>> the treasury has two ministers. f there were matters affecting that, it would probably before that she secretary to be at that meeting. i believe he was present. but he went on the eighth of may. previous meetings you had, patricia hewett, the attorney general. i wonder why the treasury was not attending on an official level there at the meeting? >> malick, we would want to attend. >> thank you. i w -- normally, we would want to attend. >> thank you. >> just to begin with, you told us already this morning, mr. brown, that the cost of potential united kingdom involvement, you told us was $2.5 billion, not to be seen as a constraint whether to act or not. how far was the potential impact on the party finances and particularly concerning the that you could share or something the treasury needed to contain within itself? >> we were setting aside money for this endeavor, so we made an original estimate of the cost would be 2.5 billion by 2006 because are planning to go through them. having revised our estimate, then it wa

assistance, and terminated the asset guarantee arrangement. treasury planned to sell its remaining 27% stake in citigroup in december, although it was delayed because citigroup share price in december was well below the price that treasury had paid and it would mean a certain loss for the united states government. the shear magnitude of citigroup's operations and the company's history of receiving extraordinary government support has led this panel to an inescapable conclusion. ci scitigroup along with a handful of other institutions enjoys implicit government guarantee. thus that the united states gooft will bear any burden and pay any price to ensure citicorp does not fail. standard and poor's issued citigroup a rating of a, three grades higher than it would have rated the company, "to reflect the likelihood extraordinary government support were needed, it would be forth coming." in other words, citi is too big to fail and it is measurably affecting its credit rating. were it not for the market's view that citigroup enjoyed this implicit government g

there is a picket line outside the treasury. ll the prime minister confirm that on this occasion he would my people to cross it and go ito to work. >> let me first congratulate my right honourable about the good news. and let me secondly thank him for getting near to asking a question about the economy. of course everyone is going to work here. we will continue to work for a labor government. >> i am grateful to the prime minister for his congratulations. most people focusing on how you find the time for these things. i am very grateful nonetheless. very interesting from the prime minister. last week he would not give any support to british airwaves. the first quarter is concerned for them to go to work. one of the things in the spirit of clearing up a few issues to one of the things the treasury are working on concerns the prime minister's disastrous decision to sell gold at rock-bottom prices. this cost the country 6 billion pounds. the treasury has now lost its four year battle against the commissioner to keep the information

the ronald reagan treasury department and the bush treasury department, 20 years apart, said they werely deficient and would work and look at the flat tax and said it wouldn't work. my question to you is if we go forward we need to have a deficit commission which we have in place and i am happy to see that the leader has made appointments and republicans in the senate make appointments to look at long-term entitlements. that is great. what i am interested in is what you think of the idea of a dedicated revenue focused entirely on paying down the national debt going forward as part of a constellation of things. we statute statutory pay go and so forth. specifically, i have proposed a transaction on non financial markets activity. dedicated entirely to the debt. i want to know what you think about that specifically. >> you are right to point out we have an unsustainable fiscal position and we need to bring our commitments more into balance over time. what we asked the commission to do is step back from politics and take a fresh look. everything is on the table. no preconditions. and to s

i would point out citigroup paid the u.s. treasury$20 million and we today are a shareholder of citigroup. >> which is the reason i ask if they're solvent and whether you anticipated additional money will be required from t.a.r.p.? >> i said we don't anticipate any additional money will be required from t.a.r.p. we have no plans in that regard. we are intending to dispose of our investments in citigroup as rapidly as we responsibly can. >> what do you anticipate the exit strategy will be? >> again, as we said, we intend to dispose of our hold holdings in a responsible, careful manner within the next year. >> okay. >> have you thought about completing another round of stress tests under current economic conditions? >> we, again, understand and know that the regulators are carefully monitoring these banks. it is not our role to perform stress tests for the banks. that's done by the regulators in close consultation with those banks. >> but i mean have you thought about the issue? have you made a recommendation? do you think stress tests

