Title: Barney Frank, Paul Krugman: What is Government's Role?

" Who gets an engine size songs just. -- discovering new list of essential recordings and take on a weekly jazz sampler and -- music dot org. This is the WGBH for a minute mark."

" And that's our economic uncertainty. I'm reminded of a speech given in 1962. By president Kennedy Yale University. In which he articulates the need for business labor and government to meet their respective responsibilities. To restore confidence and the national economy. Let's listen to a brief excerpt."

" This country depends. On the insurance. But -- major elements within it live up to their responsibilities. It is necessary to neglect its obligations to the public. -- Public responsibility. Of about. And -- to what that. It's obvious and statutory duty. A logical concern for economic cap. If anything should happen. -- confidence might well be weakened. And the dangerous stagnation we increase. This is the true issue of competence. If there's any kind of trend. For -- meeting present problems would appreciate. This is the moment to stop. People are relentless Harlem about. A star acrimony."

" One of the most formidable and influential members of congress today Barney Frank assume the chairmanship of the house financial services committee and 2007. And that role has proven to be an inspiring national figure in confronting the sub prime mortgage crisis and the current turmoil in financial markets. Never one to rely on old cliches. And back to master every interpreting them. Congressman frank recently reminded us that the notion emanating from the 1960s. That are rising tide lifts all boats this seriously flawed. Very few among the many and our society to port to affordable. And they're standing tip toe in the water he quips the rising tide goes up your nose. Described as a liberal. Understand markets he suggests that under regulation is not just a factor but the single biggest cause of the fix we're in today and advocates for government regulations. As effective safeguards against irresponsible risk taking in the market. Congressman frank began his career as chief assistant to Boston mayor Kevin white as always shown a keen aptitude for recognizing creative policy innovations. And knowing how best to implement them. After fourteen terms in office he's currently one of the most expert members and congressional rules and calls himself not a policy -- But how long about how to get things done. We are better country for his creative talents tireless efforts and legislative accomplishments. Are moderated this afternoon is Paul Krugman professor of economics and international affairs at Princeton University. Columnist for the New York Times and one of our nation's most well informed and trenchant commentators on the interplay between politics in the economy. His most recent book the conscience of a liberal is a history of the growing economic divide in the United States and a prescription on how those trends can be remedied. His columns capture was striking clarity the underlying sources of our national economic problems. For example on the parody of president Kennedy's words. Professor -- in the wake of the insider traders scandals that the philosophy motivating the indicted corporate CEOs seem to be quote. Ask not what a high stock price can do for your company. Asked what it can do for your personal bottom line. And is addressing EL university president Kennedy aimed. To leave the national dialogue out of the bought in sterile acrimony and to articulate new ideas to solidify America's confidence in itself and its economy. Tonight we are honored to listen to a conversation between two public figures. Who daily restore our confidence in the country's ability to engage in an enlightened to the political debate. Respecting the free market on not DF buying it and to right the nation's economy in service to all its citizens. Please join me in welcoming congressman Barney Frank and professor Paul."

" I think are good there's so much talk about what I thought well let's just start with some -- I was I was thinking about. As is getting ready for this about. How old sort of how things have evolved over the past couple years since two years ago today we're being told how great things work. One year ago today there was this thing that it's sort of emerged or something crime. But they did the president would have the time was contained in Mosul contained and now we're sort of you know. Hey on the are wondering if -- how we get here I -- into this mess."

" When you're you're exactly right about -- in November of 2006 for the Democrats want I became the chairman in waiting of the committee and I would kill you with the argument. Member of that it we did not substantially deregulate our financial institutions. Everybody was going into the England go to Hong Kong and Shanghai. Depending I guess on their culinary tastes but. We were going to lose everybody. And I didn't people who -- to go back and look at this overwhelming consensus in November. Two got -- from experts had. The committee that Hank Paulson. Picked. Mayor Bloomberg senator Schumer and we can import and of course. We are now in exactly the opposite direction of people forget that and what happened what. I think. Integration in the financial sector securitization. Lot of liquidity. And it. This mindset. Good no regulation and I I think people back. It -- Reagan gets hailed for his ideas let's remember his central idea. The first domestic policy was concerned I remembered from his first inaugural. Government is not the answer to our problems government is the problem and that philosophy is what we do today but it's."

" Question. Couple of branch off why now I mean we've been deregulating we've been and what what it's -- Caused it to to break at this point."

" But that's of them are a different view and other. Economists and an economic turn it does seem to me that there are some. From -- that there is this tendency. For integration in the private sector. To flourish and at first to be very welcome and -- to a lot of good weather it's the margin doctor and apprised of the late nineteenth century. What is the stock market in the bid in the in the middle -- infantry but it outstripped reasonable rules. And there you go. You get royalties in a break and nobody. Controlling them and at some point. The problems have accumulated I guess that maybe you know maybe through the depression here spewing your point where. If anything. Is if a normal kind of economic growth come you're so all the leverage your -- extended that the consequences. Become his --"

" Plus -- mean. There are fewer arguments I hear one of which is that look this is based about the housing bubble and housing bubble was going to happen anyway that this was was rooted in. Or -- had less to do with the regulation and had to do with. Greenspan keeping the rate -- long. We really stand analyst."

" I I. -- Instead correctly people were telling us over a year ago there's going to be contained. Well in fact that in -- you didn't happen that you could take that was the key issue because it. It was not just the housing bubble that attracted people. Made mortgage loans that couldn't have been me and then leverage them. Now -- that you -- some beautiful -- that 100% guaranteed student loans can't sell on the market so clearly what that was that the housing. I mean essentially. People what a lot of they may have a lot of investors they could debate housing market. We get burned by that event decide to make some that especially that could make quicker without thinking just totally. The -- than the rest and what happened was. People I think to break a fairly -- in retrospect. Until maybe what twentieth thirty years ago twenty years ago. Learned roommate. -- institution that expected to be repaid. You went -- people and they repaid you. And they -- gratitude securitization. What you -- money to people who sold the -- it would -- thanks to technology. Split up so will be kept track of it and we lost the lead to far right hip that we would total pivotal we're we have these substitute for that we have -- management. We have the rating agencies we have quantitative models. We have diversification. And it turned out that if you make enough bad votes in the first place none of those things work. You get to fill up through the rating agencies. Admit there are part of the -- I think essentially the public there were killing of more than they do wasn't anybody new film making things up is going to win but who thump but the key is. That is that the problem it started out in in more -- being made it could have been made. Multiplied throughout the system and it turned out again. The -- but none of our relationship. -- war inherent discipline. Who perfected the put for granted and what we gonna to want this exotica and securitization. We have found substitute."

" It. Is going to be a funny question but did you see any. Any of this because I mean and it's I. As the housing bubble. I -- it was going to be nasty that the financial. Chain reaction. That caught me completely flat what."

" Owner and Biotech company at first. --"

" It was a little credit there's one thing I've been saying for a long time -- that we made a mistake by equating."

" Providing decent housing for people with submitting your going to be helping it would -- moment we we exaggerate the extent to which we just. Not ready to -- owned by which everybody can afford to be one thing we did was to cut back on on read the housing and have."

" The pig with a with a Republican over in 1995. They killed for victory over the program development and housing and not thought through what we're gonna make everybody homeowner."

