the idea that our system is so fragile that the failure of lehman brothers or even goldman sachs which could have happened allegedly in the next few days would have brought the whole system down, i think is baloney. i think it's an urban legend that was created by wall street. almost everyone i talk to says "too big to fail" is a bad idea and yet in republican and democrat administrations alike, it has been the de facto policy. >> reporter: why? >> i think part of the problem is that wall street has this tremendous army of lobbyists who strangle in the cradle any decent idea before it can see the light of day. >> reporter: which sounded a lot like stockman's political polar opposite, paul krugman. >> this is as raw an incidence of the power of money in preventing us from doing something that everybody knows we should do that i've ever seen. >> reporter: and now both men favor a new tax on risk-taking financial institutions. which prompted one last question for ronald reagan's budget director, famous for the "starve the beast" argument that tax cuts would force government to cut spendin

>> he was an intern at goldman sachs and getting his business degree in virginia. >> larry: any interest in politics at that time? >> we sat down at a restaurant one night, and he was very goal oriented. he had a couple of pages worth of goals. there was maybe one flin there about one for being a senator or something. otherwise, it was not really something he discussed. it was not really -- i wasn't very political. not at all. >> larry: we'll be right back with jenny sanford, the book is "staying true," a guaranteed best seller. we'll be right back. trées... and an appetizer or a dessert to share. ends soon...at red lobster. >> larry: we're back with jenny sanford. you were catholic and your husband was not. was that hard? >> yes, it is hard. i think marriage is a meshing of two lives, and there are bound to be a number of things different among the two. in our case religion was different. i considered him a very good christian, and you know, many times you'll see a jewish person marry someone else of a very different faith. the christian tradition in general cathism is different, but o

treasury secretary from 2006 to 2009, and as the ceo of the investment firm goldman sachs from 1999 to 2006. this event was part of the greater omaha chamber of commerce's 2010 annual meeting. to find out more visit omaha chamber.org. speaking with robert in more the third about his book they always said i was very a wide go, coming to grips with rates in america. i will start off with, who said that you would always make a white coat, and why did they say that? >> i think that was more of an internal feeling on my part. i grew up in a very passing time period during the 1960s. i was one of the few african-american fans, perhaps the only african-american family to ride the wave of millions of of why to left urban america at the time to go to the suburbs. at the same time many african-american for coming off the land of rural america and going to the cities. so i thought very unique, i felt caught in between. i think two groups almost like two sides and it was a time period that was pre-multiculturalism, and so i felt internally that perhaps i was destined to marry someone who was white

and you're going to see the likes of exxonmobil and their $45 billion profits and goldman sachs and their $12 billion of profits being used to buy washington in an even bigger way than they already have bought it. >> and frank luntz will look like a minor leaguer when the money gets like that. steve hildebrand former deputy campaign manager for the obama campaign. great thanks, steve. >>> if you've watched carefully the last week you will have noticed another obama campaign just under way. could the secret to saving the nation from the party of no and the party of no principles be a new invention called facts? ♪ fearless performance. that's what you get with secret clinical sport. proud sponsor of tanith belbin... and all of the fearless athletes of the u.s. olympic team. so i got my nephew to build a website. i hired someone to make my website... five months ago. we are building a website by ourselves. announcer: there's an easier way. create your own small-business site with intuit websites. just choose a style that fits your business and customize, publish and get found in three easy

., thought it was a giveaway to goldman sachs, pointed to the places the left and right could make common cause. for the most part, these birthers, they're not reaching out. they're hysterical about barack obama and they're dividing the country. don't tell me i'm the problem and i'm not reaching out. >> i've helped put together two coalitions, one for reagan, basically evangelical christians and all these protestants down there who didn't like a lot of folks also. you've got to bring them in. also with nixon, we brought the whole wallace movement, at one point it was at 23%, he got 13% of the vote. >> but that was a racist movement. that was a racist movement. >> you call them all that. >> if you're proud of that, that's great. >> who did they vote for in 1964? lyndon johnson, for heaven's sakes. >> thank you, pat -- >> and johnson went to the wall for black people and for civil rights and he said at the time that he was giving the south away and he knew it. >> he would have never called those people names because he came from them. >> well, i come from some of them, too. i'm a working cl

