stearns: mr. speaker, i also rise in support of h.r. 3125, the radio spectrum inventory act. as the gentleman from virginia mentioned, it's a very important bill and i urge its passage. this bill offers an opportunity to evaluate all of the frequency bands between 225 megahertz and 10 gigahertz and simply to determine who uses these frequency bands and the purpose for which they are being used. while this bill would require ntia and f.c.c. to recommend which spectrum if any should be reallocated, congress ultimately will decide whether reallocation should occur. for congress to make such an informed judgment, we need a solid set of facts before we do it. so it's very clear that the united states will need additional spectrum to meet the growing demand for wireless broadband. in fact, we are victims of our own success in this country. the united states currently leads the world in wireless. wireless providers have used spectrum to provide u.s. consumers with many innovative voice and data services.

-- a a what bear stearns and got. that behavior was rewarded and therefore repeated. this is not sustainable. if we can see that this is true, then we can move from the option of doing nothing to unleashing an army of regulators on wall street. i am not in favor of that. i think that some of these regulators need to work. i am glad to see them get it, but the fact is that a swarm of a risk-averse and regulators poring over the deal books of the banks is not my idea of the revival of capitalism. it just isn't. so i come to a third way. i did not mean it in at the sense in which it is. the government can put in place a incentives less likely to produce at risk. get them right, and a lot will follow. the government can get out of the way. require mortgage brokers to have some stake in the game. have a rating agencies to take their fees in the form of securities that they have operated. -- have upgraded -- rated. [laughter] the laughing shows how far we have come, that that should be considered a crazy idea. remember i sa

hedge funds of bear stearns.i wrote about it extensively, two hedge fund managers were indicted criminally. there was a trial last fall in front of a jury of, quote, their pincers in new york. they were not their peers but they were a jury in brooklyn. it wasn't the sec, it was the eastern district of u.s. attorneys, took pieces of e-mail that were the most inflammatory pieces of e-mail and package them up and tried to sell them off as criminal indictments. sounds like what wall street was doing with mortgages but in fact when the jury heard the full e-mails and the context and saw that it wasn't black-and-white their case failed miserably. there was much more evidence they could have used and failed to use so as shocked as i was by these guys, that jurors said things like i wish i had my money invested with these guys, things like that blow your mind. i have to say to myself is very easy for the justice department or the sec to write up a civil complaint and coal from its damning information and e-mails in a ver

we bailed out bear stearns for some reason or other. but let's assume we bailed out bear stearns when the buyers said i'll pay $2 a share. the feds said well, the sellers are very, very unhappy, pay 10. which they did because the markets were about to open. i don't criticize. if i was sitting there with 32 minutes before tokyo opened, i don't know what i would have done either. then along comes lehman brothers which has offers to sell and keeps saying over and over if you look at the notes, well, they will come along. they will bail us out too. they turn down offers to sell the firm because it was less than the $10 thatbear sterns -- bear stearns, that's moral hazard. that means that you reward bad behavior and it's repeated. hank paulsen is not a flaming revolutionary. he among others says this is not sustainable. now if we can see that that's the truth, it it can move from that option which is doing nothing, to unleasing an army of regulators on wall street. now i'm not in favor of it. i think they are nice people. some of them need w

to lehman or bail you out as they've done to to bear stearns? >> no. >> final question is this, you said you were on the yours of new york. if you said that to mr. cramer, and you don't recall the conversation about, is that what you're saying? >> i do recall having lunch with him, but not that, specifically, no. >> if you did say that, what would you be sure to convey that you are the board of directors of the new york fed? >> as i think about it now, my conversation -- i don't know. you've asked me questions on trying trying to answer that. if they had something to say, they would've set it to me. >> who? >> if the fed had something to say to me regarding our position or condition that needed to be correct date, modified or changed, i had enough conversations with fed officials that they would've set it to me. and that is why, at the third quarter, and my announcements, i actually said i believed these last two quarters are behind us. >> okay, that's fair enough. >> the chair recognizes mr. feinstein. >> thank you. i want to pick up on somethi

few people would have said bear stearns was too big to fail seven years ago. which is how far in advance you need to do these things. if we credibly end too big to fail by protecting the economy from failure, leverage -- and if we put consistent borrowing limits across financial instruments in financial institutions, no matter what they call themselves, leverage will take care of itself through reasonable regulations and through market forces. because lenders will know they no longer have an implicit government guarantee. they will care more what they're doing with their money. the same thing with too big to fail financial institutions. lenders will do their own surveillance here if they know these institutions can fail without taking the economy hostage. glass-steagall we are used to living in a mark to market world. we're not going back to holding loans for books on 30 years and booking the process slowly. investors want to know what's going on -- a better solution than going back to glass-steagall is to better protect the economy from prices -- fluctuating