" And that was part of the problem. I went to Minneapolis at the request of the congress there to listen to the problems in August and the advocacy -- about the one man said they totally misrepresented. My wife and I got evicted him we couldn't find another place to rent so what else. It's now. Filling out the I did see some potential for the housing market to -- I did not she'd -- lead the chain reaction I did not cheated that the problems up front which spread as much as they can and I think what you go back here. True. Another great conservative say that I. Lived with it for twelve years when Dick Armey with the Republican. Leader in the house and he went there Ph.D. economist often. Filled with every company that did this. I know what the markets are smart and the government is -- And -- who was it that you just keep the government out of it for that went. But nobody was restraining anybody's book from doing any of."

" Sorry can't -- I. -- it to economics textbook author and Dick Armey did actually write the textbook. As and and it did so badly. As a textbook that there was nothing else for him to do except take over the country."

" Portage river residents textbook didn't self. Very good point for the market shall have been very."

" Well -- Don't get it right nobody saw this coming nobody's sure well I believe that people are popular and very. -- about what I don't remember anybody seen that we can lead to this agreed. But got a good I don't think anybody registered certainly not the people who perpetrated. He said it would take it don't they know these things the -- to take over leveraged."

" The extent to which they had -- if you connect every absolutely totally I think they've created this. -- unstable system and it just it."

" It took it won't be a failure of the housing market I don't think anybody understood about how much they had built the house of cards."

" Yet it tested for -- you know the they're really economy is in the -- but the at this point. We'll see where it goes from here but that did that to burn through which I thought it was gonna do terrible things was was quite different I think that the collapse. Consumer. Reliance on home equity loans was going to hit consumer spending much harder than it has so far. But I didn't -- see this these financial. Not on the the way that this would end up that the -- problem -- in -- would end up suddenly paying higher interest rates because of of the effects of some."

" I think it's it is. And and it doesn't what you say it does focus on the actions of regulation because what again what happens. The financial community. Was allowed to. Who would -- to -- with no government intervention affected city you're never gonna we're being told we need less government invention and some eroded. Each people design this is about and -- someone you know there are some smart people don't do what you're saying. I mean it is that true no dumb people lot of this club there's an economic problem but some of the smartest people we were told the world and they probably think this. We interconnected terribly fragile world in which -- one thing's gonna go read. Other people a -- and they must compliment from being. The front cover of the finance committee. Among the most arrogant. Operation of the world they know that's all confident that don't I think that."

" Article. On. And -- do it. Because I we're gonna bounce right -- that mean there is a view that says that these. That that there may actually be substantial over reaction right now and that it. The credit default swaps are valued. Too little and that there's actually."

" You by the given an overreaction -- the ability. You -- to people who who who made -- mistake in the first place to mate who were reacting now and -- I think that's another product regulation. Well we have now are people afraid to -- thing. People are afraid to buying. Anything because they were told for so long to AAA rated -- put Tripoli David stop that went totally. Down. Corporate regulation I think is an essential part of being in the market back. But people aren't gonna by taking SEC we have an SEC you have people not investing in the market. I think given people some confidence in what they're buying as some validity -- broad -- and rational kind of -- and we we have on. But Senator Kennedy who -- that we have 100% guarantee federal federally guaranteed to -- we can't sell. You -- the -- back is it a crazy -- it is my bond backed by the flip taxing power of the city and the state. Never fail. They never -- and acknowledge it. Despite that they were told by get to the market for you mitigating current now requiring a municipal if you were of a perfect credit on the body. -- is like making a -- by typing current European troops get an event that can't happen but nonetheless they bought it but then. So they have the papal I think that have to paper monitored but then an injury to the insult. The insurance take these premiums that are coming in -- steady stream from the from the minute believe it was. They've invested CBOs quit having no idea what that we're talking about it and now we're investing in. And their credit goes and it toilet. -- so now we have -- and -- over this country paying higher interest rates to burn bridges and school because that. And encouragement purple investment and they went down so that's an example of an over reaction -- the city a bastion of the steady California because there. -- to make stupid decisions."

" And link in a master from very nervous studios where it is that's and then it's a credit card debt obligation as we take -- Kentucky assets. Sub prime loans. Actors and together -- keep people different write to supposedly some of those rights we're AAA rated stuff that they weren't actually. And then someone else takes those things and packages and together and the and that's another NN I've -- Swearing -- of the."

" Yet whether she -- and that but one that would have been very good -- Wednesday we asked him some advice you can imagine -- have rules. That you shouldn't own anything you don't understand that people feel bad that I understand that because the people report that did not definitive. Film production it. Obama said my -- I -- I think I don't understand so we Brooklyn company and I tonight when the this stuff want to go over it. And each of the first thing I can with a 70000. Page prospective. An investment he shall we shall accompany the next day."

" that there just aren't. If you Doolittle who -- you'll find they're there's a PowerPoint explaining CEOs and it with stick figure cartoons. As both get these various people with there's this steaming heap of garbage in the corner and think how we get rid of the steaming heap of garbage in mason has not somebody -- that step --"

" They didn't go back to the federal budget by the pet food you have to. Correct and Larry did date and oh how. Right -- that that's correction and this content by two hopefully good thing because people were priced out of the market about the how -- that become a worldwide economic crisis how we get what Detroit can -- no work. -- you'll never go we will return to America and deregulate be good movie the movie industry we've been. I'm going to be and and and instead he wound up unless you're exporting -- mortgages because you bank failures in in interviewing and and it it is because -- management. Wrapped up together. It could be understood waging bets on what you."

" I'm okay now there's. One -- run in Europe that's talks about how. In 1994 -- just before the army took over the world. The you have passed legislation achieve. Greenspan gave the chairman of the Fed. Regulatory power. Which he didn't use the web what should. Could be done."

" The US together a very good point about an. I never bifurcated view of book about being spent. And I will say. I hadn't at a time when he would venerated felt. He. I do think and -- liberals we could. Appreciate that in the ninety. When a number of people with things that of unemployment dropped below 5% that was inherently inflationary. And therefore you had to deflate the economy he resisted that and he said no I think productivity has come. And he resisted it's a mother of from Clinton appointee. One to bring down the economy because it goes under Bill Clinton underwent -- we got the three point 9% and did not. -- inflation at the time. So in that sense I thought you were right on the other hand. He has had this great -- ideological. Distrustful unregulated a different outcome of that was quite striking for men who went. The chief financial regulator America if the Federal Reserve and also big bank -- he's -- the government. Never can can can do a better job than the market which just for life what he presided over the Soviet but. Congress in 1994 again not an accident in the left by the Democrat -- power that -- the homeowner equity protection act. That gives the Federal Reserve the power to regulate the limited member Republican. We -- issued by banks which were regulated like like Reagan had not been the main source of the sub prime crisis and been mortgages. They came from people outside the very good system. Larry you'd be deposited funds which are regulated and he was given the authority to regulate -- and explicitly refused to do. Great advocate economist named Ned Graham. According government told -- he asked Greenspan. To please use this authority Ben Bernanke is now in the process of trying to use that authority people -- get that we'll see an article about how would be different if we can back. And trying to get him to cut back and think that I thought were worried too weak but Alan Greenspan explicitly refused to do another example the federal trade back. Gives the Federal Reserve the power to probably eight code of unfair and deceptive practices in the banking area know a few years ago want to put. The federal bank regulated preempted almost -- console wars. If they we're evolving national bank so yeah they can prevent those words stricken. I would today that control encouraging that if you -- humility. Shouldn't you be putting something and it's quite the figure right but it's up to the Fed because they have the right to promulgate the tone that I would -- I -- the ground when he said that right erupted going to spend would you do that he said no further to a very quickly stepped -- but I think -- profile. And then maybe we would say well. The delightful what you want to do just to fight the economy I think you make some -- that would have got to the dot com if you. He even try to do anything about stock markets and whose great great financial always what. Have to encourage -- I can let the if you can continue or can cause a recession. And when that would encourage. People which -- well okay. He never would use authority. In the regulatory area to try and prevent the abuse."

