whatever the opinion, we recognize our reverence for fact. it does not always to be found in the middle. sometimes the truth is on one side or the other side. the earths not flat. [applause] [unintelligible] the object is to stay in the middle and state your views. >> you're looking like an american tourist in london, exactly the wrong way. he mentioned at this cable channels. if he were to add all of them together, you get on a typical night, 4.5 million or 5 million people. that is out of the country of 300 million people. why are you concerned about how the information and the right to talk on television allocated to the worst of the country? americans are much better informed than their parents and grandparents were. the hundred million worse informed americans are much worsenformed in the were a generation ago. you had to get out of your chair and walked over to the tv set and turn it off until the entertainment programs began a half an hour later. if he wanted to know whether a chicken was on special, you had to go back to the news about what the mayor or members of congress were doing. the problem is not media bias. the problem is that the public has dropped out of informational me altogether. [applause] we talked abo the dysfunction of politics despite the proven quality of people participating in politics. why are the lobbyists more powerful today than they were in 1965? were people better in 65? i do not think so. was the media better? we had different roles. it was not worth hiring 26 lobbyist. power was more concentrated. what would we have done every pursued a series of fixes that makes the problem worse at every turn? the driving idea that we have on how to fix politics or the wrong ideas. it makes problems worse. it is a very common error to make that when you have a big prlem you must have a big solution. sometimes the solution is as simple as changing the rules of procedure in the house of representatives. sometimes it is as simple as changing the balance of power. sometimes they are as simple as making sure presidential appointees to get through the senate as fast as they did in the early 1970's and 1980's. we are not to look at our problems, but to begin focusing on our problems and asking what the solution is we are going to pursue. the solutions are available. they are embedded in the problem. our problems are not overwhelming. we can do this job. >> of want to spend the last bit of time we ha not talking about this. people are starting to declare they are running next year. you talk about sometimes the solution is as simple as changing the rules. the new speaker, john boehner, talked about transparency. he would have you believe that republicans are going to change the rules and also all solved the proble >> that is a perfect example of what i mean. we had this bias. president obama has said they are going to publish all the laws of every visitor to the the me tell you what that means. if i have scheduled a meeting with somebody from group a few has an opinion on topic one, i have to schedule a meeting with everyone of his arch rivals. i cannot have a meeting in the white house. i have to have 13 more meetings. even at the only reason is to ok at my watch for 50 minutes so i can ignore him and get back to work. what the transparency does is it causes them to choke and suffocate. our government moved more rapidly when there was less transparency. it gives the individual members of the house is more power than the committee chairman. you get bigger deficits and less accountability. about those ideas. if we are gng to think creatively, more of the things that are not working -- and >> do not applaudthe idea that d and failed is so pathetic that i can not really begin to answer it. where do i start? you want to go back to afghanistan? do you want to talk about transparency? the want to talk about the fact that we tell the american people we would get out in 2011? now they are telling us that they do not know when they are coming out. >> if they did it in a classroom, you wld not like it. >> it was done in endless ways that the american people were kept out of. we did not know a lot of the stop the government was keeping secrets from us. this is just one example. we could give you thousands of examples. the same week the president went to afghanistan in a surprise people we were winning, which was an absolute and liked it why -- which was an absolute and blatant lie -- we are turning more and more people against us. americans need to know every time of their elected officials are lying to us. [applause] >> it has to do with the difference between the democratic and the technocratic. if all you are after is the best deal you can't reach -- every empire uses secrecy to hide and it can sell decisions they do not think are in the public interest. >> we chronically have not lanced the budget. >> why is that so? to balance the budget but had a chronically unable to do soec is one major . when you empower the 535 members of congress, that is the mood that is wrong. when power is put in place, the people need to understand it. the transparency create secrecy. the way we create secrets in washington is by having such overwhelming detail that only a few specialists have the patience to follow it. this is not a city of secrets, it is a city of mystery. [laughter] >> if you have to break that down. >> it does the same thing as the mortgage contractor you're complaining about. every detl of the contract is there if you can read it. people would be better off if they had better representatives saying, "here is the contract, read it for yourself." what of the ways we become more unaccountable is the diffusion of responsibility. nobody knows who to be angry at. the one person whose name people now knows it gets blamed f everything. if there is an oil spill, he gets blamed. you cannot blame the people whose names you do not know. bi with little accountability and a little name recognition -- that is the formula for whawe have now. >> you do recall dwight eisenhower's speech when he talked about the military industrial complex. it is so expensive that is a form of theft. why? it reinforces t permanent warring economy, the pentagon is untouchable. the deficit tripled. they could not get hold of the pentagon budget and the military budget was expanding. >> it peaked in 1986 and then came down. >> a triple. >> that is when we too control the health care budget. look it up. the medicare budget -- the line >> all we talking about the defense budget between 1972 and 1988? >> i am not defending it. since 1986, we went through greater balances than 2001. as the defense budget bens to shrink after 2013, which i expect it probably will, we will find our difficulties in balancing the budget main as chronic as they are now. this is not because we spend too much to defend ourselves. >> it may berchaic for some of you, but let me come back to something you said a moment ago. all one it is segue from u2 david brody first. what is good to happen about politics over the next couple of years as we try to write this next chapter. we are at the halfway point of president obama's first term. we are just weeks away from a whole bunch of folks startin to line up and declare they are running for the white house. most all of them are going to be republicans. >> probably starting in march, you'll see some candidates get in like newt gingrich. you'll see tim pawlenty get in. sarah pailin is an open question. i ink what you will see as relates to the republican field, i think there is an evangelical primary and a businessman primary. you have people like pukka be -- huckabee, mike pence, and some other folks who will compete for the evangelical vote. they knew the businessman primary. -- have the businessman primary. i think as it relates to where the president may have missed that, most people will agree that this is a center-right nation. i do not know too many people who would disagree with that. you have a center-righ nation and you have a president who went ahead and pass legislation related to health care. he was trying to shoehorn something. i think it woke up people -- it will cut these tea party peop who were sitting on their couch watching oprah and going to get a hot pocket. they were watching "all my children." [laughter] >> i am glad you said that. oprah was about to tweet you in about 30 seconds. [laughter] [applause] >> you are wrong about one other thing which is the center-right country. that is what i mean. the conventional wisdom kind of congeals and people ben to believe it. this country has been on a journey for a more