for your time here i'm just before i got into my main line of questioning i was wondering if you could be of help in clearing up something that actually it's a public statement on the minority side web site from this committee that have to do with the the c p p program that's its origins and it says it contains among other things the same and that under pressure from the house democrats such as nancy pelosi and barney frank the bush secretary paulson bush treasury secretary paulson partially untrue the facts are we went to congress to get the tarp legislation our primary thrust was the purchase of illiquid assets that was really the source of the problem and that was our  strong intent we got additional flexibility after the legislation it was clear that the problem was continuing to get worse the facts were changing banks were failing around the world and and there was quite a problem we needed to move quickly to really put out the fire and the by far the best idea and the only way we could think of doing it was with this program it was not  a nationalization of the banks a matter of fact the program that we implemented when i was here had preferred stocks preferred stocks you know they don't vote there it was their minority positions and i have always said that this is something to be important to me nationalization but we did some things and a number of any kind of government intervention was not something i came to washington to do but it was better than the alternative but we switched gears and fortunately congress gave us the flexibility to do what we needed to do which was to keep prevent the american people from from really having a very serious problem thank you for clearing that up and also voted for the tarp authority recognised at the time that this was a very important feature of it that if things continue to get worse that the only thing you could do fast was a rapid capital injection and that this was an important element of it and thank you for clearing that up no i'm interested in exploring the principle that you seem to be bringing forth terms of that in times of systemic risk that there are conditions under which the shareholders  might be expected to take a bullet so to speak for the good of the overall financial system on the grounds that the firm like everyone else has much to lose if the financial system collapses and that moreover the threats from federal regulators are appropriate means of encouraging them to take that bullet is a reasonable though a little bit perhaps tilted characteristic characterization of your position on this i think that is not my characterization at all because we were very fortunate in this situation to have an alignment of interest here because i have no doubt what was in the best interest of the public want us to not have a bank america collapse not have rights and i was wondering if you see that there is a need for additional legal clarity in this area well i think it's a i think the more legal clarity we have the better everything but this i just want to come back to the math because i heard people discuss this a lot no one is ever dealt with as far as i've heard on the other side the basic issue show me a delaware court that after shareholders have voted has what a company get out of a merger by in past and so are other specific issues of legal clarity for example some sort of safe harbor for c e o s that act in ways that might be construed under normal times as being against their shareholders interests but because this is a time of systemic risk and have been given direct orders by the regulators trying to avert systemic risk you see any merit in that kind of something that i have it's a very complicated issue and it's one that i really don't feel have a good bit of disclosure on because the new york attorney general's in essence public now public testimony about what occurred with that the reason why we're having these hearings is about the ramifications for the financial industry going forward we want to make sure that government officials are really keeping what's what is appropriate and so that's why th now you've had a long history in the financial marketplace is chairman of goldman sachs and you know a couple of great quotes about your service and your actions on wall street  you know one quote that i think says a lot is jim citron column from september last year says describing you as a direct intense powerful serious competitive can do and frankly balti one of his former goldman executive committee did it committee member said quote hank hasn't changed at all since it goldman literally there's no question by financial analysts or reporters or this committee members about your capacity to finish a deal and i would think the president had any concerns about that when he when i offer you the job and you know another fortune magazine describe back in zero three as the investment community steel steel iest stealthiness power brokers we get the deal you have the capacity to get a deal done now as chairman of the federal i'm s chairman of the federal reserve ben bernanke he had a set different set of powers than you had as treasury secretary is that true absolutely so as secretary of the treasury did you have the statutory authority to fire the board of directors of bank of america ok no so in your testimony you say that you mention the possibility the federal reserve could remove management the board of and the board of bank of america if the bank invoked the maque clause so in essence you were carrying a message from the federal reserve is that a good way to characterize this well i would i would prefer to characterize it the way i had