mr. paulson returning to ceo? >> absolutely not. >> i just think -- mostly by me, but whatever. >> there are a whole lot bunch of conspiracy theorists out there and one of the dangers perhaps mr. paulson coming back is that it kind of gives more fuel to that fire where people are saying, hey, well, no wonder goldman is doing well, they're in bed with the government. what is your take, chris? >> i agree with you 100%. i think that is exactly the problem. if, in fact, he comes back, it does look like, i'm not sure if he comes back from a leadership position it's not a difference as far as i'm concerned. >> matt, let's leave paulson alone. but let me ask you structurally, there are some people saying goldman needs a banker, an attractive banker and good spokesperson at the sort of most visible spot at the head and goldman needs more of a customer's man rather than a trader. what are you thinking on that? >> i think what's interesting, those points are relevant. but next week you see a possible split between ceo and c

mr. paulson. putting in a fiduciary duty situation that's subject to a variety of conflicting interests might just set them up to fail. >> how about the issue of the adequacy of fines? don't you think that to have some deterrent effect there have to be jail sentences under the rainbow? >> we have a number of different jail sentences for securities fraud, so i think we already have a lot of fines on the books. and a lot of jail sentences on the the books -- >> so you would agree that jail is necessary, but it ought to be imposed under existing law? >> it depends on the situation, and i don't want to say that i, you know, think goldman's situation determines -- >> i wasn't putting goldman in the question. >> okay. >> professor ribstein, how about it? are fines sufficient as a deterrent? >> they may or may not be, senator. i think we have to take into account both the costs and benefits of imposing criminal liability -- >> you have professor pontell's example of a $50 million fine willingly paid with

mr. paulson can short and mr. ikal told us that he was uncomfortable with the transaction and turned it down and according to mr. wagoner, mr. wagner also said that he was involved in it being turned down because it was a fundamental conflict of interest. were you aware of this decision and whether or you were or not do you think you made the right decision and goldman made the wrong decision to make that transaction? >> i wasn't aware of it at all. >> do you think you made the right decision and goldman made the wrong decision? >> no. >> mr. schwartz? >> i wasn't aware of it and it's not enough detail to know whether it was the right or wrong decision. >> thank you, gentlemen. all right. mr. vice chairman. >> thank you, mr. chairman. again, i want to thank both of you for coming. as the case study, given -- >> we will take a quick break on "power lunch." we continue to monitor the hearings on capitol hill. >>> you just heard from two former top bear stearns executives. the markets holding in there after triple-di

mr. vice chairman. and as the vice chairman indicated, will start figuring from former secretary paulson. we will then hear from secretary of the treasury, mr. baker and then we will have a panel later in the afternoon with participants in the shadow banking system from ge capital to timecode to state street bank. with no further ado, mr. paulson, thank you for being here this morning. i like to ask you to stand for what is a customary oath of office they were administered to everyone who appears before us. if you would please raise your hand if they administer the oath. do you solemnly swear or affirm under penalty and perjury that the testimony you're about to provide the commission will be the truth, the whole truth and nothing but the truth to the best of your knowledge? >> idea. >> thank you area much. mr. paulson, we have received your testimony and appreciate very much. a move like to ask you now to -- would like to give you the opportunity and we'd like to obviously care and oral presentation by you. we passed in consideration of the time that you keep that presentation to no more

mr. vice chairman. and as the vice chairman indicated we will start today hearing from former secretary paulson. hen hear from secretary of treasury mr. geithner. and it will have a panel later in the afternoon with participants in the shadow banking system from ge capital, pimco, to state street bank. with no further ado, mr. paulson, thank you for being here this morning. i would like to ask you to stand for what is a customary oath of office that we administered to everyone who appears before us. if you would please raise your right hand as i administer the oath. do you saw me swear or affirm under penalty or perjury that the testimony you're about to provide the commission will be the truth, the whole truth, and nothing but the truth, to the best of your knowledge? >> i do expect thank you very much. mr. paulson, we have received your written testimony and we appreciate it very much. and we would like to ask you now, we like to give you the opportunity ever like to obviously here an oral presentation by you without consideration of the time to keep that presentation to know more than 10 minut