" So what -- than it had been and he would've tried to establish a code of conduct for sub prime lending yes it's worth it so. Basically what we've --"

" Do we tested it yet and I hope that we'll get to a week ago we we essentially frankly looked at what the bank regulators do with banks. But what if a bank would give mortgage to someone who. Couldn't pay it back. The bank examiner which take what did you do that that's not a good idea because we -- deposit so we want to get into what. And essentially what we try to do wish to conceptualize the rule. That the FDIC your estate thanks to provide due to the OJC had applied to bankers. And make them apply to everybody as the season -- pretends to have the authority to tell states that they can't that they can't that would happen until. Have you gotten that yet and they -- and we we have to Villanova. Doug introvert radical principle that Al. Greenspan -- imposed on mortgage derivatives do not -- money to people if they can't pay it back. Do not to get kind of a factor. Than the don't take I don't know let's let's I'm not between with a lot less than what human being. -- you tell people how much going to cost. -- that don't like taxes. If you're gonna give them and we can tell you should amount to -- and then goes up in the third year. Can you have friends that by then and probably aren't you need either one they have to pay back please. Explain to them not just how much it can of course in the first period. But how much you can of course in the third get a little over and we're now trying to approach by statute the great thing -- done by regularly. Do you think that wouldn't. How much affecting things would have had it I think it would depend a substantial effect in diminishing -- because if you look at the sub prime loans and I think -- it. Do you with a surprising thing was that the -- use it heavily reverberating."

" If and Bergen who originated followed the rules that the banks have problem. We will not have a subprime crisis we would have people going moderate prices go up. But the percentage of the -- so -- vote overwhelmingly. Come from the yet. From the -- effectively done brilliantly to wait for -- that the people who originated loans to brokers and other. In the state of the state recoverable from what you do they could've done to regulate it didn't. Oracle eleven to pool of money around. Liquidity and we call it for very that he. Not covered by the popular front if -- lending fund that they've given byte by depositors. And the federal regulators watch -- because we we have to make goes up. But there will prove viability through an unregulated. Originated. Lending money from unregulated pool of money and I believe that without that would not have the sub prime crisis that you wouldn't have said."

" So. You -- the counter argument is look -- there was a housing people got so excited about housing and that that the they're very helpful we've had that we can't financial bubbles in lots of things in the past -- housing was just the latest and it. Fairly and prices for the principal driver of of foreclosures. Right."

" That happen again I think US central question and you're apparently about acknowledging that. Nobody that we can make up sort. The impact it was going to happen if you're going coming -- just -- an email. I mean if -- coming -- everywhere you sent somebody. That prediction but I think if -- hit it yet you're right of course. There would have been people who want to home that would have been paying. No question but I don't think you would have become a worldwide economic crisis and the argument that it it. If you look at mortgages that originated. By bank -- to heightening regulate. Thanks to all kinds of won't have to preserve capital they -- to get exactly as it -- second guess different modes that it if only the regulator entity known thanks for credit unions thrifts had made them all if you look at the percentage of sub prime yet you don't have a crisis. You regret something creek but it would have been the qualitative and be competitive -- who. Just about a month ago. Reorganized. Again and they had a mortgage division that originated mortgages and then a mortgage division that we'll begin to reduce it by other people. And they said that determined to bring you where they overdid it mortgages. No problem the -- you where they will be interpreted by other people there -- problems that could put that together over the keys to. Yeah I think we're -- the bank. Under the rules that had been formulated when you're expected to get be paid it and it just simple went. People -- being given the right to -- a whole lot of money to other people. With no incentive to it to get it repay it in fact the -- other and then make it into. The -- you that you described and I I really do believe that apparently regulated entity that makes up front -- look at the percentage of failure we wouldn't be in this."

" The argument is that if only regulated as a benefit just a lot less lending and home ownership would've been. You know we -- to see him promoting homeownership."

" I'm the one the preceded it we wouldn't have succeeded promoting. People who like two years. And that's what we we we didn't we didn't they probably behind only. A strictly temporary home loans there was a kind of -- work I don't know into -- time care good to be."

" Appropriate yeah I don't I could -- was about that. The problem is this notion that everybody could be homework and it that would go to work. That everybody can go home yet from her and I wish I could be born -- gain weight but the fact that. Don't think people probably the perfect people in the home -- who -- that we couldn't believe it. That's up on the part of a large part of the subprime problem. One of the worst parts hopefully came from the refinancing. Because -- older people particularly in urban areas. Who want to. And then some trouble he came in persuaded that hurt him very often and -- women took refinanced our home. It would no need for her to do with Vietnamese payment he can make and they wound up you know but even put together -- have of people have said look. The ball tonight the bill we passed last year but the rules the Fed is talking about your -- it -- you -- it says. I know people think the Fed is taking up too much. -- people who fit well if you. Don't look -- saying. Some people would be able to my home theaters yes it's about time that we differentiated. And that giving people -- home ownership situation. That they cannot economically sustain. Well perhaps fully understand is that great disservice to."

" I have a hard time being devil's advocate here because I agree with you too much but the but I really notices that the homeownership statistics after popping up. During the the boom are now backed down I think where they were in the fall of 2001. So send -- certain you're supposed to be for the sub prime expansion."

" Another image from the Hebrew but I don't want to -- this this administrator who couldn't doesn't go with the that if we in the tactic continuing racial and ethnic discrimination that we suffer from. We know we hear that in the Kennedy library my former colleague Joe Kennedy -- great piece of legislating about fifteen years ago. And got through an amendment is something called the whole building just -- correct. I would. Over the objections of many in the industry and give -- statistics. On well. Great that the city and I know we're here to -- like it over your meth they did a study that -- that if you were right. -- upper middle class African American. You would like eating at a sub prime loan an indication that if you work on a working class white person. So there in the region who have brought to Oklahoma -- what they are racial and ethnic unfinished. Narrowing the in the and we try to work on our committee. And that's the real or manufactured housing because we -- gotten kind of a bad -- Thank you we had you know that discriminated against manufacturers have an overriding reason. So we're trying to extend him but only if you give people who can economically afford at this test."

" One of the things I've been getting a lot. Hearing a lot it's -- if this were pushed back from from conservatives and and that. One story that you do here is that is the community reinvestment act that's that's the -- that's all -- that the that the the letters were forced into equities."

