a lot of money coming into this town. how concerned should average joe/jane citizen be that their interests will be protected against corp rat interests? >> as concerned as ever. >> no more than usual or is it more so? very i think there's a concern in that you don't know how the legislation plays out once you put nit place. as damon was saying, we don't know what will be put in place ultimately right now. so what perhaps is a confusing message to most americans is that both sides claim to be looking out for the interest of arnl americans and consumers. -- average americans and consumers. with one side saying if you institute proposals, you're going to end up costing people more and harming businesses with the other side understandably saying if we create this agency, the whole purpose is to protect consumers. so in the message there the truth sometimes gets lost. and time will tell about how it takes shape. >> during the health care debate, we kept hearing suggestions that perhaps doing it in pieces might have been a better way to go than trying to do the omnibus for both the reason of not knowing how it will play out and ultimately because of all the political to and fro. has there been any discussion about taking this in digestable chunks, doing a consumer agency and seeing how it works? why the approach in the big sense? >> that's a good question. at the beginning of the obama administration they had pushed to just first try to tackle this resolution authority part. how to wind down failing banks. but that seemed too impossible with the way congress works. it's hard to sort of nibble at the apple. and so they ended up doing it in this big bill. and i think there will be a debate however this plays out whether that was a good idea or not. because any part of this bill could take five years to move through congress, in the normal time period. the administration and the democrats definitely want to seize on the pain that americans still feel from the financial crisis to try to push this thing through. but whether or not they're trying to take on too much i guess we'll probably know in a couple of weeks. >> how does the election year timetable affect this process? >> i think everyone has an interest in getting it done, i don't want to say everyone. the democrats and chris dodd want to get it done quickly. there are others who do as well and maybe more importantly along the way want to use this bill to show how tough they are on wall street or how much they do care about consumers as a way of relaying that message back home, because there's a lot of people who face tough races this fall. and as it gets closer to the election season, those votes on a bill like this become a little harder to take. >> it looks like they're going to be dealing with this and also with immigration at the same time, and possibly energy. all hugely controversial issues. >> it's true. and it's funny, democrats were thrilled to pivot to this from health care. and they were just getting beat up every day. they got an issue where they feel like they can be back on the offensive and i think it might be moving quicker than they thought. it took three hostile votes on the floor but they got the debate begun. it's unclear if they're really going to try to tackle immigration and energy or just sort of use it as an issue. it would be difficult to move thing that is complex into law by -- we have a short window by the november elections. but this bill has the best chance of becoming law, the republicans are saying you're going to way too fast. but the democrats don't want to seem to hit the brakes. >> looks like you'll be spending a lot of time on capitol hill. thank you for spending time with us. >> my pleasure. >> coming up, a replay of last night's white house correspondents dinner. then goldman sachs testimony to a senate panel on his company's role on the 2008 financial collapse. after that, former president bill clinton joins a discussion on the new national debt commission. >> last night, thousands gathered in washington, d.c. for the annual white house correspondents association dinner. in a few minutes, we'll show you the main speaking portion with the first lady, president obama, and tonight's show host jay leno. first, a look at some of the people arriving for the festivities at the washington hilton. [inaudible conversations] cccccccccccccccccó [inaudible conversations] [inaudible conversations] [inaudible conversations] [inaudible conversations] [inaudible conversations] [inaudible conversations] [inaudible conversations] [inaudible conversations] >> good evening again. thank you all for coming. everybody in this room is very special tonight as far as i'm concerned. just a few quick acknowledgment. mayor ploomberg. thank you for your support. -- bloom berl. al hunt, thank you for your support over the years, and 3459, thank you. there's three special women in this audience whose love and support i feel every single day. and i would like to just acknowledge helen of sterling, virginia, my mother in-law, nancy of portland, oregon, my mother, and my darling wife, meredith, who is the light of my life and with whom i'll be celebrating a 35th anniversary this year. thank you all. [applause] . i would like to thank the natral resources defense coun silt which helped guide our efforts, and nrgc is represented here tonight by the executive director. thank you for coming, peter. and when we set out to green this event, i learned this job proves to be very easy, because the hilton hotel has been practicing many of these sustainable practices for many years. so it was very easy to do what we wanted to do. so thank you to the washington hilton hotel. [applause] hotel. [applause] >> and tonight, also marks the first time in the 96-year history tonight also marks the first time that the two presidents at this head table are guys who have the challenge of doing things in washington and shattered some glass ceilings to get here. is thank you. and finally, i think we are on the road to making history by having the shortest dinner program ever here. [cheers and applause] >> so i would just close by thanking the other seven members of the white house correspondents association board. each one of them over the past year took on very difficult assignments always with good cheer and they all had results to show. thank you very much. it's been a privilege to serve with you all. [applause] >> finally, this dinner would be unimaginable without the tireless efforts of a woman who spent the last year introducing me to people as her boss. i will tell you a little secret. she's the boss. and she's the brains and the bra wn behind this dinner and i have learned endless ways of saying know. please say hello to our executive director, jewel yes -- julie. [applause] >> i would ask you to pick up a wine glass and join me in a traditional toast to the president. i think it's safe to assume that not everyone agrees that all he has done and what he tries to do but i think we can agree he and his staff are working their hearts out. and i would like to include mrs. obama in this toast because she works so hard, being our beautiful first lady. to mr. president and mrs. obama. we are honored by your presence and may you have a healthy and long life. >> here! here! >> without furthera do, i give you the 44th president of the united states, barack obama. [cheers and applause] >> thank you. thank you very much. thank you. [cheers and applause] >> thank you so much everybody. thank you. please have a seat. thank you so much. ed and to all the other board members, to honored guests and to the lovely first lady -- [cheers and applause] >> good evening. ed's right. i work a lot. and so i wasn't sure that i should actually come tonight. biden talked me into it. [laughter] >> he leaned over and he said, mr. president -- [laughter] >> this is no ordinary dinner -- [laughter] >> this is a big [beep] meal! [cheers and applause] [laughter] >> it's been quite a year since i've spoken here last. lots of ups, lots of downs, except for my approval ratings, which have just gone down. [laughter] >> but that's politics. it doesn't bother me. besides, i happen to know that my approval ratings are still very high in the country of my birth. [laughter] [cheers and applause] >> and then the other day, my dear friend, hillary clinton pulled me aside and gave me a pep talk and said despite the numbers, don't worry, bralk, you're likeable enough, which made me feel better. [laughter] >> i may not have had the star power that i once had, but in my defense, neither do all of you. [laughter] >> people say to me, mr. president, you saved the banking industry and gm and chrysler. what about the news business? i have to explain, hey, i'm just the president, i'm not a miracle worker here. [laughter] >> though i'm glad that the only person whose ratings fell more than mine. great to see you, jay. [cheers and applause] >> i'm glad that i'm speaking first, because we have all seen what happens when somebody takes the time slot after leno. [laughter] [cheers and applause] >> by the way, all of the jokes here tonight are brought to you by our friends at goldman sachs. so you don't have to worry, they make money whether you laugh or not. [laughter] >> we do have a number of notable guests in attendance here tonight. obviously, i'm most pleased that michelle accompanied me. she doesn't always go to these things. [applause] >> and there are few things in life that are harder to find and more important to keep than love . well, love and a birth certificate. certificate. [laughter] >> the jonas brothers are here. they're out there somewhere. sasha and ma lea are huge fans, but boys, don't get any ideas. i have two words for you. predator drones. you will never see it coming. [laughter] >> you think i'm joking? [laughter] >> speaking of tween heart throbs, scott brown is here. [laughter] >> i admire scott. a politician in washington with nothing to hide. [laughter] >> now you should be aware that scott brown is not the only one with a cellatious floating around. david axelrod was offered one. i didn't know that krispy kreme had a catalog, but it's true. [laughter] >> i saw michael steele back stage when we were taking pictures, a.k.a., notorious g.o.p. he knows what hurts today, taxation without representing. [laughter] >> my