the kinds of institutions like bear stearns. this is very complicated stuff. it would really have been better if sho congress could have presented this and approached it in a bipartisan way, taken its time, gotten a bipartisan debate over these very complicated issues. i think it arrived at a better solution than they have. >> ifill: given the way you've seen congress not work together in a bipartisan way on so many different issues this year, why do you believe that that would have fixed the substance of this particular approach? >> well, simply because the issue is is no longer partisanship. you can have a debate among people who respect each other and are knowledgeable. you're going to get to better answers on what are very, very complicated issues. bob litan, alan blinder, yves, have all pointed out how complex these issues are. up can't do had in a partisan environment. i believe if we had gotten beyond the next election there was a chance of having less than a totally partisan environment. >> ifill: alan? >> i think we've waited a long time. this crisis

what or a similar arrangement perhaps as to what happened with bear stearns, the diamond to deal?mption? >> no, sir, i was not. >> in your opinion, these to not create a moral hazard. do you believe that there was the presumption that lehman brothers should be treated as just another counterparty? do you think that the government might have been behind them. >> you have touched on a very interesting piece which i would like to talk to. there were a key claims at the end of september 15th. one was that there was a huge capital hold. some said 30 billion, some said some other numbers. one thing that was pointed out was that as we went to the different asset classes, there was some reasonableness and unreasonableness but at the end of the day it was somewhere between 500 million and let's say 8,000,000,007. this would have lowered our equity. for those that thought it was dirty, this is important. >> we have your answer for the record. for my standpoint, what i think the world believes, once we have done bailouts, we would do future bailouts. i voted against the bailouts. the nobel p

and -- but then what we needed was we needed a buyer that could do what jpmorgan did with bear stearnswhich was still in the capitol whole and guarantee the trading during the shareholder vote because there was no authority -- turning over every stone to see what authorities we had. there was no authority to guarantee liabilities or to put capital into the institutions. but any event, i'm not sure but the british were -- i had said in the book i had used some rash language when i was disappointed but as as i reflected on it, they obviously have their own issues they were looking at and the regulator -- it was for them a very difficult -- it must have been a very difficult decision to let one of their banks to go ahead and in the middle of the ron, lehman brothers stepped in and make that acquisition and confident they had the wherewithal to do that. >> hank, lehman did go down on that sunday. and barclays bought a limited part in a much smaller transaction and i think it was tuesday or wednesday of the british authorities said if you have an account with lehman keeping securities there

>> no, i was not. >> or a similar arrangement perhaps as to what happened with bear stearns, the diamond deal. you were not working under the assumption that that would happen in your situation as well? >> no, i was not. >> said these bills do not create a moral hazard in your view -- so in these bailouts do not create a moral hazard in your view? with respect to the firm's you did business with, your creditors, do you believe there was a presumption that lehman brothers should be treated as a another counterpart, or do you think they assumed that like their stance -- bear stearns, the government would be right behind them? >> you have touched on a very interesting piece, which i would like to talk to. there were a couple of claims at the end of september 15 after lehman brothers. one was that there was a huge capital wholhole. some said 30 billion. others said other numbers. some said there were some pluses and minuses. at the end of the day, it was somewhere between 500 million and about 2 billion, which would have lowered our equity to 26 positive. the world believe that we had a capi

. >> what do you think was so much more stable about bear stearns than lehman brothers? >> in connection with lehman brothers the opportunity to lynn to of lehman brothers was dependent on collateral which was sufficient to justify the loans and they did not as of september 15th have that type of collateral. >> i get the sense that the fed fog that something could be done but since they weren't regulator in charge they stepped back. how do you feel about that? >> i am not qualified to and to that question in terms of what we were trying to do. over that weekend there were efforts being made. there were efforts to salvage some aspect of lehman. i can't comment beyond that. >> in your report you cited many times the risks lehman was taking was far and above, in september of 2008. >> they had in place a risk matrix that limited the amount of risk for individual transactions. they exceeded that 20 times to take on more. they simply raised the level of risk they were qualified to take. that is the way they addressed it. many were assets which became an anchor around them. >>

started off as an investment banker bear stearns and then he left to do his own investing, his own hedge funds. but what he focused on, he specialized in was merger arbitrage. merger arbitrage is basically you buy the stock is being acquired and you short or you bet against the company that is doing the acquisition. you shake it up a bit and sometimes he did. it's not full of raise. you can do better than the next guy and john paulson had a good career and had a good track record. but he never did more than 15, 20% gains in a single year. and yet he was the one who did this trade. his right hand man, the one really key in this trade is a german named paula pellegrini. and he is a native of italy. and also smart graduate of harvard business school. he is even more unlikely to play such a crucial role in the greatest financial coup in history. he's been a clear coat -- kicking around wall street that he didn't do very well. never got a promotion that he always wanted. he never really rose very far, and the leading and end up trading on his own. he didn't go so well. he traded, try training

