anyone who looks at it closely will admit that the fed, occ, sec, and to some degree that fdic were all lax in the area of over said. no question. coming out of this crisis, you not see that type of event happen again in the foreseeable future. the regulators understanding made big mistakes. moving the banks around for the sake of moving, i never saw that as constructive. it would only have disrupted things. most of your financial institutions are affected. we're talking about small, main street, regional banks. most would rather have the fed doing their audits and being there oversight then moving to a brand new agency. having to bring the agency up to speed on their activities. most of those billings were not the cause, were not affected, and were not the engine behind that economic crisis. that economic crisis. they do not deserve to have to go through this huge relocation simply because we're trying to make a public statement. online, i think the idea of taking all this authority from the fed was not good. i did not support from the beginning. >> we have about 10 minutes left. for v

studied the intricacies of derivitaves, or the complexities of how the fed regulates a bank, or how the occ relates to the ots. my sense is that most americans look at this from 40,000 feet. they are upset with wall street. they are concerned about the economy. they are concerned about jobs. they are concerned about the recession that they have been through and that has caused them significant problems financially and a lot of trauma. they would like to see congress do something substantive in all of these areas. as to the actual nuts and bolts of this bill, i do not think most americans have been able to focus on it because they worry too much about either getting or keeping the job they have. >> senator, how are you doing? >> pretty good, victoria. >> one of the areas i know that i know republicans are very concerned about is the derivatives portion of the bill, and the alternative section that was offered yesterday failed. will there be further attempts to address this? do you think -- if not by republicans, do you think some democrats will come back after senator lincoln's primary and t

we had the occ. we had the fed working with fha to go in and that these entities. it was only then we were able to get our arms around the scope and magnitude of the capital problem. the fact that we had these authorities for the first time we could address the problem. we could do something about it. we have the authority to put in capital and put them in a conservatorship. that is the story there. >> i do not have much time, but i wanted to talk about the bear stearns episode. i went into -- i wanted to get your views on whether they could have been allowed to fail. >> with your bare could what? >> fail. -- whether bear could what? >> we heard convincing testimony that they set the expectation that other institutions would get help. when lehman brothers did not get help, it was a shock and surprise. if you could give us your views particularly about setting the precedent having seen the intervention with fannie and freddie and how he thought about doing that with bear stearns. >> i give the commissioner 5 additional minutes. >> ok. i would like to answer that que

they were preempted by the occ in 2004 the fbi warns about an epidemic of mortgage fraud. i held this up yesterday. the economist has an article cover called housing pris after the fall, which is sent 2005, the lead of the story says the day of reckoning is closer at hand. it's not going to be pretty. how the current housing boom could decide the course of the entire world economy over the next few years. housing prices are moving up in 2003 at 11% or 2004, 15%. 2005, 15%. you note in your testimony the subprime lending has exploded to be 20% of the market. and by 2006, mortgage debt between 2,002,006 has doubled in this country. we are part more in the six years in mortgage debt than the whole 225 years on this country's history. the assault of the opaque natures are are delivered for this. there's knowledge of a lot of the events in the markets prefigures my fundamental question, what didn't you another policy make her snow when you came into office, guess my question is what was the missing information that would've allowed both policymakers and corporate leaders to beg

>> yes, and it went to the occ which is the other big bank regulator and it is still the same. so they haven't really blown up the regulatory structure and started again with new people, new structure and new mandate and new culture. that's what i think has been missing from this. >> i want to make one point about this. and i am surprised just like steve that there has not been a harder line on the fed, a harder line on all of the regulators. i was just in canada two days ago where, by the way, the fed's only job in life is to make sure there's no inflation. they have no supervisery powers at all. it's actually a very good model. we have gone the opposite way. >> rose: but greenspan believed that was one of his primary jobs. >> but do me one of the most interesting thing is we all have add. we have all suggested how frustrated we are that there hasn't been a bill. i would suggest to you in an odd way that we might actually be rushing all of this. i am not sure we have studied this enough, interestingly, and i say that only because for example this financial crisis commission wh

the other thing pointed out is that the examiners at the feet occ complained about the revisions of gramm-leach-blileyaying it would prevented them from information as mom bank affiliate's and kept them blind as of the asset quality problems that eventually can walk on its balance sheet. it sounds like to me there was a whole. the balance sheet entities vehicles, and no one is looking so they did pose a risk or certainly potential risk. >> absolutely in the didn't mean to claim otherwise. there was material in the sense of -- the system -- the system of a whole bunch of different regulators looking at pieces of the entity, the fed is supposed to be looking at the whole thing. accounting the regime, reading dependence, capital didn't catch all the rest come internal checks and balances that failed the risk, that system absolutely did not work. sprick by the way i said at the fcc told us they were aware -- they felt it seems to us at least my reading of the black hole of sorts. >> many ways the problem with whole is -- it looked like it was called aaa or super senior, and people didn't say well how big

