this deals with bear stearns, lehman brothers, and a.i.g.. y did the federal reserve sabin brothers? who made that decision? why was the decision made not to say lehman brothers and who made that decision? what were the respective roles of treasury? [laughter] the reserve bank of york -- of new york. why did the federal reserve say i g n two made that decision? [laughter] in my paper, i have tried to respond to [unintelligible] >> could you repeat that question? [laughter] [applause] >> i thought you bet he was some kind of plant, right? [laughter] governor bremer, the federal reserve and the treasury in consultation, we spoke to the president and congress whenever possible, attempted to avoid the systemic collapse of our financial markets, our financial system. we were extremely concerned that the collapse of these large firms in a disorderly way would have very adverse affect on the broader economy and the broader global economy. the evidence is baldwin brothers is that we were right, that the collapse of these firms is very destructive -- t

what happened to lehman brothers, they failed. they defaulted. >> then you're seeing the issue was the defense of aig. i want to understand whether you believe that the derivatives markets in a crisis our markets where everyone has to get 100 cents on the door of the time. >> in a financial panic, in a generalized financial ron, if you see cascading defaults like this on any type of contractual financial contract, that will accelerate cannot mitigate the panic. again, nothing would have been better if there was a solution in place in this case where you could have negotiated instead about comes that left the taxpayer with less exposure of losses that has no realistic prospect of success in a financial panic of this magnitude. resolution of 40 but mix of the trees is a little bit easier. but there are no good choices in a panic like that. >> i would conclude after derivatives -- if derivatives are the kind of instrument that are having the kind of importance in the markets in which 100 cents on the dollar is necessary in a crisis w

and fed today do not have any war authority to deal with collapsing financial institution like lehman brothers or aig than they did 15 months ago. they have a choice. bankruptcy like lehman or bailout like aig. and the one thing they've been asking for it seems to me to be obviously needed is a way to close these institutions so that if we do have another crisis they can do it in a more orderly manner that doesn't put taxpayers so much on the hook. all the other things are it's hard to figure out and there's one set of people that says we shouldn't rush to judgment they will over regulate or we will have unintended consequences if we move too fast. the other set says congress on the act in a crisis. we know there's things wrong with our financial give tory regime. if we don't act now my god the crisis is already fading from our memory. they will never act and so far nothing much has happened. the bill passed the house but it's not going to the senate. .. for banks about how they behave. and what i see they are is a consensus on the big picture stuff which is of course, but i'm wondering whethe

the problem is, the so-called lehman brothers theory is a myth. the market took lehman brothers bankruptcy more or less in stride. what triggered panic was actions of the federal reserve and treasury. these signaled that the government anticipated a market collapse and did not have an adequate plan of action. in a self-fulfilling prophecy, it was only after the fed ratcheted everyone up into a panic that the market itself collapsed and not after their earlier decision to let lehman brothers go into bankruptcy. other government actions also contributed to the panic. these included the inconsistent treatment of bear stearns and a.i.g., which it bailed out, and lehman brothers, which it did not. yet what does today's bill do? it expands and cements into place the government's thrt to to engage in wave after wave of ad hoc bailouts. it sews the community reinvestment act into the very fabric of the consumer protection agency and fails to reform fannie mae and freddie mac and throws out the one tool that's worked to resolve a giant failing company, tha

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 support letting this expire? >> it is appropriate to begin winding it down. we should clarify what additional needs are still remaining to make sure the financial system is still stable and will

but it is only in the fall of 2008 that we can in september when lehman brothers, merrill lynch, and aig all get in trouble at the same weekend, that the drama really reaches its crescendo. and as most of you know and i'm happy to talk about in question, the fed did not say the lehman brothers. it went under. they knew it would have some ripple effects. it turned out to be a sin on the. they didn't have to save merrill lynch because they married into bank of america. much to bank of america's later regret. and in the wake of that and in the wake of a run on the money market funds that was just as bad and severe as anything we saw banquets in the '30s, they decide to save aig, which has become a giant money sink, again with your money. but at that point having let or maybe been forced to let lehman brothers go under, bernanke adopts a new mantra. the mantra is whatever it takes. and from that point on, he sees himself as the only thing that stands between us and the calamity of the depression. they lend tons of money to aig, $85 billion in the first truck. he helped convince to get $7

