tv C-SPAN Weekend CSPAN November 22, 2009 1:00pm-6:00pm EST
areas that we identified. >> it is going to be big. the inspector general says it'll be over $50 billion. a lot of money to play with but a lot of negative things can happen. at our last oversight hearing we talked about the hate crimes issue, and i ask you about the murder of some of our recruiters and arkansas and whether or not that would apply. you said you would have to think about it and get back to me. it has been five months. i am wondering if you have given any thought to this. >> i think we now have a hate crimes bill that does say that such actions are potential hate crimes. again, there is, i believe, and mandatory minimum sentence with regard to the hate crimes febill
that deals with a set of facts you are talking about. >> thank you. one other issue that you do not have to go into now but it has to do with the voting rights act's in kingston, north carolina. in north carolina at only five hold their elections on a bipartisan basis. . . and in kingston, seven of the nine minority -- which actually is in kingston is the majority -- voted to eliminate that. and then the civil rights division went back, and because they fall under the voting rights act, having to have that approved, reversed that. and i would just like to hear
the comments about that and why that was seen. because 73% of which the vast majority of those are afric african-americans voted by over 2-1 to remove party labels. and yet what we did in washington was tell them, you can't decide that because you fall under the voting rights act. and so there's a lot of complicated questions with that. and i understand that. but i'd appreciate you giving me a written response justifying how we would reverse what the majority of african-americans in that town thought to be prudent for them when they're doing local elections. >> all right. senator, i'll get you a written response. i don't know enough about the case at this point, i think, to respond to you today. but we'll get -- i'm familiar with it, but not as well as i think i need to be. >> i understand. i don't expect you to have it. >> i'll get you a written response to that. >> thank you. and here's the area that i really want to get into because i'm really concerned. as a practicing physician and i've dealt with lots of drug abuse in this country and know the significant power of marijuana use to lead to other
drug use. on october 12th, the deputy attorney general, david ogden, issued a memorandum to u.s. attorneys in all the states that have laws authorizing the use of medical marijuana directing prosecutors not to focus federal resources on individuals whose actions are unclear and ambiguous compliance with state law. never mind the fact that it violates u.s. federal law. it's a dramatic break with previous administration policies, both the clinton and the bush administration policies, which demanded the prosecution of marijuana distributors, even those acting in accordance with state law. it's prohibited for any use under federal law, meaning that no matter what the states' laws are, it's still a federal crime to use it or to distribute it. the obama justice department is saying it simply won't enforce those federal laws as long as you're legal in your state. i think that's kind of the summation of where you are. and i know that you had limited resources.
so i understand. did you personally approve the issuance of this new policy? >> i did. >> do you agree that this is a dramatic break from past administration policies? >> it's certainly a break. i'll let other people decide whether it's dramatic. >> it's a break. cancel the word "dramatic." >> it's certainly a break. but it seems to me it's a logical break given, as you indicated, the limited resources that we have. the use of marijuana in the way that these state laws prescribes, which is for medical purposes. but what that directive from the deputy attorney general, i guess, on october 19th indicated was that we are not blind. and to the extent that people are trying to use these state marijuana laws to do things that are not consistent with state law, that are not being used for medicinal purposes, that are not being used to help cancer patients, for instance, the federal role is still there. and we will be vigorous in our prosecutions.
and on page 2 of that memo, there are a number of factors that are set out that we think are indicia of a noncompliance with state law. the mexican cartels make most of their money from the importation of marijuana from mexico into the united states. and so this continues to be a priority for this administration. >> the fact is, 90% of the people that have medical marijuana prescription in california don't have a real illness. what they have is a desire to smoke marijuana. and yet we are allowing state law to interpret federal law. i would quote former clinton white house director of public affairs, white house office of national drug policy bob wiener was recently quoted warning the administration, be careful about the new apportionment policy for medical marijuana because you may get more than you bargained for. prescription marijuana use has exploded for healthy people. there's no question about that, that it has. i want to make sure that you're concerned with that as well.
this will be my last question. you know, pay attention to this because two years ago i released a report on the justice department that outlined the $1 billion of waste a year that most americans would concur with in terms of low priorities. if, in fact, there's 10% of that truth to that report which i believe is very accurate, those monies could certainly be used to enforce the drug laws. the number one risk for our kids is not obesity. it's illicit marijuana. >> i have given extra time to the senator. >> all i would say is that, senator coburn, one of the purposes of the guidance that was issued by the deputy attorney general, and as i indicated in my response to your question that i approved, was to make clear to people in the field that this remains a priority enforcement for us. and to the extent that we have
people who are misusing these state laws or using these state laws for traditional marijuana importation of growing purposes, that the federal government, the d.e.a., the justice department, will be vociferous in our enforcement efforts. >> senator whitehouse. >> to have what? >> to have questions submitted for the report. >> of course. we'll keep the record open until the end of the week. senator whitehouse. >> i believe the senator was here before me, mr. chairman. i'd be happy to yield. >> sorry. i did have a list, and i neglected to look at it. senator? >> thank you very much. and thank you, senator whitehouse. i would have said it was fine but i have some people waiting out there from minnesota. so thank you very much for being here today, attorney general holder. you mentioned the tragedy at ft.
hood in your opening statement. and that terrible crime weighs heavily on all our minds. i was one of several senators on this committee that went to ft. hood to that memorial service. we had a young man, cam jong, who was killed there. he was waiting in line for a physical, ready to deploy. his family had come over from -- they were -- fought in the wars in laos, relocated to thailand, ten kids in st. paul, minnesota. he has three himself. and the saddest thing i remember for that memorial service is that family huddled next to his picture propped next to the combat boots. so we are very interested in a thorough investigation here. i know the justice department has a hand in this. and that no stone is left unturned, that we get the results not only for a strong prosecution, but also so we can make sure that this doesn't happen again. >> i think president obama has given us unequivocal direction that we are to find out what happened there.
how do we prevent what happened there from occurring again. and it is our intention to, again, share the findings of that inquiry with the committee and with the american people. >> today i want to focus on some of the bread and butter law enforcement issues. but i want to quickly summarize so much of the questions have been understandably about your decision about the trial. this resonates for me because it was in minnesota where some diligent citizens caught moussaoui. so we watched that with great interest, the trial in virginia. first of all, of course, my focus is on security. and i think you've talked about how you consulted with the mayor and with the police chief and senator schumer went over that at length. but, obviously, most of us are interested in getting these guys. and senator leahy mentioned that the conviction rate, i think, is 90%. is that right? people tried? >> 94%. >> 94%. and you feel that you have a strong case.
could you just briefly talk about your decision to do this in new york and why you picked that particularly jurisdiction in terms of the expertise of the u.s. attorneys that will be handling that case? >> well, we're going to have a joint team that involves lawyers from the eastern district of virginia as well as lawyers from the southern district of new york. new york is a place that has tried these kinds of cases before. you have a hardened detention facility. you have a hardened courthouse, a means by which a person can go from the jail to -- to the courthouse without seeing the light of day. i had a marshal's service report done looking at all of the potential venues if we were going to do this in an article 3 court. and the recommendation from the marshal service was that this be done in new york city. that that is the place that was the most secure and did not have to have any construction work done in order to try to harden
those facilities. and so for that reason and for other reasons, that was why i made the determination that new york was the appropriate place to try these cases. >> focusing now on some of these domestic issues, senator coffman has a bill on health care fraud enforcement. i'm a co-sponsor, a number of us are. i have my own bill with senator snowe that complements that bill. and i know in may, and this is a question for me and senator coffman. he's presiding over the senate. i know that in may you and secretary sebelius created a health care fraud prevention and enforcement action team to work on coordinating the federal government's response to this issue. could you say more about what that group has been working on since it was formed? because we just had a report, $47 billion lost in medicare fraud. the health reform that we're working on now must contain provisions that make it easier to go after this kind of fraud because it's an outrageous amount of money. >> yeah. the creation of the heat task
forc forces, as we call them, are, i think, critical tools in trying to deal with an immense problem. we have seen the misuse of medicaid, federal health care funds for procedures that never occur for devices that are never bought. we've actually seen people who were once engaged in drug dealing and in organized crime activities moving into this area because they determined that it's safer, it's easier. and we are determined to put an end to that. we'll have to work with our partners at hhs. secretary sebelius and i have been giving particular attention to this. we made the announcement, i think, in i believe april or may. we have already announced significant numbers of arrests that have occurred in a variety of cities. we are in four cities now. we're going to be expanding task forces into other cities as well. this is a national problem. >> right. and i'm hoping we can give you more tools in this bill. one of the things i find most interesting is in areas you seem
to have hot spots. also the areas that have high-cost health care, disorganized health care systems which is something we should be looking at as well. a second thing i wanted to raise is the important reauthorization that we're going to be handling in the violence against women act. senator leahy mentioned the rape kit issue and the backlog. there's also other issues as well with the rural services. we had a hearing on this recently as well as child protection issues. could you talk about what your priorities will be as we work to reauthorize this important piece of legislation? >> if we want to get a handle on the crime problem that we had success in knocking down to historically low numbers, we have to deal with the problem of violence against women. we have to deal with the problem of children who are exposed to violence and who often see that in a domestic violence context. we have to deal with these issues. the senate, this congress, our
government, 15 years or so ago made a commitment in the violence against women act. it seems to me that we need to celebrate the successes that we have had, the consciousness that we have raised in our nation, but we need to do more. there are still issues, you know, the whole question of rape kits. i mean, we have to deal with that. we have people on the streets who, because we have not analyzed those kits, are free to commit these acts yet again. the whole question of children who are exposed to violence and were the victims of violence, i think, is part and parcel of this same issue. and if we're ever to get a handle on this crime problem, we have to deal with those who are most vulnerable in a way that we are doing much better than we have but not as well as i think we can do. >> thank you very much. >> thank you very much. and senator frank and senator
whitehouse and senator specter. senator franken. senator franken. >> thank you, mr. chairman.@@@@ >> they've done this in new york and it's also increased the number of convictions. i think they've gone from 40% to 70% of the convictions just because they increased the backlog. and i was just wondering, and maring this is the answer you
can't give me right now. but what's gone wrong with this? because we had -- you know, we had this act, the debbie smith rape kit reduction law act in 2004 with $500 million to address the problem, and we still have this problem. and we still have this problem. so it's just that we don't seem to have a regular system in place to specifically track rape kit backlogs around the country. and just can you tell me what you're doing about it? and if you don't have an answer right now, get back to me? >> well -- >> or us? >> -- what i'd like to do is give you a more full response maybe in a written form but to tell you that what you're talking about is exactly right, what you said in the early part of your comment. these are -- this is an ultimate law enforcement tool. and the ability to process these
kits and then compare the results from those analyses to the databases that exist will, as you've indicated, solve cases and put people behind bars who are responsible for really heinous and very serious crimes. exactly why the prior legislation which was designed to avoid the situation we find -- >> which, by the way, the chairman was a great leader on. >> i don't know why it has not worked. but we in the department are trying to come up with ways in which we can work with our state and local partners to effectuate that act and would look forward to working with you on this committee and congress, again, to identify why it hasn't worked as well as we thought in the past and how we can prevent that from happening in the future. but this is something that, for me, matters a great, great deal. i know you've devoted a lot of attention to this.
but these are crimes that we can solve. and the inability to do that is extremely frustrating. >> i'm going to get to just a macro issue here on the united states and crime. and the number of people we have incarcerated. we had 5% of the world's population. 25% of the world's prisoners. and so many of these people are in for -- because of drug addiction or mental health problems. and very many of these people have no history of anything violent or any even high-level drug activity. we're essentially sometimes sending kids who have -- are in possession of drugs and sending them to crime school. we put them in prison, and then they learn from other criminals how to do crime.
and two-thirds of them come back had they're released within three years. and more than one-third of the counties in minnesota have drug courts that stop the cycle. these are special courts for nonviolent drug offenders that steer them toward rehabilitation and treatment. and in minnesota, offenders who use drug courts are ten times more likely to continue their treatment than other offenders. can you tell us about drug courts, what they are, and what your department is doing to support them? >> well, we certainly have supported them in connection with the budgets that the president has proposed, to increase the use of drug courts. i'm familiar with the one that we have here in wash washing, d.c., that started, i guess, a little after i left the d.c. superior court and has proved to be, i think, very successful in dealing with people who are selling drugs because they are addicted to drugs. these are the low-level dealers.
not the people who live in penthouses and drive big cars and all that. >> sure. >> and so i think that drug courts are an effective way at getting at the problem, and their expansion is something that this administration -- this administration supports. in terms of those macro issues that you were talking about, we have a sentencing group that is looking at a whole variety of issues now that i've put together to look at that wholer. we should always be asking ourselves, is the criminal justice system we have in place effective? and my thought is that we should have a data-driven analysis to see who's in jail, are they in jail for appropriate amounts of time? is the amount of time that they spend in jaime a deterrent? does that have an impact on the
recidivism rate? this group will report back to me i hope in the next couple months and it's on that basis we'll be formulating policy and working with the committee with, i hope, some interesting and innovative ideas. >> and in doing that, mighty suggest an increase in drug rehabilitation within prison? because there are people in prison who are -- a lot of people in prison who have addiction problems who should be in prison but are going to get out. and it would be nice if, while they were in there, they got treatment. i just want to mention one thing on health care fraud, which is i would like to see those people go to prison. i know i may be contradicting myself by saying we have too many people in prison. it seems like health care fraud folks might belong there more than people who are simply addicted to drugs. if i could quickly just touch on trafficking in women, it's just
a subject i just want to touch on. i'm running out of time. but trafficking of native american women is a big problem that i think is being ignored. and in international trafficking, there are women who are trafficked into this country for prostitution who, because some of these cases are sent to i.c.e., these women are -- have a disincentive to report these crimes. and i think that's something that needs to be looked at. >> that's an issue, i think, that is worthy of examination. we are paying particular attention to the plight of women on reservations. i was in minnesota, i think, about three or four weeks ago or so for a listening conference. and if you look at the levels of violence that young girls and women are subjected to on the
reservations, sometimes ten times as high as the national average is with regard to particular crimes, that is simply unacceptable in our country. and it is something that the president followed up on by having a listening conference at the white house. the international trafficking of women is something in youngsters is something that we need to look at as well. and to the extent that i.c.e. or their interaction with i.c.e. somehow prevents us from being very effective in enforcement efforts, i'll work with secretary napolitano, with members of the committee to see if we can come up with ways in which we can be really effect everybody in dealing with the problem that we have to get a handle on. >> thank you, general. thank you, mr. chairman. >> thank you. senator whitehouse. >> thank you, mr. chairman. welcome, attorney general holder. now that we're towards the end of the hearing, i'd like to take a moment and react to two things that i think have come out
during the course of the hearing today. one is, i think, perhaps, ina inadvertently disparaging term about our united states law enforcement mechanism. i hope it is inadvertent, but i want to take a moment to say that having had some experience in that world, i'm extremely proud of our federal law enforcement officers, of our career prosecutors. i've had prosecutors have to go to court in body armor. i've had prosecutors have to go home to their families and explain why a security system needs to be put in their home because of threats. they take this on day in and day out. and as you know, they don't get paid a great deal. and they are, i think, among the best lawyers in our country. and i just want to make that point because i didn't like the tone that i was detecting. the second point that i want to make is one, in favor of
prosecutorial independence. and to the extent that you have been criticized that your decision is unpopular, i think people looking at this should bear in mind that the implication of that is that prosecutors should seek to make decisions that meet with popular opinion. and from my perspective, popular opinion is a very danger husband be dangerous bellweather, and i wouldn't want that to emerge from this hearing as an unchallenged point. i think it gets worse when you move from popular opinion to legislative opinion. there are very significant separation of powers reasons why i, as a prosecutor, didn't want to hear from the legislature why the founding fathers set up a system in which the legislature was kept for good and prudent reasons out of these prosecutorial decisions.
we're entitled to our opinions. everybody has one. fine. we can come here and ventilate. but nobody watching this should not react to the proposition that a prosecutor should either listen to the threats or criticisms. i mean, obviously, with courtesy, you should and you did, but i want to assert the proposition here that a prosecutor should not make their decision or allow their decision in any way to be influenced by legislative opinion. and if there's any way to make it worse, it would be to allow it by talk show opinion. and there's been a whiff of that here today. and this country's going to last a long time, long africa lead shake mohammed is safely either in prison for life or executed or whatever the outcome is. and we want to stand by the principles that have gotten us through 220 years and that will get us through to the future. and one of them is that people like us -- and i say this as a sitting senator -- have no
business attempting to influence the prosecutorial decisions of our law enforcement officials. in evaluating this, i do want to make an additional point and get your reaction to it. in article 3 courts, we've probably had tens of thousands of criminal prosecutions. almost every possible p permutation of law and fact and procedure has at one point or another reared its head in article 3 courts and been disposed of and left a trail of precedent for future prosecutors to follow. military commissions, no matter how well we may have drafted them in our recent repair of the original flawed military commissions, have now, as i understand it, only achieved three convictions. and one came by plea. so in terms of the military commission, however properly statutorily established, being
able to contribute the same kind of reliability and resilience that federal courts have obtained through those tens of thousands of cases and through the exploration of all those different permutations. it strikes me that even a perfect military commission still bears some risk of unreliability in that you're either in new territory in which case there are questions about where you go on appeal, or you're modeling yourself on an article 3 existing legal structure in which case you might as well stick with it. but that they are, to a very significant extent, even if properly constituted, still untested. and i wonder if you share that view. >> well, first, i'd like to thank you for the statement that you made in support of the career people who work at the justice department and other
parts of the executive branch, and at the state and local level as well. you were a great u.s. attorney and a great attorney general in rhode island. i'm proud to say that you were my colleague. but your comments are really appreciated. to the extent that people have any question about the determination of the people who work in the justice department and who will be responsible for these cases about their abilities, they should put those fears to rest. these people are among the best of the best. they could be in other places making a lot more money. but they serve their country. and they do it quite well. and i'm proud to say that i am their colleague. and so i really thank you for that. in terms of the question of article 3 versus the military commissions, i think neathere's question that there is a greater experiential base on article 3 courts. your observation is correct. we have seen virtually every
permutation. i'm not naive. i know that khalid shaikh mohammed in an recall 3 court will try to do as he tried to do in the military commission, spew his ideology, his hate, whatever. article 3 judges have dealt with these issues before the unique -- issues that i think in some ways sound unique are not going to be found to be unique. in the article 3 courts, over the past 200 years, we've dealt with, as you've said, just about every permutation. there is going to be precedent for almost every decision that a judge is going to have to make u
certainly not my attention to denigrate what has been accomplished with the military commissions. it was simply -- and i agree with the attorney general, that there is this experiential base differential. if i could ask unanimous consent that three questions for the record be propounded by me, one has to be with where we are on the drug enforcement administration's new rules that will allow them to move off paper records so that we can move to e-prescribing so we can build up our electric tropg health record network as the president wishes, timing on that determination. the second is, we have people in our present bankruptcy courts who are being, i think, harshly treated under the new law. we have a u.s. trustee vacancy.
when will we have a u.s. trustee recommendation from the department of justice? and finally, as you probably have come to expect from me, when is opr going to put out its report on the office of legal counsel? and i think my time has expired, so i'll have to take those for the record. >> well, with regard to the first two, i would certainly -- will certainly send you something in writing. but i think given the fact that you've asked this question before and i think this is a matter of great public interest, the whole question of the opr report, if i could be allowed to respond to that. >> sure. >> the report is completed. it is being reviewed now. it's in its last stages. there is a career prosecutor who has to review the report. we expect that that process should be done by the end of the month. and at that point, the report should be issued. all -- it took longer than we anticipated and certainly longer than i anticipated when i
testified, i think, i five months or so ago because of the amount of time that we gave to the lawyers who represented the people who are the subject of the report an opportunity to respond. and then we had to react to those people, and opr had to react to those responses. the report is now complete and is simply being reviewed by that last career person in the justice department. and my hope is that by the end of the month it should be complete. >> i thank you, chairman, and i extend my gratitude to my colleagues for that extra time. >> thank you. i appreciate that. i also wanted to associate myself with what you said about the role of a prosecutor, those of us who -- there are several on this panel who have had the privilege serving in law enforcement as prosecutors. and i concur with what senator whitehouse said. senator specter. >> thank you, mr. chairman.
attorney general holder, thank you for your service, coming back to head up the department of justice. tomorrow this committee will take up the issue of reporters, shield, which has been very carefully crafted to try to provide some balance so that we do not have reporters jailed, as so many have been, or threatened. judith miller, 85 days in jail, no justification, yet explain just one question which i will cite tomorrow if your answer is right. and that is, are you confident that the compromise as crafted will protect the national security interests of the united states? >> yes. i think that the bill, as it presently exists, as opposed to the form that it was in before, now gives us the tools to protect the national security, to go after leaks, if we desire.
