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Geithner, Bernanke Face Lawmakers' Questions Over AIG; Giving AIG Bonuses Back; President Obama to Make Case for Budget Proposal; 64 Days In: How's the President Doing; Renters Facing Problems Due to Owners' Foreclosure
Aired March 24, 2009 - 12:00 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
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BEN BERNANKE, FEDERAL RESERVE CHAIRMAN: Congressman, I -- I gave a speech, I believe, last week exactly on the issue of too big to fail, which I consider to be a critical issue. And I addressed a number of approaches to eliminating or reducing this problem, including, among other things, both having tougher regulation and supervision of these companies, make sure they're not taking advantage of any implied government backing to take risks and so on, but also to have the resolution regime that we've discussed that will allow us to -- to -- to bring -- to resolve these companies and perhaps take haircuts on creditors so they will not be assured that they will be protected.
REP. ED ROYCE (R), CALIFORNIA: And, Mr. Geithner, I'd ask you the same question, very quickly.
TIMOTHY GEITHNER, U.S. SECRETARY OF TREASURY: I think you're absolutely right to be concerned about this. I share that concern very much. That's why the reform effort we're going to have to work with the Congress on is going to have to address the moral hazard created by these extraordinary interventions. You're absolutely right to be worried about it, and we need to dial back this assistance when we get through the crisis, and we have to put in place much stronger constraints on future risk-taking.
ROYCE: But if you let them go bankrupt, you'd actually then have market discipline and you wouldn't have to worry about this -- offsetting all of this.
GEITHNER: In the moment...
REP. BARNEY FRANK (D-MA), CHAIRMAN, FINANCIAL SERVICES COMMITTEE: The gentleman's time is expired.
The gentleman from California?
REP. BRAD SHERMAN (D), CALIFORNIA: Thank you. What I fear here is that we are doing a kabuki theater in three acts.
The first act: Washington tells the American people, "We understand your anger at Wall Street." In the second act, we nit-pick to death any proposal that actually adversely affects Wall Street. And then, in the third act, we bestow another trillion dollars on Wall Street under extremely favorable terms.
Chairman Bernanke, in the hands of a maniacal Fed, section 13(3) could be used to make trillions of dollars of highly risky loans. Fortunately, you have interpreted the law to say that you're only going to buy paper that's AAA and similar instruments.
But let's say, a year from now, Wall Street comes to you and they say they need another trillion dollars and the TARP money has run out. And Congress is a bunch of buffoons and populists and they won't provide additional money. And they're idiots, so don't listen to them.
And Wall Street is unanimous in telling you that only you can save the economy and the only way you can do it is to buy AA paper or A paper and subject the Fed to that higher level of risk. Would you then change your interpretation of the law?
BERNANKE: The law requires that we lend on a fully secured basis. In other words, you have to be completely comfortable that the collateral we're taking will allow for repayment of the loan.
That's why, in the TALF and in the program that Secretary Geithner just announced, we are not only taking a variety of protections including haircuts and the like, but we're also having TARP capital to stand between us and the credit risks. So we will be very, very careful not to take any credit risk in any loan...
(CROSSTALK)
SHERMAN: No credit risk, is that correct?
BERNANKE: You never can go literally to zero, but very, very little.
SHERMAN: Well, that's what AAA is, as little as you can get.
BERNANKE: That's correct.
SHERMAN: OK.
Mr. Geithner, you've promised transparency, but what the American people want to know is about the compensation packages. Will you publish a list of all the TARP recipients -- of the companies that got the money -- and how many of their executives -- I don't want any person's name -- just how many of the executives earned more than $1 million in 2008, how many of them got bonuses of over $500,000, and, likewise, for 2009, how many of them are earning salaries of over $1 million a year and how many of them have what appear to be contractual rights to receive a bonus in excess of $250,000.
I don't think it's just about AIG compensation. And I don't think the American people should be blindsided and find out about bonuses on a Saturday that are about to be paid on a Sunday. Can you give us a chart for each TARP recipient? GEITHNER: Congressman, you're absolutely right. This goes well beyond AIG. And the president proposed on February 4th a range of reforms to broad compensation practice, including proposing that boards of directors...
SHERMAN: No, Mr. Secretary, it is my time, and I'll reclaim it. Are you going give us the chart? Or are you going to hide the ball?
GEITHNER: I'm -- I'm not going to hide the ball.
SHERMAN: Are you going to give us the chart?
GEITHNER: I will reflect on the suggestion you made and see if that is a...
(CROSSTALK)
SHERMAN: In other words, you won't commit to telling the American people how many folks at Goldman Sachs or AIG are going to make a million dollars this year?
GEITHNER: Congressman, I will think carefully about your proposal. I will get back to you with...
(CROSSTALK)
SHERMAN: Thank you for thinking. Let me move on. I'll move on to the next question.
The law says -- the TARP bill we -- that the Treasury shall require that the financial institutions that you invest in meet appropriate standards for executive compensation. That's the law. You're supposed to write the regulations.