>> the treasury has two ministers. ere were matters affecting that, it would probably before that she secretary to be at that meeting. i believe he was present. but he went on the eighth of may. previous meetings you had, patricia hewett, the attorney general. i wonder why the treasury was not attending on an official level there at the meeting? >> malick, we would want to attend. >> thank you. i w -- normally, we would want to attend. >> thank you. >> just to begin with, you told us already this morning, mr. brown, that the cost of potential united kingdom involvement, you told us was $2.5 billion, not to be seen as a constraint whether to act or not. how far was the potential impact on the party finances and particularly concerning the that you could share or something the treasury needed to contain within itself? >> we were setting aside money for this endeavor, so we made an original estimate of the cost would be 2.5 billion by 2006 because are planning to go through them. having revised our estimate, then it was 4

i would point out citigroup paid the u.s. treasury$20 million and we today are a shareholder of citigroup. >> which is the reason i ask if they're solvent and whether you anticipated additional money will be required from t.a.r.p.? >> i said we don't anticipate any additional money will be required from t.a.r.p. we have no plans in that regard. we are intending to dispose of our investments in citigroup as rapidly as we responsibly can. >> what do you anticipate the exit strategy will be? >> again, as we said, we intend to dispose of our hold holdings in a responsible, careful manner within the next year. >> okay. >> have you thought about completing another round of stress tests under current economic conditions? >> we, again, understand and know that the regulators are carefully monitoring these banks. it is not our role to perform stress tests for the banks. that's done by the regulators in close consultation with those banks. >> but i mean have you thought about the issue? have you made a recommendation? do you think stress tests

. >> chairman bernanke, watching the market trends for treasuries, it appeared the two major creditors of japan and china have scaled back their purchases of u.s. treasurys. filling the void in demand have been other foreign governments. i would assume that would be far in banks and hedge funds and u.s.-based financial institutions as well. clearly, there is a market way. the carry trades is in effect by these banks, which essentially amounts to borrowing at next to nothing from central banks and lending it back to the u.s. government at 1% or 2%, depending on how far they go out on the yield curve. have we backed ourselves into a you raise interest rates, that carry trade evaporates as does the demand in the treasury market and our ability to finance the 1.5 -- the $1.5 trillion deficit this year. who is going to lend to us if we do that? if foreign governments are scaling back and financial institutions can no longer make money in this market, where will the demand for treasuries come from? >> this is a very large indeed market. -- and deep market. the dollar tends to strengthen beca

in taking decisions. >> so you were being kept informed by the officials in the treasury? >> yes. we would continue to monitor what was happening within sanctions, so, too, with the foreign office because it was obviously our policy in relation to iraq depended on our knowledge as to whether sanctions were working or not the conclusion that we had reluctantly to draw was that sanctions were not being effective in the way that we had wanted and were inflicting damage on the iraqi people without it the same time causing the greatest of concern to the ruler of iraq. >> as the situation evolved in 2002 and 2003, weren't you and other senior members of the cabinet council took on the developing policy? >> of course, of course. and we had reports, as you will see come regularly to the cabinet about the diplomatic course that was being taken, and of course a lot of the discussions were leading up to the first resolution. one-fourth or one in november and the cabinet was regularly kept in touch by jack straw and the prime minister about what was happening so i cannot see an argumen

only one institution has signed on for the treasury second lien program. o you intend to join the program? >> we are modifying second liens actively as part of the fdic program. we said to the treasury that we are all willing to work with them. we have just seen the details. is print for us to go through that before resigned on. >> it has been out for a while. i hope is positive response, and we will keep track of that. >> it started to testimony by saying citi is a fundamentally different company from the company two years ago. nonetheless, citi continues to pose significant systemic risk. citi is cited as the poster child for too big to fail. it is a combination of commercial bank, investment bank, an investment bank, for which glass-steagall had to be repealed so you could fall your business model. i understand your response that we are dealing with the problem of systemic risk and too big to fail by making citi stronger company. i want to focus on a different part. instead of that, why don't you concentrate on breaking citi into more pieces, so that no

