Transcripts For CSPAN C-SPAN Weekend 20090711

giving us similar tools to help us unwinding. there's a virt u of the model we have this is worded in a way that does not require the process. given the fact that based on current actions that brings to a limit. >> a credit system strong enough to withstand the institution. how the counter parties core been >> a broad range of that, i'd appreciate it. gentleman from georgia, mr. marshal. >> thank you, mr. chairman. i'm directly in front of you, hipped the beautiful blond. i suppose you could have said we are right behind the money supply. it was foolish for anybody investing now to think it was likely to do+)÷ that. we will take the action necessary. i thought tarp was an ill advised move. i thought it was dretful we had to do this and a real failure by leadership. i thoult it was something we needed to do. i thought it was shocked if we didn't do something in the future but also shocked if we don't take the kind of action necessary in the future. you have in your written testimony, the reference that he we are requiring. >> propose to require. >> we also will require you refer to working with the international requirements this matching by similar regimes in other koirpts. we talked with other koirpts about this very question. regulatory arbitration country to country. it's been a challenge for us. a fundamental regulatory skeem. the minimum standards and the investors that will not be permitted in any way directly or indirectly. the substance in our form to be in our markets elsewhere playing in our markets. it seechls unrealistic. if there's been given thought, could you share that? >> there is an elaborate framework now in 0place. i think if we get the balance wrong and do it poorly, we'll be at that rissic. we'll be careful to do it in a way that reinforces the assets of our koirpt. this crisis has been so seering that i think there's going to be substantial interest in raising theories there too. it will be our intention to apply the strictest possible sanction. we should say that any country that allows us to be a host. i believe we'll have strict instructions in there. natural gas and public ultilities sometimes put up physical assets as class ral. i understand speculators drive up costs. my question is, if we require these public ultilities to go through exchange and perhaps dik upting their cash flow with a fee. is there a way to carve out these entities in >> it's going to be an important issue. i believe the experience with central clearing, and the sxirps with the minus gracious of der rif tiffs has reduced costs to users. that's encouraging. we are still going to preserve capacity to engage in on a buy lateral basis customize the basis. it seems as though publicne ultilities would not be customized. >> i received a lot of letters. i suspect many of you have from ultilities saying we want to preserve our capacity >> i don't think we are in a different place. >> i to follow up. jo your definition of something that would be standardize is high volume. i was gathering from that that thooz contracts would be considered standardized. >> they still may go into a customized category. >> the question is, are the terms i think that's the way to think about this definition. we are going to do our best to make proposals to you and get the balance in our place. >> i'll be happy to get back to you on that particular question. thank you very much. i yield back. thank you. there's been a lot of comment about these customized versus standardized. people need to understand these banks make a lot more money on customized in terms of standardized. >> i think you are right. as you go through this process, you want to you will hear a really interesting diversity of opinion on this. >> let me recall to me my own distinction. we are talking about the end user. gentleman from kansas. >> thank you. many merps probably never heard of this before the melt down. >> the firm that's are end users of derivatives. >> yes, i think you could create a less stable system. some claim that the administration plans that companies would have to post for a clearing house? >> that's a hard thing to do well. it's about the balance. it's the beb fit of the that you push a bunch of risk off shore. i don't think you look at the last couple years of history and say we error on the side of having to be too conservative. >> thank you, mr. secretary. i yield back. >> the gentle woman from illinois. >> thank you. the administration's proposal strips all the consumer protection functions from all the banking regulators and puts them in a separate agency. can you give me a yes or no answer with that? no. we are not proposing or making government bigger in this case. we are taking authority that gifts in a bunch of different places. we are moving that to a central place with more account ability. what's the function of the banking we want bank regulators to be princeablely responsibly for the soundness. we think we'll have consumer protection if we have better separate account ability for those functions. we are open with the consumer protection. >> there's a lot of dupe cakes effort. our system is characterized by a mix up it is not a sis stem we designed beginning today. we will have to get less overlap. how do you do that if you separate those. they have not been done particularly well. we argue that separating is more simple and clearer. i have concerns about the recently passed i like to know what is the administration's position and the position on new tax. i know there was a caveat at the 3:00 a.m. 300 >> could you inspire that in writing? >> i appreciate that. >> it's a complicated bill. i want to do it well. ok. then, one quick question. i'm still worried that we'll incenti incentivize much of the market. how can we really forestall that? >> if you look carefully, what the europeans are propose ago now, there is much more converge kweps of our approach. we want to be careful of that risk. >> thank you. >> do we know a dollar figure on what these credit default swaps are worth. >> i'd be happy to respond on the number. the overall estimate and the magnitude are in the $600 trillion range. the market value are more in the $20 trillion range. that substantiallyover states that. these are enormously large markets. they assume interest change risk, energy risk, the way this happened in credit derivatives. decades ago, people figured out a risk. cost of a change in interest rates >> we were aware of the institution that's wrote huge products. that helped bring us to the edge of we