>> i don't want to interrupt you, general holder, but i've only got seven minutes. i heard your yes answer. >> okay. yes. >> a report publicized within the past several days is that out of the $440 billion a year for medicare, $47 billion is a result of waste or fraud, rather, criminal fraud. we are working hard to craft a health care reform bill. and the president has committed not to sign one which adds to the deficit, committed not to vote for one, which adds to the deficit. medicare and medicaid fraud are enormously consequential conseqo many cases result in fines, and that really results in being added to the cost of doing business. jail sentences, as we know, are
a deterrent. others look at them and don't want to be sent to jail. would you submit to the committee an action plan as to what you can do to see to it that there are jail sentences as a matter of a very active governmental policy? i know you agree with the thrust, but we don't have time to discuss it within the seven minutes that each of us has. if you would submit in writing how you will aggressively attack these issues with jail sentences. >> i'll work with folks in the criminal division and have their response. but i agree with your overall thrust in that regard. >> the bureau of prisons does a good job, i think, with very limited funding. among the many challenges you have and the many jobs you have,
i would like you to undertake a personal review of the adequate see of their funding on rehabilitation. there have been some real studies that show a two-pronged attack on violent crime would be successful in america, producing violent crime by
as much as 50% with life sentences for career criminals. for example, under the armed career criminal bill, and we passed the second chance act, the biden specter bill, the president signed it last year. it seems to me that we need more funding on detoxification, job traini training, re-entry. no surprise when a functional illiterate leaves prison without a trade or skill, they go back to a life of crime. i would like you to take a look
at that. i would also like you to take a look at the issue on attacks on prison guards. there's been a rash of them because of the very substantial overcrowding. i wrote to the director of the federal bureau of
prisons who i know is doing an excellent job with some suggestions about giving the guards some protective measures. some suggestions have been made about pepper spray, some suggestions have been made about break-away batons, stab-proof vests. i would appreciate it fld take a look at those items and others which could provide safeguards for prison guards. >> i would do so. i've actually had a meeting with the union that represents these guards, and he's actually a very
considerate person and has raised issued and potential solutions to the problems you've identified. >> i want to ask you in the remaining two minutes that i have about the distinction between trying some of the terrorists in article 3 court as opposed to the military commissions, and preliminarily let me agree with the senator whitehead has to say about the standards you apply. i'm confident you will apply them as you see them professionally. as i look at the protocol, which has been issued by the department of justice, i have a hard time in saying the discretionary judgments. if you talk about the strength of the interest, it looks to me like they are very, very similar. i don't think the location of where the offense occurred in yemen as opposed to new york city is very important, since
extraterritorial jurisdiction applies all over the world as a result of amendments we made in 1984. the point on protecting intelligence sources and methods looks, to me, to be aligned. with respect to the evidentiary problems, there could be. the decision to make these trials in the article 3 courts is quite a testimonial to our criminal justice system to try these horrendous criminals with the rights of a criminal court, constitutional rights is a great credit to the united states. the military commissions have been crafted after a lot of starts and stops, but what standards do you apply to try the terrorists one place instead
of the other? >> well, we do it on a case-by-case basis using the protocol that i think you have in front of you. there are evidentiary questions. i think the location of the crime can be a factor, and i think you're right, given the extraterritorial -- >> are you saying you have less evidence necessary in a commission as opposed to an article 3 court? >> no. i focus more on the add missibility of the evidence and where the possibility exists. if there are problems in one form or the other, with regard to the -- >> can you give me an example? >> well -- >> just one. >> i have one that i -- well, it -- the kind of interrogation, perhaps, that a person was subjected to might lead you to
want to use one form as opposed to another. there might be questions of techniques that were used, and one form might be more hospitable than another to the admission of such evidence. this administration -- let me -- i don't want you to read into that anything more than what i've said. this administration has said we will not used evidence that was derived as a result of torture. >> thank you. >> but even saying that, there is at least a possibility that some techniques were used that might be more -- might be better received in one forum than another. >> i would note that -- thank you. i would note that this is attorney general holder's fourth appearance before this committee this year. i appreciate that. every senator on the committee has asked questions today, both democratic and republican. i understand the republicans have a couple more questions in
five-minute rounds. i asked senator copy dar if she would chair for me. one of the good things about this, attorney holder, i think the american public, having been told by some commentators and others that the 9/11 suspects will gain access to classified material and be able to block the admission of evidence obtained by torture, i think those claims have been refuted very directly today. i appreciate that. in fact, some of those same protections were adopted into the revised military commissions they passed last summer. the concern i have is the military commission before it had been repeatedly overturned by the supreme court. i like the fact our federal courts have 200 years of press dents and a track record that's successfully convicted terrorists and murderers. prosecutors know how the system
works. the courts have established the system. we have a lot of confidence that following that convictions can be upheld. so i am pleased that you have a preference to use the federal courts whenever you can, and as chairman of this committee i want to acknowledge that 9/11 families are here present today. i want to recognize their losses. they and their families have been constantly in my prayers and my thoughts along with the victims of t victims and the survivors the ft. hood shooting. i will -- senator kyl, are you going out of order? i realize you have other matters at other sessions. thanks to agreeing to that. please go ahead, sir. five minutes. >> thank you. mr. attorney general i have more questions, but i want to turn to
the media shield discussion, which you and i talked about on november 4th. you indicated your willingness to address that at more length in a hearing, and i'm hopeful that the chairman will call a hearing at which you could express your views in more details than you did in the views letter sent to us recently. did you consult with secretary gates in determining to support the current version of the@@@@@ >> a small portion of the letter he wrote to us concerning the bill. he said the bill would undermine our ability to protect national security inflammation. it seriously impeded investigation of unauthorized
disclosures. in view of that strong opinion, and incidentally he was joined the that by several other members. other members, people in position of authority in our intelligence and national security community, it seems to me it would be important for us to hear from them and certainly mr. attorney general for you to weigh their views before expressing absolute support for a bill which you say shouldn't be amended in any additional way. >> i think, first off, the letter that you quote from secretary gates deals with a prior version of the bill. >> it does, indeed. there were a couple of major changes made. actually, several changes, a couple which, in my view, would arguably make the situation worse. what i'm going to propose is that we talk to all of the people who have expressed a view
about the previous legislation, since many of its provisions remain in the bill that you have supported. did you consult the fbi director? >> yes, i've talked to bob about that. >> did you tell him this was going to be the result, or did you elicit his -- did he express any concerns? >> well, i guess i would -- we certainly have discussed it. i know that he has taken a different position, at least with regard to a prior bill before. i think that he understood the position that i took, and i think he, you know, accepted, you know, where i was coming from with regard to this present form of media shield legislation. >> i appreciate that. he expressed as recently as september that his views were the same as previously expressed in opposition of the bill, which is why i asked. united states attorney patrick fitzgerald, who has been
commented on, has recommended that the law include another provision, and i want to just specifically about this. it's in effect an offer of proof under which the information sought by the government would be provided to the court in camera and only if the government prevailed utilizing all of the provisions of the law. would the information be then turned over, if the government didn't prevail, then obviously it wouldn't. you have previously in the confirmation hearing said that seemed like a reasonable requirement. would you be open to having a provision like that added to the legislation? i know in juror views letter you said you don't want to see any other amendments, but there are few amendments it seems to me makes sense, and that clearly is one both you and i and mr. fitzgerald think is reasonable. >> the bill as it presently exists is a procecompromise. >> it's a compromise between the journalists and you all and democratic members of the senate. nobody has talked to me, and i've been noting my concerns
about this bill for a long time. >> i think they are -- i think this is right, but i think senator graham on the republican side is a co-pons sore. i believe that's true. >> that's right. none of us opposed were called upon when the compromise was made know. i want to make it clear in case you had any doubt about it. >> that's fair. so the views letter was to express the concern, i think, that we had that in its presents form this is something that is satisfactory to us in law enforcement. >> could you just interrupt you. i only have 19 seconds left. i would hope you would be open to the suggestion i just made and a couple of others, if i could bring those to your attention. last, your letter did not comment on the new in effect absolute privilege in one sense -- i'm curious about why you're saying it and would elicit your feelings othat on
the privileges to extend those that violate federal law by leaking information itself? in other words, that act of leaking would be subject to the privilege, would be privileged. i just wonder -- the letter didn't express efts on that, and that seemed, to me, to be new and odd. i really wanted to get your views on that. >> i didn't seep an absolute privilege to leak. it seems to me there are provisions within the bill that deal with leaks and how they can be dealt with, and there are certainly steps that the government has to go through in order to prosecute or get information from a reporter in connection with a leak investigation. i don't think that the steps that the government has to go through are necessarily going to frustrate our efforts to identify and ultimately prosecute leakers. >> what i want to do over the time is show you section 3 and have you show me why that doesn't provide, in effect, an absolute privilege here not to disclose information where the crime itself is the leak. i hope we'll have a further
opportunity to talk about that and other concerns that i have about the bill. thank you. >> sure. that's fine. one thing i could just add. in response to senator kyl asking the question on behalf of senator grassley before, i didn't mean to be flip when i said i would consider the request about turning over the names of people who had previous representations that might conflict with their duties as department of justice attorneys. when i said i would consider it, i only meant to say i don't know if there are ethical concerns with regard to attorney/clinent privilege and things of that nature. i didn't mean to say that i was not -- trying not to be responsible or not taking seriously a question posed by senator grassley and by you, senator kyl. i wanted to have -- talk to the experts back at the department about whether there was an ethical concern in responding to the question. >> i suspect you and senator grassley have more conversations
about that. >> okay. >> thank you, senator. senator cornin. >> thank you very much, madam chairman. i don't know if we're going to get through this or not, but let's try. i want to follow-up on a question that senator specter asked about admissibility of evidence in decides which form to try these defendants. is it your position itself going to be easier to get evidence of their guilt in an article 3 court than it would be in a military commission? >> i'm not sure i view it that way as opposed to what evidence would be used in the article 3 courts in connection with the cases that i've already made the determination should go there as opposed to what the -- the way in which the military prosecutors wanted to conduct the case. >> surely you wouldn't decide in your discretion to try a case in
a tribunal where it would be harder to get a conviction, would you? >> no. what i take into account are all of the factors that are a part of the protocol. >> you mentioned marshall's report on the possible venues where this case could be tried. as you noted, a judge could contrary to my wishes or your wishes transfer to another venue other than new york city. based on the marshals report, what other venues are you prepared to try this case? >> skied the marshals to look at two districts and and the court house as to where in the two districts the case could be best
tried. >> where was the other one? >> i looked at the eastern district of virginia as well as the southern district of new york. >> nose are the only two. >> those are the two i asked the marshal sfervice look at. >> when the detainees come to the united states, will they have some immigration status? >> i'm not an immigration expert. i do not know what their status might be. i am confident, however, that given the fact that they would be here under the supervision of and as a result of their being charged in a federal court that we would be able to detain that, that we would be able to hold them as we would do anybody who was charged with such serious crimes. >> are you aware of any bar to their ability to claim asylum or
argue that they shouldn't be aremoved from the u.s. because of the convention against torture? >> again, i'm not an immigration expert. one can be paroled in the united states solely for this purpose, but there's no right to be here after. i can't imagine a situation in which these people would be paroled into the united states for that purpose. >> so is it your position they will not be conferred rights that they did not previously have by virtue of their coming to the united states? >> that is my belief. but again, i'm not an immigration expert. i am confident my expertise deals more on the department of justice side, and i'm confident on that side we can detain them safely and prevent them from
ever walking the streets of the united states. >> i understand. we can't all be an expert in everything, and the law is complicated. will you acknowledge that it's possible or -- let me ask you, if you look into it whether -- if a detainee claims an immigration status by virtue of presence on u.s. soil, it will allow them to immediately trig her tandem administrative and federal judicial immigration proceedings. will you look into that? >> i can look into that, because i would not be able to answer that question today. >> and if the detainee's acquitted or there's a mistrial, lease say one juror decides to hang up this jury, on what basis do you believe that you can permanently detain any of the 9/11 detainees?
is that on the basis of a supreme court decision? on the basis of a stat statute that congress passed? what's the foundation of that bleach. >> the initial determination that a judge would make for the detention of cal lead shake muhammad would be one that would last beyond a mistrial. there was a fril and a determination made with a hung jury. i suppose the defense could move to have his detention status change. it's hard for me to imagine that a judge having heard the evidence and making that initial determination to hold him, seeing that he is a danger and a flight risk, would then change that status of moem hamed between the time of a hung jury and next trial he. >> i believe the supreme court has held that you cannot indefinitely detain somebody under the case, but let me just
ask a final question. are you concerned that a jury may say you've made an election, an election to try these terrorists as criminals and you're bound by that election and you cannot go back and revert to the laws of war in order to claim you're going to indefinitely contain that individual? are you worried about that? >> no, i'm not. i think that under the congressional provisions that we have and the laws of war that we have an ability to -- you cannot perhaps indefinitely detain somebody, but you can certainly detain somebody for lawful reasons. again, i don't think that we're going to be facing that possibility. we're talking about very extreme hypotheticals, i believe, based on my understanding of the evidence and the law and the
ability of our prosecutors to present a very strong case. >> i hope you're right. >> thank you very much. he we hope your voice improves. i know attorney general holder will join me in saying you're sitting dangerous close to senator graham, and we'd never want to muzzle senator graham. i hope it's not contagious. >> i wish more people felt that way. >> senator graham. >> this is an important point here that, you know, the idea of preventive detention, i don't think senator feingold is high on that idea. but i am not because i like keeping people in jail for the hell of it. i just think when you're at war and the people you have in your capture, the commander in chief has determined tli a rational process is part of the enemy force, that america is not a better place for letting them go. do you agree with that general concept? >> yeah.
i agree with that general concept. it's something the president talked about in archive speech about the possibility of detaining somebody again pursuant to the laws of war and dialling in due process. >> do you believe that congress needs to weigh in here, or do . . the executive branch to make that decision without any congressional involvement? >> i personal think that we should involve congress in that process. we should interact with this committee in crafting a law for the detention process or program. >> i totally agree with you. obviously we parted ways on some of this. these are not easy decisions, so i think the bush administration made their fair share of mistakes, and also did some good things, too. preventive detention is a concept only known in military law. is there any theory under domestic criminal law where the government can hold someone without trial indefinitely? >> indefinitely?
>> indefinitely? ere's speedy trial rights. >> there's speedy trial rights. i don't think that holding somebody -- you can certainly preventive hely detain somebody with the expectation that there's going to be a trial without an adjudication of guilt. >> under military law you can hold somebody without any expectation of trial if they're, in fact, part of the enemy force. that's the big difference, right? >> right. there's certainly precedent through history of holding comb combatants through the war. >> my problem is let's play this forward, in afghanistan, pakistan, you name the venue, in the future we capture a suspected al qaeda member. under your rationale, the decision as to whether they go into federal criminal court or military commissions would not be known at the point of capture. is that correct? you would make that decision later? >> yeah. i think that's correct. >> now, from the protocols that
we would institute from the military side, what would you recommend that our military commanders, intelligence officials do at the point of capture? because under domestic criminal law, if that's where they wind up, once they're in the hands of the government suspected of a crime, that's when interrogation, miranda rights attach. under military law there is no such concept. under commissions there's no requirement for warnings or article 31 rights. you expect the person to be interrogated for military intelligence purposes, not worrying about the criminal aspects. what do we tell our soldiers and commanders when they capture somebody about how to interrogate and when to interroga interrogate? >> first, i'd say this notion of when a person is in custody is something there are lots of cases that people have to deal with and that the automatic capture of a person is not
necessarily going to be viewed as in custody by our courts, though i think this is something we need to -- >> if you were a defense attorney, would you not raise that? i mean, i would. i have no desire to, but you know, i would defend anybody because i think defending the worst among us makes us all better. let me tell you what i would do, mr. attorney general. if you took my client, who was suspected to be a member of al qaeda, and they were captured on the battle field in the federal court, i would argue that at that moment in time any questioning of my client without miranda warnings would be a violation of criminal domestic law. what would your answer be? >> well, it would depend, again, on the circumstances. you know, again, in custody is confine a variety of ways, and that's something we have to be sensitive to. >> you lose the freedom to leave? >> that's certainly a factor, but one -- i think what we have to understand is that these
determinations are being made now and have been made during the prior administration with thousands of people who have been captured. >> if i may, because our time is limited, no one in the past up until now has ever worried about this, because no one ever envisioned that the detainee caught on a foreign battlefield would wind up in domestic criminal court with the same constitutional rights of american citizens. they've never worried about that before. now we have to seriously worry about that. what i'm afraid of is the war on terror is a police action. that undermines our national security. at the end of the day i look forward to working with you about doing preventive detention and find a way for it as a nation. thank you. >> okay. >> okay. thank you, senator sessions. >> thank you, madam chairman. i know you're knowledgeable about all these issues, but i would just say, mr. attorney general, if a police officer stops someone on the street and his gun is in his holster and
asks question, that can be considered custody. if the individual has any sense they're not free to go, then that's considered custody. i can't imagine somebody captured on the battlefield not being considered custody. i went through this with mr. muller, the director of the fbi, and eventually he flatly conceded that if you are going to try an individual in federal civilian court and they're captured, you should give them miranda warnings or the statements they make would probably be sue pressed. that's the rule in federal civil court. it's not constitutional. the supreme court still says it must be given, but it's not really required by the constitution. so the military commission is one of the differences, i think, that we have in those matters. senator graham is raising a point that you can cannot avoid.