" The community events that we've you know with the bill passed. In the semi William proxmire we've been given the bank committee who put it through I wasn't there when -- when it was done. Of which I can say that through through time to get comfortable with the what they did but but I wouldn't actually -- what it said was. If you are a commitment to continued taking deposits in an area you've got some obligation to put some of that money back into the area. It is not to work through its overall general it's generally forced by the way only when you want to -- People here remember we had to be hearing when the Bank of America brought me and we were able to use that and headed out. Paternity to get some commitments at a Bank of America that help that's up from which we still benefit but the argument that the community reinvestment act that. And you haven't heard that argument. Quite so articulately. Since Flip Wilson. Went off field and the privilege and all the audience that you remember. Wilson had flipped open headed to his character apparently. Very politically incorrect Geraldine with -- yet. Offended that my. With his -- guilty but heard defense every time he was accused of some that he was the devil made -- do it. And that's the CRA you could double for these people that doesn't make them do it kind of reputation first of all the CRA does not apply. To the people who made the bad loan. Let me go back to my quick before. The CRA the community reinvestment act applies to depository institution for the problem. With the theory is that increasingly now loan to being made by institute and not covered by we. Want to cover it but the community reinvestment act. -- didn't cover credit union which we think you couldn't and what you Creighton but. She already covered that segment of the lending and -- didn't cause the problem secondly. That he got him Larry Lindsey. Who runs. The Federal Reserve governor. During the night eighty under Reagan who was both responsible there was no one they've given responsibility of the Federal Reserve board -- government. As -- gramley who women in woods under Clinton. Larry -- with the consumer affairs -- Undo. Under the under Reagan. He really and Orlando which I have put into the record and have distributed. Refuting the notion that the community reinvestment act which -- a very responsible lending he said there was no evidence that in any way jeopardize. I think he has found it. They could do no evidence for that and it's particularly syndicate. That the great poker of them you know that -- sub prime crisis were made plain stupid not covered by the community reinvestment."

" And yet I have seen not stood outside in the the the act but I have seen. Angelo Mozilo of of Countrywide Financial which is here through your. Here are entitled. Because villain in this case saying that was affirmative action and maybe do it."

" I have let him know. Who. Took down 150 million dollar players helping bankrupt the country. Coming to -- that. Much of -- activity wouldn't covered by this field and you come by nationwide outbreak and renewed a public hearing not covering. Entities that. Like that and again it was. Zero evidence -- the Shia Reagan differently does not get into specific loan decisions what it says. You could ever certain amount of your activity in the areas where you take in the the neat project. And it too convenient whipping boy program. The former Republican candidate who helped put through the building grim bleak well you built I think. Remove regulation when it could have been there in terms of they invented -- that is it is -- John McCain's closest economic adviser. Phil -- when gun went program ran for president. John McCain supported him. And and program has been reciprocated. And eat try to kill the whole community reinvestment act they would -- evidence. That it could permanently go back again whether -- country right or anybody else. And mr. Reynolds has affirmative action not presumably yeah community reinvestment act but again as to affirmative action. The I'm going to go direct public particularly they said. Hopefully we we we gave all these loans to African American and Hispanic but what the whole broad stroke direct data showed that -- a large number of Hispanics and African Americans got these sub prime loan. But it's not that in the fifth situation they would've gotten here -- it is that a 52 -- that would got prime world. So it was a disproportionate. Racial element of the sub prime loan but it came from that being discriminated against the prick into that category rather than -- being --"

" a lot of people I was would qualify for prime loans got steered into sub prime and just proportionally those would have been an American Hispanic. --"

" Just go Greg -- showed that put the survey yet. You met Boston I forget the need is a very good. It's -- that it doesn't and they documented. That race and ethnicity were a factor in people being put in the sub prime loan."

" Let me give you just what tumor known that he gets another one along those -- I've I've been getting a lot are those jump start but. That that zoning this is the villain. That it's restrictive zoning because -- promised that home prices were too high end and goes on in his Ohio home prices have."

" When I do agree that. Building. Had been used in front of an argument that -- To restrict affordable there's no question about it but. The notion that this -- this crisis is. If third in the first place if you don't mean restrictions cause I have infected. Why then -- prices drop because only -- thing. The media took it -- if if it's -- restricting the supply of how -- really uptight driving going to be going up and popular president on reflected. And running at ninety here. Republicans not getting any happy about -- to integrate into. It -- to frustrate adulthood trying to get affordable housing bill that there was this. Ever going to be negative reaction -- and give me. And we broke -- of affordable housing nitrogen to believe that people like Mike to -- years ago. -- its private public housing. And it was built with the the requirement that it be affordable for low income people for forty years. Now the forty years are starting to expire and we have this problem because either talking that was built with. Restrictions on who could -- forty years ago. Is now eligible to go on the market and it turns out we revenue problem. The kind of people who forty years ago said this housing in the awful bill would give me not want to move into it. And I wanted this place the proud people. And and helping them and what prompted to try to put some legislation through. We don't lose that but I would I do want to know. Then the very same types of people know -- yet if someone looked out dead but the want to -- That complained about this housing in the first place have now found so desirable that a problem that -- a bid for people without even want him to -- the first place."

" I actually actually know -- makes a living as consultants have been hoping developers through that process of taking that could -- make -- the stuff on affordable anyway. I'm glad I. If you don't have the fifth the other -- you'd. -- surprisingly. Drinks a minute I -- was puzzled me a little bit which is talking about the financial innovation and we don't want to stop an infinite patience and it's -- you know we say well you know -- it. It's great to tune in then banks. Content the stock market it and we'd all agree that that was the thing which financial innovation of the last. Twenty years. -- matter what and that is what would have been good financially innovate so."

" I think. The secondary market and housing. Can be equivalent. If it's if we run well I think Fannie Mae and Freddie Mac about -- hopeless constructive or what to think that Obama sponsored a bill that would increase the -- I can of them. This administration which started out good morning to dismantle them. These it's -- and that our mortgages in the it is in the market. So that the originated and then make room. They make who. Mortgages. Well run I think that does increase liquidity conduct increased -- I think department when it's done. Without any kind of regulation whatsoever but I do think that the it and that's and securitization had been has been. Beautiful."

" A balance as best I can make -- they are the only source of housing finance now. They are and that's exactly two very good point because again you go back -- you can vote in this administration wanted to put Fannie Mae and Freddy next century. At a business and they said -- television beat beat of quasi public and they are and that now the administration has done a complete reversal and it's pushing. Put them to be even more Barak now I agree that in doing that we could improve the regulation but I I think again that's an example -- have something that you. Okay. What are things what what's the state of the crisis right now what you think how are we doing well I think what kind of might be conservative. Copies -- win now. And we do nothing. Then nothing. He doesn't get better for. If there weren't there to question 11 -- the immediate in the financial meltdown. This I saw progress first there are you think well that's what I think. That Ben Bernanke that actually. Been youthful image keys. Taking some flak from some people but. Death well which we mentioned. Monday that we need it dried out and a lot of -- it. You know municipal bonds made to metropolitan community there's a lot of great investment --"

" this whole thing. Well auction rate securities which is why this is I'd never heard of until it blew up but it turns -- to be other. Three to thirty billion dollar mark never heard of and things like metropolitan museum in and state agencies to -- so through it and and just collapsed."