perfect union from the moment the constitution was written. every bit of progress we have made, they were all left-wing in his it is in a center-right nation? -- they were all left-wing ideas in a center-right nation? you are giving every progress that ever happened to the left. [applause] >> i think the polls bear some of this out. >> what impact -- you talk to the tea party tonight. we sell the impact in their -- in the midterm elections. what you think thend that will be in the presidential election? >> as it relates to the house of representatives, they wil make john boehner's live a real problem. he has 43 or so house republicans that are tea party yeariers. >> are you saying the deep -- the republican party made a dl with the double in the tea party? >> no. >> i am not being flippant. did the republican party make a deal with the devil with the tea party. they wanted these people to take over the house in november. >> here is the thing. they were with the tea party on the overall philosophy. they attended hundreds of tea party events. to do a deal with the tea party -- it was there for the taking. the difference is in ideological purity. the tea party was ideological purity in the sense of constitutional roots and going back to the first pnciples. john boehner and mitch mcconnell are up there to cut a deal were to work on getting legislation passed. it is a mucstiffer reality. >> -- it is a much different reality. >> this is always true. there's always a tension between what you have to do for your party to win the election and whatou actually do when you are elected. a colleague was giving a speech in 2007 in which he talked about global warming and dealing with the prlem. the was a very intelligent and well informed person. this is going to be used to torment and torture him. this is a very difficult thing for him to get past. ms. romney is a very effective executive. he would make a fine, center- right executive. he supported tarp. the is like mr. death-panel now. we saw what just happened in the past 34 hours th t pawlenty. the was the former governor of minnesota. he is a civic minded person. he is now saying it is going to be a priority of this to repeal "don't ask, don't tell." david trimble is making eight -- >> >> you are making my case. if i am barack obama, i am thinking about your analysis right now. i am thinking myself, you cannot be somebody without nobody. >> i want to put that on record. >> that somebody is going to be somebody. i am thinking about who they are going to put up here. i am also say to myself, you do not have anywhere to go. what are you going to do? [laughter] quite bear witness, brother. >> we have two years now. it is very clear that ty system. you have both parties that are dominated by the same interests -- corporate and big business. you have physiological and racial groups that are relatively powerless. that can be the makings of a faction of we do not begin to come to terms with this. on the other hand, it also means the tea party is going to become more and more upset wh the establishment and the republicans because the business interests are getting more attention. at the same time, barack obama masterful, eloquent, charismatic in his language, in his policy -- you cannot bring in a geithner and call him martin luther king. he was anti militarism. he was against the american empire in terms of this -- of thpresence around the world undermining the principle. that is why when he died, 75% of people were agains left-wing. when you love working people that much, that makes you the most fearedan in the country. to both the republican and democratic parties. i can only call for it because i do not control hry has a rottenness running through it. [unintelligible] we are still working on this thing together. >> what is martin saying every day he wants in? >> what makes you think the war in afghanistan does not have the same set up as vietnam? the problem is this -- these are part of the lines of the mainstream. people have reached the conclusion at barack obama is the fulfillment of king's dream. that is not true. [applause] it is fulfillment of king's drain, he is not the fulfillment not just black people, martin was that kind of a dreamer. we have to be honest. >> if you get back and look at what the president of the campaign manager wrote about the campaign -- it was a campaign of audacity. in that book, you see again and again they talk about the middle-class. they talked about the people being told there is a very clear foundation to the campaign. there are two quotes. the president said, "our task iscircle so that we bequeathed e american dream to future generation" that is what cornel is talking about. that is what america has always been about. including more and more people. this has to be a share, a national agenda. [applause] the second part is from fdr. the is releasing the same thing in different words. he is saying debt of our whether we provide enough for those who have nothing. when newt gingrich gave his first speech in 1994, he said that fdr was the greatest american president. was the right or left? we need to stop this debate conversation. i was in brazil recently. i interviewed the conservative president of july. -- chile. he said his greatest priority was in an aching poverty in chile. you have the conservatives this policies were more progressive. why? because they realize you cannot have a successful, a thriving country if you have people falling out of the middle class. [applause] >> if you notice, tavis, both cornell an i danced around your question. there is nothing they can do about it. tuck with this president. they are going to support him. there were not be any serious challenges to the president. -- there will not be any serious challenges to this president. at the same time, you see the potential for some real fratricide in the republican party. i think it is fairo say that this president reached his low point on november 3 and the republicans to reach their high point. -- and the republicans reached their height point. we are looking at the 2012 election with a 2010 mind-set. once they added millions of jobs and people are feeling better, it becomes a very different equation. you have a more satisfied electorate, at a less angry electorate. quite the thing that is likely to happen? >> of course. you never know what is likely to occur. >> where are these jobs coming from? >> last month we added 100,000 jobs. >> there are massive amounts of foreclosures in the pipeline and massive amounts of shadow inventory. >> if the economy does not broke, all bets are off. >> if my hon. had went to college, he would be my aunt. [laughter] the economy is not improving in a way where working people and the middle-class -- larry summers has connced the president that the economy had turned around. larry smers has convinced the president that when et came to the midterm elections, unemployment would be down to 8%. i remember being with them on a television show. he said there would be growth in the spring like chancey gardener. [laughter] >> all this conversation does is take us back to the issues. i want to press this once more. for those who sport president barack obama when he ran, who bought into this hope and change, to believe things were going to get better and that there was another way, why should we believe that anything is going to get better if you have nowhere to go on the one nd, and on the other hand, this is divided government means there is going to be more compromise, or capitulation, anything to get points on the board. you are not going to get what you thought you're going to get. you do not have anywhere to go anyway. what are you going to get for the next two years? >> you are absolutely right. the is much to let you down. he is going to betray you. i would also say, i was there for conversations like this in 1982 with ronald reagan. what conservatives thought of ronald reagan in 1982 -- he is a sellout, he is not delivering. pridents are compromises. that is what the political system does. you take what you can get and decide what you like a little bit more. it goes back to my point about judging these things by the wrong metrics. people need understand the way peoe do their work in the assembly. the people who will make john boehner's life a misery, -- if he is able to bend the curb on government spending, prevent tax increases, major new regulations are not imposed -- those will be used tryouts. if the does by what any reasonable definition is a huge tryouts, people will see him -- people will see him as a sellout. >> we get so caught up