different if the british government had let them go through and barclays had been able to bank lehman brothers. it might have been a catastrophe later. i'm not saying this wasn't the only problem. we now know that the economy was slowing precipitously at the time that lehman was going down but i think that they made in this calculation. and bernanke and paulson dropped the notion that they somehow wanted to try a failure. they don't mention that anymore. they rely exclusively on the legal argument they didn't have the power to do it but i find most people don't believe it. they think the fed managed to stretched the law every other day except that one but it's worth remembering the editorial pages on monday the monday after the weekend praised them for letting the men go. it was in the aftermath and the few days afterwards that it turned out that they had expected some ripples but not the tsunami. the markets did not anticipate -- >> host: what happened? >> guest: lehman brothers goes into bankruptcy, a lot of news and then a couple of things happen. one is that the fed and the treasury figure

these deal with bear stearns, lehman brothers, and a.i.g. [unintelligible] to the federal reserve, why did the federal reserve said lehman brothers? who made that decision? why was the decision made? what was the decision made not to save lehman brothers? who made that decision? what was the role of the treasury? the federal reserve bank of new york? why did the federal reserve save a.i.g.? he made that decision? [laughter] in my paper [unintelligible] [laughter] >> when you thought the former member was called that he was some kind of plant? we, as you know, the federal reserve and the treasury spoke to the president, spoke with congress whenever possible and attempted to avoid the systemic collapse of our financial markets, our financial system. we were extremely concerned that the collapse of these connected for -- connected firms in a disorderly way would have a greater effect on the broad economy. the collapse of these forms -- these firms is destructive. we did our best to save, protect, the system from the collapse of these firms, all

>> think about what happened after lehman brothers. lehman brothers failed. they defaulted. >> then you were saying that the default of aig - i want to understand whether you believe that the derivatives market is a market where everyone has to get 100 cents on the dollar all the time. n ain a financial panic generalized financial ron, if you see cascading defaults like this on any type of contractual financial contract, that will accelerate cannot mitigate the panic. again, nothing would have been better if there was a solution in place in this case where you could have negotiated instead about comes that left the taxpayer with less exposure of losses that has no realistic prospect of success in a financial panic of this magnitude. resolution of 40 but mix of the trees is a little bit easier. but there are no good choices in a panic like that. >> i would conclude after derivatives -- if derivatives are the kind of instrument that are having the kind of importance in the markets in which 100 cents on the dollar is necessary in a crisis we need to regulate the

as andrew said 16 months after the collapse of lehman brothers we don't have any new regulations on thebook and no timetable of when they are going to be put on the book. >> but why, why are we in that, we have talked about that on the program here as we look at the various proposals so why has nothing happened yet? >> i think two things. i think the government did a pretty good job of inventing a complete financial catastrophe. they took the emergency measure, the fed purposing money into the economy, lending to banks that needed it. the obama administration introducing a stimulus pack ago. all those measures combined managed to prevent a return to the 1930s whereas if we had been gathering sometime last year some people would have been worried about. but the authoritys were concentrating on avoiding the a immediate crisis they didn't take long-term measures. now what we found is the economy is recovered, these big banks have got labee pog we are again in washington. the political agenda has moved on, all focused on health care and the wall street reform movement has been stymied. it i

look at times that have changed our nation, september 14, 2007, had to do with bear stearns and lehman brothers to our attention a long-term deficit trend as well as a short-term tremendous blow to our economy. for the people in here, should that date symbolize -- the along the lines of the berlin wall, 9/11, that it affected our nations in that way? it looks like a trend that will happen for a while. se>> this goes back to john owen 's first question about how we know when we are in one of these moments. if you are analyst, it is important to set yourself benchmarks for rethinking fundamental assumptions. i would answer your question in a negative. i do not see the financial crisis as such a moment. i have an old fashioned way of thinking about things. i made the victim to the same scholarly problems i talked about. -- i made the victim to the same scholarly problems i talked about. -- i may be a victim to the same scholarly problems i talked about. if the entities with the most capability are not altering their strategic remarks -- frameworks, we do not have evidence for being one of those fu