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the aig bailout and the money going to goldman sachs, i wouldn't want to disclose that either. and making statements like we had to do, it was a violation of the wall if we didn't pay 100 cents on the dollar meanwhile in france they were selling these less than 100 cents on the dollar. we got royaled. >> host: she pointed out it was a treatment in the u.s. between different classes of interest which is to say 100 cents on the dollar, but -- because there was a contract to point out for the uaw working guice -- gispert had to redo the contract. >> host: and take concessions. >> guest: double standard. so not surprisingly, the financial markets have resisted doing the kinds of things that need to be done it in the beginning of the conversation we talked about the risks too big to fail institutions. haven't done anything about that. >> host: let's talk about that because in the but you talk about the importance of what had been a glass stegall type and looking at the size and firewall support for instance commercial banks can be gambling like an investment bank with my savings and

and you're going to see the likes of exxonmobil and their $45 billion profits and goldman sachs and their $12 billion of profits being used to buy washington in an even bigger way than they already have bought it. >> and frank luntz will look like a minor leaguer when the money gets like that. steve hildebrand former deputy campaign manager for the obama campaign. >>> if you've watched carefully the last week you will have noticed another obama campaign just under way. could the secret to saving the nation from the party of no and party of no principles be a multivitamin for men. that's right. enjoy the world's perfect pepper. pace. made right since 1947. at a weight watchers meeting you can get the life skills that put you in charge of your world and hungry and the online tools to help you face any situation which means "darn right you can go to the dinner party" and still lose weight. and learn how to keep it off. join for free now. sorry, hungry. you're not invited. but you are, join for free today and change your life. weight watchers. stop dieting. start living. >>> little jimmy olso

>> he was an intern at goldman sachs and getting his business degree in virginia. >> larry: any interest in politics at that time? >> we sat down at a restaurant one night, and he was very goal oriented. i thought that was refreshing. he had a couple of pages worth of goals. there was maybe one line in there about one for running for a senator or something. otherwise, it was not really something he discussed. it was not really -- i wasn't very political. not at all. >> larry: we'll be right back with jenny sanford, the book is "staying true," a guaranteed best seller. we'll be right back. protect your family, launch your dreams. at legalzoom.com we put the law on your side. ♪ ♪ ♪ ♪ [ male announcer ] the cadillac cts sport sedan. one of car & driver's 10 best for the third year in a row. ♪ and now, cadillac announces the new luxury collection lease. >> larry: we're back with jenny sanford. the book is "staying true." you were catholic and your husband was not. was that hard? >> yes, it is hard. i think marriage is a meshing of two lives, and there are bound to be a number of th

the aig deal of money going to goldman sachs, i wouldn't want to disclose that either. but, and you know, making statements like we had to give, frank said it was in violation of the wall if we didn't pay them 100 cents on the dollar. meanwhile in france they were selling these for less than 100 cents on the dollar. we got for roiled proposed what was in the interest in the u.s. on the different clauses of interest which was to say 100 cents on the dollar but for the -- because there was a contract that you point out for the uaw working guice -- >> guest: they had to redo the contract. >> host: and take concessions. >> guest: double standard. so, not surprisingly, the financial markets into a half of have resisted doing the kind of things that need to be done at the beginning of the conversation we talked about the risks of the too big to fail institutions. haven't done anything about that you get >> host: let's talk about that because in the but you talk about the importance of what had been a glass stegall type and looking at the size and fire walls so for instance a

now goldman sachs seems to feel bad about this. it wants to donate $500 million to small businesses. what kind of three markets do we have been small businesses have to depend on a rich company's treating it as a hobby in order to get the capitol financing. but this in fact has not been a failure of three markets. the past 25 years are the stories of what happens when the government does not understand its proper role in the free markets and that is to provide a level predictable consistent system of prudent regulation so that markets can discipline themselves without causing unacceptable harm and destruction to the broad economy. we know how to do this. we did this for 50 years more or less well from the 1930's until the 1980's. how did we learn how to do this? we learned lessons of the 1920's the twenties were wonderful innovative decades as amity noted in her own work. the problem with the twenties as it relates to financial markets is that innovation creates optimism. optimism creates excess optimism and when you have financial

we're talking goldman sachs. the price target goes to $73, getting close to an all-time high. time warner reported 55 cents, 3 cents ahead of expectations. revenue was also above. then the company increased its quarterly dividend. it was 13.3%. >> really? >> that was pretty good, i've got to say. anyway, that is going to be a little bit lower this morning. and then comcast reported 29 cents, 2 cents ahead of expectations on revenue that was also above expectations. and that now looks more or less unchanged from yesterday. >>> with health care reform in doubt, pharma stocks could be poised to pop. joining us is health care strategist at miller chayback. i have a problem with that thesis in that drug stocks were totally on board with obama care. out of all the lobbying money, they spent more than anything else for the program. could they be hurt by obama care not passing? >> probably in the longer term there will be fewer people insured. but i think they had to be on board with obama care because otherwise, you know, they would have been steamrolled. >> it was a long way from ge