in barack obama acting as an independent to get the presidency. wh this is about is the message, whatever that message is. it people believe his policies or not centered -- are not centered, he has to convince the american people that they make see. the conversation of the ideas in this country -- that is what republicans will have to do to win the white house. whether be met ronnie, tim pawlenty, or whoever, they will have to get down and dirty and explain why free-market principles of the right place for america. you cannot just go on talking points, you got to go deep in the playbook. explain it.o if you do not explain it, it will not work. >> we make the tea party as this use movement. they are the squeaky wheel. they did an excellent job of making sure that they put in the congress. it is not what barack obama is going to do for us, but the majority will hold barack obama accountable. it creates a sce that make sure our representatives are ready to baccountable. i do not want to pick up my marbles and go home. it is our accountability to make sure we are putting pressure on our government. [applause] >> it is a powerful point. i wrote a book on accountability. my question is, how do we hold the president accountable and helpush him into greatness? specific in the black community -- and give you an example -- everybody knows that the most loyal constituency in the president's stage are black folks. they are the most loyal constituency. the enthusiasm, excitement about barack obama at two years ago brought people al that had never voted in their lives. he was on every black radio show. he was talking and begging black people to vote for him in the midterm elections. what happened? all the excitement of two years ago disappeared even amongst the faithful. he needed them to do that to move forward his agenda. the excitement and the symbolism is not going to do it. iraq to accept it. but how do you do it for the next two years? >> i do not think this is going to be worked out in washington. i think we have too much faith in what people are doing around the country. it is important to talk about that. as i travel around the country promoting my book, i am asked again and again by the people who may have given up on politics, but they have not given up on progress. they are using social media to come together. there are fascinating examples. a concierge in portland, ore., could not get another job. the brought together and other unemployed people -- unemployed lawyers and unemployed accountants were helping each other. they were taking their passions and their hobbies and turning them into a way to make a living. they are swapping things they have and they need. they are not talking about his role or promising it. it is not just what is happening in washington, but what is happening around the country. we are bringing these people to prominence and encouraging others to get involved. for me, that is really the battle. there are forces of cheer and forces of tremendous enomic anxiety. people are demonizing and turning on each other. >> once we perceive the limits of the electoral policy, people either disengage and just followed the weapons of mass destruction -- television, video, internet -- it is a world of make-believe. you organize poor working people, those who love them and what their situation to be better, and put pressures on the political system. it is so broken that even the organization does not have and that, then we are in a world of problems. >> it reminds me of allen barnett. the first time people organized said they did he not want people to compare slaves in america to the people of israel. that is the blues. what they said was, do not think that just because you have been emancipated they will not come get you. do not think that because you elected a black president that after his eight years, we will not have more black residents. i am not just concerned with black people, but i start there. what that means is, how do i deal with the desperation? do with their hopelessness? -- deal with their hopelessness? we almost lost it in the 1860's. >> if you go back to march 1965 and the famous meeting that dr. king had in the white house with lyndon johnson, lyndon johnson told him about the voting rights act. a. basically went al and staged the selma -- he basically went out and staged the selma march and then we had the voting rights act. instead of constantly looking for the leaders in washington -- they are not there. [applause] >> to invoke john mccain for a moment on this stage, the straight talk here is the president has invested in political capital. you cannot just at an event. we had the beard summit. that was pretty much the media highlight in the first two years. it did not address anything as it relates to the african- american community. unless the president is going to invest political capital -- what happened to the responsible fatherhood initiative? that could have brought evangelicals from the moderate and conservative standpoint and the african-american community together on something like that. it was pushed to the side. >> if you say that the highlight for black votes was the beer summit -- >> i am talking about the media perspectives. >> black folks celebrate the health care package and "don't ask, don't tell." i do not think that the black folks think that the highlight of the past two years was summit.beethe beer >> the media portrayed it as a black issue. health care was not proven as an issue for afran-americans. >>tell me why, given all that has happened since to the obama was elected -- the tea party, people showing up to rallies with guns, losing the house in november -- tell me why i should not believe that all of the top in this country about stability that this is not going to be the ugliest massive campaign for the white house in the history of this country. >> i would n be able to do it with any confidence. we just had an announcement this evening before we came up that democrats the republicans are going to sit together during the state of the union address. [laughter] >> are they going to hold hands? >> hopefully they will hold hands. >> sing "kumbaya" and all that. >> it feels like these might be different. just from experience, i find it hard to believe that will occur. i did a column recently on the person in charge of the budget for house republicans. he wanted to take it and litigate it in the next election. we every state point where everybody has basically given up on the hope that they can stop each other from doing anything. there is not much they can do. they cannot actually achve anything affirmative so they have given up and are throwing themselves into a bitter, nasty campaign. >> i want to check back in about a year, david frum, and ask you the same question. democrats and republicans are saying this is not about republicans and democrats, we are all americans. tell me why i should not believe this will not be the ugliest, nastiest, maybe even the most racist campaign for the white house ever. >> you are going to have 55% to 57% of the population of voting. when you have a bigger electric, you have a less partisan electorate. i struggled in 2008. it was aersonal election. not everythin is conolled by the campaign organization. there was a lot of restraint shown. mccain should have sent signals about barack obama's race. that did not happen. it did not happen partly because of the character of the people involved. john mccain is a man of very high character. pragmatic strategist working for both parties will not work. negative advertising, especially on the democratic side where you grab younger voters, negative campaigning is going to be counter indicated for years. all the republican side, if anything has any a trickle -- any attributable, that will be radioactive. they will be super careful about it. >> there are a number of people in this country that have alluded to this conversation that if between now and the election in 2012, the job picture in this country turns around massively -- we do not think that is going to happen -- but if it changes significantly, barack obama will win. people say that because we vote our personal interests. it the economy turns around, there is some reason to believe back oma will be reelected. do you believe that, number one? and, is there anything related to the meeting with china this week that the president can do to aid and abet that particur effort? >> first off, i now understand the finition of moderate. [laughter] that said, if the jobs it turned around dramatically and any history of any rege has told us that the