it characterized as earlier i had i had had a comprehensive conversation with ken lois and which i reaffirmed the support that he was going to receive from got the government because we are committed to every systemically important institution and that and that support is also fed right free like israel right and so we federal reserve lawyers that expressed a judgment that if he were to go ahead and do something like this in endanger his company merrill lynch and the system it would be it would be a lack of judgment and then i explained to him and i explained to him that the federal reserve had the authority to replace management a board that's a supervisory authority and that last phrase he said there that you relayed the  replaced the board had you had discussions with the fed and your staff had discussions with the fed that that was within their capacity well what i what i have said earlier and i will repeat it th is that i have no recollection of ben bernanke having ever talked with me about directly about that authority i do have i participated on a number of  of calls and meetings where there was staffed together and i don't remember whether i heard someone express lee say that or whether it was just the tone and the force well most of that discussion but i clearly had that understanding and i think that understanding has been borne out by the by the e mails the committee has released and some other things that when mr isay ask you in the second set of questions here about this you said will explain the fed statutory authority right now did your lawyers say this or was it the fed lawyers that said that it's that hard to recall as as i said the i have that understanding and as you can imagine when i'm participating in these many discussions and calls it's different and what i think what i've told you is i don't remember whether some of the express regulator says we don't think this is legally valid we think if you do this you're going to cause great harm to your company and to the financial system going to be a lack of judgment and then if someone goes ahead and does that it's a pretty logical conclusion that maybe even the regulator would be irresponsible if they didn't care if they didn't hold them accountable my time is short and just one final well my time is expired well i've got additional questions i hope they'll have an additional round  you would agree with me even with those emergency circumstances that you found yourself and there's no reason to suspect in ethical behavior is there i didn't hear you i'm sorry no absolutely not all right and it is interesting that as i read your testimony i read it to several times that you ever express tremendous concern about our constituents and the people of america who are suffering greatly and i was just wondering did you were you aware of the the merrill lynch three plus billion dollars worth of bonuses they were about to give out when this deal came down you know i wasn't and when did you find out about those that  three plus billion dollars in bonuses that the american people basically left pants i have my best memory of this was sometime around the middle of january the day or so before we were putting this this deal together and when we were talking about the compensation restrictions for b of a and i'm not entirely certain but i have a memory that someone o staff said and in terms of merrill lynch their bonuses have already been paid do you think that was fair to the american people to stockholders and i mean basically what ended up is that the american people pretty much ended up paying merrill lynch's three billion dollars plus bonuses that were apparently given out just before this deal went through you understand that right well i do understand the bonuses were paid before the deal went through would call that an ethical that merrill lynch paid out bonuses before the deal went through whether whether that is something that should have been done is another question you think it should have been done i wasn't there i didn't make the decision i don't think i should be judging  you judge everything else you just made a judgment with regard to mr lewis you made a judgment when you said that you felt that he had it would be a colossal lack of judgment by him to push the mat you made judgments all along way you made decisions affecting the american economy so why use if i suddenly you wash your hands of this you've been you've been bragging up there this morning all this time about a judgment you yes but i don't i don't not have all the facts on the situation let me ask you this i'd like to clarify something that you just survive through this morning a letter we received from mr ben one thousand and handwritten notes we received under subpoena indicate that it was mr lewis who first what up the issue of receiving a bailout is it true that it was bank of america who first brought up the bailout i i'm not sure exactly how it came up but very well could have been i sure know that it was with one hundred percent certainty it was bank of america that came to us said they've got the losses and said they have a major problem and and created let me let me finish let me as i want to answer the whole question created by the losses at merrill lynch or would it be fair to say that you at least intimated to mr lewis that he could count on an working with him to come up with the support program we thought would work let's talk about goldman sachs for a moment let's immediately before becoming secretary of treasury you were the chairman and c e o of goldman sachs were you not absolutely and  treasury and as treasury secretary us then goldman board member