>> andy stearn, the number one visitor to the white house since president obama's been in there, allight, guys, thanks a lot. >>> hiking taxes on gas price, 15 cents gallon to pay for a new global warming bill. the latest d.c. money grab that has folks say why stop at as cents? >> forcing citizens to do government work for free. i hope you'reod.eady to cut gras and pick up trash. . ♪ at the end of the day in sitka, alaska, everyone awaits the return of the fishing boats. ♪ their safe arrival is highly anticipated, ♪ as is something else. a shipment of natural sea salt from cargill, essential for preserving the catch. we deliver the salt on precise schedules... and ship it efficiently all along the alaskan coast; saving the fishermen money, and their catch. this is how cargill works with customers. careful what you ask for, cities cutting costs by asking storm e sstems volunteer to do city work. neil always wanted to be a lawn boy. forget the government, c >>> i wish neil was here for this one. cities across america slashing costs by slashing services like colorado springs cutting out

about the -- and then what we needed was we needed a buyer that could do what jpmorgan did with bear stearns which was fill the kettle hole and guarantee the trading during the shareholder vote because there was no authority to do this in

stearns. gentlelady from california, ms.ssue is recognized. >> thank you for holding this hearing on the recommendation for the fcc's national broadband plan. as you know i represent the heart of silicon valley and it is a place where many companies and industries live by the mantra, innovate or die. the issues of innovation and competition in the plan reflect a legislative initiative that i have pursued on behalf of my district for many years. in 1996 when congress passed the telecommunications act that partnered with my great pal, ed markey, i'm including a provision, section 609 to encourage innovation through competition and the set-top box market. in the 14 year sense, we have only seen minor steps forward in creating new technologies. is true the cable industry did take it upon themselves to create cable card as a follow-up to the order to implement section 629 but as the fcc recognizes in its national broadband plan, quote despite congressional and fcc intentions cable card to fail to stimulate the competitive retail

if you mention auction rate secured, dirty madoff, lehman brothers, bear stearns from aig and a host of other problems all of those big jul and problems with the regulators do can change all of the rules in the world but if you don't change the people manning those agencies and put confident people in their nothing will change because those people couldn't enforce the old rules we had and they want to give more complex rules and broader responsibilities. how are they going to achieve that? they are not. >> host: we better figure this out before the responsibility of looking out for the entire financial system and of the law and that is exactly what senator dodd wants to do creating a systemic risk regulator. and they can't find madoff after you go out and warn them including in a memo with the title, what was the title? >> guest: the largest hedge fund is a fraud. maybe i was too subtle? >> host: mabey and you said that you specifically modeled after the bin laden memo from the summer of 2001, and it still you've got nothing from the sec. what did me to be competent? if you go into t

started off as an investment bank and bear stearns and then he went out and did his open investing and hedge funds. what he specialized on was merger arbitrage which is among the safest kinds of investing. basically you buy the stock that's being acore and you sure it or bet against the company that's doing the acquisition. and you have to shake it up a little bit and sometimes he did. but it's not full of risk. you can do better than the next guy. and john paulson had a good career and had a good track record but he was a merger arb and he never did 15 or 20% gains in a single year and yet he was the one who did this trade. his right-hand man, the run really key in this trade is a gentleman named paulo pelligrini. and he is unlikely to play a greater role in the greatest financial coup. he was kicking around wall street. he was a banker there. he never got the promotion that he never really wanted. never really rose very far. ended up leaving lazar freur. did some trading on his open. he didn't do as well. he traded -- tried traded as one -- he's twice divorce and traded some of his w

but then yet, you see that it leaves companies publicly traded by lehman brothers, like their stearnswatcher of like david einhorn who wrote the forward to your book being publicly something is wrong here. you're a public debate about this greater market signals for the stock was going down. you had a greater chance that markets could work with a fun like madoff's this is private. he then told his customers, don't tell people that you got your money with me or i'll kick you out of the fund, with temperatures that could not have been a very bad punishment. should the sec have some kind of public walk with him by people like yourself to say look i think i found something. people should prove me right or wrong. something like we have the political futures markets for politicians. which one it going down? would that help this? >> guest: the fcc has adopted that proposal. they're putting off for the whistleblower and paperwork for people to come in with information driven economy take undue career-best and you may be writing yourself a ticket out of the industry. become a smoking gun e-mai