president -- that the present administration will continue. it will be easier to talk about the future than bringing up the past. that, i think, favors the incumbent in this case. if i were in the administration, the most important thank for american business -- american business does over 50% of revenue in general. this is now the biggest country wi a fixed economy. our issue is, we do not always think that way. i'll put it in simple terms. we have to make sure we leave the invitation open. in order to do so, we need to reciprocate. we also need to help them to create more jobs. right now, policy lies an attitude lies on both sides, it is preventing free [unintelligible] our allies are getting their fair share plus some more. the first thing i would do if i was president obama is to make sure we have sell policies to open up the markets, selling policies to integrate ourselves -- sound policies to open up the markets and sell policies to integrate ourselves. we decided we're going to buy all the solar panels made in the united states. at is not the most helpful thing. we may be buying solar panels fr france. i think we should let the product and the technology and the pricing and the market when. -- market win. >> i believe it will be about the economy. if t market turns, it will be a shoe in. -- shoo-in. people who are operating businesses are feeling that they had a lot of expenses coming out because of health care. they are unclear about the regulatory environment. they do not know how deregulation will look. they have new regulations coming at them. that is keeping them hanuffed in terms of adding new heads into the payrolls. that will be an issue for the president. 50% of all mortgages are under water. we need to see policies in place that will encourage businesses to create jobs. the extension of t tax-cut plan could be a game changer for entrepreneurs. small business managers who may see it as a positive to create new jobs -- >> it is a purely political, partisan point of view -- if marie and john r. writ that this election could turn on the -- if maria and john r. wright, this election could turn on - john are right, this election could tn on the economy. >> my biggest concern is not that. my biggest concern is this white house is prioritizing jobs. i am writing a column -- >> you are telling me that the white house still does not get that it is jobs, jobs, jobs? >> if you go back to the last state of the union, he actually said, "jobs are going to be my primary focus." that was the last state of the union. that is for me, the fundamental problem. the white house is not looking at the urgency of the job market. i was hoping there would be somebody comg to the white house to single-minded priority was the creation of jobs. when i say that, i mean that there are so many tools in the toolbox we have not used. we have changed from something small -- right now, we are not allowing foreigners to come into this country with ideas and money to create jobs because of this instinctive anti- immigration visa. -- view. >> if we believe the situation for working people has the same sense urgency and sang state of emergency -- the same state of emergency -- that is a state of emergency. what if we really believe that the situation is a matter of national security as it is in afghanistan? >> americans have such intelligence and ingenuity, the public sector and private sector will come together and say the future of american democracy depends on treating people with dignity. >> it is more than just jobs. i do not think a turnaround in the job market is necessarily a shoo-in for the president. people want to feel the freedom and the independence and the aspiration to move out the economic ladde that they believe america can provide. >> howill they do tt if they do not have a job? [applause] i am not being very simplisc, but i have two daughters in college. so many other friends are graduating and they cannot get jobs. [applause] these are kids to read all the right things. they went to college. they are graduating from college. that is the sense we need to bring to our national conversation. >> as you mentioned, one of the biggest issues that president obama has in his back pocket to stimulate the economy right now, today, is immigration. thway you do it is you have individuals who can actually compete on the global scale in the technology sector, but you also bring out people that raised the level where they are competing for fair wages. these individuals have to pay taxes to ensure that they have a path to citizenship. we talk about the dream act. it allows citizenship for individuals who have graduated high school who are ready to go to college or go into the military. we are the only countryhat thinks about deporting a valedictorian. that is absurd. [applause] there is the iue of national security. we actually need to know who is living within our bders. we do not know right now. >> we have one minute to go. you and i talked often over the years about the difference between optimism and hope. we have to write this next chapter, even for those who have no reason to be optimistic. there is something we can see, feel, or touch the issue a reason to believe in hope. even when people are not optimistic, why after all this can we remain hopeful about our future as a country? >> because as a people, anyone who has not lived with despair has never lived. we are wrestling with despair in the midnight hour. i wrestled with despair everyday when i look at people's situations. i do not hate these folks. i kw they are doing all right. that last moment is one of love. that is what it looks like in public. i am just passing through. [applause] >> >> please commit bank c-span f covering this -- thank c-span this.ver i thanks for being with us tongiht. let me askou to thank you rselves for being a part of this. -- by thee in late way, thank george washington for having us -- and misse any part of this, next week over three nights parts will repeat on pbs. 18, 19, and 20 of january. god bless you. have a safe ride home. [captioning performed by national captioning institute] i think you have more and more in the congress who are moving in that direction. i think the reagan took -- the regulatory tsunami we are facing will be bad. you cannot underwrite risk without rules. we have to work with that to the degree that we can. we have to keep the tax rate as low as possible, particularly on the small business community. >> i actually agree on a macro level on the regulatory burden. the notion that if you add a regulation, you had to take one away at the same size and shape. yet to sort of employment this. the u.k. has passed america in the terms of competitiveness. we have done some things around the edges. the fda is different than your grandfather's fda. $12 million in loans since the end of september. there is a program that we work with the chairman bair all in that 25 states have. it runs to the banking industry to create a loss-reserve pool. it is not administered through the government. i think there is a bigger issue. i do not have the answer, but i would love to have a discussion on it. i used to be in the venture capitalist business. as we move towards more financial engineering, we are dealing with the banking sector to make money through financial engineering -- engineering. who wants to take the tough job anymore? that is why it has been pushed down to a lot of community banks -- of doing third-stage landing? the venture capitalist business has gotten so large that nobody does it very well. we cite these statistics six appropriately, discounts from those firms that grow rapidly. not the butcher shop for the tire fixing place, which are important. until we can think more creatively, i am not sure we'll see the kind of job recovery we need. >> the wall street journal pointed out that it is not small business that creates jobs, it is new business that creates jobs. it is about venture-capital and start a business, not necessarily about small business. >> i do not want to overtop here, but angell networking has disappeared. there are certain things we have done around tax policy around no capital gains. dinky more aggressively is an area of would love the panel to consider. cracks we talk about loan balances and credit lines. about half of this is credit cards. the very small startups use credit cards to get them started. we are starting the conversation with an improving economy. >> can you square the circle for me? the federal reserve has flooded the system with excess reserves. there is a kind of money out there for banks to