have to make sure to have a stronger framework of adaptability in the future. that's what we are attempting to do. >> what would be the congresses gwenss if these were called in, cashed in to make due on the cash swaps. the economy, like you recall, we are living still with a very challenging seft economic risks in the future. if we are successfuljv;, the ultimate risk to the taxpayer would be lower. >> i yield back. >> thank you charm. thank you mr. secretary for being here and answering these questions. >> with your proposal, i wanted to seek some collar if i cakes. was your attempt to register with the s. e.c. the hedge fund instead of the c.f. t. c. and if so, why. talking about those statute that's need to be brought in line. wanted to see where stha harm miezi miezing . we have these two different statutes and enforcement cultures. they are making some progress, they have a long way to go. we will spend some time working it through. we are not far enough to work out the ee tails. >> the >> from massachusetts, mr. lynch. i want to go back to the system that the president's plan envisions where you have a standard derivative. the standard ones being linear in many cases. and you have custom derivatives trading with transparency. there's a big pay day for the!v bank an unregular lalted system, the markets favor that system. the ab you are putting these custom derivatives off the exchange where they will be a miss pricing. folks can come in and take a bet where they have no interest at all. those are all moral hazards. >> we are not just the participants in these markets but overall the products. we are giving the authority not now had to. we are trying to make sure those margins are higher. jo you want to have standardized parts, traded on exchanges or on open ended trades. the customized u meek special health that the ultilities to provide energy needed will have to be late. you are suggesting that we force all of that stuff on to exchanges the companies by and large trying to make sure we protect that capacity. we have proposed a substantially better balance than we have today. >> thank you. mr. secretary, i'm going to paraphrase. i don't disagree with that assessment. i would sigh the question is wlrpt the lhadministration's t public debt has increased by almost $$1 trillion. given that back drop, i'm having to look at this new proat the corporation 3 m testified, projected that they would be looking at $100 million per year for a moneyed torry clearing environment. i believe in questions be the gentleman in kansas. i believe you said something along the lines that it is difficult to ultimately gauge the cost burden for those who have to go to a mandatory clearing. >> creating a fewer jobs. in this economy, i'm hery until i have convincing evidence. the ultimate impact on the job environment. when do we expect that analysis. >> as you know, you and i are going to refer fundamentally. the appropriate response of a koirpt facing a place we inharted. how to get the balance right. jo we are trying to make it better and more possible for our koinlter to have both a stable system. we are basically committed to that and trying to make sure the innovation and less risk of damage they are probably very great. tru the critics you said were wanting to maintain the status quo. many believe the greatest cause we have for the economic crisis with fanny and freddie. i'm glad you raised that. it's absolutely true. the framework over those entities that came late in the process jo thank you, gentleman? >> i want to say thank you for all your hard work. you have been pushing for clearing long before. a couple questions, i missed some of the testimony you may have answer some of the transaction this might be cleared >> the clearing house wouldn't want to take on that product and think they could manage that risk. >> i want to encourage you with that product. that we not require beyond exchange in the volume. >> for the clearing houses, absolutely. they concentrate risk. we need to make sure they add kuwait the margin. i want to be confident. we have to race to the bottom where people shop for the cheapest clearing house. >> last question, health accounting. i hear that health accounting requires them to be customized andôñ genz what we are trying to do. how can we address that? where people who aren't truly hedging? >> you are right. part of the concern is that they would not be able to meet those requirements. the more fundamental concerns is that not all risks can be captured. >> i want you guys as you are working on this and as you keep in mind, try to drive it into the market as generally a problem where a lot of the accounting problems run up against. i think you are right to point out the importance. >> it's an important part of getting it all right. if we get into the accounting rules where we are marking one side of the balance sheet and not the other. those rules have an impact on what they decide to do over here. >> thank you, gentlemen. from missouri. >> thank you. just your final comment was about working with our country parts. i know we addressed it several times here. >> could you address the size of the involvement of our foreign counterparts if you had any negotiations with those folks at this point. where you see the problems or the positives of where you need to go with this. starting in 2004-2005, new york brought together the supervisors for all these markets around one table and compelled them to agree to a set of measurable benchmarks. that's one way to do it. getting them to v)wagree. the u.s. has been significant. we are not effective enough. we are going to be focussed in making sure to bring our table together. i believe that it varies across the products. it is roughly on average. don't hold me to that. it's an important ingrooet greedent. jo there is one concern we have. these are global markets and we want to have a global framework. we want to try to come up with a risk in these areas. that will be effect jif in reducing risk. that's one example i am concerned we want to come up with the approach and end up with the thing that works and is reducing the overall risk. >> thank you >> i'm wondering if members each could have the time. >> may we shave it a little bit. we'll go to 1.5 or 2:00 minute questions. >> thank you very much. >> good morning, mr. secretary. >> most of what you have discussed justifying the derivatives or the purposes is that the underlying asset from which the derivative is derived. >> there's no risk to mitigate. it sdpt appear to have anything to do with