fannie may and freddie mac played a leading roll in adding to the fire that burned down our financial system and our economy as a whole. they really abused the governmental advantage to the taxpayer and ran up a bill to the taxpayer. when the housing and economic recovery plan scored the bill as $25 billion and said there was less than a 50% chance that a bailout authority would ever be used and less than a 5% chance that the cost would run over $500 billion. he said the most inflamenttri arithmetic i've ever heard. the higher cost estimates estimated, these numbers thrown out are inaccurate and misleading. the c.b.o. recently updated their scores and the costs have increased by over 1,500%. so we begin this month with a more formal debate with providing the government with a more explicit authority i think it is important any discussion begins and ends with g.s.e.'s and any reform that does not include g.s.e.'s are not true reform. fanny and freddie are a large part of the problem and reforming them should be a lart part of the solution. i'm worried that a so-called stemic -- systemi

managi troubled subprime mortgages in the freddie mac and fannie mae portfolios. the people of the united states have through the fed have propped up fanny and freddie to the tune of $200 billion. for the record, can you provide the contract that black rock has with the fed, particularly the one regarding the management of fannie mae and freddie mac's port fort yoes? >> i don't know if i can. we don't run black rock. we have two or three seats on the board, but don't have a ceo or chairman and he doesn't report to anyone in bank of america -- >> you own 49.9%. isn't that a strange relationship. >> we don't own 51%. that would be the difference. >> do you know how much black rock will earn from that contract with the federal reserve to manage fannie and

to manage the toxic assets of freddie mac and fannie mae. in their collateralized mortgage obligations. it's a mess that he helped to create but now we have hired the same man to clean it up? one question i have to ask is, how can we be sure he isn't self-dealing or covering up what he did in the last quarter century? some might say that relationship is a bit incestuous. the administration's financial regulatory reform proposal includes some consideration for dealing with too big to fail institutions, but rather create an architecture that keeps risk in hand what they are doing is they are allowing institutions like black rock to become too big to fail. in fact black rock's assets on our larger with the purchase of lashingly's than the federal reserve system itself. black rock although not bank is getting too big to fail perhaps? is black rock favoritism an example of how we should be rebuilding our financial system? paul krugman thinks not. i wish to place his editorial in the record tonight in which he states in short, mr. obama has a clea

let's not get sidetracked by thinking that fannie mae and freddie mac freddie roach problem here. what kind of systematic risk and institutions face that systematic risk, and make sure it doesn't happen again. but the kind of checks and balances in place that do not allow people to rip off the american people. that is why we are going to have a consumer protection agency within this reform package, so that the people can know what kind of products they are getting. i am on the financial-services committee. i do not understand my credit card agreement. sometimes it is pretty hairy without a lawyer to even get a lawyer or a mortgage, to get a loan, and understand it every document. we want the american people to know what they're buying. host: charlestown, west virginia, rick, independent line. caller: thank you for taking my call. i wanted to know your position on granting more power to the federal reserve. i have a personal story. i submitted a request to the federal reserve to get the original shareholders. as i suspected, it is a private entity. the shareholders understood the a

caller: i wanted to make a comment to michael and get feedback relative to fannie mae and freddie mac. i have been in the mortgage industry for 20 years. and the last year, both fannie mae and freddie mac implemented a policy whereby they charge excessive fees, very large fees, from one points all the way to three points on the long side. based directly and solely on credit scores. it has created a situation where people will really pay their bills and do the things that they are supposed to on time, will have minor difficulty in their credit -- say they missed a $35 annual premium on the credit card, the credit scored drop 100 points but just on the basis of something as small as that. fannie mae and freddie mac charged them thousands of dollars because credit scores, which they did not do only eight or nine short months ago. guest: well, the fannie and freddie situation is something -- i think it has sort of fallen by the wayside since the crisis began last september. that is one of the first tipping points we saw, is when the government had to take over fannie and freddie. for last