ed liddy to take over as head of a id is that correct yes goldman has subsequently been revealed to be the largest recipient of a i g s counterparty payments benefiting to the tune of more than thirteen billion dollars after the i g was bailed out i noted the firm repeatedly claimed that it that its exposure to adji was fully hedge and it was not material to the firm just goldman posted a record three point forty four billion dollars in quality profits and plans to give out billions of millions of dollars with billions of dollars over bonuses to the tune of six hundred thousand dollars for twenty on the average to twenty eight thousand employees i just ask you one question this and this is my last question the people in my district will lose their homes their insurance the ones you talk about in your statement their homes insurance everything they've got some of them elderly going about the work you know what they asked me they say cummings that money that those folks are getting on wall street those millions and billions is it our money because our money went somewhere we don't know where it went but we know people get millions and billions of dollars what about us what about us who are out of work what about last who have to elect their kids in our kids to college in september after they've done everything they dispose of do to prepare for college what about us who don't have a house what about us you keep telling us that the storm is going to be over but when the storm is over who's going to be living in my house what about this and i'm asking the question if somebody is money their money  creditors or counterpart is number one secondly what i would say to you is the thing that bothers you bothers me because the people that are paid the price had nothing to do with the problem but the sad truth is that if these companies had gone down they'd be paying a bigger price there would be more foreclosures there would be more people that are unemployed and so you are absolutely right in asking the question you should keep asking the question this is a terrible thing and that's why i believe other members of congress need to work so hard to put in the kinds of regulatory reforms and the kinds of powers that we need to have in place to make sure we don't have to go through something like this i see my time is up thank you madam i thank the gentleman congressman bilbray thank you secretary i'm sort of sitting said is i have an understanding that under unusual circumstances if the federal reserve is dealing with a regulated entity and there are decisions made at that regulated entity that endangers the safety and soundness of that institution then the the fed has the authority to hold them accountable now clearly the in terms of corporate governance one hundred one we have a you know we know boards are selected and we know the boards select management but there needs to be something for regulated entities where the regulator can protect the safety and so well i i'm sensing we've moved in the on where we've historically been we've gone into a brave new world where now with the de facto nationalization of the industry we're sitting here as a committee considering items that in one nine hundred twenty seven when this committee was founded never dreamed that washington would be determining what kind of decisions are made in either wall street or main street now washington is making those determinations and this brave new world we ventured into of nationalizing you know major industries really does place a strain on the system it was never designed to make or to make the decision or to do the oversight as we're trying to do today never was perceived by the founders of this committee that we would be having this discussion my question to you as the secretary as we talk about other situations and talk about exit strategies where is the exit strategy what date can i tell my constituents that we will not have this discussion a more we will know that this committee and congress will not be discussing question it's a question i ask myself and it's a question this easier to have to ask this is it and has to answer but it's a question you should be asking because we is a nation needed to some things that many how we put in place those those reforms to really reduce the risk that we're never going to be back here again doing these sorts of things but i don't i can't stand here and tell you today that i have the answer to your question but i hope it's soon well let me say i i think the last administration had the public turn on them because they did not have a net exit strategy for another situation regardless of who's in the making of this and this administration doesn't develop an exit strategy give some timelines that do not exist today i think all of us going to be held responsible in fact that washington has stepped into something has started punching on this tar baby and now has no way of extricating ourselves out of it and we have now created a whole new environment of what is appropriate for the federal government to be doing and we're down now having this hearing about who gets hired or fired who was notified that if they don't do certain actions there's going to be determination all of these things have never been perceived as being the appropriate position for the federal government which is now the federal government's engaged and to so extracting ourselves i extract ourselves out of the situation is going to be some i think the american people are going to man very soon  terry paulson just in continuation with my line of questioning before from from the notes we have on your schedule from december nineteenth