quite frankly, you have the impression that the financial implosion has happened because a team of evil martians have invaded the world and taken over the system with some kind of dastardly plot to bring down the financial system. and this idea that there were actually human beings inside the financial system who were taking decisions, both the good and bad, and who like any human beings had complicated motives wasn't really about. so i picked up on the jpmorgan group, and essentially the book divides into three parts. the first part is calls innovation because i try to tell the story about how this group developed a set of ideas starting in the early 1990s which proved absolutely crucial later this decade in terms of taking credit risks which had traditionally been treated as something which stuck to the balance sheets of banks and slicing and dicing it in a way that it could be sold across the system and parceled out to investors all over the world. they initially did that with corporate credit risk, and in fact, for the most part stuck with corporate credit risk, and they did that partly through derivatives. and as they developed these idea

judgments and sometimes have the impression the financial implosion has happened because a team of evil marcion's have invaded the world and taken over the system with some kind of on bass and a plot to bring down the line and show system. and this idea there were actual human beings inside the financial system who are taking decisions for but it -- good and bad and like every human being had complicated motives wasn't about. so i picked up on the jpmorgan group and essentially the book the rise into three parts. the first part is called innovation because i try and tell the story about how this group developed a set of ideas starting in the early 1990's which proved absolutely crucial in terms of taking credit risk which were traditionally treated as something which stuck to the banks and slicing and dicing it in a way that could be sold across the system and parceled out to investors all over the world. they initially did that with credit risk and, in fact, stuck with corporate credit resco and they did that partly to the derivatives. and as they develop these ideas and came out as a much longer stream of international development occurring i

you mean the financial system and as a member of financial system you would be affected? >> yes. >> if they went and sold it to somebody else or lowered the somebody else or lowered the price and packaged it or if merrill lunynch had gone througa bankruptcy, all of those alternatives would have been either better or at least no worse? >> yes, i can't speak to that but those would be options. but i can't speak to whether it would be better or worse. >> my last question and i'll yield to one of other members. if you did not have the government at the table and i know that's hypothetical. if you did not have the government at the table, would you have, a., asserted the clause, and b, either walked awayr substantially changed the deal? >> it didn't happen that way, so it's hard for me to project what i would have ultimately done. but obviously we were strongly considering it. >> so it would be somewhere between possible and likely? >> i don't know how to characterize it. i just -- i'll stick to how i described it, i think. >> thank you. and you're constituent, mr. mchenry will

the nine states. what is different? >> we have a system that proved too unstable, too fragile, undermined what was the great strength of this country, which was a financial system that was the best in the world at taking the savings of americans and channeling them to the best ideas. it helped finance growing companies. our system is still pretty good at that, but it was fundamentally too unstable and fragile and did a bad job at basic protection of consumers and investors. those are things we have to change. >> a couple of weeks ago, we are going to do a chart of all the regulatory agencies that exist, but there are too many to put on a chart. >> is a spectacle. >> it seems like the system you are laying out is a bit of a compromise. you're not getting rid of very much and you are putting in a new college of regulators. how's that going to work? >> we are trying to focus on what was at the core of this crisis. there are a range of things in a system that she would not put and if he were starting from scratch. there are things that would be nice to do if we have time and infinite capital, but we're trying to focus on the practical issues. they are basic

the government planned to address major flaws in the current system exposed by the financial crisis and i look forward to working with my colleagues on both sides of the aisle on this and other proposals for reforming our regulatory system. over the past year we have witnessed unprecedented government interventions in the financial system and in the corporate governance. hundreds of billions of dollars have been spent recapitalizing individual financial institutions some of which were probably on solvent and should have gone into a bankruptcy proceeding instead of being propped up with taxpayer dollars. federal reserve balance sheets has more than doubled. from roughly 870 billion before the crisis to over 2 trillion now according to the remarks made by federal reserve chairman ben bernanke. in the short run government interventions have stabilized the market but i fear these repeated multibillion-dollar taxpayer bailouts are weakening the financial system and now threaten our economic future combined with a current administration to borrow and spend this policy many have come to believ