that point is, if the presumption is according to the u.s. department of justice, your department, that individuals who are terrorists would be tried in federal court and not in military commissions, then it's almost an absolute requirement that people apprehended need to be given miranda warnings and told they can have a lawyer and don't have to talk. when our military is in a life-and-death struggle to win a victory over the enemy and one of the key things of the 9/11 commission drove home to us is that intelligence is the way to do that in this kind of battle we're in. i think that's not a matter that can be lightly dismissed. >> senator, i would not lightly dismiss it. we have a great deal of flexibility. i do not think that the military commissions are an illegitimate
forum to bring the cases. on a case-by-case we look at the admissibility of evidence and the quantum of evidence introduced and make that determination. that's one of the factors. five of the people i talked about last week are going to go to military commissions as opposed to article 3 courts. >> well, if the presumption is these cases will be tried in civilian courts, then i don't think why the soldier he talks about on the battlefield isn't instructed to give miranda warnings. i would also just note that there's been a hostility by the president toward military commissio commissions. for example, soon after taking office, he suspended military
commissions immediately and later issued an order suspending all military commission trials. and we haven't had one since. >> but i don't think he necessarily indicates a hostility towards military commissions as opposed to a desire to perfect them. i think we're in a position where we have a much-improved military commission system that i think can stands on its own, that is ledge mats and in which we can place as i have people. >> the supreme court did raise questions about the military commissions of congress passed some laws that improved that. the congress did some things that will make it clear to me that normally for these kind of cases you're better trying them in the commission. for example, reliable hearsay is available so you don't have to bring people off the battle field, perhaps. and it's easier to have in camera hearing. we have them all the time in
federal court trials. but you have to have a real high reason to do that in the normal civilian trial to go in-camera. they're on the record, of course. nil tear commissions you can go on the record and in camera and protect intelligence sources and methodsing better. i don't think there's any doubt about that. i just would disagree there and would point out that general mccasey has expressed concerns about new york city. he tried the blind sheik case as a federal judge, your predecessor, and he's afraid that new york city would, quote, become the focus for mischief in the force of murder by adherence to sheek mohammed. i don't think that's an irresponsible analysis. do you remember the case
involving mr. salo who who was a co-founder of al qaeda held in the dpourtle bombing of kenya and tanzania murders. he attempted to escape use tobasco sauce and pepper perp and put it in the eye of one of the guards and stabbed him in the brain with a makeshift knife and blinded him and he's unable to fully speak today. mine, these are dangerous people, sxild just ask you that. two more things now and i'll wrap up. senator cobin's concern about medical marijuana have been been involved in that for many years attempts to do what we did to deprive down the use of illegal drugs in america. working with the partnership for use and tree-free mobile, i've seen the history of it. we need to send that clear message, and we're sending a bad
message with the medical marijuana laws. states are making a mistake when they do this, and the federal government really needs to speak out against it and show some leadership there. second, i really want to affirm that i will be supportive of your efforts to enhance medical fraud recoveries. every president has tried to do something about it, but it will take a sustained effort, not just a press conference, over a period of years. and i think mr. attorney general you're experienced boetd as a prosecutor and judge, you could probably hope this be more effective than it has in the past. >> i think there are a number of u.s. attorneys on this panel who i think if we put our heads together we can come up with an effective way to deal with this problem.
of health care fraud, and i think you're right that this is something that has to be sustained over time, which includes funding, maybe dedicated resources, but i think we'll make money back on the provision of additional prosecutors, investigators, and people at hhs, auditors to do these kinds of things. they will more than pay for themselves, and i think we should be cog zannizant of that. i do believe that we can protect sources and methods within the article 3 courts, and i would note, as i said, i guess, in my opening state, that the provisions designed to protect sources and methods in the military commissions are based on the sepa act we use in article 3 courts. i have great respect for judge
mukasey and he helped the healing process that has begun at the justice department. the only thing he didn't have the department was the gift of time. we owe him a great deal for starting to right the ship, and i'm trying to continue the work that he began. i disagree with him about new york. this is not a secret. new york is a target for al qaeda and for those who would do this mash harm. i'm not at all certain that the bringing of these trials necessarily means that new york is at greater risk. with regard to what happened in the jail, that's an unfortunate, tragic thing that we learned from. i'm confident that the people responsible for the detention of these individuals will handle them in a way that will be consistent with our values but also allow them to protect themselves. i do not take lightly, though, the issues and the concerns that were raised by judge mukase.
i have great respect for him. one of the things i read in making this determination was an article he wrote, i believe, it was for the "wall street journal." i remember reading that articles and underlining people that he said and asking people to respond to the things that the judge had raised. that's the degree of respect i have for him both as a lawyer, a judge, and as a great attorney general. >> thank you. >> thank you very much, attorney general holder. i want heed to follow up on a few of my colleagues' questions. you were asked about evidence and if there was miranda rights read or not. could you just go through again this notion that you raise at the beginning that that's one of the considerations that you have when you look at whether you're going to use the military commissions or whether you're going to use article 3 courts. >> yeah. one of the things that we look at, one of the things that we
consider is the admissibility evidence. where can we get admitted the evidence necessary to be most successful. that is something that really is important in the determination that i made with regard to the use of article 3 courts concerni concerni concerning sheik muhammad and his four colleagues. the people in the field have been@@@@@@@ ú2 i think that is the other thing we have to remember. the trials we will bring will not only be based on admissions, confessions, but there will be other ways in which we will prove the guilt of the people that we charge.
i have discretion and i want to have the maximum use of the tools i have been given by congress and the president in making these determinations and, on a case by case basis, using a protocol we have, that is what i will do. >> you said at the beginning of your testimony that you're being as forthcoming as you could be, describing your decision making process. but you also said there was evidence you could not share with us today, which is also difficult for prosecutors. you said there was evidence you couldn't share with us today. it's always difficult for prosecutors. where you explain things to people, and you want so much to tell me them about the real factor that led you to a decision but you can't until the trial is going on or until a trial is over. could you expand on that will a little not telling us what the evidence is but explaining that there's some evidence you can't discuss right now in this forum?
>> yeah, there is really from my perspective very compelling evidence i'm not at liberty to discuss now that probably will not be revealed until we are actually in either trial setting shg , perhaps a pretrial setting and once the case has been indicted and a judge is assigned and motions have been filed. at some point an assistant united states attorney will rereal that which i cannot talk about now. the evidence i'm not talking about as i said, i think, is compelling. it's not tainted. i think we'll be proved to be decisive in this case. >> thank you. then i wanted to move just last to some of these general issues. as we look at what you are facing, whether people on this committee agree or disagree with some of your decisions, i think we're unified in wanting to give you the tools that you need to do your work. there clearly have been issues in the past you raised with
morale in the justice department. i think everyone knows that, and you mentioned and praised attorney general mukasey for some of the work he did to right ha ship. he worked hard with our minnesota attorney general's office and with me and others in trying to fix some of the issues there. i think that we're well on their way, as you know, with frank mcgill and now our newest appointee todd jones to do that. could you discuss more generally at the justice department what you've been doing to work on this morale issue and improvements you think have been made. >> one of the things is to make people again believe in the mission of the department and to reassure people that some of the unfortunate things that happened in the past and that are, you know, identified i guess in the inspector general reports, that that's not the way in which this justice department is going to be run. that we go back to -- we're not going to be inventing things. it's not a new way of doing
things at the department. it's going to be a return to the old ways. i served as a line attorney in the justice department under a republican as well as democrat if i can attorneys general, and had great respect for all of them and the way in which they dealt with me as a career person. that's what i try to reassure people at the department, we're going back to that way of doing things. they're only expected to do their jobs. there are no political consequences or litmus tests with regard to case decisions, with regard to who gets to be a lawyer at the justice department. this is the way things have always been done at the department. it's the great tradition of very, very special place i've had the good fortune to be associated with most of my professional life. i think one of the things that would help with regard to morale, just kind of an advertisement, i guess, would be for confirmation of those
remaining assists ant attorneys general. we have three left. to get them confirmed would be help. >> i understand. we have three pending on the tloor, and i'm sure you'd like to get those done, say, before thanksgiving. that would be nice. >> tomorrow would be good. >> then i think there are six pending before this committee. and i'm sure you would like to get those through this committee, because when i look at your workload that you're facing here, not only with these newest trials but with this major investigation going on at ft. hood, with the medicaid fraud we want you to focus on, as everyone person in this country should want you to do. with the new and revived focus on white collar crime, which i think is long overdue, from the madoff case which i know that has been completed here. there's offshoots from that and other white collar cases across the country tont have some of these nominations clogged up a
bit here. just cannot be what you want. so i know i want to move forward on those as soon as possible. >> i appreciate that. >> thank you very much. you have one more, senator sessions. >> i offered the record a letter earlier, and i failed to note that from the 9/11 victims that according to their letter when word of the letter got out, some 3,000 firefighters across the country joined us and added their names less than 24 hours after attorney general's announcement last friday, 100,000 people signed our letter before our computers crashed. this is the box of signatures and confirmations. i just feel like i should make that statement for the record,
because i do think the victims felt strongly about it. they're asking that the attorney general reconsider. >> there certainly have been those who have opposed the decision that i've made. there have been many people who have supported it as well. i expected that when i made the decision. these are tough decisions that an attorney general is called upon to make, and all i can do is look at the evidence, look at the facts, and look at the law and try to make the best decision that i can. i hope people would understand that. >> thank you very much, attorney general holder. i want to thank you for so thoroughly and respectfully answering all the questions from the members of this committee. i want to thank those who have been very respectful in the gallery here as well. i know that not all of you agree with every decision here, but i want to thank you for your respect and for those of you who are family members, firefighters, thank you so much
for your service. as senator schumer said we can't imagine what you've been going through. we want to thank you for. we want you, attorney general holder, to go back and whatever disagreements there may be, but to make sure you put the best do their work, that we get the toughest penalties here and we wish you well: thank you very
[inaudible] >> my brother is a port authority -- retired port authority police officer. he is my best friend and i grew up with him in queens. he had a responsibility to help identify port authority police officers who were killed on 9/11. i think about them. i cannot imagine the pain that you feel, but what i have tried to do is come up with a way in which we maximize the chances of getting an outcome --
>> i would just ask on behalf of all of us that you -- put them in guantanamo bay. i don't believe they have -- i don't believe they belong in our country. they have taken 3000 of our mothers, fathers, children and friends. this is a really important mission and the medical marijuana thing is what i wrote you about and i was astonished when the senator and others [inaudible] but that's something that is hurting kids across the country, especially in california. lock them up and close them down. marijuana will never be madison. i have 30 years of studying it. it destroys your immune system. >> people should read the guidance we sent out. we essentially said we will get them in a way that's appropriate.
i will read your letter. >> i lost my son on a flight 93. i have great respect for you and your office, but i have to say i take great exception to your decision to give short shrift to the military commissions and to put the five most heinous criminals and war criminals in court in new york city. i cannot help feel it makes new york city a much more dangerous place and a target and it will give these ugly people very eloquent access to all of the media of the united states. for those reasons alone, i would oppose this, not to mention the fact that there has been a
tremendous delay now -- i heard them encouraging their buddies, and they did plead guilty and want to be executed and then withdrew their pleas because it was possible execution would not be available because they had pled guilty. you are very conversant with the law. i am not. i think i can speak for many 9/11 families when i say we are heartsick and weary of the delays and machinations and i'm afraid theatrics' will take over at this point and i very much regret that. >> think of this -- for how long have these cases been pending? i have been attorney general for eight or nine months and we have taken the first that toward resolving these matters.
they did things there. >> that there were 26 members of the defense team as opposed to the six members of the prosecuting. >> they will do all that stuff. judges will handle that. we have experience in doing these things. what we have done is put in motion a process that will finally resolve these matters and do so in a relatively short time given the fact this administration is only 10 months old. i respect the concerns you have raised and their issues i considered. i did not give a short shrift to the military commissions. this was a tough decision. >> i was this -- i was disappointed to understand that there were among the attendees during the june meetings at the department of justice, several, one was particularly named, a
member of a liberal group -- i forget whether it was human rights watch -- she was never announced and came there as a guest and presumably of -- a member of the department of justice. she typical of the employees of the departed justice? >> i am not sure you are talking about. people in the justice department want to enforce the law and old people accountable for the crimes they committed. in respect of of what they may have done in their prior professional lives are hard working employees now and who will make the american people proud. >> i think, like you, i a board torture and i'm aware there were abuses committed during the past administration. i have a great deal of confidence and hope that you and president obama will be able to overcome some of the objections that human rights organizations have voiced. i am not sure that this move is
anything -- >> i responded to one of the last questions -- there are reasons why bring in this case before the court, when it comes to the admissibility of certain evidence is the right way to go and maximize our chances of getting a successful outcome. >> i will defer judgment. >> i am sorry for your loss. >> thank you.
quacks' follow queen elizabeth the second as she travels to the new parliamentary session. she will deliver the queen's speech from the throne in the house of lords. the speech is drawn up by the government and outlines its priorities for the coming year. members of the house of commons and lords attend. that is tonight at 9:00 eastern on c-span. >> thanksgiving week on c-span -- a look at politics in america from the bipartisan policy center. topics include next year's midterm elections and a look ahead to 2012. what is fair in politics? the role of the media and
assessing the obama presidency. tuesday night, the first state dinner as president obama welcomes the indian prime minister. later in the week, american icons -- three nights of c-span original documentaries beginning with "the supreme court" thursday night. >> on today's "washington journal" to congressman sat down to talk about the senate's health care bill. this is about 45 minutes. 2. "washington journal" continues. host: we want to welcome tom udal. guest: thank you. good to be here. host: the only senator not to vote was the senator of ohio. is there anything in this health care bill that you don't like? guest zpwest well, there are two things that i have real concerns about. i guess you can phrase it you don't like. one would be i represent a state
that's 10% native american. when you talk about health care reform, there needs to be major reform in in indian country. one of the things that isn't in there is the reaught slation of the indian health service. that is something that should be in there. we've talked about it being in there. i've been pushing to get it in there a long time. the other area would be i don't think we're strong enough on rural health. i think we need to do a lot more to get providers and doctors and physicians assistants and nurses out into those rural areas. we need to get telehealth out into the rural areas. and so i would really like to see a greater push. so i would say i don't think it's strong enough in terms of not like it, strong enough in the rural areas. host: your republican colleagues saying this is not an $848 billion. it's closer to a two trillion dollars health care bill. where to the numbers come down?
guest: i don't know where they get those number. when they like the congressional budget office, they agree with the numbers. we waited for this, the republicannings asked for it, the leadership was demanding that things be held up. then we get the congressional budget numbers. basically this thing is paid for. in the first 10 years, you help the deficit in terms of $131 billion. i think it's a good sol lid number that's paid for. i trust the congressional budget numbers. let's note that that is a bipartisan group of hard working analysts over there. host: we're going to get right to your calls. you can send us a bill.
guest: you're talking final vote to get it into the conference. probably before christmas. i would think. host: there's talk of reconciliation. what does that mean and will that be political? guest: leader reed has said reconciliation is not on the table. he's trying to focus on giving a bill that we can conference with the house or that we can amend the house bill and play some ping-pong, as you know in washington how that be happens. but the basic idea is to get a bill where we have the normal process rather than going to the budget process, which is much more constrained. but what you can get through that with 51 votes. host: do your republican colleagues have a seat at the
table when it comes to crafting this bill? they say they don't. guest: they had a seat at the table all the way through committee process. we had a significant -- if you look at the finance committee and the health committee, we had a significant involvement in terms of amendments and we went through a lengthy two- and three-week period where they were up late and dealing with amendments. and some of their amendments were adopted. and then they chose at that point in time to uniformly -- you know, we had 40 -- we would have had, if george voinovich had been here. 40 republicans against this. every single republican that voted voted against it. so they've chosen to be united. so they're not at the table at this point i don't think. host: do you know why senator voinovich was not there? host guest: i actually don't. i hope it wasn't a family emergency or something. i know he's usually very
conscientious about those things. host: tom udall was elected with the senate last year. gary is joining us from texas on the democrats line. good morning. guest: good morning, gary. how you doing? caller: fine. how are you all today? guest: good, good. caller: senator, i have a question about the health reform bill. that would be do you have demig do you have anything in there that states about the government subsidizing research for h.i.v. cures instead of h.i.v. vackveens? guest: you know, h.i.v. cures as opposed to h.i.v. vaccines. i think there is a significant component in terms of moving forward with research in newer areas, trying to do everything we can do make sure we support n.i.h. and the research agencies. but i don't think this is the big that really does a lot on
the particular issue you're talking about. i think later in the year we were probably going to take up n.i.h. re-authorization kinds of issues and n.i.h. legislative issues. and then usually the appropriations progress, the congress has been very support i have and i have been very supportive of an n.i.h. research in that particular area. host: you brought the issue of health services. are you spliesed we spend double on seniors versus health services for indians? guest: oh, i'm -- i would say outraged when you look at the health services that are provided in indian country and what we do in other places. number one, thry times more is spent in federal prisons on federal prisoners that we spend
on the federal health service. you're talking on a per capita basis. we probably on average spend five times more, six times more in a program like medicare than we do on native americans. so it is a heroic agency. they have very good people. they are totally underfunded. they don't have the resources today need to do the job. we have got to reauthorize that agency. it's fwen years and they haven't hat an authorization. this is something i feel very strongly about. the senate has already passed a bill in the last session. the house has passed a bill. host: our topic is health care. our guest is new mexico senator tom udall. terry is joining us from fort worth, texas. good morning. caller: i was just wanting to ask a question about the new type of health care that they're
developing right now. i know that george bush got rid of a lot of doctors from the veterans administration and brought in a lot of interns and physicians' assistants. our health care has gone to crap. they've dumped all these people. i've got a bunch of people that's gone to iraq and afghanistan several times. i'm not sure i agree with it, but that's neither here nor there. i didn't agree with vietnam, but i went. is this indicative of what they're going to do to our health care? guest: no, it isn't. let me first of all, thank you for your service. you indicated that you had served in the armed forces and we really need people like you and the people that are in afghanistan now and iraq are heroic and every time we see them returning in airports, i
just feel so good about the effort that they're putting out for our country. veterans health care is something we have to move aggressively on, and we have. if you look at the veterans health care budgets over the last couple years, they dramatically increased. the biggest problem we're running into is the mental health problems, the post traumatic stress syndrome as the soldiers return. we're not doing the screening when they get out. we're not working closely with their families. we're not working with them. we've had dramatic increases in the funding, and my understanding from talking to my veterans help people in mexico and others is that we're starting to put in place that mental health infrastructure to work with the ones that are having problems when they return. the other health care issues are also very important, and we're trying to do everything we can to put the resources into that
department to bring it to the point of first class health care for all of our veterans. host: this program is seen overseas, including live coverage on the bbs parliament channel. sarah is joining us from london. good afternoon to you. guest: hi. can you hear me? guest: you bet. caller: i wanted to say good morning to senator -- guest: udall. caller: my question is when exactly is this bill supposed to take effect? what month and what year? guest: that's a bit of a complicated question and i can't give you an exact answer. the earlier provisions, many of the insurance provisions, for example, where we say you can't discriminate against somebody based on an preexisting condition. the insurance company can't drop an individual who has a serious illness. the fact that we're going to put
a cap on overall expenses. those things take effect immediately upon the passage of the bill. now, most of the other provisions, it's 2014 until those are put in place. and so we're talking about some concrete things that will happen for people that are going to be very good under the current insurance system, and then we're talking about some of the other things, the insurance exchanges, the public option, getting those up and running. and that's the reason for the delay. i mean, if you're going to get an insurance exchange going in every state, that's going to take a while. and so that's the difference that we're talking about here in terms of immediate going into effect and later.@í@í@í@>@>@>@⌞>
if the citizens of south dakota are paying into this, it is unfair for south dakota residents not to have the public option. he is confused to why this is in the language in the bill when there are few states if any that would opt out. caller guest: if the governor does not want them to, he can pass legislation, the bill, and it's out. pass, sign it, and out. host: but the residents would still pay for it. guest: no, the residents -- the public option, and there's a real misunderstanding out there. we're entering an insurance market where you have these big, huge insurance companies that are making billions of dollars of profit right now.