brother. >> i did a similar routine last year but it always worked. odds are that the salahis are here. [laughter] >> there haven't been people more unwelcome at a party since charlie crist. [laughter] >> unfortunately john mccain couldn't make it. recently he claimed he never identified himself as a maverick. and we all know what happens in arizona when you don't have i.d. adios amigos! [laughter] >> i feel for john. we were on the road together and obviously had a hard-fought battle and you learn that politics isn't easy. this year, i have experienced my share of disappointments. for example, i had my heart set on the nobel prize for psychics. but hey, you can't win them all. [laughter] >> speaking of undeserved honors, a few weeks ago, i was able to throw out the first pitch at the nationals game. and i don't know if you saw it, but i threw it a little high and a little outside. this is how fox news covered it. "president panders to extreme left wing of batter box." . msnbc had a different take. president pitches no-hitter. [laughter] and then cnn went a different way all together. >> how can you get a volcano in iceland. when you think of volcano, you think of hawaii. you don't think of iceland. you think it's too cold to have a volcano there. >> i guess that's why they are the most trusted name in news. [laughter] >> look, i have a reputation for giving cable a hard time, so let's pick on politico for a while. you know, people attack politico for putting a new focus on trivial issues, political fodder, gossip sheet. that's not fair. politico's been doing this for centuries now. check out the headlines. our researchers found these. japan serneders, where's the bounce? then there's this one, lincoln saves union, but can he save house majority? there is a little portion there. he has lost the southern white vote. [laughter] >> an analysis there. and my favorite, july 3, 1776, senior whig official, talks break down, independence dead. some so this is nothing new. even though the mainstream press gives me a hard time, i hear that i'm still pretty big on twitter, facebook or as sarah palin calls it, the socialized media. [laughter] >> of course, that's not the only thing that we have been accused of socializing this year. you might have heard that we passed the health care bill. [cheers and applause] >> and was that roger applauding out there? some republicans have suggested that the bill contains a few secret provisions. and that's ridiculous. there aren't a few secret provisions in the health care plan. there are like hundreds. [laughter] >> tonight, in the interest of transparency, i would like to share a couple. let's see. this provision is called the bay state of denial. it reads, this bill shall cover short-term memory loss relating to the passage of massachusetts' health care reform. good news. your condition is covered. this next provision is called the jersey shore-up. it reads, the following individuals shall be excluded from the indoor tanning tax within this bill. snookie, jay wow, the situation and house minority leader john boehner. [laughter] [cheers and applause] >> this provision put a common misconception to rest. it says right here. if you do not like the ruling of your death panel, you can appeal. [laughter] >> now, look, obviously, i have learned that politics can be a tough business, but there are times that you just can't help but laugh. you know what really tickles me? eric massa. [laughter] >> apparently massa claimed that rahm came up to him one day in the house locker room stark naked, started screaming object sen ties at him to which i say, welcome to my world. [laughter] >> i feel ya! it's a tense moment. you know, even as we enjoy each other's company tonight, we are also mindful of the incredible struggles of our fellow americans in the gulf coast, both those leading the efforts to stem this crisis and those along the coast whose livelihoods are in jeopardy as a result of the spill. also in our thoughts and prayers are the men and women in uniform who put their lives at risk each and every day for our safety and freedom. [applause] >> in that spirit, i would also pay a tribute to the journalists who play an extraordinary role in telling their stories. earlier today, i gave the commencement address in michigan where i spoke to the graduates about what is required to keep our democracy thriving in the 21 century. and one of the points i made for all the changes and challenges facing your industry, this country absolutely needs a healthy, vibrant media. probably needs it more than ever now. today's technology has made it possible for us to get our news and information from a growing range of sources. we can pick and choose not only our preferred type of media, but also our preferred perspective and while that exposes us to an unprecedented array of opinions and points of view, it makes it that much more important that we are operating on a common baseline of facts. it makes it that much more important that journalists out there seek only the truth. and i don't have to tell you that. some of you are seasonned veterans who have been on the political beat for decades. others here tonight began their careers as bloggers not long ago. it's fair to say that every single reporter in this room believes deeply in the enterprise of journalism. every one of you, even the most cynical among you cherishes the free press and preservation of our system of government and our way of life. i want you to know that for all the jokes and the occasional gripes, i cherish that work as well. in fact tonight, i wanted to present all of you with a bipartisan congressional resolution that honors all those wonderful contributions that journalists have made to our country and the world, but unfortunately, i couldn't break the filibuster. thank you very much everybody. god bless you and god bless the united states of america. [applause] >> we are going to make history tonight. it's not 11:35 p.m., but i give you a man who is good any time of the day or night. jay leno. [cheers and applause] >> thank you, ed. this is everybody comedian's dream, rich people eating. i got stuck behind the arizona congressional delegation. luckily all their pips were in order. and i have the honor of being the only person on this panel not subpoenaed by rod blagblag. that is impressive. i see the white house press corps is very excited. so this is it. enjoy it while it lasts. i'm not looking over. is he laughing? some of you noticed that the president is turning gray, but he has had his share of stress. his mother in law moving in with him. i think that would break most men. sometimes the press can be one-sided. during the election, they would ask, is obama black enough? is obama too black. never the other way around, is john boehner orange enough? is he too orange? we never hear that. as you know, the president and first lady have a wonderful family. you remember this heart-warming photo. we all went ahh. and it reminded us of all of the similar photo taken in the previous administration, take a look. ahh! [laughter] >> our hats off to michelle obama who made childhood obesity one of her causes. [applause] >> she has started a more intense program called leave no child with a bigger behind. and that is a wonderful thing. [laughter] >> but mrs. obama with all the good work you have been doing, it's been undermined by others in your administration. here, take a look. >> it's's easy to say to stay healthy and exercise more. our children might not live as long as their parents. what can we do to help? be the example they need. make healthy choices and help them do the same. let's raise a healthier generation of kids. [laughter] [applause] >> and there was a big set back for nasa, president obama cutting the space program and not sending any more men to the moon. we can talk to one major achievement, we did get an astronaut on "dancing with the stars"." and that's something we can be proud of. i remember meeting president obama a number of times and critics describe the president as cold and aloof. he loves to socialize, car companies. [laughter] >> i congratulate president obama, he has done more than for the car industry except for toyota. [laughter] >> and as you may have heard, there are more problems for toyota, two of the crash test dummies refused to get in the car. so things are not looking good. but one wonderful thing about president obama, never lost his street cred. he knows how to deal with the average guy. here he is meeting a business guy on the campaign trail. >> the president is walking in here. this is where we are about to go. the president again expecting to talk about small businesses and how he is going to hurt them in this economy. what he's going to do. [laughter] >> another piece of cake? mr. president, i have to admit, when you were elected, comedy well at the white house has dried up, so thank you for picking joe biden. joe is a great pick because nobody is more media savy. here he is with andrea mitchell. the word he is looking for is "avatar." >> you have been a very busy man. do you ever get to the movies? >> as a matter of fact, we do. and umh, i think one of the odds-on favorite is this new program that i looked at it and wish i was seeing it in 3-d and watch this science fiction thing unfold in front of you. >> it's "avatar." as you know a lot of republicans wouldn't be here because of his dollar night at the bondage club. michael steele is here. michael, this has got to be pretty boring entertainment. couple of guys talking, come on. that was my favorite story. republicans in a lesbian bondage club. they don't want them getting married, but they like to watch them tie the knot. i thought that was interesting. [laughter] >> republicans going to bondage club, looking at porn, i can't wait to get back to hollywood where people have values. i want to talk about white house security for a moment. it's supposed to be the most secure place in the world. here's president obama and vice president joe biden, two most powerful men in the world. watch the door behind them. how does this happen? take a look. >> good evening everybody. >> good evening. >> tonight, after nearly 100 years of talk and frustration -- >> who's that guy. is he on the tour? did he wonder off? [laughter] >> and according to the