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

" Here the hottest concerts. Without ever. NPR music webcast for hundreds of shows from the nation's top music venues. -- on demand that NPR music dot org. This is the WGBH forum --"

" And the sound economic uncertainty. I'm reminded of a speech given in 1962. -- 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. -- late -- Public responsibility. Of about. And -- to -- that it's obvious and statutory duty. A logical concern for economic cap. If anything should happen. Then confidence might well be weakened. And a dangerous -- nation we increase. This is the true issue of confidence. Trend. First meeting present problems would appreciate. This is the moment to stop. People landed -- 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 and 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 a Florida vote. And they're standing tip toe in the water he quips the rising tide goes up your news. 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 wonk. 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 -- wrote in the wake of the insider -- 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 law that 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 -- 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 -- I was I was thinking about. As has -- 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 of sub prime. But they did the president would have the time was contained in Mosul contained and now we're sort of you know. -- on the are wondering if -- how we get here coming into this mess but it."

" Your your exactly right about cake in November of 2006 for the Democrats want I became the chairman in waiting of the committee and I would still used 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 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. Thank. Mayor Bloomberg took command McKenzie report and of course. We are now in exactly the opposite direction 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 did -- Reagan gets hailed for an idea let's remember his central idea. His 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 -- today but it's."

" Question. Couple of branch -- 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. From -- that there is this tendency. For innovation in the private sector. To flourish and at first to be very welcome and -- to a lot of good. Whether it's the large industrial enterprises late nineteenth century. Whether the stock market in the bid in the in the middle one 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. If if a normal kind of economic growth come -- so averages so overextended. That the consequences. Become --"

" 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 -- too little too long. We really stand --"

" I. -- you said correctly people were telling us over a year ago there's going to be contained. Well in fact that is exactly didn't happen that you could take that was the key issue because. It was not just the housing bubble that attracted people. -- involved -- could have been made the then record them. Now meet that you -- some beautiful thought that 100% guaranteed student loans can't -- on the market so clearly what happens to the housing. I mean essentially. People who are a lot of they may have a lot of investors they could debate housing market but I get burned by that and then decide to make some that especially that could make quicker without thinking just totally. Poison than the rest and what happened once. People I think to break a fairly simple thing in retrospect. Until maybe what twentieth thirty years ago twenty years ago. Learned what made. -- institution that expected to be repaid. You went -- people and they repaid you. And then you gratitude securitization. What you -- money to people who sold the -- won't it would -- thanks to technology. Split up so -- kept track of it and we crossed the went -- right hip that we would total pivotal we're we have these substitute for that we have risk 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 radiate -- And that there are part of -- I think essentially the public there were 200 more than they do more than anybody new film making things up is going to -- but who -- but the key is. That is that the problem it started out it in more -- being made it couldn't have been made. Multiplied throughout the system and it turned out again. The -- but none of our relationship. -- war inherent discipline. We took that to to put for granted and what we gonna to want this exotica and securitization. We have found something to."

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

" owner and Biotech company at first."

" It was a little credit -- one of the indictment -- one time it that we made a mistake by equating."

" Providing decent housing for people with submitting your going to be helping it would be -- 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 victory over the program to build -- and not thought to 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 problem in August and the advocacy -- about the from one -- said that -- my wife and I -- couldn't find another place to -- 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 -- go back here. True. Another great it's everything 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 the media 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 one. But nobody was restraining anybody's book from doing any of."

" Sorry can't resist 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. -- two point for the market shall have been very."

" Well that's. Don't get it right nobody saw this coming -- I'm sure well I believe that people -- popular vote and very. -- about the -- I don't remember anybody seen that can lead to this agreed. But got a good I don't think anybody registered certainly not the people were perpetrated. The extent to which it don't they know these things the extent to take over leveraged."

" The extent to which they had open your big if you connect -- otherworldly I think they 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 pat you know. The they're really economy is in the -- but the at this point we'll see where it goes from here but Brett. 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 Mets problem using them are and the suddenly paying higher interest rates because of of the effects of some."

" I think it's it is. And and it doesn't for the -- does focus on the absence of regulation because what again what happens. The financial community. Was allowed to. Who would -- work to -- with no government intervention affected city you're never gonna we're being told we need less government invention and some good. These people designed -- sense of I've been terrible but somebody you know. There are some smart people don't -- 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 apparently they -- this. Holy interconnected terribly fragile world in which -- one thing's gonna go read. Other people a bit and then what confidence from being. Coming -- 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 did. Because I we're gonna bounce right about that mean there is a view that says that these. That that there may actually be substantial over reaction right now -- that it. The credit default swaps are valued. Too little -- that there's actually."