sachs on my right and a couple of chairs down was the ceo oven jpmorgan jays. their powerful politically. -- they are powerful politically. this situation will only change when mainstream opinion, or the conventional view of banking changes and we begin to realize that this kind of aggressive -- reckless risk-taking is very dangerous to society and brings nothing to the table in terms of benefit society and brings times of high unemployment. host: which agency of this government could effectively shrink the financial sector when these are not just u.s. companies? they are global companies. guest: what other people do in their own countries is up to them. honestly, the u.s. is the center of the world financial system. we can sort our own problems are. we can bring other people with us, that is fine. but there is no reason to wait for the europeans. and the agency question is a good one. i am open to all kinds of possibilities and suggestions. the federal reserve is the regulator and the supervisor of all the big holding companies. i'm not expecting the federal r

the second element of it is that companies like morgan stanley and goldman sachs, they are not banks. they became banks when they got in trouble. but nobody in washington explains that to the public. you know? aig, nobody explains to the public that the reason it couldn't be allowed to go down the drain is its tentacles were so vast, so underreaching that if they did allow it to get flushed down the drain, then the big banks go down, and only then. and now back to present day with the legislation on the thing, there's only one piece of legislation consumers are interested in other than having their mortgages taken care of if they're in trouble, and that's, let's hammer the credit card companies. if they can't put a contract out in english that you can't understand, then they should be in business. >> and we will get some of those changes. they're coming down the pike very, very shortly in terms of how the credit card companies are going to be forced to deal with consumers in a more fair way. but i think coming back to the mortgages for a second, we can chip away at the interest rates

unfortunately, the system now that is more crony capitalism he serves goldman sachs and masquerades to be serving the public interest and i think -- >> guest: he wouldn't even think it so lovely. he would consider it quite typical. [laughter] but yes. >> guest: but smith understood temptation on the part of the merchant or business person to quote himself interest in the public interest, and how dangerous it was. >> host: samuel fleischacker, give a brief biography of adam smith. where was he raised, where did he go to school, etc.? >> guest: okay. i hope your viewers don't fall asleep in this. he has one of those boring lives of any important human being. his father died before he was born. he was born in a small town in scotland called kirkcaldy. he supposedly was kidnapped by gypsies when he is about 7-years-old and released a few days or weeks later. that's the most interesting thing in his lifetime and after that he went to a university in belasco, got a special scholarship to go on to oxford. came back and taught at oxford, he was a professor which was in that, and to some of the

now we have unemployment and underemployment at 17.5%, but yet goldman sachs says that it has to pay it least $16.5 billion worth of bonuses so that its own employees don't leave the firm. now, goldman seems to feel bad about this. it wants to donate $500 million to small businesses. what kind of free markets that we have when small businesses have to depend on a rich company treating it as a hobby in order to get capital financing? but this in fact has not been a failure free markets. the past 25 years are the story of what happens when the government does not understand its proper role in the free markets. and that is to provide a level, predictable, consistence system of prudent regulation so that markets can discipline themselves without causing unacceptable harm and destruction to the broader economy. now we know how to do this. we did this for 50 years more less well from the 1930's until the 1980's. how did we learn how to do this? we learned lessons of the 1920's now, the 20's were wonderful innovative decades as amity has noted in her own work. the problem with the 20's is i

it brings to mind the ceo of goldman sachs who recently was quoted as saying he does god's work as an investment banker making sure capital flows to its highest valued use. it's a lovely idea. unfortunately, the current system which is marconi capitalism than real capitalism usurps goldman sachs and masquerades to be serving the public interest. >> guest: smith wouldn't even think it's so ugly. i think you would say it's quite typical. >> guest: smith understood on the part of the merchant or the business person to cloak itself in the public interest. and how dangerous it was. >> host: samuel fleischacker, give us a brief bio of adam smith. where was the race, where did he go to school, ephedra. >> guest: okay, i hope your viewers don't fall asleep in the spirit he is one of those boring lives of an important human being. his father died before he was born. he was born in a small town in scotland called kirkcaldy. he'd supposedly was kidnapped by gypsies and he was seven years old in the least a few days or weeks later. that's the most interesting thing in this lifetime. after that he