pentagon, al qaeda is in financial ruin. you know what broke them? health insurance preliminary yummings? you know the monthly premium for a suicide bomber is? do you have any idea? if you took all the money republicans spent trying to stop health care and what democrats spent trying to get health care, we could have had it couple of years ago. supporters say that the american people will now get the same health benefits that members of congress get. and of course, that's great. how about some of the other perks? get out of jail free card. mr. president, you did a great job but you have to give a lot of credit to nancy pelosi for the way she sold it to the american people, she went to the new media, she went to youtube. here, take a look. >> in order to have quality, affordable health care for all americans, it is essential that everyone participate when they are well and not just join in when they are sick. so it's all better quality, lower cost, more access if everyone is mandated. [laughter] [cheers and applause] >> you have to admit that president obama's mood really changed once that health care bill passed. i would see you come into the press room before the bill passed, kind of slumped over, looking depressed, didn't have the spark. here's the president the day after the health care bill was signed. take a look. >> he should step in here just a second. >> are you ready for this? ♪ ♪ >> as you know, secretary of defense announced that the pentagon will ease up on don't ask, don't tell. he said they will be against the rules but not enforcing. like the ethics regulations in congress. david axelrod is here. he is one of the people most responsible getting president obama elected. and without him, john mccain would have been elected and watching "wheel of fortune." david axelrod was on my show. when i told him he was going to be on with "kick ass" he said, rahm's here? he claimed that rahm confronted him in the shower. congress has a gym? anybody in congress look like they work out? it took barney frank 30 years to get that body? what is harry reid bench pressing now? five found? [laughter] >> the president has the most diverse staff in history. they represent every ward in chicago. and i think that is fantastic, mr. president. [laughter] >> michael douglas is here. where's michael? he won an oscar for high portrayal as a greedy wall street broker. where does hollywood come up with those crazy ideas? bill mar? he is the reason we had no opening prayer tonight. and speaking of that, you know, everybody complains about the lack of civility on both sides. you see it in sports, you see it in politics. i think we have the answer. take a look. >> the reforms i'm proposing would not apply to those who are here illegally. >> you lie! >> are you tired of hearing what people say what is on their minds. they have an opinion and compelled to share it with others. those annoying comments can go away with this, duct tape. this gray sticky fabric solves it all, the american solution to everything. >> osama bin laden releasing tapes blaming the united states on global warming. even the united states blames the united states for global warming. i think he wants to quit al qaeda and join al gore. president has been promoting alternative energy. texas state university generates electricity when you exercise and generate power by exercising. you thought americans with hiring a lot of illegal aliens before. manuel, keep peddling. president obama threw out the first pitch at the washington nationals game against the philadelphia phillies. biden got kicked out for cursing the umpire. the pitch was not a good pitch, but to be fair, you are used to softball. i'm going to get fired again. i tell you something. a lot of critics felt that president bush did a better job getting the ball over the plate. but on the other hand, president obama can talk. so i think it balances. [laughter] >> as you know, president obama and the first lady, very much committed to education. in fact, here's their latest program. >> president obama says that a good education is everything to a child's future, but what if you have a child that can't learn or worst, won't learn. thanks to a bottled government program, you can rein trade them in. it's cash for clunkers. bring in that thing you call a son and get $4,500 for a new or select used child. that's right. up to $4,500 for that wannabe gangster or that morbid punk. so don't be stuck with that tramp you gave birth to. get a kid you you can be proud of. get clash for clunkers today. [laughter] >> i read that book game change about the 2008 election. you know what i learned from that book. reporters hold back all the good stories from the newspapers, they can get really rich. [laughter] >> nice to see chris matthews. chris, where are you? chris has been on "the tonight show." he comes down and talks straight through for 10 minutes and then i ask him a question and then he talks another 20 minutes. let's talk about the press for a minute. i want you to watch how different networks cover the same story. remember that story about president obama, somebody had a jacket and had a big poster on time square and the president isn't supposed to be endorsing. this is how cbs covered it. >> president obama no longer has the commanding presence in a new york location. remember this huge billboard with his likeness. it was removed. mr. obama's picture is not to be used for commercial purposes. >> now look how fox news carried the exact same story. >> timing is everything. ok. [applause] >> but to be fair, it is a two-way street ks, and i think the white house likes to play games. i'm going to show you some tape. this tape hasn't been altered in anyway. i'm going to show you some reporters outside the white house. notice how quiet it is when the msnbc reporters reporting and watch what happens with fox. we haven't changed it in anyway. >> does make a couple of problems go away. >> secretary robert gibbs. >> emergens of this part of the party isn't a good thing. >> and john boehner said. >> past few minutes that it involved just more than congratulations. a special election. >> republicans have held it. >> sausage making you don't want to look too closely at, but -- >> you be the judge! and you mentioned the situation in the gulf of mexico. there's talk that this oil slick could be bigger than that huge disaster they had up in alaska. really? bigger than sarah palin. that is unbelievable. and wolf blitzer is here. doesn't that sound like the name of sarah palin's helicopter? you know, the big rumor is, sarah palin may run for president in 2012 and she is a former beauty queen. if she wins, it would make history, would make the first time that a beauty queen would bring about world peace. they all talk about it. she could make it happen. you see her last month. it was beauty and the deceased. and my favorite democrat, senator john edwards, while a personal injury attorney who turned out to be a sleaze ball. i was stunned by that revelation . [laughter] >> well, now there's talk of a john edwards' sex tape. there's something that people never seen before, a lawyer screwing people. wow! how unusual is that. betty white is here. we love betty white! hi, sweetheart. betty has a long history in this town. her first stage performance was interrupted by john wilkes booth. [laughter] >> the last time i was here was 2004 and back then, hillary clinton campaign had $20 million but now mark penn has it. little inside baseball. the rich guys get it, yeah. newsweek is reporting that hillary clinton has been talking to friends about stepping down as secretary of state, you know, i think i picked up a clue in a recent interview about what she plans to do. it's a little subtle. >> i want to ask you again, you are never going to run for president again? >> i have absolutely no interest it. i know that's hard for people to believe. [laughter] >> governor bob mcdonald is here. i heard him say, when he heard the president was going to be here, he said what? jefferson davis is coming? [laughter] >> this is a tough room. my good friend joy beyhar from "the view" is here. i seen president obama in tough negotiations with the russians and showdown with similar jung il. and president ahmadinejad. but the only time i seen him look nervous and jerky is on "the view." look and count how many times times he fidgets. >> i'm surrounded by women. you always surprise me. you always surprise me. >> i'm going to say, over the weekend, i reread "dreams of my father." >> let's wibed this baby up. my favorite moment was seeing all five living presidents all together in the oval office and something spontaneous happened and i thought it was fantastic, take a look. ♪ what is it good for? war yeah what is it good for absolutely nothing say it again ♪ >> this has been an honor and privilege. this is the greatest job, for the president of the united states, first lady michelle o'bauma. thank you very much. -- michelle o'baum -- obama. [applause] >> thank you all for coming, ladies and gentlemen. please stay where you are. and my successor will escort the owe baum ast out. good night -- owe baumas dobamas out. good night everybody. [captions copyright national cable satellite corp. 2010] [captioning performed by national captioning institute] >> later today, we will show the debate from the pennsylvania democratic primary between senator arlen specter and rep joe sestak. is the only debate schedule before the primary on may 16th. tonight, another debate from the british parliamentary election. it is the third and final debate among the leaders of the three largest political parties -- gordon brown, david cameron, and nick clegg. the topic is the economy. that is tonight at 9:00 on c- span. >> this coming week, the senate continues work on the financial regulation bill with a man in votes scheduled for tuesday. now, we'll show you testimony from last week of goldman sachs ceo lloyd blankfein. he entered questions from a senate subcommittee on his company's role on the 2008 collapse. this is three and half hours. >> do you solemnly swear the testimony you are about to give will be the truth, the whole truth and nothing but the truth, so help you god? >> yes, i do. >> i don't know if you heard the earlier testimony or not, but we use a timing system that will give you a red