these obligations belongs squarely with the company and the federal reserve did not interfere in the company's disclosure decisions. the federal reserve had a legitimate interest in knowing when bank of america or merrill lynch intended to disclose those losses at merrill lynch. given the fragility of the financial markets at that time we were concerned about the potential for a strong adverse market reaction to the reports of significant losses at merrill lynch. if federal assistance is stabilizing these companies were to be effective the necessary facilities would have to be in place as of the disclosure date. dessauer planning with importantly influence by the company's plan disclosure schedule. but the decisions and responsibilities regarding public disclosure always remained as it should with the companies themselves. a related question is whether it there should have been earlier disclosure provided by the u.s. government to the bank of america. importantly there was no commitment on the part of the government regarding the size and structure of the transaction until very late i

blurred the distinction of the independence between the administration, the executive branch, and the federal reserve and its unique, independent role. what do you think of that concern? and what are you doing to reassert the independence of the federal reserve, not just in structure, but in the impression of the marketplace? >> that's a very long question, but i'd like to address it, if i might. first of all, on the technical aspects of unwinding, we are confident that we can unwind this process. what we need to be able to do is raise short-term interest rates to tighten policy in the normal ways. in order to do that, we have a sequence of things that can happen. first, short-term lending, short-term programs can either decline because of lack of demand, which we're seeing. we're seeing a very substantial decline in the usage of our short-term programs over the last couple of months. but secondly, of course, as conditions return to normal, we can simply shut down the short-term programs, that's step number one. step number two, the authority that congress gave us last year, by setting interest rate

the federal reserve system, back when richard nixon was president, he had a fellow by the name of charles burns, and he instituted some programs and the way to pay for them was to use the federal reserve because you could use inflation. that is when high inflation got started and continued on through ronald reagan -- i mean, through jimmy carter. it got so out of control with inflation, that jimmy carter tried to control it. basically, he was in the reagan years before -- you squeeze the equity out and it took different things to bring it back down. the government has used these systems, and that is the way our economy has run in the last few years. thank you. host: thank you. on the independent line, we have carlos from atlanta, georgia. caller: good morning, how are you doing? host: how are you? caller: i am good, thank you for asking. i think c-span for giving us -- i thank c-span for giving us the latest news and everything. one of the things that i have been hearing that the colors have interviews, and i understand all that. what i would like to point out is that if we are in the "un

i have a concern in regards to the federal reserve. they are mainly asking for all these funds and when it is granted the keep for their families and friends, not reporting to congress nor the president of certain situations and i am really concerned about that. guest: i am not completely sure what the caller was getting up there, but there is some concern about where the fence interests lie. it is the fed serving the banking system, or is it serving the broader economy and financial system? fed officials will argue they are serving the broader system. it is critical and it is how lending for any major project is usually taken. there are alternative forms of much of it ties into the banking system. one of the sources of anger on capitol hill is the issue of whether the fed is serving people properly. host: on the republican line from tacoma, washington. caller: thank you for the opportunity to speak. good morning. i have two comments. then a question. let me comment on the gm issue brief. i bought, have bought a gm truck since i was out

treasury and with the federal reserve? >> it was about announcing everything at once. >> i understand. but the timing is interesting. let's announce it in january, not in december. was there something critical that happened in in wall street that made it better in january than december? >> there was not an agreement in december. >> i'm sorry? >> there was not an agreement in december. >> there was not an agreement among whom? >> among us. us being the federal reserve and the treasury. >> so there were discussions but not an agreement in december. >> there were discussions but not an agreement, yes. >> did those discussions involve the secretary of treasury himself and a the chairman of the federal reserve himself? >> yes, they did. >> and yourself? >> yes, they did. >> and the agreement was let's hold off until january because we're not in agreement about when what to disclose and when to disclose it? >> we did not have an agreement on the details or the amounts. >> were the reports that you were reluctant to accept t.a.r.p