sachs or a j.p. morgan will simply drop their bankholding as a company status and continued to engage in proprietary trading of hedge funds. if they do that, will our financial system be left systemically at risk? >> i think whether they choose to be a bank holding company engaged in banking activities or whether they choose instead to be engaged in these riskier activities, the full range of supervisory constraints and provincial standards that we think need to be tough and heightened will still apply. from that perspective, we will still be well-covered in the proposals we are putting forward. additionally, we will have these activities not subsidized to affect where the firm has because of its access to the safety net, a lower cost of funding ended bandages that are helping them focus on engage in the activities we are concerned about. >> of the vocal role alone that we are concerned about -- people were -- volcker rule alone is not the only thing to consider barry >> absolutely. >> you have said

sachs order of j.p. morgan will simply drop their bank holding company status and continue to engage in proprietary trading, hedge funds, private equity activity. if they do that, will our financial system be less systemically at risk? >> i think, senator, whether they choose to be a bank holding company and engaging banking activities, or whether they choose instead to engage in these riskier activities, the full range of supervisory constraints and standards that we think need to be tough and heightened will still apply. and so, from that perspective we will still be well covered in the proposal we are putting forward. i think what will happen additionally is not having these risky activities be subsidized in the fact, in circumstances where a firm has, because of its access to safety net, essentially a lower cost of funding and damages that are in some sense helping them to focus on and engage in the activities that we are concerned about. >> so the volcker role a realm under alone, outside even banki

will his downtown rival, lloyd blankfein of goldman sachs get more or less? our mary thompson is here to take us inside the numbers. >> what's your bet, more or less for blankfein? >> think blankfein should get more, but because of the crept environment he'll get less. he'll come in 100,000 less. >> dimon is receiving a 2009 bonus worth $16. 1 million, one that doesn't include any cash and j.p. morgan is also giving something to its shareholders and an advisory vote at this year's annual meeting. according to an sec fighting, it has 175,000 shares of restricted stock and 563,000 worth $8 million. the only firm that remained profitable throughout the financial crisis, dimon didn't take a bonus for 2008 p. that year it took $18 million in t.a.r.p. money and it did repay those funds plus interest the next may. dimon's bonus isn't a mind blower and he says he thinks wall street's moving in the right direction when it comes to pay and the multimillion dollar bonuses raising hackles in washington and main street. a lot of these firms wouldn't be around if it weren'

sachs bankers, but also a lot of unions. the house plan didn't have it. so how are they going to reconcile that? the white house reached an agreement with the unions that said, we'll keep that in there, but only for nonunion workers. how's that going to pass? but if you strip it out, how are you going to pay for the bill? martha: if they have to reconcile too much, then they can't do reconciliation. >> that's right. martha: the president's going to have a lot of homework over the weekend if he's going to put his name to a bill that can magically bring this together because you're pointing out major differences. >> and there's some parts of the bill that can't be moved to reconciliation, for example, the insurance forms requiring insurance companies to take anyone regardless of pre-existing conditions. both of these big insurance reforms that don't appear they could pass through reconciliation, they could be challenged and kicked out. martha: karl, i want to ask you about this very interesting piece that you wrote on the gop

goldman sachs may decide next week not to be a bank that there will be no less, that will not get them regulation so that was a great point to the extent the large financial institutions tell us we should regulate, to the extent that takes that the need for regulation on in willing to work with us to make proposals about how best to do it, that will work well. i will give an example in this is evolving today. the question of banning proprietary trading by banks and in this case technical banks which we are quinn to go ahead within which paul volcker talked about. the committee that i chair-- many suggestions being made by mark karney of the canadian bank and others, the notion is that you get proprietary trading not so much by a sharp line but by a volume of more or less, because there's a certain amount that has to be done to keep things going so the answer is, i believe that the major financial institutions understand regulation is coming. that is their interest to give us the kind of the advice we need so we can do it in the best way in the best way includes a tough way but a smart

it does not take a genius or an economics professor to figure out that when goldman sachs, who was behind nafta, along with mr. robert rubin, bill clinton's first secretary of the treasury , they basically went against the american people's will because that was the percentage of the american people that opposed nafta. the other thing i want to say is that when china passed their stimulus, they had a provision that 100% of that money had to be spent in china. if we have the same provision in our -- we had the same provision in our stimulus, but the chamber of commerce lobbied against that and it was taken out. i think the chamber of commerce should take the "u.s" out of their name. i have taken some economics, but i am not an economics professor. host: let's get some more information from don peck, who wrote the article. guest: i am notçó an economics professor either, although i did look at these issues for mariko and by everyday work. -- for my article and my everyday work. trade is tough. it is easier to see the drawbacks and sometimes harder to see the benefits. there are real benef