light in five minutes and the light will turn yellow after four minutes so that you can try to give us your testimony, as possible, in five minutes. >> chairman levin , ranking member, and members of the subcommittee, thank you for letting me appear before you today as you examine some of the causes and consequences of the financial crisis. today, the financial system is fragile, but largely stable. this stability is the result of the size of the necessary government action during the fall of 2008. like other financial institutions, goldman sachs received an investment from the government as a part of its various efforts to fortify our markets and the economy during a very difficult time. i want to express my gratitude and the gratitude of our entire firm. we held the government's investment for approximately eight months and repaid in full along with a 23% annualized return for taxpayers. until recently, most americans had never heard of goldman sachs or were not sure what it did. we do not have banking branches. we provide a very few mortgages and do not issue credit cards or loans to consumers. instead, we generally work with companies, governments, pension funds, mutual funds, and other investing institutions. these clients usually come to goldman sachs for one or more of the following reasons -- they want financial allies, they need financing, they want to buy or sell stock, bond, or other financial instruments, or they want help in managing our growing financial assets. the nearly 35,000 people who work at goldman sachs, the majority of them work in the united states, are hard working, diligent, and awful. through them, we -- diligent and how awful. through them, we advise companies and provide them funds to invest in their growth. we work with university endowments and pension funds to build and secure their assets for generations to come. we connect buyers and sellers in the securities markets, contributing to liquidity and vitality of our financial system. these functions are important to economic growth and job creation. i recognize, however, that many americans are sketch show -- are skeptical about the contribution of investment banking and don't understand how wall street contributed to the financial crisis. we're trying to deal with the implications of the crisis for ourselves and for system. what we and other banks, rating agencies, and regulators failed to do with sound the alarm that there was too much lending and to much leverage in the system, the credit had become too cheap. one consequence was instruments that pooled mortgages and their risk became overly complex. that complexity and the fact that some instruments cannot be easily bought or sold compounded the effects of the crisis. while derivatives are important tool to help companies and financial institutions manage risk, we need more transparency for the public and regulators as well as safeguards for the systems of their use. that is why goldman sachs, in supporting regulatory reform, has made it clear it supports clearing houses for eligible derivatives and higher capital requirements for non-standard instruments. as you know, 10 days ago, the sec announced a civil action against goldman sachs in connection with a specific transaction. it was one of the worst days of my financial life as i know it was for every person at the firm. we believe deeply in like culture that provides team work and rewards saying know as much as saying yes. we have baekeland-centered firm for 140 years and of our clients believe we do not deserve their trust, we cannot survive. while we strongly disagree with the complaint, i also recognize how such a complicated transaction may look too many people. to them, it is confirmation at how out of control the believe wall street has become common a matter how sophisticated parties or what disclosures were made. we have to do it better job of striking a balance between what and former client believes is important to his or her goals and what the public believes is overly complex and risky. finally, the subcommittee is focused on the more specific issues revolving around the mortgage securitization market. i think it's important to consider these issues in the context of risk management. we believe strong, conservative risk management is fundamental lead helped define goldman sachs. our risk management processes could not and did not provide for absolute clarity. they highlighted uncertainty about evolving conditions in the housing market. that dictated our decision to reduce the firm's overall risk. much has been said about the supposedly massive short goldman sachs haddam housing market. the fact is, we were not consistently or significantly net short the market in residential or mortgage-related projects in 2008. our performance in the residential mortgage-related business confirms this. during the two years of the financial crisis, while profitable overall, goldman sachs lost $1.2 billion from activities in the residential housing market. we did not have a massive short against the housing market and we did not that against our clients. would rather, we believe we managed our risk as are sure alders and regulators would expect. thank you for the opportunity to address these issues. i look forward to your questions. >> thank you very much. we have heard in earlier panel today example after example where goldman sachs was selling securities to people and then not telling them they were taking and intending to maintain a short position against those securities. i am deeply troubled by that. it is made worse when your own employees believe those securities are junk or a piece of crap or a shitty deal, words those employees -- or does e- mail to show your employees believe about this deals. timberwolf, synthetic cdo squared. a senior executive called it a shitty transaction, but the sales force was still as a priority item for months. goldman sachs sold timber will securities while at the same time holding a short position, and other words betting against it. a cdo went to junk status in about seven month tenure investors lost big-time, but goldman one on the deal, profited on the deal. in the $500 million long beach deal, goldman shorted it at the same time it was selling it to clients. securities defaulted in a few years with a 65% delinquency rate. the bad news in your own words was your client lose money, but the good news is goldman sachs made money on that deal. $700 million on the fremont deal, and rmbs of mortgage loans, a notoriously bad a lender. one of your clients talked to your sales force about it and your sales force, among themselves call democrat loans and go out and sell them anyway. at the same -- call them crack loans and go and sell them anyway. at the same time, they are selling items and shorting the deal. city short stems of the goldman sachs makes money when this security fails, when it did in 10 months. on the $300 million anderson synthetic cdo, it is stuffed with new century loans which are known to be shoddy loans, one or two in the list of bad loan producers. a client of years asks how does goldman sachs get comfortable with this deal? goldman sachs is pointing out it is a new century -- goldman sachs did not respond and did not say we're not comfortable, we are shorting it, we are betting against it. asked a direct question, how can you guys get comfortable with the deal involving those loans? instead responding honestly, we've got problems also, we're not taking chances on this deal, we may be selling it but we are also betting against it, that is not happen. instead, the client was told goldman was an equity holder, which it was, but that was a half truth. it was also betting against that same security. that cdo failed within seven months. your client lost, goldman profits. the $2 billion hudson synthetic cdo, goldman sachs was the sole protection buyer on this cdo with a $2 billion short. in other words, they were betting against it. a goldman sales person described it as junk, not to the buyer, of course, but inside. the cdo imploding within two years, your clients lost an goldman profited. there is such a fundamental conflict, it seems to me, when goldman is selling securities, particularly when its own people believe they are bad items, describe in the way these e- mails show they were described and your own sales people believe about them, to go out and sell these securities to people and then that against those same securities, it seems to me is a fundamental conflict of interest and raises a real ethical issue. i would like to ask you whether or not you believe goldman the in fact treated as clients properly and, as you say, as clients believe we do not deserve their trust, we're not going to survive. those are the ringing words you given your own statement. given that kind of history here, going heavily short in a market, which you did, you made a strategic decision to do that, but then, on these specific examples, to be betting against the very securities that you're selling to your clients, and internally, your own people believe these are crappy securities, how do you expect to deserve the trust of your clients and is there not an inherent conflict here? >> there is a lot in your question and i'm sure we will spend a lot of time on different parts of it. our clients' trust is not only important to us, it is essential to us. it is why we are as successful a firm as we are and have been for 140 years. we are one of the largest client franchises in market making in these kind of activities we're talking now and our client base is a critical client base for us and they know our activities and understand what market making is. >> do you think they know something is a piece of crap when you sell it to demand that against? >> i don't know who that is. >> we went through it today. >> i know that and there were individual e-mails that were picked out -- the line >> i'm just asking a question. if your people think something is a piece of crap and go out and sell it, do you think that deserves your trust? >> of want it will make one thing clear. when you say -- >> you bet against it. >> we are principles. the act of selling something is what gives us the opposite position of what the client has. if a client asks us for a bid and we buy it from them, the next minute, we own it and