lend, yet they are not lending. had we fix that problem? >> first of all, we have to make the banks stronger. they are strengthening. they are getting more capital. capital is rising. the leveraging is starting to slow down. lending is starting to improve. we have to get an appropriate balance between prudence and making those loans. it has been a tough couple of years. small-business lending has contracted quite significantly. interestingly, small-business lending has contracted less at community banks. it has also contracted last that healthy banks. if they are healthy, they are better able to land. we are in a position where we are starting to get some improvement. i think that 2011 will be a better year for small business lending. supervisors and monetary lending advisers will do what we can to help that. >> do you see something going on in the market? >> yes. in terms of small business lending, there is no more tightening at this point. that is according to small business officers. we have surveys from the nfib which has shown some improvement. we have a lot of anecdotes and examiner information that suggest an improvement. and we follow the data on smaller loans. they give us some sense. overall, it is still a very tough situation. things have stopped getting worse and are looking a little better. again, as the economy improves, you expect to see better lending going forward. >> we think it is turning. loan balances remain stable for the first time after quarter- to-quarter declines. most banks are profitable again. the credit quality -- they're going to their troubled loans. those are all things that improve the bank's ability to lend. if things continue as they are, it is still getting better. >> it seems like everything finally came together. congress got a few things done that people were waiting to get done. are you hearing about the $30 billion program and what happens to the 100% appreciation? >> i have not heard as much in terms of the small business lending that comes back to $30 billion. the money has been taken up by real questions, whether banks will pick it up in the first place. i think $12 billion in small- business and this little access program, which will leverage $15 billion in lending, will be incrementally helpful. i do not want to discount what sheila has done with this helpline. as tom rightly pointed out, with the pendulum going too much, as a regulator, no one wants to say that we're done. it is a mixed message of lend, but be healthy. if they are told by their banker that the regulators causing this problem, pick up and call the helpline, that might make that regulators think twice about it. >> this will be important information for this. we contract this information the way we do consumer inquiries. if we see a greater frequency problems, we can take a deeper look at that. >> it definitely improves the lending environment. our numbers are getting better. the activities of december will have a very positive effect, i think, on the overall economic environment, particularly with regards to small business and confirming the tax rates, even though it is only two years. it still gives you two years. that is about all the small business can see anyway. and then depreciation and other things that have been done over the last several months by both legislatively and administratively, i think it has the fully improve the environment. i expect that landing will improve substantially through 2011 given the demand. the big issue is still the man. if we can get them and wrapped up, do not think that lending will be the problem. >> i think we will try to improve that front. improve the legislative process and the rule-making process. some say that there are probably 500 rolls of have to be made. this will be really something. i think that the rule-making process and some adjustments legislatively, we can come up with a solution that works for everybody and it will be further addressed by the business community. we do not like what we have right now. we have two people in the group right here. do you want to do a memo? >> this was a very close call. some courageous people did some things that were not universally supported. we got a lot of criticism from our membership supporting tarp and some of the other legislative initiatives. but it was the right thing to do. now we just have to come back. >> chairman bernanke, we have a lot of questions. is it in your opinion that is the regulators, because of the mistakes in the past, they are over doing it now? >> again, we're trying to keep the psychological feature in mind. we make the rules. first of all, we have to follow the intent of congress. that is number one. we're not legislators. we are rule-makers. we're trying to implement the laws that congress enacted. we want to make the rules as sensible as possible. the financial system is really important. that is why we do not want to strangle it. we want to make sure that it is safe. we want to make sure that it does its job. so we're trying to strike the right balance. there is a set of complicated rules aimed at the largest institutions. they are very complementary. when you put it together + the rules on resolution and on activities and so on, together, i think they do quite a lot. but we understand the burden. we need to write the rules and away that is workable and not contract activity. secondly, we need to move as quickly as we can and insist on getting it right. we do not want this to be hanging out there for a long time. we talked with the bankers and said, look, we can live with all kinds of stuff, but tell us what the rules are so that we can get back into the game. >> how many deadlines you have coming up? will you make them? >> we have an elaborate project management system at the federal reserve. try to keep track of reports, consultations, and everything, it is a big job. even regulators have gained. >> would you comment on the subject of overdoing it? >> we all want transparency initiatives. we have enough policy people that want to meet with us. we have a timetable on rule- making. someone can set outside the rule-making process. we want people to come and ending it with us. we want the right to know who we are talking to. we have also scheduled round tables with various interest parties to talk about our rules. i think we have good input from the public and it is impacted by these rules. i think we're trying to be balanced and fair. i would agrehem that we need to get on with it. they just need to know the rules are so it can take action. >> i have to smile a bit because i have had leaders of some of our major financial institutions coming to me in the last few months since dodd-frank was passed. they say, frank, you have to move along. but you need a two-year study. i spent 20 years in the financial sector before i got involved in politics. it has moved so far beyond my knowledge level. and i think it is beyond most legislators level. it is opaque, complex, and i hope more transparency. it would be great if we had more real engineers as opposed to financial engineers in this country. we have set up a system that allowed financial engineering to create paper value rather than value where we create intellectual capital and make things. i would like to get back to more of that. part of this transparency underlies the need to level the playing field with these large institutions. >> did the market create these financial engineers or did the government create them? >> the market. the government had a role to play, a permissive role, i would say. when you have astrophysicists designing financial products to be sold by bankers, that is probably a bad recipe for sustainability. [laughter] you talk about overreaction. there has been overreaction. but i would have to say, what would you expect? the overabundance or however you want to describe it, on the other side, which created the problem in the first place, was at least as far, say, to the right as this is to the left. we just have to come back to the middle. i have not heard anything here today that suggests that we are not moving back towards the middle. that is good news. >> you are optimistic about the government. i am. temporarily optimistic. [laughter] >> that is a news flash. since you guys lost qe2, rates have gone up and the stock market has gone up. we did a poll and they say that qeii is responsible for higher stock markets and higher commodity prices. >> , you have to enter this question. >> as much time as you need. >> first of all, policies have contributed to a stronger market. in 2009, we did the last iteration of this. the