remedies in committing billions of taxpayer funds to a corporate management that the federal reserve believed had failed in major ways. this committee has sifted through tens of thousands of pages of documents by bank of america, the department of treasury and the federal reserve. our investigation will help set the record straight about bank of america and merrill lynch. the story of bank of america's merger with merrill lynch and the huge subsidy helps to answer brooder questions about how the corporate management of very large institutions operate with virtual impunity for their mistakes. this is a disconnection between the fed's ability to analyze financial problems and its ability to remedy them when they involve very large financial institutions. finally before congress rushes to revise the banking regulatory frame work, we would do well to incorporate the lessons of the bank of america merle limplg episode that this committee's hearings over the coming weeks will draw. i yield back. thank you. >> thank you, gentleman from ohio. now with yeel to ranking member, jim jordan from

on reserves that the banks are holding with the federal reserve. now, and at one point in time the federal reserve would start to see that credit creation by the banks on the basis of these reserves starts again very quickly, they can offer in interest rates on those reserves which could mean that the banks won't use of these reserves as a basis for credit creation. so they basically have to tools to present when a lot of people fear these days, an inflationary binge that would -- if a the fed -- let me put it this way -- if the fed does react to slow it will have inflation, not the slightest doubt about that. but i have all the confidence that the fed has the knowledge and and technical ability to make his move in a timely way. >> my guess is if the fed started to take money away they will get a lot of heat, and politicians will not like the idea can access the big problem because certainly the fed will have to move in the direction before the unemployment rate stops increasing, before the and implement rate stops increasing. so you're all american

i want to say that charged with lie against the federal reserve and that is where we are hung up in the course of the dilemma. the federal reserve as i can see it, had several opportunities to prevent this economic crisis. one is the long used 14 years of power to lay down the conditions on mortgage obligations in this country, that all the way through about 12 of those 14 years the federal reserve failed to take any action until you came on the scene and finally did have inactive set of standards across the board. if they had enacted earlier standards, most of these toxic assets we talk about would not be circulating around the world that their supported and passed by the united states government. two, there are issues with the federal reserve that they are now requiring additional powers, when they failed to use their-- could you address those two issues? >> certainly and i agree with you. >> the gentleman's time is expired but please answer the question. >> congressman kanjorski you are right, the federal reserve was late to invoke those protection powers. we have been very impressiv

this country got along very well before 1913 when woodrow wilson signed into law the federal reserve. and before he left office, he said that he had sold out, that he had made a mistake and sold out the american people by instituting a federal reserve. to give the federal reserve bank, a privately owned bank mostly of entities more power over us and the government is an act of treason. when people were asking -- you know, one of the politicians was asked to the federal reserve bank be audited, and they did not give an answer. if the fed ever gets audited, we will find out that there are a bunch of crooks in charge of our finances and our money. they are the cause of the wars, they are because of this depression, and if we get rid of the fed, 95% of our problems would disappear. it is called the campaign for liberty.com. go there, sign up, let's get rid of

on august 20, 2007, the federal reserve reply to a bank of america request to waive banking regulation that limited the amount that federally insured banks can lend to related brokerage companies to 10% of bank capital. 10% of bank capital. until that point, banking regulation was that banks with federally insured deposits should not be put at risk by brokerage activity. four months after that waiver was provided to bank of america, bank of america bought countrywide. which has proven to be the worst subprime lender in our nation and i would like to place in the record a report that documents that. and the question that i have is, who headed bank of america at the time the request was made of the fed to waiver that, to allow bank of america to enter into that brokerage activity? >> i was the chairman of -- and ceo of the company. >> you were chairman and ceo. >> you made the request? >> i really -- i don't know of this particular request. >> but you are aware that bank of america then bought countrywide four months later? >> yes, ma'am. i am very aware of that. >> okay. what kind of du