they don't. if they ask to buy it from us, the next minute they own it and we don't. we could cover that risk, but the nature of the principal business and market making is that we are the other side of what our clients want to do. >> when you sell something to a client, they think that you are rid of it and it is no longer in your inventory. >> not necessarily. >> but they have a right to believe you want that security to work for them. that's a believe i think most customers would have. but in example after example, it is not just that you sold something, which obviously meant you sold something, but that's not what we're talking about. we're talking about betting against the very things you are selling -- going short against it without disclosing that to the client. do you think people would buy securities from the if you said we want you to know that we're going to sell you this but we are going out and buying insurance against this securities exceeding. we are taking a short position. we're getting this thing out of our inventory and betting against this very thing we're selling to you. that is a totally different thing from selling a security and no longer having an interest in it. my question is, is there not a conflict when you sell something to somebody and then are determined to bet against that same security and you don't disclose it to the person or selling it to. do you see a problem question >> in the context of market making, that's not a conflict. clients are buying, customers are buying an exposure. the thing we're selling to them as opposed to give them the risk that they want. they are not coming to us to represent what our views are. the institution clients we have would not care what our views are and shouldn't care. we do other things at the firm. we are advisers and manage their money. there are parts of the business where we are fiduciaries. >> that is the part that is confusing. they think you are fiduciaries. >> not in the market making context. >> but they are not told that not only are you not a fiduciary, you are betting against the very security you are selling to them. you do not disclose that. that is worse than being a fiduciary. that is being in a conflict of interest situation. >> i don't think our clients care or they should care -- eli >> that you are betting against the security you are selling to them. >> use a betting against. >> you are holding a short position against it. i heard you over and over again, you are selling securities, many of which are described as crap buyer on people. we'll come back to that. there is an inherent conflict when you do not disclose to your client that this security you are buying from us as a short side, but we are the people who were keeping the short on this one. we are betting against this securities exceeding. you do not think that is relevant to the client? >> -- new line in a human context, the markets work with respect to what the item is. it does not carry representations' of what aid position seller has. think of buying from the new york stock exchange rate futures market. you cannot even know or you are not supposed to know who is on the other side. you could have the biggest mutual-fund in the world that all selling something. they could hate it and you never know that if you were the buyer of a stock, who was selling it or why they were selling it. liquidity in the market demands transparency, that the thing is supposed to do what is supposed to do. the people coming to us for risk in the housing market want to have a security that gave them exposure to the housing market and that is what they got. the unfortunate thing, and it is unfortunate, but the housing market went south very quickly after some of these securities, but not all of them, people lost money in it, but the security itself delivered the specific exposure that client wanted to have. >> you do not believe it is relevant to a customer of yours that you are selling a security to, that you are betting against that same security? you do not think it is relevant and needs the disclosed? >> yes. and the people selling it at our firm wouldn't even know what the firm's position is. >> yes they did. >> we have 35,000 people and thousands of traders making markets throughout our firm. they might have an idea, but they might not have an idea. >> what do you think they have -- putting that aside, what do you think about selling securities at your own people bank are crap? does that bother you? . . probably it if they ask a salesperson their opinion, that salesperson owes a duty of honesty, but otherwise they are representing the security, what it is, and what it will accomplish. we are selling securities all the time. they are weak, and we ourselves don't like them, but it is a function of the price in the market. i bet that some securities -- and i don't know which specifically are the subject of those comments -- can be bought today for a willing buyer and seller for cents on the dollar. people are making rational decisions today to buy securities for pennies on the dollar because they believe it will go up, and sellers are happy to get the pennies because they believe there will go down. >> i believe that. i understand it. you were the soul of the security, and u.s. goldman sachs believe it is a piece of crap. as part of the deal -- and talking about this, i am talking about where the deal is that you are selling, it has you in the short position in tending to keep that position. that is the deal. whether there's not an obligation then to disclose to the people you are selling to end the deal that hey, we, goldman may be selling that to you, but we believe it is going the other direction and are taking a short position. you do not see any conflict in the act is? >> in those transactions that we underwrote -- and my understanding is that it is disclosed that we can have a long or short position in the securities. >> were you take a short position, do you think that should be disclosed -- where you are betting against the very same security yourself? >> you keep using the words "betting against" -- >> just try my question. in a deal where you're selling securities in your intended to keep the short side of that deal, which is what happened here in a lot of these deals, do you think you have an obligation to tell the person you are selling that security in that deal, that you're keeping the short position? >> that we will not covered in the market? >> that you intend to keep the short position. >> no, i do not think we would need to tell them -- i don't know that we would know ourselves. even if we intended -- >> i said where you intend to keep a short position. that is my question. >> no, i do not think we would disclose that, and intention for market-maker is a very -- >> you are investing in the securities. you have made a decision strategically -- forget strategically, but you made a decision to bet against, to take a short side of a security that you are selling. you do not think there is any moral obligation here? but aside a legal obligation. to tell the person you are selling this to that you are betting against the security by maintaining a short position? >> i do not think so. i am trying to answer. or for that matter if a client came to us and asked us to buy something from him and we intended to hold a long position, and neither do i think we have an obligation to tell them our intention to hold it. >> that is the same side, not the opposite. no, you said a client comes to you to sell something and you decide whether or not to buy it. >> every transaction, a senator -- and i'm not trying to be resistant, but this is terminology -- as a market-maker we are buying from sellers and selling to buyers. >> you're not selling it to anyone else. you are selling to somebody in taking the opposite position. you are betting. you're getting a default swap, however is done. if you are betting against the very secure you are selling to the person. you do not see a problem? when you put together a deal and look for people to buy the securities, it adds insult to injury when your people think it is a pile of junk. but the underlying injury is that you have determined you are going to keep the opposite position from the security you are selling to someone. you see no obligation to disclose that? >> i do not believe there is a disclosure-obligation, but as a market-maker i'm not sure how market would work if it was premised on the assumption that the other side of the market cared where your opinion was about the position they were taken. >> do they have a belief you at least when you're going not to peddle securities, that you want the security to succeed? don't they have the right to assume that if you are going not to sell securities you believe it is something that would be good for that client? >> i think we have to have a believe, and we do have a belief that if someone wants an exposure to housing -- the to you are out there selling the securities. you're picking up the phone, calling these people. you do not tell them this is a security which incorporates or in some references of a lot of bad stuff in your own inventory -- bad lemons. you are out there looking around. over and over again we have e- mail's for you are out there looking for buyers of stuff whether juggernaut, where you are betting against what your son. you intend to keep the opposite side. you are not just selling some from your amateur. you are betting against the very product you're selling. -- you're not just selling something from your inventory. >> i cannot endorse your characterization. >> it is a question. i am send your not trouble? >> i'm not troubled by the fact we market-maker as principal, and we're the opposite. when someone sells to us, they sell from us. and vice versa when they buy. >> and you are betting, keeping abeting interest against the security. it is not just that they are buying from you. that is not my issue. they are buying something from you and you select thsolicit th, and you are keeping the short side. you're getting a default swap. you are taking a position against the very security you are selling. you are not troubled? and you want people to trust you? >i will not trust you. if you came to me and wanted to summit securities and you did not tell me that you have a bet against