lehman brothers declared bankruptcy, and it made for a quiet week. as a journalist confronting what we saw last fall, it forces you to ask some fundamental questions. why did this happen? why did we have this tremendous meltdown of the stock market meltdown of our financial sector? how could this happen? given all that regulatory framework that was put together during the great depression, wasn't that supposed to protect us? wasn't that a cushion? again, this was the exact extent that benjamin roth lived through. we were supposed to have figured everything out. i don't know if you read "the new york times" magazine with any regularity, but paul krugman had a story about that for economics, and he said in most major universities in this country, they thought the macroeconomic question had been figured out. let the markets do everything, basically. all debate about what level of intervention was appropriate had been resolved, and the correct answer as if limited by people like alan greenspan and ben bernanke, was let the market settle everything. and y

financial crisis, so at this conference we did, alistair darling said during the interview that after lehman brothers and the crisis in september, he was talking to a very senior, well-respected london banker, and he said, have things changed at your institution? oh, yes, things have changed a lot. one thing we have made a firm policy that we are not going to buy any security we do not understand. wait a minute. what did you do before? these are very complicated. it is a much more complicated world, and even people that are in the middle of it do not understand. >> i have a really tough question about journalism. what is the use? you talk about the futility of journalism, but we cannot really explain what is going on. is that what you're saying? >> in my side of the business back in the late 1960's, i have a model in my mind that if we bring the right facts to bear that the system is ultimately rational. it may not be rational day-to- day and week to week, but if you bring the right facts to a situation, a policy will go in the right direction. if you persuade people this is an educational process, i

and we're very proud of that result at lehman brothers and m.j.k. clearing which collapsed -- >> i understand that. >> in this case the utter lack of records makes it very, very difficult to answer your question. there are still 7,000 boxes of records in the control of the prosecutor that is difficult to access and they aren't digital records. we're working with that as fast as we can. 71% of the people have had their claims determined. and we will get the rest of them out as fast as we can. the complications involve when accounts are tied to others and when accounts are tied to insiders. when accounts are split. and those are very, very difficult accounting procedure. >> there is problems with getting the records from the prosecutor? is that what i am hearing? >> i think we have transparency back to sometime in the 80's but we don't have complete transparency on all the records. >> because? >> the sheer volume and it is one answer. >> what about the prosecutor? you said 7,000 records are -- >> tibbi believe the prosecutor on the ongoing criminal in

interesting quote from the failed co of lehman brothers who took them 135, led a 135 your company into bankruptcy and they asked him nine months after was all over, if you had it to do all over again, what would you do? he said i would wake up at 3:00 in the morning and i would think about, i thought about it and thought about it and if he said-- he said if i had to do over again i would do just the same. think about the fact that you are going to rationalize your way. here is the guy that destroyed was it formally great enterprise that had been around for 135 years. how many of you could think of that you could do over where there was a basketball shot, a mistake you made in a relationship. if you can't face that reality, a lot of times we a to face our own reality. we have to face our own reality. you talk about love and fear. if i have fear it is often because it is my own fear that i am basing. if i am uncomfortable realm somebody who is different than i am for whatever reason, that is really my problem and not theirs but i have to look myself in the mirror and say why is that. i t

we do not have to force lehman brothers into bankruptcy. they could take another route, and it would be a managed downturn. when the secretary performed by questioned his legitimate authority under the commerce clause to go one step further and preemptively prevent getting to the point where the company is having such a systemic risk to society than they may bring it down. if they do, why wait until that critical stage? why not look at what has happened and recognize that there are some companies -- is not just size, it might also be interrelationships and interconnections. there are all different reasons but they have so many tentacles in our system that if they are individually to fail, they could bring down the system. to prevent that happening we have a council of regulators that will constantly review the top 50 countries -- companies in this country. if they see that something is wrong, i propose that we should have the authority that if they determine that there will be a grave effect on the economy as a whole by the attributes of th

what happened to lehman brothers, they failed.they defaulted. >> then you're seeing the issue was the defense of aig. i want to understand whether you believe that the derivatives markets in a crisis our markets where everyone has to get 100 cents on the door of the time. >> in a financial panic, in a generalized financial ron, if you see cascading defaults like this on any type of contractual financial contract, that will accelerate cannot mitigate the panic. again, nothing would have been better if there was a solution in place in this case where you could have negotiated instead about comes that left the taxpayer with less exposure of losses that has no realistic prospect of success in a financial panic of this magnitude. resolution of 40 but mix of the trees is a little bit easier. but there are no good choices in a panic like that. >> i would conclude after derivatives -- if derivatives are the kind of instrument that are having the kind of importance in the markets in which 100 cents on the dollar is necessary in a crisis we