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

i don't know how much we are paying them. >> will black rock be handling freddie mac paper? >> they will be managing gse guaranteed papers that would include freddie, fannie and johnny. >> i would urge your staff to go back and look at black rock and operations at first boston before he founded black rock in relation to what they transacted with freddie mac and when they did that. >> the gentleman's time is expired. >> thank you. that we thank the chairman for his time and at the outset of this hearing, bayh said that it's time to shine some light on the events surrounding bank of america's acquisition of merrill lynch. at this point i would say we have got a peek, not much, but we don't have full sunshine yet. i would make three observations before we close. number one. there are significant inconsistencies between what we have been told today, what we were told to weeks ago by ken lewis, and what the fed's internal e-mails seem to say. it is still unclear whether bankamerica will forced by the federal government to go through with the merrill deal or whether the ken lewis'

the problem is that we privatized fannie mae and freddie mac back in 1968. and as private existence, they've looked at all the money the banks were going and said we ought to imitate that. and as they started imitating, they actually took off some of the responsibility from the banks, and they imitated what they did, and that had disasterous consequences. but no one ever told a bank to lend to somebody beyond their ability. no one told a bank to be bad in their accounting practices, so bad that the banks themselves didn't know what their balance sheet was and that's why the banks -- they didn't know their own balance sheets, so they didn't know the balance sheets of any other banks and weren't willing to threatened to anybody. no one told them to engage in those kinds of irresponsible lending. even alan greenspan pointed out that he made a mistake. he thought the banks were sufficiently responsible that they would have enough self interest that they would not engage in successive risk taking. but look at the banks. it's happened over and over again. we had t

i don't know how much we are paying them. >> will black rock be handling freddie mac paper? >> um, they'll be managing g.s.e.-guaranteed papers including freddy, fanny and begin any. >> i would seriously urge your staff to go back and look at the operations of black rock and mr. fink's operations at first boston before he founded black rock in relation to what they transacted with freddie mac and when they did that. >> gentlemen, time has expired. thank you, thank you very much. let me thank the chairman for his time. and at the outset of this hearing, i said that it is time to shine some light on the events surrounding bank of america's acquisition of merrill lynch. at this point i would say we got a peek, not much, but we don't have full sunshine yet. i would make three observations before we close. number one, there are significant inconsistencies between what we have been told today, what we were told two weeks ago, by ken lewis and what the feds' internal e-mails seem to say. it is still unclear whether bank of america was forced by the federal government to go through

mac? and i wish to state this for the record. lawrence bank, the head of blackrock, in which the mr. summers who heads the national economic planning council, is a major investor, just got several no-bid contracts from the fed including one to manage fannie mae and freddie mac. does the fed now that he is the person who first created a collateralized mortgage and brought that instrument to freddy mac and sold it to them for over $1 billion? he's now the fed's go-to man through his firm on workouts. i have a question about the revolving door and how do you protect the public against the company's conflict of interest that relate to his own and his firm's historic ininvolvements with those portfolios? >> it's a separate institution. i don't understand your question. >> you have signed a contract with blackrock to manage the fannie mae and freddie mac -- >> not to my knowledge. >> i understand it was one of the four and five contracts you signed with blackrock. >> i'd have to go back and chec

mac's port fort yoes? >> i don't know if i can. we don't run black rock. we have two or three seats on the board, but don't have a ceo or chairman and he doesn't report to anyone in bank of america -- >> you own 49.9%. isn't that a strange relationship. >> we don't own 51%. that would be the difference. >> do you know how much black rock will earn from that contract with the federal reserve to manage fannie and freddie papers. >> no, i don't. >> let me mention, "new york times" wrote the following, can a company being paid to sell troubled assets for the same kind of assets for private clients without showing preference and should the government seek counsel from a company that stand to make or lose billion fz the policies are enacted. can you outline how the bank of america will avoid conflict of interest in the mortgage portfolios and insider dealing charges as mortgage portfolios are resolved and bank of america mortgages are involved when black rock is actually the des ig knee to manage the portfolios