" That that security that depend on auction. To function and because of this overreact hitting it I think people -- body. And what they really do to get security information. To allow it to be too good on their own. Paper. We -- like that would have been hurt even worth. There have been efforts to -- Like government do to alleviate that and I think yeah the Federal Reserve has done the right thing there again I would. The of problems -- but I I think well short term. There are some things we can do to provide more liquidity Fannie Mae Freddie Mac as an example this administration went from. Opposing there was distance really can now relying heavily on them the federal home. Which -- another quasi. Public entity that we've -- we have at the Federal Reserve -- getting -- in India in the short term what I hope we will have it in the following. I've been working with senator Dodd and convert structure of it and I at risk of further undercutting his ability. To do things youthful secretary person. Secular person is secular treasury. I think there's been a -- beatable guys there are some ideological differences. I think he represents the more pragmatic wing of this administration and that a number of areas and have. I do think even one of those who persuaded the president that the best response to the second. We're not simply to make the tax cuts of 2001 permanent immediately rather than have them hold off that was -- major service. But what we're trying to do with it what -- that's legislated that. Rural shape who don't who moved the moment had not been rendered but the people who brought these. Complications from the mended and the people who had tried to them what Google services. That if they want except the fact that they let her money than can ever be repaid in a reasonable world. And that they would be better not for coping. Which can have negative effect revenue to people they invested to make your money not to become an -- of vacant property in Cleveland. -- Depressed property value if they're willing to write down what they. Are entitled to legally and be realistic. We will then have the federal housing administration. You rarely guaranteeing. Doom we're -- if the people can pay them. We think that helps stabilize -- and then have observed it to a second -- by Fannie and Freddie so what we talk about the package of legislation. That would give holders. The year incentive. True except that gossage hopefully stabilize the situation that we think by that that we can avert. Many hundreds of thousands and maybe make -- we don't we won't open to a foreclosures. Get some money back into the market I do think if that happens to honor roll because the sub prime market had been the source of the problem some kind of confidence back there we think. Could help us begin that did that to dig up. The question will still in many kicking vote out of the trip but we would hope that it -- dizzying rate."

" I'd have to say IE her ardent support legislation. But I'm not entirely sure why that makes some sense because this -- not and that's been and it's probably economists diseases if it's. To the mutual advantage. Holders of paper and it'd -- people sitting in the houses to reach it."

" Why and why hasn't done any -- you do it when I do think that an America that the public comment. That there are people who will direct them unless they know those people -- that they may think they're gonna well the program to go beyond that. Secondly. And I hate to very fair question but we aren't we both said in a kind of psychological problem I mean that. The market is. Not acting units on rational self interest and if people -- having been burned by buying -- that are now trying regularly fail if a child you know catches just don't get burned. He won't purchased over it but knowing that people going to the refrigerator the purpose of the media. That's good that's good that's a problem that there were reacting to the left and right what we're trying to do it okay guys. Come back and we'll put it I mean it probably psychological. It is okay so that if -- a critical -- where if if you know that other people doing it it it it it could be helpful and we do think you have. Haven't yet they take you to guarantee that's the other piece of it yet we we got paper about the it could be the gratuitous now what what we are doing and the administration is moving in the direction. Loosening the quite curious something the FHA acknowledge that it doesn't mean that the FAK it will probably take a higher it'll look great not enormous we're talking about. 34 billion dollars it if you guarantee. 300 billion dollars worth of mortgages the ultimate cost to the federal government overtime might be four or five billion dollars but we we what. We're throwing it to the lenders to save it. But the federal loan if you can go right down -- you -- and you break on the new one. We can very much committee for kids to -- get burned again. We won't we won't make the well don't let alone that you're now agreeing to. -- on the market so you really be getting eighty whatever percent of what to open book but you'll get it you'll get it for work and and you'll be out of it and that's what we offered to them whereas if we don't do that they couldn't go to the -- today they'll say well okay I'll do that but it may still be stuck with them until."

" Yet the risk of of excessive. Long business history that what this made me think of this the in my in my career it at that a lot of -- international financial crises axiom in very grateful that this time there's a financial crisis that I can kiss FM the -- There across the Pacific that I can just take New Jersey transit. That the man. But this is reminiscent of the the Brady deals that were done under royalty debt at the end of the opiate of the eighties which not to have been as successful as they work."

" If the numbers like Howard -- that apparently was like arguing the part of it we tried to do with. Normally low income countries and which kind of makes me that."

" Brady do next so that was let's should not have made it fundamental difference there's a twitch but somehow change that the atmosphere total but I do think in the case. That there aren't that -- we're we're but they're broker which we I think it's all right look. Except the fact can never going to recover the amount that you are real people who work with the -- didn't work that the people have the money if you met him. -- We would've been easy the criteria."

" By which the FCK guarantee that when out of here vacated say we're gonna -- but it differently now let them rule. If you read the -- you can come with them and ask them to make it -- didn't take -- case. And we accept that we have some some increase in the default but did he -- stepped up to the mind that the the value of the ability to send them okay. You have it could begin with the private sector people accepting the fact that they take well there are no taxpayer dollars and that. We I think that once you've done that. We won't make it -- going to Europe that completion get to reduced figure that you agreed to right now they can say well agreed to reduce it I still have all this uncertainty. We feel if you agreed it would do it. We were at that point step in and you can be sure what you got and I do think that this is part of what the uncertainty what have I got what -- I know what it's worth. -- to the problem."

" How much to think the what what do you think of the other stuff the the -- and attending these various we've we've had an explosion. Of acronyms now these various things that the Fed is doing that thing."

" Oh all insecurity to me I I'm not. An expert. No yes I won't make him up obviously I've been angry -- and I don't think Bernanke's. Moving in the right direction I think maybe I would put -- I quote as they -- with a all of it with feed him to be critical of any of them but people forget. -- the country can be more elegant than the problem it is for himself and you have to keep in mind the words of one of my favorite twentieth century philosophers. Penny on the -- your -- compared to what. And I think that it got to be. That the keystone of public policy today you know I like what would barely know about this third that you know over the Health Department to better. Yet the federal government's deputy head to the people may feel a bit. We're Likud could not left. Hanging not because they've with the best people in the world of -- everybody -- they -- if they wish. Sordid than they would short of the people you get it downward cycle and it was a well. Doesn't thought -- do that but even the the -- that we get from about the other people who borrowed money could devote that much money. There are people who don't know how for themselves and their family than with reasonable. But probably going to help them now that he -- anybody. That in mug anybody in a -- people it was somewhere responsible. And you might -- don't help people who are responsible the cost of not helping them however it is probably true. Make the situation worked of the country all the while I'm prepared about the total lack of regulation in the economy. About -- irresponsible people who take our economy hostage. And I accept the fact that we're going to have to think of it like to quite your tournament to. But -- but it was possible and it paid to the -- to a deserving people we can find there are no hero and and that's what that would be my justification."

" You were close to the end of this part so tell me your vision what what what should what should regulation look like to avoid the great financial package when he thirteen that question it's. We need true."