mid to ember december nineteenth is what we conversations you had with him lois the conversation i would care louis on the twenty first you talk to ken lewis multiple times in december yes there were multiple conversations where he said they were considering mack you said it was bad you then came back and said you know  your patience today given our schedule like to go back just a little bit and maybe i could start following up on my colleague's question about the mac it's our understanding that not once but twice mr l threatened to invoke the mac because they had discovered a twelve billion dollars problem in the merrill lynch deal is that correct what i remembered was  billion pretax one time and then twenty two billion pretax and then fifteen billion after tax but my numbers might be ok but in both cases they threatened or discussed with you the possibility of invoking the mac is that correct yes and your reaction obviously negative both as this is why the it was based upon the view of very experienced lawyers and again i haven't heard this refuted elsewhere with any degree of of vehemence that that there was a legally binding contract and that the mac laws would not have been legally valid in this situation the shareholders had voted for both companies this was a delaware company but that's really a legal matter obviously not normally involving the secretary of treasury why would you care one way or the other whether he was acting on misinformation legal misinformation and threatening to invoke the macro i normally wouldn't care but this is if you have a situation where a company doing something like this in a period of uncertainty and fear could do grave damage in the opinion of the regulator to that company and to the whole system of you  know i sure better care you're worried about the impact on the a very fragile system at that time i was worried about the impact of the very practical system and and also the impact on which was the biggest bank given that concern m secretary at any time in that period and around december of two thousand and eight did you have any conversation that could be construed explicitly or impliedly as promising  exchange for their backing off the max threat or even going public with the twelve billion dollars or whatever the ultimate number was in exchange for that silence or that proceeding forward that there would be tarp funding felt a responsibility to keep the financial system for collapsing so this was not a situation where she will do this big favor for you this was a situation where we were doing this for the american  as almost a threat by you and perhaps by mr bernanke that if he didn't take the federal money were going to fire you and your board that's a far cry from how you characterize it as sort of a cop lots of interest unstable the the in terms of my communication with him but i've been pretty direct i i would use the word threat but i've said what i said and i was very direct and i intended to give a very direct strong clear message and that was i'm not george arising it is a threat because and lewiston script characterize it as a threat but i did explain the fed's powers but that was the in terms of the confluence of interest to me that's just an obvious thing if you follow the train of logic we've laid out here you either accept the logic or you don't consult people some people say well there was no crisis nothing would happen to be of a nothing would happen to merrill lynch nothing would happen to the financial system i can't satisfy those people yes and i'm with you mr secretary there was a crisis and i understand where you in the federal reserve chairman were coming from but i guess we're trying to understand and i think my time is up madam chairman i hope i have the opportunity to return to some specific questions regarding the terms in this you stated that you kept him when once he was nominated you kept him informed however we have notes from joe price who's the chief financial officer for bank of america basically chronicling the conversation that you had with chairman lewis and yourself and in those those documents he says quote fire b o d if you do it you're responsible for country the board of directors tim g agrees in those conversations did you ever invoke tim geithner's name or suggest any ways that he was on board with your view on this to apply additional pressure to mr  you know those are joe price's notes and someone would have to today ask him i don't i don't even remember talking to joe price i remember talking with with ken lewis and as i said i  recollection as as additional pressure that he was on board i don't i sure don't recall that can't there seems to be a lot of confusion or seems we're arguing over semantics over whether or not you threatened mr lewis or bank of america and i don't think it's necessary that we argue over the semantics of a threat i think you've been very clear at least in your earlier testimony that if they went forward with invoking the mac that you would have moved forward with attempting to remove deals it's ok because it worked out you agree with that bernanke you responded no sir now the words it would not be appropriate for ken lewis and bank of america to feel pressured given  last cheering that that threatening to fire bank of america's management to get them to go through with the merger would have been inappropriate are you prepared then to take responsibility for issuing such an inappropriate statement i'll tell you why i certainly take responsibility for what i said and what i said i think it logically follows from i laid out a train of events and i think it logically follow that's what