this president has declared that he doesn't want to own or manage, freddie mac or fannie mae, the financial institutions or the auto makers of america, but he has engaged in all of that without an exit strategy. i call on president obama to come up with an exit strategy to divest the american taxpayers that he makes hugo chave3 that he makes hugo chavez a piker. mr. akin: that is a summary of where we're are. this disease that struck the

why are we further bogging it down with trying to solve problems for fannie mae and freddie mac? page 115, the term energy efficient mortgage means a mortgage loan under which the income of the borrower for purposes of qualification for such loan is considered to be increased by not less than $1 for each dollar of savings projected to be realized by the borrower as a result of cost-effective energy saving designs. i'm sure that will create a lot of jobs. then we get to page 141. the cranston-gonzalez national affordable housing be act as amended. why are we amending the cranston-gonzalez national affordable housing act? i thought we were doing an energy bill here. page 142, use of building materials and methods that are healthier for residents of the housing, including the use of building materials that are free of added known carcinogen that is are classified as group one known carcinogens by the international agency for research on cancer. outlined building materials as well, it appears. then we have a grant program to increase the sustainability of low-income community develop

what i did not know is that he would sweep fannie mae and freddie mac under the carpet. fannie and freddie represented greatest systemic risk these government sponsored enterprises within our economy. they will prove to be the mother of all bailouts, and his plan is absolutely silent. the administration got the wrong diagnosis, and therefore they will get the wrong remedy. their diagnosis is that there was a failure in deregulation. it was not deregulation as much as it was dumb regulation. we need to enforce what we have on the books in the first place. the administration takes the field structure, and instead of trying to repair it, rearrange it, it adds on more regulation, more regulators, and again, it will institutionalize bailout nations and it ultimately i believe harm taxpayers. host: let me bring the phone numbers to bear here so that we can get audience reaction and questions for you, congressman. for phone questions, 202-737- 0001 for our republican viewers. democrats can reach us at 202- 737-0002. and our line 4 independents, 202-628-0205. and our tour addres

i have also heard people make the charge that fannie mae and freddie mac brought down the system. but i want to ask you that question, is that your opinion? i can express mine in that fannie and freddie fail affidavit the credit crisis occurred, and the credit crisis occurred more in the securitization in the private markets, particularly of subprime loans than of fannie and freddie, and they followed in the destruction of credit in the country. is that relatively true? >> well, there are many, many factors and many people guilty over this bubble that we had and in particular the housing market. there was excess liquidity. as former secretary paulson used to say, risk was mispriced not only in the housing market, but across financial markets and across financial institutions. certainly, in the housing market underwriting standards fell dramatically, and in particularly the subprime market and most of it did go into the private label securities, and i have to admit that fannie and freddie were big buyers of the securities and not only the aaa ones, but they and everybody else inclu

well in part facilitate bad loans in bad neighborhoods sold up through fannie mae and freddie mac which has been nationalized because of the insolvency in pa created by some of those transactions. and get out the vote democrat drive that took place in many of the cities, chicago, for example, and register hundreds of thousands of fraudulent voter registrations. and in fact by acorn's own admission over 400,000 fraudulent registrations were filed by acorn in that cycle leading up to the 2008 election. and i ask for investigations, i ask for congressional inquiries, i ask for the justice department to look into acorn. and i have no sympathy on this side of the aisle. temporarily had some sympathy from the chairman of the judiciary committee, mr. conyers, for about three weeks was on record as believing there was evidence there that may warrant that we take it up and investigate acorn. three weeks after he expressed the sentiment he concluded there wasn't enough evidence there. there's a lawsuit against acorn that has been won. and a settlement that's been achieved. we have put hundreds of