morgan chase chief executive officer jimmy diamond or $9 million issue to goldman sachs group ceo lloyd blank fine, noting that some athletes take home more pay. this interview will appear on newsstands friday. we have got an excerpt from the two web sites. those are two of the experts -- excerpts. this is how the politico reports on this issue. "activists angry over obama bonus talk." on the white house blog, white house.gov -- you can go right to the blog. you can read this -- we wanted to clear of confusion on where the president stands on bonuses and executive compensation. we will read a little bit more of this but let us get to your calls. the obama administration perceived as anti business. jerry from columbus, ohio. independent line. caller: thank you for the picture of the sunrise -- reminds me of king richard the third, now is the winter of our discontent -- remember what adam smith said, steve, supposedly the first capitalist. when the economy ties itself to financial capitalism it is on its way to ruin. thanks a lot, steve, for taking my call and have a wonderful day. keep s

according to an estimate from goldman sachs, the recovery package provided 3.3% of the increase in real gdp at its peak during the third quarter. following the third quarter, the contributions to growth from the recovery package start to diminish. given the high unemployment rate, the continuing concerns about the economy, and the fact that they impact of the recovery package has started to wane, i'd think it is appropriate for us to consider additional job creation measures at this time. i would like to hear from our witnesses, their views on the benefits of enacting such measures at this time. the economic downturn and the federal response to it has contributed significantly to the worsening of our budget out loud. this is the other side of the picture. in the short term, measures that were taken to stabilize the economy and stop a precipitous collapse, have been affected. we know there is a price to be paid and the price to be paid is increases to our deficits and debt. this chart depicts the projected deficit under president barack obama's proposed budget over the next 10 years. it

and if anyone wonders why we see so many -- goldman sachs, members of the administration continue to impact the next administration -- that is because there needs to be stability. nobody likes surprises. guest: i think it is true the economy in china is growing very fast. that creates a lot of potential issues that we are still getting used to. for half a century, the economy was a non-factor in china. that was because of bad economic management. it is now coming into its own and we have to be used to the idea of 1.3 billion people being a bigger factor in the world economy. but whether or not that is a zero sum game it is connected to the way you ask the question. of course, that is not necessarily true because economies can grow together. however, there may be more competition in certain areas. you've heard the president talking about the desire not to be no. 2 in anything. so there is an element of competition. host: he talked about alternative energy. "the new york times" talked about the race to lead a clean power. they write -- as china grows, their workers will demand more. ho

goldman sachs, under the assistance of timothy geithner, bankrupting the country and this will continue to go on until the power is taken away from the few eats that controlled the country. but the matter of the democrat is an office, does not matter if the republican is an office. until congress and all of these politicians, left, right, in the middle, in between, every which direction, have some balls and get these illegal -- eat people off the high horses and but the power back under -- these eat people off the high horses and put the power back to the people. these secret societies, the agenda is to bankrupt this country and usher in a one world order which is dangerous and they are taking away our constitutional rights and our bill of rights and they are not going to stop until national sovereignty is eliminated. we need to be worried. i agree with the last few callers. the last 10 or 20 years, if we are still here, are going to be detrimental if something is not done. host: about 30 minutes into this conversation but all pegging up of robert shiller's column in "the financial time

sachs. to have no public plan with a penalty -- there are many people that do not have health care because they feel fine and do not want it. we are paying taxes for people that do not have it, but to penalize someone by taxing them if they do not want health insurance if we pass this reform -- i do not think that is a solution. guest: thank you for those thought. we are not taxing average people to pay for the plan. we tax people that make over $500,000 a year. we think they can afford to pay a little bit more. average middle-class people, there is no tax. we hope that by putting this national exchange where people can get competitive bidding for their health insurance plan that their cost will be lower. they will end up paying less money. we had average middle-class americans who are paying 30% more in their insurance premiums, almost as much as their mortgages. it is important if we are going to reduce the cost that everybody gets health insurance. everybody has to be enrolled in our plan

it does not take a genius or an economics professor to figure out that when goldman sachs, who was behind nafta, along with mr. robert rubin, bill clinton's first secretary of the treasury , they basically went against the american people's will because that was the percentage of the american people that opposed nafta. the other thing i want to say is that when china passed their stimulus, they had a provision that 100% of that money had to be spent in china. if we have the same provision in our -- we had the same provision in our stimulus, but the chamber of commerce lobbied against that and it was taken out. i think the chamber of commerce should take the "u.s" out of their name. i have taken some economics, but i am not an economics professor. host: let's get some more information from don peck, who wrote the article. guest: i am notçó an economics professor either, although i did look at these issues for mariko and by everyday work. -- for my article and my everyday work. trade is tough. it is easier to see the drawbacks and sometimes harder to see the benefits. there are real benef