one of the reasons we were so worried about the failures of bear stearns and lehman brothers was that we thought it might lead to a collapse of this critical market. and so in recent quarters, the fed, the private sector and others have been working together to try to improve how those markets function and in particular that we would have a set of protocols that we could've used in case a major player field, a major firm were to fail. so we want to make those market stronger. that's indirectly helps with the too big to fail problem because if we feel the system is strong enough, there's less need for danger in allowing a firm to fail. so we're very much interested in strengthening those markets. the fed -- it's very active in the repo market now, but in order to help reduce reserves in the system, we are looking to broaden the people we trade with to include not just the primary dealers we deal with on a daily basis, but also a wide range of other short-term money providers like money market mutual funds we party worked with. so, you know, we are expanding that the we will be able to

they also benefited from the fact that lehman brothers is gone, bear stearns is gone, merrill lynch was bought. so there is more market for them to take. that has resulted in very strong numbers for the firm. yes, they are fighting fraud charges from the s.e.c. they continue to fight a larger public relations battle because of the optics of making so much money when people feel as though, what did we get out of this and we don't even potentially have a job in many parts of this country. >> david faber, we'll call on you again, as we always do, to explain this kind of thing as goldman sachs deals with this two-pronged story. thanks. >>> at the u.s. supreme court today, the justices handed down a decision involving animal rights, videotape and the first amendment. a virginia man sold videos of pit bulls in violent dog fights. they were made overseas, he says, where dog fighting is legal. he was arrested and sentenced to three years in prison under a federal law that banned depictions of animal cruelty, but by a vote of 8-1, the supreme court today struck down that law saying it was so bro

stearns, for five minutes. mr. stearns: i ask unanimous consent to revise and extend my remarks. the speaker pro tempore: without objection. mr. stearns: good morning, madam speaker. last week the chief actuary for the center for medicare and medicaid services, c.m.s., issued a troubling report. but it is not all surprising to many of us who debated the health care bill. the report said that the obamacare health care bill will increase national health care expenditures by $311 billion. that's a deficit. during the debate many of us said on the house floor that this bill will increase the deficit and expand federal powers. i'd like to take a new minutes to outline some of the problems with the bill that's coming to the fore by government officials pointing out that these are the problems. first of all, obviously increases the deficit. c.b.o. projected the cost of the health care bill to be $940 billion and reduce the deficit by $138 billion. however, that is proven to be wrong. there are budget gimmicks in place and it is unlikely congress will keep those gimmicks in place. the bi

i thought right up to the end after the flak had been received by the fed and treasury after bear stearns that would be highly unlikely they would want to do that again. >> the chair recognizes you, sir. >> thank you. good afternoon. to follow in your remarks, there you believe there were corporate government failures at lehman? >> no, i do not. i think our governance procedures were really very good. i have stated in my statement that i believe the major problems with lehman were just what i said. basically, if you'll remember in 2006 we have had years of a very profitable real estate operations in this country. and at the market was going up. we have had record earnings. the business decision was made to expand our proprietary investments. part of that was going into real estate. i think it ended up with real estate as one of our major problems -- obviously. the other thing was, an investment bank cannot continue to exist once confidence is lost and there is a run on the banks. you can hardly have enough capital for that. that occurred for a lot of reasons, some of which [inaudible] >>

stearns: mr. friday the s.e.c., security and exchange commission, filed fraud charges against investment bank goldman sachs for misleading and defrauding investors through their selling of a complex financial product based on toxic subprime mortgages. these charges are serious. but the s.e.c. should have been investigating the abusive practices that contributed to our financial crisis much sooner. american taxpayers could see that goldman sachs was a lot of smoke and mirrors. american taxpayers could see past lloyd blankfine's defense of his company when he said such things as we are very, very important. he went on to say, i'm doing god's work. americans could see that there were problems on wall street well before the s.e.c. was willing to publicly acknowledge it. now, according to the s.e.c., goldman sachs was approached by one of the world's largest hedge funds, paulsen and company, which asked the firm to create and market collateralize debt obligations whose values were linked to the value o

