so where were the bank regulators? the painful fact is that they had a front row seat to washington mutual's high risk lending strategy, its poor quality and long-standing securitization practices but did little to stop it. the documents reviewed by the subcommittee showed that ots new all about washington mutual's high risk lending strategy. in fact it was ots that required the bank to get board approval of it in january of 2005. ots knew about wamu's shoddy lending practices having repeatedly identified problems with the bank's operations in examination reports year after year. every time ots listed a problem, it also told wamu to take corrective action. but when the problem didn't get fixed, ots failed to force change. instead, ots wrung its hands as the bank sank into deeper and deeper waters. this chart 1-c provides a quick summary of some of the findings made by ots over the years regarding failings in the underwriting, meaning lending, practices at washington mutual. now, these are not all of the findings. but he

people are concerned about breaking up the banks. >> there's so much money that the giant banks make of their unique advantage. the two-class system. is it because the two-class system allows them to take so much more money that they can basically have an overinfluence in politicians and really no one else stands a chance? >> well i think that's part of it. one of the interesting things is they have an incredible advantage over all the other banks in america. a study done of the certificates of deposits from the really, really big banks, they get higher interest rates than their fellow banks. but one of the things we need, dylan is for the other bankers to come forward and explain, we don't need these massive banks, we can compete and we can

i think the key blind spot is banks. that is even sensible people on capitol hill are still not getting to that. but certainly we think there should be a lot more capital in the financial system. we think that the current consensus on raising capital would basically take us back -- move all financial institutions to a capital level roughly equivalent to what the lehman brothers had the day before it failed even if you measure lehman brothers capital correctly which doesn't strike as a compelling idea. the en brothers didn't have enough capital but anybody at that level have enough capital we stink it should be more than that. and the counter toward negative spirit i know people's eyes glaze over whenever i see that it's important and it's very political but they should be traded on exchanges and there should be more capitol hill that the derivatives and you see a contraction in the amount of derivatives trading. there's also a subsidy for durham evidence which arises from the fact the broker-dealers to write contracts are

>> not the benefit of the bank, no. t was for the benefit because we felt that our analysts were being abused and we did not want that. i>> the bank got their way. they succeeded. >> they may have succeeded in that instance, but it was not for their benefit. >> at moody's, there was a man named andy campbell. does that strike a bell? take a look at exhibit 24b. this is attached to this cover sheet from mr. mcdaniel to himself for his file. this is a long memo about credit policy issues at moody's. it looks like it came at about october of 2007, exhibit 24b. çare you familiar with this? >> i am not. >>> yuri yoshizawa, we were advised by moody's chief credit officer that it was common knowledge that ratings shopping occurred in structured finance. investment bankers saw ratings from credit rating agencies and who would give them their highest ratings. would you agree with that? >> i believe that it does exist, yes. >> is -- did the same thing exists in your area? >> yes. >> there would be no reason to shop. >> because yo

in the country. no bank can be more than 10% of the deposits. that is pretty low from the antitrust perspective and sensible from the macroprovincial perspective don't put too many eggs in one basket or that one player become too powerful politically. that was the intent. i talked to the people that drafted, that was their intent and sensible. two problems first of all the action since 94 hasn't been in every tell deposits in the wholesale which is banks' lending to other banks to read so the retail cap didn't work and secondly there were loopholes of course in the law that regulated sympathetic regulators were allowed things as big as bank of america to be driven through. but the spirit is there and that idea and figuring out if it is the idea of antitrust and spirit of antitrust just like of glass-steagall. we need to figure out how to update and apply and i'm serious. 1902 there was no economic theory that said what teddy roosevelt was doing made sense. now it is obvious to everybody in the room why you w

don't have to prepay the bank tax fee, there is more scope for a bank tax. apparently this is what treasury secretary tim geithner wants. the obama administration has previously discussed this ten-year, $90 billion tax on the nondeposit liabilities of the banks. the u.s. would like to do a bank tax in sync with other countries. take a look here at how the financials are trading on this news discussion of the bank tax. they are down. however, i will tell you that just before i came on, guys, morgan stanley sent out a note from its research analysts saying, stay long banks. they think the credit improvement is more important than whatever is happening on the regulation side. from what i can tell from a quick read they're not mentioning regulatory reform and the effect on bank stocks from what's going on in congress right now. >> seems a little self-serving, that call. what can you do? steve, thanks so much. >> there is an interest there. >> lawmakers on capitol hill gearing up to tackle financial regulation today with a vote to begin debate set for 5:00 p.m. ea

