will have begun its pathway a permanent deficits. are you concerned about the

chairman, whether from the fed's viewpoint this is working. bold action was necessary to head off a collapse of the financial system. but the steps taken also swell the nation's deficit and the national debt. it's all but impossible to balance the budget when the economy is bucking a headwind like this recession, because what we do to make the economy better is likely to make the deficit worse. yet at the same time we cannot add infinitely to the national debt without facing the consequences of global credit markets or on our future capacity to borrow. one purpose of this hearing is to explore both the advantages and the potential downside risk of our bold and unprecedented response to financial turmoil. should we be concerned that some of our swelling debt must be financed with foreign credit? we hope that most of our outlays are for nonrecurring needs and much of what has been advanced in recent months will in time be recovered, repaid and used to pay down the debt we are incurring. we'd like to have your assessment, mr. chairman, of that po

kennedy's bill to deregulate or get into the fed? i think it was something like built 00001, one of the first things he did. that would have allowed us to get into the fed and start to dismantle it. why don't they do something seriously so that we can get in and look at these people? they do not deserve the freedom of the law that they have been enjoying since 1913. host: also in "the financial times toda," today, 0 deficit disorder." the public mood may change. they're right about the u.s. deficit. the congressional budget office will -- even on its optimistic assumptions for economic growth, the cbo predicts national debt will double to 82% of gdp in the next decade, a level not seen since the second world war. let's go to the republican line, naperville, illinois. caller: i am calling to refute what the first caller said. he is way off base. this whole thing is the result of democrat policies. the reinvestment act starting with jimmy carter, strengthened in the clinton administration, resulting in the irresponsible behavior of fan

the european central bank has done an number of things, as felt -- well as the fed, following the fed's lead. they have not gone as far as the fed, but it does seem to mean that it is one of the strengths of our system. the criticism of trade, i have long been a critic of trade, but it is with us to stay. we have to learn to adapt to it. we have to learn to make it work for us. and i think that one of the challenges going forward is that probably this crisis have demonstrated that there is such a thing as being to globalize. the germans are probably too globalized. and the chinese were probably too dependent on exports. and one of the new consensus is coming out of i think this crisis may be a bad to have a more sustainable economy, you have to have a better balance between export dependency and dependency on domestic demand. and when you let that get out of whack, you expose yourself to danger. and that will be heretical in many economic circles, but i think it is one of the lessons we will learn. host: bruce stokes, international the grazed at george washington forest service schools

german bernanke, ken lewis came to you with a store the fed didn't believe. you were getting information from your staff and pierced considerable concessions should be required at bank of america because of concern of the quality of top management, and yet you decide to give the eight away without any meaningful changes to bank of america's corporate management or compensation policies. how do you explain that, chairman? >> congressman, the process isn't a one time thing, it's an ongoing process and in the ongoing supervisory process we have made demand of the bank of america in terms of their -- >> so you give the money first and then start supervising? >> well, we have the ability to insist on these changes at any point. >> thank you mr. chairman. >> thank you. i now yield to the gentleman from indiana, mr. burton. >> is mr. lewis lobbying? >> with respect to what? >> i said is mr. lewis lobbying when he tells the committee you put pressure on him along with mr. paulson? >> all i know is i never said i would replace the board of management if he invoked mac

fed's involvement in the mortgage-backed securities. there has been a report out recently that says that, i think "wall street journal" said you're 10% underwater on the mortgage-backed securities. there is currently $480 billion worth, i think is the number that they use. so, as we look forward, i have a couple of different questions related to this. are you concerned that the risk of the fed purchases will outweigh the benefits? and that's first question. the second question would be this. the fed has said that they will buy up to a maximum of $1.25 trillion of mortgage-backed securities. do you plan to go up to that limit and if so, by when? >> on the first issue, i'm not sure about the correctness of that calculation. because we have a mix of securities, not just ones we purchased recently. but it is not our anticipation to be selling those off on the

so the fed has nothing to do with that. we're buying fannie and freddie mortgages but they have already been guaranteed by those agencies that are in conservativeship in the government. >> long-term, we're on the hook. >> you're on the hook for it. i believe one of the things this body will want it look at is reform of fannie and freddie and figure out how the government's intervention in the housing market ought to be conducted. i think everybody is -- many people are convinced that the way fannie and freddie was set up before was not entirely satisfactory and we need to have rethinking about how to -- how the government -- what role the government should pay in the housing market. >> thank you. i want to switch topics real quick here. i want to go to cap and trade and the legislation, the global warming legislation that supposedly is going to move through this body and i'll be very up-front with you, i'm strongly opposed and strongly against this policy of adding any type of energy tax at all to the american public, espec

you were the fed. and he said it was based upon the knowledge that the fed's strong opposition to bank of america attempting to renounce the deal was something that he knew to be the case and that he was in effect speaking on behalf of what you sent him. >> the gentleman's time has expired. chairman bernanke, you are directed to answer the question, though. >> we were strongly opposed to that action for the reasons i've described. >> is that your answer? >> yes. >> i thank the gentleman. the chair now recognizes mr. -- >> thank you, mr. chairman. mr. bernanke, i have one comment and two questions. my comment is thank you for your incredible service in very tur pwu lent times. we all appreciate it. two questions, one about mr. lewis and then a following up on what mr. fortenberry was asking about. mr. lewis was here with a number of different stories on a single transaction. he told the shareholders that this meryl deal was a great deal for them and persisted in that story even in december after he foun

the fed is not the private institution. it was supposed to be owned by the member banks and a technically own shares in the fed. the fed is a creature of congress because its charter can be revoked at any time. the fed governors are appointed by the president of the united states, as they are with the securities and exchange commission, and approved by congress. . have fixed terms. i think i have been fairly critical of government agencies when they have not been doing their job. i don't see malevolent intent over there. we have at the white house a director of national economic policy who took huge payments for making speeches at goldman sachs before coming to washington. but ben bernanke was a respectable academic who earned a modest salary teaching at princeton. largely speaking, that people who work at the fed have perfect reputations. they don't seem to be feathering their nests and operating with any malevolent intentions. i don't always agree with everything they do, but everything they do is justifiable. i think it