the impact on financial institutions are vital to the effective operation of the financial system in our economy there seems to be a bit of confusion in the media some times and elsewhere about the relationship of the accounting standards we set. we do not determine regulatory capitol. bank regulators do. however, under the laws enacted by congress, the determination of regulatory capitol by the bank regulators does start with the gap numbers. the regulators have discretion to discuss those and have other tools to address the concentration of risk at regulated institution. the regulators have a natural interest in the accounting standards we set. likewise investors have an impact on the regulatory requirements and in actions. in that regard, i would like to commend the fed and bank regulators with the rault of the resent bank tests. as the policy and investors or citizens of this great country, we all share a deep interest in the strength and stability of our financial system and the economy. public policy in the focus of the setting and regulation in helping achieve these goals are s

president, i rise today to discuss the state of our financial system and to provide some thoughts on systematic risk regulation. as we set about crafting an overall reform for our financial regulatory approach. yesterday treasury secretary timothy th geithner and directof the economic council, laurence summers, published an editorial in "the washington post", laying out the broad outlines of their proposals for regulatory reform. i share their views on how we arrived at this moment. and i share the broader goals that they discuss and look forward to working with the administration on comprehensive and timely regulatory reform. however, i want to speak today about one area where i disagree, and that is how to address systematic risk. but let me step back for a moment. mr. president, the magnitude of the events of the past two years strains comprehension. i believe what we've seen over the last couple of years is the equivalent in economic terms of the 100 year flood. millions of families and retirees have lost their financial security. millions of people are out of work. each day we re

they've been exceptional and extraordinary and they've created the risk that unless we reform the system, we'll face a greater risk of financialcrises in the future because we would have created moral hazard that would make the system more vulnerable in the future. i am deeply worried about that and i share that concern and that is why it is so important that we put in place against constraints in the future. what the president will recommend in terms of financial reform will be a set of much more conservative set of constraints and risk taking across the financial system with a more effective oversight and as part of that, we need to have a better capacity to deal with the potential failures of large institutions. the system that you referred to and the system that congress helped put in place built around the fdic, strengthened the weak of the crisis is a very effective crisis, but it was designed to deal with relatively small banks and thrifts, and it was not designed for a crisis of this severity. that is why we did not have -- and that system was not designed to deal with a more complex type of failure, for example, like

now we started this year in the worst financial crisis in decades and because of that crisis and the damage done to the financial system, we had to do with the congress extraordinary things and those by necessity, produced a short-term temper increase in our deficits. there was no path through this crisis that did not involve some temporary short-term increase in borrowing, but at the time we proposed that, again, the president proposed and he acknowledged that we'll have to bring those deficits down over time and that's something that we'll have to do with the congress and it will be difficult to do, and it's going to be important to do because we'll find the recovery will be weaker. private investment will be weaker. interest rates will be higher unless we're able to convince people that we'll have the will and the ability to do that. >> okay. too big to fail. it can't be an option in any industry, and i think we may be there in energy. we may be there in food systems and we're absolutely there in the banking industry. >> right. >> how do we fix it? do we fix it with regulation? how do we fix it? >> i would mention a

not only at the safety and soundness of individual institutions but also at the stability of the financial system as a whole. one of the reasons this crisis took place is that while many agencies and regulators are responsible for overseeing individual financial firms and subsidiaries, and no one was responsible for protecting the whole system from the kinds of risks the tide these firms to one another. regulators were charged with seeing the trees but not the porous. some proposed a systemic -- trees but not the forest. some of the cape as banks by were chosen to be regulated like other entities. one firm threatened the viability of others. there was no system in place prepared for this outcome no one was charged with preventing it. we were facing one of the largest financial crises in history and those responsible for oversight were caught off guard and not have the authority needed to address the problem. it is time for that to change. i am proposing that the federal reserve be granted new authority and accountability for regulating bank holding companies and other large firms to propose a lar

president obama has announced a number of changes to the financial regulatory system. the the plan would dismantle large financial companies and for the first time into was regulations on certain types of transactions. this is 20 minutes. >> i administration has an extraordinary response to a historic economic crisis. we have taken action to repair our economy and working hard to build a new foundation for sustained economic growth. this will not be easy. this recession is not the result of one failure but many. many of the toughest challenges we face are the product of a cascade of mistakes and missed opportunities which took place of the course of decades. that is why we are seeking to build an energy economy that creates new jobs and lessen our dependence on foreign oil. system that instilled in each generation certain ideas of innovation. the american medical association, we want to reform our health-care system so we can remain healthy and competitive. this new foundation also requires strong, vibrant financial markets. transparent, fairly administered rules of the