to insert a private non-profit into that system, you're going to have to invest a little bit in terms of government resources. and so what you're talking about there is over a 10-year period giving the money that they're going to end up paying back, but you're just getting them set up. the actual non-profit, or whatever it is that's set up, is going to be run on premiums. and they're going to dedicate themselves to health care and all the resources are going to go to that. and so that's really what we're talking about when we talk about a public option. so the citizens are going to be held harmless on this. they're not going to have a situation where they're paying for it and they're also opting out. it's going to be a choice for them, like all the other choices
in an insurance exchange. insurance companies that people know of and then the public option in there. host: lisa was commenting earlier about george voinovich, the only senator not to know yesterday. she says he missed the vote because he was celebrating the 30th anniversary since being elected the mayor of cleveland, ohio. joe is joining us on the republican line. caller: good morning, thank you for taking my call. guest: good morning, joe. caller: i watch the program i guess a month or so ago about a businesswoman in california. she spoke about like five insurance companies or 10 insurance companies providing insurance. i mean, wouldn't it be easier for the government to get involved and say to california, you know, open the doors, let some more insurance companies in, this way you free up some competition. i don't know if this is going on in other states orningt but it seems kind of weird that we got a limited number of insurance companies.
and the second one is in new york, we have new york healthy. wouldn't it be easier for the federal government to kind of support or, if you will, -- what can i say. give money to support their program to make it cost effective for, you know, people in new york and i don't know if other states have that program. sure makes sense to turn it around and make it another health care business. guest: joe, we're doing both of those things in this bill. right now, most states in the united states have one or two insurance companies with control , most of the market in the state. in new mexico, two insurance companies can control 65% of the market. what we're trying to do in this bill is set up an insurance exchange using my home state of new mexico as an example where there will be many more companies, and in addition,
there will be the non-profit public option that will also be a competitor. dedicated -- it's a non-profit dedicated just to health care. so with this bill, we're going to provide many more options for people on health care. host: let me pick up on that point, because this other viewer is saying if citizens live in a state and that state has opted out, are they then exempt from the mandates and taxes related to the health care bill? guest: yes. as far as the public option, because the public option is going to be set up and run on premiums on its own with the people that participate in it nationwide. so basically, what you're talking about is in the public option is having a private non-profit that's going to be provide health care. its sole dedication is going to be to provide the very, very best health care. it will be run on premiums. it will not be run with the government injecting money into
it. it's going to be run on premiums. that the people pay. that choose it as an option. host: leslie wants to know will i be put in jail if i refuse to buy health insurance in guest: no, you're not going to be put in jail if you refuse to buy health insurance. there's a minor fine that starts out the first year. what people should liken the to is we live in a civil society. to drive an automobile, you got to have auto insurance. so if you don't have auto insurance and the police stop you, they ask you for your proof of insurance. you get a ticket, you get a small fine. i mean, we're mandating that individuals get insurance. we're trying to make it easy for everybody because we're helping small businesses with premium credits to allow people to get into -- to allow employees to cover pelosi. we're subsidizing some of the
private insurance that people will buy, up to 400% of poverty. we're really designing a system that is going to work much better for people because the bottom line is quality, affordable health care for 98% of american citizens. that's what we cover with this bill. host: north beach, california. good morning. caller: good morning, senator and thank you for c-span. the next 30 day, the most important bill the my loif time. i am a self-employed person. i am very close -- i have a repair shop. my insurance, which has been with blue shield for the past 38 years, has increased from $300
in 2000 to $1,100 to cover my family. what you are debating is very important in my opinion. the republican senators onboard to help you pass this. it's absolutely crucial not to set aside the public option. a few weeks ago, blupe shield was on c-span. he was claiming they are a non-profit organization. that's nonsense. in the past fur years continuously from 2006 to 2009, my premiums are $19,000 a year, and besides that, i have paid over $8,000 in medication expenses. host: let me just ask you, do you have a preexisting
condition? has that been a factor? do you have a preexisting condition? has that been a factor? caller: absolutely not. the past seven, eight years, the only medication i am taking is to reduce my blood pressure. no hospitalization at all. to surgeries at all. this year alone up to november, we will be paying $19,000 in premium. blue shield has spent less than $2,000 in our medical expenses and we've already paid $7,000 in medication. host: we'll get a response. thaks for the call.
guest: that's why vag public option, having insurance exchanges be a part of this will bring more competition to the market, will move us down the line. we're in a position to have citizens choose lower costs, affordable, quality health care through all those options we're going to put on the table. so this bill is trying to go right to the heart of the problem that you mentioned there. host: leonard murphy saying if citizens are mandated to buy health insurance, does that include you? guest: the people that are covered -- basically what this bill does, steve is the people that are already covered by a health insurance policy, i'm covered under the federal employees -- two million federal employees. we're covered under the federal health insurance policy.
you keep those policies. we're trying to deal with the people that aren't insured. we're trying to improve the system that aren't insured. we're trying to strengthen medicare and make sure that it's going to be there for the future. i mean, we're doing all of those things at once. we basically say to people that have a health care policy right now, you can keep it, and we're going to probably improve upon it for you. host: i want to conclude with the question we'll ask of our next guest, is the bill deficit neutral? guest: the bill is definite neutral. the c.b.o. has said, after extensive study that the bill over a 10-year period will reduce the deficit by 131 billion dollars in. the 20-year period, will reduce the deficit by $650 billion. these are bipartisan analysts.
usually the republicans have hanged their hat on the c.b.o. numbers. i don't know why they're headed off in another direction. i mean, they ask in the committee that each of the committee tass considered the bill, let's do a c.b.o. analysis. and now apparently they're using other figures. but the c! ♪ host: we continue the conversation on the issue of health care. senator lamar alexander, thank you for being with us. i want to pick up where we concluded with senator udall. he says yes it is. guest: i say no, it's not. host: why? guest: what the program spends
after it's fully implemented and not increase the debt. i'll give you a couple examples. one is the plan doesn't include reimbursement for doctors. how are you going to have government programs like medicaid and medicare and a new government program and you pay doctors through those programs and not reimburse the doctors promerly. if you believe that we're going to cut doctors' fees by 23% in 2011, then you might think it's balanced. another thing would be the plan is based upon at least a half trillion dollars in medicare cuts. and the congress has never cut medicare in that amount. it means that if you have a medicare advantage plan and one out of four medicare recipients, that that will be cut. so it's based on a number of assumptions that congress won't follow through. and david broder wrote a column
about a well respected survey that shows that one out of 10 americans actually believe that this will reduce the debt, and i'm in the nine out of 10. i don't think it will. host: the vote yes today was abprocedural vote. it basically said we want this to get to the floor. we want a debate. why did you and your fellow republicans vote against just to get this to the floor for a debate? guest: because as senator mcconnell said last night, we want to change the debate. we don't want to end the debate. this bill is an arrogant bill. it's 2,000 pages. that assumes that we have the wisdom to be able to change the entire health care system at one time. we think it's much too complex. and that instead of doing that, we ought to set a goal reducing health care cost and we ought to take specific steps towards that goal. for example, give small businesses a chance to pool their resources, the congressional budget office. they can offer more insurance at lower costs and save money. there are a number of other steps we could take.
most americans, if you presented them a problem, they just would say let's identify the problem, take some steps to fix it. we wanted to change the debate, not end the debate. we think the bill is so fundamentally flawed with so many premium increases, tax increases, medicare cuts, transfers of costs to states, transfers of costs to states, that it's a lot like the >> it only got 46 votes. the same thing is likely to happen here. host: you are a veteran of this program and we have viewers lined up to talk to you. if it's good to peoria, illinois. caller: good morning, gentlemen. i agree with mr. lamar. the government should have went after the health-care costs
before they started proceedings to do with bills to ensure people. number two, i am hoping the republicans can somehow attached to this bill that if it costs -- if it ends up adding to the national debt, any senator the votes in favor should have to give up his pension. . pension. they keep laughing and smirking whenever the republicans say it's going to cost the u.s. taxpayer, but why not put them to the task and make them put something on the line to prove that they are definitely right? guest: that's actually a pretty good idea. thank you for the suggestion. i've also suggested that any senator who votes to expand the medicaid program, which is the program that's costing states so much and ruining higher education. we noticed the other day that california tuition went up 32%.
if this bill passes, college tuition will go up all over the country because states are strugtology pay for either medicaid or higher education. i've said that any senator who votes to expand medicaid in this way and send the bill to the states ought to be sentenced to go home and serve as governor of that state for a couple terms. host: you're a former governor. one of your colleagues in south dakota mike brown saying that the public option is not workable for states. guest: well, the problem -- host: the issue of opting out. guest: right. i don't quite understand that. we already have a big government program with an opt out in it, and that's called medicaid. it's in fact our largest government program. 60 million americans are in it. 50% of doctors won't see new medicaid patients because the doctors are so poorly reimbursed. so this bill would assign another 15 million people to what i would consider a medical
ghetto. it's like giving you a ticket to a bus line with a bus that doesn't run but half the time. i think the governor may be saying if we can opt out of the benefits, can we opt out of the taxes? how does this work, i think he's probably saying. the government option really means that many employers are simply going to look at their options and say i can't afford all this, i'm going to write a check to the government for my fine and write a letter to my employees and say, congratulations, i'm not offering health plans anymore. you're in the government program. host: rosemary is joining us from georgia. good morning. caller: two quick yes or no questions, please. is there specific language in the bill to prohibit illegal aliens to receive subsidies for the public option? and number two, depuzz it not afend republicans, democrats, independents alike that senator
landrue was paid off for her vote? guest: well, the answer to the first question is there's an attempt to do that. under our law, anyone who shows up to an emergency room usually ends up getting treatment. second, it's very cynical and a part of the arrogance of this bill that we be getting a senator's vote by giving $100 million to that state. this bill is full of hypocritical and arrogant activities, just the idea that we can fix the whole system this way, the idea of dumping low income americans into a medicaid program that none of us senators would want to be a part of. and then sending the bill for much of that to the states, telling the american people that it cost $850 billion when really, when it's fully implemented, it's $2.5 trillion, today assuming that we're not smart enough to figure that out.
this is just another example of an arrogance. they say the bill is historic. i think it's historic in its arrogance. host: the viewer saying, who wrote those laws, decreasing payments to doctors providing medicare and medicaid assistance? guest: well, the congress did some years ago. but they've never been enforced. what happens is every year, we come along and say, well, we can't do that. and what's happened this year is that the house of representatives just two days ago -- and this goes to the deficit question you asked me when we began the program. they just said, well, we're going to add about a quarter of a trillion dollars to the deficit, to the national debt to reimburse doctors in this big health care program that we're passing and we're going to play like it's outside of the health care program so we can say the health care program doesn't add to the debt. that's another example of arrogance. host: you're from the south. this morning, above the fold of
"the washington post," sweetness for the south. he writes, it's a $300 million fix, which is 20 times the original price of the louisiana purchase. guest: that's another example of the cynical and arrogant act. that's why i think in the end this bill won't pass because i think the american people don't like the bill to begin with. they see it as higher premiums, higher taxes and we're scaring the daylights out of them by running out the debt the way. when we start passing out $100 million just to go to the vote for a bill, i think that's going to add to the cynicism and cause the bill to collapse of its own weight. host: why do you say it won't pass? guest: because, as i mention, i can vividly remember being on the senate floor during the immigration debate. it started out with a big -- a lot of well-intentioned enthusiasm. some of our best senators working on it. kennedy, kyl, mccain, all sorts
of people. we all wanted to solve the problem. we bit off more than we could chew. we tried to do a comprehensive fix of the whole system. when it calm down to voting on it, a vote that needed 64 votes, it only got 46. it collapsed of its own weight because the american people said you're biting off more than we can chew. host: our next call is harry joining us from maryland. republican line. good morning, harry. caller: good morning to y'all. good morning to senator alexander. i really respect you. i'd like to say that right now, i'm 57 years old and i have never seen anything quite like this. maybe back in the johnson era. but this thing with obama is moderation? there's nothing moderate about the guy at all. the approach we take -- every step we take seems to be bigger and bugger government, bigger
and bigger debt. if you can save money by fixing it, why go any further? just fix it now and take that money and maybe do some of these thing things that they talk about that we like to do with the uninsured. but, you know, as far as these moderate democrats, the semiconservatives. you got fell sob, landry, casey of pennsylvania. they're going along with something that is so far left to me it's scary. i mean, it's just absolutely scary. and the thing i think that really shows their lack of backbone is they really want to reform things. they go to some sort of tort reform also. i'll let you go ahead and respond to that. but i really respect. keep up the good fight. guest: thank you. those are very interesting comments. you put your finger on something about medicare, the program for
seniors, which about 40 million americans depend on. this bill has about $450 billion in cuts in grandma's medicare. now, the president said that -- i mean, that's a fact. $450 million over 10 years in grandma's medicare. but the cynical part is not spent to make medicare solve. despite the fact that medicare, according to medicare trustees, is going to go broke. so your point is exactly right. there are savings that might be gotten from medicare. one out of $7 according to the government accountability office and this government program goes to waste. but if we're going to find savings and medicare, we should spend it on medicare. host: please relate this current bill to ten care. it happened after i was governor.
hooray, tennessee is going to cover twice as many children for the same amount of money. i remember thinking, i bet that doesn't happen. our democratic governor has done a good job of bringing it under control. but it was a promise to cover more people. for the same amount of money without reducing the costs. and it literally nearly brumented our state. -- bankrupted our state. we should start with step by step efforts the reduce costs. that's what we've offered. if people are waiting if senator mcconnell, the republican leader, to roll in a wheelbarrow with the 2,000-page republican comprehensive bill, they'll never see it. we believe in going step by step.
host: let me ask you about an issue you were involved with. as the governor, you helped lead the effort to bring saturn to spring hill, tennessee. saturn is now shutting down. what impact will that have on your state and your thoughts? guest: well, it will hurt. i wrote a little obituary for saturn, said it led a good life. host: 25 years, less than that. guest: there's a lesson there. saturn came in about the same time nissan put its big manufacturing plant 14 miles away. they've been side by side in competition. and nissan has become the most efficienting plant in north america. saturn now has closed without ever having made a profit. people will lose their jobs. but saturn did us a favor, because tennessee had no auto plants except for nissan at the time it came. those two plants have turned our state into a state where a third of our jobs, manufacturing jobs, are auto jobs. is it reminded the world that
tennessee with its right to work law, central location, good roads, good place to make cars. now vokes wagon is in chattanooga. so we'll miss saturn, but during the time it was there, it was helpful in raising our standard of living. host: will it be replaced by another company? guest: i hope so. i had maked pen ski would make a go of it, but i can't imagine that saturn plant -- the largest in manufacturing 25 years ago when it came. general motors put another bid into it not long ago. i can't imagine general motors won't want to use it or won't sell it to some other car company that wants to take advantage of a the good circumstances there.
host: evelyn is joining us from fort worth, texas. caller: good morning. i don't even know where to start. the cynicism and the scare tactics are republican all the way. the system we have now was a nixon invention in partnership with keyser perm then today. also the post office is now public and has been since nixon's time. this is just a republican attempt to -- well, as i see it, bring down obama. you know, there wasn't any problem in paying for an unfunded occupation in afghanistan and iraq. but now to help the people, there is. here in texas, we have one of the worst health care systems in the nation. what -- when i was working every year, our premiums and co-pays
would go up but our coverage would go down. you know, if the republicans have their way in this state, nothing will get any better. it just amazes me the scare tactics that the republicans are putting forth to do whatever they can do not help the people. host: thank you. guest: well, i agree with you, the results of this bill are scary. but it's because of what's this in the bill. the bill does cut nearly a half trillion dollars out of medicare. that's never happened before. and if you have a medicare advantage plan, which one out of four medicare recipients does, their benefits will be cut. the bill does that will mean that premiums for insurance for most americans will go up and not down. in so far as texas goes, one of the things republicans would like to do is something you
have done in texas, which is to stop run away lawsuits against doctors. in tennessee, we have those malpractice lawsuits and as a result, pregnant women in 45 counties don't have a ob-gyn doctor to go to because they can't afford the ma practice so they're having to driving to get their prenatal care. in the rural areas of texas, doctors are more available. hannah: you have a flight to catch. we thank you very much for joining us. greg: thank you for having me on. hannah: do you think there will be a it took us a month to debate the farm bill. it took us nine weeks to work on anering bill, nine weeks on no child left behind. this is 1/6 on the economy. it affects all 300 million of
us. we need to take the time to discuss it. it. so we need to take the time to discuss it. and my prediction is that as we do, americans will find out that it raises premiums, raises taxes, cuts medicare, collapses with it own weight and hopefully will get on the r right track o >> tomorrow on "washington journal." walter pinkus explains how the devert intelligence agencies communicate with each other. ruth goldway discusses the future of the u.s. postal service. afl-cio president richard trumka outlines the units plan to fight unemployment and underemployment in the u.s.
and erik olson talks about a new report on food-borne illness and the impact on the u.s. on newsmakers, michigan senator carl levin, chairman of the armed services committee talks about the strategies for fighting terrorism. news neaks at 6:00 p.m. eastern on c-span. >> in 1989, judy shelton wrote about the coming soviet crash. in 1994, the international monetary system. now she is talking about the u.s. economy. >> this is unprecedented spending, unending deficits and what i consider an unconscionable accumulation of debt. >> judy shelton tonight on
c-span's q & a. >> thanksgiving week on c-span, a look at politics in america from the bipartisan policy center. topics include next year's midterm elections and a look ahead to 2012. what's fair in politics, the role of the media, and assessing the obama presidency. also tuesday night, the first state dinner as president obama welcomes indian prime minister singh. later in the week, american icons, three nights of c-span's original documentaries beginning with the supreme court thursday night. >> now a house oversight hearing on the federal government's role in the bank of america-merrill lynch merger of 2008. we'll hearing from congressman dennis cuisine yitch -- kucinich.
first, how did a private sector deal announce in september 2008 wind up as a major government bailout with the taxpayers on the hook for $20 billion. second, i asked whether the government forced bank of america to go through with this deal. finally, i asked whether bank of america's c.e.o. ken lewis really had a legitimate basis for backing out of the merrill lynch deal or when he realized late in the game that there were serious problems with the deal did he threaten to back
out to gain leverage for a taxpayer bailout. today, as a result of our investigation, i think the answer to those questions are much clearer. each senior bank of america executive who was involved in the deal has hold the committee that the government did not force them to go through with it. ken lewis has also told us that nobody in the government did anything improper during this transaction. if there are still people who want to say the government forced bank of america to go through with the deal, they are turning a blind eye to the facts we have before us. a simple but important fact is that the government did not elbow its way into this transaction. ken lewis called in treasury secretary hank paulson on december 17, 2008, and brought the government to the table.