you asked earlier for a bear stearns regulator. if you have one now confronted you. we need to be blunt. you have not heard much bluntness in the hours of testimony. we stopped a non prime crisis before it became a crisis in 1991 by supervisory actions. we did it so effectively that people have forgotten that it even existed even though it cost several hundred millions of dollars in losses but none to the taxpayer. we did it by pre-emptive litigation. we broke a raging epidemic of accounting control fraud without new legislation from 1984 and through 1986. legislation would have been helpful. we sought legislation. we did not get it. we were able to stop that because we did not simply continue business as usual. lehman's failure is a story in large part of a fraud. it is fraud that begins at the absolute latest in 2001. that is with their subprime and liars loan operation. lehman was the leading purveyor of liars' loans in the world. studies on these loans showed incidents of fraud of 90%. lehman sold this to the world with reps and warranties that there no such frau

even today i think it's clear from the record that even at hfbs and bear stearns, there were not the highest level of decisions about how to handle subprime. that didn't come until september and october. it just seems to me at the end of the day, the two of you in charge of this organization did not seem to have a grip on what was happening. now, mr. prince, i will say that on november 4th, you took responsibility and you resigned. mr. robert rubin, i want to ask you very clearly, because you've gone out of your way in the interviews and public statements to make a very fine point or a very large point about how you were not involved in operations. you said you made speeches warning about potential risk. you were chairman of the executive committee of the board of directors. you attended weekly business. your compensation was $1 million plus $14 million guarantee bonus. mr. prince, in your interview, you indicated the level of into action was frequent. if one of you were out of town, you would talk by phone every other day. mr. robert rubin, you were very involved in the investment b

they feel confident, but i can remember bear stearns confident, and remember drexler guys looking confidenti don't know that that gives you a clue, but what i do feel pretty certain about is this is opening up a can of worms, whether for good or for bad. we all want fraud pursued, but we want to look at people innocent until proven guilty, but i think a process has begun, and i do think the fact that pause are not and goldman were the first ones, just means they aimed really high for the first case. >> what's your view? you were talking about gold and today's trade, but also don paulson's link to gold? >> no question about it. when we saul gold cascading the way it was, first we thought it was an exit to the risk trade, but we thought there was more to that. because they have sold gold exposure, i guess someone was making the chain down the line perhaps he was being indicted, some stupid connection like that, and all of a sudden it became fashionable to punish gold disproportionately, but the markets have recovered a bit the exact moment that jim said that goldman possibly had a position in

aig, bear stearns, synonymous with the meltdown and a good chance derivatives are at the core of it. >> ali's not exaggerating this by a conservative simt of the u.s. treasury, some $600 trillion worth of derivatives held by invests as we speak subpoena look how that compares with the entire growth of the global economy. the output for the world, gdp, is only $60 trillion. only $60 trillion. ten times the global economy. >> i have to say, christine, i don't know if had the same experience, on my facebook page, a lot of comments from people troubled by the idea of the secret drivties and worried we're giving up a drerivatives bad name. >> no. >> bring in smoob know as great deal. neil, deputy treasury secretary, the treasury department. very involved in this move. neil, tell us what this new legislation, that's passed the house, the senate is working on, that president and you folks at treasury want to pass? what is that going to do about the world of derivative, the bad part that nearly brought our economy to its knees? >> first, it's good to be here. derivatives are, been a very big

on 6/12, june 12, my birthday, 2007, bear stearns asset management, it was announced that their funds were in significant problems. i knew you would want to know my birthday, mr. vice chairman, so you could note it on your tickler. on july 10, s & p and moody's announced significant cdo changes and down grades. on august 10, pnbparibus noted significant down grades. both you and mr. rubin said you became aware, mr. rubin did in september and i think you said the same thing, of problems in the cdo desk. when all these things happened, why didn't the potential of problems rise to the top in the wake of these major announcements? why didn't it bubble up? >> well, mr. chairman, i think you have to go back to the time in question. so much has happened since then, that it's a little hard to put yourself in the time frame of when this happened and i can only speak for what people must have been thinking, because i obviously didn't know about the cdo positions and the time frames you're talking about, but i believe in hindsight that people believed and they believed with a level of certainty,

then all of a sudden bear stearns went down. we now have china suing goldman over bad derivative deal, we have germany, france and the u.k., god nose, what did they -- "godfather of the kremlin" knows what did they do with -- god knows, what did they do with greece as ta way to take some off their balance sheets to get support from the e.u. and in the course of doing so, hid much of the debt and now we all know what's happened to grease. we -- to greece. we know what happened to the stock market just yesterday of the rating agencies taking the steps they did. this company has no shame. this company is willing to do any deal as long as it makes them money. ms. kaptur: will the gentlelady yield? ms. speier: i will. ms. kaptur: do you know what the boe nutses were for goldman sachs? ms. speier: i yield to the gentleman from oregon. mr. defazio: it was $9 million, most americans would be happy to have that salary for a fraction of a week. ms. kaptur: i think he thought it was too little. mr. defazio: compared to the enormous wealth