that same security? you do not think that affects me? >> senator, we could do a public issue of an oil company tomorrow. an ipo of an oil company that goes out to search for oil. when we sell that company, and as an underwriter we make sure there is due diligence -- but we can tell investors if they want an exposure to an oil company and understand the risks, and we do a good job in the diligence and all the disclosures required by ourselves and all the regulators, we can sell the security and will not necessarily disclosed, and will not even know, and the buyer would not care, that we could be negative on the equity market and-on the oil market. it's still one of matter. >> stick to the point. i'm talking about the security you are selling. i don't care what kind of this. you are betting against the same security that you are out there selling. i have to keep repeating. you got a short bet against that security. you do not think the climate would care? >> senator, i cannot speak to what people would care. the obligations of a market- maker or to make sure your clients are suitable. we are part of a market process. we do hundreds of thousands if not millions of transactions per day as a market-maker. >> this is much more. you're keeping proprietary interest in a position that is the exact opposite of what your son. we are going round and round on this. i don't think we'll get an answer from you that you have any concern about that kind of situation. senator john mccain? >> thank you for being here, mr. lloyd blankfein. would you agree upon intercrossecrisis -- but it wasn by a collapse in the housing market? >> i think it was a number of factors. i don't know that was the initial factor, but it was a major episode in the collapse. >> your involvement in the housing market is not in a direct mortgage business? >> correct. >> and received $10 billion as part of tarp? >> investment was made into goldman sachs, yes. >> and why did you think you needed that money? >> we were part of a group of banks that were brought in, and at the same time had an investment made by the government to stabilize what was a panic of sorts because the lack of confidence. >> you did not make any direct home loan mortgages? >> de minimus. >> since it was the housing market collapse you needed $10 billion, and you recovered rather nicely, i guess. you declared earnings for 2009 of some $13 billion, is that correct? roughly? >> that would be in the ballpark. >> in your bonus was? -- and yours was? >> about $9 million. >> and you're doing pretty well this year, too, according to earnings and stock the? >> um, financially -- yes. >> how the you think the community banks are doing? i think they're doing pretty poorly, being closed all the time. they are the ones who make the loans for the mortgages. think they're doing ok, the community banks? >> i think the recession -- whether or not the recession has ended, and most believe it has, the consequences of it still grinds on indiscrete in substantial hardship. >> but goldman is doing pretty well. and one of the reasons obviously why goldman is doing pretty well, before the got the $10 billion of tarp money, of taxpayers' money, there was a november 2007 e-mail from you that stated "of course we did not dodge the mortgage mess. we lost money, then we made more than we lost because of shorts." that is a quote from your e-mail that you read. how much did you make, more than you lost because of shorts? >> in residential in this market, we made for the entire year of 2007, less than $500 million of revenue and the succeeding year of the housing crisis in 2008 we lost $1.70 billion. we did not make big money. what i was referring to in my e- mail was th --at -- and this was on the back of a message looking at a pro-business, same e-mail of money in shorts, when i knew that we had a lot of longs and shorts that netted two very, very small positions as our goal during this time was just to manage risk down. >> you know, mr. lloyd blankfein, there's a lot of animosity out there that i'm sure you have seen. we find in my state, for example, 40% of homes are still under water, worth less than the payments being made. the community banks continue to struggle and have great difficulties. you receive $10 billion in tarp money, and the committee banks of the ones gone under. do you think that in the minds of many americans is a contribution? you're doing fine. paying millions of dollars in bonuses. in the meanwhile, the direct lenders and the housing market, the committee banks -- the ones homeowners relied upon are the ones struggling in still having enormous difficulty. do you understand what people might think there is a dichotomy there? even an unfairness there? and i do understand that life is not fair, but many americans do not quite understand what went on their, or understand what hit them. >> absolutely. i think committee banks play an important role. -- community banks plan important role. not generally or specifically, but maybe some hurt their own situation by over lending, but i'm sure for many they only conducted their social purpose and lent money against housing. the people who owe the money cannot pay back. the housing as collateral goes down in value. they may be victims of recession. i can understand. i share your concern for the situation. >> and i know you are not a charitable organization. but has goldman sachs done anything to try to help these community banks and homeowners who are struggling to make their mortgage payments? >> senator, -- >> you did get $10 billion of the taxpayers' money. >> if yes, we did. and i mention that his position -- the disposition of that with a high rate of return for taxpayers. we have always been a philanthropic organization. we are sometimes invisible. in the last year, 2009, we allocated -- and i do not mean just a crude, but delivered $1 billion of the firm's funds to flaunt their peak, including $500 million to a program to support small businesses by giving education, through the medium and delivery mechanism of community colleges, and with a view to providing finance for some of the graduates of the programs for small businessmen to make them bigger businessmen. and to involve our people with it. are any of these things enough? not for the suffering existing in the world, but we are trying to do our part. we think in the main conduct of our business we're also doing important things for the capital markets, but do keep account of committees we normally do not reach. >> what about community banks? any involvement with them? >> we may, but i just do not know. >> explain perhaps for the benefit of the committee and record -- what is a synthetic cdo? >> i was going to build two. a cdo is a pool of assets, mortgage assets, some mortgages pulled together that can be sliced in a way to yield a particular credit exposure. one would want to pull mortgages because it gives diversifications. you can get them from not just one committee, but over the entire country. you would slice it because it even bigger place on the credit skill. you would like more senior ones, or newer ones. in a synthetic you do not pool those, but reference points better connected to those specific pools. >> in other words, in a synthetic cdo you really have no ownership, but are just betting on the fortunes of the fortunescdo? correct? >> yes, you are doing it to give a specific risk in a specific place of a specific level of spectrum without necessarily having to assemble the particular securities. you can do more quickly, more precisely. >> how does that differ from going to caesars palace in making a wager on the outcome of an athletic contest the? >> i think the people participating in the synthetic cdo market are specifically trying to take particular risks with respect to the housing market, short or long, and presumably there would to take dead either to initiate that exposure, or to use that exposure to help hedge themselves, or just the risk profile. >> it has been alleged in the case of the abacus transaction that the credit agency was not informed of a hedge fund client was taking a short position. is that true? >> i think the specific complaint was a lack of disclosure that a short -- someone taking the short side of the opposition had an influence on the selection agent. and that that should have been disclosed. >> should it have been disclosed? >> we do not think so, no. that is in dispute. >> that the credit-rating agency -- >> it is complicated. in the alternative -- there is also -- and again, this is litigation. there was also a belief on our side that the selection agent did know. >> so let's assume that the agency did not know. you would know whether you informed the rating agency or not, wouldn't you the? >> of personally would not. the person who was also hear testifying asserted he believed the other side of the transaction did know and therein lies a factual dispute. -- i personally would not know. >> the region trating agency would know, wouldn't they? the hedge fund -- there is a difference of opinion between the hedge fund client and goldman? >> i do not think there is a difference of opinion between them. >> well, the rating agency rates the cdo, write the? >> yes. >> it is alleged that the rating agency was not told the hedge fund client was taking a short position. >> senator, this may be different point. it is not the subject of a legal proceeding to the best of my knowledge. >> well, a lot of these things are fairly complicated, mr. lloyd blankfein. a lot of americans do not understand what happened. but they do understanding that they are still hurting very badly, many across this country. they believe that you're handling, and that of other financial institutions, and the housing market and these complicated transactions were a direct contributory to the meltdown america experienced. and they have not recovered. you have done pretty well. i do not think that is the vision that most americans have of how this nation and its economy should function. thank you. >> thank you. senator kaufman? in your testimony you saying -- you say goldman has been a firm for 140 years. the new device, financing, 30, to buy or sell a stock bond or other financial estimate, or want help in growing our managing their financial assets? >> yes. >> is it fair to say in the