i think the banks are getting bigger. next time they fail, there is nothing i can assure you in economics orval law or physics that says the amount of offsetting impetus to can provide the economy through monetary policy or for fiscal policy will match the negative sharp targeting from the collapse of the financial system. in 1930 if the federal government had wanted to do a sensible what we regard as a sensible fiscal policy and a fiscal stimulus because they were having a major problem they look to this estimate that the federal government could have done a fiscal story was of 1% of gdp because the government was much smaller than now. that wouldn't have made a difference. we increased over several years 40%. next time 83 the next time we may not have the capacity to increase the debt. the federal reserve cut the rates down to zero and engaged in all kind of imaginative and i think probably this successful form of so-called quantitative easing. next time are the -- will that make so much difference? i have no idea. i don

and the key is if you get a run on a bank, the first -- the first job of the central bank is to preventhe contagion effect and to prevent that run from running throughout the system. the federal reserve failed to do that. as a consequence it allowed its banking system to collapse. >> host: what could it have done to top the contagion of the runs? >> guest: two things. the first was inject reserves into the system. it could have done open market operations, buy government bonds, flood the system with cash. and secondly, and again, this is what they ended up doing in 1932. this would not be the federal reserve but the treasury and the government should have acted to replenish the equity of banks. and they entered into a program in 1932 to inject capital into banks. they just didn't do it in 1931 when the bank panics were occurring. >> host: what did they do? >> guest: they just sat by and let banks go under. they basically argued that it was not their job to bail out bankers from the consequences of their poor investment decisions. >> host: something you also hear these days. >> guest: ri

the banks are fighting it. i get the biggest kick out of this part of if the banks were for this why are the jamie dimo ns and lloyd blankfeins of the world opposing this? >> but bush's administration did the bailout when we were on the brink of collapse. you would think they had nothing do with it. >> let the hair and a former banker on the panel. >> mitch mcconnell was wrong when they say they try to force this down our throats. we have had republicans negotiating this. you had senator corker from tennessee and you even had the senator from alabama, richard shelby trying to work something out. dr no from kentucky is on that kick. it is not true that the democrats are shoving anything down the republicans the road. they are negotiating. >> the other piece of news that affects this is the treasury is now estimating that losses from the bailout are much smaller than anybody expected. everybody talked about $800 billion at the beginning. it turns out that if you said the banks and you have a piece of the bank and

, the size of biggest banks shift the consensus. there is no evidence and i mean really no evidence. economies of scale or scope or other social benefits to an increasing banks' scale above $100 billion of total assets and we are talking about banks in the trillions of dollars. actually we can argue how compelling the evidence is for social benefits about $10 billion. but above 100 billion there's nothing. there are claims. jamie dimond from jpmorgan chase made this claim to his shareholders this week it's not true. it is flatly not true. and the book goes through this. the book has the evidence. the book has been in the hands for months. of course they got an early copy. i make this presentation to the finance experts. i'm on the board of one of the country's top. i make this presentation of all schools. i talked to lawyers. i talked to the big d.c. law firm at lunch yesterday. i give this talk endlessly. i even said to steven colbert. [laughter] whose question is interesting, his line of questioning wasn't so different from what to

, particularly the world bank. all the interventions have been an education and community development have been with the world bank and the idb. we have available a total of $50 million for haiti. we do not have to give him a debt relief because all of our positions use bank sources. of this $50 million, $30.5 million represents a long-term project. our current assessment will determine whether the $13.5 million will be transferred to other projects. in essence, we have $36 million available in new commitments which we

, the community banks. my colleague just mentioned those a moment ago. we met with the community bank representatives in arizona, and they fear that this kind of provision will make them uncompetitive vis-a-vis the big boys and what will happen is we will end up with a few really big banks and some that are kind of a medium-sized operation and almost all of the smaller banks having to go out of business because of this anticompetitiveness that will result from the legislation. now, one of the other ways in which what i've been talking about occurs is through section 113, the so-called financial stability oversight council. this is one of these entities that allows for the backdoor bailout. gives the authority of this new -- that this new council deems to be a threat to the stability in our economy. this is a board based in washington. it decides which institutions gets special treatment. it gives these bureaucrats tremendous latitude to pick winners and losers, again resulting in a competitive advantage and