" I think bank regulation on the whole worked well. We haven't had enormous number of bank -- and -- and to be said that the bank would probably hitting group and of the it's because they went outside of banking. In new investment bank. I think that's essentially what we need to say that we're -- in the financial market and imagine that that -- beat -- act. -- to have you know the glass Steagall act which that you could be a bank. Regulated by the regulated at Comerica bank would be an investment house not regulated we took away that distinction. But we got the distinction in regulation and that I think unfair. Negative competitive effect great though the technical frightened. Negative regulatory arbitrage. Which any parent would know which is brilliant and let my kids there. -- to make hard that would like I have to do -- that's that's sibling rivalry putting the public policy and haven't what. We need there was to -- to the investment houses doing like much money is the deal first the world. Everything that's going about. You gotta you gotta let people know that you are happy viability. Secondly. You gotta give them the way banks do third. You weren't going to have to have some requirement that a bank now. Whatever you learn that might make it have to keep a certain amount of money at -- as a reserve against bedroom. The investment of -- don't have to do that and they don't pretend to be put. But whenever they get the best and it was 35 to one interpret what they hope because. We we'd be VP is greatly increased beverages but it so I think essentially. And he comes out this. The -- relationship having been dissolved. You need to have regulation. That puts some restraints on -- taking that don't exist now the private sector and that includes by the -- compensation. For the top executive because you have a situation now where are you one of the top executives here and you take a risk and it paid off you make a lot of money. If you take it with and it doesn't pay off you don't have that did. But you don't pay any penalty. And the worst comes to work if you make enough bet that don't pay off you get sent out the past few with the very well -- A compensation package to make you. -- be able to get over it. So regulation has to do it's too. Bill and some constraints on risk taking it to the currently unregulated sector of the economy that -- second guess that we have to. Right now the individual. Institutions haven't seen there were paying a penalty for failure of our society paid their penalty. At."

" Think that brings us to the end of the dialogue and we have questions but I believe it's that it just lineup and -- of those two mikes and local people as they come up. I noted that the generic warning please ask questions. Not not speech is. The --"

" Yeah. As I'm sure you know economics is in just housing. It's gasoline and food. Which is an intense psychological. Things are following a -- Have you any suggestions as to what we can do on both those cases."

" Well stocked with food -- today. It predicted. Question would be welcome news and talk about -- we were talking about if -- traffic -- world I think with -- we I don't plan have a hearing him in the -- I think. 1 thing I am persuaded of that yet the ethical issue. This is a part of this problem the focused on taking. The polls and making them into energy with heavy subsidy has been overdone and I think that needs to be subjected to -- much better. That set a record."

" If it's. The truck -- when I say justice is it's it's startling actually how little. Political movement there's been on that despite the he added that the power of the farm state -- the the fact that -- we've -- a little bit that if if if only the first caucuses of the year we're in central New Jersey and we haven't outrageous subsidies for diners instead of for this stuff. Okay but -- real problem."

" I'm sorry state won't let -- and become an Iowa. Not just at that time has -- And -- to that. To tell our good friends in New Hampshire and Iowa that privileged position is over they have flood across."

" You know the notion that because active. Those -- people in New Hampshire. And all the other people interest. Florida and Michigan could be in the buying it and double but -- the -- That ethanol it is it is an example in our food problem in general let me say about the policy. The greatest hypocrisy in the history of American politics. Come from my conservative friend who represented agricultural district. And preach to what whether it comes to the minimum -- well -- union health care or housing or any other domestic program. The virtues. Non involvement by the government of the free market no subsidy. Of -- standing up on memo and apparently there was a footnote. Hidden somewhere in Friedrich Von -- book that's a book Friedrich acting but everybody right now that the -- to agriculture. And not any karma and what they probably have now we will not send money. As the United States government to countries where food is terrible problem. We will only send them American food. And that is a very expensive and inefficient way to do it. And I you. 888. Republican and natural form remember if it's legislative who was the a I didn't fit and I have enjoyed infantry. That's an idea right. It is hard to think humans to do in the in the short run. A -- given the good that we got the oil like situated from invading Iraq. That they don't think that invading Iran would be he would hypocrite and a."

" I understand you -- to ask short questions from the road. Yeah that's correct it's okay."

" These secondary market for mortgages has never. An issue if you have very. Well collateralized presidential the those functions of work through -- did speak up please epic part. And what would you do in the if you re ran the tape. With the -- can either we saw this coming. My dad used to call it because some of the switch but what would you do you could read read you right to hate. And put some regulations in place that might have -- purpose. Taking regulation away from just the depositor institutions. To the other sources premise that contribute to this."

" Well I would say. And as we've mentioned in 1994. The rest on the Democrats in control before the fifth year. The democratic congress did pass the homeowners'. Equity protection act which gave the Federal Reserve the power to do exactly that to regulate -- mortgage. I would not directly above my predecessors senior Democrat John before -- one of the major. Evidence that we've Chris Dodd went well. The problem made. From the legislative standpoint you can sometimes prevent executives from doing bad things obviously not always. Which would almost never force them to do good things. But the regulatory authority within it just wasn't you'd but I do believe and I think one of the lesson we learn now it. And it had to do with this -- we were told don't worry about the quality. Of the initial decision. Good we would have risk management techniques that we'll handle it and I'm not convinced that if enough bed initial decisions are made. No so called risk management technique an -- to be the harm. We need to build and determined to make it a mistake in the first -- and I think had we didn't do that 1994. And now we've spent just specifically and explicitly refused. Do you -- authority it."

" I would just I think that that. They -- the kind of lowering that -- that that might not have happened is the loan which was 9500%. Of the value of the house. And could not be paid once the resets took place at and was only viable under the assumption that the home prices go up -- the the -- would be able to refinance and then. Went home prices -- percent. All hell breaks lose and if if -- if it had been aware of 8%. 80% mortgages and that the none of this would've happened it would still had some people under water. Given given how it. How big the problem last fair number of would have been under water but no where near as many the first nowhere near as many foreclosures and hopefully a smaller overall crisis."

" In the current presidential. Campaigns he gives a brief synopsis of the candidates are and then addressing these issues. And what you she has the potential. Approach from running candidates."

" Point I think Senator Clinton and Obama have both come out with. Appropriate to the sub prime crisis -- yet. They were pregnant similar to what we've been talking about Senator Clinton I but they did to everybody yet. And nationwide moratorium on what coach who I think would be unworkable. Below one thing we are going to be trying to do without it's two. After the ability of the states. To deal with book quote think the state can do know when you -- Copeland residential property that could be a free activity. You bet you're the owner of that property and it's sitting in the neighborhood and you have the obligation then to keep it safe and secure that he did -- can be done. -- in that regard Senator McCain shouted out by saying that we couldn't do anything. And they moved into saying that we could do something closer to where we are but I I honestly believe if you look at the history of the of the three candidates. The two Democrats. And -- that would be appointment I think the two Democrats would be. On the whole supportive of the kind of regulate -- talk about Sen McCain made history. Would not I would say. And it's not the case of integrity. But you go back to Senator McCain. The one time we got some trouble between he would advocating on every minute Charles Keating. But which one of the great. Advocates of the kind of deregulation that led to a meth maker banking crisis which we've yet to know prices of the eighties and nineties. And John McCain was clearly on the won't fly and and with -- being regulated at that time. Sort kind of deregulation. That caused the rest of the great."

" Assuming that nobody wants to be thrown out of their own home. Michael closure. Can this problem obese are by simply going to 6% to fix the real interest for the remainder of the time. With this would require -- write down and it would immediately give confidence of people then eventually people are going to be paying these loans that it seems likely that the problem is that the the 3%. -- up to you -- percent after a couple of years is the disaster."

" Well them. It's not legal problem. But the point of this yet that would be good but. These loans held -- private individuals. Government can't simply decree. That people -- sign a contract -- timing and X percent now have to take X minus 4% we just can't do that I tried to look."

" Police are also a fair number of ours who can't afford to. We have had a lot of a lot of remarks from borrowers."