most economists believe one of the major causes besides fannie mae and freddie mac one of the major cause was the fed fund's rate in europe and here in the united states, the central banks setting a negative interest rate when adjust ford inflation for four years running. there's no way that wouldn't cause a housing bubble. but the question about the involvement in fanny and freddie purchasing subprime, purchasing the loans and the instruments that, otherwise, would not maybe find ready buyers out there, that is unique. and that is a part of their role as government-sponsored enterprises, really, that they evolved into. as i said originally in '89, they wouldn't go near a lot of these practices and especially wouldn't go near the idea of buying these things for their own portfolio. but then that process changed and politics took over. what i wanted to ask about -- and i'll mention a couple of other factors as well. i don't think anybody says it was solely fanny and freddie but a number of economists worry about the bullying in the market that went with cra in terms of the direction of loa

with the horrendous experience the american people have had with fannie mae and freddie mac, i think the last thing we want to do is model insurance reform by creating some sort of hybrid between the federal government and private insurance that would probably alternately end up at the same place as a government-run option. >> talk about the government-run option. when i mention this to people, they say medicare works, medicaid generally works. so why not some kind of program that is more expensive? isn't medicare a model for what you would want to do? >> it is. let me say that if you think medicaid and medicare are working, i encourage you to sit down with a hospital administrator anywhere in the country today. the reality is when the government takes over an area, health care or any other area, it is ultimately operating with scarce resources and rationing is the natural consequence of that. hospitals have been struggling for years with what is called the reimbursement rate that comes through this very same public system today where the hospital says the procedure costs this much a

. >> the worry is it sounds an awful lot like the way fannie mae and freddie mac got started. the question is what is the federal government's ultimate obligation? you said there's a proposal that billions of dollars would go in as a startup for a co-op. but really, there's no barriers in the law today with the exception of state regulation of insurance laws, there's no barrier to americans pooling resources and creating association health plans as we proposed for many years. i have to tell you, with the horrendous experience the american people have had with fannie mae and freddie mac, i think the last thing we would want to do is model insurance reform by creating some sort of a hybrid between the federal government and private nurens that would probably ultimately end up at the same place of a government run option. >> talk about -- i want you to talk about the government run option in this light. when i mention this to people, they say, well, medicare works. medicaid generally works. so why not some kind of program that's more expansive? isn't medicare a model for what you

and to the banks, the financial markets, the takeover of fannie mae and freddie mac, takeover of large insurance companies, our auto industry. you know, people back home and all around the country are alarmed. and as i heard someone say last week, they tried to explain to me they're alarmed, and they threw up their hands and they just said "i'm outraged out," and couldn't speak any more. my question for my colleagues today: is this a good time to create another government program? the answer on the other side is obviously been yes. yesterday they all voted, i believe, to get the federal government in the tourism business, to close off debate and pass a plan that would get the federal government to promote tourism in america all over the world. i think it's like $400 million. in today's terms, a small amount of money. but the tourism industry, while hurting because of the economy, is certainly not in collapse and need of a government bailout. the tourism industry spent billions of dollars on advertising last years. and it's not as if the rest of the world does not know we're here. the p

fannie mae and freddie mac are willing to work with you. you can go to the financialstability.gov website if you're a homeowner who's concerned and get more information and contacts, people who can counsel homeowners about how best to hold on to their homes. >> but the servicers need to do this as well. we carved out the safe harbor for these, which was controversial, to insulate them against lawsuits from investors. and we -- frankly the investor community broke up and said you're breaking contracts here. and they're right. but we understood if we didn't do that, the argument would be, look, we'd like to help out these homeowners but we can't face the possibility of an overwhelming number of lawsuits for investors that will sue us for engaging in modifications. so, we insulated them from the problems. what are the servicers doing? servicer by servicer, what are they doing out there? the homeowner is reluctant, you're right. the servicer shouldn't be reluctant in light of the safe hashers. we want to know what they're doing and whether or n

mac. they allowed them to swell to unimaginable size and make property that's could not have been gained. and now expose tax aers to over $5 trillion of risk. although current market conditions preclude immediate sweeping action to end the market distortions, the current model is broken. it must be altered. once we've stabilized our economy, the reform bill will over a reasonable period of time transition away towards a competitive free market. any piece of legislation that propourts to by the system and does not touch fanny or freddie. making sure fanny and freddie are rock solid. their conservatorship will set under our bill. the government substidies will wind down. that being fanny and freddie. it is my honor to introduce the chairman of the committee, the gentleman from georgia, dr. tom price. we find out selfs in the current challenge not due to deregulation but because of the structure. the government wants to guarantee more bail outs to establish a permanent bail out agency. the am