Not to your credit, you have kept on Assistant Secretary Kashkari to honcho this program. He came before this committee, and I asked him, I said, on December 10th -- and I mailed a copy of this transcript to you just as soon as you got sworn in -- "I'm asking about AIG. Is a $3 million bonus an appropriate standard of executive compensation or has the law been violated?"
And your quarterback said that he didn't think that a $3 million bonus was necessarily inappropriate compensation. Then I asked him about $30 million bonuses to AIG executives. And his response was, well, I can't opine that that wouldn't be appropriate compensation.
Is this the guy that should be running the TARP program? And when are you going to give us the regulations required by law? And are those regulations going to prohibit million-dollar bonuses and million-dollar-a-year salaries?
GEITHNER: Congressman, we are committed to putting out those regulations. We will do so as soon as we can.
Mr. Kashkari, who is an excellent public servant, it is not his job to make those judgments. That is my job. I'm accountable for making those judgments.
FRANK: The gentleman may finish his sentence.
GEITHNER: And -- and we are working on putting those out so that we lay out some clear standards for the American people to govern these compensation practices going forward.
FRANK: The gentleman's time has expired.
The gentleman from Oklahoma, I believe, is next.
REP. FRANK D. LUCAS (R), OKLAHOMA: Thank you, Mr. Chairman.
Let's continue to look at the process of cleaning up behind this parade.
In Oklahoma in the 1980s, we went through a twin ag and energy resource boom and bust. And it was fascinating, after the FDIC got done stomping through the arena, how 5 and 10 or 15 years later amazingly there were some millionaires made dealing and disposing of these assets.
Could we talk for a moment about the public-private investment fund? And if you could, just let me give you a real-world -- from a perspective of the real world.
BETTY NGUYEN, CNN ANCHOR: And we've been listening to the hearing on Capitol Hill with Treasury Secretary Tim Geithner and Fed Chairman Ben Bernanke as they speak before the House Committee on Financial Services.
It's an important one today, as they delve into the AIG scenario, what happened, why did it happen, how could it have been dealt with even better?
CNN's Brianna Keilar is outside the hearing room on the Capitol -- at the Capitol.
And Brianna, it seems like the headlines so far is, before we even discuss broadening the Treasury secretary's powers, let's find out what went wrong with AIG.
BRIANNA KEILAR, CNN CONGRESSIONAL CORRESPONDENT: Sure. And that's really issue number one today in terms of the first issue they're dealing with, this residual outrage over the AIG bonuses. And then, overall, just the need to help AIG out considering what happened with that whole bonus debacle. So you've seen there Ben Bernanke and Tim Geithner defending exactly why AIG needed a bailout in the fist place, and talking a little bit about the bonuses, as well.
But the real headline today, Betty, is that Treasury Secretary Tim Geithner, here in this hearing, asking Congress to give the Treasury Department, to give the federal government, unprecedented power when it comes to dealing with companies like AIG, when it comes to selling off assets, when it comes to winding down a company. And this is something, this request of Congress, it's already getting some pushback from Republicans, including the top Republican in the House, John Boehner.
Here's what he said even before these men came before this committee to testify.
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REP. JOHN BOEHNER (R), MINORITY LEADER: This is an unprecedented grab of power. And before that occurs, there ought to be a real debate about whether we should give that authority to the Treasury secretary. We need to look at insurance operations as an example that are regulated by states. What interest would the Treasury secretary have here and why would he want this power?
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KEILAR: And some Republicans raising concerns with the Treasury secretary, if that isn't then ripe for some abuse of power, turning over too much control to the Treasury. Tim Geithner saying that's not a concern, what we're trying to do here is make sure that what happened with AIG doesn't happen again. That if there is a company like AIG, we will have more control when it comes to executive compensation and other things, so that we don't look back and say, wow, we really should have done something differently -- Betty.
NGUYEN: Well, let's look at AIG for just a moment, because I understand that some of the executives have decided to give back some of those bonuses.
KEILAR: Yes. At this point, as we understand coming from officials in New York, $50 million of that about $165 million being given back. Many of the top executives at AIG giving back those bonuses just because of the pressure that they've seen. But make no mistake about it, the efforts to really tax those bonuses, we saw the House pass a bill pass last week. But the efforts to really move that out of Congress have stalled in the Senate.
We've heard some objections, some concerns raised by President Obama, and from some key senators. And right now, it's in the Senate's court to take their bill -- to tax those bonuses back and put it on -- it's not even on their schedule, Betty. So you can see that effort has lost a little steam.
But still, when you talk with Democrats, they say maybe it has lost a little steam, but we put a lot of pressure on AIG. Even if we don't put a bill out there that President Obama signs in to law, we have been part of this full-court press against AIG that has been able to recoup this money -- Betty.
NGUYEN: At least some of it.
All right. Brianna Keilar joining us live.
Thank you, Brianna.