we had the occ, we had the fed working with fha to go when and look at these entities.as only then we were able to get our arms around sort of the scope of the magnitude of the capital problem. and then the fact we had these authorities for the first time, we could address the problem, we could do something about it. we have the authority to put in capital and to put into conservative shed. so that's sort of the story there. >> i don't have much time, but us wanted to go back and talk about the bear stearns episode itself. i wanted to get your views on whether bear could've been allowed to bail. >> weatherwise? >> to be allowed to fail. and we heard yesterday fairly convincing testimony that the purchase of bayer set the expectation that other institutions would get help and that when women went down, we did not get help, that was a great shock to the market. i was wondering if you would give us your views particularly about setting a precedent, having seen the intervention with fannie and freddie how you went about doing that with bear. >> give the chairman five additi

keep in mind that one of the variables that occs is that we have a lot of debt against the business, and it is one of the anomalies of our counting-- accounting system. as people ecome more concerned about aig, it actually improves the profitability of financial products sewer spreads widen and therefore we can take in earnings which is unfortunate. we shouldn't do that, but we do. that is how we comports on bad times we live better and didn't good times we look were so i will tell you if y take all that accounting out of the noise you will see risking. the team is done an absolutely outstanding job. we are fortunate they are still there. even though they were vilified and appropriately they are working as hard as they can to de-risk this book, and do it in a breakeven to dislike off at. >> when they close down a credit default swap and are they currently closing-- are attempting to negotiate this down? >> we negotiate what we can negotiate in a marketplace from the position of strength so i don't have the analysis. somebody would have to give you what level but i will tell you when

comptroller of the currency, another division of the treasury department, and emerged in the and the occ, which oversees national banks, not overseen by the fed, would take responsibility. host: what other agencies should we keep an eye on for increased or less authority? guest: the fdic that insures bank deposits, it will have a role in winding down firms that are too big to fail. if they are in trouble, the fdic has given that authority to take control of the firm and break it down as it does with failed banks now when it takes them over. there are a number of differences between house and senate versions that need to be worked out. the securities and exchange commission is actually going to sing a number of changes, more mandates for investor protection, a lot more responsibility in did giving shareholders access to nominate directors. and past and a senate amendment, by senator al franken, changing the credit ratings were done. it would create a panel in the sec that would basically route companies to the credit rating firm to give out credit ratings rather than letting them go out a

this country to the explosion of sub-prime lending, the efforts of states that were printed by the occ to fight fair deceptive lending, and just look him and i was a person in real estate investment on the ground, 50% annual increases in home prices so a lot of warning signs out there. clearly, one of the things you have identified is the lack of a structural barrel bureau plea to move on these problems but i want to assess and i really thought about it as we have gone through a set of hearings. do you also think that the system doesn't have enough iconoclast synod, that the decision-making process is unduly controlled but by people who were of the financial system and close to it and am able to step away from it in the way you need for true risk assessment? and of course i think there are variations of this all the way from people may be on wall street who can say what is happening in bakersfield and sacramento on the ground to families, to people who just don't have enough distance to make a critical analysis that you would want and expect? >> i think that is a very good question. an

or lrps which temporarily and automatically pose trading in stocks when significant price proouchlt occ movement occurs. let me be clear. the lrp mechanism does not halt trading. instead for a short time trading is automatically paused to facilitate more accurate price discovery and prevent the market from a sudden and significant move. during this pause our quote is visible to other market participants and new orders are accepted. to jump on chairman again ler's analogy, our lrps are analogous to taking the controls of a plane off autopilot during turbulence. this is not meant as a comment on other markets or other market models just to clarify from the nyse standpoint what we saw. during the 2:30 to 3:00 period market share on nyse was 5 percentage points higher than usual during that time of day. the participation rate of our designated market makers form amly known as specialists was equally strong. this was evidence our liquidity providers did not walk away from the market as we actively traded during the downturn. furthermore to demonstration lrps protected -- erroneous executions

in this country to the explosion of sub-prime lending, the efforts of states that were printed b the occ to fight fair deceptive lending, and just look him and i was a person in real estate investment on the ground, 50% annual increases in home prices so a l of warning signs out there. clearly, one of t things you have identified is the lack of a structural barrel bureau plea to move on these problems but i want to assess and i really thought about it as we have gone through a set of hearings. do you also think that the system doesn't have enough iconoclast synod, that the decision-making process is unduly controlled but by people who were of the financial system and close to it and am able to step away from it in the way you need for true risk assessment? and of course i think there are variations of this all the way from people may be on wall otreet whondha le aryn' tme put in place measures that might mitigate those risks. our system was fundamentally flawed and organized. you had people calling over the system with nobody responsible, and nobody in charge. that was a tragic failure f