. >> you will be kept informed by the officials in the treasury? s, we would cobt continue to monitor what's happening with sanctions. it was obviously our policy in reaction to iraq. the conclusion that we had reluctantly to draw was that sanction were not being effective in the way that we had wanted and were inflicting damage of the iraqi people and at the same time causing the greatest of concern to the ruler of iraq. >> has the situation evolved 2002, 2003. were you and other senior members on the policy? >> of course. we had reports that you will see regularly in the cabinet about the diplomatic course that was being taken and of course a lot of the discussions, the cabinet was being kept in touch about what was happening. i cannot see an argument that the cabinet was not informed. we were informed fully. they were essentially focused on the diplomacy and the problems as well as the opportunities that came from that diplomatic process. >> were you informed with number so's exchanges with the white house and did you see mr. blair's letters to t

one of the concerns in treasury is lack of leadership. i just want to make sure i understand this right. the president goes out and announces his program in february, march, and they did not hire a chief homeownership preservation officer until november. is that right? >> yes, that's correct. one of our recommendations you point out was to get ahead of that office establish. >> i think one of the things we want to have a responsibility on, have such an important program. you have people bleeding over there. the president stands up before the american people as this is going to happen. you can even hire somebody until november? my understanding was they made a recommendation they need 36 full-time equivalents into the program, and then they modify that and said no, we only need 29. we need less resources, not more resources. but still haven't filled out 29 positions, is that right? >> that's correct. >> you know, i just don't understand it. we are all these complaints about this program. that taxpayers have set aside tens of billions of dol

i would put that in the treasury weakness that we saw today. the dollar strength recently also putting pressure on select areas of the stock market. and new and existing home sales, i don't care what they say, expected or not, clearly a disappointment yesterday. in line yesterday, with the existing home sales, not saying much. we need to have a better number, and those jobs reports next week is going to be key. we talked about this earlier. 200,000 is the expectations for march. people go to 300,000. the street's long on the jobs report. we'll see what happens. i mentioned the strong dollar affecting key parts of the stock market. affecting a lot of the materials names, precious metals stocks. look at the gold stocks today. as we've seen dollars throughout the day. gold stocks are getting hit 3%, 4%, 5%. wig gold names. definitely we've got pluses and minuses in the market here. erin, back to you. >> thank you very much, bob. time for "street signs" pick and play today. we pick three headlines and a trader gives the play. joining us is craig pec

petroleum and the treasury what sort of act as first loss. this is why the fed reputation is suffering because it is allowed itself to be delivered up by the treasury and get into these programs and so i think that the political pressure that's on the fed now we is really understandable but the fed ought to get back to its role as a monetary authority and if it doesn't get back to it we are going to have more people like ron paul writing books called abolish the fed and that's not a good thing for the fed. to talk for a brief moment about systemic risk, the real problem is not who is going to do it but what do we mean by systemic risk? it's easy for everyone to say okay now we are going to be focusing on systemic risk what exactly are we going to do? we know that the nature of most bubbles or after the fact very brilliant about it, but during the process we are not so brilliant and some people who look in 2004 bald shiller evansdale who wrote the foreword to my book he said the housing market was out of control. he showed you all the numbers.

i believe the last report from treasury has 110,000 of mortgages that are in active trial mods. with the extension of treasury through january 31, we are now awaiting results from all institutions, but i think anxiously awaiting your results as well as to how those individuals were treated. i think the important part is these are individuals who had been willing and able to make these reduced payments and are awaiting final determination. we know that there have been problems at servicers. we know that there are problems in the appeal process. so can you give us any information about what we may expect to see in the decisioning with respect to those trial mod sns. >> mr. newman, i completely agree with you that attacking the issue of housing is important for the economy, but particularly for our customers and clients as well. we, as the assistant secretary one, we're number one in active modification right now. right now the ratio of completions is about 18% of that. we think that number is going to go up do 40% maybe pretty soon. that's where we think it's going to go. not every

john harwood thinks it might sit inside the treasury. i think mr. bob corker wants it to sit inside the fed and the liberals and the democratic party want it stand alone. where do you come out on this? >> i come out of it where a lot of americans are coming out on it right now and that is we want consumer protection. what we don't want is another big, bloated, regulatory body that won't get the job done. we seem to have too many regulators and none of whom are really doing the job. so it seems that washington is being tone deaf here. because what people are really concerned about is getting the job done. it's been 18 months after the bailout and we've seen no real financial reform. so there's a lack of confidence and the perception outside the beltway is that there's a lot of in-fighting and bickering and there is no clear discussion of what exactly this is going to do for consumers and then you get people going on national television like elizabeth warren saying that some of the credit card reforms have been thwarted. so people want more accountabil