past 30 years that goldman has gained more from trading on its own account without the need for clients? >> we have focused more and more in trading of the principal, but that is the with a quiet business have evolved. >> but away from classic investment banking and two more trading,? >> increasingly, and this is a change in the sociology of the business that took place over the last 15 or 20 years -- and i'm not sure it was precipitated by the fall of glass-steagall, or that caused glass-steagall to fall as u.s. institutions had to become more competitive with global ones, but somewhere along the line, clients used to ask you for advice, and if you win investment bank, then went to other institutions and ask them for financing. and to take principal risk. somewhere along the line they stopped asking necessarily to do things for them, but to do things with them -- to be the other side. today in the world, and this evolved over a long period of time, to be effective for your clients, you not only had to give them advice, but you had to have the financial wherewithal -- in other words the balance sheet, to be accomplish their objectives. not just to advise them on their objectives. so, goldman sachs 1213 years ago actually had to reverse many years of being a private partnership to become a public partnership -- 12 or 13 years ago. so that frankly we could survive in the evolving world of needing to be a principle to accomplish our client's objectives. >> but it was also very profitable. goldman is one of the most profitable. it was not just a move of society, but when you sat down to have meetings you decided this was the way to go. >> i know that, that you're not saying it negatively, but just for the history it was a very famously -- it was a very observed decision done very reluctantly, not so much -- and the real rationale was not to make incremental profits, but was done for us to survive as a leading financial institution. had we not, if we were not effective for clients to allow them to accomplish those objectives, goldman sachs would probably not be around -- it would be wrong, but not an important company today. >> your one of the leaders of? >> we were the last of the firms to do this. >> those proprietary trading ever run counter to the interest of your clients? do you ever feel like it is a conflict of interest? i'm not saying you are being corrected, but does proprietary trading activity of a run counter to the interest of your clients -- or present a conflict of interest? >> when you say proprietary it means business that is totally separate from client business. no, i don't think so. when we do proprietary trading, this separate. separate people. >> i'm not saying anybody is doing anything wrong. someone in department a is talking to smith over in department b -- but if smith is doing one thing, and jones another -- i can resolve that by telling them not to speak to each other, but when you are doing it out of one firm, these kind of transactions, there is a conflict of interest. whether or not you handle it well, how of all of the middle -- it seems to meet the potential for conflict of interest when you are perpetrating your own account, is great. >> in our principal of activities, more than the proprietary activities, there was always -- we always have to manage conflicts. necessarily if you are a principal, you are on the other side. i think our proprietary businesses actually have much less, although the perception of it -- obviously, the perception of complex, but we keep those very separate. >> this is a business where there is conflict of interest where there did not used to be. when you were 100% concerned about your client, you were not involved in proprietary trading. inherent is the conflict of interest. to return to" chairman levin does, in the first half of 2007 goldman sachs long-goldmancdo's contrary to its clients the? >> back then we reduced our risk. since they began as long it means we sold some long positions and put on the other short ones. >> you sold positions, and while the cdo's goldman itself had greeted it -- you were selling cod's of the same time you're taking short positions on the same? ? there is a thing called hudson mezzanine. you were selling cdo's into the marketplace. by your account your selling the very same ones short? >> i do not have any knowledge of them. >> if you believe that can happen the? >> i believe some people can own --look, on the first they someone can buy a cdo from us -- yes. if people came to us the day after we sold our entire amatory, and the day after one to buy them -- >> you were selling cdo's you had bundled together -- mortgages you have an altogether as cdo's through 2006, 2007. at some time you decided you had risk. therefore, you began to sell the cdo's short to solve the risk. >> i cannot answer. i know that we reduced our risk is part of the instruction. the risk began long. i don't know to what length. it was some of it. selling certain securities, shorting some -- but i cannot tell you because some was the future of the new abx index as well. i just do not know. >> but you do not think there is anything wrong with that? >> no. but to the extent you are asking me whether we were long or short a certain security, or saddam position, i do not know. i cannot rule it out, but i just don't know. >> i will not ask to 20 times. only once. does that have the appearance of a conflict of interest? >> that we were short -- >> that you were selling cdo's. according to this hudson mezzanine 2006-i, you apparently marketed the cdo's then sold them, then at some time you were concerned about them and decided to short them to offset risk. don't you think that has the appearance of a conflict? >> again, i do not know. if we have pools securities in a mentor and are trying to get, to reduce the risk, but we will be selling those -- >> on the last panel we talked about this. you decided you do not want to sell those. most people who are not as sophisticated as goldman sachs, if they are in a position where you have a lot of stock or cdo's -- that you now think may be risky, you do not soar something -- people do short things, but most people just cut back. if they have a 500 shorts, maybe they will sell 100 of them. the previous panel said that it was illeiquid. you went out and goldman sold short. >> man speak generally? the best way of reducing risk is to sell what you have. -- may i speak generally? sometimes you cannot because it is illiquid, or an attractive. sometimes what people are doing is gee, i'm sure this thing in the capital structure, so will sell something similar but a little lower inequality because i think it will underperform compared to what i have. that is what they're doing. >> the no, i'm talking about when you are actually out selling it. in every other business for most americans if you were coming to me and saying, hey, buy this car for me, and at the same time -- these are good cars, these are great, but i just told mind because it is a clunker -- that concerns me. why your oral analogy really does not work -- what is really at the heart of this -- at what time did a woman beside the housing market was going south and we want to get out of it? it was not like you're carrying this oil deal. in 2007 then, and people were starting to see the market was bad -- goldman sachs sells a lot of stuff short, and guess what? they make a lot of money doing it. but it was just a business deal? do you see where the concern is? it is like the old watergate thing. what did you know, and when did you know what? if you were still selling rmbs' after you really had decided this was a down market, and were evidencing that by selling short, i think that is what people are wondering about. >> i realize that. we are very informed and would not be here except for the fact that there was such a collapse in the housing market. to return to the oil analogy i gave, if we were sitting here having underwritten a new security like what i described, and after we put it into the market, three months later we were short bet security -- that sounds ok. >> that is ok because you're not continuing to sell the securities at the same time. >> but it was the same secret we had underwritten three months earlier. >> of something the world has a problem with that. let's say i sold out every one of them, and six months later i seldom short. things happen. what is inherently wrong is if you start to sell securities, a series, and then at some point decide -- these are really bombs. we heard earlier that you're selling washington mutual 90% of wage were stated in coming months. home equity loans. they all went bad. at some time some looks up and says oh, my god -- they have all these stated income once. we have to get out of this business. that is the concern. at what point did you know that? >> we did not know what subsequently occurred in the housing market -- we did not know. by the way, we did not behave like when you would. in other words, there are e- mail's going around that this one was nervous -- and we're talking about relatively and junior management people. then there are other e mills where people were excited and thought the market would rebound. we did not know the housing market was going to happen like that. >by the way, our positions reflect that. had we known we would have been massively short the market instead of just getting short. about equal to what our longs were. >> can you remember at what point -- an important day -- decided to pull the management of goldman sachs and say, this housing market is a bad place to be in? when was that day? >> i never did. >> right up to the and you never had as corporate policy that we should reduce positions in mortgage-buy securities? -- right up to the end? it was not just last week, said there had to be a time. >> again, we're doing with the same information. tomorrow, i think there needs to be -- it would serve the public interest for the securities market in the housing -- learning from the mistakes revealed -- assume it with me he learned from mistakes, i think secured housing home mortgages is not inherently a bad activity. >> at which point did you decide -- that goldman sachs had to do everything you could to get out of this business? the second quarter of 2007 you shut down your cdo warehouses, reduced