lewis it wasn't just an issue of the financial system but think of america at risk and he should take that into consideration when he made his decision. >> so it was the indirect benefits to the shareholders from not having the whole system collapse that he was optimizing for. if you accept the federal recapitalization on both merrill and bank of america were probably inevitable do you think the net effect of the merger was represented the reshuffling around of the funds we would eventually have to commit or do you think it is a more complicated situation than that? >> i see the combination strengthened the company's and particular will be learned during the crisis is the investment banking model wasn't very stable, it was subject to funding problems by combining with america with the retail deposit base and was possible to solve those to some extent. >> okay. thanks again and i yield back the remainder of my time. >> i yield to the gentleman from ohio mr. jordan. >> thank you, mr. chairman. mr. bernanke, let me go back to what i think starts this pattern of pressure on behalf of the

system where there is more clarity. that is something we want to work to in this context. we need to look at the u.s. financial system today versus where it was in in january. we are in a stronger position to get through this today because of the capital that has come into the system to make sure we have a system that is reinforcing recovery and not constraining it. >> there is a misperception about the public of you. they think you were a longtime banker. you were a regulator never a banker. you said you do not understand baker's. >> i do not know and i said that. i have been accused of being a banker many times. >> i question your skepticism about them. to the care about anything else besides [unintelligible] ? >> i am not going to answer that question. [laughter] it is hard to judge motive in these things. >> are you frustrated that they have not had other interests? >> we ran an economy that relies on the market. it realized that we have a set of constraints against excessive risk-taking. those basic protections failed for many reasons. the basic checks and balances of oversight were insufficient. supervis

in the last year with large firms whose failure likely man would significantly disrupt the world financial system and economy. we had no good options to deal with those companies. it's extraordinarily important as i have said for some time as congress reforms the financial regulatory system we develop a resolution regime for resolving failing critical firms, increase oversight and take steps to make sure too big to fail will not be a problem in the future. i agree strongly with that. >> let me ask you, i have read many articles over these last few months and seen all different sorts of figures as to how much money in total the fed has loaned, pledged, paid and all the different bailouts. would you tell us what you believe those total amounts to be that the fed has committed over these last few months. >> in terms of bailouts, the amount of money we have involved in a.i.g. and bear sterns is about $100 billion. >> in other actions, what other actions did you take? i've seen figures as high as -- like 2.2 trillion. >> the balance sheet is 2.2 trillion but more than half of that is u.s. government b

and america but how are we going to actively shape the financial system? and it's tempting now to say let's try to chop all innovation out like people sometimes say when one goes wrong let's try to ban all drugs and stop the entire product. but if we are going to do that we will face a world where the banking system operates on a much slower to much lower capacity where credit is much more rationed and it's going to be a much slower. so the question i would leave you with is as we look back at the story of jpmorgan, the story of credit innovation which parts of the innovation can we actually preserve and which parts can we throw out. is there a way we can actually take the original ideas about financial innovation that were developed in the 1990's and keep them for the good or is it the case all complex finances bad. i think looking back at real-life human beings and how they've tried to develop those ideas offers one way of showing that it didn't have to be like this. and so i hope that for the future it will provide a pointer of not just a terrible mistak

the new regulatory framework of the united states. >> we have -- we had a system that proved too fragile that undermine the great strength of this country. we had a financial system that was the best of the work -- in the world at taking the savings of the people around the world and channeling them to the best ideas. our system is still good at that, but it was too unstable and fragile. it did a bad job at basic protection of consumers and investors. that is something that we have to change. >> we were going to do a chart of all of the regulatory agencies that exist. there were too many to put on a two-page chart. >> it was a spectacle. >> the system that you are going to lay out is a bit of a compromise. if you are not getting rid of too much. you are putting in a new college of regulators. how is that going to work? >> we are trying to get at the things that were at the core of the problem in this process. there are a lot of things that would be nice to do that if we had time and infinite capital. we're trying to focus on the practical issues. they are basic gaps in protecting against systemic risk and price -- crisis prevention. basic gaps in their eff