And as she just mentioned, some AIG executives who did get those big bonuses are giving that money back. New York Attorney General Andrew Cuomo is investigating the bonuses, and he commends the ones who have actually returned the money.
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ANDREW CUOMO, NEW YORK ATTORNEY GENERAL: I would like to say to the individuals who have given the money back, you have done the "right thing." You've done what this country now needs and demands. We're living in a new era of corporate and individual responsibility. And I believe the employees have set an example for the rest of the company.
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NGUYEN: All right. So let's bring in Christine Romans of our CNN money team to talk about this.
Look at the numbers for just a second. How many people and how much money are we talking about?
CHRISTINE ROMANS, CNN BUSINESS CORRESPONDENT: We're talking about $50 million. These are the top 20 executives. Fifteen of them, according to the New York attorney general, Betty, have decided to forego their retention bonuses. An AIG spokeswoman saying that they are gratified that they decided to do that. So 15 of the top 20 returning their bonus cash, some $50 million.
And those other five, it's not to say, frankly, those other five might not do it, too. It's either because the New York attorney general hasn't gotten through to them, or because they're still deciding, but clearly -- and nine of the top 10 earners have turned their money back in.
NGUYEN: All right. So where does the money go? Now that it's been returned to the company, where does it go?
ROMANS: It goes back into the general operating pool here of this thing.
Look, it was going to be taxed back, maybe. There were other ways they were going to try to figure out -- Congress wanted to figure out how to claw it back.
Clearly, the New York attorney general also pointing out, too, Betty, that not all these people were responsible for the big risky bets that brought the company down. Some of them were, frankly, he said just doing their job and trying to unwind these complicated positions. So the story isn't over yet, but most of these people, the top earners, at least, are giving it back.
NGUYEN: All right. Christine Romans joining us live.
Thank you.
You know, we are going to continue to monitor the hearings live.
Plus, the president focused on the economy. We're going to go live to the White House next. (COMMERCIAL BREAK)
NGUYEN: Let's take a look. We are monitoring an important hearing on Capitol Hill.
You're watching right now Representative Gregory Meeks of New York speaking. And what these lawmakers are doing is they're grilling Treasury Secretary Tim Geithner and Federal Reserve Chairman Ben Bernanke. And everything is on the table today, folks, from those big bonuses given to AIG execs, to the billions in bailouts paid for with your tax dollars. Also in the mix, a push by the Treasury chief for more government power over big financial firms.
We're going to take you live for key statements throughout this newscast.
All right. In the meantime, though, the president goes before the nation in prime time tonight. And in addition to taking questions during his news conference, he's going to be making the case for his budget proposal.
White House Correspondent Suzanne Malveaux joins us now live.
It's an important speech. We're going to hear some of details of this proposal tonight?
SUZANNE MALVEAUX, CNN WHITE HOUSE CORRESPONDENT: You're going to hear a little bit of everything, Betty, here. Obviously, it's going to be a short speech, but it is going to focus on the economy.
He's going to be talking about the need to pass the budget, as well as to support the bank bailout plans and these other things that they've rolled out within the last couple of weeks. But the bottom line here is he wants Americans to feel confident that things are going to work, that eventually they're going to turn around. But he's going to acknowledge some of the anger, the frustration from folks when you look at those executive bonuses from AIG, that there are ways to prevent this from happening again. So those are the kind of things you're going to hear.
I had a chance to talk to the press secretary, Robert Gibbs, and he gives us a little bit of a preview, Betty I want you to take a listen.
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ROBERT GIBBS, WHITE HOUSE PRESS SECRETARY: I think what the president will start by doing is giving the American people an update of where we are and what's being put in place to strengthen our economy, to create jobs, to put money back in their pocket, and stabilize the financial system.
(END VIDEO CLIP)
MALVEAUX: And Betty, I had a chance to ask him, that little bump there in Wall Street, of course, in the market, whether or not they are really quite pleased with this, whether or not they needed that piece of good news going into this press conference. And he said, look, you know, day to day, this fluctuates, there are some really big things, big tasks that need to be done that they're going to start to measure, whether or not people go back to work, whether or not they go back into their homes. Those are the big things, but obviously they are somewhat encouraged by what they're seeing on Wall Street -- Betty.
NGUYEN: Well, Suzanne, the president will have a national audience tonight, but is he also hoping to send a global message with this?
MALVEAUX: Well, he did something unprecedented, and he actually -- he wrote an op-ed, and sent it not to 30 different papers in the country, but around the world, simply saying that, look, this is a crisis that all people need to deal with. Part of that, he said, "Our leadership is grounded in a simple premise: We will act boldly to lift the American economy out of crisis and reform our regulatory structure, and these actions will be strengthened by complementary action abroad. Through our example, the United States can promote a global recovery and build confidence around the world."
Betty, he is speaking to the American people, but also to people around the world, in preparation for a summit that he's going to be attending in the next couple of weeks to try to deal with the economic crisis on a global scale -- Betty.