s&p 500 was up about 25% +. small-cap stocks were up 30% +. i think a stronger economy helps small business more than it helps even larger businesses. yes, it is contributing to the stock rep. interest rates are higher, but mostly because the news is better. it has responded to a stronger economy and better expectations. i think that the policies help and small business, which we started off by saying, response to increased demand and opportunity and it is the beneficiary of that. one of the best things we can do is try to send it into the overall economy. >> have you gotten a little bit more optimistic about the economy? >> i am. we started taking action in august, really. even though we made these announcements in november, the policies began in august. we begin to reinvest securities and i began to talk about this at jackson hole, where you can always come and join us. at that time, the economy was looking somewhat shaky, frankly. we were quite concerned about its ability for recovery and inflation and those types of risks. something needed to be done. i think we're seeing some improvement. we're looking for a stronger recovery this year. i think deflation risks have receded significantly. we're moving in the right direction. >> you think the banks are more bounce now than they have been? >> yes. in august, it was deftly to the downside. now some of them are more balanced. there are many uncertainties in the world. we have to keep a close eye on them. >> we have been over this, but i let you put it. this is a person from the fdic. i will not give you their name. bankers say that we're open for business. small businesses say that we cannot get credit please comment on this. [laughter] >> i think the truth lies somewhere in the middle. we need to caution against overreaction and strike the right balance. i think some banks became more risk-averse than they should have. credit has been down. the truth is somewhere in the middle. we are encouraging banks. we want them to lend. but getting the economy going will strengthen the ability of small business to make them more credit worthy and give them more confidence. >> senator warner, could you walk us through this next several months. it seemed like there will be relatively dramatic across the river here. >> i'm glad we are in virginia right now. [laughter] >> things are relatively quiet. but as far as the debt ceiling or the deficit reduction, they are not primary issues, but they are important to small bonuses and what is going to happen there. >> one of the messages we heard from the regulators, chairman bernanke is -- he would not say this in politely, but he is basically saying to the congress that we need to walk and chew gum at the same time. we need to show that we can do short-term stimulus, which we just did $900 billion worth in december and what will be critical to keep this economy going is the government using its tools. we have to get part of the two dollars trillion that is sitting on corporate balance sheets of the sidelines and reinvested. as for some of the policies -- in december, they will help move that. i think we also have to, longer term, implement a meaningful deficit reduction plan. we are working on basically taking the president's commission, the simpson-bowles commission. we will introduce that as legislation and is put up or shut up time. there are democrats and republicans alike to say that the single largest long-term threat to our national economy is not simply the short-term town as we face right now or the financial crisis, but getting our nation's balance sheet in order. that will take both sides with dramatic cutbacks on spending. it will take meaningful tax reform. and a tax reform similar to what simpson-bowles did. by lowering their rates, it broadens the base. in some cases, it creates the revenue stream need. it does not take a rocket scientist to say that spending 24% of gdp and only 18% revenue is not sustainable. >> not to get too deep, but is it linked to the debt increase? >> time will prove that out. i trust you like a brother, but i will not share all of the strategy right here. [laughter] i think we will see broad bipartisan interest in not letting deficit-reduction -- at the end of the day, it is easy for politicians to give tax breaks. it is hard to make the hard choices, but we have to make them to put our nation back on track. states are arguing it. i had that opportunity when i was the governor of virginia. >> would you tell us what the business community wants when it comes to deficit reduction? >> first of all, it is the number one issue. it is not way out there in the future. it is present. i think the last election cycle demonstrated very clearly that there is a lot people in this country -- the majority of them think that we have too much government, more than we can afford and more than we want and that we can do something about. i have seen the issue raised up in the top three issues in most of the opinion surveys. i think with the business community would like to see is a significant restructuring of the tax system and the time of programs. the problem we have at the chamber with any issue like this is that many of our members have their own specific tax accouterments of the beloved and they want to hang on to them. [laughter] whereas they all agree that we have to do something, just do not do anything that affects me. i think this is the first time that the chamber is taking the position as an organization and our members are generally receptive of -- ok, we get it. we have to look at the longer term. we have to look at a significant restructuring of how we derive the revenues we derive and we need to get our spending down to below 20%. that is about all you will get out of tax revenues, 20% of gdp. so there has to be a balancing there somewhere. >> that is one of the most interesting issues out there. as i look at -- lowering the corporate tax revenue, you have to raise taxes on half of the corporations. it is not a republican or democrat issue. it is a bipartisan issue if you're going to resolve the corporate tax issue. >> we need to bring it down to 25. effective rate for a lot of large corporations is a low- 20's. so there will be some winners and losers. the way you get that is with a bit of shared sacrifice from everybody. everybody has to feel like they're doing their part. while deficit-reduction is in the top three right now, you got and say -- i think simpson decibels was not strong enough of social security. some of this is just math. these things have to be going on the table. overwhelmingly, the public does not want to touch that. we have to have a little more truth. we will not have anything done unless the business community says, we are in for our hard choices as well. >> german bernanke, one issue was real estate as collateral. in the environment of uncertainty surrounding real- estate values -- i want to leave here with a sense that there is something we can have done here going forward. is there a role for the fed or other government agencies to come in and resolve that issue so that the small businesses that are viable can get loans? >> on the margin, you can do some things. first, besides the stuff you try to do to get the economy going again, you can work with appraisals. one of the issues in real estate is that, in a stressed environment, sometimes the appraisal comes in very low. but will affect the collateral value. the basic message is that you want to look at the whole context, how the property will be used and what is the cash flow and that sort of thing. one micro kind of thing like that can be done. until the real estate market comes back, you cannot rely on collateral for repayment. what other prospects are there in the business? what is the cash flow. the guidance should be there. you should not be making loans or rejecting loans because of the industry. you need to look at every individual business and think about its actual prospects and learn the business and make that decision. collateral is a way to make a loan without doing much work. collateral is a problem now. >> are the bankers too lazy to do that? [laughter] >> i think someone forgot how to do it. i think -- there are more high- tech wonders. they have more knowledge of their borrowers. larger institutions have more relationship with their borrowers sometimes. that will give us better loan quality. all the exposure we will take, we will get better asset quality. >> we are in the last two minutes. >> one of the things we have been urging regulators is that, if a loan is performing, even if the value is