" You by the given an overreaction to having the ability. You -- to people who who who made a 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. Because 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 the validity is important vote in national -- that -- and we we have on. But senator Kennedy's work that we have 100% guarantee federal federally guaranteed -- won't we can't sell. You know if you -- back is it a crazy yep it is my bond backed by the flip taxing power of the city and the state. Never fail. They never -- and acknowledge that despite that they were told by yet. The market when you mitigating current now requiring a municipal if you were of a perfect credit on the body. Default encourage -- 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 -- I think that have to paper uninjured but then any 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 cities and -- over this country paying higher interest rates. To burn bridges and school. Because that and encouragement purple investment and they went out so that's putting him over no reaction publishing. The city a Boston -- the steady California because there. -- to make stupid decisions."

" And link in an -- for everybody knows policy US where it is that's and then it's a credit card debt obligation -- 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 packaged. And -- and the and that's another NN -- and he's -- it'll be yet."

" Whether she -- and that the one that would have been very good and others. Wednesday we asked him some advice you can -- these weapons rule. That you shouldn't own anything you don't understand that people feel bad that I understand that he -- the people report that did not definitive -- that dimension it. Obama said my nerves will I think I don't understand so we Brooklyn company and I tonight we -- the stuff we 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."

" 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 got 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 blank today and -- how. Right -- that that's a correction and this content by two hopefully good thing because people were priced out of -- market about the how can that incumbent -- right economic crisis how we get what Detroit can -- no work. But you're never go we will return to America and deregulate because we're -- wounded defeat we've -- I'm going to be and and and instead he wound up unless you're exporting their mortgages because -- bank failures in in interviewing and and it it is because the management. Wrapped up together. Incredibly understood waging bets on which it."

" I'm okay now there's. One minute 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 -- what should. Could be done."

" The US together a very good point about. I never bifurcated view of book about being spent. And I will say. I haven'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 would think 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 is a mother of from Clinton appointee. One to bring down the economy because -- goes under Bill Clinton unemployment openly that the three point 9% and it did not cause 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 -- the Federal Reserve and also big bank Reagan 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 or power that festival called home. Owner equity protection act that gives the Federal Reserve the power to regulate -- limited member Republican. We -- if -- like banks which were regulated like like Reagan. Have not been the main source of the sub prime crisis had been mortgages that came from people outside -- 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 a former member. 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 who do they get that we'll see an article about how the -- from meat -- back. And trying to get him to cut back and think I thought we're -- too weak but Alan Greenspan explicitly refused to do another example the federal trade act. Gives the Federal Reserve the power to probably eight code of unfair and deceptive practices in the banking area know a few years ago on the quick. The federal bank regulated preempted almost worse -- console wars. If they were evolving national bank so yeah they can hear those words stricken. I would today that control encouraging that if you -- the state -- it. Shouldn't you be putting something in its present he -- your right but it's up to the Fed because they have the right to promulgate the tone that I would brought. I took the ground when he said that's right erupted going to spend would you do that he said no further to a very quickly that I think that -- 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 -- have -- to the dot -- issue. He even tried to do anything about stock markets it is great presidential always love. Have to encourages I can let the if you can continue -- can cause a recession. And when that would -- People which -- well okay he never would use authority. In the regulatory area to try and prevent the imputed committee he views."

" So what -- than it had been and you wouldn't try to establish a code of conduct for sub prime lending yes it's worth it -- do what we proud that we --"

" Don't have 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 heard the 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 -- she had applied to bankers. And make them look like everybody as -- 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 end and we we have to develop you have to -- radical principle that Alan Greenspan -- imposed on mortgage derivatives. Do not lend money to people if they can't pay it back. Do not to get -- of the factory work than the don't take I don't know let's let's I'm not that's -- a lot less than what human being. -- you tell people how much going to cost. -- and it should I don't like taxes. If you -- going to give them and -- amount to mute and then goes up in the third year. And 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 would that -- 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 we agreed to. Do you with a surprising thing was that this up front right just -- heavily reverberating."