-- the largest six banks because it does come down to these -- the largest six banks have a balance sheet, total assets size of the bank which is 63% of gdp, that's pretty big, what were they before the prices? 2005, 2007, they were smaller. they reduce export 58% of gdp. what were they in 1995? the same banks of predecessors -- 17 percent of gdp. there are getting bigger. of course, there are, they were bailed out and save and allowed and encouraged by other banks. the cost of running today in the credit markets is estimated i think accurately to be between 75 and 80 basis points lower than other banks, some -- .8 percentage points -- that's a big funding advantage. jaime diamond, the ceo of jpmorgan chase among one of the more successful banks recently said in a letter to his shareholders just this week that it would get big because we win because we are good we should be allowed to reach any size we want. that's the free market. well, that's not the free-market. we do not have a free market -- we have a too big to fail on their advantage. if you run a massive bank

if the bank of canada is doing this, will the central bank in the u.s. follow? and the message we're hearing is very much different, they're willing to tolerate this level of interest rates for a longer period because they think the underlying trend in inflation is going downwards. if you listen to what's being said in various speeches and the fed page book, there is a strong belief in the u.s. that strong core pressures are going to remain very low for a considerable period of time. i can understand why people can put two and two together and make five and say this is a big signal for other central banks. but i think in the case of canada and the u.s. relationship, this time it's probably different. where my concerns would really focus would be on central banks in asia, where we do see strong growth and we see evidence that inflation pressures are beginning to build. >> ken, stay with us. we'll bring roman in in just a second. we have numbers out of fiat. fiat group trading profit, with just beating expectations. 52 million euros. the average consensess was 345

apparently it's part of the american banking system. although it has nothing to do with lending or investing. all of these examples have us wondering which democratic party will win out in the end. the party trying to push a bad bill through for special interests and keep our country in tremendous risk as they seek to retire and go hang out on the farm or maybe get a hedge fund job? or the party of truth-tellers, who are willing to do the hard work and get their hands dirty it try to resurrect real rules-based capitalism, lending and investing and a brighter future for the american people. joining us now ezra klein, staff writer for the "washington post" and liberal blogger cenk yuger. who wins? >> on these issues i tend to be a little pessimistic. i think you have described it exactly right. they're battling for the soul right now of the democratic party and i think probably the corporatists will win. the progressives almost never win. it would be a tremendous surprise if they pulled out the victory here. i hope they're strong and hold

the second bank of the united states is a well-run bank. nicholas biddle was a charming character by all accounts. and jackson was struggling to really get his point across, though he didn't have that much going on capitol hill. and yet even less support was nicholas biddle started to run for the trunk urge people to vote in his direction. but as biddle thought back and as biddle extended the campaign contributions, and as biddle, when biddle said on contracting in order to make the point that you cannot reina us and how much people believe that jackson was onto something. and this is what jefferson was warned about. feet they debated these issues at the beginning of the republican hamilton was right i would say are most or much of the economic substance, but jefferson -- that's what was on the boat. represent have a very important point which is absolutely correct, which is you must fear the arrival in the entrenchment of the financial aristocracy. that's what jackson paced and prevailed against. that's a teddy roosevelt faced very similar

the second bank of the niceties was a well-run bank. nicholas little was a charming character, by all counts. and jackson was struggling to really get his point across that he didn't have that much pull on capital hill and had the support once nicholas start to spin freely to encourage people to vote. in his direction. but as google fought back, and as biddle extended the campaign contributions, and as biddle, when biddle said i am contracting credit in your to make the point that you cannot reign as in, people began to understand that jackson was onto something and this is what jefferson one. is what jefferson warned about. jefferson and hamilton debated these issues and hamilton was right i would say on most or much of the economic substance but jefferson, jefferson had a very important point which is absolutely correct. which is, you must fear the arrival and the intention of a financial aristocracy. that's what jackson faced and prevailed against. that's what teddy roosevelt faced. and largely prevailed against. also what fdr faced i

and reserve bank and the reserve bank decided to intervene in the marketplace at the behest of merchants and essentially impose government price controls on transaction fees associated with car use. the regulator also freed merchants to impose surcharges on consumers who use their cards. the intention was to lower prices for consumers on the theory that savings to reduce transaction fees would be passed on to the customer. but the experience has been quite different the unintended consequences the opposite of what the regulator thought to achieve actually occurred. by the regulators on assessment prices have not gone down four australian consumers but annual fees on cards have gone up and benefits have been reduced and many merchants including the flagship airline qantas have impose fees on consumers at checkout for using their card and consumers are not happy. the bottom line is this experiment in government management of digital currency has generally harm consumers while creating no clear social benefit. the lesson of these experiences is not the government has no role to pl