the that's what a regulator should do i would say i think chairman bernanke when he testified here you know last month i think he acknowledged that if someone put their made a decision that harmed their company they deserve to be held accountable and that's certainly what i was what i was trying to communicate to to ken lewis you stated earlier that you took issue legal staff for their view on the mac as your justification are you aware of do you know the names of the legal staff that you relied on listened in and participated in a number of calls experienced lawyers i do not know there are specific experience i mean come on now there's a difference between being an experienced lawyer and an experienced lawyer in mergers and acquisitions i would know whether or not a company has the legal basis i'll tell you one other thing ok one other one other test i've participated in deals in markets for thirty two years and when i hear a lawyer say to a company what's your legal justification after after two shareholder votes and whether maque the structure of this way i'm not getting very much back on the other side and i'll tell you something as someone who's been around in the markets everything i heard squared with my instincts and judgment were you aware that bank of america had successfully invoked the math less than a year earlier on the sallie mae deal was that after shareholder votes on the delaware company  what i'm trying to understand is if you date time that if you legally had had justification and legal expertise to invoke the mac was once i would i would question why they would come forward and justify that they they could do it in this instance and be contend the timing of what you call in your testimony a finance and financial crisis one precedented in our lifetime was actually a calculated wall street scenario underpinned with masterful deceit and extraordinary moral hazard your clarion call for the taxpayer bailout of wall street's excess came six weeks before a major national election when our government is the most vulnerable and tender in congress skittish what your orchestration yielded was an on precedented dumping of private sector losses on the us taxpayer history will show that the u government and you knew about wall street's growing losses long before the bank of america merrill merger in fact bank of america's purchase of countrywide in january of two thousand and eight was but another positioning of private sector interest in preparation for what i call the greatest hail mary pass of all time in taking those wall street losses and placing them on the next three generations what interests me is who you helped and who you didn't yesterday's new york times reports that goldman sachs the firm in which you spent your life posted the largest quarterly profit in hundred forty year history three point four billion each goldman employee reportedly could earn seven hundred seventy thousand dollars this year and the same paper's lead editorial yesterday states across our nation unemployment is rising foreclosures are surging lending is still constrained i wish i had an hour to talk to you about that it looks like  secretary of treasury in two thousand and six until today have you or any of your family had any financial ties or investments related to goldman sachs in any way whatsoever no thank you what about bank of america  let me ask you about the deals you structured while at treasury in terms of the warrants that you structured in the ten billion dollars goldman sachs the terms provides that once goldman re preferred shares it has the option to purchase back the warrants at a market value at a timing of its discretion why did you draft a provision that allowed goldman sachs the borrower to determine when the bought into goldman sachs at a level of five billion dollars under your watch as secretary of treasury our taxpayers were forced to invest ten billion in goldman not counting the counterparty deal with warren buffett forty three point five million options worth one point eight billion billion dollars gamble our taxpayers by contrast got nine point five million options worth five hundred million one fifth of much for their investment which was double his buffett is being paid ten percent interest on his preferred stock yet taxpayers only get five percent for the first five years and nine percent for the second buffett has a ten percent  premium taxpayers have no premium right buffett got five billion dollars of present value for his five billion dollar investment taxpayer four point nine billion of present value for their ten billion available provided under duress but providing capital which was structured so that the taxpayer would get paid back the capital we put out as the call of goldman whenever it gets the term first of all the down of a systemically important institution what do you envision well i think something very similar to what has been suggested by the  sense because there needs to be when there is a when there is a real systemic risk so this should not be done forever just like when the system is at risk there needs to be a way to to avoid the normal bankruptcy process a regulatory body come in and handle the winding down of the liabilities in such a well there's been a number of things that have been suggested what what we had suggested as part of the regulatory blueprint was the fed playing the role of a macro stability regulator being able to look across the whole economy and look across the capital markets for us being able to access and get information and being and determination by the this secretary of the treasury you know by the chairman of the fed by by