loan purchases and other party exposure -- it sounds to me like he wanted to get out of the business. >> to the best of my knowledge, because i was not close to that decision, i don't know the decision was made to leave the business as opposed to reducing the risks. >> "shutdown cdo warehouses?" that was not an indication? >> when you tell me what to get out of a business -- senator, i don't know. >> you can see what people are concerned about what went on at the second quarter of 2007, and what point where you reached a point where you could not sell this anymore? it is not correct to originate these loans. i'd just have incredibly -- it is hard to believe -- there is an illusion in this country about how smart people are on wall street. i know they are really, really smart of mostar. it is hard for me, for the american people to believe that people this smart never decided this was going south and a big way. >> i heard your earlier remarks as well. i think we're not that smart -- maybe there were people who knew -- and by the way, even those who with hindsight knew it, i thoughthink they thought it, and turned out to be right. for my own self, at 20% down in the housing market, i did not know whether it would go down 30% or rebound of 10%. >> now is a different story. the reason this is a problem is because one of the defense's use is that these are all big boys. we are dealing with the boys. therefore caveat emptor really does not apply. you can get into the house and you know, but you ask for a heck of a lot better documentation. you ask for higher returns, all kinds of things. it is very risky business. the request and is, we have talked to washington mutual. they were just pushing stuff out the door as fast as they could. stated in coming months. the office of thrift supervision said he had no idea that washington mutual, 90% of their equity loans were stated in come, 53% option arms. he had no idea. he had previously stated that stated income bonds were and athena to the business. -- anathema to the business. there is a problem. why in the thousands of rmbs' they raided 50% aaa -- and they are not all junk? people were still doing things long after they knew there was a problem. >> there were many business judgments. i wish that i had known -- it just look at all the big, wall street firms that lost tens of billions of dollars even after this time in 2008 holding on to the securities. i did not know. all we know is the discipline of mark to market and reducing our risks and the markets are nervous, and when pnl's are moving. >> let me finish with this thought. this was the worst thing to happen to this country economically since the great depression. millions of people were put out of work. millions of people lost their homes. the of the people are really hurting. what really bothers people the most, at least those i talked to, is not the bailouts, although that really bothers people -- it is the incredible compensation, bonuses to people that during 2007 made terrible decisions and still receive gigantic bonuses. especially from executives who said it should be based on performance. the performance was lousy, and they still made billions of dollars. what billy gets the most is, here we are after this terrible travail, and there's only one section of our entire economy that has to worry into what really bothers them the most -- only this one sector workers about their bonuses. it may be totally chance, thing beyond our control, but the idea that wall street cannot of this thing just fine, thank you. it is just something that grates on people. i think that they think he did not just cannot find because it was luck. they think that you guys really gave this thing real well -- not that you caused the whole thing. but just that you came out of this fine. it disturbs them. thank you. >> dr. coburn? >> thank you, mr. blank fein, for being here. i have to disagree. i think the majority of the responsibilities of some lack of congress. i'm adamant in my view on that because you cannot record the last time we had an oversight hearing until the problems came up. we do not do oversight in advance to see how things are working. i have a few questions, having said that. the activities you and employes had been called here to talk about is that your understanding that competitors were engaged in same activities? >> yes. >> some are not here anymore? >> that is correct. >> did you have any concerns that some time about any attendees undertaken the surcease i did not. oh, i'm sorry. >> so you have not heard anything today concerning you about the actions by goldman or former goldman employees? >> i think as i heard it everything sounds correct, but when you say concerns -- in my role look deeply into everything. what is going on in the hearing today is a fact-finding for you, but for every one also. i heard nothing today that makes me think anything went wrong, but i will not -- you raised transactions i have never heard of before. i will have people look deeply into them. >> on sunday, september 21 -- >> what date? >> 2008 -- about the goldman becoming a bank-holding company. he said the decision is based on a recognition that it provides full prudential supervision and access to permit liquidity in funding. we believe that goldman sachs under such supervision will be regarded as an even more secure institution with an exceptionally clean balance sheet and greater diversity of funding sources. prior to september 2008 did you or anyone at goldman sachs have plans to convert the bank to bank-holding company? >> prior to september 1? yes. we did not resolve to do with it, but it was something we were very much looking at. >> was this something discussed at a board meeting in? >> and yes, it what. >> are the records of that board meeting 60s there must be. i have not reviewed the records. >> would you have your staff provide this to us circe's yes, i will. and we decided not to have the boy do that. >> looking back today, would you rather be an investment bank? >> you mean -- >> rather not be under the federal reserve today circe's i think -- i'm not sure. we will have to wait and see how the legislation unfolds. i'm really not sure. i'm not sure how realistic that will be. the reason why we were looking at it at the time was, we originally started with an entire regime for investment banks. then post-bear stearns and post-lehman, it was clear there would not be a whole regime for -- for the classical investment bank. because there were not that many. >> in your september 21, 2008 statement you talk about access to greater liquidity and diversity of funding sources, would yowere you referring to ao the window at the federal reserve the? >> possibly, but i'm not sure. >> that would make sense to you circe's yes, it would, but i'm not sure. there were many facilities already in place. i am not sure. >> let me ask a follow-up question. prior to september 2008, is it accurate to say that goldman sachs had temporary access to the discount window? >> there are even people who may know that answer better than me. i know we had access to certain funding facilities. i'm not sure it was the discount window per se. >> that would be something i would be interested in having. have you since becoming a bank- holding company accessed the discount window? >> to the best of my belief, other than to test it to see if it would work, i would say no. but as you notice, and i'm looking for counsel, and i look much -- and i feel much better having gotten it. >> let me ask you a few questions about the bill being proposed. your cfo city generally impressive, are supportive of the dodd bill, have been fairly profile -- high profile and your support. do you still maintain your support for this bill? it doesn't solve the problems that we got into? >> first of all, some of specks of the bill i think have morphed over the past, even over the past few days. >> i do not think so. the bill was turned down. >> right, i'm to in support. there are details that i am not as sure of it, but on the whole, financial reform is essential. i will say that last week in new york but listen to a speech by barack obama at wall street. one of his points resonated with me. i had said it myself. he said the biggest beneficiaries of reform will be wall street itself because proper reform will make the markets safer. and my own peace -- the biggest risks the financial institutions have are with each other. to that extent i think america will be a big beneficiary, but specifically, so will we. >> what do you think will happen to loan origination from community and smaller regional banks as they are required to maintain 5% of every mortgage they run? what you think will happen to mortgage volume? in >> sur >> sir, there are parts of that bill that affect us, and that we have particular expertise in. there are other, big part of the bill that are remote from our experience. how effects community banks, mortgage originators, and how it affects consumer banks, legislation being a bigger part of it, is remote from our experience. we do not engage in those activities. >> do yok have any thoughts that this does not address any core problems? you would agree there is an incentive to make loans to the implicit guarantee of the federal government to people who were less qualified, then what we had seen prior to the onset of freddie and fannie? >> i cannot speak to the qualifications are standards of fannie mae or freddie mac. i can say they were an instrument of policy to attract more money into home ownership, which i'm not suggesting -- but that is what they accomplished. >> you will agree with an implicit federal guarantee on a mortgage, that would make it more available to more people? because the cost of capital would go down. >> yes. coming to mind there are two big policy facts but tend to draw more money into housing. at least two. one is through government- sponsored entities, implicitly those were able to draw in the money because there were considered to be cause i- government credits. and of course the fact that the tax code allows you to deduct mortgage interest. so, those two government things would favor more money to flow into the sectors. >> have you personally spoken with anyone at the treasury about the regulatory reform effort? effort? >> since the beginning?