now, unexpected decline in new home sales weighed on the markets. treasury yields surging after weak demand for the government's $42 billion sale of 5-year notes and the yield on the 10-year rising to the highest level since early january. and oil prices tumbling 2% to close under $81 a barrel. well, lots of news also happening across the pond, and that is where we will find our maria bartiromo who is on assignment in london. maria? >> two major stories rocking the uk today. first britains finance minister alistair darling releasing the much anticipated budget plan today and we have the details. also, the news on the arrests in one of the biggest insider trading cases in london, and we saw arrests at deutsche bank and other places. all of that and more coming up to you from london. >> here is how we finished the day from wall street. the dow ending at 52 points down, and again, economic news not necessarily the best. we had durable goods reports in and poor performance numbers in terms of housing that contributed to the downside that we saw in addition to po

>> well, 3.9 or 2.5 or so in the u.s. treasury is the major inflection point, and yesterday's high in terms of the yield terms stopped on the down-turn line, and even if you push through 4.0 which is the 200-week moving average and if you push through, there are several numbers between 416 and 425 that says you could get a break out there, but a false breakout, and it won't be a clear case. >> if this sounds like mumbo jumbo, the point is that traders really do trade on technicals when you deal with things like commodities and interest rates as well. >> yes. >> and the economic news, as you were pointing out, fractionally better and consumer confidence has not been particularly great recently. >> should be much higher. >> and the recent jobs report, i have been saying for a couple of weeks that the traders seem fairly optimistic that the jobs numbers will show good growth and the street is 200,000. but we have seen some people who are at 300,000. >> that is where the morgan stanley folks are. 300,000, and 100,000 census, and 1 100

paulson becomes secretary of the treasury. asked for permission to negotiate with the congress whom he admires over the objection of many others in the white house. he is negotiating with me, in the next election, the democrats got a majority. he points out in his book that he -- we passed a bill that he said was far from perfect, but was still better than the republican bill in 2005. i apologize to the judgment from new jersey. i thought he was saying it was the democrats that had done this. he is talking about the democrats at the republican leadership. i do remember this, they were outvoted by the democrats and some republicans. in 2005, the records are all here, no amendment either in committee or on the floor and that making the bill tougher on fannie and freddie that received a majority of republican votes past. in other words, the bill that passed committee on the floor -- in no case did a majority of republicans get overwritten because the minority of republicans were with the democrats. that is history, and we have to

assistance, and terminated the asset guarantee arrangement. treasury planned to sell its remaining 27% stake in citigroup in december, although it was delayed because citigroup share price in december was well below the price that treasury had paid and it would mean a certain loss for the united states government. the shear magnitude of citigroup's operations and the company's history of receiving extraordinary government support has led this panel to an inescapable conclusion. ci scitigroup along with a handful of other institutions enjoys implicit government guarantee. thus that the united states gooft will bear any burden and pay any price to ensure citicorp does not fail. standard and poor's issued citigroup a rating of a, three grades higher than it would have rated the company, "to reflect the likelihood extraordinary government support were needed, it would be forth coming." in other words, citi is too big to fail and it is measurably affecting its credit rating. were it not for the market's view that citigroup enjoyed this implicit government g

>> the treasury restored what it had last year, an account at the fed.pay interest on that account so the fed is not losing any money. that gives us more flexibility as we manage policy going forward. >> my last question -- how does the fed acquire the mortgage- backed securities? does it require them directly from auctions, or do they require them as collateral from banks that are borrowing against them? >> we buy them in the open market. >> thank you. >> the gentleman from kansas city is recognized. >> thank you for having me here. my office is three blocks from the fed. i know him very well. we flew in together on monday. i am concerned about reasonable issues. first, chairman volcker, here in this post-economic crisis, how should the fed and regional banks relate? right now it appears we have two seats of power -- the one you lead, mr. bernanke, and new york. i am concerned what happens to the regional barracks. are we going to a emasculate of further? how should we create a relationship between the federal board and regional banks? >> taking off of