if you look at merrill lynch, look at bear stearns, look at citi bank, bank of america, proprietary trading was at the heart of huge losses in their positions. i would just argue the presumption is an error. >> senator, you talk a lot about cracking down on conflicts of interest regarding wall street trading. okay. fair thuf. let me just ask you, though, with respect to goldman sachs in these e-mails where they went short and they hedged their mortgage position, isn't that the business they're in? i mean, don't they owe that to their shareholders? isn't that what they should have done as a prudent business decision? >> well, if you're hedging your own position, that's one thing. but if you are selling securities and recommending it to your client while internally you're betting that those will go down, that is enormous conflict of interest that can lead to the design of products basically mislead your customer. that should be off the table. that shouldn't be happening. the goldman discussion highlights that. >> there's an issue of the timing. when they started buying them, they didn't reali

although we saw that against bear stearns. it didn't work. the justice department lost. do i think that goldman will lose clients over this? i think anytime there's something bad you're going to lose a client or two. but you know what the clients are motivated about? making money. and if goldman provides moneymaking ideas, business flows right back. it's the nature of the beast. don in my home state of pennsylvania. don. donald, speak to me. >> caller: i'll give you a real big boo-yah from the phillies game here. boo-yah! >> i like that, but my dad and i were commiserating. you know, other than halladay no one's gotten past the fifth yet. these are things of course i think about while i'm debating about the goldman thing. but you know, i'm like a guy, and it's a guy thing maybe. except for the female fans. all right. go ahead. >> caller: well, that's a good segue from halladay to what i need to ask you. >> meaning a winner to whatever. okay. go ahead. >> caller: what's the deal with treasuries rallying, going up and oil dropping? does it have anything to do with goldman

caller: the caller prior to the other louisianian caller -- the market went down, starting with bear stearns and everybody knows that. we just got the report from goldman sachs about what was done. these subprime loans were sold to people who could not afford loans at a high interest rate. they broke them down and so the men to the market as derivatives. everybody knows what has happened. then they turn around and blame poor people for what happened with the economy. -- the broken down and sold into the market as derivatives. fdic protests us from losing money to most of what is the problem that we are asking banks to pay $50 billion of their own money so that if one thing fails it does not affect the other things? how canceling argue against this? all these republicans are trying to do -- they have the 2012 agenda. it is to make obama a one-term president. everything that comes out -- we cannot support this bill, not any changes. this is a start. host: democrats who are critical of republicans for not supporting this bill have a memo that was put together by a pollster that is widely public

. >> did you experience any default in connection with bear stearns or lehman brothers in 2007 or 2008 on the derivatives positions? >> i do not know. >> the wall street journal, on tuesday, reported that fannie mae and freddie mac correctly have more than two trillion dollars in interest rate swaps on their books. they are thereby, among the largest participants in that market. evidently, the federal housing finance agency is considering requiring that all those instruments be cleared through a clearing house in order to diminish counterparty risk and to obtain improved pricing in permission. . . mike observation of reading the article was as i noted in the testimony, in some ways it will effectuate changes of policies of the market. there may be other reasons to do that i am not aware of. >> do you have a reaction? >> i would be interested in the proposal. i have not seen the proposal, so it is difficult without seeing it. >> let me follow up a little bit on some questioning from the commissioners about the political power and influence that fannie mae exercised prior to the conserva

very successful at preventing the kinds ofç disasterous collapses like we've seen with a.i.g., bear stearnshman brothers. by moving the speculative derivative changing back on to the clearing houses and the exchanges, this bill may do more than anything to prevent a repeat of the disasterous institutional failures we've seen in the last few years. >> brown: and yet, david skeel, this is an area where some of the investment houses and banks have fought against as well. what would you add toç the explanation of the meaning of the exchanges and clearing houses and how it would change things? >> i would reinforce some things that lynn said. i think it is useful to extinguish between the exchange component and the clearing house component. the exchange idea is just the idea that derivatives should be bought and sold like shares of stocks are, like general electric, or microsoft stock is. the idea is if you tradeç them on exchanges, there will are more transparency and nothing will be taking place in the dark. the role of the clearing house is to guarantee those contracts. so that if either par

lehman brothers and bear stearns were let fail. now goldman sachs' largest competitors in fixed income was lehman brothers. lehman brothers is gone. so goldman sachs now has total control over that marketplace. and so, of course, if the government is picking winners, which they did, they picked jp morgan, they picked goldman sachs, they picked ge, for that matter, and those winners are now able particularly in the banking sector as goldman is, able to suck up all of the business. it's as if all the other cable stations were taken out by the government and suddenly msnbc had all the cable viewers because the government decided to put all the other cable stations out of business. >> what do you make of the fact that now they're pushing back, taking on financial regulatory reform. many people thought this would be a slam dump and that who is going to go and say, i'm supporting and defending wall street? sure enough, some people are doing that. >> they both are. the democrat's plan preserves too big to fail. the republican's plan also