" If and -- originated followed the rules that the banks have problem. We will not have a sub prime crisis we would have people going -- moderate prices go up. But the percentage of the -- upon all over the -- become from the yet. From the Reagan effectively done brilliantly to wait for through all that the people who originated loans to brokers and other. In the state of the state improbable don't want you to they could've done to regulate it didn't. Oracle -- group 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 regulated walk -- because we we have to make goes up. But there -- proven ability 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 --"

" So. You didn't have to counter argument is look if there was a housing people got so excited about housing and that that the they're very normal 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 technology and it. Nobody that we can take up sort. The impact it was going to happen if you're going for coming -- just -- an -- I mean if -- coming -- everywhere you sent somebody. That prediction but I think -- hit 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. My bank -- to heightening regulate. Banks have all kinds of little -- to preserve capital they -- get exactly as it -- second -- different modes that it if only the regulator entity known thanks for credit unions thrifts had made them all if you look at the candidates applying that you don't have a crisis you would read something creek but it would have been the -- read you an example -- I noticed -- Just about a month ago. Reorganized. Again and they had a mortgage division that originated -- and then a mortgage division that we'll begin to reduce it by other people. And they said that the morning to -- 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 that to get it repay it in fact the governor's -- and then make it into. These CEO. That you described and I I really do believe that -- poorly regulated entities that make subprime -- that -- the percentage of failure we wouldn't be the secret."

" The argument -- that if only regulated -- benefit just a lot less lending and home ownership would have been. You know we wouldn't -- in promoting homeownership."

" Right 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 think we didn't they probably behind it. A -- temporary homeowners there was a kind of underwear it I don't know into credit time care good to be."

" Appropriate yeah I don't I could think it's about that. The problem is this notion that everybody could be homework and that that would go to Rick. That everybody could go home yet from her and I wish I could be born and gain weight but the fact that. Don't think people -- a perfect people in a -- who -- that we could obliterate that. That's up on the part of a large part of the subprime problem. The worst part -- came from the refinancing because their older people particularly in urban areas. -- And then some trouble he came in persuaded that -- very often and urban women took refinanced our home. It would no need for her to do what he had never -- he can make. And they wound up you know but even put -- gesture of of people have said look. The ball tonight the bill we passed that you but the rules the Fed is talking about every today you'd type that says. -- know people think the Fed is taking up too much. And people said 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 getting people to -- delicate 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 back 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 give us this administration -- doesn't go with -- that if we in the tactic continuing racial and ethnic discrimination that we suffer from. We -- here in the in the Kennedy library my -- coming -- Kennedy in the great piece of legislating about fifteen years ago. And got through an amendment is something called the whole building just -- correct. I would. Objections of many in the industry and give -- statistics. On well. Great that the city and I know we're here to be like it over your meth they did a study that -- that if you were right. -- upper middle class African American. You -- like -- at a sub prime loan and medication that if you work on a working class white person. So there in the region who have brought to Oklahoma look at what they are racial and ethnic unfinished. Narrowing the in the we try to work on our committee and that's the real or manufactured housing because we can 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 can reach people who can economically afford at this test."

" One of the things I've been getting a lot. Hearing a -- 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 that the that the the letters were forced into equities."

" The community events that we've you know with the bill -- In the semi we've proxmire we've been given the bank committee who put it through I was there when -- when it was done. Of which I can say that -- tried to get comfortable with the what they did but without an excellent ability to send us. If you are -- commitment to continue taking the project an area you've got some obligation to put some of that money back into the area. It is not to work -- open all general it's generally forced by the way only when you want to -- People here remember we going to be hearing when the Bank of America brought me and we were able to use that and -- Paternity to get some commitments at a Bank of America that help Gaza 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 Raphael and -- privilege and all the -- you'll remember. Wilson -- Clinton headed to his character apparently. Very politically incorrect Geraldine with a yet. Offended that my. With his -- guilty but heard defense every time he was accused of some that he was the devil made me do it. And -- you could double for these people that doesn't make them do it kind of reputation first of all the CEO -- does not apply. To the people who make 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 -- and we. Want to cover it but the community reinvestment act. Kevin thanks but didn't cover credit union which we think encoded into 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 in the eighties under Reagan who -- both responsible they would have -- they've given responsibility of the Federal Reserve board -- government. As -- gramley who women in woods under Clinton. Larry Lindsay with the consumer affairs -- Undo. Under the under Reagan. He really and Orlando which I have put into the record and it 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 evidence for that and it's particularly syndicate. That the great poker of them you know that a -- 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. -- Much of his activity wouldn't covered by this field and you come by nationwide outbreak and renewed a public -- not covering. Entities that. Like that and again there was. Zero evidence for the Shia Reagan differently does not get induce 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 help put through the building Brit week party built I think. Remove regulation when it could have been there in terms of investment bank -- 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 trying to kill the whole community reinvestment act they would go to hear evidence. That it -- the problem and we'll go back again whether -- country right or anybody -- And mr. Reynolds -- affirmative action not presumably yeah community reinvestment act but again as to affirmative action. The hardball -- direct public particularly they said. Hopefully we we we gave all these loans to African American Hispanic -- the whole broad stroke direct edit show and that's a large number of Hispanics and African Americans got these sub prime loan. But it's not that an efficient Q where can they would've gotten here Romo it is that a fifty to a group that -- got prime world. So it was a disproportionate. Racial element of the sub prime loan but it came from that being discriminated against -- put into that category resident and being great stuff."