the clerk: h.r. 4573 a bill to direct the secretary of the treasury to instruct the united states executive directors at the international monetary fund, the world bank, the inter-american development bank and other multilateral development institutions to use the voice vote and influence of the united states to cancel immediately and completely haiti's debts to such institutions and for other hurps. the speaker pro tempore: pursuant to the rule, the gentleman from new york, mr. meeks, and the gentleman from california, mr. miller, each will control 20 minutes. the chair recognizes the gentleman from new york. mr. mix: madam speaker, i ask unanimous consent -- mr. meeks: madam speaker, i ask that all members have five legislative days to revise and extend their remarks on this legislation and insert extraneous material thereon. the speaker pro tempore: without objection. mr. meeks: i yield myself five minutes. the speaker pro tempore: the gentleman is recognized for five minutes. mr. meeks: -- the speaker pro tempore: the gentleman will suspend, please. if we could get some order. if -- wil

now the reagan treasury department and the bush treasury department 20 years apart. they were fatally deficient and wouldn't work. they looked at the flat tax, said it wouldn't work. so my question to you is as we go forward, we need to have a deficit commission which we have in place. i'm happy to see they're going to make appointments. can you look at long term entitlements. and that's great. what i'm interested to know is what you think about an idea of a dedicated revenue focused entirely on paying down the national debt going forward as part of a constellation of things. we pass statutory pay-go and so on. but revenue source dedicated to debt what you think about that as a generality. and then specifically, i have proposed a transaction fee on nonstop, nonfinancial markets activity, penny on a dollar, dedicated entirely to the debt. i'd like to know what you think about that specifically. >> congressman, you're right to point out that we have an unsustainable fiscal pgs and we'll have to bring our commitments more into balance over time. now what we've asked this

as an incentive, the treasury will pay lenders 10 to 20 cents for every dollar the mortgage is reduced. the government is also encouraging homeowners who are current on their loans and have good credit to refinance with the federal housing administration. lenders would receive incentive payments if they agree to reduce the outstanding mortgage by at least 10%. the $14 billion to fund the f-h- a program will come from the troubled asset relief program known as "tarp." f.h.a. commissioner david stevens makes it clear his program is not for everyone. to qualify for help from the f.h.a. homeowners must be current on their mortgages and pass a credit check. >> they wouldn't do this if they didn't want to keep their home at all costs. and that's what this program is designed for. it's responsible homeowners who could afford and want to keep their mortgage and their home if the principle balance could be lowered to make it affordable for them. >> reporter: the administration is also asking lenders to lower mortgage payments for homeowners who lose their jobs. the help will last up to six mont

the equity markets went through indigestion where they could not handle the supply coming from the treasury, and the markets were worried about not just near-term supply, but also longer-term sovereign concerns, because of long-term deficits. now, yields were also rising, as you mentioned for somewhat positive reasons on the economic front that we do continue to get better data over time, and the markets are often reacting ahead of payrolls and that is one thing driving interest rates higher, setting up for the really first significant turn in payrolls that we have seen so far, and more importantly, we do think that this is a sustainable trend. >> you do? well, that is my question, because we are bumping up against 4% in some parts of the curve, and do we go significantly higher than that do you think? >> well, we do believe that the interest rates will rise gradually throughout the year, and 4% is a significant level to markets in part, because of investors having been waiting for something to do in the interest rate market. so far, we have been in pretty tight ranges. this week, one of th

we have the deputy treasury secretary with us. neil will join us on why we must heed the calls for financial reform now. and stop trying to side-step it. that, plus a whole lot more. >>> much more live from the wireless connection conference in las vegas. reading palm's future, is a time for it to fold or be sold. >>> also ahead, wireless, is it the savior of the third world. the founder of trilogy partners joins us with the best areas of growth. >>> and the wi-fi scramble. still looking for a decent correction? ruckus wireless is shaking things up. we talk to the ceo. >>> look at that live picture of ctia, the wireless conference. we're sitting on the set. this is a huge annual wireless conference we're covering in the second hour of "power lunch." i'm michelle caruso-cabrera. we're on the verge of a revolution in wireless. the distinction between your computer and your phone, it is going away as we speak. and they are all trying to capitalize on that here. we've got a great lineup of guests to talk about that. and whether or not