NGUYEN: Yes, because it's not just affecting us, it is affecting everybody.
Suzanne Malveaux, joining us live from the White House.
Thank you.
The best political team on television, we'll be right here for special coverage as President Obama explains his economic strategy in tonight's prime-time news conference. Watch it live, 7:45 Eastern, right here on CNN and CNN.com.
Well, the Obama administration is putting more money into security along the U.S. border with Mexico. And officials will also increase the number of border agents and equipment. Now, this move which prompted by increasing violence carried out by Mexico's drug cartels.
Well, Homeland Security Secretary Janet Napolitano made this announcement.
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JANET NAPOLITANO, U.S. HOMELAND SECURITY SECRETARY: We've seen some increase in violence between -- primarily between cartels themselves -- kidnappings, for example, in the Phoenix area, in the Houston area. But what we want to do is to better secure the border area against further violence and make it a safe and secure area where, of course, the rule of law is upheld and enforced. (END VIDEO CLIP)
NGUYEN: All right. Here's some details for you. The plan commits $700 million to bolster Mexican police., several new helicopters, and an enhanced communications technology system.
Well, the secretary of homeland security does join us live in the next hour of CNN NEWSROOM to talk about it. Janet Napolitano, on the drug cartels in Mexico. Don't miss it, right here on CNN.
And Anderson Cooper live in Mexico tomorrow night. Join him on "AC 360" for "THE WAR NEXT DOOR." That is tomorrow night, 10:00 Eastern.
And we, of course, will continue to monitor the live hearings on Capitol Hill.
Plus, breaking down the plan to save the banks. What are the chances of it working? One CEO gives us her opinion.
(COMMERCIAL BREAK)
NGUYEN: We are continuing to monitor an important hearing on Capitol Hill. Lawmakers are grilling Treasury Secretary Timothy Geithner, as you see there, and Federal Reserve Chairman Ben Bernanke. Everything is on the table, from those big bonuses given to AIG execs, to the billions in bailouts paid for with your tax dollars. Also in the mix, a push by the Treasury chief for more government power over big financial firms.
And we are going to take you there live to the hearing for key statements throughout this newscast.
But in the meantime, let's talk about this, the Obama administration's latest plan to solve the bank crisis. Will the effort to clean up those toxic assets from the banks actually work?
Well, Lynn Tilton is chief executive officer of Patriarch Partners, which is a private equity firm. And she has experience in dealing with bad banks and toxic assets. She joins us now live from New York.
We appreciate your time.
Let me ask you this, what do you think of the administration's plan to deal with these toxic assets?
LYNN TILTON, CEO, PATRIARCH PARTNERS: Well, I think they got a lot of it right, but I think they missed the most important point, which is that everybody who antes to play, the banks, the private sector, and the taxpayer, has to have mutually-aligned beneficial interests. And what's happening is the bank is at odds with the taxpayer and the private sector in that they need a very high price and the buyers need a low price. And they're not sharing it upside equally. NGUYEN: Well, let's look to where those investments lie and the interests lie here. We have a graphic to show how this is supposed to break down according to the plan. And here's how it goes.
There will be an auction between the banks and investors to set the price for the toxic assets. And then the government will back part of the cost. Now, if the deal succeeds, the government and the investor will split the profit. If the deal fails, taxpayers could take a hit.
And I want you to take a listen to what Representative Brad Sherman has to say about this plan. He breaks it down like this...
(BEGIN VIDEO CLIP)
SHERMAN: When they make money, we -- half the profit goes to Wall Street. When they lose money, 94 percent of the loss goes to the taxpayer.
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NGUYEN: That is a whole lot of loss for taxpayers that are already footing the bill for a lot of this.
Do you agree that that's how this plan is going to break down?
TILTON: Well, the reality is that the leverage is all the taxpayers'. So the first loss layer is the taxpayers' money. And that's why it's so important that the price be below the recovery value.
If you pay up too high, then the leverage just costs the taxpayer more. And so the purchase price has to be low, which is why I believe the banks must share in the upside, because you need to incent (ph) them to take the liquidity and part of the profits, because if you pay too much, then the taxpayer is going to lose a lot of money.
NGUYEN: Well, so, in this plan, is the government essentially gambling and hoping that the value of these assets will actually go up?
TILTON: I don't know if they're gambling. They're hoping that private sector actually knows how to price the assets. My issue is I don't think that the banks and the private sector can come to an agreement if it's a zero sum gain, where the banks are going to lose and watch others profit significantly at their expense.
NGUYEN: Because if the deal fails, once again the government cannot only lose that initial investment, but it could also possibly have to pay the full cost of the loan here.
TILTON: That's correct. They are the first loss layer on the leverage. And so if, in fact, you paid too much, the first loss is going to be to the taxpayer. The taxpayer only wins if the private sector wins.
NGUYEN: Got you.
All right. I want to shift over to this briefly and get your expertise on this.