the worst financial crisis since the 30's. it's threatened the stability of the global financial system and the global economy. extraordinary actions have been taken and we've learned a great deal and as i said in my testimony i hope the congress will take action to ensure the system will remain stable and no such actions are in the future. i very much regret being involved in them but i saw no alternative at the time. >> and how do you see yourself at this point given the fact that you have been fairly politicalized, your treasury is strictly political, you have caused a political entities you e@/)@ @ @ @ @ @ @ @ @ @ @ @ @ @$ out the use separate yourself from this so you are not completely political? >> as the crisis is ending, we will withdraw our programs and we paid the money, and as we go forward, we can see a withdrawal of the programs and support, as this becomes more normal. >> part of the problem was they went to a banking sector with merrill lynch, and you know that this has been a recreational vehicle, with the floor plans. most of that was a non banking sector. how do you deal with us in the futur

this should not be recycled through the financial system. this should be repaid to the taxpayer, by reducing the debt of the united states. this is the only reasonable way to approach this. this would be a strong signal for the american taxpayer, to show that this administration is serious, but this would be a tremendously strong signal for the world markets, that we were willing to take the money and pay down the debt, this would also follow the proposal of the original bill, and this said that after the financial system was stabilized, any money that is coming in should be used to reduce the deficit and the debt of the united states. this should not be used for new ventures in the private sector, automobile companies or auto insurance companies, this should simply be used to reduce the debt. i hope that they will do this because this what be a good sign, the world markets are becoming suspicious of the debt as we have seen in the number of instances, the cost of the tenure bill, and also the fact that the chinese leadership in the financial

they've been exceptional and extraordinary and they've created the risk that unless we reform the system, we'll face a greater risk of financial crises in the future because we would have created moral hazard that would make the system more vulnerable in the future. i am deeply worried about that and i share that concern and that is why it is so important that we put in place against constraints in the future. what the president will recommend in terms of financial reform will be a set of much more conservative set we need to have a better capacity to do with the potential failures of our institutions. the system that you referred to in which congress helped to put into place built around the fdic is a very effective process that was designed to deal with relatively small banks. it was not designed for crisis of this severity. that is why -- and it was not designed to do with more complex failures like that of aig -- that is why the president will recommend stronger capacity to resolve and better manage the risks posed by those types of institutions. i want to underscore a couple of things about context. when i came into offic

responsibility to ensure that the financial system works for the economy as a whole. there has always been a tension between those who place more trust in the guiding hand of the government and in the marketplace. it gives rise to help the debate and create a dynamism. in many ways our financial system reflects this. the economic, as independent decisions, we see the potential for creativity and for abuse. we see the capacity for innovation to make our economy stronger and for innovation to exploit our economy's weaknesses. we are called upon to put in place those reforms that allow our best qualities to flourish while keeping those worst traits in check. we are called upon to recognize the free market as the most powerful generative force for our prosperity. it is not a free license to ignore the consequences of our actions. this is a difficult time for our nation. from this time of challenge, we will pass those ideals and values that have allowed us to allow us to lead once again. we will see more americans live their own dreams. these reforms are so importan

and although the financial system has begun to heal, our country faces substantial economic and financial challenges. the president and administration are working to meet these challenges and we're working hard to get our americans back to work and to get our economy back to a growth path again by committing to restoring fiscal discipline and fiscal recovery and by making the health care reform in energy and education necessary to improve the productive capacity of our economy and to ensure that over the longer term we enhance the competitiveness of the u.s. economy. to achieve these goals we're working to repair and reform our financial system so it works for, not against recovery. we're working to restore growth and meet our fiscal goals by redesigning our tax code, bolstering enforcement. we're working to advance our interests globally, working with other countries to promote economic recovery and financial repair and to ensure more open markets for u.s. businesses and to protect our nation's national security interests, we are deploying all of the tools at our disposal to exclude terr

discussions i express concern that invoking it would entail significant risk not only for the financial system as a whole but also for bank of america itself for three reasons. first, in light of the extreme fragility of the financial system at that time, the uncertainties created by indication of the map but it triggered a systemic crisis that could well have destabilize bankamerica as well as merrill lynch. second, an attempt to invoke mack after public remarks by the management of bank of america about the benefits and the acquisition would cast doubt in the minds of financial market participants including investors, creditors and customers of bank of america about the due diligence and analysis done by the company. its capability to consummate-- its overall risk management and its judgment. third, based on our staff analysis and legal issues we believe it was highly unlikely bank of america would be successful in terminating the contract by evoking the mack for the rather and attempt to invoke the mack would involve extended in costly litigation with merrill lynch that would significantly