, why it is that the private corporation known as the federal reserve has governor's from othr banks, and more disturbingly, actually foreign banks. in other words, what i am getting here is really the fact that the federal reserve' is a bank that is in business for profit by other bankers. host: thank you, john. guest: of the board of governors, they are all appointed by the president of the united states and they are confirmed by the senate. there are other participants in the decision making, something called the federal open market committee that makes the decisions about interest rates. and those are presidents of regional banks around the country, all the way from new york to san francisco. and those are appointed by local people. they are approved by the board. but the reason for those of the participants, it goes way back in time, if you -- so much power and one board or center, it is a way to diffuse, if you like, and get more participation from other parts of the country. some people complain about that now, but that is the original purpose. but i do think it needs to be tho

the schedules and payments are omitted along with a designated representative of the federal reserve bank of new york as well as key personnel. given that you are using taxpayer dollars to pay these contracts, weigel met the schedule and payment procedures? >> we have a committee that works through all these different types of information some of which is confidential or proprietary and releases all that it believes is appropriate but i will go back and talk to them and make sure they are looking at those issues. >> i tell you the housing crisis is the heart of this economic crisis, and if we are going to fix what has gone wrong in this society it seems to me those who hold extraordinary power to create money and certainly the new york federal reserve has more power than any regional reserve bank does or people who live on the street i live on where homes are being foreclosed as we sit here. something went seriously wrong, and i hear what you said this morning, but i am deeply concerned the fed itself is involved in the manipulation of the markets of the mortgage markets particularly

there has been a lot of talk about the federal reserve. the american people need to know that not only is the federal reserve a private -- i mean, one of the founding board members -- he said something along the lines, i care not who writes the laws in the country as long as you give me the right to take money. there has always been a jewish chairman. can you comment? guest: in terms of the religious affiliation of the chairman i do not really have anything on that. in terms of the fed they were appointed by the prison and are designed to be away from the politics. they are most affected -- by the president and are designed to be independent. they are most effective if they are not affected by the political ebbs and flows of the current times. the biggest concern for people is that they are so involved in the rescue operation of the financial system that all of a sudden they are under the watch of lawmakers. if you were to ask, the goal is to pull back to the previous state. hopefully, avoid ever been involved politically again. host: phil

i agree with that last caller about the federal reserve. there are many small businessmen who are getting organized to elect more republican lawmakers. we think would help the market instead of raising taxes like obama would be to cut back capital gains tax rates. wouldn't that energize the stock market? you should cut the capital gains. would that help the market, john? guest: and they actually did cut the capital gains tax rate. it has been part of the policy agenda for the past 15 years. the capital gains tax rate came down to 15% during the bush administration. that part has already been done. there is a vigorous debate about how effective it was. republicans argue it would raise revenue. it did in the early years, but i don't know if it would help now. it has already been brought down significantly. host: the callers are talking about the fed as a problem rather than a solution. take us over to the hill. these five major points -- which of them must get approval? guest: a lot of them have to get approval. it is amazing how large a legis

it was with great, great reluctance the federal reserve got involved in that kind of situation. there being no good alternative to avoid a collapse of a major financial firm and the consequences that would have for the financial system and for the economy. as i've said, for a number of times, at least a year, i think a very critical step that the congress needs to take is to develop a resolution regime that will allow the government, not the fed, but the goverent to step in when a major financial firm is near default and financial system is in crisis. that would be parallel to what we already do now for banks, through the fidicius system. if we could have such a system in place, we would no longer be in the hobson's choice of standing aside and letting the system collapse or taking actions which are very uncomfortable for us. that would be an area where we would be happy to withdraw or pull back on our activity if the government would provide a good system for addressing that issue. >> we discussed a little bit the treasury bill rates and specifically the ten-year treasury which