other regulators that there is a true systemic issue so there should economy in the last year given the government's intervention we're now left with the reality that ten banks in this country control about fifty percent of that are positive that is not a systemic risk in something that makes me uncomfortable so how how would this new regulatory framework look at that potential such a well just as i said what and i'm just only going to deal with things that i said i'm saying nothing now that i didn't say when i was treasury secretary we put forward a regulatory blueprint which called for greater consolidation the banking regulation as opposed to the multiple regulators and so i think adding having greater consolidation and stronger regulation coupled with the wind down powers so that you don't have bank holding companies being too big to fail i think is a is a meaningful way of dealing with the risk because in my judgment a regulation no matter how good is always going to be imperfect down but to the extent the the infrastructure in the financial markets are perfect and i'm talking about to try party republican ark it credit default swaps so there's a lot of work that's being done there trying to play gotcha here anything just looking ahead to say are we now in a situation where the actions that were taken to try to stabilize the economy has left us with further vulnerability and the potential for systemic failure because of this highly concentrated control of the financial system in the hands of a few i understand your question and there's going to be because when you look at the number of banks there's going to be a lot more was perceived as being a liquidity problem but we had it at the insurance company level regulated insurance companies that were well capitalized perceived as being stable and so the fed could solve the liquidity problem by loaning against those insurance company assets and the market accepted that lehman brothers had a capital hole and a liquidity problem and we had been working with a group of industry participants to help of finance a deal if we could get a buyer and we were unsuccessful at getting that buyer and so the once we had the tarp in place we had other tools in the toolkit and i do there's been a lot of confusion for instance people will say the fed made a loan to lehman brothers after they failed against such a lateral that's true the fed made a loan and that was to facilitate a liquidation in a bankruptcy a fed loan to lehman brothers by itself would not have failed the capital would not have taken care of the trading book each gave a number of speeches where we said we don't have the authorities that are necessary to deal with nine banking institutions financial institutions so the but your hundred and eighty billion dollars because they were irresponsible because they took a risk because they created these exotic products and  met their responsibility congressman i can't tell you how much you pains me on the other side of this conversation because i can't tell you how angry i was when when i sat there that weekend in september with the management team came in and laid out the issues this is in you're absolutely right  there was a situation where we had a centrally and i regulated hedge fund on top of insurance companies there was a huge gap in our regulatory system th should never been allowed to happen it did happen all i can say to you is never be able to explain that so your constituents can understand it and that's a good thing because we don't want to have to understand this in this country we don't want to be in a situation where this can happen again but all i can tell say to you is i believe if the fed had not of taken that action given the size of a we would have had a global banking run we would have had a financial system meltdown the wealth that would have been lost and for one k program saving plans the wealth that would have been destroyed in this country what would have been was tragic  so but now you have a situation where the government is an owner the government is there and we have to be careful we don't draw the line between trying to punish them and shooting ourselves in the collateralized debt obligation the c d o was for the basis of the current crisis we have today but while you was c e o of goldman sachs you were active part of that business so my problem is when you say you're payin by i go back to your bait and switch when you came here to congress and you suddenly decide instead of buying a toxic loans you're going to go out start to give money to these people so if you don't have any credibility on the bait and switch how do you have any credibility to day to come before us and tell us that us on and you switched it and then you started giving money to these institutions top fifteen institutions when all these banks and these people who had the loans you could have worked out a homeowner's equity plan around this country to help the people who are actually you know i really feel that i shouldn't be making these decisions to make lehman brothers go bankrupt that i really should recuse myself and the fact is if you're coming here and say you feel the pain of a i g is just it's just outrageous i would like to saying to us you support the obama administration giving more power to the federal regulator the the fed but but when you look the fed was on geitner was on board at the fed the new york fed dealing with all these institutions he didn't get it and then we had this fellow who came up afterward mr friedman he was on the goldman sachs board and he didn't last too long as a fed chairman why because he had a conflict of interest is it