but then yet, you see at least with companies that are publicly traded like lehman brothers, bear stearns committee of short-sellers like david einhorn, who wrote the forward to your book saying publicly something strong there, you have a public debate about this coming wet market ignores for stock was going down. you have a greater say in the market could work with a fun like madoff. as he sat even told as customers can't don't tell people you catcher manny with me or i'll kick you out of the fund, which in retrospect would not have been a very bad punishment. should the sec have some kind of public law where they invite people like yourself to say look i think i found something here. people should either proven right or wrong. they might we have the political future is for politicians, something like this for private funds, which one is going down? without this debate? >> guest: the fcc has adopted a proposal from me. they're using the whistleblowers are cordially paying reports for people to come in with information because when you come and you take a and you take a new career best an

but then get you see with companies bader publicly traded like lehman brothers like bear stearns you have short sellers like david who wrote the foreword to your book saying publicly something is wrong. you have a public debate about this and had market signals where the stock was going down. a greater chance that markets could work with a fund like madoff this was private as you said he even told his customers don't tell people you have your money with me or i will keep out of the funds which they would not have been a very bad punishment should the f dee dee to sec have a public wall where the inside people like yourself to say i think of something people should prove me right or wrong like we have the political future markets for politicians, something like that for the private funds which is coming down. would that help? >> guest: the sec adopted the proposal. there is starting the whistle-blower and paying rewards for people to come in with information and when you come in you to come to career risks and maybe the members of a ticket out of the industry but to come in with a smo

and banks acting in a fiduciary sound manager by trying to hedge off the exposure to lehman or bear stearns a k in and of itself have a destabilizing effect broadly speaking on the market. and bill and others have pointed this out as well. and i would love to see the trading records of the proprietary trading desks of the big banks during 2008. i would like to see if they were shorting each other and buying credit default swap protection in each other. >> rose: are you suggesting people like barney frank, that that might be an appropriate subject for investigation by the financial services commit snefrjts absolutely! or the financial inquiry commission. we need to find out because so much of this narrative was hedge funds and short sellers being vilified and being pointed to as the cause or additive to the problem and, in fact, people like me were covering our financial shorts in 2008. we didn't put them on in 2005 and 2006. >> rose: why do you think the financial services committeer the financial inquiry committee will do this? >> i hope so. i think it's important to understand who were th

although i disagree with the fed's participation of the bailout of aig and bear stearns, the fed's timely action as lender of last resort in markets prevented the financial panic from becoming a depression. during the spring of 2009, the stress tests and subsequent capital increases by large banks restored confidence in financial institutions and markets. largely because of these decisive actions, the u.s. economy is now beginning to recover. however, the recovery will continue to be sub-par as businesses to lay critical hiring and investment decisions due to the uncertainty generated by president obama and congressional democrats to increase taxes, raise their prices, an act of killing regulations, and generate a dangerous level of federal debt. despite recent guidance from washington bank examiners about commercial mortgage loans, i am concerned the bank examiners were exacerbating real estate problems through their inflexibility. pressed by regulators, community and regional banks are not renewing reforming commercial mortgage loans even though their underlying cash flow can easily ser

so aig, lehman brothers, bear stearns, they weren't the biggest.ere going to blow up and destroy the world. so the first thing that we must do is defang a lot of these institutions. now, we must also look at the issue of too big to fail on the big side and on the fail side i guess is the way i'm saying it. so the president has called for caps on how large the biggest financial institutions can get. but also a series of things to defang them and make them less dangerous like the volcker rule to end conflicts of interest and get them out of risky trading for their own accounts like the trying to get the distributes out of the shadows so they can't threaten to blow up the aigs of the world. >> can i ask you one quick question? at the 11th hour, blanche lincoln added a really important provision to the bill which was the idea that government guaranteed banks should not be allowed to trade derivatives. that would be really, really radical. or are you planning to trade that away for republican support? >> well, as i say, i don't know a whole lot about le