one example of where the federal rer reserve removed management was a.i. g where there was an agreement the c.e.o. would be replaced upon the consummation of the loan we made to stabilize that company. >>. >> the gentlemanwoman's time has expired. >> thank you, mr. chairman. >> congressman mchenry from north carolina. >> thank you. chairman bernanke, thank you for your testimony. i know this is certainly not easy to recall what happened in those very, very busy days of the fall and you certainly had a very challenging tenure with the federal reserve, you did not come in in easy times so thank you for your service to your country. during your testimony in front of financial services which i'm on, in your numerous comments, you worked very closely in the fall with the former secretary of the treasury mr. paulson. correct? >> that's correct. >> in some testimony, some comments, almost daily or hour-by-hour conversations, throughout the fall with your counterpart there. >> daily, certainly. >> with then-new york fed head tim geithner you also had significant in

>> among us, us, the federal reserve, and the treasury. >> there were discussions, but not agreement in december? >> yes. >> today and salt -- today involve the secretary of the treasury himself and the chairman of the federal reserve and yourself? >> yes, they did. >> in the agreement was let's hold off until january because we're not in agreement yet? >> we did not have an agreement, and we did not agree on all the details or the amounts. have an agreement on the details or the amounts. >> were the reports that you were reluctant to accept t.a.r.p. funds true? >> i'm sorry, i couldn't hear. >> there was a report that you did it not want to accept t.a.r.p. funding. is that correct? >> it is true that we did not think we needed the t.a.r.p. funds at the time we were asked to take them. >> was there any connection between your reluctance in accepting them and the

did the federal reserve in attempting to protect the system apply well established remedies when it eengneered billions of dollars in subsidies to bank of america to complete its deal with merrill lynch? or, did the federal reserve peru an untested experiment -- pursue an untested banking regulation in variance in commiting billions of dollars in taxpayer funds to a corporate management that the federal reserve believed had failed in major ways? mr. chairman, members of the committee, this committee has sifted through tens of thousands of pages of documents produced by bank of america, the department of treasury, and the federal reserve. our investigation will help set the record straight about bank of america and merrill lynch. furts more, the story of bank of america's merger with merrill lynch and its huge taxpayer provided subsidy helps to answer broader questions about how the corporate management of very large financial institutions operate with virtual impunity. for their mistakes. the documents we will reveal today provide the public a rare look into the disconnection between the feds'

nobody had a conversation with treasury or the federal reserve or at the bank of america? let's not put this in writing right now? >> i can only -- i can only speak to what was happening at the time. i don't know what was said to everybody. but the two things that i would continue to say, no one, the goal was to get this done comprehensively so it was one time and would not shock the markets with something that was dangling that is needed and then secondly, we had not come to a final conclusion for several weeks. >> i yield back and thank my colleagues for their indulgence. >> thank you, mr. chairman. i know sitting there for three hours and answering questions is not the greatest thing in the world to be able to have to do. in my first round i asked about whether you felt government and connection with the t.a.r.p. program, exercise any excessive influence and day to day operations and you said, your answer was no. but i want to go back to, and i'm taking this from a may 13th bloomberg news story, documents obtained by judicial watch relative to a meeting that you had wit

there are already tensions between the federal reserve's responsibilities for the conduct of monetary policy and responsibilities for bank supervision. adding this additional responsibility on the federal reserve, i believe, is a step too far. my other concern is rooted in the tkpwofrg philosophy of this country which i think has quite honestly served us well. that philosophy is that too much economic power placed in one place puts our system of government at risk. our founding fathers opposed that concentration of power, economic or otherwise, in favor of a system of checks and balances. that's like america, unlike so many european countries, never created a single, all-powerful national bank. and we have, consequently even since that time, reality sifted -- resisted creating that central bank. in the experience of some countries which concentrated too much power in one entity i think should serve as a cautionary basis. we should not ignore the fed has had some responsibility for systemic risk regulation under the current structure and over the past year we've seen the tprefrbg and t