let's have another lehman brothers. we say no. let's try to stop them from getting there. if they do get there, yes, we will put them out of business. but in a more orderly way. i reserve the balance of my time. the chair: the gentleman reserves. the gentleman from alabama is recognized. mr. bachus: mr. chairman, i yield myself such time as i may consume. the chair: the gentleman is recognized. mr. bachus: i ask unanimous consent to address the house from the floor. the chair: the gentleman is recognized. mr. bachus: mr. chairman, this is a great country. and i think we're all proud of our country. it is no small@@@@@@@ @ @ @ @ @r is so wrong and not the size. individuals in this country ought to have the right to choose. they ought to have the right to choose their health care provider, their doctor. they ought to be able to make choices, health care choices, treatment choices between themselves, their doctor, their family, not the government. we see with health care that this idea of the individual, this idea of choice, this idea of freedom to make those choices is under

some of them who worked at lehman brothers or otherwise are out of work, but many are doing just finehere is a boom market on wall street and in the stock market right now. the dow jones is up substantially. for those on wall street still in the business times are pretty good. for the rest of americans unemployment is 10%. you cannot get a mortgage loan. your house is under water. that disparity between wall street and the real country is just extremely dangerous. host: the u.k. announced last week there would give a one-time tax, 50% for bonuses over 25,000 pounds, about $40,000. france followed suit. possibly other european nations will as well. our american bankers concerned about that sort of legislation going through congress? guest: for now, yes, they're very concerned. they view washington as very unpredictable. it is not viewed as likely to happen here in the u.s. although the french and british said they hoped it would. they hoped by announcing their measures in the same week they might urge other countries, at read the united states, would do it as well. when you look at the

we don't want anymore aigs or lehman brothers.e 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 freddie mac are particular problem that need addressed. the t.a.r.p. was used to bail out companies and make all creditors whole except for the shareholders under a well-designed resolution regime, many creditors would, should lose money which would create market discipline going forward which is what is desperately needed to avoid the moral hazard problem you're referring to. >>

. >> if your recommendation had been in place at the time of lehman brothers, with that had been handledad been in place then? >> as far as the council is concerned, the goal of the council would be to address systemic risks -- emerging risks before they become rigid before they become so critical. the council with a macroprudential perspective would have done its work well before things came to that pass. certainly by the time of the crisis in september and october of last year, we were well beyond the point of arresting the risks before they became apparent. what would have made a great deal of difference last fall would have been having the resolution regime i talked about, if we had been able to wind tdown that firm and others that would allow them to fail, avoiding tax payer intervention, but not have had all the adverse consequences on the financial system that we saw. that would eventually better than what we got. >> indeed use on the legislation from congressman paul on auditing the federal reserve? >> my views are known. let me make a point that is important -- the so-called alt

or lehman brothers at risk of collapse will be dissolved in an orderly and controlled process. this process will be paid for by the shareholders, by creditors, and the assets of failed companies not by the taxpayers. for years wall street has reaped the spoils of success with no penalties for failure. this bill will end this unjustice and force wall street to accept responsibility for its failings. i urge my colleagues to support this bill. i yield back. the speaker pro tempore: are there further requests for one-minute speeches? for what purpose does the gentleman from massachusetts rise? >> madam speaker, pursuant to clause 1 of rule 22, and by direction of the committee on appropriations, i move to take from the speaker's table the bill h.r. 3288, with a senate amendment thereto, disagree to the senate amendment, and agree to the conference asked by the senate. the speaker pro tempore: the clerk will report the tight. -- title. the clerk: h.r. 3288, an act making appropriations for the departments of transportation and housing and urban development and related agencies for t

well, lehman brothers went through bankruptcy and still in bankruptcy which resulted in credit markets freezing up around the world. this is not a real solution. the -- in sum, h.r. 4173 reforms wall street for the protections of the consumer and the investor on main street. the republican alternative in contrast represents business as usual for wall street. we don't need more of the same contained in their plan. we need substantial reform found in h.r. 4173. vote none the republican substitute. i yield back the balance of my time. the chair: the gentleman yields. the gentleman from alabama is recognized. mr. bachus: madam chairman, i yield two minutes to the gentlelady from illinois, mrs. biggert. the chair: the gentlewoman from illinois is recognized for two minutes. mrs. biggert: i thank the gentleman for yielding and, madam speaker, i rise in support of the republican alternative. it seems like every time we come down to debate this issue we begin to focus on past history. history is good because we can learn from that, but i think we need to hear more about what the substantive is