. >> do you think it gives the fed to much power? >> the new authority for the fed to supervise all firms that could pose a systemic threat to our financial system, i think, is very important. i wish i had been in place before. i am not certain that the fed could not have assumed more authority and used more authority than it did in a timely way. but, having higher capital standards, once tended to look at all of it, that is all very important. the office of thrift elimination as been blended into the office of the currency. they should have had the oversight of aig. it had one of its investments a thrift. therefore, under the ots, that is absolutely ridiculous. i am glad that the office is gone. >> there are 330 two co- sponsors/ -- there are 332 co-sponsors currently. 66 of them are democrats. what is your position on the particular bill, including the expansion of the role of the fed? >> people want to know more of the secrets of the temple. that may be a phrase from before you were born. it was required reading in my day. many of

the government believed all of that about you and your management team, were you surprised that the fed arranged for you to receive an additional financial support in january? it did that surprise you? financial support in january, does that surprise you? >> we received 15 billion, not 25 billion from the original t.a.r.p. package. it did not surprise me they were willing to give us more. we talked about coming to a solution to get the merrill lynch deal done. >> there was a financial crisis and they thought it was necessary -- unanimous consent for twoore minutes. >> without objection. >> there was a financial crisis and they thought it was necessary for the system, for the deal to go through. if there's one thing about your record that's clear, you have experienced negotiating deals. what do you believe your leverage with the government was at the end of 2008? at the end of 2008? >> the only leverage i would say we had was that two honorable people had given me their word they would try their best to find a solution. >> isn't it true it was because bank of america was a big bank. if y

how is the fed fare under president obama's plan? guest: what it does is it rejiggers the responsibilities of financial leaders. one of the concerns throughout the crisis was that there was not a single solution looking over the entire system, the entire financial system, looking over the broad economic

the fed must be in a position to respond to whatever force is dominant. in conclusion, these a been challenging times. the fed is met the challenge with innovative programs that depart from traditional policy. we a pursued this approach in a manner that is commensurate with the size and the variety of risks we have faced. programs should not obscure the fact that the ins remain unchanged. both policies are aimed at fostering a stable financial system, separate -- supporting sustainable growth and price stability. as economic conditions improved and we laid the groundwork for a reduction in our balance sheet, these in our in our mind. thank you very much. [applause] >> you can write your questions down. they are collecting the cards right now. he started about your forecast and you expect to see unemployment continued to rise well into 2010. how high do you expect the unemployment rate to rise and do you have a regional forecast as well? >> most recently, the view is -- was that the unemployment rate would rise to 9.5% and it would peak in 2010. events hav

and the fed is trying to address both of them.it is true, first of all, because of -- the consumers an small businesses rely on banks. and banks have not only had their capital reduced by losses, but they have become, you know, more reluctant to extend credit to these customers, either because they're worried about losses or because they're worried about their own financial positions. in this respect, we have heard complaints that bank examiners from the fed and other agencies are too prone to prevent banks from making loans in the interest of safety and soundness. we had a joint statement, the federal reserve and other banking industries last fall, making the point that making loans to credit worthy borrowers, maintaining credit relationships is profitable for banks and therefore good for banks. and that in addressing whether or not certain types of loans should be made, the examiner should balance the need for conservatism in a difficult situation and the need to make credit worthy borrowers allow them to receive credit. >> mr.

the fed supported this in the beginning of the crisis. but now they are calling on congress to think about this longer-term. does this put the fed in the position of being more outspoken about the economic functions of washington, with the people who have to pick up the pieces at the other end? >> this is central to the mission of the federal reserve. we have to look at the government's spending and how this position -- how this is positioned for the pathway of sustainable growth. it is the standard fare to talk about the effect of the fiscal programming, so that we understand whether or not more accommodations or less accommodations will be put in place, this is normal. you are talking about over and above -- these kinds of issues. these are not the issues i am embarking on. but the chairman of the federal reserve is a very important responsibility, and congress last the opinion of the chairman, on a number of issues. >> i will ask one last question. >> it seems that i should not answer. >> this is an important question. you can probably

i want you to look at the following from the fed's restrictioned analysis. the potential for losses cited by management, including those from leverage loans and trading in complex structured derivative products, what they also call correlated trading should have also been reasonably well understood particularly as bank of america itself is also active in these products. how do you explain the contradiction between your sworn testimony and the fed's findings that you knew about the acceleration in losses and the potential for future losses as early as mid-november? >> i can only tell you what i just said. that part of the november losses were causing the projection we were getting in december. they were a factor in the increased projection. >> my time is expired. let me yield to ranking member of california. >> mr. chairman, unanimous consent that the minority background memo as well as documents referred to in it be included in the areaing record. >> without objection. >> thank you, mr. chairman. mr. lewis n your 35 years, how many acquisitions including sto