paulson becomes secretary of the treasury. ked for permission to negotiate with the congress whom he admires over the objection of many others in the white house. he is negotiating with me, in the next election, the democrats got a majority. he points out in his book that he -- we passed a bill that he said was far from perfect, but was still better than the republican bill in 2005. i apologize to the judgment from new jersey. i thought he was saying it was the democrats that had done this. he is talking about the democrats at the republican leadership. i do remember this, they were outvoted by the democrats and some republicans. in 2005, the records are all here, no amendment either in committee or on theloor and that making the bill tougher on fannie and freddie that received a majority of republican votes past. in other words, the bill that passed committee on the floor -- in no case did a majority of republicans get overwritten because the minority of republicans were with the democrats. that is history, and we have to go f

according to the u.s. treasury department, haiti owes $828 million to the multilateral development institutions, $477 million to the international development. $39 million to the world group bank and $58 million to the international fund for agricultural development. haiti owes -- haiti owes -- i introduced this bill to free haiti from the burden of these debts. it instructs the directors at the multilateral institutions to use the voice, vote and influence of the united states to cancel the debt owed by haiti to these institutions until such time as the debts are canceled on the provision of emergency, humanitarian and other help to haiti in the form of grants so they do not accumulate further debt. this bill directs the secretary of the treasury and secretary of state to use all diplomatic influence to secure all multilateral and other debt owed by haiti this will allow the government of haiti to focus its meager resources on the essentials. the people of haiti are poor but spiritually resilient. i know they will

there is a picket line outside the treasury. will the prime minister confirm that on this occasion he would my people to cross it and go ito to work. >> let me first congratulate my right honourable about the good news. and let me secondly thank him for getting near to asking a question about the economy. of course everyone is going to work here. we will continue to work for a labor government. >> i am grateful to the prime minister for his congratulations. most people focusing on how you find the time for these things. i am very grateful nonetheless. very interesting from the prime minister. last week he would not give any support to british airwaves. the first quarter is concerned for them to go to work. one of the things in the spirit of clearing up a few issues to one of the things the treasury are working on concerns the prime minister's disastrous decision to sell gold at rock-bottom prices. this cost the country 6 billion pounds. the treasury has now lost its four year battle against the commissioner to keep the informatio

we all know that the treasury has been looking at that. i think the question -- the budget will reveal whether we'll have one party that is willing to rule it out. but if we get an increase in vat, then it will elevate inflation throughout the course of this year. >> guilt is getting a tick higher after that cpi. you talked about some concern on treasuries down the road. have you got a short-term concern over gilt? >> inflation as we know may be the only way out of our massive debt problem. i am a great supporter of inflating away some of that gigantic nominal debt that is effecting our acts at the moment. and if we believe that is the way out, we don't want to hold a large quantity of gilts. i think tomorrow will be very interesting to see how much the treasury plans to issue an inflation linked securities versus conventional securities. because at bigger amounts in inflation linked securities will make it understand that the government still cares about inflation and if they plan, instead, to let inflation go, then they will not issue man

using the nominal treasury rates, by the way, the treasury really sold off today. and comparing that to the real treasury that so-called tips inflation tree, it shows that the expected inflation rate is going up. what is your take? >> you know, he and i have a fundamental disagreement on what causes inflation. when i look at output employment and production, i think of inflation as being too much money chases too few goods. if we have a recession, a slow-down, a depression, that causes a recession, not takes it away. if you have two goods being produced and lots of money, the prices are going to be a lot higher. >> because we have a competitive economy. if people start demanding more goods, this economy is well able to supply them. >> not true. >> that's when you get inflation. >> no, no, that's not correct. that's when real returns go up. when you have inflation is like the 1970s. when you have very, very high inflation, high interest rates, when we took office at the prime interest rate was 21.5%, and grankly, that wad very competitive, plenty of supply. the probl

as we begin this year's deliberations, the treasury secretary has joined us. future we will hear from the secretary of housing and urban development. after the completion of these initial proceedings by the full committee, the capital markets subcommittee will renew its examination of these matters by exploring more detailed and technical questions related to government-sponsored enterprises and our nation's housing finance system. in sum, i appreciate your efforts in convening this hearing as we received testimony regarding what functions a new housing finance system should be able to perform. we have to work to do no harm to those parts of the system that have worked well and we need to protect taxpayers from future losses. >> i will read from the republican list. the gentleman is recognized for one minute. >> thank you for holding this important and long overdue hearing. it is unacceptable that more than 18 months after the gsc's replacement does -- that the treasury department still does not have a plan for fannie and freddie. outperform, the american econo