you know, when we came in, and even before we came into my body remembers the lehman brothers crash andhat happened right before the holiday season last year. the banks, the hedge funds, the whole financial system had leveraged itself so much -- and leverage means that they took $1 and turned it into $30, or at least they pretended it was $30 or $40 or $60 and were going out and landing like crazy even though they knew that a lot of these loans really made no sense whatsoever. so, they were lending -- part of what drove the housing boom is that it used to be that you had to save 20% money down to get your mortgage. suddenly, people were putting no money down. it used to be that you would get a fixed mortgage of 30 years and he would have a steady payment. suddenly, you did not have to pay interest. you only pay principle. there were a lot of other sectors of the economy were this was happening. not only were they getting money to folks that probably in previous eras would not have qualified, but was also happening was they were then taking those loans and selling them. there were packag

about 11 months i appeared before you to report on the lehman brothers and i would refer you to my written report which i think is subtannial. in the madoff case, unlike the lehman case, a transfer of accounts was simply impossible. through the claims process, the following is the status in claims. the trustee is allowed $4.6 billion worth of claims. that represents returns to 1,600 claimants. sipc has committed and advanced most of $559 million. this is more than in all previous sipc liquidation proceedings combined in the past. there have been 16,000 claims filed and there have been 11,500 claims determined or 71% of the claims. the trustees thus far electric $1.1 billion and these filed 4 lawsuits seeking the return of $14.8 billion and we will discuss that again in just a moment. the subcommittee has asked specifically for information on the fees in this case. as you heard this morning, the trustee has been paid $1.275 million in the law firm of baker and hustett has received $30.75 million. i remind you that this is the largest ponzi scheme in history and most of the trustees and lega

these include aig, bear stearns, citigroup, lehman brothers, and merrill lynch.deposits to insure their investment. consequently they severed liquidity crisis when the creditors became aware of the magnitude of the investment losses. these liquidity crisis for the modern version of bank runs. computer clicks replaced queues of depositors withdrawing their money. last the goal had prevented commercial banks -- glass- steagal had been in commercial banks from these problems. i have a number of questions for the panel. what changes should be made to the risk-capital standards for banks? should congress require all banks to spanish standards? should they be established for other like a highly leveraged financial institution? should all banks and other highly leveraged financial institutions be subject to simple limits on leverage in addition to any risk based capital standard. should fannie and freddie be restructured or fully privatize? should any of those funds to be transferred to the federal housing administration and the place transparently on the federal budget

we do not have to force lehman brothers into bankruptcy.ld take another route, and it would be a managed downturn. when the secretary performed by questioned his legitimate authority under the commerce clause to go one step further and preemptively prevent getting to the point where the company is having such a systemic risk to society than they may bring it down. if they do, why wait until that critical stage? why not look at what has happened and recognize that there are some companies -- is not just size, it might also be interrelationships and interconnections. there are all different reasons but they have so many tentacles in our system that if they are individually to fail, they could bring down the system. to prevent that happening we have a council of regulators that will constantly review the top 50 countries -- companies in this country. if they see that something is wrong, i propose that we should have the authority that if they determine that there will be a grave effect on the economy as a whole by the attributes of these compa

some of them who worked at lehman brothers or otherwise are out of work, but many are doing just finethere is a boom market on wall street and in the stock market right now. the dow jones is up substantially. for those on wall street still in the business times are pretty good. for the rest of americans unemployment is 10%. you cannot get a mortgage loan. your house is under water. that disparity between wall street and the real country is just extremely dangerous. host: the u.k. announced last week there would give a one-time tax, 50% for bonuses over 25,000 pounds, about $40,000. france followed suit. possibly other european nations will as well. our american bankers concerned about that sort of legislation going through congress? guest: for now, yes, they're very concerned. they view washington as very unpredictable. it is not viewed as likely to happen here in the u.s. although the french and british said they hoped it would. they hoped by announcing their measures in the same week they might urge other countries, at read the united states, would do it as well. when you look at th