franklin delano of them where they left the national banking system to go to the state banking systemfar more than coming the other way. but in terms of that being a systemic problem, it certainly was not, have not been, and i have not felt any pressure at all to change as a result. of that kind of pressure. >> do you think there is a need to address the issue further beyond, you know, your suggestion? >> i testified on regular consolidation before. you know, it's fond of quoting jerry hawke of the subject where something that no one would design and there is but it works okay in practice. i don't think it was the root cause of a bunch of problems but on the other hand, could we use some regular consolidation, would it be a better system? i think the answer is yes. but i don't think it's critical that you go to one regulator to address that issue, either as a matter of supervisor efficiency or to avoid the kinds of inappropriate charter arbitrage that you're talking about. there is some talk about doing that, not some talk. there are some proposals to do some consolidations that are i

do not let the banks get too big in the first place. do not let the banks get too big in the first place. sound difficult? and then break up the current megabanks that are still holding the threat of economic collapse over our heads as leverage to take whatever they want from us. if wall street's real mission is to do what it was intended to do, only two things -- lend money to businesses or people or invest money in businesses or people. if that's all they're here to do, then why do they need any more than say, $100 billion, or $500 billion in assets to lend or invest with people. the answer is, they don't. so why haven't we seen the big banks broken up? well while too big to fail is horrendous for america every day as retirees, students and middle-class-teams suffer, it is unbelievably good for bank profits. you have a rigged game in which all the money comes to you. of course, a portion of those ill-gotten profits do have to go to politicians and lobbyists. so that they can keep this legal. and that is the most formidable foe we face

the federal reserve as a bank regulator we put out guidance in the november of '08 and we are strongly urging banks to be responsible in restructuring of their mortgages where necessary and in particular in participating in the administration's congress's plans to help underwater borrowers. >> do you see, do you have the concerns that i have that we could have another foreclosure crises though given the way that the markets are and the interest rates right now especially those adjustable rates especially those underwater because they cannot refinance their mortgage to get a fixed rate and therefore -- and thereby -- tau gentleman's time has expired so the chairman will perhaps answer that question. >> later? >> later or briefly. >> okay. we control very short-term rates. very much, many fewer adjust rate mortgages out there now than there were a few years ago. most people have fixed rate mortgages so they wouldn't be affected very much by our policy. >> gentleman's time has expired. je happen from texas. -- gentleman from texas. >> thank you mr. chairman.

the banks are raking it in. but how do we keep the big boys from taking us down the road to perdition again? the democrats say we regulate, of course. that is president obama's next big fight. can he win this? >> he can win this big. can he win it because of the popular issue, wall street is unpopular. also you have some republicans who also recognize it's a popular issue and they're going to get onboard. >> charles? >> if you had a bill that would propose putting the bankers in stocks in times square, would pass the mood of the country as anything you label, regulatory banking reform will pass. >> nina? >> let's put it this way. if he doesn't win it, the democrats will run on it. >> mark? >> whose side are you on? that simple. i think that's the formulation that's going to carry the day. >> senate republican leader mitch mcconnell says the new regulations the president and senator chris d.o.d. are pushing -- chris dodd are pushing will just lead to more bank bailouts. >> it's a bill that actually guarantees futu

as you and i both know, the banks had no money. they were getting it from the federal reserve, which is us. it's funny money. they had no capital to back up their lending. but that did not matter because they also had no risk in the lending. get the lending paid off, they win. and they won big when they did that because they did it with leverage. top manhattan executives alone paid themselves $121 billion in bonuses over the first part of the decade. now, mind you, when the bank loans failed, they knew they were too big to fail. so the rest of us, you and me, would have to bail them out. ignorant electorate, if you will, the patsies who had no idea, and really still don't, understand how badly they are being conned by our government and our banks. once the banks, however, realized there was no losing, the question was, how do we make the con bigger? how do we get more money through this crazy machine so we can get richer? the question -- or the answer, i should say, is simple, make more loans, more credit card loans. think of all th

they stand with the big banks. hey don't stand with the infrastructure of everyday people who make this country the great place we have become. they do not stand for opportunities like the ones that allowed americans to come together after world war ii to get an education, get jobs, become the greatest generation that built our nation into the greatest on earth. instead, our friends across the aisle stand with wall street lobbyists who demand that we do not take up this bill. what an outrage. they stand for maintaining a banking system that denies people and businesses the funds that they need and sells people mortgages that they can't afford while lining executive pockets with billions in compensation. the picture is quite clear, very obvious as to what's taken place here. after hearing the demands of the wall street lobbyists, the other side of the aisle systematically marched down here, voted no in lockstep, not once, not twice, but three times. no one bold enough to say yeah, we ought to do something about this