that one phone call started everything in motion. on that phone call, ken lewis claimed that he believed bank of america could back out of the deal with merrill lynch based on the material adverse change clause in the merger agreement, the so-called mac clause. what we know now is that bank of america's top lawyer told two top bank of america executives on december 1, 2008, that bank of america did not have a m.a.c. the attorney was suddenly fired nine days later without explanation and replaced by a senior insider who had not practiced law in years. our investigation has also uncovered documents showing that on december 15, 2008, lawyers working for bank of america knew that to win a m.a.c., it is not enough to
show a short-term earnings decline, no matter how severe, they must show decline in value over a period of years, not months. nonetheless, ken lewis called hank paulson on december 17 and said bank of america actually had a m.a.c. again on december 19, lawyers working for bank of america gave executives a memo that noted that delaware courts had never found that a m.a.c. occurred allowing the buyer to terminate a merger agreement. nonetheless, two days after receiving that memo, mr. lewis again called secretary paulson and threatened to back out of the deal. finally, the committee has obtained notes showing that bank of americaout counsel believed on december 18 that they had at least an 80% chance of losing a m.a.c. claim. perhaps the most telling of all documents is the one where a lawyer of bank of america
writes," threat of m.a.c. don't push too far. it could turn against us." the documents and testimony the committee has reviewed clarify that the bank of america was aware that the chances of prevailing on the m.a.c. were very slim. merely invoking the m.a.c. could have led to significant adverse financial consequences for the company. based on the fact we have before us, it sure looks like it was a bank of america that was holding the shotgun at this wedding. today we will hear from the lawyer who was fired nine days after telling bank of america executives there was no m.a.c.. we'll also hear from brian moynahan, the person who replaced mr. mayopoulos and who determined sometime between december 15 and 17 that bank of
america could back out of the deal by invoking the m.a.c. after replacing mr. mayopoulos, mr. moynahan served as general counsel for 44 days. he stopped serving as general counsel about six days after the bailout was a done deal. he is now president of consumer and small business lending at bank of america. we will also hear from two bank of america directors who were on the board when this deal and the bailout went through and who now are helping choose the next bank of america c.e.o.. at this point our investigation has shared a great deal of light on a deal that was secretly made and at the cost of taxpayers' billions. although the investigation may be coming to a close, i am
certain that no member of this committee will stop working until all the taxpayers dollars that bank of america received are paid back. thank you very much. on that note i yield to the ranking member of the committee. >> thank you, mr. chairman. i have greatly appreciated your willingness to engage in necessary oversight of the bush administration -- i repeat the bush administration's decision to force bank of america and other banks to accept tarp funds and subsequently force bank of america to acquire merrill lynch. unfortunately, the bipartisan nature of the investigation appears to have stalled today's hearing. first, mr. chairman, there has never been a shotgun wedding in which the groom held a shotgun to himself. as you have said in the past, this was a shotgun wedding and the only people that could have held the shotgun was the bush administration, paulson, and
geithner, and we all know that. i regret the investigation today has now become apparent cover-up of the continuing activities of the obama administration and particularly secretary geithner. in securing promises of billions of dollars of taxpayer support in exchange for bank of america's waiver of its contractual right, even if it was 20% likely to attempt to negotiate a 20% using that 20% likely mnk a.c. clause for magic. at one time, mr. chairman, you were willing to follow the trail of misconduct wherever it led. now that the trail may lead to a cabinet officer in the obama administration, this committee's time and resources have been redirected toward the political scapegoating of bank of america. as a businessman i said sometime to go that i saw through what ken lewis was doing. what he had was he had losses,
which if put back into the correct places they should have been -- in other words, recalculating the profits not made as a result of those losses, he had a good case for a m.a.c. he had a good case for saying in an enron-like fashion that, in fact, merrill lynch had overstated their profits by booking these as good when, in fact, after the fact they were known to be wrong. that's no different than enron. you can't call a profit a profit when it's clear that it ultimately was a risky investment likely to lead to failure and, in fact, it had led to billions of dollars in failure. ken lewis was doing what most tough negotiators do, found an opportunity, get a dramatically better price, one that would have saved his company money and ultimately the stoke holders money -- stock holders money. and yet the bush administration under secretary geithner, then fed chairman of new york, and secretary paulson, forced the
issue and used money, both literal and figuratively as justification for why they must go through, literally because they offered the money, and second geithner offered it repeatedly verbally during the transition team, figuratively, because they offered to take ken lewis and his company down if they later needed money and did not go through with the merger. bank of america c.e.o. ken lewis repeatedly asked the bush administration to put purely verbal comments for additional taxpayers money into writing, but both hank paulson and ben bernanke refused. instead they sought to control disclosure for this new bailout until the last possible date. the incoming obama administration support for the commitment of billions of additional taxpayer dollars was absolutely essential to ensure bank of america's cooperation in this purely verbal backdoor deal. mr. chairman, we do not want to
see lawyers doing verbal things and yet in this case, we had no memos that we could rely on and no written contracts. mr. chairman, where is tim geithner who could in fact verbally and under oath give us the answers to our questions? the fact is where is sheila bear? where is mary shapiro or where is chris cox? where is the government? changes come, mr. chairman. under the bush administration, whether republicans or democrats were in charge of this committee, we brought in administration officials. the witnesses we're going to hear from today are appropriate and they will speak to their view of what happened, but we have already had ken lewis here under oath testifying to his explanation of what happened and it has not been refuted by any of the subsequent documentation discovery or
testimony. mr. chairman, as ranking member, i do not have subpoena authority. as ranking member, i do not have the ability to get a witness. as ranking member, i will be asking for in writing another minority hearing. i will because, in fact, we had majority and minority agreement on this panel and the panel which is not here today. mr. chairman, my request for a minority hearing will be for the exact people that you have chosen to drop off of this list after agreeing. i ask for nothing more. mr. chairman, it is very clear that we cannot feel the changes come, and therefore, the obama administration no longer can make a mistake even when, in fact, the people who made the mistake under the bush administration are now in the obama administration. with that, i yield back. >> here we go again. let me say that if the ranking member would like for me to pull out a calendar, i am happy to do so and remind him that
this merger and bailout occurred during the previous administration. and if he had such strong feelings and concerns about it, this bailout, i wonder why he was not asking the bush administration the tough questions last year and i yield to the gentleman from ohio. >> thank you very much, mr. chairman. this investigation started with questions, how could a merger of the largest bank and second largest investment bank in the country require a government bailout only weeks after shareholders had voted to approve it as a private deal? was it true that the financial situation shifted so dramatically in that short amount of time, or did top management know or should they have known about the changing situation much earlier? did they fail to make necessary disclosures to their shareholders? when we asked ken lewis, bank of america's c.e.o., about this at our first hearing, he told
us that he relied on the advice of counsel and that he relied on forecasts from merrill lynch. recently in response to our request, bank of america produced to us the documents on which they based their decision not to make additional shareholder disclosures as well as the notes from some of the discussions that led to that decision. this included the actual forecast that was created by merrill lynch and used by bank of america's lawyers as a basis to determine if there was something shareholders should know before they approve the merger. our examination of this forecast and how it was used should sound alarms about how wall street really operates. the forecast, when it was created by merrill lynch on november 12, revealed that in october are, the company had absorbed in just one month more losses than in the entire previous quarter, and half the amount of losses in the fourth quarter of the previous year.
yet incredibly, the forecast omitted to make any projections of how the most triple some investments sub prime mortgageback securities, credit to fault swaps would perform in the next two months, november-december. the forecast assumed those investments would have zero effect on merrill lynch's bottom line for 2/3 of the remaining fourth quarter. bank of america saw the deficiency in the document but did not show us they did any actual analysis to make up for meryl admissions. on the contrary, the evidence we have suggests that bank of america pulled a number out of thin air. far from being consistent with the actually experience of october or what they knew about the third quarter, the guess wishfully assumed that the
markets for clatalized debt obligations and credit to fault swaps would be significantly better in november-december. it was assumed that merrill lynch would almost break even for november and speding the bad results over two months. the attorneys went to work. they did not question the financial information they were given. they began with the assumption that additional shareholder disclosure was necessary and they discussed what kind of disclosure they would make. but after studying yet for a week, they decided that the news was not sufficiently out of line from past performance and previous disclosures to warrant further shareholder disclosure. thus on the advice of counsel, bank of america did not make any further disclosures to its shareholders in advance of the merger vote. within only weeks, however, reality crowded out the wishful thinking. far from having a small effect,
those collateralized debt obligations and other exotic instruments continued to lose large amounts of money. bank of america's guess which played a significant role in the decision not to make additional disclosures to shareholders proved to be billions off the mark. that's when bank of america went to the u.s. government for help. this investigation has opened up a rare window on to the management suite of the largest bank in the country. here is the story of how bank of america's top executives allowed guesswork, guesswork to masquerade as actual expert knowledge and how numbers pulled out of the air without any actual analysis served as the basis for corporate decisions made about other people's money, shareholders' money. unfortunately for all of us, i doubt bank of america is unique. look around to see what the genuses of wall street have
wrought. the house of cards that they have built that have buried our constituents under debts they can't pay, record foreclosures and joblessness. if you think they deserve the millions of dollars they paid and the bonuses they award themselves, if anyone thinks they can be trusted with running companies that are too big to fail, think again. the wizards of wall street are now more wizards than the wizard of oz, except, unlike the kingdom of oz, when that kingdom falls, there is wreckage all over america. i yield back. >> thank you very much. i now yield to the gentleman from ohio, mr. jordan. >> mr. chairman, i just want to respond to your previous statement. this is not about one administration, holding one administration accountable and not the other. this is about holding government accountable. that's this committee. this is a government oversight committee and the ranking member's suggestion that we need ms. shapiro, mr. cox, ms.
bear and mr. geithner here is exactly on target. no one in our previous hearings, which i appreciate, no one went after the previous administration, specifically secretary paulson harder than ranking member isa and myself. we want to question the same folks who are now in our current administration who were involved in this decision. the chairman mentioned shotgun being held to -- the only shotgun involved here was what the government held to bank of america's head when they forced them to take -- nine days after this passed, they forced bank of america, when bank of america had to sit down with eight other big institutions in country, force them to take tarp money. then in the deal itself, that's why we need officials who were involved in this whole decision here as i suggested in some of our previous hearings. i think mr. paulson actually misled the congress when he came in front of the congress last year demanding that,
asking for the tarp money. as i said, nine days later changing course dramatically and saying we're not going to purchase any of these mortgageback securities. we're just going to give capital toll banks. the unprecedent moves we have seen from the government and the pressure we have seen from the government on this institution i think requires us to get mr. geithner, mr. cox, ms. bear and ms. shapiro in front of this committee. i hope the chairman will do that so we can get an entire airing and ask the questions. i would yield some time to the ranking member. >> i thank the gentleman. i want to set the record straight a little bit. it's important. first of all, we understand that we're not the financial services committee, the s.e.c. does not report to us and, in fact, the s.e.c. has more jurisdiction over this commercial portion than we do, but we are the government oversight committee. and i would join with my colleague from ohio, in this
case, marcy capner. we knew that the money would not be properly spent the way the administration brought it to us. as it turns out, just days after they got the money, they spent it in a very different way. so i think that when we're setting the record straight, we're setting the record straight that we didn't think the last administration should have these hundreds of billions of dollars of walking-around money losing disguised as an emergency fund for a specific reason and that a merger which was approved on december 15 consummated around december 17 or december 31, in those 20 days that president bush was still in office, there wasn't any oversight we could have done. we weren't even in session except to organize. what we did do is those of us who fought on a bipartisan basis the funding of tarp continued to say that these were outlandish ways to spend the money, this was wrong for us to be part and parcel of mergers and acquisition and price setting.
so today i think this committee needs to stand up to what we were doing in the last congress and continue to look at where government failed us. and it doesn't matter whether it was republican or democratic government. we need to continue to do that and we need to see that the remainder of the tarp not continue to be spent in a way that you yourself, mr. chairman, have called a shotgun wedding. i thank the gentleman for yielding. >> let me give back. >> before we move forward, i think that to make that assessment before we hear from our witnesses, i mean, you don't know what they're going to say, how much they're going to say. and based on the fact of what has been said up to this point by mr. lewis who indicated that the government in no way acted improper. i mean this is what he said. the question is if you don't believe in terms of his comments or his statement, then that's another issue. but in the meantime we're going to move forward. will the witnesses please stand?
you may be seated. going from my left to right, our witnesses today or timothy who was general counsel of bank of america for nearly five years from january 2004 until december 10, 2008. he is currently the executive vice president of general counsel and secretary of fannie mae. mr. moynahan was the general counsel of bank of america from december 10, 2008, until january 2, 2009. he is the president of consumer and small business lending at bank of america. mr. gifford and mr. may are currently on the bank of america board of directors and were on the board last december
when the bank received its bailout. they are both also on the committee that is selecting the replacement for mr. lewis. please give your opening statement. you have five minutes and the light starts out on green. then it turns to yellow and then it turned to red. when it gets to red, we ask that you stop which will allow the members an opportunity to be able to raise questions after all of the witnesses are finished. thank you. >> chairman townes, ranking member issa, members of the committee, thank you for the invitation to appear before you today. bank of america recently waved its attorney-clint privilege with respect to the merger and has instructed me that i am free to answer questions the committee may have for me. accordingly as the committee has requested, i will briefly summarize and have set forth some more detail in my written testimony the legal advice bank of america received in
connection with the merrill lynch merger as well as the circumstances of my departure from the company on december 10, 2008. i served as general counsel of bank of america for five years. i was responsible for overseeing a very large number and wide range of legal matters. in the case of the merrill lynch merger, relied heavily on the company's outside counsel as well as my own in-house legal department. questions have been raised about what legal advice bank of america received as to whether to disclose to shareholders the amount of the potential 2008 bonus pool for merrill lynch employees. to my recollection, i had no role in this issue. i do not recall anyone raising or discussing with me whether the potential year-end bonus pool for employees should be disclosed to shareholders. as far as disclosure was concerned, as was my practice, i relied on the legal staff to prepare the proxy statement properly and accurately. the committee has asked what legal advice bank of america received regarding the material
adverse change provisions of the merger agreement. the only advice i gave was on december 1, 2008. i advised joe price, the chief financial officer and the head of corporate strategy that for the poor financial performance to constitute a material adverse change, it had to be disproportionate to that of other companies in the industry including bank of america. we discussed the relative performance of the two companies since the merger had been announced and i advised the men that there was no basis to conclude that a material adverse change had occurred with respect to merrill lynch. the committee has asked what advice bank of america had received as to whether it should disclose the losses of the third quarter of 2008. the lawyers and i gave advice on that topic to mr. price. everyone involved concluded that disclosure of the losses was not warranted. there were a number of reasons. first, because the materials announcing the merger and the
proxy statement did not contain any future performance, there was no legal duty to update past disclosures about future performance. merrill lynch's performance put investors on notice that they might suffer multibillion dollar losses in the fourth quarter. over the 12-month period beginning with the fourth quarter of 2007, merrill lynch had experienced after tax losses of $22 billion for an average quarterly aftertax loss of more than $5 billion. third, the proxy statement and other disclosure documents clearly informed investors that unprecedented adverse market and business conditions could continue to impact merrill lynch negatively. finally, there were also many highly publicized events that were warning signs to investors that financial institutions would remain under great stress and might continue to incur significant losses including among others, the near fall of bear stearns, the collapse of lehman brothers, the government's rescue of a.i.g. and the government's
extraordinary actions to authorize the expend tour of $700 billion to try to save the financial system. moreover, the sthathes estimates were based in part on guesses as to what the loss would ultimately be. it is obvious in hindsight that if either the $5 billion or the $7 billion loss estimates of which i was informed had been publicly disclosed to shareholders at that time, shareholders would have been misled as these estimates turned out to be wildly incorrect. no one ever suggested to me that the losses were expected to reach $15 billion as they ultimately did. with regard to my departure from bank of america, amy brinkly, the company's chief risk officer advice med a little before noon on december 10, 2008, that ken lewis decided to replace me as general counsel. she said i was being terminated effective immediately and i was to leave the premises immediately. i was stunned. i had never been fired from any job and i had never heard of a general counsel from a major
company being dismissed with no reason and explanation. i cannot tell you why i was fired. i don't know. after i left bank of america on december 10, i was never consulted about any of the matters i had been working on. i cannot tell you what legal advice the company received after i was gone. i can assure the committee that at all times i acted in good faith to provide legal advice that i believed to be appropriate, considered and to be in the best interest of the company. i did my best to be a good, careful, and honest lawyer. i would be pleased to answer any questions that members may have. >> thank you very much. mr. moynahan. >> good morning and thank you mr. chairman and the rest of the committee. my name is brian moynahan, and i serve as the president of global consumer small business and bank of america. prior to that job, i served in many capacities including
running the group that merrill lynch came into in january of 2009. i served as bank of america's general counsel and prior to that i served as deputy general counsel for a predecessor company. prior to that, i was a law partner in private practice and i specialized in merger and acquisition financial institutions, securities law, and other matters in relating in particular to the financial sector. i band to touch on two points today. -- want to touch on two points today. the backdrop of this committee hearing, i want to briefly discuss how our company, bank of america, continues to help homeowners, families, and businesses under the economic challenges we all face. second, i want to talk about how our acquisition of merrill lynch helped to stop a further financial collapse last winter. it was a good deal for our shareholders and our customers. but most importantly, it turned out to be a good deal for the taxpayers who gave assistance. we acted in good faith in the interest of our shareholders and the country in mind. let me turn to our first point.
you hear from constituents as we hear from our customers about the challenges they face. bank of america is doing all we can to help them. we understand the pup expects that of you us, especially as a financial institution that received taxpayer assistance. as we recently announced in our quarterly lending and investment report, we have extended $7 5 billion in loans since our first report late last year. that represents $17 for every dollar of financial assistance we received. making home loans is a priority for our company. in the first nine months of 2009, we made almost $300 billion in home loans available to over 1 million customers. we made $255 million of credit available to large and small businesses. in addition to that, we made $26 billion in credit available to municipalities and other nonprofits. all these figures don't include the $1.5 trillion that we committed to invest in low and
moderate income communities around our country and also don't include the $200 million in support we give to charitable organizations. i turn to my second point. i think it's important to keep one thought in mind throughout our discussion today. although the merrill lynch transaction and merrill lynch itself as a company was severely impacted by the worst dislocation that the financial markets have seen since the great depression, our acquisition of merrill lynch is a success. first, the acquisition has provided great benefits to our customers. a stable bank of america-lidge platform can simply provide more capital to more businesses in these tough times. second, the taxpayers are also benefiting from a stronger financial system and more directly in the form of a financial return they're receiving on their investments. third, closing the transaction in december 2008 was in the best interests of the financial system, the economy, and the
country. as the committee has heard in prior testimony, the failure of merrill lynch in december 2008, particularly on the failure of the lehman brothers and other financial firms would have exacerbated the economic havoc that our country faced. i'm proud that bank of america stepped forward. we have cooperated and will continue to cooperate with the committee to develop a better understanding. the record created by the testimony and those document shows, and i hope my testimony will help further demonstrate that throughout the deliberations of merrill lynch around the acquisition, bank of america acted in good faith and consulted with one of the premiere law firms in the country to address difficult issues. businesspeople confronted with flex business and legal issues acted in an open and honest manner. all of the parties involved including the lawyers did their level best to address and balance the merits of these complex questions in a time of great stress and in the face of unprecedented economic conditions. thank you for the opportunity
to make the statement and i'm pleased to answer your questions. >> thank you very much, mr. moynahan. mr. gifford. >> chairman, ranking member, [inaudible] . >> i assume i don't need to go again, mr. chairman? >> thank you. >> i would only like to make two observations at this point. first, i believe the of america/merrill lynch combination is bearing fruit.
the benefits are already beginning to take hold. although it is fair to say, i had a number of probing questions about the transaction at the start, i firmly believe that over the long haul, merrill lynch will continue to be an important contributor to bank of america's proximity. second as someone who spent his entire professional career in the banking sector, i can attest that the financial crisis of 2008 was simply unprecedented in its depth, breadth, and velocity. even in the midst of it, predictions of how bad it would get consistently understated the scope, the severity and its duration. our government took bold action and made extraordinary decisions to stablize the financial system.