"sometimes the company already had ties to the government, like frenier -- fannie mae and freddie mac. sometimes the bailout state's beneficiaries are businesses, like aig, citigroup, and bank of america. the wards of the bailout state have more in common in government support." indiana, good morning. caller: is an amazing thing the power that the obama administration is amassing. they have taken over the car companies. taken over the banking industry. it is to the point now that here they are, trying to tell stockholders that we will take care of your money and give you pennies on the dollar, and we will sell it. if i thought that he was supposed to create money and jobs. so far i would say that we lost $2 million with no end in sight. i think that people who voted for him voted for him like a cult figure, with no idea of his policies. now that his direction of america is upon us and people are trying -- shaking awake. host: if the deal follows through, fiat will be exploring china and closing factories. steve is next. good morning. caller: we have to look at this carefully. i rememb

mac to make loans to poor people so they could have a piece of the pie and have a part of the american dream and own their own home. people began to apply for a loan. these houses that may be sold for $200,000 are now worth 400,000 and those were 400 are now worth 800. that is a pretty good investment to go up in value. loans were marketed by mortgage companies they had the incentive to place loans. they got paid a commission on the basis of the loans that they put out. so the more loans that they had in the markets the more money they made. they decided they could enhance that prospect to radically if they could securitize those loans. of the mortgage companies began making loans to people who really should not own house is to begin with then they passed the loans up to wall street where they were bundled together called collateralized debt obligations and once that was done they said these are loans for thousands of thousands of people so they must be good so they gave them a aaa rating which is the same as a government bond and that meant they were good for investment accounts, inst

mac. senators john cornyn and spoon are expected to hold a news conference later. even though the use of charter flights does not violate senate ethics rules as long as paid for by the members office, some senators been more than others. office account records show that senators chuck schumer and john cornyn are the biggest spenders, but are not the only ones to use charter flights. in the first half of the fiscal year, three others spent more than $100,000 each on transportation. following a decision by the united nations security council to move ahead with sanctions on north korea, defense secretary robert gates says he does not dismiss threats of retaliation. speaking in brussels, the secretary also says that it does not appear that the capitol has made any military preparations to follow through on the threats. officials from scotland, indonesia, and thailand, and from the missions in geneva expect in announcement of a global swine flu pandemic to be imminent. the world health organiza

mac get into trouble, they would step in to save them. in part it was that perceived federal lifeline that enabled these firms to borrow cheaply and take on so much risk. as we discussed reforming our regulatory structure to address firm that are too big to fail, i'm concerned we run the risk of bifurcating our financial system between those we designate as systemically significant and everybody else that's in competition. as our experience with the housing government sponsored enterprises demonstrates, this would be a big mistake. and it would provide competitive advantages to companies in a have implicit backing of the taxpayers and they would be incentivized to engage in higher risk behavior. that's what economists who look at the model tell us when they fret about what we're doing here. in the context of systemic risk regulation, do we run the risk of distorting market by labeling those institutions too big too fail as such and more effective to focus on potentially high risk activities in the market instead, rather than a set of larg

mac. they forced the banks in large part to do this. i'm not saying the banks are responsible, but your world of the precious government and how great and righteous they are whoas me away. i would rather have a free market operating and the wealth it produces over time than a spiteful government controlled program that you're mentioning, and sure, every 40 years real estate hiccups and people go crazy in it. i don't know how you ever get around that, but the point is that the glassman bill and repeal of it by clinton was the problem of this thing created by a democrat who deregulated the financial markets and caused the likes of big banks like what cove ya an bank of -- like what cove ya and bank of america to come out of that. guest: you're right deregulation was a mistake. banks are backed up by deposit insurance. the notion that you could run a banking system without regulation sometimes called fro banking is an idea that has been shown over and over again not to work. the last experien