the ceo of goldman sachs received a stock bonus of $9 million, and the ceo of jpmorgan received one of $17 million, i believe, for 2009, and it is difficult for folks to accept that when you have, what, 8.2 million u.s. jobs and the minute it during this downturn? -- jobs eliminated during this downturn? and there is anger, at the gentleman said, at the derivatives that were created on wall street, which, a shocking the, these people did not understand. the banks themselves and didn't understand what they were selling, what they were creating, -- which, shockingly, these people did not understand. these created major, major problems for the economy, and policymakers at this point are trying to figure out how to prevent that from happening again. president obama has proposed limiting the risk taking at banks, and there is a fair number of people out there who think that is the right way to go. you essentially have to make these things very boring, going back to an old way of thinking, where they just have to lend things to people and collect money from people, and these kind of exotic t

you know, the aig bailout with the money going to goldman sachs, you know, i wouldn't want to disclose that either. and, you know, making statements like we had to do it. the french said it was a violation of the law if we didn't pay them 100 cents on the dollar. meanwhile, in france, they were settling these for less than 100 cents on the dollar. you know, we got royaled. >> host: it wasn't treatment in the u.s. of different classes of interest. which is to say 100 cents on the dollar but for the -- 'cause there was a contract. but you point out for the uaw working guys >> guest: they had to re do their contract. double standard. not surprisingly, the financial markets have resisted doing the kinds of things that need to be done. the beginning of our conversation we talked about the risk of too big to fail institutions. haven't done anything about that. >> host: and let's talk about some of that. you talk about in the book the importance of what had been a glass-steagall-type. you explain it needed to be updated but the idea of looking at the size and also looking at firewalls so that

according to an estimate from goldman sachs, the recovery package provided 3.3% of the increase in real gdp at its peak during the third quarter. following the third quarter, the contributions to growth from the recovery package start to diminish. given the high unemployment rate, the continuing concerns about the economy, and the fact that they impact of the recovery package has started to wane, i'd think it is appropriate for us to consider additional job creation measures at this time. i would like to hear from our witnesses, their views on the benefits of enacting such measures at this time. the economic downturn and the federal response to it has contributed significantly to the worsening of our budget out loud. this is the other side of the picture. in the short term, measures that were taken to stabilize the economy and stop a precipitous collapse, have been affected. we know there is a price to be paid and the price to be paid is increases to our deficits and debt. this chart depicts the projected deficit under president barack obama's proposed budget over the next 10 years. it

according to an estimate from goldman sachs, the recovery package provided 3.3% of the increase in real gdp at its peak during the third quarter. following the third quarter, the contributions to growth from the recovery package start to diminish. given the high unemployment rate, the continuing concerns about the economy, and the fact that they impact of the recovery package has started to wane, i'd think it is appropriate for us to consider additional job creation measures at this time. i would like to hear from our witnesses, their views on the benefits of enacting such measures at this time. the economic downturn and the federal response to it has contributed significantly to the worsening of our budget out loud. this is the other side of the picture. in the short term, measures that were taken to stabilize the economy and stop a precipitous collapse, have been affected. we know there is a price to be paid and the price to be paid is increases to our deficits and debt. this chart depicts the projected deficit under president barack obama's proposed budget over the next 10 years. it

i agree with the goldman sachs analysis on that and of course we should expect the federal reserve to withdraw support for mortgage-backed securities as we go back into the spring despite the weaknesses in the economy, despite the continuing high unemployment, this is what the fed i think is very clearly indicating both directly and indirectly. . worst part of the picture. the worst part is i am afraid that a serious crisis is brewing in western europe. there are many people who claim that this time is different. i would apply the conclusions that greece has a serious sovereign debt problems. these issues are spreading to portugal and spain. there may be implications for ireland and italy. there's a great reluctance on the part of the stronger european countries to help the weaker european countries. basically, they don't have an institutional mechanism in place. they will not, in my assessment, bring in the international monetary fund. i will be happy to expand on the procedures behind that assessment. put all this together and you're looking at a substantial shock to government cred

and cheaper nike also told lawmakers that goldman sachs and other wall street firms may be looking into a sophisticated instrument investment instrument to make bets that greece will default on its debts. also about the healthcare summit which you can see live on c-span3 and c-span.org, a story from yahoo news saying that a consensus on how to rein in spiraling healthcare costs seem to be emerging as president obama some that the president agreed with assertions by oklahoma republican senator tom coburn that abuse them out account up to a third of the cost of a time of programs like medicare and medicaid. and is a major barrier to worldwide insurance coverage. senator coburn said that the cost is the chief reason millions of people do not have health insurance. that in yahoo! news as we wait for the senate to come in. mr. president. right now there's a meeting at the white house that's been covered extensively by the media live and much anticipation about the meeting between the president and a number of members of congress equally divided between the two bodies, the house and senate, t