down, particularly on commercial loans, it puts folks between a rock and a hard place, especially when they have been performing for a long time. with a massive consolidation along some of the larger banks, you have management teams that have been wiped out in communities. the connection between the borrower and the baker have been so destroyed. i am not sure, long term, that we will be able to completely fund the community. the whole business community is out of the banking system. >> realized and unaddressed loan-loss imbedded in the banking community from real estate has not been addressed. disclaimer -- i ran a real estate trust for many years. it has not been addressed. we want to get the stuff out of the system, get it into secondary hands. you have to create a secondary market. there is a lot of money invested in the secondary market. they want to make money. some of them will make bets have lose money, but others will make bets and win money. this administration has to address the fact that, look, if you agree the structure, some people will get rich. a lot people will lose money, but it will solve the problem. >> we could go for another half-hour. that was the regional design. it has not been used and the issue festers. hours we could leave on a more optimistic note. please join me in thanking your panelists. [applause] [captioning performed by national captioning institute] [captions copyright national cable satellite corp. 2010] we will now hear comments from the fdic officials and small business administration. this is one hour and a half. >> we are keeping some mystery around the panel. hiding on the other side of the wall. there will be eight of them. we have to have chairs for everybody. if i could sing and dance, i would be doing it at the moment. everybody is coming al. the deputy assistant secretary of the treasury, the associate administrator of the small business administration, chairman and ceo of the central bank, the federal deposit insurance corp., the superintendent of the alabama state banking department, someone from bank of america, the chairman of the latin business chamber of commerce in los angeles. welcome our new panel. [applause] by gettingrt aout your brief take on the central conundrum that was addressed by the previous panel. that was the contradiction with the fact that banks say they are ready to land, but small businesses say they cannot get loans. it is a it -- is it a regulatory problem? is it another problem with the economy? >> i think there are a number of issues. we are obviously coming out of the worst economic conditions i think any of us have faced in our lifetime. because of that, we have seen some tightening of regulatory requirements on a lot of the banks. >> appropriate tightening? >> absolutely. you have seen some changes to borrowers'credit. that has had an bid pact -- that has had an impact on theirredi you have had some banks that are a little bit scared of what they have seen over time. we are now at the point where we will see a lot more lending going forward. we have taken a number of steps at the federal level to help banks do more so they can increase their lending. as you may know, we just passed a small-business bill that the president signed in september. there are two programs that are focused on providing banks with the capital they need. that helps them get the easing of the regulatory constraints by the regulators so that they can land and so they can feel moreet those dollars out and use them appropriately. >> how much of a difference does that small-business lending facility make? some people say that some banks ini- regard that as many- tarp. >> it provides a tremendous opportunity. it is very different. banks that need the capital and have the demand in their community, it will be a tremendous opportunity for them to leverage and get back to lending. >> we have gone to a crisis. i think it is a recession many of us have not seen in our professional lifetime. businesses are beat up. our banks or beat up. i think this provides a wonderful opportunity for banks that are looking for capital. i think it will do good at the right time. >> let me get a show of hands. is there anybody on this panel -- is everybody on this panel agree with the proposition that the bank will be a in a lot better shape in 12 months? does anybody disagree with that? talk about it a little. >> if you look at the levels of unemployment in the state of california and you look at the number of foreclosures in 2011 we are looking at visiting another 2 million homes. that will keep things very rough. perhaps there is a measure of growth, it is good news for the big corporations. however, the money they are making is not going into job creation. it goes more into stock buybacks and acquisitions and these types of things. opportunities for small businesses to make a recovery. there is no real economic recovery for people in small businesses. >> i think you could say itetter businesses. for small businesses it is starting to improve. many are invested in real estate, both commercial and residential. i think it will be an uphill recovery for small business. >> john harrison, tell me from your perspective, to what degree are we suffering from overreaction by regulators? how much improvement can we get by turning those dial's as the reaction is real. there is not a single bank in alabama if you dial them up would not tell you they feel regulatory pressure when they are making a loan. on the flip side, banks cannot survive without amending. we have tried to partner. we have tried every aspect of making sure our banks were involved in the lending process. based on what we hear, banks do not want to land. when we surveyed that, our banks say they do not have the demand. they are willing to lend. >> what is your perspective on that? >> it goes to the debate we had in 2010 where you have some in the business community who are complaining that the reason the economy was not doing better is because all the regulations and the laws that were being created created uncertainty. is that a fundamental problem with lending to small business? >> i think that is a large part of the issue. we hear a lot of anecdotal comments from bankers this say it is the regulators causing the credit crunch and causing bankers not to land. when i am visit a bank, they consistently tell me, "we are open for business." they are ready to make loans, but there is no demand. the businesses are to make sure that their business plans are still going to be it is a combination. >> do you agree with that? the fate demand at the business level is the fundamental problem? >> it is a lack of demand. it is clearly at getting some credit somewhere. in 2010, that8%. the number of approvals edged up slightly. i am not sure that the total numbers changed all that much from year to year. clearly, the man, at least in terms of businesses that wanted it, were down substantially. we solve the fed survey of borrowers and lenders that come out that the major banks. it shows we began to see something -- a downward trend beginning to reverse itself. see that a little bit. still, demand is a real issue. >> what is your perspective on the small-business lendingis no? >> we supported it when it was before the congress. does it make a difference? not really. you are looking at a situation where itot he money to land. that is not true for the most part. we have seen a lot of small banks with lots of money that are sitting there because they do not have customers they can lead it to. at these. not only do you not have any know howere is the deal and t many banks have applied for this so far. i have not heard on the banks are interested. >> gene sperling broke his back getting that small business loan and bond past. was he wasting his time? >> i respectfully disagree with my colleagues. we have heard from businesses all across the country who are saying, "we cannot get access to credit." it is a little bit more nuanced. there is a bit of a geographic dispersion for credit demand around the country. there are some parts of the country where you have banks who are flush with money but do not have borrowers. there is a large part of the country where businesses cannot get access to lending because the banks are constrained from , aviding them withwe believe td is not for everyone or for every bank, but at the end of the day, you'll see a huge uptick in the amount of lending because of the program. >> you are the reality check. who is right? >> if there is a lot going on. we do have credit and we do have capital. we need the demand. in looking my colleagues