for these measures, those of us in the banking industry should be grateful. i want to take this opportunity to personally say thank you to the american people as the process of the recovery moves forward, admittedly slowly, we will remain mindful of what was done to stable lies our system and in the important role in making these decisions work for our customers, families, businesses, and investors. thank you again for the opportunity to participate in today's hearings and i, too, look forward to your questions. >> thank you very much mr. gifford. we are caught off guard with your shortness. we generally have to stop people. thank you. mr. may. >> chairman townes, ranking member issa -- >> is your mic on? >> yes it is, my name is tom
may. i am chairman, president and c.e.o. of a holding company and i have been a member of the bank of america board of directors since 2004. i also appreciate the opportunity to be here today to discuss bank of america's acquisition of merrill lynch. i would like to associate myself with the remarks of mr. gifford and mr. moynahan so i can brief also. the merger is working thanks in no small part to our extraordinary associates. we all remain mindful of the extraordinary circumstances, the global financial system faced in late 2008. the assistance we received to complete the merger and the commitments we made at that time to the america taxpayers. we look forward to fulfilling those commitments and to ensuring that the bank of america and merrill lynch
continue to provide exceptional value to our customers and our investors. i also am pleased to answer any questions you may have today. >> thank you very much. thank you for your testimony. on december 1, 2008, did you tell bank of america c.f.o. joe price that you did not think bank of america could back out of the merrill lynch deal invoking the m.a.c.? >> yes, mr. chairman, i gave that advice. >> were you fired nine days after giving that advice? >> yes, mr. chairman, i was. >> do you know why you were fired? >> no, mr. chairman, i don't know why i was fired. i don't know whether it had any to do with the advice i gave or might give or whether it had to do with something else. i don't know why i was fired. i wasn't given an explanation. >> did you at any point have a conversation with ken lewis talking about your role after
the merger of bank of america and mench? at any point did they talk to you about what your role would be after that? >> yes, mr. chairman. on the evening that we negotiated the merrill lynch merger, mr. lewis told me i would be general counsel of the company following the combined merger. >> but it didn't happen? >> no, sir, it didn't. >> let me just move forward to you, mr. moynahan. just to make sure i'm clear, did anyone in the government force bank of america to go through with this deal? >> no, sir. >> no one in the government? >> no, sir. >> we know much more now about the m.a.c. and this entire deal than we did last summer. if you believe there was something material about the merrill deal that made you want to back out of it, why didn't you think it was material to the average american who was thinking about buying some of
your stock and disclosing it publicly? >> mr. chairman, when i became general counsel and we worked and looked at the $18 billion loss that we were facing at merrill lynch, we believed we had a valid acclaim for a m.a.c. the disclosure requirements would arise when we had a duty to disclose those which was later when we saw earnings in january. >> you're sitting next to to the other attorney, did you think he was a lawyer? >> yes, i did, tim was a good general counsel. >> excuse me? >> yes, he was a good general counsel. >> did you think it made sense to fire someone who had been the top lawyer for the previous five years, especially right in the middle of one of the biggest deals in bank of america's history, didn't you feel uncomfortable with that? >> mr. chairman, the times that we were going through in december 2008 was we were downsizing the company
relatively dramatically and we were changing 10% of our executives were terminated then, which was terrible things and term times to go through but part of the economic stress. and changes that were made were in the context of us changing the numbers of senior executives because of the stress we were under. it's a tough thing to go through. it's about business. and that's clear that's what drove the decision. >> i just wanted you to repeat one thing there is some question about the government's involvement here. the government did not pressure you at any point to do anything you did not want to do? >> i did not personally feel at any point to do something by the government that was not to do. >> mr. gifford, the committee has obtained two emails you sent regarding the bank of america deal with merrill lynch. and one of those emails you use the frays "screw the
shareholders." "screw the shareholders." you the other you expressed disagreement in the way that bank of america approved mergers. can you tell us any more what you had in mind when you wrote those emails? anything else you can tell us? >> i can, mr. chairman. i'm obviously not terribly proud with the choice of words to be sure. the first reference to an email was as i recall the middle of january. it happened during the middle of a board meeting in an exchange with a very good friend and we were being rather informal as the words might suggest. and we were going back and forth and it was during that meeting that we were announcing earnings for january, for the fourth quarter and the year, which were certainly unsatisfactory and we knew would have a poor effect on share prices. we eliminated the dividend down to a penny.
>> the long term strategic benefits were such that i voted for the transaction. >> i also voted for the transaction and to this day, still feel it is a tremendous combination of two wonderful companies. >> thank you, mr. chairman. thank you both for doing your fiduciary duty. i'm sure it is not easy at 10 and then $18 billion of unexpected losses piled up at a company in the middle of a merger. i've done a few acquisitions in my day and said on the board of my company and i would not want to decide whether to pull the trigger or not with so many people on both sides, particularly at a time when secretary paulson and president bush himself or appear on the hill telling us there was a crisis and if we did not vote
money in a matter of hours, the world would come to an end. as you know, the world never comes to an end in washington because we just print money. we have had no layoffs. it will not surprise you, but government has grown at by 139 new employees -- 139,000 new employees. we do not feel your pain. but let me go -- let me set the record straight. if we can put up slide #one. it's hard to read, but it says -- the right now gone on vacation. this is from a bank of america lawyer. on the second slide, fire board, if you do it. tim g agrees. this is from one of your cfo's
at the company. hank paulson made it clear that treasury and the fed were prepared to deliver an assistance package. hank made it clear he had concurrence of the fed and tim geithner and others. he also says that tim geithner and larry summers were both on board with this transaction. those mr. chairman, are the words of ken lewis. $45 billion tarp available if necessary. obama team and formed an agrees. slide #5 is not here today. third -- incoming team at fed and treasury in agreement. this is from another board member who is not here. slide 5, -- a slight six, ben bernanke and henry paulson spoke
to tim geithner. you have our commitment is will be resolved. you will get additional investment. that's from bank of america lawyer. none of these are in dispute here today. none of the testimony we have had until now this beats the fact that in various ways, the then new york bank chairman, tim geithner, was in the loop because this was after he was the likely and in fact now is the secretary. knowing all of this, do you believe today and that if the money had not been made available, and this is for the board members primarily, in the form of a loan or a loan through preferred stock with interest, do you believe you would have likely pulled the mac, and it is
going through with the deal as currently cost, $18 billion in losses. since your career has been in banking, if you take $18 billion out of your balance sheet and try to have the fdic come in and take you out, is that not a real concern you have to deal with? >> it was a confusing time, for sure. i can tell you that as we, the board, originally on december 19th of the growing and significant losses of merrill lynch, management presented to the board an opportunity to exercise the privileges of the material adverse exchange clause and get out of the transaction because of how much damage had been invoked on merrill lynch. we then talked later with mr. leiws a few days later, and he
expressed the fact that the government thought it would be a major mistake for us to walk away. they thought it would be a very dangerous systemic risk and dangerous and not positive of all for the bank -- >> let me interrupt. did he express that if you in -- if you walk away and needed help later, the fed would not be there. >> he did not. he expressed the sentiment and there was another session later in the month that the government would provide financing. there is nothing in writing, but it was from very senior officials from the government that one would believe would follow through. the details were not reviewed. i can tell you as a member of the board of directors, i can only speak as one person. the issue was relatively clear to me. in a perfect world, it would have been better to walk away. >> one last question -- as
business leaders who have had general consuls, don't you normally require two things -- your general counsel gives u.s. on a statement, you take his legal advice, but don't you need to have a general counsel who is on board with your leadership decisions? >> a general counsel who is on board with our leadership decisions? >> would you keep a general counsel who constantly tells you not to do what you've already decided to do from a business standpoint? >> any member of the board has to make up their own mind. you would like to be in a position that general counsel would provide good counsel. >> i agree with that totally. >> the gentleman's time has expired. i yield 5 minutes to the gentleman from ohio. >> thank you. i ask consent to enter into the record to enter documents. >> without objection. >> as general counsel of
bankamerica, you determine whether or not the bank made an additional disclosures to shareholders to update its proxy solicitation. what threshold of quarterly losses would have led you to recommend additional disclosure to shareholders before the vote? wasn't that threshold anything above 8 $10 billion forecast quarterly loss? >> congressman, the historical experience at merrill lynch over the prior four quarters as a had quarterly losses ranging from $2 billion to $10 billion, as you have the $10 billion or higher in after-tax losses, the case for disclosure became much more compelling. >> you state in your testimony that you received a forecast dated on november 12th. the information played a role in your legal deliberation about making additional disclosures about the financial situation at merrill lynch.
let's look at the forecast you received -- staff has provided the gentleman with a copy of what we're talking about. merrill lynch's most illiquid and volatile assets, the collateralized debt obligations, credit default swaps, an subprime mortgage-backed securities, were trapped in rose marked a significant items, totaled marks, and if you follow that across the column entitled btg, what it stands for balance to go, in that high lighted box, they are blank. there are no numbers there. is that correct? >> i do not see any numbers. >> so there is no projection for collateralized debt obligations and other illiquid assets that were losing a lot of money at the time. when my staff asked merrill lynch's cfo, he produced this spread sheet, why forecast would contain no projections for these assets, he told us that this
document was not intended to be a valid forecast despite its title. did you notice that a mission and did you ever question whether or not the november 12th forecast document was a valid forecast? >> no one ever told me this was not a valid forecast. >> so that is a no? >> yes. >> i need you to look at the bottom of the page. those notes were added by the bank of america treasurer to the girl was a forecast document on the morning of november 13th. they were intended to help fill the omission of love. can you read those lines allow? -- can you read those lines aloud? >> [unintelligible] >> i am referring to the line that says [unintelligible]
was your understanding -- do you see that? what is your understanding at the time? is that an engine to is that feeling? >> i do not remember that specifically. i do recall at $1 billion contingency in the $5 billion forecast. that seems to correspond to that line of there. >> when my staff interviewed him, he said the november 12th forecast was of questionable validity and also said he did not have time to delve deeply into the details of the forecast. did you know he had not delved deeply into the details of the forecast before a billion dollar gas was added to it? >> no. >> did that create any concern in your mind at all that might be a number pulled out of the air? and that feeling? >> i understood this forecast was in part a guess. >> my understanding is you did not transmit the november 12th document to the attorneys.
the record betrays you, sir, as the individual who relayed the relevant financial information to your outside counsel. do you recall telling the attorneys on november 12th and 13th that the october losses were $7 billion and merrill lynch could break even in november, allowing you to spread october's losses over two months question >> i do not recall that. >> if you look at the documents, you are quoted, and to members of the committee, you say in a conversation that you said that merrill lynch lost $7 billion so far in october. how do we get the number out? in the meeting notes, your comments to mention again, relating to the $7 billion number.
when you spoke with your attorneys, did you recall telling them the fourth quarter forecast received from merrill lynch omitted november and december projections for the credit default swaps and mortgage-backed securities which were so important for billion in october? >> no sir. i received a forecast from the finance department and described for them with the bottom line numbers were. >> do you happen to know with quarterly loss for merrill lynch turned out to be? >> my understanding is about $15.30 -- $15.3 billion. >> the actual loss acknowledged just two weeks after the shareholder vote were well above the threshold that would have led to recommend additional disclosure. in fact, at bank of america, they extracted losses into october and december, you would have come close to the actual magnitude of losses for the quarter, but neither merrill lynch nor bank of america did that or any financial analysis
at all. mr. challenger -- mr. chairman, they relied on somebody's gut feeling. >> thank you. i yield 5 minutes. >> let me tell you the story the way i see unfolding. last fall, you make a decision you will acquire merrill lynch. in the midst of that, the tarp bill passes. nine days after that, the biggest financial institutions are brought to washington. they are told they need to accept the money and he makes the call to board members and decides to do that. in the midst of this last fall, you look to emphasize the back to put more pressure on merrill lynch because they're losing more than you initially thought and you ought to get a better deal. that is what to businesses to all the time. the government said no to that. based on testimony we have heard, there was some kind of
subtle pressure placed on back of america to go through. we have the letter from attorney general " that suggests that. they suggest the board would be gone if they did not follow through on the deal. you sought assurances as was pointed out by mr. issa, from the incoming players in the obama administration. use of underwriting -- you said they would not put anything in writing, but our assumption is you got verbal assurances to proceed further with this. let me ask a couple of questions. is it in fact the case that you received assurances in some form other than writing from the likely folks to be involved in the obama administration at the treasury department that if things got worse, they would be there with additional part dollars to help -- additional
tarp dollars to help with bank of america. >> we received statements from secretary paulson and ben bernanke that as we worked through from the december in the two weeks we had to work through it, if we went forward, we would receive some sort of assistance which we finally negotiated and closed in january of 2009. as to the statement of the incoming administration, i think mr. lewis has testified to that. they had heard about the transaction, i was not part of those discussions. >> i want to be clear -- was there a promise made from the incoming obama administration that they would be there to back you up if in fact that is what bank of america needed? >> i don't know that.
i was only told what the conversation was -- >> [inaudible] >> i was aware of no such promise. >> neither was i.. >> were you aware of assurances. -- were you aware of assurances? >> there was a lot of he told--- >> he said the administration was aware of the discussion. we were being apprised regularly of the progress being made. let me move to the end of the story here. how much money has bank of america received less mark >> $45 billion. >> what is your cash position
today? you all said this is a good deal. what is your cash position today? >> it is in excess of $150 billion. >> have you pay back the tarp money. we made it clear that it was our goal to pay back as soon as possible. >> why the not pay it back was mark >> last week, the federal government issued series of -- >> have you asked the federal government to pay it back? >> -- >> what is preventing you? you have $150 billion in cash and you of the taxpayers $45 billion, why has it not been paid back? >> it takes a series of steps -- >> if you could, would you pay it back? >> if we could, yes. >> in your judgment, are there hindrances or obstacles the obama administration is putting in place preventing you from
paying it back? >> the question that the government, to make sure we can stabilize the economy, that was the intention. we have done a good job of doing at as have -- as have our colleagues who received the money. >> in your professional judgment, why the hindrances? why can't you get that money back to the federal government? >> we have to be assured that if we do it, the economy is in the kind of shape for a company like ours which supports the american -- >> would you agree that as of october, we ran the highest deficit in american history? the highest single deficit in bed -- in history. anything administration wants to get that money back in and help -- >> in the gentleman's time has expired. let me ask you to put your microphone closer. we have some senior citizens appear to have a hard time
hearing. i yield to the gentleman from maryland. >> thank you very much. i find your testimony very troubling. i don't know who you think we are, but i've got to tell you i find some of the things you have said not believable. first of all, the chairman asked you why the season attorney was fired nine days after he gave an opinion and he basically said he suddenly got into downsizing fever. it is that basically what you are saying? >> i said i was not personally involved in the decision. >> you replace him, didn't you? >> yes, i did. >> i remind you that you are under oath. why did they say was the reason
he was fired? >> they asked me to take a job as general counsel. i said i would take a job. >> you did not answer the question. were you told, you are replacing somebody and you had not practiced in years. you are replacing somebody who is a seasoned attorney who had just given an opinion that apparently mr. lewis or others did not like. you are walking into a job and you say what hap -- you did not say what happened to the last guy? >> that's absolutely logical question. >> what did you find out? did you ask the question and what did you know? >> i did not ask the question. >> you did not care? >> i cared for him as a person, obviously. but i met with the director and started my job. >> if you were advising a client size of bankamerica, what would you say to the management if they told you they wanted to fire their in-house counsel and replace him with a senior
business executives who, while an experienced attorney, had not practiced law in 10 years and was not a licensed at the time? would you advise them to make that move? >> the decision was made for me to be general counsel, i think was a wise move on behalf of the company and i'm competent to do it. >> that's very interesting. you had an opportunity to talk to our committee staff, did you not? >> yes, i did. >> you believe there was a case for a mac. at the time he talked to staff to be produced no evidence with regard to why you had that opinion. do you have any evidence to date? >> the evidence is that in the fourth quarter of 2008, merrill lynch lost $21 billion pre-tax, and it's not clear they could use the tax benefits. that was twice as much as they
ever made as a company and completely depleted capital by 50%. therefore, it was a material change in their circumstance. to earn money at the level there is a post was impaired by their capital going down. >> that was inconsistent with the law firm and what the attorney had said, right? was that in a consistent? in other words, you are a big law firm and you have a general counsel and then you come and annie had not practiced law in 10 years and you come along and say i think this is a good time and it's fine? i'm trying to figure out how did you get there? >> i relied on what tell-lived in. -- i relied -- watell-lipton and
hundreds of deals i had done as an attorney and business person. we were of the same opinion that this $21 billion in losses and this is a material change at merrill lynch. >> is that what was said? he says they are all in agreement, is that right? i did not have any conversations with them about the material average change clause. >> this is one of the people you are considering to take mr. lewis' plays. >> that's what i read in the newspaper. >> what you mean? >> we have tried very hard not to talk with us publicly. >> i'm trying to figure out if this is the guy we have got to face when we are trying to deal with bank of america, when we have $45 billion invested in a
company. i'm trying to figure out is this the face we're going to be facing? >> i am responding -- >> i'm not -- is he one of your top 10 candidates? >> he's a very talented executive at bank of america. >> thank you very much, mr. chairman. >> i now yield to the gentleman from missouri. >> thank you, mr. chairman. i would like to follow along this line of questioning. in our documents year, it indicates that you informed mr. price bank of america did not have a basis for invoking the mac. >> in order for there to be a material adverse change, there had to be an event that occurred with a disproportionate impact on merrill lynch in contrast to other companies, including bank of america. as i discussed with mr. price, the stock price at bank of america have declined almost as much as merrill lynch's.
bank of america had raised substantial capital and cut its dividend. its earnings had been reduced and both companies had suffered significant downturns in their prospects in the time since the merger was announced. >> was the information you had, did you not have the information he had with regards to the $21 billion loss at the time you made your opinion? >> that is correct. i did not have the information. >> if you had done that, what would your advice had been? >> although i do not have all the of ration the company had that time, my view would have been invoking material adverse change clause would be a dangerous and risky prospect. but i did not have the information or study that question. >> so what you're saying is you would have gone along with saying it would have been a viable way to invoke it?
>> i am not saying that. i think it would be a very difficult decision to invoke the material average change clause. i would have suggested that the company said down with merrill lynch and try to renegotiate price. but that did not work, i don't know that i would have threatened to invoke the material average change clause. >> do you believe the reason that it was eventually used as a bargaining chip in your judgment to extract a better price from the government? >> i do not know what it used -- what it was used for. i was never privy to any of the discussions. i was gone. >> along this line, there is the threat to fire mr. lewis as well as the entire board. can any of you tell the
circumstances under which they had the authority to do that and to extend they believed their role as the board that could do -- that you are doing something wrong they could fire you for? >> the discussion about that is reflective of the various serious circumstances we faced in december of 2008. the economy was in total disarray. but they're going to fire you for the economy? >> the economy is in disarray, the regulators are serious about us thinking of the pros and cons and using our judgment for what we would do as a company. i always took that as a view of how serious the situation and how serious they wanted to think about it. we wanted to prepared to exercise the back in respect of the vote would happen. -- exercise the mac. >> that answer does not fly with me. you cannot tell me that bank of america, the entire economy will go down until replaced the
chairman of westmark you expect me to believe that? >> we feel that if we had to be removed, of the government said we had to be removed -- >> they were extorting your decision to go along and except merrill lynch as a business partner? >> what i said was we did not let that factor into our decision of what's best for our shareholders. but if i may respond, we heard on december 22nd, the ceo reporting to the board that the government, secretary paulson, had made it clear that the government felt very strongly that this transaction should continue. it was in the best interest of the american financial system as well as bank of america. we also heard the comment that if it does not happen, there's a risk to members of the board and management keeping their jobs. i can assure you, sir, as much as i care about the american financial system, our job is
representing shareholders. that did not one iota factor into the decision that i, and i believe my cohorts made in proceeding with the transaction. to do so would be just directly the summary our fiduciary duty and -- directly does honoring our fiduciary duty. >> one more question -- you testified that they lost $21 billion. can you come in with the problems were and why they lost the money and have the problems been rectified now that bank of america owns the company? >> the problems were due to the markdowns of securities and other things going on in december 2008 as the markets continued to deteriorate. they were rectified because merrill lynch makes money, but the context, merrill lynch being owned by bank of america with a stable capital base, is now able to produce the kinds of money and do the kinds of things which
for our customers is strong. in december 2008 -- >> are they still involved in the sale of derivatives activities that cause these kinds of problems? >> they continue to trade with the clients. a lot of these legacy things you hear about are not being renewed as we speak. it is a more straightforward, clear, and less risky platform a stand-alone company of what bank of america has. >> the gentleman's time has expired. i yield five months -- five minutes to the gentleman from massachusetts. >> at what point in time did you become aware the attorney was being relieved of his duties and the other man was assuming the role? >> [inaudible]
>> that was a day before he was unceremoniously fired. tell us what was discussed and you learn he is being fired. >> i and the rest of the board was informed at the end of that december 9th board meeting. -- rest of the board was informed at the end of that december 9th meeting. a number of board members within a couple of minutes expressed regret because as i said earlier, he is one of the most talented executives i've ever worked with. we express that to the chief executive officer. at that point, i and a bunch of others got back on a plane and went back to boston. i knew nothing about tim, i only
knew that brian was leaving the company. when i returned to boston, i got an e-mail, as did all members of the board from the chief executive officer informing him that brian was staying in bank of america and becoming general counsel. half >> were you privy to that same set of facts? >> yes, i was. that day at the board meeting, we found out brian was leaving the company. i did express to ken lewis, i indicated his versatility and we have had him in almost every aspect of the business, with a wealth management, investment- banking, or legal. we were happy to hear he had found a solution. you have to recall this is a time when a merger was going on and we don't usually use the word fired during mergers, but
positions are eliminated. you have to treasuries, two controllers, two presidents, things were being eliminated and -- >> you don't think all this happened in the context of a merger and you're shoveling positions around? at that critical moment, instead of waiting for the transaction to be completed, he will shake out any one while it's going on? >> this was absolutely happening. he was leading the bank american investment bank. the merger with merrill lynch not eliminated his position, but someone else was chosen to lead the investment bank. brian was asked to go to the credit-card business in wilmington. that was a job he turned down. so, yes, sir, you is the victim of a merger synergy. >> how long did he hold the job of general counsel after he decided he had to have the job?