the bailout with money going to goldman sachs, i wouldn't want to disclose that either but making statements like we had to do, the violation of the law if we didn't pay 100 cents on the dollar meanwhile in france they were selling these for less than 100 cents on the dollar we got roiled. >> host: you pointed out it wasn't even treatment in the u.s. of different classes of interest which is to say 100 cents on the dollar but because there was a contract to you point out for the uaw working guys -- >> guest: they had to redo the contract. >> host: they had to read and take concessions. >> guest: double standard. not surprisingly the financial markets have resisted doing the kinds of things that need to be done and beginning of the conversation we talked about the risk of the too big to fail institutions. haven't done anything about that. >> host: let's talk about that because you talk in the book about the importance what had been a glass-steagall type, you explain it this updated but looking at the size and firewalls so that for instance commercial banks can be gambling like an investment b

according to an estimate from goldman sachs, the recovery package provided 3.3% of the increase in real gdp at its peak during the third quarter. following the third quarter, the contributions to growth from the recovery package start to diminish. given the high unemployment rate, the continuing concerns about the economy, and the fact that they impact of the recovery package has started to wane, i'd think it is appropriate for us to consider additional job creation measures at this time. i would like to hear from our witnesses, their views on the benefits of enacting such measures at this time. the economic downturn and the federal response to it has contributed significantly to the worsening of our budget out loud. this is the other side of the picture. in the short term, measures that were taken to stabilize the economy and stop a precipitous collapse, have been affected. we know there is a price to be paid and the price to be paid is increases to our deficits and debt. this chart depicts the projected deficit under president barack obama's proposed budget over the next 10 years. it

a law we preventing commercial banks from engaging in proprietary lending one possibility is that a goldman sachs or jpmorgan will simply drop their bank holding company status and continue to engage in proprietary trading hedge fund private equity activity. if they do that will our financial system be less systemically at risk? >> i think, senator, whether they choose to be a bank holding company and engage in banking activities or choose instead to engage in riskier activities the full range of supervisory constraints and standards that we think need to be tough and heightened will still apply so from that perspective we will still be covered in the proposals we are putting forth. i think what we will have additionally is not having these risky activities to be subsidized in effect in circumstances where a firm has because its access to the safety net is essentially a lower cost of funding and advantages that are in some sense helping them focus on and engage in the activities we are concerned about. >> so the volcker will alone if we are concerned about the broad systemic risk of side is

. >> even the chairman of cfo, goldman sachs is it will be very difficult to distinguish between prop trading and trading for clients or hedging. >> that's right. >> even he is saying it's going to be difficult speculative struggle recognized the reality that it is difficult, but that is why reform is so important that the objective we're trying to do is to make sure we have clear constraints on risk-taking by these large institutions so they don't bring us to the edge of collapse again. part of that is making sure they are holding enough capital against those risk, but part involves tougher constraints and what they can do. but we have to design those anyway that are sensible, and careful, and recognize the reality in the ways to run. >> i think you know i support them or clean clean approach. thank you, mr. chairman. >> thank you, senator. thank you, secretary geithner. clearly we have a huge challenge ahead of us. and i think you can tell this debate wants to work with you. it's a two-way street. no surprises, but tell us what you're working on and let us know because we want to he

goldman sachs says it will be very difficult to extinguish between prop trading and traded for clients or hedging. even he's saying it's going to be difficult. >> start by recognizing the reality it's difficult. that's why reform is so important. the basic objective we are trying to do is make sure we have clear constraints on risk taking by these large institutions so they don't bring us to the edge of collapse again. and part is making sure they are holding enough capital. part involves tougher constraints. what they can actually do. we got to design those ways that are sensible and careful and recognize the reality the way institutions are run. >> i think you know i support a more clean approach. thank you, mr. chairman. >> thank you, senator. thank you, secretary geithner. clearly we have huge challenges ahead of us. i think you can tell this committee wants to work with you. it's a two-way street. no surprises but tell us what you are working on. let us know. we want to help both with the economy and get those jobs -- i also urge you to take very strong heed of senator cantwell an