" Not a lot of people I was would qualify -- prime loans got steered into sub prime and just proportionally those would have -- an American Hispanic. That's what --"

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

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

" When I do agree that. Building. I'd be used in front of an argument that renewed. To restrict affordable there's no question about it but. The notion that this -- this crisis is. -- third in the first place if zoning. Restrictions because I have infected. Why -- prices drop because only good thing right the media took it as if if it's only restricting the supply of housing. Great -- driving going to be going up and popular target don't -- quite -- And running at ninety here. Republicans not getting any happy about a added to integrate into. It kind of frustration of -- trying to get affordable housing bill that there was this. -- And we broke out of affordable housing nitrogen to believe that people like Mike -- 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 of either talking that was built with. Restrictions on who could -- forty years ago is now eligible to vote 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. This is the very shady types of people know four yet if someone no doubt that put the want to -- That complained about this housing in the first place have now found so desirable that a problem that went out into poor people without even want him to fill the first place."

" I actually actually know some of -- makes a living as a consultant have been hoping developers through that process of taking the computer making the stop on affordable anyway. I'm yeah I'm. If you don't have the fifth the other -- you'd. Somewhat surprisingly. Drinks and it has always 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 that was it. It's great to tune in then banks. Content stock market -- and we'd all agree that that was the thing which financial innovation of the last. Twenty years. -- what 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 Obama -- constructive or want 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. Because it's -- and that our mortgages in the it is in the market. So that the originated and then make them. 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 has been has been. Beautiful."

" 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 Freddie that essentially. At a business and they said -- through television beat beat of quasi public and they are and that now the administration has done a complete reversal and pushing. For 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 Hud could have something that -- okay. What do you think is 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 parade there weren't there to question 11 -- the immediate in the financial meltdown. -- I saw progress first there are you think well that's what I think. That Ben Bernanke that actually. Been -- and -- taking some flak from some people but. Death book which we mentioned. Monday that we heat 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 turns -- other. Three to thirty billion dollar mark never heard of and things like metropolitan museum in and state agencies -- so through it and and it 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 -- commission. To allow it to be too good on their own. Paper. We have -- it would have been hurt even worth. There have been efforts to -- Like government to to -- and I think yeah the Federal Reserve has done the right thing there again I would. The problem had been written 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 for another quasi public entity that we we we have at the Federal Reserve you're getting my money in India in the short term. What I hope we will have it in the following. Ever worked with senator Dodd and inverted structure -- it and are at risk of further undercutting his ability. To do things youthful secretary person. Secretary person is second treasury. I think there's been a fraction Poland 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. -- not simply to make the tax cuts of 2001 permanent immediately rather than have them as well that was. A major service but what we're trying to do with it will open pass legislation that. -- no -- to know who -- the moment had not been rendered but the people who. But he 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 affect revenue to people they invested to make your money not to become an -- of vacant property in Cleveland. Should fit -- Depressed property -- 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 -- guaranteeing. There. Doom we're -- if the people can pay them. We think that helps stabilize -- and then have observed it to a secular market by Fannie and Freddie so what we talk about the package of legislation. That would give holders. The year in sensitive. True except that message hopefully stabilize the situation that we think by that that we can avert. Many hundreds of thousands and maybe make -- we don't we will open to a foreclosures. Get some money back into the market I do think if that happened to honor roll because the sub prime market had been the source of the problem some kind of confidence back there we think. Couldn't help but again that it -- to dig up. The question most know in many kicking vote out of the trip but we would hope that it -- dizzying rate."