that has blurred the distinction of the independence between the administration, executive branch, and federal reserve and its unique role. what do you think of that concern? what are you doing to reassert the independence of the federal reserve, not just in structure, but the impression of the marketplace? >> a long question, i will attempt to address it. we are confident that this process can be unwound, but we need to raise short-term interest rates in the normal way. to do that we have a sequence of things that could happen. first, short-term programs could either decline because of lack of demand -- we have seen great decline in programs over the last couple of months. second, as things return to normal, we could see step no. 2. very important development by studying interest rate reserves close to the target, it would be likely that banks would want to lend out in the overnight federal funds market a rate above that. many effectively use that tool. there are a number of ways to address this problem. from a technical point of view, we are able to address the current level of our balance sheet. th

caller: how come the federal reserve has now taken over the united states treasury? it is not back bygold or anything. when you look back in history when john f. kennedy -- he quit the federal reserve and it issued silver certificates. then he was assassinated. i think it has a lot to do with the federal reserve. guest: maybe two points. one on the tarp in support of mr. obama, senator mccain also supported the tarp program as did the senate republican leader mitch mcconnell, the house republican leader, john boehner. the bush administration was the one who came up with the tarp program. it was supported strongly by the chairman of the federal reserve, ben bernanke and bipartisan leadership. the rank and file never liked the program much. to the caller's other point, with the federal reserve -- one of the interesting questions is just how powerful the fed is. it has been very aggressively getting the financial system stabilized. most people think they have done a good job, but will have a difficult time removing programs to return to more normal operations. there are

and that they've just received 5 no-bid contracts from the federal reserve, among them managing troubled subprime mortgages in the freddie mac and fannie mae portfolios. the people of the united states have through the fed have propped up fanny and freddie to the tune of $200 billion. for the record, can you provide the contract that black rock has with the fed, particularly the one regarding the management of fannie mae and freddie mac's port fort yoes? >> i don't know if i can. we don't run black rock. we have two or three seats on the board, but don't have a ceo or chairman and he doesn't report to anyone in bank of america -- >> you own 49.9%. isn't that a strange relationship. >> we don't own 51%. that would be the difference. >> do you know how much black rock will earn from that contract with the federal reserve to manage fannie and freddie papers. >> no, i don't. >> let me mention, "new york times" wrote the following, can a company being paid to sell troubled assets for the same kind of assets for private clients without showing preference and should the government seek counsel

were there specific details that the federal reserve and treasury told you not to disclose to your shareholders? >> no, sir, neither secretary paulson nor the chairman of the federal reserve, mr. bernanke, ever told me not to disclose something that we thought should be publicly disclosed. >> okay. mr. kucinich referenced e-mails and i wanted to get on the record, have you seen -- have you seen the e-mails before today? >> no. >> and i want to make sure we got inthat on the record, mr. chairman, with all due respect to you. as i asked earlier, you've been involved in a number of merger and acquisitions, your institution has been involved in dozens upon dozens over your career with the bank. to your knowledge have there been material adverse change clauses included in previous deals of this sort? >> virtually every acquisition would involve some material adverse change clause and not totally uncommon to have them invoked. >> has your institution invoked this clause before? >> yes, sir, we invoked it on a deal with sallie mae. >> all right. >> looking at the list of federal reserve regulators who

there is a story on inflation and the federal reserve. people who worry about inflation may not have fully grasped the ramifications of american households leveraging. the pullback is going in to prop up a faltering economy. at every level of society, the demand for cash is unprecedented. meanwhile in today's wall street journal, a report on a story twin threat jobless rate deficit. flags have been raised as the president who is so personally popular is losing ground on some of his economic policies. there is little he can do to please everybody. if he pulls back on the economic stimulus, he may be pulling back on green shoots. he expects the unemployment rate to reach 10% this year. rising joblessness could trigger pressure for another injection of spending. let's take our first call from new york on the independent line. caller: donald trump was on with larry king and was asked about real estate. and he said that he sold his home for $100 million at the height of the market, because he feared that the high oil prices was the cause of the