sachs may decide next week not to be a bank if we make sure to become certain changes but there will be no less -- yy get them out of regulation. so that is a good point. to the extent the large financial institutions tell us we should regulate -- we ignore them. to the extent they exceed the need for regulation and are ready to work with us to make proposals about how best to do it but will work well. i will give you an example and this is evolving today. the question of banning proprietary trading by banks in this state technical banks which paul volcker talks about. the committee i chaired had given the regulator power to go forward to give a reason for the suggestions being made by the ssa. i spoke with mark of the canadian bank and others. the notion as you get the proprietary trading and also much by a sharp line of either work but by a volume of more or less because there's a certain amount that has to be done to keep things going. so the answer is all i believe the major financial institutions understand the regulation is coming. it is in their interest to give the kind of ad

some even the chairman of the cfo goldman sachs says it will be difficult to distinguish between the trading and the trading for the client for hedging. >> that's right -- >> if he's saying it is going to be difficult -- >> you have to start by recognizing the reality it is difficult that is what reform is important. the objective which right to do is make sure we have clear constraints on risk-taking by the large institutions so they don't bring us to the edge of collapse again and part of that is making sure they are holding of capital against the risks but part of it involves tough constraints what they can actually do. but we have to design those ways the sensible and careful and recognize the reality of the ways shortages are run. >> i think you know i support a more clean approach. thank you, mr. chairman. >> thank you, senator and secretary geithner. clearly we have huge challenges ahead of us, and i'd think you can tell the committee wants to work with you. it is a two-way street. no surprises but tell us what you're working on and let us know because we want to help and get

the bailout with money going to goldman sachs, i wouldn't want to disclose that either but making statements like we had to do, the violation of the law if we didn't pay 100 cents on the dollar meanwhile in france they were selling these for less than 100 cents on the dollar we got roiled. >> host: you pointed out it wasn't even treatment in the u.s. of different classes of interest which is to say 100 cents on the dollar but because there was a contract to you point out for the uaw working guys -- >> guest: they had to redo the contract. >> host: they had to read and take concessions. >> guest: double standard. not surprisingly the financial markets have resisted doing the kinds of things that need to be done and beginning of the conversation we talked about the risk of the too big to fail institutions. haven't done anything about that. >> host: let's talk about that because you talk in the book about the importance what had been a glass-steagall type, you explain it this updated but looking at the size and firewalls so that for instance commercial banks can be gambling like an investment b

sachs and other companies and their derivative arrangements with greece. and this issue as well. credit default swaps are properly used as hedging instruments. >> i agree. >> the sec of coors has been interested in this issue obviously. using these instruments and a wave that is counterproductive. and i'm sure the sec will be looking into that. we will shortly be evaluating what we can learn from the activities of the holding compass that we supervise here in the u.s. >> let me make the request of you here. i'm sure i'll of us on this committee would like to very quickly what the response is going to be if any from you our recommendations he would make it was from the sec. i will make that former request this morning. it's a critical issue for all of us. senator shelby? >> thank you, thank you chairman don. thank you to the committee, mr. bernanke, again. as our financial markets begin to show signs of improvement, many of the fed's temporary many facilities have been allowed to expire and monetary policy has begun to normalize. and while use of the tempor

we pass a law preventing commercial banks from engaging in proprietary lending, one possibility, a goldman sachs or a jpmorgan will simply drop their bank holding company status and continue to engage in proprietary trading, hedge fund, private equity activity. if they do that, will our financial system be less system i canly at risk? >> i think, senator, whether they choose to be a bank holding company and engage in banking activities or whether they choose instead to engage in these riskier activities the full range of supervisory constraints and prudential standards we think need to be tough and heightened will still apply. and so from that perspective we'll still be, well-covered in the proposals we're putting forward. i think what we'll have additionally not having these risky activities be subsy diesed in effect in circumstances with are a firm has, because of its access to the safety net, essentially a lower cost of funding and advantages that are in some sense, helping them it, focus on and engage in the activities that we're concerned about. >> so the volcker rule alone, if we're

this is a foam goaldman sacks partner. -- this is a former goldman sachs partner. they state that pot pry terry trading -- proprietary trading can't be mistaken for normal marketing activities. they add that customer money is invested alongside the firm's capital. it is even considered in congress they found arguments to undermine the spirit of the proposal. these critics would leave the decision making to the regulators. and i could not exist more. we should not leave decision make to the regulators. i applaud chairman volcker's direction. i believe we need to go further. we cannot pass the buck to our regulatory agencies. we have tried that before. they punted their responsibilities to the credit agencies into the banks them and we were left with disastrous consequences, the big issue we face is not how to make regulation cleverer, but how to protect taxpayers from a huge bill when all of the precautions fail and a bank steps into the void. congress needs to draw a hard-line that gets directly at the structural problems that afflict wall street and our largest ba