., 5% of general motors, 10% of chrysler, 36% of citibank, 80% of freddie mac and fannie mae, and it goes on and on and on. and so we have all of this spending, borrowing, taxing now on top of that increasing amount of government ownership of our america's private economy. and if there is one thing that americans are clear on, it's that government should not be taking over bigger and bigger shares of the american economy. there was a survey that said 75% of americans agree that the federal government shouldn't take over the u.s. banking system. that was a poll done in february. more recently 60% say that the bailout loans given to g.m. and chrysler were a bad idea. a new poll on may 3st shows that 67% of americans are opposed to providing general motors with $90 billion -- i'm sorry, $50 billion and giving the government a 70% ownership interest in g.m. 56% of voters said it would be better to have g.m. go out of business. none of us want to see that. but most don't want to see the federal government owning american companies. the federal government is inevitably going to use thatter

because, the fed could conduct monetary policy by buying and selling fannie mae, freddie mac and gmac debt instruments! [laughter]. >> and as it turned out, the economists were half right. we haven't paid off the federal debt, but we are conducting monetary policy, by buying and selling freddie, fannie and gmac debt. so, this illustrates the fact that five, eight years from now the gloomy outlook i have just given might be very, very different, should health reform and a -- in a constructive way be enacted. thank you. [applause]. >> thank you, bob for those excellent and somewhat sobering remarks. and, for your very kind words about nihcm's anniversary, appreciate that. next we'll hear from cleve killingsworth from blue cross/blue shield of massachusetts and is a leader of health reform in massachusetts and is also participating very much in the day-to-day way in that health care reform as well, and he has been an out spoken advocate for quite a bit of time now, on payment reform and he is doing some very interesting things with his own company. joining him will be andrew dreyfus, who

will there be a recommendation for freddie mac and fannie mae? >> the future of the gses, including fannie and freddie is an important challenge for us, but we're not going to recommend in our initial

mac and gmac debt instruments. [laughter] >> and as it turned out, the economists were half-right. [laughter] >> we haven't paid off the federal debt but we are conducting monetary policy by buying and selling freddie, fannie and gmac debt. so this illustrates the fact that 5, 8 years from now the gloomy outlook that i'd just given might be very, very different should health reform in a constructive way be enacted. thank you. [applause] >> thank you, bob, for those excellent and somewhat sobering remarks. and for your very kind words about nihcm's anniversary. i really appreciate that. next we'll hear from cleve killingsworth ceo of blue cross blue shield of massachusetts. cleve is a very important leader of healthcare reform in massachusetts. he's also participating very much in the day-to-day way in that healthcare reform as well. he's been an outspoken advocate for quite a bit of time now on payment reform and he is doing some very interesting things with his own company. joining him will be andrew dreyfuss who

will there be a recommendation for freddie mac and fannie mae? >> the future of the gses, including fannie and freddie is an important challenge for us, but we're not going to recommend in our initial proposals for reform precisely what we think the future of those should be. we're going to begin a process of consulting with the congress and a broad session of housing experts on what we think the recommendations are. we'll defer recommendations on those things for a bit longer. >> okay. can you give me a time frame that you're looking at? >> i can't yet but we probably will next week when we lay it out. it's just a little early. given the scale of the stuff we're trying to take on. we want to do this carefully. >> no problem. thank you. >> mr. secretary, thank you for your time here today. we're going to allow you to leave, of course and go about your business of saving the american economy or lunch, whatever is on your schedule. but we thank you very much for being here. we'll send you some questions that you might'?'?a >> congress is expected t