and we're very proud of that result at lehman brothers and m.j.k. clearing which collapsed -- >> i understand that. >> in this case the utter lack of records makes it very, very difficult to answer your question. there are still 7,000 boxes of records in the control of the prosecutor that is difficult to access and they aren't digital records. we're working with that as fast as we can. 71% of the people have had their claims determined. and we will get the rest of them out as fast as we can. the complications involve when accounts are tied to others and when accounts are tied to insiders. when accounts are split. and those are very, very difficult accounting procedure. >> there is problems with getting the records from the prosecutor? is that what i am hearing? >> i think we have transparency back to sometime in the 80's but we don't have complete transparency on all the records. >> because? >> the sheer volume and it is one answer. >> what about the prosecutor? you said 7,000 records are -- >> tibbi believe the prosecutor on the ongoing criminal in

finally, other relative documents, the bailout of aig, bank of america, citigroup, bear stearns, lehman brothers, general motors, chrysler, cit and gmac. instead of those documents, what i got in return was a folder full of paper that printed off the fed web page. just in case anybody was wondering, those documents did not provide any new or useful information. that kind of response is not only disrespectful to the senate, but it raises the question of what they are trying to hide. i think we should know the answers to that question before we move forward on this nomination and every member of this committee should demand the same. while it turns out we actually may have an opportunity to find out some is of the information. i hope every member of the committee listens to this. earlier this week i was informed that despite the fed's refusal to provide individual senators or the public with the information i requested, they have let committee staff of this very kesse some documents related to the aig bailout. when my staff asked what was in the documents, we were informed that we cannot be told b

about 11 months i appeared before you to report on the lehman brothers and i would refer you to my writtenreport which i think is subtannial. in the madoff case, unlike the lehman case, a transfer of accounts was simply impossible. through the claims process, the following is the status in claims. the trustee is allowed $4.6 billion worth of claims. that represents returns to 1,600 claimants. sipc has committed and advanced most of $559 million. this is more than in all previous sipc liquidation proceedings combined in the past. there have been 16,000 claims filed and there have been 11,500 claims determined or 71% of the claims. the trustees thus far electric $1.1 billion and these filed 4 lawsuits seeking the return of $14.8 billion and we will discuss that again in just a moment. the subcommittee has asked specifically for information on the fees in this case. as you heard this morning, the trustee has been paid $1.275 million.

several in the majority have alluded to the failure of lehman brothers as a reason for the needed reform of the over-the-counter derivative market. and we do propose some reform and i'm going to discuss those in a minute. the gentleman from new jersey also discussed them. so there are some points that we do agree with chairman peterson and even chairman frank. but lehman, i don't believe, can be used as an excuse to inject the government into a derivatives market that is used primarily by thousands of small and medium sized and even large companies to hedge against business risk and as i said have done that safely. the reality is that lehman's portfolio, includingity derivatives positions -- including its derivative positions, without any government assistance was unwound with relative eeds -- ease. it was unwound. the real problem with lehman's derivative business was the lack of segregation of collateral, a problem that is addressed by our republican substitute. the comprehensive republican substitute we plan to offer provides a commonsense approach to oversight of the over-the-counter

. >> if your recommendation had been in place at the time of lehman brothers, with that had been handled differently? if the council had been in place then? >> as far as the council is concerned, the goal of the council would be to address systemic risks -- emerging risks before they become rigid before they become so critical. the council with a macroprudential perspective would have done its work well before things came to that pass. certainly by the time of the crisis in september and october of last year, we were well beyond the point of arresting the risks before they became apparent. what would have made a great deal of difference last fall would have been having the resolution regime i talked about, if we had been able to wind down that firm and others that would allow them to fail, avoiding tax payer intervention, but not have had all the adverse consequences on the financial system that we saw. that would eventually better than what we got. >> indeed use on the legislation from congressman paul on auditing the federal reserve? >> my views are known. let me make a point that is i