>> a couple of months. >> 44 days? >> something like that. >> so it doesn't strike you as in congress that you give him a job for 44 days and then you shuffle them to another job? >> that is the fragility of the organization going through a transition period that is fallout. there are people left merrill lynch who left the combined company and we were fortunate to have brian to put them into some of these polls. >> were you not told to be general counsel of the merged -- of the merged entity's? >> yes. >> did you believe them? >> yes. >> the you tell him he is going to be general counsel of the combined units? >> yes. >> why did you like to him? >> at that time he was one of four or five different people i had working with me and he was the general counsel. >> and you believe he was capable of doing the job? >> absolutely. >> so why was a man who was
capable of doing the job got bounced out in the fact he did? why did he get fired? >> i know this is difficult, but in the business world, this happens. what i joined to rent wealth management, the person who left that job -- the person who had that job left that day. a decision was made to eliminate 10% of senior executives. one of the outcome was the change between tim and i. it's not great for people, and i know it's hard to understand if you are and outside business, but in these tough times, that's what happens. >> so in just a few days' time, he said that the mac was not an option? >> it had nothing to do it. >> my time is up. >> i yield 5 minutes to the gentleman from louisiana. >> thank you. this is my question to the members of the board -- i have
heard your statement saying how good the acquisition of merrill lynch is to bank of america. my question is if i were to ask you to compare bankamerica now without the purchase of merrill lynch with the bank of america with the purchase of merrill lynch, which of the two would be a stronger institution today? >> from the customer standpoint, there's the dow we are a stronger institute today with the products in the u.s. and around the world to serve customers, whether an individual, a small business, large business, an investor across the world, the capabilities we have across the world are better than the one had before we came here. >> do you have for example any kind of profit studies with respect to bank of america without merrill lynch and bank of america with merrill lynch? >> the eggs are scrambled at
this point in terms of decisions we have made. it's hard to separate it. the legacy banking program would have been five or six in some businesses and two or three in others. we have received the second highest amount of investment banking fees every quarter this year. the second is j.p. morgan and head of every other banking firm you can name. the combination together is more than bank of america had in that business. i conducted every one of the businesses, whether it's the financial advisers, sales trading, investment banking, all of it is true. it happens in every business. we are better now today than we were as two separate companies. >> knowing that a company would face a loss of billions of dollars, the $45 billion in tarp money, is that one of the
reasons bank of america purchased merrill lynch? >> in respect of the transaction, it would have been 25 it had 20 in connection to help the losses merrill lynch had in the fourth quarter of 2008 and the latter half of that year. i think the investment helps stabilize the economy, the financial system. if merrill lynch would have failed, it would have been a complete surprise and wreak damage on the entire system and hurt our company just because we are a participant in the markets. >> was it part of the $45 billion? >> the $20 billion relates to the merrill lynch transaction. the other part doesn't relate to anything done before the transaction closed. >> did i hear correctly that you are one of the potential candidates to replace mr. ken
lewis. >> that's probably not a question for him. >> that would be a question for you. >> we're trying and it's very difficult with the visibility of bank of america to keep this election process confidential. i think for obvious reasons. it's very difficult for us when present candidates appear in the press. it makes it different -- it makes it difficult for their current job. >> what i'm -- what i am trying to say is we're not disclosing publicly those we are considering. >> based on what i have heard so far, you say he's not doing a very good job? >> i hope i did not imply that. >> if he is doing a good job, by which one to replace him? >> mr. lewis announced two
months ago he wanted to retire this year. that is what prompted this search. >> just following up on the, the question earlier, you have $100 billion and more in the bank. if it were not for the regulatory rules of how much capital you have, would you in the ordinary course of business payback the $45 billion. i will give this caveat -- if you could get back tomorrow, would you pay a back today? is the only reason you are not paying it back is that if you are paying it back it cannot come back out again? >> i don't think i meant to say that. >> i want to get it straight. you've got the money, he would happily pay the government is you were later deemed to need it and it was a line of credit, you would pay it back. the only reason you are not paying it back as the government
has put hurdles in a way to prove you can not only payback but pass the stress test, isn't that right? >> our goal is to pay this back and return the money. >> i appreciate that, but mr. jordan did not get the answer from what i have asked. you have the money in the ordinary course, if it were just another creditor, you would pay it back. there are regulatory questions the government has put up and there are questions about capital provisions, but notwithstanding that, you are not putting that money to use today. you are not loaning them money out. if there were not hurdles to cross, you would pay back, correct? >> you are talking about a 2.3 trillion dollar balance sheet. yes but our cash balance was and i told you. this money is fungible and so provides our ability to lend. >> is a balance sheet question, but for the board, you would pay
this money back in the ordinary course -- >> we have said publicly we would like to pay back tarp. >> i yield five minutes to the gentlewoman from california. >> i want to direct this question to mr. moynihan. after mr. lewis spoke to the fed, the fed chairman expressed skepticism about the truthfulness of bankamerica's claim stating in an e-mail that he thought threat to use the mac as a bargaining chip and we do not see it as a very likely scenario. was it the mack used as a bargaining chip to get more
federal assistance or a lower purchase price? >> this was a determinative the agreement. $21 billion lost in the fourth quarter constituted a valid claim for a mac. what became clear was we had a very difficult situation and very difficult times that reasonable people tried to figure out a solution unnecessarily it did not result in litigation. in the aftermath, having a company that could have failed and we would have had to litigate against. it was those judgments that what is to take the course of action we did which we believed was in the best interest of not only shareholders, but the economy. that is how it came down. we had the right to exercise it, but the context of where we end up with a discussion of what is the best course for our company.
>> before the issue of the mac arose, and bank of america engaged in discussions with representatives of the federal government about receiving governmenttarp funds? >> not that i'm aware of. >> have not attended to invoke a mac and would bank of america have receive the additional $20 billion in funds announced on january 16th? >> i do not know. >> in your testimony, you stated you had a number of tests -- a number of tough decisions and questions about the transaction at this start -- at the start. could you talk about problems you saw with the merger? >> yes. overwhelmingly, my issues in
september had to do with timing. we were at a time when the next day lehman brothers failed, the day after that, there was an aig bailout, and within two weeks, washington mutual failed and what cobia was taken over by wells fargo. -- wachovia failed and was taken over by wells fargo. i was just in a very sensitized state, so it was much more along those lines that was merrill lynch itself. merrill lynch, for a long time, we do it was a terrific addition to bank of america. as a set of my testimony, i believe it and believe -- i believe the and believe it was a
terrific strategic conversation. in january and february, the markets became much worse than expected. that's my background. >> were shareholders given adequate information about merrill lynch's economic condition and compensation practice prior to the vote to approve the merger? >> as a board member, i fell -- i had felt and do feel management, and it is a management issue, to determine working within -- working with inside and outside lawyers, what is to be disclosed. there is nothing in my mind we were holding back information that we should. i can assure you if i or any member of the board felt that way, which we did not, we would have raised the issue. >> the thing shareholders would ultimately benefit from the merger? >> i do, indeed.
year-to-date, this year, which has started out hard, it has been agreed to our earnings. -- it has been accretive to our earnings. >> as general counsel, you did not report directly to the ceo, but your successor did? >> that is correct. >> to him did you report as general counsel? >> at the beginning, i reported to the vice chairman and cfo, then i reported to the chief risk officer and finally i reported to mr. moynihan. >> the thing that would affect the general counsel position? >> i think it can affect the general counsel position. >> thank you. >> the gentlewoman's time has expired. i now yield five minutes to the gentleman from utah.
>> thank you for being here. my questions are directed at mr. gifford. did you at any time feel pressure from the federal government to complete this transaction? >> is hard to quibble with words. i felt, getting it from the ceo, that the government was very desirous of us completing the transaction. >> then you also said, if i heard you earlier in your testimony -- in a perfect world, it would have been better to walk away. what was the pressure that was creating this imperfect world that led you to come to this conclusion? >> we had a contract to buy merrill lynch. >> but you could have stepped out of it. >> a material adverse change clause is not straightforward. there have been few material adverse change clauses -- i'm not a lawyer --
>> neither am i. that is a credit to both of us. >> it has been in delaware court. >> was the government applying pressure on your decision whether or not to move forward? >> for me, the key decision was not the government threatening board seats, because of that were the key, i would not be doing my fiduciary duty. the key was the uncertainty of the mac, to walk away and say we're not going to close. to walk away with a lose-lose for bankamerica shareholders. >> my apologies for cutting you off, but if we could pull up a slide #7, my understanding is this is an e-mail from wednesday, january 21st. can you go through this is to? i would like to have these people are in their relationship you had what to do professionally.
>> this is an e-mail dated january 21st. it is addressed to my four children. it has a copy to my wife. >> can you tell me what your children do professionally and they do anything politically? >> i can. one is a stay at home mother. my son, charlie, works at a private equity operation. my other son works here in washington as a finance director of the democratic national committee, my daughter works for the pro bono area of the law firm in boston. my wife takes care of me. >> in this e-mail that you sent out, i'm going to midway through the first page. you are talking about merrill lynch -- this is a bad mistake. this was a bad mistake and their
assets became much worse than expected when presented in september. when the deal was announced, we were $31 or $32 a share and then boom. this was a bad decision. when we realized same, the government pressured us to stick with it. that is when they agreed to give us more capital and guarantee some of their bad assets. that seems to be a direct contradiction to what he said time and again in this committee that it was important to them, but here you are clearly, directly saying it was a bad decision and that mistake. who are you lying to? which is accurate and which is inaccurate? >> what i have said is -- i voted for it in september, that's a fact. i based it, notwithstanding worries it was a good strategic decision, what happened since then, as we all know, the markets went slowly --
i realize you have five minutes -- it got so bad in december that we tried to figure out a way to exit the transaction. it was within that context that the fact we eliminated our dividend and merrill lynch lost $21 billion. in this time, when the day was darkest, and i'm expressing to my children what is going on with the security of bank of america, that's when it was. >> i'm just confused by the inconsistency of the way you characterized the decision. what was at the time, seemingly private to your wife and children, you say it is a bad decision and bad mistake. essentially we should not have done it. publicly, you are putting a good face on it. but me go to the end of this paragraph at this e-mail -- what do i worry about?
a serious 12% unemployment number that is prolonged for release stupid politicians or extended panic in markets. i do not think that will happen. there is some stuff i'm not saying as far as the management decisions. we will do that in person. in the meantime, i'm sleeping fine and so should you. what is it that you told them in person that you have not disclosed today about the management decisions that would be pertinent to this decision? >> i have no idea what i told them in person. absolutely no idea. i was wrong about stupid politicians. >> that is the one thing i would agree with you on. [laughter] that was the sense of credibility as saw in these documents. [laughter] >> of the gentleman's time has expired. i now yield to the gentleman from massachusetts. five minutes.
>> thank you, mr. chairman. i want to thank the witnesses for coming before the committee and helping us with our work. as same matter of disclosure, when jones was formerly active in my district and another was -- i am familiar with a few of them. the bank of boston college's as a matter for disclosure, was supporter of mine when i was back in the state senate. so that out of the way. i want to ask, i am a little confused on some dates year. the time line that i have, and it has been provided by the committee, indicates you were fired on december 10th, 2008. is that right? >> that's correct. >> four days later, december 14th, ken lewis learned of the
law said merrill lynch. your testimony indicates you advised on the fact the $12 billion may or may not have been a material adverse change. my time line indicates that would be impossible because you were fired before the events giving rise to mac. i'm not questioning your veracity, i'm just trying to get the facts straight. >> sure. on december 1st, i advised mr. price that i did not believe there was a material adverse change based on the information i knew as of that time. i was not informed at that time there was a loss at merrill lynch of $12 billion. at that time, i understood it was an after-tax projected loss of about $5 billion. >> that is true.
bankamerica shareholders were provided with information that there was a forecast at the time of the approval of the sale of about $9 billion and then later on, there was an additional disclosure when the $12 billion loss was learned about. your testimony is consistent with that, i was just curious -- we have been looking at this undisclosed additional -- undisclosed $12 billion as being the mac and the subject of your letter and that is not necessarily the case. in his testimony, ken lewis indicated in his conversation with secretary paulson, he promised to fill the hole the
recent losses of $12 billion were caused after the losses were disclosed. he went back to the board, at least a couple of witnesses may have been on the board at the time, i'm not sure. subsequently, bank of america received $10 billion americatarp in its connection with the purchase of merrill lynch on top of the $15 billion it says it did not ask for. that is also supported by testimony raised by the ranking member and mr. jordan that you will get additional investment. that was a statement he recounted. tell me about that. were you in the boardroom at the time when ken lewis said he
would fill the hole with taxpayer money? >> we had just found out about the expanding losses, the accelerating losses. we did talk first about the mac , and i was very much in favor of pursuing that route because of the effects on capitol mr. moynihan mentioned earlier. then we talked about the other issues, which for the government's desire to have this go forward. the fact that financial help could be available to us of that would plug the hole. so, yes, we were in those discussions and that continued for some time throughout the month of december and into january. >> thank you. mr. gifford, were you there? is that pretty much -- >> is, indeed. >> -- it is, indeed.
>> those two elements were negotiated between the company and the fed and openly was the path we took instead of trying to pursue an mou. >> was there any discussion in that board meeting or thereafter about the advisability of informing shareholders events that cause you to consider an adverse change, and then on the other side of the scale, no one is talking to the shareholders. i understand they had been bison were some losses at merrill, but here you were talking about something on a different magnitude. i miss wondering if there were discussions about whether the shareholders should be informed. >> i think we generally understood the rules of the sec
with regard to quality reporting and special events reporting. we were not able -- if we disclose something that did not happen, we could have misled them in the wrong way. typically what you disclosed is the transaction that you have, and we ultimately were able to get that term sheet signed around january 16. that is when we disclosed it. >> did the bank of america pressure it special outside counsel to make a case that the firm did not believe in on the mac? >> this is what they do in life, and we rely on them as outside
counsel. i believe there were given the facts, losses we found out about that had moved to $14 billion and ultimately $21 billion. they came to the same judgment and i suggest that they believed we had a valid right to claim on the mac costs. i think the bias that people look at is, these are difficult cases -- the advice that people look at. the reality was that they were consistent in their advice. >> so the council you are specifically on this issue was not unduly pressured to come up with this answer? >> i had no knowledge of that. >> to your knowledge, did anyone in this committee actually interview this outside counsel that was advising you on the mac?
>> i was told they talked to some of the staff on the committee. i am not positive, but i was told that. >> as far as we know, not specifically about the mac advice. >> i do not know. >> for the record, as far as i know, we have not specifically -- there has been a claim made that they were unduly influenced, and they basically were being pressured by you, or by the company, to come up with the justification, when in fact as far as i know, we have not sat down and got the testimony directly or allow them to come
here to explain their position. doesn't it single interesting that here you had a special counsel directly advising that there is a question about what pressure was put on them, that they are not testifying before us today? >> i would have to leave that you. i have no knowledge -- it has been nothing but clear that we have a claim for mac. >> i appreciate all of you being here today. i just think when we leave out some money as critical as special counsel, there is an issue here. i would really like to raise the issue again that the special counsel on something this important should be considered. mr. gifford, i understand your concerns. the testimony we heard from paulson here in this committee was, it was not specifically either you do this or we will fire, but there was a statement here that said if you do not do this and it does not work out, there will be held to be paid. i think in the jargon of grown
individuals, that pretty well indicates that this was expected -- the mac was a very important issue to the government and they did not want you to execute that mac. is that a fair observation? is that testimony consistent with what you observed? >> it is, sir. >> mr. chairman, i just think a lot of times nuance and words do matter, and someone told me congressman, if you do not do this and you get in trouble, there is going to be held to be paid behell to be paid. i would expect any staff information i need to be a persuasive statement if not downright threat. i yield to the ranking member.
>> in light of your personal family email that has now come to like, if we ask a question that is a little bit jiggled different, the government reject a little bit different. when we ask you did you feel pressured, that is always the ambiguous word. but was the government' clearly pressuring you, that is what you said in your own e-mail. do you stand by your e-mail as truthful? >> i believe the government -- i am sorry, sir, i have got to use words. >> do you stand by your e-mail is truthful? >> i wrote an e-mail to my children trying to explain the circumstances in the largest financial holding we have. words in a private e-mail to your children, and i did not
proofread it, to be honest. >> this committee is giving you an opportunity to say that upon reflection you do not agree with e-mail you sent, or to stand by it as truthful, and in fact the government was pressuring. >> i think is fair to say as i reflected that the government pushed as hard to do this deal. if that is interpreted as pressure, sir, then i would interpret that as pressure. >> the gentleman's time is expired. the chair recognizes ms. norton from the district of columbia. >> thank you, mr. chairman. mr. gifford, you used what for me in all these proceedings is a seldom used word fiduciary.
i am interested in the role of the board here, yet generally, in newspapers and general discussions, the board has been given to local attention. would you agree in general the board is where the buck stops? >> i think the board is the ultimate decider of a corporation. i am fascinated by the role of the board. i served on the role of fortune 500 companies before coming to congress, and trying to put myself in your position, given the crisis context in which operating. could i ask each of you how long were you on the board here? >> i joined the bank of america board in 2004. >> i did also, at the same time.