regulators, the securities lending division in tandem with the financial products unit put at risk the entire company and the broader financial system. half of this came from the securities lending division, the other half from the financial products unit in terms of the overleveraging. with more than 250 subsidiaries operating in 14 states and more than 100 countries, aig is the poster child for both the need to open up lines of communication among regulators worldwide and the need to establish a domestic insurance regulator with the ability to oversee these large and complex institutions, and again, mr. chairman, thank you for holding this hearing. >> thank you, mr. royce. we'll hear from the gentleman of georgia mr. scott for one minute. >> thank you very much, mr. chairman. i think this is of course a very important and timely hearing. the issue is, of course, i think what is the systemic risk as relates to our insurance industry. and where and how is it best regulated at state or federal level? but i think that the major mod thael we are using, aig, is flawed at its best because as we look back at it, what caused the problem wi

lewis we strongly believe that invoking the mac was bad not only for the financial system but the bank of america but i didn't tie it directly to replacing him or the board. >> i yield five minutes to the gentleman from ohio. mr. kucinich. >> i thank the gentleman. chairman bernanke, your staff believed bank of america knew about milledge's accelerating losses in mid november. for months before coming to you, and weeks before the shareholders voted to approve the merger. those fourth quarter losses rose over 15 billion out of the pockets of bank of america's shareholders. but i want to ask did the fed know about those accelerating losses before the fed approved the merger at the end of november? >> no, i don't think we did. >> may i introduce into the evidence this e-mail which is from the new york fed to autrey of merrill lynch dated wednesday, september 17. it says hope this gets to you. our management, that is the new york fed, has asked to continue the flash report on a daily basis and i am sure with the sec. so the fed was receiving detailed information by which they could have co

they're saying we don't think it's the best thing for you or the financial system. ou weren't assured you would win the mac. if you lost you were subject to severe lawsuits and severe amounts of money you would have to pay. we thought given the fact that the government felt that strongly and the fact that there was a risk that you wouldn't get, you would not win the mac. and finally that you might end up not getting merle lynch in any sengs even after paying the fines. >> so you were pressured? >> it's hard to find the exact right words to describe what i just described. i found as i tried to have different words it's best just to describe it and let people come to a conclusion. >> yeah. i yield to gentleman ranking member for the rest of my minutes. >> thank you, mr. chairman. mr. lewis, in our review of the fed's documents, it reveals in contrast to your representations to us today, fed officials concluded that you must have known about the accelerating losses at merrill lynch much earlier. as early as mid-november. when your shareholders could have voted to disapp

the appropriate oversight is of paramount importance to at the safety and soundness of our financial system. the events of recent months have made it abundantly clear that large financial firms are not too big to fail but, rather, too interconnected to fail. the idea that if extreme measures must be taken to prevent the failure of a single firm such as bear stearns, which had just over $10 billion of shareholders equity, and a few thousand employees drives home the point that greater regulation of our financial markets is warranted. derivatives serve an incredibly important role in our financial markets, current rules exceed several hundred trillion dollars and reflect the importance role of these risk transference contracts. the commercial justifications for the market are well established and well understood. regret my as the market has grown to almost unimaginable scale the regular -- regulatory frame work -- now is the time to put an end to the antiquated practice of bilateral trading. the use of central clearinghouse open to up a participants will end the era of too interconnected to p

the future to threaten our prosperity and to imperil our financial markets. in several aspects, the president's financial reform proposal parallels legislation that i introduced in march to fundamentally transform our nation's financial regulatory system. the bill that i introduced would create a council of financial regulators to act as the systemic risk monitor. the bill would also require stronger safety and soundness standards and would close the loophole on the regulation of credit default swaps. it would eliminate the office of thrift supervision among other provisions. madam president, there's widespread consensus that we do need a system of -- a measure for reviewing systemic risk. we need to have one entity that is responsible for looking across the financial markets and financial institutions and to identify regulatory black holes and high-risk practices or products that could put our financial markets at risk. for this reason, i'm pleased that the administration is proposing the creation of a council of regulators to ensure that any perspectives and areas of expertise are brought to the table. as we know now from bitter experience, we do not have currently any entity that is charged with eevaluating risk across the financia