" Pent and we got that -- don't think you need to do we fight we met but the Bush Administration. Finally thank ticket -- began to do something. And the first thing they did with to try and get the interest rate increase overall. The so that they said put off of five years. The reset the interest rate so that people couldn't refinance their way out of it. But then the -- became that they couldn't be planet with the property work too little that's why we got it to the -- the question of the of the amount but the fundamental right you cannot decreed. By laws that people. You can't open the -- to cut back seat to -- it didn't would be one of the problem I'm not I've actually. Great friend a little financial institutions. But some of them would be paying more for the money that they have. Got to use than that amount I don't wanna quit more failures and although it took -- so. And would you say that everybody -- about people could that the other problem we've got people who can't afford it what about people can do they get a reduction do we reduce everybody in the district to present. Yes and our country."

" Anybody in out in -- one to prove they only grew up. There occupying now this eliminates all of the aspect."

" it would eliminate a lot of the legitimate financial institutions. And and I don't think she will we get -- authority to simply go in and rewrite all the contract."

" That's this -- actually would have thought that that you cut could writes it's a lot like the but might be. Ill advised that might be I don't."

" That you talked about contract or you've written your confiscating people's property right I I'm very skeptical that we can do that every case to meet you could say well. In emerging gate but it needed for everybody. -- looking the other opponent who we've got it is silent -- written. The the other -- that would extend some good -- to beat everybody. Come from mark Feldstein the former chairman of the Council of Economic Advisers under the Reagan straight and I put that before."

" Okay -- I think probably it's. This is probably -- to -- in the country that loves capitalism and entrepreneurship. But I was wondering I'm."

" What can Canada about people who -- unjustly. Enriched through this yes you know."

" This stands still runs basically medical not a person but I. But my sense is that a lot of them went out of business with a lot of money in the --"

" two things first of all you right attacked. We undercuts the very wealthy because they're afraid that --"

" Hello. And we."

" No great public servant. But the military record charming story irrelevant but you know making vehicles better. During the 2060. Back in. Some right wingers were trying to steer people out of voting democratic. And one piece of neutral we saw fit don't vote for a Democrat for congress because of the Democrats take over. The chairman will be Charlie Rangel. John Conyers the African Americans in Detroit and Barney Frank that they haven't done. The chairman of the committee will be Charlie Rangel John Conyers and Barney Frank and I showed that. Somebody show that Charlie and the fifth. They -- Barney Frank with college. The answer is. We really that active in the -- in."

" Work on a bill that passed the house that said that CEO compensation. In the a couple of the other top people. Has to be subjected to wake shareholder vote invite remote that we herald vote and they have to include in that vote. Retirement benefits and if they have any provisions. For if they make money and get opponent. Today get -- on bonus when they when they moved the money that. So that's the other thing and the third. I would hope that would be prosecuted and some of these cases where there would. To put but -- and I thought they did put a bill through the which would frankly given the Alternative Minimum Tax on. A lot of people here who about it it would it be that the bar metric tax structure. And instead really the the attacks on what we -- carried interest. For the hedge funds -- they pay at the compact a great enough capital gains rate for income that they get that I think the boot to the best way to do that to a protective."

" I hope this also -- extends to those real estate agents and mortgage brokers who actually. Falsified applications. For a well let individual."

" Because you need to get prosecuted that they have this problem for. And finish to the prosecuted. It's hard to prosecute crime without witnesses. Part of the problem it isn't much beyond about that in many cases. The borrower which fully complicit in the fraud. And it would be very hard to punish. The -- and not the borrower. If only because the bar -- probably be advised not just any and a positive giving them all immunity and not a hundred federation can turn anybody who doesn't. But they're there. There are investigations going forward there -- a big Justice Department. Sort of thing I've been actively could be but nobody thought about immunized -- of people from from -- break."

" And -- taxes only perspective. You know those people like the guy from countrywide who walked away with all of this money. And hope these people who basically was doing all this type of greed is going to be way to recoup that money from them."

" probably wouldn't at no point having it. You know break. I would -- thing but that what you do. Kitty that you can show criminal behavior. What I take a back there are civil lawsuit. And people can bring several relatives in some cases. And that would be civil out of everything we -- above the business community complained. That only cities' assuming. The quip. The most significant look through an America in that area businesses doing the business. And what you have are there going to be normal work group of investors. Who bought stuff from countrywide suing countrywide general."

" I have -- pop pop pop policy question here. If you. Won't listen to mr. Greenspan in mr. -- that it. They have both a concern at reflation. And up. I believe. One of the ways we got into this is mr. Greenspan who loves so much money in the that created inflation the housing market that wasn't real. Now mr. Ben Bernanke like tomorrow they claim he's going to lower interest rates when you low interest rates to create inflation. And now now they creating inflation in the AA agricultural market in the the energy markets. And and where I'm getting confuses if you look at it capitalism. That the way supposed to work if you if you -- create these places you'll bring prices down. But we have two people that are in control of the Federal Reserve -- bank that wants inflation. And in. So like I can't understand why why they are into the operation mode and just one other thing and they have no concern are the currency. Because you don't you study history. And and you look at the it's -- Soviet Union and in Japan to Europe Europe Germany before war would suit you had inflation in the it because it. Currency would whistle because they they Rhode you don't mention so much about it and in the other thing."

" Third. That the Fed reserve looks like they well -- bread -- earned a Buddhist country. First you're right hyper inflation can be a problem. I don't think we are in the position of Germany between the war. They -- one they would it was very punitive. Settlement so yes and fight through the problem right. I don't think we've we've fainting like the threat that you storm in and that -- our republic Germany or. Where secondly. Is that the trade off here. And on the hall I have supported. Many -- I don't think. The housing price inflation which caused by the level of interest rates. Bill problems. In pool of money being available. That we're not subject to regulation. Being available alone don't have I think most the other causes. The priority -- rate cut trade deficit the money that was accumulated debt and elsewhere in the world and the the other side -- visited. If you focus single mindedly. And just you play carrier -- great. Then you're gonna get I do believe we get more unemployment if you if you bring goes down. So -- I think the clintons. The the bubble world grip on -- voting -- about fueled by the way to record that you want the ability to -- with a look at. And you knew that there is something that you talk about that the the impact in -- I think it is reasonable look at the extent to which. Financial. Activity. In the futures market. Has that contributed to some increasing troop right that -- basically in real phenomenon. But I do think that there may be yet it financial factor that goes up quickly but but fundamentally I do not think he would be good idea to work. Reduce -- that's what -- critic Andrew Greenspan it. I would. I was actually more active regulation. I think that's the BA in micro. Respond I don't want to see. A reduction in employment economic activity as a way to get rid of the problem."

" I just that that. What I know. Both the Fed in general and and Ben Bernanke particulars that the the example of Japan hangs heavily over them the what we saw in Japan in the nineties was that they. Got behind the curve they were concerned about inflation they were slow to cut interest rates and by the time they realized that that was not their problem. They've got -- situation weird deflation. They've got built into people's expectations. And we are cutting the interest rate their equivalent of the Fed funds rate was reduced all the way to zero. And it wasn't enough and they found that of this track with moderate policy having nothing more to do. Know of action and the Fed study that intensively and reached a conclusion that the way you avoid that is by do you have about a bursting verbally respond aggressively. And try to get ahead of it which is what's happening now that may be -- but there's it's not it's not some lack of understanding of history it's a it's a very acute awareness of recent history they've. They've got the Specter of Japan. Hanging over them they believe that in 2002 we had a near Japan experience here in the United States. And and they're desperately afraid of that and there. -- errors they're starting get really nervous about food and fuel but they're but they're still also really worried about deflation."