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

" Why and why hasn't done anyway doing drugs 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 -- well -- better 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 it people having been burned by buying -- that are now trying regularly fail if -- child you know catches just don't get burned. He won't purchased over again but now we've -- people -- the refrigerator the purpose of the media. That's because that's good that's a problem that there were reacting to the left and -- what we're trying to do it okay guys. Come back and we'll put it I -- it probably psychological. It is okay so that if you've maybe got a critical mass where if if you know that other people doing it. It it it it could be helpful and we do think you have. Having the -- they give the guarantee that's the other piece of it yet we -- we talking about the it could be the gratuitous now what what we are doing and the administration is moving in the direction. Including the quite curious something the FHA acknowledge that it does mean that the FHA 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 that 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 those who 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 epic today they'll say well okay I'll do that but it may still be stuck with them until."

" At the risk of of excessive. Long business history that what this made me think of this the in my in my career and I did a lot of -- international financial crises -- in very grateful that this time there's a financial crisis that I can kiss FM the flight. 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 fiftieth of the eighties which are not -- have been as successful as they work."

" If the numbers like Howard news that apparently was like arguing the part of it we tried to do with. My only low income countries and it was kind of an excuse me that."

" New Mexico that was was should not have made it fundamental difference there's a twitch but somehow change -- the atmosphere total but I do think in the case. That there aren't that -- we're we're but there -- 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 probably didn't work that the people have the money if you met him. -- We -- then he's the criteria."

" By which the FCK guarantee that when out of here vacated say we're going to root -- differently now had to move. If you read the -- you can come with them and ask them to make it -- didn't -- placate. And we accept that we have some some increase in the deplorable but it you'd you'd expect it to them -- 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 more out there are no taxpayer dollars and that. We I think that once you've done that. We won't make it might going to Europe that completion get -- 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 do -- got what do I know what it's worth. It's to the problem."

" How much to think the what what do you think of the other stuff that 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 -- right but we're making him up going to be -- an -- and I don't think Bernanke's. Moving in the right direction I think maybe I really put simply. I quote as they -- with a all of it -- him to be critical of any of them but people forget. -- the country can be more elegant than the problem it is for it yourself and you have to keep in mind the words of one of my favorite twentieth century philosophers. Penny on the -- you're -- compared to what. And I think that it got to be. The keystone of public policy today because I like what would barely know about this third that you know over the counter parties 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 the audit everybody and they -- if they wish. Sure did then they would short of the people you get it downward cycle and it was a well. Doesn't argued that -- even -- the -- that we -- from about the other people who borrowed -- who could devote that much money. There are people who don't know how for the children and family than with reasonable. But probably going to help that 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's probably true. Make the situation where -- all the while I'm prepared about the total lack of regulation in the economy. About -- irresponsible people who take about the economy. -- 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 -- question -- We need to."

" But I think bank regulation on the whole worked well. We haven't had enormous number of bank failures and in the end and to be -- to the bank would probably -- group and of the it because they went outside of banking. In new investment bank. I think that's essentially what we need to say that we're both in the financial market and imagine that that -- beat -- act. We used 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've 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 -- 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 say to the investment houses -- much money is the deal festival. Everything that's going to balance. You gotta you gotta let people know that you are happy viability. Secondly. You gotta get examined the way banks do third. You weren't going to have to have the requirement that a bank now. Whatever you learn that might make it have to keep a fair amount of money at -- as a reserve against bedroom. The investment -- don't have to do that and they don't pretend to be put much more and everything get investment it was 35 to one. In terms of what they hope because. We we the -- 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 to help you make a lot of money. If you take it with and it doesn't pay off you don't have a -- 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 a very. 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 just have to. Right now the individual. Institutions haven't seen -- there were paying a penalty for failure at Philips decided that the penalty. At."

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

" 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 path. He -- suggestions as to what we can do on both those cases."

" Well stocked with food -- the -- Did predicted. Question would be welcome news and talk about -- we were talking about if -- traffic for the world I think with home we I don't plan have a hearing him in the -- I think. 1 thing I am persuaded -- 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 this set of economic."

" If it's. The truck what what I say justice is it's it's startling actually how little. Political movement there's been on that despite the -- that that the power of the farm state -- the the fact that -- we've been saying 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 subsidy for diners instead of for this stuff. Okay but -- real problem."