it is an important source of employment value creation and innovation for the financial system. i would like to underscore the industries strong commitment identifying the risks in the business. we believe that otc derivatives off significant value to the customers who use them, the dealers who provide them and the financial system? general by enabling the transfer of risk between counterparties, derivatives exist to serve the risk management and investment needs of end uses and include over 90% of the fortune 500. the vast majority of these transactions are interest rate and current si swaps and equity and commodity derivatives and privately negotiated contracts. we recognize that the industries today faces significant challenges and we are urgently moving forward with new solutions. we have delivered and are delivering on a sear's of reforms in order to promote greater standardization and resilience in the markets. they have been closely overseen and encouraged about regulators who recognize that optimal exclusions to market issues are usually achieved through par participation

broadly it will be measured by the degree of stability that enters the financial system and to which nks can lend to consumers. this whole notion we hear about systemic risk, but institutions became so in snared and complex, that brought the whole system into jeopardy. the long term will be the sense in which banks lend, to which consumers and businesses can borrow at a reasonable rate, the degree of stability in the system. host: with the money that has been given back -- is that a pure way to sense if there is stability arriving in the market? guest: it is an indication. i was at a hearing yesterday with tim geithner who took the repayment as a positive sign. he was careful not to overstate it. he said there are tough times ahead, but it seems like these institutions have gotten their feet under themselves. they're doing better than there were six or nine months ago. but it is too early to tell if this will spread throughout the system. host: what you make of statements made by elizabeth warren yesterday about the stress tests used to gauge the health of banks backs and her concerns

the british economy. and financial-services was deeply dependent on the housing prices and sales, which have fallen dramatically in great britain. it was deeply dependent on transfer is in the financial system and activity in the financial system, which has dried up a great deal during the recession, in part because, we must remind ourselves, much of the financial crisis began because of the excess is. and the problem going forward for britain is that they've you how to fix this problem, how to deal with this crisis differently from most of the other continental europeans. they are desperately concerned that the european union will want to impose new regulations and financial-services and bank activities and hedge funds, etc., and much is centered in london and the british see this as a threat to their competitive advantage. host: peoria, illinois. good morning to hezekiah on our democrats line. audit of i -- caller: i was just wondering about your guest. do you seem the european union emerging as a global power over the united states? because they have about the size of our economy, 300 million people, all together throughout those nations state. i was wondering if you saw the european uni

>> sir, as the law states, the financial stability program is intended to improve the stability of the financial systemwhile protecting the interest of taxpayers. i think it's very important that i, if i'm confirmed for this responsibility, are mindful of both of those conditions. and i think it's early to say what the eventual returns will be to the american public. i can assure you that if i'm confirmed, i'm going to work very hard to make sure that these moneys are well invested and well managed and tightly controlled going forward. keeping the interest of the taxpayer and the american people very much in mind. >> you know, as we look at where we are in the t.a.r.p. program today, sebody like you, i don't think, would take on a position like this unless you had responsibilities and you felt like you were making a difference. i mean, you have stature and you have substance, and yet as i look at the program and where we are, it seems to me that those decisions that are going to be left as it relates to t.a.r.p., other than making decisions about timing and when we -- when we take advantage of our warr

we're not vulnerable in the future, to risks just moving offshore to other areas where it could present a bigger risk to the system. more evenly enforced across the u.s. financial system and bring the world to the higher standards as well. >> you also made an excellent point where you talked about the excessive leverage in the system. i think when bear stearns failed its leverage ratio was 30-1. something that a small community bank or a credit union never would have been allowed to have under our regulatory process. so i hope as you look at this issue that we're going to be establishing safety and soundness requirements regardless of the type of institution. it seems to me that bear stearns, the large investment banks, all of which have disappeared, been acquired or no longer exist, should have been required to meet the same kinds of capital requirements and leverage ratios that we would impose upon a community bank or a credit union. >> senator, i have a lot of sympathy for that view. i think that again, center piece of what we need to do for the country is to make sure there are more conservative better design constraints on leverage applied across the core

the regulatory system altogether. we have seen the development of financial instruments, like many derivatives, that are so complex that they defy efforts to assess their actual value. lenders have profited from systems filled with bars that will never repay, because the lender offloaded the loans and consequences to someone else. that is why as a part of the reform, we will dismantle the office of thrift supervision, closing loopholes that allowed companies to cherry pick loopholes. we will allow only one federal banking charter, regulated by federal supervisor. we will raise capital requirements for all depository institutions. advisers will be required to register with the fcc. we are proposing comprehensive regulation of credit default swaps that have threatened the entire system. we will require the originator of a loan to obtain an economic interest in the loan so that the lender and not just the holder of the security has an interest in ensuring that a loan is paid back. by setting common-sense rules, these financial instruments can play a constructive rather than destructive role. we have seen, time and again,