The Treasury secretary is asking for some broad oversight today. We've been watching the hearings on Capitol Hill.
Now, you have helped restructure, w hat, some 60 companies I'm seeing here? Does this talk of giving the Treasury secretary this much power, does that have a chilling effect on companies out there?
TILTON: Well, I really think it's the type of the investor that the government becomes. So in an AIG situation, where they were the lender of last resort, and the white knight, and they put $176 billion to work, they do need to come in with an army, and they do need to restructure the company, and they do need to protect that investment.
In these private/public investment programs, they're really much more of a passive investor trying to get the private sector to put money in and get it flowing. So I think the government needs to learn to be a lender commensurate with its standing.
NGUYEN: All right. Lynn Tilton, CEO of Patriarch Partners.
Thanks so much for your time and your insight today. We do appreciate it.
TILTON: Thank you so much for having me on.
NGUYEN: Sure.
And we do want to take you back to those live hearings on Capitol Hill.
Let's take a listen.
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REP. DONALD MANZULLO (R), ILLINOIS: Yes or no?
GEITHNER: It depends on the nature of those specific contracts. It depends on the nature of those contracts, but what the critical thing is, the damage to the average American pension fund...
MANZULLO: No, you did not answer the question. The average American person has already lost 40 to 50 percent of their insurance plans.
FRANK: I would ask the people in that second row to stop the gesturing and the conversations. People are here to listen. Conversations are going on. They will end. And if there's any further disruption, I would ask the officers without any further intervention to simply escort people out.
Please continue.
MANZULLO: Thank you.
The American people have lost 40 to 50 percent of their retirement plans -- IRAs and 401(k)s. But people with retirement plans that bought insurance from AIG did not suffer that loss. Isn't that correct?
WILLIAM DUDLEY, PRESIDENT & CEO, FEDERAL RESERVE BANK OF NEW YORK: If I could just make one point here.
MANZULLO: Can't anybody say yes or no?
DUDLEY: Can I make one point?
MANZULLO: If you give me yes or no.
DUDLEY: The insurance was on the stable value funds. If the investors in the stable value funds had taken losses in the AIG case, this would have stabilized stable value funds...
MANZULLO: The answer is yes, isn't it?
DUDLEY: ... broadly throughout the U.S. economy...
MANZULLO: The American people paid $40 billion so people with retirement plans that had insurance with AIG did not have to lose. Isn't that correct?
BERNANKE: They lent $40 billion to avoid a catastrophic collapse of the financial system.
MANZULLO: Can give me a yes or no? Anybody there? Please.
BERNANKE: You said it was the purpose. That was not the purpose.
MANZULLO: I've got 14 percent unemployment back home. We could lose lots of factories. People are desperate. Half the people have lost half their retirement, or most have lost half their retirement, and not one of you three can give me a yes on that answer. Or no.
BERNANKE: Because it's a poorly-posed question.
MANZULLO: Well, then it's poorly written in your statements. The question is very simple. Maybe I should make a statement, that American people had to bail out AIG so that they could honor the insurance plans with people who bought insurance on their retirement plans. But most Americans still lost 40 to 50 percent of their retirement plans. But most Americans still lost 40 percent to 50 percent of their retirement plans.
BERNANKE: I we had not made that action, they would have lost 70 percent.
MANZULLO: AIG people would have lost 70 percent?
BERNANKE: No, the measure people. MANZULLO: Well, thank you for that correction. That makes me feel even better. But the point here is that American people had to pay $40 billion in order to make sure that people at AIG got 100 percent of their retirement plan and that's why the American people are really upset.
FRANK: The gentleman from Massachusetts.
REP. MICHAEL CAPUANO, (D) MASSACHUSETTS: Thank you, Mr. Chairman. Thank you, gentlemen.
I'm not going to focus too much on the AIG issue because I think most of it's been said the other day when Mr. Liddy was here. I think Congress has spoken. I think you understand how we feel and what we'd like to do. And I also think that, in comparison, the proposal that was put out today is, you know, much more important to the general economic well-being of this country.
I guess I want to start with a couple of things. I heard, I think, at least two of you say, maybe three, say that you didn't have the authority to do something earlier. Well, I would respectfully disagree with that legal. I understand -- I don't want to rehash it, but you've used the term exigent circumstances to afair (ph) these well, to get into things the Fed never got into before, no one would have thought they could have got into, auto loan, student loan, mutual funds. And the truth is, I've support that had because I think it's necessary at the moment. I believe you could have used the some term to get into these issues beforehand to have avoided these issues had you tried. Again, past history, but nonetheless, I still believe that you can do it.
I want to talk about the plan that's here. I have a few questions. I'm trying to figure it out the last 24 hours or so. And I guess I want to, first of all, understand, I see the FDIC as effectively a taxpayer funded organization. I know it's not technically through taxes, but it is because we all know that if the FDIC failed, we would bail it out. I don't think anybody really doubts that, number one.