don't leave the country. banks in our country and i come back to the question i asked david again she didn't answer the question on inheritance tax. corporation tax he will cut off for the banks. why is he cutting the corporation tax for the ranks and he stated he wants to ensure they pay their share. 3 cents is money taken from the manufacturing industry again is the same conservative party. islamic we want the bank let the to get the money of the banks that all of us have had to put into the bank's. do i want to cut taxes on all businesses particularly small businesses to get the economy moving? you're right i do. we've got to get this economy moving otherwise we are not going to get the jobs or the investment and wealth we need and the prime minister has to face up to the fact that right now it's not working. small businesses, and say i've never gone over my over draft limit or broken my covenants but i cannot get the loan. we stuffed these banks full of money. they are not lending and we need some action from t

same with the banks. they have been caught with their hands in the cookie jar, or the piggy banks or whatever. and they still are able to effectively bribe the members of congress to dilute the legislation that should be passed to properly regulate. >> they completely thumb their noses at the white house. >> and they can charge on their credit cards interest rates that used to have the mafia sent to jail. >> this is nothing new. will rogers talked about the best government money can buy and we still have that in the united states. and that is not a free society, it is a bought and paid for society. >> this is true. can i just get back to banks for a second? recently citibank sent me changes in my account in about -- i don't know. >> 50,000 tiny, tiny words. >> i have two magnifying glasses. >> if you don't like it, what are you going to do about it? nothing! >> nothing! >> well, i have very good news for our viewers. the marvelous thing is that our viewers can turn this program off without penalty. you can

but the banks still aren't lending. we have a new product we'd like to launch but we need a loan. we put everything in the business to make it a success. how is a business to grow if it cannot get financing even if it has a proven track record of success? it's about joann from cincinnati who writes i'm one of those small business owners who can't get money from the banks. if the situation continues, my family and i and my employees and their families will be out of luck and out of an income and into unemployment. the banks are sitting on cash. they're cleaning up their balance sheets. they're killing us with their fees. mr. president, some republicans

will see the largest six banks because it does come down, the largest six banks have a balance sheet total assets the size of the bank 63% of gdp. that's pretty big. what were they before the crisis weeks to those of five, 2006, 2007 they were smaller, 56, 58% of gdp. what were they in 1995, same banks and predecessors. 17% of gdp. they are getting bigger. of course they are getting bigger. they will were bailed out, the cost of funding today in the credit markets is estimated accurately to be between 75 to 80 basis points lower, that's .752.8 percentage points. that is a big funding advantage. jamie dimond the ceo of jpmorgan chase more of the most successful banks recently said in a letter to the shareholders this week if we get big because we win, because we are good we should be able to reach any size we want. that's the free market. well that's not the free market we do have a free market, we have a two big to fail on a fair and vintage if you run a massive bank, and i'm assuming none of you do because they don't usually come to hear me talk. [laughter] but would be happy

the supervision of the fed banking agencies, including the federal reserve, is an important reason why banks and bank holding company affiliates were not a significant originators of the most controversial loan products as non-bank affiliated companies that operated outside the jurisdiction of federal bank regulators. the recent crisis reinforces some important messages about what supervision and examination can and cannot do. the forecasts of regulators have had a woeful record of chronic failure. history tells us regulators cannot identify the timing of a crisis or anticipate exactly where it will be located or how large the losses and spill overs will be. regulators cannot successfully use the bully pulpit to manage asset prices and they cannot calibrate regulation and supervision in response to movements in asset prices. for examine regulators fully eliminate the possibility of few fewer crises. -- future crises. what regulation and examination can do is promulgate rates that are preventive and rules that are preventive and that make the financial system more resilient in the face

banks. good to have lots of competition. but the reality also is that bigger banks offer generally better products and services at generally really competitive prices. the longer-term trend will be fewer smaller banks in the nation for that reason. >> reporter: as nobel laureate economist paul krugman reminded us recently small is not necessarily beautiful. >> it's possible to have a banking crisis even without too big to fail. it was a lot of small banks that collapsed the financial system in the 1930s. >> reporter: indeed 140 banks failed in the past year with another 702 just added to the fdic's problem list. moreover, says robert kelly.... >> we also have a gigantic economy which you can't run with a lot of really small banks. you need big, successful sophisticated, profitable banks. >> reporter: but the village bank is a $600,000 million says ceo brennan, big enough to offer almost anything i would need. >> size does matter but you don't need to be a large institution in order to be successful as a financial institution today.