" I always say well that's right and become an Iowa. Not just that the time this. And went to that to tell our good friends in New Hampshire and Iowa that privileged position is over they have flood problem. You know the number could that be good to have. Those -- people and New Hampshire. And all the other people and it could. Florida and Michigan could be in the buying it and double but it -- That ethanol it is it is an example in our -- talking in general let me say about the policy. The greatest hypocrisy in that you're American politics. Come from my conservative friend who represented agricultural district. And preach to what whether it comes to the minimum wage of may -- union or 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 say. Of Friedrich acting what everybody -- know that the -- to agriculture. And not any karma and what -- we will not send money. At 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 legislator who was the a I didn't fit and I have been doing -- currency that. 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 -- that -- it --"

" I understand you want us to ask short questions that road. Yeah that's correct look at. These secondary market for mortgages has never. An issue you have very. Well collateralized presidential -- of these. 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 greed can -- and 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 Forsberg this. 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 -- 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 from buffalo one of the major. Evidence that we've Chris Dodd wasn't well. The problem it. From the legislative standpoint. You can sometimes prevent executives and doing bad things obviously not always. Which would almost never force them to do good things but the regulatory authority -- there it just wasn't -- but I do believe. And I think what the lesson we learn now it. And it had to do with the -- we were told don't worry about the quality. Of the initial. Decision because 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 -- risk management technique can -- do would be the harm. We need to build a deterrent to make it a mistake from the Fred quite as they did we did 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 loan 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 it was only. Viable under the assumption that the home prices go up and that 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."

" What 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 what can be done. It in that regard Senator McCain shut 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 -- yes and no crisis 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 a -- right down and it would immediately give confidence of people then eventually people are going to be paying these loans that it seems like 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 -- this yeah that would be good but. These alone public private individuals government can't simply decree that people -- sign a contract that timing and X percent now have to take X minus 4%. You just can't do that I tried to look."

" are also a fair number of virus and anti that was it. We have had a lot of a lot of remarks from borrowers."

" That and we got that -- don't think you need to do to -- 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 hit 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 -- to the question of the the amount but the fundamental -- you cannot decreed. But laws that people. That you can't open the five -- Betsy duke duke it didn't would be one of the problem I'm not -- Great friend -- 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 -- we're 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. That's well and don't."

" An out in -- one to prove the only -- Iraqi prime -- this eliminates all of the aspect."

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

" That's -- actually would have thought that that you cut could -- 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 -- you could say well. In emerging gate but it did for everybody. -- the other proposal we've got to sign it -- written. The the other proposal that would extend some good -- to beat everybody. Come from Martin Feldstein the former chairman of the council of economic -- under the Reagan straight and I put that went before."

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

" What can Canada about people who are 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 --"

" Rockets who think you read the book you read that -- We undercuts the very well think -- that --"

" Hello. -- the."

" No great public servant. But the military record charming story irrelevant but you know making vehicles better. During the 2000 at sixteen action. Some right -- 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 ever done. The chairman of the committee will be Charlie Rangel John Conyers and Barney Frank and I showed that. Something -- that Charlie and the fifth. They know Barney Frank with colored. We raise that -- hit in the first."

" Work on the bill that passed the house. That said that CEO compensation. In the a couple of the other top people. Has to be subjected to -- shareholder vote and -- vote that we go to vote and they have to include in that vote. Retirement benefits and if they have any provisions. Floor if they make money and get opponent today get -- on bonus when they when they -- 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 was. 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 for they -- that the compact raise enough capital gains rate for income that they get that I think the boot of 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 -- didn't you believe that you need to get prosecuted that they have this problem. And finish to the prosecutor. It's hard to prosecute crime without witnesses. Part of the problem it isn't much beyond about it in many cases. The borrower which fully complicit in the fraud. And it would be very hard to punish. The -- lender and not the borrower. If only because the bar -- probably be it might not just any and a positive giving them all immunity and not a hundred federation could -- we've got to. But they're there. There are investigations going forward -- a big Justice Department. -- thing I've been actively could be but nobody thought about immunized -- people who from from --"

" 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 on the side of greed is going to be way to recoup that money from --"

" Probably it at no point having it. You know break. -- I worked -- things but that what you do. Kitty that you can show criminal behavior or take a back there are civil lawsuit. And people can bring some liberal groups in some cases. And that would be civil look at everything we go above the business community complains. That all the citizens -- showing me the -- 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 got stuff from countrywide suing countrywide general."