Number two is taxpayers pay it through fees, if not through taxes. I know the fees aren't assessed on them directly, but effectively we all pay it through higher bank fees or lower interest paid by the bank. It's all passed through. If the FDIC is included, it's not a six to one ratio, it's a 13 to one ratio. Every dollar that's spent on this new program through the FDIC and taxpayers directly will be 93 percent paid by taxpayers. So it's a 13 to one ratio, not six to one, if you count the FDIC. If somehow you don't count them, I guess it is six to one. But if the FDIC fails, it's on us.
I guess a couple other questions I have. We're target about a trillion dollars worth of these toxic assets. Am I wrong to think that we have anywhere from $20 trillion to $50 trillion of these assets sitting out there someplace? Is that a wrong number?
GEITHNER: That's larger. The total assets of the banking system are roughly the size of the American -- of GD -- annual GDP, which is roughly $14 trillion now. So that's too big a number. Global financial assets are much larger than those held by U.S. banks.
CAPUANO: So globally it's -- all right. But it's a lot higher than a trillion?
GEITHNER: True. But assets that this program targets are . . .
CAPUANO: I understand that.
GEITHNER: (INAUDIBLE) real estate loans that are (INAUDIBLE).
CAPUANO: I understand what it targets. It targets all the AAA stuff, which, of course, amazes me. You're using rating by the very credit rating agencies that have now been completely undermined. And anybody with faith in these rating, I guess, hasn't been paying attention the last year. But so be it. You've got to draw the line somewhere. And I guess that's all we have.
I want to ask specifically about the FDIC's role here. The FDIC, as I understood it, and again without getting into glorious word, was there to protect me, as a depositor, up to $100,000, now $250,000. We're trying to extend that. That's what they're there for. And yet, in this case, they're being used to finance the purchase of toxic assets. Nothing to do with what anybody would have thought the FDIC was supposed to be used for. And they're being used, as I understand it, and correct me if I'm wrong, to basically float collateralized debt obligations backed by these very toxic assets in order to fund the purchase of these toxic assets, getting them off the books of the investors and putting them on the books of the taxpayers. How am I -- what am I missing?
GEITHNER: First, FDIC fully supports this program. It uses an existing . . .
CAPUANO: I don't care whether they support it. I'm interested . . .
GEITHNER: But it's important because this is based on an existing mechanism that they use and design as a normal part what they do as the principal resolution authority of the United States today. So they have broad experience doing this well. And they helped design this and fully support it.
The reason we're doing this, congressman, is because we think it's the best way to protect . . .
CAPUANO: No, I understand why you're doing it. Answer my question. Are they going to fund these things by floating collateralized debt obligations.
GEITHNER: No.
CAPUANO: Then why is it that on your website is says the buyer would receive financing by issuing debt guaranteed by the FDIC? The FDIC guaranteed debt would be collateralized by the purchased assets. What am I -- am I -- is this not right or am I reading it wrong?
GEITHNER: I just wouldn't call that a CDO.
CAPUANO: Ah, OK. But it is a collateralized debt somehow backed by a toxic asset?
GEITHNER: But, congressman, you -- it's good for the FDIC borrowing to be secured.
CAPUANO: No, no, no, no. I understand -- we can disagree on what's good and bad. That's what it is. And understand that you think it's good, otherwise you would have proposed that. And, of course, I want to make it very clear, I think you gentlemen are well intended, intelligent men who are trying to save the economy. I think your motivations are fine. I just think you're dead wrong on this one. I think you're jeopardizing the FDIC. I think you're taking it - in this particular case, yes, taxpayers may benefit if there's a profit, 50/50 benefit. But if there's a loss . . .
FRANK: The gentlewoman from Illinois.
REP. JUDY BIGGERT, (R) ILLINOIS: Thank you, Mr. Chairman.
I think that from the very beginning we've always said we need to restore confidence in the market and to provide the taxpayer with protection. I think we also -- and I think what's happened in the last week or so that we need to restore investor confidence and confidence in our government and the federal leaders, rather, and the regulators, that if Americans work hard and run a solid company, they're not going to be subject to punishment from the government if they do well.
And on that note, I think that we need to work together and really to focus on this economy. And I'm afraid that we're just not doing it or not getting all the information. What came up at our hearing last week was I asked the question of Mr. Liddy about the three trustees that were appointed to, I believe, to represent U.S. taxpayers' interests on the AIG board.
NGUYEN: And we will continue to monitor these live hearings on Capitol Hill.
Plus this, kicked out of your home because your landlord could not pay up? Renters taking a hit in this housing crisis. Stay with us.
(COMMERCIAL BREAK)
NGUYEN: Let's get you some more of those live pictures now from Capitol Hill. We were just watching Representative Judy Biggert from Illinois questioning Timothy Geithner, as you see right there. The Treasury secretary and Federal Reserve Chief Ben Bernanke in the hot seat today. They're testifying about those big bonuses given to AIG executives and the billions paid in bailouts. Plus, Geithner is also seeking more government power over big financial firms. Now we are going to bring you more of that hearing live throughout this newscast. But in the meantime, 64 days in office. We have been counting. Many of you have, as well. Well, a recession weighing heavily on his shoulders. So what do you think of President Obama's job performance so far?