what's your take on the stability of the banking sector today? >> i certainly think that goldman sachs shot themselves in the foot. if i had to buy something that goldman sachs was selling, i would think twice about buying from goldman sachs. >> so as a client, it bothers you that there wasn't the transparency -- they didn't tell the other side that it was john paulson who selected many of the securities. >> yeah. it's securities fraud if there is an -- if the seller of the product omits to state certain things that are very material. >> as far as whether or not this is the tip of the iceberg -- in other words, we don't know how many other wells notices are out there. we don't know how significant or steep the number of lawsuits will be for the entire industry. somebody saying just like you're saying, if they defrauded this person, they must have defrauded me. i want to sue because maybe i didn't get transparency. so there is a bit of a vacuum of information from an investment standpoint. we don't necessarily know the extent of this twb right? >>

in america and harm the smallest banks. the big banks will get bigger and smaller banks will be gone. at a time when small businesses are looking for loans, i think the bill that came to the house, at a minimum, will make it more difficult for community banks to provide loans to small businesses. in addition, the american people are looking for jobs, but they do not see washington doing anything to help the private sector create jobs. it is all about more government, bigger programs here, and i just think that the uncertainty that continues to exist in the country about policies coming out of this administration and this congress are throwing a wet blanket on employers and putting them in a position that they are scared to death of what is going to happen next. >> senator corker said that your side, republicans made a mistake by not making a deal in committee, and that you all had pulled back from doing that. does he have a point? >> i think senator corker has been an enormous amounts of time and desperately wanted to come t

the banks say the economy will pay a price. tonight, we're going to bring you both sides of this duel, beginning with jake tapper at the white house. he covers the president. jake? >> reporter: good evening, diane. finance shl regulatory reform is an incredibly complicated, in the wields debate, but president obama talks about it in stark terms, almost as if he sees himself as a sheriff in the wild west, trying to clean up a criminal casino. painting a picture of some of these unregulated financial markets, president uses words such as gamble and bet. the chips are the economy. >> we can't allow financial institutions. the same recklessness that nearly brought down our entire economy. using money and connections to stack the deck. >> reporter: and in this good guys versus bad guys drama he describes, the president seems increasingly ready for a showdown. >> what we've seen is an army of industry lobbyists from wall street descending on capitol hill if they want a fight, it's a fight i'm ready to have. >> talking in terms of mor

allies to come with us and make the banks safer but if they want to cooperate and i think we have to reassess what we allow them to do in the country with our financial system and remember the driver, what people want to participate in in in this economy is the dynamism, the information, the new companies, the resourcefulness of the people come and what i think and hope again we will once again be the resilient credit worthiness of the sector and the government sector. that's us. you get to work in the financial markets if you play by our rules. not on any other basis. it's the united states and that is the when you work and you can say to the outside world. other countries by the weak all other countries can say that we can and we should and i think on that note -- thank you very much. [applause] [inaudible conversations] to the 2008 economic collapse. it is even was part of the greater omaha chamber of commerce 2010 annual meeting. [applause] >> , first of all i want to thank you for coming. i should declare right off the bat i am a friend of hank's. have been. i

new highs on the bank stocks here, on the regional bank stocks many of which were heavily shorted for a while. at least today there's definitely room for the market to continue moving up and you might not think 15 points is moving up here, but significant advancing declining stocks for the second day in a row. creeping rally here. stocks hit stealth rallies here. you can move up 15 points every day for six weeks and suddenly you're up hundreds of points. >> we'll take those 15, right, melissa? >> yes, thank you. >>> senator blanche lincoln put it for mark up before it goes to the full senate is expected to be combined with dodd's bill. in the legislation lincoln calls for more derivatives trading, but should banks be trading derivatives at all? let's bring in jim and securities lawyer andrew stoleman. thanks to both of you for joining us. this is a topic that has gotten a lot of play, did derivatives call this problem in the first place? we want more transparency but i'm not sure trading on the prop desk is how we got in this mess. jim, what do you think? >> i'm fairly certain it's no