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 freddie mac are particular problem that need addressed. the t.a.r.p. was used to bail out companies and make all creditors whole except for the shareholders under a well-designed resolution regime, many creditors would, should lose money which would create market discipline going forward which is what is desperately needed to avoid the moral hazard problem you're referring to. >

than september 15 came along, lehman brothers collapses, the public says things really are bad.the kind of change i want needs to be more drastic. obama shoots ahead and becomes a heavily democratic. 2004, the first presidential election after 9/11, i submit you voters are asking which president is going to make us more secure, keep us more secure. the kerry people realize that. despite kerry's vietnam record out there. he got what's now become a verb here he got torpedoed, if you will, by use of his military record. but the kerry people agreed with the bush people at that point time and about what the question was that the people want answered that in 2000, we had a close election. still not sure what question they were trying to answer. republicans would say we need change. a lot of the country was saying things aren't that bad, i don't know how much change what. we saw a very close election that year because not only was there not easy answers to a question, there wasn't an easy question. go all the way back to ronald reagan. ronald reagan won two elections by the exact same

look at times that have changed our nation, september 14, 2007, had to do with bear stearns and lehman brothers to our attention a long-term deficit trend as well as a short-term tremendous blow to our economy. for the people in here, should that date symbolize -- the along the lines of the berlin wall, 9/11, that it affected our nations in that way? it looks like a trend that will happen for a while. se>> this goes back to john owen 's first question about how we know when we are in one of these moments. if you are analyst, it is important to set yourself benchmarks for rethinking fundamental assumptions. i would answer your question in a negative. i do not see the financial crisis as such a moment. i have an old fashioned way of thinking about things. i made the victim to the same scholarly problems i talked about. -- i made the victim to the same scholarly problems i talked about. -- i may be a victim to the same scholarly problems i talked about. if the entities with the most capability are not altering their strategic remarks -- frameworks, we do not have evidence for being one of those fu

i am just kind of curious, now that we have some nonbanks that our banks, and lehman brothers has beene goldman sachs and those folks at all, since this all took place? >> i cannot comment on specific institutions. right now we have backup authority only for insured depository institutions. even though they might be part of a broader holding company structure, we have no authority there. >> goldman sachs is now a bank, is it not? >> no, because the insured depository institution is only a subsidiary of the larger bank holding structure. this has been a problem for us. another positive thing we think it does -- it is only over the peace that has the deposit insurance, which is not the whole thing. >> the thinker -- neon >> what are your plans to do that? >> fortunately, the accounts have done a lot of it already. it basically requires that the off-balance sheet exposures now be found on balance sheets. we will be finalizing rules next week to make clear that we need to hold capital in reserve from the regulatory capital, that we will treat those as nine balance sheet assets. tal that we

i appeared before you to report on the largest brokerage firms and a history, lehman brothers and madoff. in the bernie madoff case, the transfer accounts were simply a possible. through the claims process, -- a plea in possible. through the claims process, there were $4 billion of claims, returns to 1600 clemmons. sipc has committed as against $550 million. -- and has advanced $550 million, more than all combined in the past. there have been 11,500 claims determine, or 71% of the claims. the trustees have collected $1.1 billion, filed 14 lawsuits seeking the return of $14.8 billion, and we will discuss that again in just a moment. the subcommittee has asked specifically for information on the fees in this case. as you heard this morning, the trustee has been paid 1.27 $5 million. i remind you that is the largest ponzi scheme in history, and most trustees and legal scheme efforts that are being expended here, for the purpose of recovering assets. in terms of legislative initiatives that are before you, sipc has proposed a number of amendments, and these include increasing the amount that

finally, other relative documents, the bailout of aig, bank of america, citigroup, bear stearns, lehman brothers general motors, chrysler, cit and gmac. instead of those documents, what i got in return was a folder full of paper that printed off the fed web page. just in case anybody was wondering, those documents did not provide any new or useful information. that kind of response is not only disrespectful to the senate, but it raises the question of what they are trying to hide. i think we should know the answers to that question before we move forward on this nomination and every member of this committee should demand the same. while it turns out we actually may have an opportunity to find out some is of the information. i hope every member of the committee listens to this. earlier this week i was informed that despite the fed's refusal to provide individual senators or the public with the information i requested, they have let committee staff of@@@@ we were told that this could not be told because they were protected. members of the united states senate, members -- that is a tremendous insul

finally, other relative documents, the bailout of aig, bank of america, citigroup, bear stearns, lehman brothersrs, chrysler, cit and gmac. instead of those documents, what i got in return was a folder full of paper that printed off the fed web page. just in case anybody was wondering, those documents did not provide any new or useful information. that kind of response is not only disrespectful to the senate, but it raises the question of what they are trying to hide. i think we should know the answers to that question before we move forward on this nomination and every member of this committee should demand the same. while it turns out we actually may have an opportunity to find out some is of the information. i hope every member of the committee listens to this. earlier this week i was informed that despite the fed's refusal to provide individual senators or the public with the information i requested, they have let committee staff of this very kesse some documents related to the aig bailout. when my staff asked what was in the documents, we were informed that we cannot be told because it was