Let's bring in CNN's senior political analyst Bill Schneider live from Washington.
So, Bill, where does the president stand in the polls right now?
WILLIAM SCHNEIDER, CNN SENIOR POLITICAL CORRESPONDENT: Well, with the recession and controversy over those AIG bonuses, you might think that they've brought the president's ratings down. But we did a poll of polls. And what did we find?
In polls taken in the last 10 days or so since the news of the AIG bonuses came out, the average job approval rating for President Obama is up. It's actually 63 percent. A little bit higher than in early March before the AIG controversy broke when the average was 61 percent.
So the president's job approval ratings are holding up very nicely. He appears not to be damaged personally by the controversy over the bailout and the bonuses for the AIG.
NGUYEN: All right. So how do he stack up as compared to previous presidents when we're talking about just the first two months into the first term?
SCHNEIDER: Well, let's look at where his four predecessors stood at this point in their presidencies just after they were elected. Take a look. George W. Bush was at 58. Bill Clinton, 53. The first President Bush, 56. Even Ronald Reagan was at 60 percent. What did we just say about Obama. He's at 63 percent. So he's actually doing a little bit better than his four predecessors were at this point in their presidency.
NGUYEN: All right. I've got to ask you about this. Treasury Secretary Tim Geithner, we've been watching him in the hot seat today on Capitol Hill. How do Americans feel about the job that he's done so far?
SCHNEIDER: Not so good. Look at the contrast between President Obama and Secretary Geithner. Fifty-four percent of Americans say that they are satisfied with President Obama's handling of the AIG controversy over the bailout and the bonuses. But the same number, 54 percent, say they are dissatisfied with Treasury Secretary Geithner's handling of that controversy.
Remember, Americans did not elect Geithner. They elected Obama. Geithner comes from a Wall Street background. He was with the Federal Reserve system in New York and was very much involved with the restructuring of AIG when it was first proposed last fall.
This is a populous controversy. The people see it as us versus them. And them, in this case, is Wall Street. They clearly do see Secretary Geithner as one of them. But at this point, they still see President Obama as one of us.
NGUYEN: Very interesting there. All right. Thanks so much, Bill. We do appreciate it.
You know, the best political team on television will be right here for special coverage as President Obama explains his economic strategy in tonight's prime time news conference. You can watch it live at 7:45 Eastern here on CNN, as well as on cnn.com. And we, of course, will continue to monitor the hearings on Capitol Hill.
Plus this, saving for a new baby. Health insurance and the best 401(k) for you. Well, our personal finance expert tackles your tough financial questions along with her panel of experts. You don't want to miss it.
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NGUYEN: You're looking at live pictures of a hearing on Capitol Hill. You're looking at Chairman Barney Frank speaking right now. You know, lawmakers, they are still very angry over millions of bonuses paid by AIG while its living on a lifeline from U.S. taxpayers.
Well, Treasury Secretary Tim Geithner and Federal Reserve Chairman Ben Bernanke are explaining the steps that they took to the House Financial Services Committee. And we are monitoring that hearing for you. We'll also take you there live as the testimony warrants.
You know, the financial crisis has pinned plenty of Americans up against a wall and our personal finance editor, Gerri Willis, tries to help out. And what she's doing is she's getting experts to answer your money questions. Take a listen.
GERRI WILLIS, CNN PERSONAL FINANCE EDITOR: We wanted to get you answers to your financial questions. Let's go straight to The Help Desk. Ric Edelman is the author of "Rescue Your Money." Beth Kobliner is the author of "Get a Financial Life." And Greg McBride is senior financial analyst with bankrate.com.
OK, guys, these are some toughies. Let's start with Natalie from New York. "My husband lost his business four months ago and we have $100,000 in debt." All of our savings are gone. "We have a three- year-old and will have a new baby in five week. We can barely scrape together money for health insurance and will have to give it up when the baby is born because we can't afford it. Because he was a business owner, my husband doesn't qualify for unemployment benefits. Is there any health insurance we qualify for?"
Beth.
BETH KOBLINER, AUTHOR, "GET A FINANCIAL LIFE": Gerri, this is such a sad one. But what they need to do is he needs to get a job that offers health insurance. You know, it might be difficult because if he owned his own job, he's used to being -- his own business, he's used to being his own boss. But he's got to get a job with health insurance. If they can't, there's a government program, insurekidsnow.gov, which actually offers health insurance for children. So for their kid, they absolutely have to make sure they're covered. And for themselves, they might want to consider a catastrophic plan. A short term catastrophic plan. So it won't pay for their everyday bills, but if something catastrophic, major happen, it will cover them for that.
WILLIS: Very good ideas. The kids program is called SCHIP.