it should not be spent on other programs, shouldn't be recycled through the financial system. it should be repaid to taxpayer by refusing the debt of the united states. that is the only reasonable way to approach it and it would be a tremendously strong signal, not only to the american taxpayers, if this administration is serious about doing something on the debt side, but it would be a tremendously strong signal for the world markets that we were willing, as a nation, to take this money and pay down the debt. and, ironically, it would also follow the proposal of the original tarp bill which said that after the financial system was stablized, any moneys coming in should be used to reduce the deficit and the debt -- the debt of the united states. it certainly shouldn't be used to fund new ventures into the private sector whether they be buying automobile companies or insurance companies or anything else. it should be simply used to reduce the debt. and i hope the administration will do that because that would follow the law, that would be a good sign for the world markets. who a

. >> obama has announced a number of proposed changes to the financial regulatory system. the plan would create a way to dismantle large financial companies and, for the first time, impose regulations on certain types of transactions. this is 20 minutes. [applause] >> thank you very much. please, everybody be seated. since taking office, my administration has mounted what i think has to be acknowledged as an extraordinary response to a historic economic crisis. even as we take decisive action to repair the damage to our economy, we are working hard to build a new foundation with sustained economic growth. this will not be easy. we know that this recession is not the result of one failure but of many. many of the toughest challenges we face are the product of a cascade of mistakes and missed opportunities which took place over the course of decades. that is why as part of this new foundation, we are seeking to build an energy economy that creates new jobs and new businesses and will free us from our dependence on foreign oil. we want to foster an education system that instil

and soundness of individual institutions, but also for the first time at the stability of the financial system as a whole. one of the reasons this crisis could take place is that while many agencies and regulators responsible for overseeing individual financial firms and their subsidiaries, no one was responsible for protecting the whole system from the kinds of risks that tidies firms to one another. . . there was no system in place that was prepared for this kind of outcome, and more importantly, no one has been charged with preventing it. we were facing one of the largest financial crises in history, and those possible for oversight were mostly caught off guard and without the authority needed to address the problem. it is time for that to change. i am proposing that the federal reserve be granted new authority and accountability for regulating bank holding companies and other large firms that pose a risk to the entire economy in the event of failure. we will also raise the standard to which these kinds of firms are held. if you can pose a great risk, that means you have a great responsibil

the most important proposals is the consumer protection financial agency and charged with one job, looking out for the interests of ordinary americans in the financial system. this is essential, where this crisis may have started on wall street, but the impacts may have felt by ordinary americans. it's true that this crisis was caused in part by americans who took too much debt and took out loans they couldn't afford, but there are millions of americans that signed contracts they didn't understand offered by lenders who didn't tell the truth. folks signing up for a mortgage, student loan or credit card face incomprehensible options. companies compete by offering fine print and hidden terms. it's no could insid science that the lack of protections led to abuse, the lack of rules to stop deceptive lending practices. this new aagency will have the responsibility to change that and have the power to set tough new rules so companies compete by offering innovative products that consumers want. those pages of fine print that no one can figure out will be a thing of the past. you will be able to compare products to see what is best for you. the most unfair practic

market with predatory loan products such as supply and mortgages, weaken the prospects for financial gains and increased the systemicisk. as a result of this increased systemic risk the american taxpayer has been asked to bail out financial institutions through liquidity tools such as capital purchase program the term asset backed securities loan facility or talf. that isn't a gift but a loan from the public and requires certain protections. one of these protections is a pay star who will place transparency into the system so the public shareholders are properly informed. bonus compensation poses a risk it merits limits. i thank the witnesses for helping frame the discussion on which bonus compensation limits may be appropriately and in systemic risk. that said no t.a.r.p. recipient should have souder is capped by the president or the congress. thank you. i yield back the balance of my time. >> we will do one more minute to mr. moore. i apologize, we will go to mr. campbell. >> thank you, mr. chairman. you know, there's no argument there been instances, a number of them and which people and companies have been paid