the bank tax is back on the table. and a european franco-german value added tax looks to be on the table. your speech down in new orleans -- i heard it on c-span driving to the weekend place a couple of weeks ago. it's one of the best things i've heard in a long time. where are the constitutional limits? where is the tea party contract with america? where are the spending cuts, mr. pence? it seems like, after all the demonstrations across the country last week, it's all gone, and we're just back to taxing and spending. >> we really are. i've never seen a time, and i started in politics back in the '70s as a democrat, became a republican in the reagan years. i've never seen a time in my adult life where i felt like washington, d.c., was more out of touch with the american people than they are today. here you've got millions of americans packing town hall meetings, tea parties, saying we need to focus on jobs. we need to focus on tax relief to get the economy moving again, and we need to focus on spending restraint. and

where the west bank is under military control. this new order gives israelis the right to deport from the west bank any palestinian born in gaza for the west bank and whose parents as an identity card issued in gaza. or any other identification card not issued by the military offices of the west bank. >> why good people not simply apply for the new permit? >> israelis will not give any palestinian with a gaza identification any permit in the west bank. they have refused from the beginning of the oslo agreements to change the residents of any palestinian that moves from gaza to the west bank. any of those that attend university, of these were cleansed three to four years ago. now they are seeking every one. >> if this is as pernicious as you say it is, what do you think that israel is trying to do? is there some other motive apart from the one given in public? >> the word infiltrator is absolutely abused and misused. >> what do you think there are ulterior motive is, then? >> the ulterior motive is the long term motives of the popul

past has cree the banking problems. and eventually, we do work through it. it will cause the problem for a number of banks in the near term. i don't know what to suggest, frankly, to congress. ultimately, the banking system and the borrowers will have to find solutions and work through this as quickly as possible. >> mr. brady. >> i have about 1000 questions but in the interest of time, two proposals have been floated to increase banking taxes and a transaction fee on trade. one is to pay back tar thep although the banking set -- to pay back the tarp. the transaction fee is a way to raise revenue. what are your views on those taxes? the banking one seems to be a global effort to increase taxes on banks that have international relationships and connections. what is your view? >> the tax on transactions -- the treasury has rejected that idea which came up and other jurisdictions. i think i agree with the judgment on that. the problem is that by taxing transactions, you would greatly reduce liquidity in markets. people who

next couple of years and that is because the banking system is still not back to health. >> you spoke about the importance of regulatory reform. this includes a wide range of financial intermediaries. do you believe that the current legislation before congress today addresses that or does something more need to be done there? >> we don't know exactly what the legislation will come forth from congress. it is premature to decide whether to is broad enough. it is important that we do not check out the requirements for commercial banks and let all their activities flow into the non-regulated sector. it is hard to do in practice. the fact that congress is talking about systemic risk regulation is helpful in that regard. that implies you were looking at risk horizontal across the financial system, not berkeley -- not of vertically. -- not article it. ver nottically. no chickt vertically. we don't want to drive activity into the unregulated sector. >> let's move onto tougher questions [laughter] . everyone knows that one aspect of the crisis we just

bank. it is not the size of the banks. it is the way they were run. you are planning to cut corporation tax for banks in your manifesto and take money from investment allowances and manufacturing industries in this region and give a corporation tax cut to the banks, that again i'm afraid is the same old tori party. . . >> i need we think to impose the 10% tax. under our tax system in this country, the banks can offset the tax they are supposed to pay against losses they have already made. that means that for some bags they're not paying any tax at all, even though we built the mouth and the only tax they will pay would be this 10% levy which eight should be on their profits. >> we are taking the money back from the banks and will insist on doing so. beyond the shares of the two big banks, we will recoup that volume for the company -- for the country. wheat nationalized them to get the profit women sell on the shares of a future date. we will continue to fight for global levee and that will happen this year but it will happen in the way the banks will l

, the community bank. e just met with the community bank representatives in arrest. they fear this will make them uncompetitive. these are the big boys. result we will end up with a few really big banks and maybe some that aren't, that are in kind of a medium sized of operation and almost all of the smaller banks having to go out of business because of this anti-competitiveness that will result from the legislation. now one of the other ways in which what i've been talking about occurs is through section 113. the financial stability oversight council. this is one of the entities. it's the federal reserve authority to prop up any nonbank financial company that the council, this new council deems to be a threat to the stability in our economy. this is a board based in washington. it decides which institutions get treatment and gives the bureaucrats tremendous latitude to pick winners and loosers results in a competitive advantage and disadvantage. what determines whether a nonbank is a threat to stability. wh