mr. paulson. i want to turn to a portion of your testimony with which i agree. i would like to highlight this if i could. on page four on securitization, you say, "because securitization separated mortgage originated and underwriters from holding the rest of the loans they originate, it enabled subprime lenders to stop focusing on the creditworthiness of the loans they made and instead focus solely on their ability to sell them upstream to underwriters. underwriters relaxed underwriting criteria relying on their ability to sell these into a booming market." you go on to say that "reforms are unquestionably a required." they should be required to retain some portion of what they sell requiring underwriters to keep some "skin in the game" which would align their incentives to hold the bulk of the risk. you go on to say "these changes will provide them with powerful incentives to focus on credit worthiness and lead to more responsible lending practices." yesterday we heard from chairman cox. he said words to the effect of a "if honest lending practices which have b

mr. paulson and that guy up there now -- i'm trying to think of his name. guest: geithner.aller: i voted for him. i hope he succeeds. they need to be in jail. these people are criminals. guest: when the savings and loan issue happened. people stealing the taxpayers blind, hundreds of people went to jail . that was a smaller crisis. the taxpayers paid out. but it didn't sink the whole economy. the reason i call this book the presidency in peril, if the president didn't live up to the promise that a lot of people saw in him. when you raise hope sky high the way obama did during the campaign. then you deliver a very slow recovery. you safe it from a great depression, the air goes out of the balloon. 71% of first time voters voted for obama. young people went to work for him by the millions. a lot of disillusioned people that hope he gets his game back. i'm one of them. . . caller: please, america, you have to think twice. they destroyed this country. guest: well, in fairness, we need to cut barack obama at some slack. he inherited a huge mess. there are all kinds of structural

mr. paulson can come along with like his negative public- relations campaign.hey're doing that with greece, italy, spain, ireland, and so forth. can he bring the state to down like he did with greece? guest: i do not know if he brought greece down. there is an issue there. when will the can derivatives and the questionable products that have been on the market, we tend to focus on the seller's and what they did. the buyers must have wanted what they were selling. in cases where it is not outright fraud, you have to wonder what they were thinking. in the case of the states, one reason why california in particular, but a fair number of other states like new york, and michigan, they're feeling the squeeze late because they rapidly expanded in the last decade. their pension and health benefits have expanded and they count for paying for that i returns on investments in the market. -- they [;am -- plan on paying for that by returns. they have negative cash flows. it is taking money out of the budget they did not plan on when they were programming of the other spendi

mr. paulson came along, it wasn't that, you know, he came along and had this great idea. they were all doing this. all the banks were doing. this i think most people don't know that all of this is that all the product on earth is $60 trillion and these derivatives and c.e.o.'s and credit defaults they add it up to $100 trillion. host: we'll leave it there. we're having trouble hearing you. what about the point? guest: the point is well taken. i think up until the last few weeks, most people thought the meltdown was directly related by people unable to pay their mortgages. that was the problem, but that problem was multiplied by a factor of three or four by the betting on whether people would pay the mortgages. if we didn't have the betting and the american taxpayer having to be the lender of last resort to the casinos like a.i.g.'s and merrill lynches who had to be bought by bank of america, if we didn't have the betting, this crisis would have been a lot smaller. we wouldn't have one in six americans either unemployed or underemployed. >> host: we will go to mike in arka

mr. paulson came along, it wasn't that, you know, he came along and had this great idea. they were all doing this. all the banks were doing. this i think most people don't know that all of this is that all the product on earth is $60 trillion and these derivatives and c.e.o.'s and credit defaults they add it up to $100 trillion. host: we'll leave it there. we're having trouble hearing you. what about the point? guest: the point is well taken. i think up until the last few weeks, most people thought the meltdown was directly related by people unable to pay their mortgages. that was the problem, but that problem was multiplied by a factor of three or four by the betting on whether people would pay the mortgages. if we didn't have the betting and the american taxpayer having to be the lender of last resort to the casinos like a.i.g.'s and merrill lynches who had to be bought by bank of america, if we didn't have the betting, this crisis would have been a lot smaller. we wouldn't have one in six americans either unemployed or underemployed. >> host: we will go to mike in arka

mr. paulson, who actually was the c.e.o. of goldman sachs, as i recall, came to this house, came to the senate and said, oh, my, oh, my, the world's going to collapse unless you immediately cough up $1 trillion to the banks to stabilize the banks. fortunately this house said, wait a minute, let's see what we're doing here. instead of a one-page bill, giving the treasury department $1 trillion, the tarp program was put in place. and it did stabilize the financial institutions. but it was a clear sign that the financial -- that wall street banks had become too big. a.i.g. how much have they taken? $200 billion, $300 billion of our money? are we going to get it back? we don't know. mr. dry house, if you'll carry on here. i now you were involved in that tarp legislation and share with us. mr. driehaus: getting back to the issue of too big to fail, i think this is really a critical issue for people to get their arms around. you know, i think it's important that we have strong capital markets. that the private sector works well in