across the country, i see that there is an opportunity. there is a need for banks in the debt capital. there are any number of things that they are up against that they are not able to land. for a lot of those organizations, this will be a tremendous help. it is a part of>> to his right? >> i think it is somewhere in between. i wonder how many banks need the capital. it will be interesting to find out who has applied for it. there is some reluctance to applied due to the stigma associated with it. i do think it will help some of the community banks. there are provisions for capital access funds for states. i think that will help. it will help some borrowers at the margins. >> in alabama, we were a proponent of tarp. we thought it was an outstanding way for our banks to get much needed capital. perception was that it was a government bailout. they took a lot of heat from their customers and from the press and from the public in general. actually, it was a great investment for the government and for the banks. this is the same plane. -- this is the same thing. we have some banks that need additional capital in alabama. private equity markets are pretty rough. it is not easy for them to be able to acquire capital. however, sometimes i look at whether the real criteria, the ones you probably need the capital and can make it and use it will not be able to qualify because they have some problems. the ones that are strong and healthy probably will not need the capital. they will not want to use this program. to date, we have 145, 150 banks that have somewhere around $250 billion in assets and only one application on file. >> the answer really is, it will be good for some institutions and other institutions will make a decision that they do not need it. that is the honest truth. >> is a good thing that congress created it? >> i think it is a very good thing. it provides another resource and a tool for the banks that look at this point >> is a $30 billion slush fund? >> i do not see that at all. i see it supporting our community banks. our community banks pay -- play a vital role in providing access to capital to small businesses. it is another resource to help strengthen these banks. >> do you agree? >> i think the concept is excellent. it is about as innovative as you'll see from the government. [laughter] there are some funds there for community banks and we have a ton of them in california. i they we saw some good folks here this morning. their hearts and their minds are in to governing. i think it is a really good concept. there are more access to that program that show additional innovation by the government. the biggest problem is it is a digit too small. if you look at the nature of small business across the country, they have a need for funding. there are other things that are important about this. alternative means of providing credit -- by looking at these things, you're looking at some extraordinary measures that can do some good. the problem is, there is not enough funding. >> i want to talk about some questions that were submitted by the audience. one entry me was this question. "there is now proved that the use of the personal credit score is a major barrier for lending for some small businesses appear "what can be done about that? >> i am not sure that i agree with that concept. when banks are looking at their lending function and deciding, a credit score may be one of the issues that they looked at. a lot of small businesses and individuals are using their homes as collateral or using their personal wealth to get financing approved. it is just one factor. most of our lenders have a variety of issues they look at and consider. >> is a big issue or not a big issue? >> there is less reliance on credit scores today than there was at the height of lending. >> this question might have come from somebody in this room today. do you want to rebut the statements that it is not a big deal? >> [unintelligible] >> let me have you get to the microphone. we will repeat the question. we'll start again. >> gracias. my name is mitch jacob spirit we are -- mitch jacobs. we are trying to solve the problem of all the time that goes into evaluating financial health. banks feel like the reliance on the personal credit score is very important. if they were to approach their regulator with a portfolio that it,a lot of 600 fico's in they would have a problem. the credit score is not relevant to the overall health of the business. the work evolved -- involved in evaluating business is too much work. that is what chairman bernanke said. >> we are working with individuals. >> would you land to a 600 fico? >> it is part of the equation. we look at the entire story. sometimes it is good and sometimes it is bad. >> there are millions of loans that need to be made to get this thing takes started. i think that is where the challenge comes in. there should be a conversation about this. when you are dealing with those smaller loans, you are relying on personal credit scores. it is a major obstacle to small business. >> he has a good point. >> he has an extraordinary point. our chamber works with members and other small business. part of the federal assistance is that we can give alms to bankers were we have an agreement with them long term. not everyone will be eligible for a loan. however, we can approve this business has operated efficiently. they have an opportunity for growth. can be a measurement or a substitute for the credit analysis. >> what do you think about this question? >> i am fascinating -- fascinated by it. the thing i keep thinking about is we use paydex rather than fico. there is a relationship between it is better off than it is not. it is interesting because you are developing a new type of credits for. -- credit score. >> it is the smaller businesses that are paying extra for going for lower revenue. >> you are starting a new type of credit score, just not using fico. that is a very interesting thing. i am very interested and i hope it works. >> this country has extraordinary technology assets. there should be more discussion about using technology assets as we try to solve the problems. thank you. >> i want to shift to a question about collateral. we had a discussion rl estate as collateral in the last panel. since small business lending is based on collateral, what other kind of financial products are possible for small business? why not take preferred stocks? is that a viable way to compensate for what has happened with a real-estate? >> it depends on what kind of business you are talking about. if you are trying to get to rural america, it is tough. if we start making a bunch of business loans without collateral, i am not sure my friends at the fdic is going to treat us well. >> anthony, is this a dead end suggestion? >> the majority of our institutions when they are doing lending and looking at which ones they will approve, they are looking at repayment capacity. collateral is looked at as a secondary source. anything they think they can liquidate at the end if they have to go that route and be repaid, they would probably consider it. the majority looking at repayments. are you going to be here in a year to repay my lawn? loan?aid might loay my >> is a more negotiated sort of thing in a nontraditional way. we talk about giving different types of paybacks and different types of -- what can i call it? certain types of ownership shares and so on. the thing that makes it useful is that it goes for a certain type of business. it is not the under 20s or thete opportunities arrived for such things that you're talking about. >> one of the other things mentioned earlier is that we have taken a number of steps at the federal level to support small businesses, recognizing that there are these collateral issues. one of the programs is the $1.50 billion credit initiative. that is specifically aimed at states with innovative credit support programs around the country. those programs are really aimed at supporting businesses that had collateral deterioration issues. their collateral support programs are all across the country. these innovative programs have worked at the state level, operating with the fiscal constraints that the state governments are facing. the federal government can step in and provide them with additional funding. at bare minimum, we will see about $15 billion in additional lending to those businesses that are having the most trouble. >> the biggest issue is a lack of cash flow. when you bring up -- a lot of these businesses need an equity injection. it is not lending they need, they need equity. the previous