the government incentivized it, whether through the community reinvestment act -- fannie mae and freddie mac got involved in this, and that allow wall street to get involved in all these financial instruments. everybody was happy, and all this was happening because home prices kept going up and everybody was making money. my state was one of the state's, nevada was leading the bubble. when the bubble burst, we suffer the most during that period time. the rest of the company -- rest of the country got dragged down with us. barack obama coast office, and his answer to fixing the problem is basically what fdr did. it is like we do not learn from history. it was not fdr's polities that brought us out of the great depression. if it did, would you like to stay in it for 11 years? the only thing that brought us out of the depression was world war ii. it was not the policies of spending. it was a war that brought us out. by the way, the economy was still not good. the stock market did not recover for 26 years. do we want to see wall street not recover for 26 years? i do not think that is the pol

fannie mae and freddie mac over the weekend basically with a graft without claiming it and came out of bankruptcy on monday morning without going in and creditors got paid $0.100 on the dollar. the creditors 1.6 trillion dollars for the creditors, 500 billion held in china were paid off whole. how? u.s. government taxpayer gave them 400 billion and the clock is still ticking and we could eventually pay $1 trillion program makes no sense all of the bill strip out -- bailouts, wall street and auto six cetera and they are not punishing the shareholders but also the debt investors it is not fair. >> that is my second question i read about the debates about why the banks were nationalized and by the bondholders were protected. what in your opinion is the reason for that? why did that happen? >> in a complex world it is an easy answer. because they lobby our government. they lobbied your government when they had market valuations of 100 or $200 billion. for a while when citibank stock without water $2 they had a market cap of 10 billion i thought that would take muscle away but they were not

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

mac. it is not a republican phenomenon. the man is off base. furthermore, this problem is the result of the fear of obama's socialistic policies that kick in before the election as the rich -- as we realized he was going to be elected. this needs to be emphasized. this whole focus on ben bernanke is off base. we need to look at these policies and realize what we have done and what the democrats with their social leftist policies are doing to this country. host: on the independent line, we have ritchie. caller: how are you today? on ben bernanke,, i believe with the woman who said that when these people say they cannot recall and -- you know they are lying through their teeth. we should be careful who we put in, but we have no say. the american worker like myself, we have no said. they can put in who they want. no matter who you vote for, that will put in who they want, not to the public wants. i do not trust bernanke as long as i could throw him. have a nice day, now. host: you, too. on th

g fanny mack and freddie mac, manage hint was replaced. why was the fate of mr. lewis so different in this instance? >> well, i think in this case, the merger was undertaken in good faith, it was at the time looked like a reasonable combination, a lot of firms suffered severe losses in the fourth quarter, one of the worst quarters in history in terms of financial losses. our judgment at the time was that he could continue to lead the company and we have not addressed that but we'll continue to make sure that we're comfortable with leadership of bank of america. >> in an e-mail from mr. walsh to yourself on december 30, mr. walsh writes and i quote, "ken lewis is going to call you to reaffirm the understanding you have. ken may also raise his favorite perrenial issue, that is, the richmond supervisory team on same page as the board. richmond staff was on our call today but prior to the call, it sounds like they may have threatened a little more than ideal our need to get rid of dividend and fast. i told price systems will be making joint determinations." my questi

chairman, let me ask you when the government invested heavily in aig, fannie mae and freddie mac management was actively replaced. why was the fate of mr. lewis so different in this instance? >> well i think in this case the merger was undertaken in good faith. it was at that time looked like a reasonable combination. a lot of firms suffered severe losses in the fourth quarter. it was one of the worst quarters i think in history in terms of financial losses. ever judgment at the time was that he could continue to lead the company and we have not addressed that. but obviously we will continue to evaluate management in the board as we go forward and make sure we are comfortable with leadership of bank of america. >> in an e-mail from mr. walsh to yourself on december 30, he writes and i quote, ken lewis is going to call to reaffirm the understanding that you have. ken may also raise his favorite issue, that is the rich man supervisory team on the same page as the board. richmond staff was on our call today but prior to the call it sounds like they may have threatened a little bit more than id