mr. paulson came along, it wasn't that, you know, he came along and had this great idea.ey were all doing this. all the banks were doing. this i think most people don't know that all of this is that all the product on earth is $60 trillion and these derivatives and c.e.o.'s and credit defaults they add it up to $100 trillion. host: we'll leave it there. we're having trouble hearing you. what about the point? guest: the point is well taken. i think up until the last few weeks, most people thought the meltdown was directly related by people unable to pay their mortgages. that was the problem, but that problem was multiplied by a factor of three or four by the betting on whether people would pay the mortgages. if we didn't have the betting and the american taxpayer having to be the lender of last resort to the casinos like a.i.g.'s and merrill lynches who had to be bought by bank of america, if we didn't have the betting, this crisis would have been a lot smaller. we wouldn't have one in six americans either unemployed or underemployed. >> host: we will go to mike in arkansa

mr. chairman. thank you secretary paulson for joining us today. i want to turn to a portion of your testimony with which i agree. i would like to highlight it if i could read on page 4 of your testimony on securitization, use a," because securitization separated mortgage originators and underwriters from holding the loans there is genetic, +u÷ to stop focusing on the credit worthiness of the loans they made and focus on their ability to sell those loans upstream to underwriters. they relied on their ability to sell those loans into the market. you say under writers should keep some skin and a gay man that would probably align themselves with investors who -- skin in the game and that would properly aligned themselves with investors. that would lead to more responsible lending practices. yesterday, we heard from chairman caught in his written statement and he said were to the effect that if of lending practices have been followed, most of this crisis simply would not have occurred. this led to the creation of so much worthless mortgage paper that a

mr. benjamin bernanke and treasury secretary hank paulson as they explained what had happened to a.i.g.,the largest insurance company in the world and what would need to happen to fix the problems posed by the activities that that company was involved in. just as some international corporations create shell companies in the cayman islands to avoid tax responsibilities, a.i.g. created a subsidiary called a.i.g. financial products to sell complex and risky products. and it was thus able to take advantage of the fact that there was no regulatory requirement that a.i.g. hold enough capital to cover its exposure to these products. meanwhile, because a.i.g. was rated triple-a by the rating agencies as a company their counterparties didn't demand much in the way of collateral or margin. essentially a.i.g. guaranteed other people's bets. that is, these counterparties -- goldman sachs societe general sperbgs a frank bank -- a french bank. a.i.g. was able to do so without anyone knowing how many of these guarantees they actually sold. as we now know, they sold trillions of dollars worth. when it t

mr. speaker, was september 19, 2008, when then secretary of the treasury, henry paulson, came to this capitol and asked for the $700 billion in tarp funding. then senator obama and now president obama supported all of those moves. president obama as senator and later as president supported the takeover of the banks, the insurance company, fannie and freddie, general motors, chrysler. by the way, the student loan program. not to mention obamacare. and now we have the financial world that is -- our effort to take that over. i'll stand and oppose these changes. i'll stand and oppose them for a lot of reasons, perhaps an opportunity i can get into a little bit later in this hour, mr. speaker. the federal government should not be making arbitrary decisions on which businesses succeed and which ones fail. it should not be in position evaluating, and if there is credible evidence of an entity, a corporate entity, financial credit entity, credible evidence as to whether or not they might be in trouble, that would give the secretary of the treasury the authority to pull the plug on the company, take i

mr. davis. guest: good morning. caller: i was listening to you going through the various stories. they were talking about henry paulson and tim geithner pushing this new legislation control in financial markets. i'm sitting here thinking. two of the most incredible sources -- both of these gentlemen have very close associations with goldman sachs. isn't this two foxes guarding the henhouse? guest: paulson was the head of goldman sachs. there's no question about that. tim geithner has been criticized as being too close to wall street. there are legitimate issues about how tough financial regulation that is being proposed really is. there are people out there, respectable people, who argue that if the fundamental problem was that if the banks were too big to fail, they should be smaller and less connected. you should have the equivalent of very powerful antitrust action against those banks. we're not going anywhere near that. we are tightening regulation, hoping to be able to spot the next problem before it occurs. that is a really tough one. if it does, if we have another financial panic, procedures would be in place t