the federal reserve is also actively working to incorporate the lessons learned from recent experience into our supervisory activities. the federal reserve played a key role in the development of the principles for sound compensation practices issued by the multinational financial stability board in april 2009. in addition, we are in the process of developing our own enhanced guidance on compensation practices at u.s. banking organizations. the broad goal is to make incentives provided by compensation systems at these institutions that we supervise consistent with prudent risk-taking and safety and soundness. in developing this guidance, we are drawing on expertise within the federal reserve as well as on research from the broader academic community and other compensation industry experts. our investigation suggest that there are certain key principles that should guide efforts to better align compensation practices with the safety and soundness of financial institutions. first, to be effective compensation practices must be properly aligned throughout a financial firm. this includes c

another tool is the payment of interest by the federal reserve. without interest on reserves, the rates are raised only by restraining the quantity of what is available in the market. reaching the target may lead to a sharper reduction in the balance sheet. we can raise the interest that is paid in tandem with the target and this will raise the opportunity cost of the banks that are lending. as we announced in march, we are looking for additional tools for legislative action. an example would be the authority to release debt, and expansion of the treasury supplemental plan. now what circumstances will require us to use the tools that we have, and what we may have in the future? one clear concern is price stability. the balance sheets grew in a matter of weeks and remains large. there is a precedence for a large increase in the balance sheets. this is subsequently associated with inflation. i want to emphasize part of this, inflationary pressures are likely to rise without broad expansion. this explains why there is concern, and why we look after th

we meet today to hear the distinguished chairman of the federal reserve, benjamin bernanke, testify onthe recession that is plaguing our economy and on the prospects of recovery. chairman bernanke testified before our committee on october 20 of last year, as we searched for ways to mitigate, if not avoid a long recession. the chairman acknowledged then that monetary policy has its limits. without being specific, he welcomed a fiscal compromise. congress had just passed a bipartisan compromise offering $700 billion to dispose of troubled assets, so-called t.a.r.p. backed by these funds, the treasury, the fed, the fdic have made extraordinary measures to banks and other financial institutions, recognizing what chairman bernanke told the joint economic committee last month, quote, a sustained recovery in economic activity depends critically on restoring stability to the financial system. this is one question we hope you'll address today, mr. chairman. just how strong and how table are our financial institutions. by february of this year it was clear that t.a.r.p. relief was a necessary, b

the federal reserve is responsible for regulating mortgage lending but did the federal reserve act when the f.b.i. warned in 2004 that the subprime mortgage fraud could become an epidemic? no. so if the f.b.i. warned an epidemic was ahead on something that the federal reserve regulated and the federal reserve failed to act, what makes us think that they can actually regulate anything and why should we give them more power, which the administration proposal does? many more questions need to be asked about financial regulatory reform. we should not rubber stamp the administration's first idea. our people want a sound credit system. we should act for no less. the first goal of our banking system as opposed to a security system should be to create a safe and sound and prudent credit system in this country. madam speaker, i yield back my remaining time. the speaker pro tempore: mr. burton from indiana. for what purpose does the gentleman from texas rise? mr. poe: i wish to claim mr. burton's time to speak out of order the speaker pro tempore: without objection. mr. poe: madam speaker, the st

i think it is extremely a proper for the federal government and those of us in congress to know what the federal reserve is doing. so i think it is a very good bill that ron paul has, with a lot of co-sponsors, and it is basic transparency. the federal reserve is doing things on the up and up, and they should be willing to share that information with us because they do control our money supply. there was an article that appeared two weeks ago on a thursday in the editorial page of "it will street journal" which shows what they have done with m1, which is the supply of money. you go back from 1960, van de graaff