now that we have some non-banks that are banks and lehman brothers absorbed by b of a, have you beenrtion of b of a? been in to examine the bank itself? been in to examine goldman-sachs and those folks since this all took place? >> we have -- i cannot comment on specific institutions. i will tell you generally what we are doing which is right now we have backup authority only for insured depository institutions. so activities outside of this, like investment banks even though they might be part of a broader holding company structure, we have no authority there. that is exclusive to -- >> goldman-sachs now a bank. is it not? >> no. because the insured depository institution is only a subsidiary of the larger bank holding company structure. this has been a problem for us. and another positive thing we think the house bill does is gives us backup authority over everything in the holding company. right now it's only over the piece that has the deposit insurance which is not the whole thing. >> do you think that there needs to be some ability to regulate and have oversight of these balanc

now that we have some non-banks that are banks and lehman brothers absorbed by b of a, have you beenn to examine that portion of b of a? been in to examine the bank itself? been in to examine goldman-sachs and those folks since this all took place? >> we have -- i cannot comment on specific institutions. i will tell you generally what we are doing which is right now we have backup authority only for insured depository institutions. so activities outside of this, like investment banks even though they might be part of a broader holding company structure, we have no authority there. that is exclusive to -- >> goldman-sachs now a bank. is it not? >> no. because the insured depository institution is only a subsidiary of the larger bank holding company structure. this has been a problem for us. and another positive thing we think the house bill does is gives us backup authority over everything in the holding company. right now it's only over the piece that has the deposit insurance which is not the whole thing. >> do you think that there needs to be some ability to regulate and have overs

we had seen bear stearns, lehman brothers, merrill lynch, aig, ford, general motors, chrysler, fannie mae, freddie mac, tarp. wisn a huge a structural deficit. he walks into the office and the things he has to start with immediately and the stimulus package. it was fought by the republicans every set of the way. -- every step of the way. they started fighting for a stimulus package and then fighting with housing prices that have dropped 29%. there were mortgage foreclosures at the rate of 300,000 her month. in canada we have 10,000 per year. bailouts of financial institutions are continuing to take place. then the compensation which he and answer for it in those institutions. he introduced a health care measure which was extraordinarily difficult and would be in any country. america is deeply polarized and it is very different -- difficult. the climate is extraordinarily difficult. today, the united states unemployment is in the double digit area and has continuing reductions in house prices, the aftermath of the financial restructuring, and so on. a lot of americans are angry and fru

democratic convention, republican convention, lehman brothers collapses and aig, john mccain suspends800 points, last presidential debate, obama prime thyme and the election. so you can see the progressive footprint is pretty extensive. if you know your map, you'll see it's most extensive and hardest hitting in the battle ground states and least hard hitting in the states where you wouldn't need to, like illinois. you know? or new york. or california. these are states that were pretty safe blue states. here's what we're going to look at in two universes. what we call the spore rat tick voter voter voter -- sporadic voter. we were looking at people who were called, for turn out as the left of the grid. you can see they turned out in higher numbers. democrats and overall. and in terms of media, low and high, heavy-paid media being television radio, lower paid being liz and me. direct mail, phones, and in person. ohio, well, we talk about microtargetting, it usually means we create models. we have create add number of models that we use extensively in 2008 and continue to be used. in ohi

financial crisis, so at this conference we did, alistair darling said during the interview that after lehman brothers and the crisis in september, he was talking to a very senior, well-respected london banker, and he said, have things changed at your institution? oh, yes, things have changed a lot. one thing we have made a firm policy that we are not going to buy any security we do not understand. wait a minute. what did you do before? these are very complicated. it is a much more complicated world, and even people that are in the middle of it do not understand. >> i have a really tough question about journalism. what is the use? you talk about the futility of journalism, but we cannot really explain what is going on. is that what you're saying? >> in my side of the business back in the late 1960's, i have a model in my mind that if we bring the right facts to bear that the system is ultimately rational. it may not be rational day-to- day and week to week, but if you bring the right facts to a situation, a policy will go in the right direction. if you persuade people this is an educational process, i