possible that there's so much conflict of interest here that all you folks don't even realize that you're helping people that you're so shaded with and you should be ridiculing yourself for america's ethics let me make several comments the first comment i'll say is i came to congress i tarp and i asked for it for authority to purchase illiquid assets when i was your bank your pain we changed because the situation changed dramatically in ten days you betcha i've got a conflict of interest here you don't feel any kind of scintilla of ethics on this thing at all but totally i operated very consistent with the in the ethic guidelines i had a secretary of the treasury and when it became when it became clear that that we had some very significant issues with goldman sachs and of morgan stanley when i did then it would have been very wrong for me to recuse myself when i did was i when i got a waiver from the ethics agreement because when we had concerns in charge of the ethics agreement who's in patience a few minutes ago we talked about an institution that you thought would be able to deal with regulatory  activities how do you feel about the regulatory proposals that have been put forth by president obama and congress that's a pretty broad general question have you been following them i would say i made when i was secretary of the treasury i put forward a number of regulatory proposals put forward a regulatory blueprint and there are a number of things that the administration has put forward that i am very very pleased about the wind down authorities from non banking institutions the idea that there exact question would you put your responses in writing so i can say that when we form this new regulatory system these are some of the points that we ought to consider we're trying to unscramble that are really rotten at this point and we must move forward and correct this system it's impacting on not only the united states  rest of the world too we gotta get it right and i don't i cannot be convinced that this wasn't seen back a year ago the collapse but in trying to move on  i want to reiterate what has happened on tuesday it was reported that just one month after re pain there ten billion dollars in aid goldman sachs would be posting a second quarter net profit of three point forty four billion dollars i'm curious to hear your perspective on their success despite the recession given your twenty six years of experience at goldman sachs and the need unique role former goldman employees have played in economic policy considering that the last two chairman of the federal reserve bank of new york the head of the world bank and the head of the new york stock exchange and the former assistant secretary at treasury sponsible kashkari were all former goldman sachs employees and why do you believe goldman sachs has been able to bring in such profits despite the current economic  conditions i don't have an answer for you i have not worked at goldman sachs and three years so i can't explain with what they're doing that's working but i thought i can say know you can hand write them i do have it and we'll send you in writing what we would like to add and what you think should be proposed you can write it in hand you can do pencil  paper i'll do are my best to work with thank you all right i appreciate that and do you think that goldman sachs has benefited from the economic crisis and the debt solution of some of their strong on how was the determination made that institutions such as bear stearns and merrill lynch should be saved either through direct assistan acquisition while lehmann brothers would be allowed to fail i'm not quite clear and i know you've addressed it and i can i think i would just say to you we did not have the legal powers we believe to do something in the lehman brothers case we did not have the tarp to put capital in we did not have a buyer as we did in the case of bear stearns  responsibilities need to know what you consider in writing and we'll put that in our letter to you what you can to govern that could do more  do know that we did not this committee under the former administration did not do the kind of oversight maybe we were asleep at the wheel i may really look the other way but i'd like to hear from you what government could do so we don't regulation there we've had a number of panels in financial services look at this and the bottom line is the takeaway that i've always heard is not a gap in authority not adopt cap and regulation that there were regulators there in place but what they actually and that's what we need to answer her question going forward is resolution authority as well but here's a question i posed for you hypothetically had we had resolution authority prior to the situation can you think explain to me it would be different  we're not doing it right now but more a larger burden on the taxpayer and if you did what they're doing now essentially saying we're going to do it out over a period of time there's still the threat of the problem so help me understand why anything would be different significantly to the taxpayer and the structure had we had a wind out of already in place prior to the situation where it was necessary to keep the current company didn't go through bankruptcy kept the current kept the current to answer that question for you in terms of what they're doing now what they might do differently with the resolution authority only posit the question is i do know you were not on the scene after the fact but positive question was i know you have said the past and here too i think that we need the wind  ot if you will and so we haven't we already set up the press