so on the one hand i see treasury continues to monitor the situation. i guess my greater concern is, is there in fact a defacto plan perhaps not by design but perhaps by accident. i note that the chairman of our committee in january stated that fannie may and freddie mac are now, quote, basically public policy instrumentsíúu of the government. charles halderman said, quote, we are making decisions on loan modifications without being guided=ñ solely by profittabili. daniel mu fsm dd said, the government is running fanny and freddie as an instrument of national economic policy not as a business. it appears to many of us, and i'll give you an opportunity to disabuse me of the notion or accept the premise that what we now have are the g.s.e.'s an instrument at of the administration to fund taxpayer funds into frankly a failed foreclosure plitgation plan with nothing else in sight. i'll yield to you, mr. secretary. >> our strategy is to fix this damaged housing finance market, to make sure this country recovers from the trauma caused by the recession. we're

>> the treasury restored what it had last year, an account at the fed. we pay interest on that account so the fed is not losing any money. that gives us more flexibility as we manage policy going forward. >> my last question -- how does the fed acquire the mortgage- backed securities? does it require them directly from auctions, or do they require them as collateral from banks that are borrowing against them? >> we buy them in the open market. >> thank you. >> the gentleman from kansas city is recognized. >> thank you for having me here. my office is three blocks from the fed. i know him very well. we flew in together on monday. i am concerned about reasonable issues. first, chairman volcker, here in this post-economic crisis, how should the fed and regional banks relate? right now it appears we have two seats of power -- the one you lead, mr. bernanke, and new york. i am concerned what happens to the regional barracks. are we going to a emasculate of further? how should we create a relationship between the federal board and regional banks? >> taking off

david, what's happening in the treasury market right now, does this concern you? is this a temporary blip? >> we're hoping it's a temporary blip. i expect pushing the ten-year by 4.25% in the end. this action in the last few days is faster and steeper than i'm comfortable with. but at least so far, i think it's just a little bit of indigestion with all the supplies coming into the market. i'm not so sure it's the start of a trend. but it does make me nervous and it does bear watching. >> dan, what do you think? i guess you're still talking about incredibly low rates historically. but the move over the last few days has been more dramatic than people had been expecting. is this something to get worried about? if not, what should we watch? >> hopefully it doesn't become a trend. hopefully it is a supply issue. right now, there's still a lot of fear regarding debt. we see it in europe and we see it here, as well. hopefully it doesn't become a trend. it becomes devastating to the economy if it does. >> is it easy to see japan tra drnlly doesn't come up and by as they'r

we've had a serving secretary talk about a serious dispute between the treasury and the m.o.d. we've had the former commander of the pairs in afghanistan say he was and i quote staggered by the lack of any sense of responsibility from the prime minister. why does the prime minister think that all these people, dedicated to the defense of this country, are wrong what only he is right? >> mr. speaker, i put the facts before the inquiry on friday. and i said to the inquiry very clearly, about first love, the expenditure of the ministry of defense which has been rising in real terms under this government. and i sat in addition to that expenditure, 8 billion pounds had been spent in iraq and that we're spending 9 billion pounds in afghanistan. and i have to say to him that the chief of the defense staff has said on record that we are the best equipped force that we have ever been. at and that is a personable to on the ground and in his position has got to satisfy himself that the forces have the equipment they need. i have also to tell him, i've got to take no lectures on integrity.

i have not heard the treasury say it is overfunding itself. where did it say it will reduce the size of these auctions? >> in the refunding statement last time they signaled, they suggested that perhaps that the next move was going to begin looking at reducing the issue and i think that's something that the treasury is considering and that's something we heard matt rutherford talking about and i think as we get into the funding you may see more discussion. they'll be asking individuals, primary dealers what are your expectations for the deficit and how it will be funded. >> if i could amend what larry said. no hard and fast correlation between deficits and interest rates. i will say there is a correlation between deficit expectations, larry. what i have heard from bond traders a lot -- >> i don't think it has been proven. >> i don't think it has been proven. the health care thing kind of spooked their sense of trajectory of the deficit. >> no doubt about that. >> i agree with that. and i think -- >> they don't need to solve the problem, they ne