Carla has a question. "I left money in a 401(k) with a previous employer because it was doing well. However, the account has declined from $14,000 to $7,000 in the past year. Should I withdraw the money, take the 30 percent tax and penalty hit and open a CD or other type of safe account?"
Ric, this is up your alley.
RIC EDELMAN, AUTHOR, "RESCUE YOUR MONEY": That will just make a bad situation worse. You've lost 50 percent, so you want to make it an 80 percent loss. No, absolutely and positively not. Take the money, roll it over to an IRA. No tax penalty. No fees to do it. Leave the money invested for your retirement. Invest it in a long term diversified way. You'll be fine in the next 20 or 30 years.
WILLIS: All right. Robert has a question. "I've been calling my mortgage company since December asking for help. At first, they refused to do anything. When the president' economic plan came, they said to call back in the middle of March."
Greg, everybody's getting the stonewall from lenders. What do you do?
GREG MCBRIDE, BANKRATE.COM: It has taken lenders some time to get off the ground, particularly with the new mortgage plan. And kudos for being persistent about this. Keep it up. In the mean time, go to financialstability.gov. They have the eligibility requirements there. Make sure this is something that you're eligible for and that you can qualify. Then, you know, that will give you some time until the lenders all ramped up and ready to roll.
WILLIS: Great answer. The Help Desk is all about getting you answers. Sent me an e-mail to gerri@cnn.com. Or log on to cnn.com/helpdesk to see more of our financial solutions.
And The Help Desk is everywhere. Make sure to check out the latest issue of "Money" magazine on newsstands now.
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(WEATHER REPORT)
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NGUYEN: Want to give you some live pictures now from Capitol Hill. We do continue to monitor this hearing. Treasury Secretary Timothy Geithner and Federal Reserve Chairman Ben Bernanke in the hot seat today. And they are testifying about those big bonuses given to AIG executives and the billions paid out in bailouts. Plus Geithner it also seeking more government power over big financial firms. And, of course, we will bring you this hearing live during those key statements.
But, in the meantime, listen to this. Some renters are just shocked to find out that even if they pay on time, they can still get evicted. That is the situation facing tenants caught up in the foreclosure crisis.
We get the story now from CNN's Deborah Feyerick.
(BEGIN VIDEOTAPE)
DEBORAH FEYERICK, CNN CORRESPONDENT (voice-over): When Lisa Brown moved into this rental house on Long Island last summer with her three daughters, she said it felt like a new beginning.
LISA BROWN, EVICTED RENTER: Once you got out in the park. I wanted to come here and I wanted to see my kids graduate from this school district.
FEYERICK: Instead...
(on camera): You need to be out in two weeks?
BROWN: I have to be out in two weeks.
FEYERICK (voice-over): Brown and her family are being evicted not because of anything they did, but because the landlord defaulted on the mortgage and the house was recently sold at auction.
(on camera): Did you ever think that somebody would actually rent you a home that was about to be sold to somebody else?
BROWN: She knew that this house was foreclosing on her. And she did nothing about it.
FEYERICK: Except take your money?
BROWN: That's it. Take my money.
FEYERICK (voice-over): Not to mention the upfront cost.
(on camera): It's $5,700 basically just to secure this?
BROWN: Yes. And she would not give me my deposit back.
FEYERICK: Nothing?
BROWN: Nothing.
FEYERICK (voice-over): It happens more often than you think. According to the Center for Housing Policy, nearly 20 percent of all foreclosures are on rental properties. While the owners know what is going on, renters are usually kept in the dark.
JEFFREY KLEIN (D), NEW YORK STATE SENATOR: In many instances, they are actually paying their rent on time and the owner of the property, who is in foreclosure is pocketing the money.
FEYERICK: New York State Senator Jeff Klein is working on a law already in place in a handful of states to warn renters of foreclosure proceedings ahead of time and thereby keep them from losing their security deposit and being evicted with nowhere to go.
KLEIN: What we're facing here is sort of the new homeless population, unless we do something about it.
FEYERICK: Eviction papers trump the lease. The renters have no legal right to stay.
BROWN: If it was me, yes, I can move out, I can go on my own. But it's my family you're talking about, you know? My three daughters, and my pets that I brought in thinking that we're going to stay and be, you know, happy, but, now, what am I going to do?
(END VIDEOTAPE)
NGUYEN: Well, the broker who rented the house says that he did not know the home was in foreclosure. And we also tried to reach the owner, but she didn't return our phone calls.
The CNN NEWSROOM does continue right now with Kyra Phillips.
KYRA PHILLIPS, CNN ANCHOR: Betty, thanks.
We're pushing forward. Two major developing stories with one thing in common -- an outrage factor that's off the charts. The chairman of the Fed says don't blame me for those AIG bonuses. Ben Bernanke tells Congress he wanted to sue.
And we can hear the lawsuits now. Veterans hospitals in two states warn thousands of patients their colonoscopies may have given them HIV