or bear stearns, you name it. all those billions and billions of dollars went out the door, you know which bailout really trumps all those combined? it would be the g.s.e.'s, fannie mae and freddie mac, where i mentioned earlier this evening the number is close to $400 billion already projected to cost the taxpayer over the next 10 years. the president's plan, the dodd-frank plan, silent on trying to do anything about that. not only silent about doing anything on it, not only are they silent about doing anything about that, but silent on putting any limits to it. it's money coming out of your pocket and my pocket to bail out these institutions. remember, finally, it was largely government that got us into this situation, we find -- into this situation we find ourselves in in the first place. it was the implosion of fannie and freddie that create sod many problems we see across the economic spectrum as we see it today. it was also the easy money policy of the fed, the errors made over time there. it was the misplac

it's march of 2008, obviously the housing markets are in substantial trouble, bear stearns has collapsedthink it's fair to say liquidity is diagnose up in the housing market dramatically. there was a big challenged posed here of the safety and soundness and solvency of the corporations and liquidity is the larger mission. in a sense, there's probably no time when this dual mission collapses or comes together so dramatically. it clashed -- >> and it didn't clash. because when they were sitting on $5 trillion of mortgages, and if we couldn't stabilize that mortgage market, the safety and soundness was not going to work. i mean basically, they were going to fall if we couldn't stabilize the mortgage market. there was the tight rope that we were walking. >> i do want to ask you a couple more questions about this. mr. thomas laid out a timeline. he referenced on march 17th a press release that was proposed and then there was one other item. you actually did respond to the first press release. i want to get your thinking. because you are there on the ground. y'all have a follow up. when you re

. >> host: you used to be with bear stearns as well. >> guest: yes. >> host: what did you do for them? >> guest: again, i've always been involved in structuring, therefore, i do know these very well. and i left to write about them, but i wasn't uninvolved. and when i was at bear stearns, it was in london, and i worked on a lot of different types of analysis. i worked in giving suggestions to investors into not just buying toxic assets, but which government bonds to buy, which governments were better, which were worse at any particular time and a lot of analytic-type advice. i think when you're in the environment and that's why i can look at it from outside and really dissect it, you don't think about the ramifications necessarily of the products that you're making. there's all of this pressure to make money, there's all this pressure for your area to make money within the firm, for your firm to make money within the industry -- >> host: is it constant? >> guest: it's absolutely constant. and there's a real, it depends on the day and the firm and everything else, but everyone is talkin

back in the bears and stearns bailout, that early on right from the very beginning. they were placed in receivership, there's and stearns. had heard of black rock group? >> guest: i've heard of blackrock and i know bear stearns was the earliest big institution that collapsed during this crisis but i'm not, with the individual. >> host: just more generally about the history of some pride, do you know more about it? the whole concept of the subprime mortgage? >> guest: there have always been mortgage is given to people who might not otherwise qualify for them because of either a poor credit history or inability to pay. and these loans gained traction as the impulse toward increasing homebuyer ship and homeownership gains strength. but what i think was a crucial difference was the securitization of these loans. instead of holding the loans on their portfolios and, you know, writing off whatever losses came when the loans defaulted, banks increasingly packaged and bundled these loans it is agreed that were then sold to investors. that had an acceleration process that mag

first countrywide, then bear stearns, the federal reserve had to intervene behind-the-scenes to try to keep credit flowing. remember, in a capitalistic society in our economy, you have to have credit flowing. credit, that's what the small businesses need. that's what governments need. overnight credit, state of california couldn't even get overnight credit. and the crisis hit. the worst crisis hit in september 2008, the worst since the 1929 great depression. listen to this, mr. president. over just three days, mr. president, september 13th, 14th, and 15th, three major financial institutions failed, layman, a.i.g., and merrill lynch. oh, my god. the shock in the country. regulators were unprepared. they had no warning. panic spread from this wall street debacle as banks lost confidence in the solvency of the financial system and they refused to lend. credit was frozen. consumers start to withdraw their money from failing money market funds. and some of them found out -- am i right on this -- that they weren't insured by the money markets. we had to actually create insurance. the stock m

about it, there's more risk now because we have more investment firms that were independent like bear stearnsh are now part of our lending banks. so we really have put thefireworks in the living room, if you will, and that in itself is a risky situation. we need to act before we have a second disaster on our hands. jane: as we said, tentative vote set for monday later in the day. senator jeff merkley, thanks for your time. >> you're welcome, jane. thank you very much. jon: well, jane just mentioned it, the new health care law. and there's new analysis of the effects of that law just in. well, guess what? it's going to be more expensive than we thought according to one federal agency. what it means to your pocketbook next. when you have diabetes like me, you have questions. like, why are my numbers too low? are you looking for answers? the accu-chek aviva system now has new tools to help you discover what your numbers mean and how the things you do are connected to your blood sugar patterns. [ sarah ] with this tool i can see how food affects my numbers. i discovered what i can eat and how muc