>> particularly the gse that has a line of credit with the treasury, built in to borrow from the fedr state and local -- >> i personally said, as i said in my testimony, we need to end a system in which you have this awkward combination of private shareholders with a broad sense of explicit and implicit support. i think that system was a terrible mistake. those mistakes were very consequential. and when as we work together to create a new system to replace our current one, we can at least agree, we should not re-create that fatal mix of public and private shareholders in the same institution. >> but i think as long as you have a government entity competing with the private market you subsidize them anyway. it is unfair competition. i think it crowds out the private market. i think we have seen the result of that. >> i think, again, this is -- at the heart of this debate will be to think about what is the appropriate rule for the government in providing some form of guarantees to assure more stable flow of housing finance, and what role should the private markets face? that's the fund

and today barofsky told the committee that treasury officials administered the plan in such a way that it led many people to apply for relief who don't earn enough money to qualify. >> we've found it to be essentially counterproductive-- it's led to a huge backlog of trial modifications and more importantly diverted scarce resources that could otherwise be devoted to permanently converting modifications and perhaps worst of all, it may have actually harmed the people this program was intended to help, borrowers, who are put into hopeless modifications with no chance to succeed. >> reporter: the government's acting comptroller general gene dodaro told the committee that treasury's efforts may improve if given more time. but that did not pass muster with the committee's ranking republican, darrell issa of california. >> if we continue doing what we've been doing that has failed, then only insanity explains why we'd continue doing what we know doesn't work. >> well, i think in terms of making sure that the program has a fair opportunity, it needed to be set up to have some stability, to b

i think the treasury is close deciding whether they want to go forward with this program. >> reporter: say your home is worth 100,000. under the plan, bank of america will forgive temporarily up to 30% or in this case, $30,000, lowering your monthly payment and hopefully bringing the equity in your home closer to its market value. there are conditions. your loan balance must be at least 20% more than your home's value. your payments must be on time for five years, and in exchange for paying on time, bank of america will make 1/5 of that temporary 30% reduction permanent each year. >> it's a big deal because for three years the banks have been resisting any kind of principal writedown. >> reporter: resisting it because it's expensive and because many like this california home owner say it spends the wrong message. >> why reward people for bad habits that don't try? >> reporter: while bank of america has more than a million delinquent loans this program will only help about 45,000 borrowers. if other banks and the government follow, it could finally stabilize home prices, which might pu

other democrats are opposed; they want it to be an independent agency or based at the treasury. i asked dallas fed bank president richard fisher about that: can the fed really be a watchdog for consumer interests? >> i think we can always do a better job at anything we dochl we're working hard to do a better job on this front we i think we're doing a better job, we're trying to do well. it will be up to the congress to decide where they vest that particular aspect of bank regulation. >> susie: meanwhile, barney frank, head of the house financial services committee, calls the proposal to put the consumer watchdog at the fed a "joke," saying the house will not accept it. >> tom: toyota's loss was its rivals' gain when it comes to last month's auto sales. general motors reported a 12% sales increase. but with a 43% surge, ford outsold g.m. for the first time in decades. there was some good news for chrysler, too. sales inched up by 0.5%-- not much, but that's the automaker's first increase since december, 2007. at toyota, sales fell 9% amid its massive recall and sales suspension of

i was a career service member in the treasury department. i left in 2001. at that point the cbo projected, future surpluses of $5 trillion. eight years later, those surpluses turned into $8 trillion in projected future deficits. i would be happy to compare the basic records of what we achieved in that period of time in the clinton -- on fiscal responsibility with the record of the succeeding eight years and i'll stand not to make -- it's a fair thing. i think the important thing to recognize is over that period of time when we demonstrate the as a country that we were able to produce surpluses we saw a record of strong private investment growth, strong productivity growth. >> because of tax cuts. >> no. >> no. >> in the -- >> bush administration. >> no. i'm comparing the growth record of the previous eight years. the growth record of the eight years under the bush administration was -- did not compare faborably. it was worse on growth, worse on any basic measure of basic returns. and, again, worse on the thing you care about a lot which is on basic test of f