" I have -- out pop pop pop policy question here. If you. Will listen to mr. Greenspan in mr. -- that it. They -- both a concern at the place and 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 -- what I'm getting confuses if you look at it capitalism. That the way supposed to work if you he's also create the places you'll bring prices down. But we have two people that are in control of the Federal Reserve blame bank that wants inflation. And in. So like I can't understand why why they are into the operation mode in 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 the war would suit you had inflation in the it because it. Currency would whistle because they they Rhode you know -- so much about it and in the other thing."

" Third. That the Fed reserve looks like they -- common -- I've learned a Buddhist country first you're right hyperinflation 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 invite him to pop right. I don't think we've we've fainting like the threat that you've gone in in -- is -- our republic Germany or. Where secondly. Is that the trade -- 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 higher interest rate cut trade deficit the money that was accumulated debt and elsewhere in the world and the the other side of visited. If you focus single mindedly. And just you play carrier -- straight. 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 clothing that could upset about fueled by the way to an accord committed wanting to I think it's time -- to look at. They knew there is something that you talk about that the the impact in throughput. I think -- 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 practice that goes up quickly but but fundamentally I do not think it 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. The 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 it to 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 the cover of 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."

" To just what you know every reaction has account react now and are you concerned about the currency fall fall fall fall and flat -- ugly they only responded last I think he has got a problem on the property. I wish. It reminded by those who were -- I wish the European Central Bank."

" Would be a little. Let -- in insisting on keeping its interest -- 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 evocation of work and we've got some adjustment adjustment does not come in the right places."

" And 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 over 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 at the moment and what are your views on deficit spending."

" Well I think. Look you know between the government and how about a -- hole deficit spending can be very useful. I think the problem with the mental term. Budget deficit that we are encouraged remember when that 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 -- but it 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 agreements -- who you who needed did not get down to zero in the debt and then. Two things happened hurt you would put put through. Tax -- beyond what were 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 -- security probably respond to Homeland Security -- want to rock and excessive. So what you've got like. 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 budget that we can that we were not in such a terrible deficit situation. Going forward that I think we -- responded more vigorously intent of the least they may have propose that I ugly. That would have an idea for drugs so I I don't think it was a bomb them but there are interest. If we put in on January of nineteen two dozen ninth to withdraw from Iraq. Costing well over 100 billion. I believe that the tax cut this -- foot put through expire. For income over 200000. Who 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 pay now. It will then if we get credit for all the interest be okay it will start to run into trouble. At the current rate. In 2041. To according to that would put an upbeat on and 102 -- but they're going to worry about. At some point. Beginning in 2000. Thirty it may be that some adjustment would be needs some increase in the fact -- make it generous but the the no -- About the show that there is -- regret that -- the Medicare. -- only because Medicare is part of the American health system. There's 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. And 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 a 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 over -- he chaste and continent but not yet. We have the book 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 -- we spend let me go back -- Iraq. If we would pull out of Iraq and that we would do one thing. Sometimes we give -- 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 Soviet Union President Clinton plate and I don't I think we need to continue to build weapons to defeat them. We are spending. At least over -- 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 serious well they have no enemy. A weapon could have happened and be 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 are 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 -- I -- given the 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 applicable Democrat with. People who were britney's people as well. And they said it probably 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 the unemployment compensation the most logical one some increase in food stamps and written with who found them to actually. We then got into. Detroit and went to speak -- and negotiate with the president. And granted -- great resistance and evening but that they started out with -- to make tax cut permanent. The people -- negotiated I think the best you can go to we went to -- but it is true that there rebate and there -- better ways to lose in rebate. Which he should get credit for the progressive nature of the roommate. We could run for people -- from 3000 to 75000. I think people don't pay taxes. You get some rebate. I would have liked to have done it better we will try to have a second stimulus package that -- every conduct an important job they can some -- to the state. We put a bill through our committee this week. That would provide some very targeted date -- date may be by giving money to the state to buy up property that Brodie been foreclosed. Put that back -- role 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 -- invite if you look at the very few people getting it I think it can't be it will be helpful in. Of 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."

" I hate to be honest I 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 partly. I do under the -- The difference between the two parties you know. Parties are a much more -- American people would give them 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 -- something wrong with partisanship. If it's done right troubled me. But one of the biggest differences between the parties that do with health care. And whether or not need to have an 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."