a bit set up the situation maybe going all the way back with bear stearns that you create the conundrum of them saying that we look to the government to bail out and under the administration proposals or say we're only going to bail out tier one entities and apparently just doesn't fall into that category so they're not going to get the bailout so you have a disincentive now you have a disservice to the taxpayer and disincentive to the taxpayer that you're going to encourage companies like that i boy i better get into that tier one situation again or else i'm not going to be i'm going to fall into this situation isn't that the problem with the administration's proposal well i don't have all the facts in terms of  what has happened when i was here the regulators made a bank holding company they came in with a regulatory recommendation to treasury we funded we funded them out of programs as soon as we can yeah but my fear is is that we my question to you would be are we not would we not under the ministrations proposal and i know you spent some time with these things basically perpetuating that situation going  agree one thing that we we don't want to move toward a situation in this country we have certain organizations that are too big to fail and everyone else can fail and part of our oversight and reform at this time i'd like to ask unanimous consent that the committee consolidate questions of minority in my majority so that we can keep from overburdening mr paulson and still work with him to get a follow up answer without of thank you and i personally want to thank you as a private citizen for coming here and giving us so much of your time and your insight into what happened at this very difficult time there are unanswered questions there are questions that we will never know we will never know had maryland state on its own stood on its own and received let's say half of the tarp money that the combined company received would it in fact today be a viable going concern with the backup plans invision by the treasury in the fed in case of a were to back out would they in fact it worked we'll never know that the secretary i want to thank you for your attempts to make sure we never had to know it i'm fact i've been an output outspoken critic of some of the activities including the threat i am and will continue to be an outspoken critic of expanding the fed's role beyond the monetary supply giving them a direct role in this systemically risk question i do so because i believe that the fed has a primary and premier obligation as an economic modeling organization well you have a long history in mergers and acquisitions understanding of what a quote good merger isn't a bad merger is not inherently a core talent that we expect to see in the fed so as we work to go forward to find the right models in case something like this happens again and hopefully the right models to see it before it happens and prevent it i hope you'll continue to be a resource for us because i do believe that the commission which is just been formed and this committee have an obligation to make sure we get it right so we don't have to do it again mr chairman i want to thank you for this series and for you continued partnership on a bipartisan basis and particularly for your help today and making sure that everyone heard was a call on the seventh where the losses were eighty billion pretax by the nineteenth there were twenty two billion pretax and when i said to people that's a loss it takes my breath away when the market hears about now all i could say to you is december the ended november and december were the worst months in the marketplace and banks it was a worse month for the economy if you look at what's going on economically it was a worse month in terms of the credit products and banks losses and so i i didn't when i looked at it i wasn't shocked that this could have happened so quickly but i don't have that explanation you would have to get that from from merrill lynch or b of a you know i could see this if you were talking about m credit products there was a big erosion in value based upon what was going on in the markets but i don't i don't know it was i heard about it for the first time on the seventeenth but let me just finish by saying last year bank of america received be nice and big banks were forced to take b s many ss they didn't even ask for most significantly all of this was decided behind closed doors with no oversight in a way the bank of america merrill lynch deal illustrates the dangers of concentrating enormous power in only one or two individuals when you turn over complete  to the treasury department or the feds with no accountability and no checks and balances this is what you get or oak commitments involving bales of dollars seemingly arbitrary decision making and residual suspicion mr paulson has stated that the principal regulatory agencies the f c c and the f d c were consulted in this merger i think it is clear that we need to hear next from the former f c c chairman mr cox and from f d i c chair person there to better understand the nature and extent of their participation i intend to schedule a hearing for the purpose of following the august recess there is the unanswered questions here and we're going to reform financial system i think we need to have the answers to these questions so mr paulson i want to thank you for taking the time and come and i hope that you will be become a resource in many many ways to be able to help us to sort of unfold and get through this mess and to be able to come back stronger than ever before thank you so much for testify thank you very much mr chairman thank you