mac. the expectation, the implicit guarantee of the federal government behind those two gses allowed them to swell to unimaginable size, make profits that otherwise could not have been gained in the marketplace and now expose taxpayers to over $5 trillion of risk. in the 21st century, our housing system can exist, operate and prosper without fannie and freddie being allowed to monopolizes their product and socialize their losses. now, although current market conditions preclude immediate sweeping action to end fannie and freddie's market distortions, the current gse model is broken. it is irreparably broken and it must be fixed. the republican financial reform bill will over a reasonable period of time transition our secondary mortgage market away from government sanctioned monopolies towards a competitive free market. any piece of legislation that purports to reform our financial system and does not touch fannie or freddie cannot be taken seriously. we will ensure that fannie and freddie

john mccain was arguing for stronger regulation of part of the economy, including freddie mac and fannie mae. i think it is very important to note that none of those arguments go to the issue of whether or not global warming is in fact being caused by man-made activity or whether a cat and trade system is the right way to go about it. we began by pointing out by saying that the democrats want to cap carbon dioxide emissions, we should do it as has been done with other so-called pollutants. the gentleman from -- and the gentleman that i mentioned earlier said his utility can meet the carbon-side caps and meet them by the deadlines in the legislation. we can do that, and i am willing to do that. he said his company can meet those caps sooner than in the bill and can be more severe ones than in the bill. but just do not do it by cap and trade because it doubles the cost. her concern about the economy is my concern about the economy. if we can meet the carbon dioxide goals -- carbon dioxide is a pollutant, which the majority appears to believe -- and assuming that it is true that it causes a

mac got involved that allowed wall street to get involved with these financial instruments. everybody was happy when all of this was happening because home prices kept going up and everybody was making money. my state was one of those states that was leading the bubble. when the bubble burst california and nevada and arizona and florida we suffered the most during that period of time but the rest of the country god drug down with us because all of the financial instruments were tied together. his answer to fix the problem is basically but fdr did. it is like we don't learn from history. it was not fdr's policy that brought us out of the great depression. if it did would you like to stay in it for 11 years? basically we're in the depression but for 11 years the only thing that brought us out was world war ii. not his policy of spending, it was a war. by the way the economy is still not good. the stock market did not recover for 26 years. do you want to see the dow not recover for 26 years? settled think that is the policy we want. i believe the stimulus bill the president bro

mac. the expectation, the implicit guarantee of the federal government behind those to gse allow them to swell to unimaginable size and make profits that couldn't have been gained in the marketplace and now expose taxpayers to over $5 trillion of risk. in the 21st century, our housing system can't exist and prosper without fannie and freddie being allowed to monopolize and the market, privatize profits and socialize their losses. now ought current market conditions preclude immediate sweeping action to end fannie and freddie market distortions, the current gse model is broken. it is broken, it must be altered. once we have stabilize our economy, the republican financial system reform bill will over a reasonable period of time transition with the secondary market away from government sanctioned monopolies towards a competitive free market. any piece of legislation that purports to reform or financial system and does not touch the any or freddie cannot be taken seriously and the transition p

mac and fann fannie mae, making black rock the dominant player in pricing these distressed assets. i am concerned that black rock and its chief executive officer mr. fink may not be fair and impartial in conducting these responsibilities because they in fact have been heavily involved in inventing, creating and trafficking in those instruments for most of the last two decades. indeed, doing the risk analysis associated with them and selling billions of them to the government of the united states. so one of my questions, mr. bernanke, is do you know in what year mr. fink sold his first trench of mother-backed securities? the first was a girlon dollar. do you know what year that occurred in. >> i do not. >> do you think that's important for you to know? >> no i don't because arrangements we have with black rock and other asset management companies are carefully set up to prevent conflicts of interest, to set up fire wals between the portion of the company that is working for us and the portion that is engaging in other market activities. >> do you know what other instruments black ro