>> the federal reserve is a separate institution from freddie mac. i do not understand your question. >> you have signed a contract with black rock to manage freddie mac. i understood it was one of the four or five contracts that you had signed with black grout. >> i would have to go back and check on that. >> i would appreciate that. >> before you have to leave, i've -- we are going to make to fiscal policy decisions this summer. when talk about capt. trade and health care legislation. that is more to impact our borrowing and our deficits. the bill that is moving to the floor that is already in the commerce committee, they auction off 88% of the permits which dramatically reduces the ability to do the rebates such as you discussed. which therefore dramatically reduces the ability to do the rebate as needs to be off setting the blunt impact on the economy. gives away 88% of the permits. given that the lels we're looking at gives away 88% of the permits drying up the money to do rebates. do you think that has a negative effect on the economy? >> my und

dn't rule out the federal reserve as being a source they could go to in case of emergency? well, i think that it has never happened -- >> no -- >> but we can't rule it out and it's one of the lessons of this crisis, we have to make sure that our statutes are up to date so that in an extreme -- >> that's what we're trying to go through. >> i'm agreeing with you, senator. >> don't have much to add to that. the securities clearinghouses did work very well in the last year under extraordinary circumstances but the last year taught us that anything can happen that we haven't anticipated historically, real key for clearinghouses will be robust risk management, that they are well capitalized, effective oversight and vigilance from regulatears, whether it's the fed as a backstop regulator or the functional regulators, the sec and the cftc. it will be important for them to have conservative margin requirements and procedures that are well-understood, transparent for how they resolve the default of a participant in the clearinghouse. >> would you like to comment in any way? >> the bo

>> i think it might not be the cftc but it will be the federal reserve or the sec said in capital in this regime but just as there is capital standards in the full oversight iowa -- i defer. >> is to analyze the risk of our doing business with each other and to demand collateral against the position we are creating some much of that and now the system would be required here is analysis that i think the dealers are very comfortable doing. the difference would be there would be government oversight but i don't think we will have the capacity to second-guess every transaction whether there is was analyzed appropriately but we would expect the firms to stress test of their models and ensure the risk-management procedures are first class. .. >> what about your system would have stop that? would your system have kicked in ats' mind and you would call the ceo of aig and shay you're at $200 billion and you're down, you can't do this anymore. would we have stopped aig? >> it's always hard in hindsight. i think a number of features here would have slowed down and maybe even stopped. aig put on

the federal reserve is creating inflation concerns through its massive asset purchase program. the fed plans to purchase $1.25 trillion in mortgage-backed securities, $200 billion in freddie mac and fannie mae debt, and $300 billion in treasury bills this year. since not enough people apparently want to buy the treasury bills at lower interest rates the federal reserve is stepping in and buying them in an attempt to keep the rate done. so far, the fed has purchased $481 billion in mortgage-backed securities, $130 billion in treasuries. the intense of the program is to reduce the treasury yields and interest rates but some say it may be backfire. a "forbes".co forbes.com articls could have a different impact, could actually cause inflation rather than -- and even cause a rise in treasury bond yields. this is what he said: -- quote -- "this can become counterproductive to the extent that you stoke inflation fears and you get an inflation-risk premium built in to the bond yields, you can't ease that away. you do have to be careful and more measured than that." in other words, when

the federal reserve board of new york had $85 billion loan to a ing. the testimony today is that money was used to buy all the contracts and cancel them, that's how they took care of that obligation. what was of concern to me and others is the counterparties appeared to have received 100% of that even though testimony from people at aig before the committee said they thought there were a lot of contentious reasons to think they did not all 100% if they would anything at all on those particular obligations that there had been serious negotiations about whether they should pay anything to the counter parties and if they should pay something, chest and 100% they should pay. we pressed mr. lardy at aig for makarov on just how the negotiations went, why did they pay 100%, his comment was he was the wrong person to talk to and in fact the fed had all of those documents and paperwork because they had struck the deal. so, my question to you is why was 100% paid on these obligations including what was the rationale, why weren't the interest of the public money i