" You just what you know it every reaction has account react now and are you concerned about the currency fall fall fall fall -- for the army they only respond to the last guy they brilliance and got it from private property. I wish. It reminded by those who were -- I wish the European Central Bank."

" Would be a little. Let rigid in insisting on keeping it interest rates up. Part of the problem is that there isn't great priority now in America it's great to European it is great that contributing bit. The single biggest impact in our currency has been -- bureau. And that's. That I do think we got we McCarthy who is make. Be to be some countries like China that it wished to body dedicate it wasn't we've got -- different adjustment does not come in the right place."

" In the 1980s President Reagan. Spent more than than he took in and that the federal budget. And it took and we found that the interest rates went up higher and and the drops. -- lost. And took several years to recover from that. Now we have Harvard Business School. Educated president who is almost doing the same thing we have a deficit and and why aren't things worse than they are that that the momentum what are your views on deficit spending."

" Well I think. But the analogy between the government and how about a -- hole deficit spending can be very useful. I think the problem with the -- of term. Budget deficit that we are -- remember when. George -- took office. As a result of think it Bill Clinton did not and the republic of some of which I thought went too far in some areas. But and part of -- couldn't tax increases that I voted for 93 which we're very progressive. Reasonably progressive and other thing. In 2001 Alan Greenspan fear was that we were going to run out of national debt. Because we didn't have national daddy couldn't do monetary policy agreement said who you who needed did not get down to zero in the debt and then. Two things happened first yard -- put through. Tax -- beyond what or reasonable I think some. Tax cutting aid to the middle income people it to the other one would read about the time and then came the murders of 2001. And and the need to respond. The response I supported like Afghanistan and this -- that Homeland Security probably respond to Homeland Security -- want to rock and excessive. Go to college. The first time in American history a combination of two wars and five attack. Which put put forth and yet those are having I think long term negative economic market because -- by the way. And short term. Our ability to respond to the current recession is constrained. By the terrible -- which that we were not in such a terrible deficit situation. Going forward that I think we -- responded more rigorously intent of the -- they may have pulled that I ugly. That would have -- idea -- drugs so I I don't think it was a bomb them but there are interest. If we put again on January of nineteen two dozen ninth to withdraw from Iraq. Costing well over 100 billion. -- tax cut this short foot put through expire. For income over 200000. Who would then in a a difficult situation but not extreme."

" And be very clear. Social Security is not in crisis. As we've stated today so food security is taking in more money and -- ago. It will then if it gets credit for all the interest be okay it will start to run into trouble. At the current -- In 2041. To that point to that would put an upbeat on and 102 foot but they're going to worry about. At some point. Beginning in 2030. It may be that some adjustment would be needs some increase in the fact will make its generous but the the no -- About the so that there is don't don't regret that -- the Medicare. Credited only because Medicare is part of the American health system that an American health system crisis. Like neither one though could be victimized by yet to be scapegoat in this regard."

" Actually I want to follow up on the question with regard to deflation. You mentioned congressman the the current account deficit. On the federal level and and when you consider that tens of trillions of dollars that we as American citizens borrowed. In our role as consumer patriots. I wonder. If if if anyone has calculated the impact with of the withdrawal from those borrowings from the economy going -- both on -- national and global level. And is it it is -- prospect for the fairly severe deflationary environment."

" The -- that we've been actually pleasantly surprised. That are admitted Edna parker yeah I mean this -- problem that we we Americans do not save enough not remotely enough. And we'd be released to save a lot more. -- it's it's like Saint Augustine O lord make it -- continent but not yet. We hope people don't start saving reasonable amounts to quickly because with the economy can't handle it we we need that consumer spending."

" But I don't think look we spend -- go back and making Iraq. If we would pull out of Iraq and that we would do one thing. Sometimes we give us -- too little credit I am prepared to be triumphant about the end of the Cold War but they don't have very good thing. But because -- and I do I think we need to continue to build weapons to defeat them. We are spending. At least over -- Iraq. We spent you're the military and the rest of the world put together that. The -- throughout put together it's not going to attack us. And if they did we'd be pretty good shape. We have weapons that we are building that have one very curious what they have no enemy. A weapon could have happened and -- so yeah we do spend too much. The notion that we we would get Iraq and make military spending reasonable we could we could tether on -- we need to start talking about them more."

" Take two more questions so. People who -- ordinary income tax electronically are already doing their rebates. Arm was the reading a good idea and -- have a percent of whom are beneficial effect."

" I think your rebate with. A better idea than nothing -- better write it in the remake of the human history December 7. Let him and people vote to convene a meeting of some economists. Larry Summers down blinder who. From John Sweeney. Some people. Forum forum very. Segment -- Democrat but people were britney's people as well and they said it troubling is coming you better start thinking about a stimulus package. -- at a time the president was. In principally triumphant about at all so we started doing that the Democrats began to put one together. Which included. The number one. Stimulant which is unemployment compensation the most logical one some increase in food stamps and -- with who fund -- We then got into. Detroit went to speak -- negotiate with the president. And granted -- great resistance and evening but that they started out with -- to make tax cut permanent. That the Pope had been negotiated I think the best you can go to we went to -- that it is true that there rebate and they were better ways to lose and rebate. Which he should get credit for the progressive -- through the roommate. We could run for people -- from 3000 to 75000. -- people don't pay taxes. You get some -- I would have liked to have done it better we will try to have a second stimulus package that -- every conduct -- they can some -- to the state. We put a bill through our committee this week. That would provide some very targeted date to this -- mainly by giving money to the state to buy up property that Brodie been foreclosed. Put that back and attacked -- and in many cases it's so useful ways like before grounding out in for the employees who work in the city. Et cetera. After we're helping I think it would help -- I don't think. People should look you think people going to run spend money you know I think it invite if you look at the very few people getting it I think it can't be it will be helpful in. Bringing spending cutbacks that would otherwise have come when you're talking about people making 405060000. -- economy. I think. Obama -- spent and they will spend it. Not cutting back and spending that they otherwise would have done so would have preferred. A more structured and targeted one but I think this is better than nothing. I think last question here."

" Regarding your comment on health care costs. And since seven out of ten people pass each year of chronic diseases in this country I know that you had cosponsored the speaker Pelosi bill. HR 3643. The coordinated environmental public health network act of 2007. -- if this does pass it will save millions of lives and also. Millions of dollars in health care costs could you please elaborate on the current status of this critically important bill."

" ID to be honest -- can't tell you where that village. As the chairman of the committee I know on any given day more and more and more about nationalist movements and a lot about where to go and -- I do run into the -- The difference between the two parties you know. Parties are a much more point. American people -- credit for we have great difference in the party that they're -- democracy has -- world didn't agree with didn't exist without political party. And it's no commitment something wrong with partisanship. If it's done right publicly. But. One of the biggest differences between the parties that do with health care. And whether or not need to have increased public sector role what do you do an entirely privately given the current state of divided government. I am afraid that we cannot vote for any significant advantages in our health care system until and unless that changes. If you get a democratic president elected in 2008. The country you're talking about will go forward. If not that won't."