we had to shore up the banks. we saw a lot of pain in the economy, unemployment go up because of it. as for the housing market, there is a lot of debate about how much government should be in there. they got in with the home buyer credit. use of a big rush on the lower- priced homes, existing home sales go up. new construction when up. prices began to stabilize in the housing market because of that tax break. after november 30, when most people thought the credit was expiring, the numbers started to fall off a bit. now with the extension, home prices are not as stable as they were five months ago. we are seeing a rise in foreclosures, and while pending home sales index has gone up, we are not selling as much as we would like to. the government is pulling out of buying mortgage-backed securities from fannie and freddie. the question is, do we want the government to continue in this manner, do we want them to pull out? host: there is a story about anthony mozillo testifying before a congressional hearing -- what are

the former chief executive of the world bank of scotland. the start of the year, they were on the treasury committee. this led to the disastrous decision of the top agenda. >> you've given me the opportunity to repeat what i said to our shareholders. we are profoundly -- i don't think we would say undeservedly sorry -- at the turn of events. our shareholders have lost a great deal of money. i make a full and unreserved apology on behalf of the board and i repeat that this morning. i apologize and i am happy to do so. i would echo those comments, a profound and unqualified apology. how would not risk for there to be any doubt for that whatsoever. it has affected everyone. [unintelligible] we deliberately started this with a full and frank apology. it is affected shareholders -- has affected shareholders in the communities in which we live. we are extremely sorry for this turn of events. >> liberal democrats have elected a new leader, nick clegg, in the final days of 2007. but in 2009, [unintelligible] >> they cannot do that. there is a simple

called continental illinois -- this was the eighth largest bank in the country at the time. and continental illinois was a pioneer of sorts in the banks industry. -- in the banking industry. continental was a pioneer in that it did not follow a business model of solely keeping long-term loans on its books, booking the process as people and companies repaid the loans. and having a very slow business model insulated for the most part from acute panics. instead, continental purchased loans that had been securitized. that meant that they were vulnerable to fluctuations in prices, day-to-day. and continental booked the profits from the fluctuations in those prices. that's one way that they made themselves and they made -- multiplied over many financial institutions in the future, they made the system of credit more vulnerable to financial excesses. the other way was that they depended on short-term financing, uninsured short-term lenders provided a good deal of their money so they made themselves vulnerable in a second way because these short-term lend

today the six largest banks' assets total 63% of gdp. so clearly we can't let them continue to get bigger and bigger and bigger, because when they engage in far too risky behavior, it begs the question of what's going to happen to our economy. the last time we did real reform, real reform in this country, was in the 1930s and it protected the financial part of this country for really, six decades. we've got to look long term and do it right. keeping banks from getting too big is one way to do that? >> this sounds like a tough legislative needle to thread. how do you calculate how big a bank should be allowed to be, and if you're putting some kind of limitations on them, might that make them more vulnerable to collapse? this sounds like there could be many unintended consequences to trying to define -- the government trying to define the size of banks. >> we listen to people. for instance, we listen to a lot of people who are experts on this, mainstream economists who have worked for the fed, some still do, and got their views. and all kin

the mortgage bank crisis.he bank reportedly said the e- mails were cherry pick by senators. -- 2007. >> goldman profited while the market dropped, taking many goldman clients with it, not to mention the damage done to the u.s. economy. >> according to abc news, lloyd blankfein is expected to start this morning in the hearing thanking taxpayers for the bank bailout, noting goldman has paid it all back with interest. brianne carter reporting. thank you. >>> financial reform is not the only issue taking center stage on capitol hill today. a senate committee will hold a hearing on mine safety in the wake of this month coal mine explosion in west virginia. that killed 29 people. the time mine safety official in the nation is expected to testify at the hearing. >>> crews are racing to contain the oil spill from the giant oil rig that exploded and sank into the gulf of mexico last week. it threatens fish and many tourist attractions in four states from louisiana and florida. 32,000 gallons of oil are leaking every da

for the banking sector, for example, there was too much leverage. that's part of the reason why we have the financial crisis. no reserve and other agencies are working internationally to try to develop higher more rigorous capital standards, which would portray two-phase and chloe so not to disrupt too much the recovery. but going for there needs to be higher capital, lower-level general financial system. more generally waning to have a better balanced economy. we need more saving by consumers and we need a better fiscal situation as we've discussed already several times. and in both cases, that would involve less that by the public and private sectors. on the other hand, we need to make sure that their sources of growth going forward. and if it's not consumer spending, then what's it going to be? one area certainly a scuttlebutt that which increases productivity and leads to long-term growth. and another is net exports. we have a current account deficit trade deficit and we are very to finance that. that's another format. we would like to have an ec