and also, the federal reserve. i also obviously want to recognize chairman harkin on the agriculture committee for the longstanding work on derivatives issues and i look forward to having both committees coordinate closely as we work to provide transparency and reduce the risk of the financial sector. this week we find ourselves more focused than ever on the important work of merchandising and outdated regulatory system for goeth call this hearing to explore one of the key aspects of such reforms. to modernize regulation of the over-the-counter derivatives market and the institutions that participate in these markets. both exchange rate and over-the-counter markets have grown extremely rapidly over the past decade. and tillie recent downturn of the economic markets, every category of derivatives show almost a decade of extreme growth, in many cases more than tripling or quadrupling trading values according to data compiled by the data resource service. between 20,002,008 the number of contracts traded on exchanges r

the republican plan would rein in the federal reserve, have them focus on monetary policy. the democrats' plan would expand the federal reserve, institutionalize a bailout nation. if you agree that bailing out aig, citigroup, and gm at the expense of struggling taxpayers and small business, if you think that is good economic policy, fine, support the democrat plan. if you believe the best consumer protection is less competition and an additional layer of bureaucracy to decide for you what is right for you and your family, yes, please, go support the democrat plan. if you still believe in freedom, competition, accountability, then i hope people will support the republican plan. host: arnelle last phone call -- our last phone call for a congressman jeb hensarling. danielle, you are on. caller: i appreciate the opportunity to call, and i hope i have the opportunity to say everything i want to say. for eight years i have followed not only the markets through cnbc, but also c-span and what the republicans have been doing. i see some of what mr. hensarling is saying is borderline

correct the real core issues -- the financial system and its dominance of our economic system and the federal reserve sacredness, the secret nature. some of that is being addressed, and in fact i giving more power to the federal reserve which is not transparent. host: of the federal reserve meeting today and tomorrow, and we will talk to john taylor served in the budget ministration and now with the hoover institution out of stanford university, calif., to talk about his views about what the fed needs to be doing or may not be doing it. for it to get retooling aid. the story points out the obama administration is set to announce retooling loans for ford motor co., nissan motor co. nissantesla, the first under a $25 billion program to spur fuel efficient vehicle production in the u.s., according to people familiar with the decision beard we are asking questions about the economy and some indication that the mixed signals. give us a call or send an e- mail, journal@c-span.org, you can give us a sweet or give us a call. one of the photographs we want to show you is from inside "the n.y. daily news." sec

the federal reserve treasury -- the federal reserve treasury and ftse have taken steps to provide bankswith liquidity for -- and fdic have taken steps to provide banks with liquidity to insure debt issuance and capital injection concerns remain that a deepening recession could threaten the solvency of some banks and amplified the financial crisis. confidence in large measure is determined by the current and future shape -- a future state of bank balance sesheet. it is important that banks have a clear picture of whether they current downturn. it is welcome news that the obama administration is set to announce that some of the nation's largest banks will soon be able to repay billions of tarp funds. however, the fed has imposed additional requirements on banks that proposed repaid capital that they receive under t.a.r.p. since the stress test enable them to raise the money needed by bains, this raises questions about what is assumed about repayment of t.a.r.p. funds. some banks seem reluctant to perform their normal rules as providers of credit. i was honored to justify recently in new y

but the problem is to set up the federal reserve board as the systematic risk regulator is to set up a systematic risk regulator that is unaccountable. the federal reserve board is unaccountable, not accountable to the congress, not accountable to the president. so in addition to establishing an unaccountable entity, it is also an entity that operates in great secrecy. i give the president great marks here for suggesting we have to have more effective regulatory capability. good morning sure we'll have discussions about exactly where should that regulation exist. who should be responsible, how do you get it right. but i do hope we can have a discussion about whether the systemic risk regulator should or could be an entity that is really not accountable and one that operates in substantial secrecy. my feeling is there is a much better way to do that number one. number two, i'm still -- while there are a lot of details that i'm not going to describe today, i still am interested in this question of whether we will confront -- and i don't know that from the president's description today -