capitol allocation that seems thin given how huge the derivatives market is. did you give any consideration as to whether or not the product should be allowed at all. >> let's get the question. the gentleman from texas. a quick question? yes, sir. >> please ask your question. we have 8, 246 deposits in our country. >> mr. chairman, mr. secretary, thank you for being here today. there have been concerns about mandating clearing houses to force on to the clearing house. how would you a dr.s those concerns? >> can i go to reverse order in >> we need to make sure there are safe guards adequate to concentrate for that dramatic consequence of risk. you'll have a chance to list tone the businesses across the country. is there economic value in my capacity. the existence of the underlying asset is a complicated asset. >> the gentleman from new york, this is an issue near and deer to my part. >> hopefully you are familiar with this task force and the fact that you have really two groups here being treated differently. the hourly workers got 100% of coverage while the salry workers stand to loose up tot 770% of their pension. the fact that we now own 60% of general motors, we have been trying to reach out on the task force and trying to get answers for the retireries frustrated. i'd like your thoughts on what we can do about it. the trade offs in the judgement in part of this justice. why the alternatives would be happy to do that. >> i appreciate having the opportunity. >> mr. chairman, i'd like to add a record r letter to the record. >> without objection, with that, we'll bring this to a close. i want to thank chairman frank and all members of both committees for good dialogue. we look forward to working with the two committees together. thank you, mr. secretary. the meeting is adjourned. >> in a few moments, announcing that row land burris will not run for reelection in 2010. and coming up next, live your calls and comments on washington journal. >> coming up on book tv, the late robert macnamera. and an interview with a wall street journalist. also, books on the economy. the international financial collapse waspre dibl up. a talk of the current economic crisis and what to do about it. there's more on book tv.org. >> how is c-span funded? >> the public, i think. >> private contributions. >> 30 years ago, america's cable companies created c-span. no government mandate, no government >> now senator burris made the remarks in chicago that he would not be running for reelection next year. it is about 10 minutes [applause] >> thank you all so much. thank you. thank you. i appreciate all that energy. thank you for joining me here today. i'm here to talk about so o'some important issues today. the wonderful people of illinois and how important the united states snat is to the future of our country. i was named to the snat back in december. i stated that i would serve a two-year term. i still feel that way. i have served the people of this state for 30 years public service working and advocating and fighting for the good constituents and their needs sda in and day out. i tried to do that everyday of my career. i'm honored to be a member of the united states snat in such a critical time in our united states history. the president has bold ideas of healthcare, economy, job, rules and the environment. all those. i'll continue to look forward to working with him. >> the united states snat will be at the center of those issues. i've been a member of that twoedy now for several months. i've seen firsthand what my colleagues have dedicated as all americans for democrats and republicans alike. it is my hope we can come together and work together many a by partisan manner to address this. the last point of my remarks is my future plan. ladies and gentlemen, life is about choices. make no mistake. i love discerning the people of illinois. >> we love you. >> i'm the only african-american servant in the senate. the reality today to perform the job takes a retick. political rights have become far too expensive in our country. i'm making this decision. i was called to choose between raising funds or addressing issues for my state. i believe the state of illinois should always come first. so today, i have returned to the place where my political journey began in 1978. and i announce, my friends that i will not run notice 2010 election. i will not run. last january, the same month i was seated. a new president took office setting our country on a new course. the democratic lead congress leads an exciting time to be in public service. more exciting and more fulfilling with hope and possibility in a time that i can remember. i say to the young people, this is the world in which you will grow up and you will shape and change. i made a decision as a young man. to get involved in public life. never imagine that you have a great mondayor to serve the stain state and country. now, it's your turn. you will decide how you will serve your community. all of you have potential to arive at the issues and ken you are leaders. future leaders and maybe even future presidents. living the public life is not easy. it's a noble and important calling. for the reminder -- the remainder of any term, i am committed to working hard for the people of illinois to fight for healthcare, and green jobs frnlt as i have done in the past, keep fighting for the state of illinois. we have been successful. i want to thank each and every one of you for making it possible. all the progress that we made together for the partnership and leet r ship thank you3z for the help you have given me in my political career. i thank you, my family and friends. always been my core of suppose porlt -- support. i am proud of everything we have accomplished together. and most of all, people of illinois, whom i have had the honor of serving as public service and private service over the poft 30 years. thank yous all so much. god bless you. [applause] >> thank you. thank you. >> are you taking questions? >> coming up on c-span, your calls and comments live on "washington journal." after that the senate cabinet committee hears more on clean energy. >> this week, three former law clerks talk about what it was like to work for judge sonia sotomayor. that's today on c-span. >> live coverage of the confirmation hearing for judge sonia sotomayor will be on c-span. coming this fall, tour the home of the highest court, america's supreme court on c-span. >> in an hour, we'll talk about a new provision to require the contractors and subcontractors to find the legal status. the government a