>> you understood the business, you were experienced board members. could i ask you, prior to his termination, what was your opinion of the job he had done as general counsel? >> i thought he did a fine job as general counsel. >> i would concur. >> how did you learn of his termination? >> as we testified earlier, congressman, in an e-mail from the chief executive officer on the afternoon of december -- >> so there was no discussion about terminating the general counsel whose reputation which he was solid, no discussion with the board about his termination,
but an e-mail informing you of his termination? >> that is correct. >> in light of the fact that you had seen no issue or problem with his work, did ask for an explanation as board members, given the context of a deal going forward is that time? >> i believe as i said earlier we had a context, we had shifting sands at the time because of the merrill merger, and there's this location of many executives. it was not an issue about performance. >> i heard that explanation, and i can understand that if there is a merger, you do not need to of everything -- you do not need two of everything. in the middle of december, there is a deal influx in the middle
of a crisis in the united states and a crisis in your company, don't you think you could have made that change in the usual order of business, rather than in the middle -- were you making other such changes in the middle of the deal? >> it was a chief executive officer making a decision on who he wanted on his team, and he was concerned about losing mr. moynihan at the time, as we said earlier. >> mr. moynihan, who was not even in that position, but had a position in the company. >> he was at a higher position in the company. >> had he threatened to leave? >> we had been notified that afternoon that he was leaving the company, yes. >> so you believe it was important to change general counsel lawyer in the midst of this deal because you might otherwise lose mr. moynihan, you
did not keep for very long? >> this was mr. lewis's decision. >> i am asking as board members with a fiduciary responsibility to the shareholders, as board members, you yourself say the buck stops here. whether you inquired in detail as to this huge change in the middle of the deal, or whether you just simply accepted it as somebody else's decision. >> i supported the decision. pres>> based on what facts? >> based on the fact that mr. lewis was choosing to get the team, putting the team together, and he felt the best qualified people for his management team -- a >> on reflection, if you are doing such a complicated deal in the middle of an economic crisis in our country, not only the deal within your company, would not have been prudent to await
the completion of the deal one way or the other before shifting chairs on top of the titanic? >> again, the actual transactions involved literally dozens of our executives. mr. moynihan was more involved in the transaction of merrill and putting it together and all the risk associated with that business platform. he was a more critical member of our management team at the time. >> the chair recognizes the gentle lady from california. >> mr. moynihan, you highlight the success of the merger, but can you tell us about the
initial rationale for consummating the deal with merrill lynch? did it change whe, and why did bankamerica consider pulling out of the deal? was it about leveraging the merrill lynch losses to renegotiate the purchase price? >> you have to separate from an operating perspective the logic that led us to acquire merrill lynch was about the brokerage firm capabilities it gave us. those are the same facts that there today, that we are are in those businesses in the country, and those around the world. what we face late in 2008, from an earnings and capital perspective, the situation
changed dramatically in the market. when the losses became clear, there was a different set of decisions. that gave rise to the assertion of the claim for the mac. >> let me go back to the fact that you focus so much on bank of america's response to consumer needs. the real purpose of this hearing is about the circumstances in which your bank received an additional $20 billion in hard- earned taxpayer dollars. can you give specifics on how this additional $20 billion has been disseminated and utilize? is any of this money going to this year's executive bonuses? >> the money that was received as part of the merrill lynch transaction, which is the taxpayer money, was meant to
provide the capital that merrill lynch lost in the fourth quarter and to stabilize that platform so it could be acquired. it sits there today as capital in our company. it allows us to provide business and consumer loans, as i stated earlier, so is put to good use. it is used to make loans, to provide incentives to business and governments in these tough economic times. it is not used to pay bonuses. >> will it at any time in the future? >> we all agree that the idea is we will pay the tarp money back as soon as we can, and it will not be used to pay bonuses. >> it is my understanding that when you were offered the general counsel position by ken lewis, you had not practiced law in over a decade. what do you think this eeo gaby this position, and why we asked to report to him directly with the council's before and after you were not required report
directly to the ceo? >> i had been reporting to mr. lewis ever since i came into the company, so i think the reporting relationship remained that i had. it was not a change from our reporting relationship. mr. lewis asked me to be general counsel in the context of the merrill lynch merger. i accepted the position because this is what the company needed me to do. >> mr. gifford, we discussed your concerns about the merger with merrill lynch. if you raise any objections about this with your colleagues on the board? >> yes, i did. i might add, it really was asking questions of the board
and other directors also raised questions about certain events and the timing and so forth. >> i yield back. >> the chair recognizes the gentle lady from ohio. >> let me just take that as a citizen of our country and representative from ohio, the important question to me is for the future, what quality should the banking system of america restored to regain confidence in our marketplace again and a banking system that a sound? this is the thought that keeps running through my mind, what about the future? the total tarp money that went into bank of america is over $45 billion, as best i can tell. mr. gifford, you are one of the largest shareholders and bank of america, is that true? >> i wish i were.
for my family, i am a large shareholder, but hardly one of the largest. but to is the largest shareholder in bank of america? >> it would be a series of institutional shareholders, like barkleys global investors. fidelity, wellington, a whole series of people like that. >> can you provide that for the record, the top-10? >> if we are allowed to do it under the law, we would be happy to. >> how did you become a board member for the bank of america? >> i became a board member when fleet boston financial, of which i was chairman and ceo, was purchased by bankamerica. at that time, i became chairman of bank of america and since have stayed on the board. >> was that a normal bank or a
private equity fund? >> i like to thank it was a -- think was a normal and good bank. >> did you do subprime loans of that bank? >> not to the best of my knowledge. >> according to the charlotte observer this month, there is a story that is rather critical of your presence on the board, stating that you may well be the highest-paid executive associated with the board, other than mr. lewis. it states in the article that just for your airplane flights, the bank of america spent $947,000 on those flights on private jets, and another $281,000 to help you pay the company taxes on those. become -- the story goes on to state that does not include the bank a new more than 220 up
thousand dollars in office and administrative support -- $225,000. it does not go into stock and benefits that accrue to your present position. would you agree that you are by far the most highly compensated member of the board? >> i believe i am, as a result of my retirement agreement from fleet five years ago. that was a contract that was agreed to buy years ago as part of my retirement for the corporation, retiring early and so forth. it is not part directly of my compensation as a board member. my compensation as a board member, excluding more term agreement, it is the same as every other board member. >> i looked at a poll yesterday talking about what the american people think of the country and the direction we are headed. they look at all these bills that passed congress, and they
are very angry because they feel that the bills that have been passed up here such as the tarp have benefited -- two-thirds of the people think they have benefited the banks and the executives. 10% of the people think anything we have done to date has really helped them. you are a value setter in industry. what people think is pretty important in terms of confidence in our financial system. the people are very angry, and i would just urge you to think about what you can do institutionally to reshape the value set that is operating inside these institutions. something is fundamentally wrong. nobody is against the moneymaking money, but when most of the public's incomes are going down and people are making
extraordinary salaries and benefits, particularly when the public is supporting these institutions on life-support, we have to behave differently. >> i can appreciate the difficulty of that. >> the time of your termination was very curious. can i ask a question in the way the institution used to work for functions? why would the chief risk officer with a person tasked to terminate you? what kind of an organization -- review the top lawyer? -- were you the top lawyer? why would you go to a results, and if she still with the company? >> as i am understand, she is no
longer with the company, and i do not know why she was sent to fire me. she reported to mr. lewis. >> the gentleman from virginia. >> mr. gifford, thank you all for being here today. mr. gifford, when did you first learn that there was a significant hole at merrill lynch. >> we first learned at the december 9 board meeting that the loss had increased to $9 million, i am sorry, $9 billion. >> was that information revealed to shareholders? >> i do not believe at that time. >> is there reason for that? >> in circumstances like that, we on the board relied on management dealing with lawyers,
as you can appreciate. it is complex with sec loss and so forth as to what should and should not be sent out to our shareholders. >> did you it buys mr. lewis or anybody in senior management that may be that piece of management -- piece of information needed to be disclosed to shareholders? >> i also learned on december 9 that the projected loss had grown to $9 billion. i sought to talk to mr. price, the cfo, after that meeting. he was not available, and i decided i would talk with him the next day. that day i got fired. >> you first learn that the loss was about $9 billion at the same time? when did you first have a conversation with mr. lewis or other senior officers of the corporation about possibly invoking the mac? >> the only conversation i ever
had about invoking the mac was on december 1. >> why would they be talking about invoking the mac on december 1 if the information about the extent of losses at merrill lynch was available only eight days later? >> mr. preston not tell me why he was asking. he just asked me to review with him the terms of the clause and how it would be interpreted. >> in retrospect, would reasonable person perhaps deduce that the reason he instigated the conversation was because he was in possession of the extent of the losses long before december 9? >> i do not know what mr. price knew at that time. >> do you know when mr. lewis had conversations with mr. paulson about invoking the mac?
>> no, i do not. >> are you aware that documents have invited to this committee that there were several conversations, one of which took place when mr. paulson was on his treadmill press mark >> no, congressman, i am not aware of that. >> when you asked about the map, what was your legal opinion about the validity of invoking the mac by bank of america? >> my opinion and my advice that time was that i did not see a basis to invoke the mac. >> why not? >> because there had not been a disproportionate impact on merrill lynch. >> please move the microphone close to your mouth, because i cannot hear you. why did you have a different legal opinion about that? >> i think there is some confusion about the timing from when tim was general counsel to when i became general counsel.
when i came in on december 4315, i became aware that the losses had been increased. faced with the $18 billion pretax, which went to $21 billion, basically have the capital of merrill lynch, twice the amount it ever earned in the past year, that is the question of the mac that i had to address. it was in the week that began december 15. >> you are saying the difference between you and your predecessor as general counsel was the extent of the loss. >> the losses had gotten much more dramatically different. that has been the testimony you have heard. >> in your opinion, wouldn't and
$9 billion call for invoking the map? that is a pretty significant loss. >> when i came in, the loss was $18 billion. >> but you were certainly reviewing the opinion of your predecessor, were you not? do you disagree with his judgment? >> the facts were different. >> i am asking you the different question. did you disagree with your predecessor in his judgment about the extent of the laws and whether it qualified for the mac at the time of his opinion to senior management could marks i did not reflect on his opinion. >> you had no reflection whatsoever? you only looked at the losses you started with when he became general counsel. >> that was the situation we faced with the $18 billion pretax losses. >> i find that extraordinary. >> what you think regard?
>> congresswoman, i do not know why i was fired. >> you must have an opinion. why do you think you were fired? cracks in the end, i do not know why. i was not the decisionmaker. i do not know what decisions went into it. >> you think it was because you offered the opinion that the mac could not be exercised effectively? >> i do not know. >> mr. moynihan, you indicated you were about to leave the company, based on testimony we heard from mr. may. what was your conversation with mr. lewis? >> about what, about leaving the company? mr. lewis had asked me to take a job to run the credit-card business, which would have required a change in location. having gone through this with predecessor companies, i personally could not do it. it was my decision that because i personally could not do it, i
made a decision about my potential future with the company. i know that may sound different to people outside a large business like ours, but when you make a decision, you know the ramifications of that decision. >> so at that point you said -- he said wait a minute, we will make a general counsel? >> his statement was, i understand your decision, and that was basically the discussion. >> in hindsight now, you would reflect on the decision to buy merrill and probably suggest it was a good decision, is that true? >> as i said, the operating business that we have between merrill lynch and bank of america, by putting these two companies together, is a business that is very good for our customers. >> so you made money in the first quarter, is that true? >> yes.
>> and in the second quarter? >> yes. x and in the third quarter? >> we did not make money in the third quarter. >> the taxpayers of this country have now given bank of america about $45 billion, correct? >> that is correct. >> so we have almost paid for merrill to times over. >> the tarp investments in bank of america had three different pieces. >> i understand that. i am talking in total. in total you receive $45 billion from the taxpayers of this country. merrill was purchased for about $20,000,000,000.20 of the last three-quarters you have actually seen profits.
>> that is correct. >> the taxpayers have seen the interest rates on their credit cards jumped to 29% in many cases. many of your clients now are paying 29% interest on credit cards. you were in charge of the credit-card division, so you are familiar with that, correct? >> the credit card is not the majority of our clients. we pull back on the pricing and stopped all the pricing for risk in advance of the credit card act, which none of our peers have done. >> you have reduced the interest rate or charging? >> the pricing you are talking about is when people had delinquencies or repricing cards based on risk in the portfolio. we have not done that, as the card act would not allow us to do that. we stopped that early this fall. >> what is the interest rate that most credit card holders are paying? >> i would have to get back to you. >> are the paying as much as
29%? >> there could be a card holder who could be paying that much. >> are they paying 35%? >> i do not know what the cap is. i am not the head of the credit- card division, but i would be happy to get back to you with all the impression about that and give you the details. >> my point in pursuing this line of questioning is that there has got to be something in it for the taxpayers. right now, the taxpayers -- i do not want to focus on executive compensation. i want to focus on what can we do for the taxpayers. my suggestion to you and to any bank that has received tarp funds is that during the time in which you have tarp funding and federal support and taxpayer support, you should reduce the interest rate your charging the taxpayers of this country to
something close to 12%, 14%, 16%, but show some goodwill to the people that are picking up the tab. my time has expired. >> my questions are for mr. may and mr. gifford. in your testimony, you state that this acquisition is already bearing fruit. however, it seems that these results have come at the expense of the taxpayers and shareholders who are not fully aware of merrill's losses. the feel that this deal was fair to both shareholders and american taxpayers? in other words, do you believe that the ends justify the means? >> the answer is yes, i do.
in terms of the bank of america and shareholders, we believe this is a good transaction for shareholders. there was a time in december and january when it looked very dicey, but it is accretive today. we are building an incredible platform for our customers. as it relates to the taxpayers of this country, as i said earlier, in response to a question from the ranking member, the board of this bank is determined to pay back the tax payers in full with very significant dividend payments. the timing is exact, but we are very determined to do that. by putting these two companies together, you make for a much stronger company who has the ability to repay the taxpayers in full, which we are determined
to do. >> mr. may, was it a seamless merger? >> no, it was not. as the analogy has been discussed earlier, this marriage has had its ups and downs. we thought in september that it had great potential. inset predict in december when the losses were piling up, we had concerns about its ability to execute, with the addition of the turkish capital, things have improved. as a result, i do feel very good about the results -- the addition of the tarp capital. >> how much does bank of america plan to pay out in bonuses and similar awards this year? >> there has been no decision. the year has not been completed yet, and that will be based on the performance of the company
in january or february when it is being looked at. >> looking forward, what is the projected time line for bankamerica to return federal bailout money? >> the board continues to review the issue. we are discussing it with the government. those discussions are very sensitive, but we hope it is sooner rather than later. that is all i can say at this time, sir. >> are you familiar with the process of liquidating the combined toxic assets of both bank of america and merrill lynch, and if so, could you give me some kind of schedule of how that will work? >> we have continued to work down the assets you would refer
to as toxic assets. they continue to be worked off the balance sheet over time. the team that works on that works every day to bring those balances down. they are lower now than they were last week and will be lower next week than they are this week. >> were you familiar with the circumstances surrounding the departure of mr. mayopolous? >> these are very difficult times in the economy, and we have been shaping our associates headcount down. it was in the context of changes in senior management that went on at the time that affected about 10% of our senior executives. >> i will yield five minsk's to
the gentleman from ohio, the chairman of the subcommittee -- i will yield five minutes. >> i want to thank you, mr. chairman, for holding these hearings. it has given us a rare window into the management suite of the largest bank in the country. what we've seen is the story of how bank of america as top executives allowed guess work to masquerade as expert knowledge, how numbers were pulled out of thin air. they guessed at numbers. they guessed wrong. they are wrong guess hurt shareholders and in all the taxpayers of the united states and created great consequences for markets, not only in this
country, but around the world. i don't think the bank of america scenario is unique, but the house of cards that was built through collateralized debt obligations, credit defaults swaps, the subprime mortgage fiasco, has ended up sparing our -- burying our constituents under debts they cannot pay, joblessness, foreclosure, and yet frankly, it would be wrong to put this on bank of america or to put it all on wall street. in our economic system, if we have a true system of checks and balances, we would see some
measure of discipline exacted on behalf of the people of the united states. this investigation has also raised questions about government oversight, about the agency's that are charged with protecting shareholders and protecting taxpayers. from what we have seen, it is not clear there has been any criminal conduct, but it is clear that there has been a lack of fidelity to shareholders and to taxpayers. i appreciate that mr. moynihan in his opening remarks talked about where we are in terms of the economy.
we need to start looking forward. we are really at the end of this discussion about who did what to whom, but we really need to look forward, with 15 million americans unemployed, with businesses failing all of this country. the report yesterday, 47 million americans are hungry. we really have to start looking forward. within the context of our economic system, this is going to be a matter of finding a way for business to do its part in creating more liquidity, for the banks to do your part to create more liquidity so businesses can survive, for the government to do its part. the president is having an economic summit in december.
we really have to find a way of looking for work, and i am hopeful that as this committee continues to its work, we understand the responsibility for the collapse is spread across the boards. where do we go from here? what do we do when people are worried about getting a job? they did not care who is going to provide the job, they just want a job. that is where we have to find a way to work together to create that. we are being judged on our performances, people are going to ask not whose side were you on, not whether you were on the side of wall street or on the side of the administration or the taxpayers. the question is going to be, what did you do to help protect and enhance the economic position of that average
american, the person who is struggling to hold on to their homes, their jobs, their investments, their health care. what did you do? our response in government and the private sector is going to determine whether or not we can have confidence in our system anymore. not unlike the questions that were posed in the 1930's. i am hopeful that on this side of the table and on that side that we will have the right answers. if we don't, this system is threatened at its core. >> i want to thank our witnesses for being here. it is not easy to come here and take the questions to get from the members of congress. this whole escapade just highlights why we should have never traveled down this road.
this unbelievable path we put the country on with this unprecedented government interference in the private sector, this judge shows why it is bad. but for the merrill merger, which was done at the prompting of a phone call from hank paulson, bank of america would have never needed the tarp money, under any conventional analysis. but the government says you are going to take the tarp money, then the government says you have to complete the deal with merrill lynch. then they basically prevent you from giving the money back, now that you are in a position to return to the taxpayers. the amazing thing to me, we have a federal government weczar telling private american citizens how much money they can make in the united states of america. think about where we are at because we started down this trail. mr. kucinich is right, we need
to make the right kind of policy decisions, but they need to be decisions where we scale back this unbelievable move by the federal government to get involved in the private sector. it is making matters worse. it big government spending and regulation would get us out of this mess, we would have been out a long time ago. it is wrong, and it needs to stop. i appreciate the chairman having these hearings, but these hearings highlight what is wrong with the path we chose to take. this is the move the bush administration and the obama administration have taken, and it is wrong. the american people see where this has taken us and see that it is wrong. they want us to turn and go the other direction. >> in closing, i want to ask
unanimous consent that a page from the report be included in the record. it is only fair. i want to thank you all for being here today. i want to thank the chairman for considering a document which shows that the only money that was given to bank of america was a $6.20 billion that merrill lynch bought, most of which it would not have gotten if we had not bailed out a ig, and the $800 million that bankamerica got directly. these were the credit defaults, essentially the guarantees. $7 billion is what you got that you should not have gotten, because aig should not have been bailed out at 100 cents on the dollar. you should have taken your hair cut their.
our hearings today have made it very clear that merrill lynch was not worth what you paid for it, had he been able to negotiate in december instead of in september. you would have been able to negotiate a much lower price. i think mr. gifford made that very clear that had you been able to do the deal with what you knew in december, you would have done it for a lower price. we have had a series of hearings starting with stan o'neill being brought appeared to try to explain why he got tens of millions of dollars while bankrupting merrill lynch, while the company was going the wrong way for a very long time. at the time, i was not sure those hearings were worthwhile. we were looking at public companies to pay large bonuses to their executives, when in fact, their stock was going down. those executives explain to us that those work rules from an earlier time.
now it seems interesting that we have the very man who set of the company for failure at merrill lynch in front of us, and we ½lever asked him, what about te brokers? what about the future of merrill lynch? what about the risks that are being taken in order to have any profits at all in the company, at least on paper? i wish we had an opportunity to know then what we know now. all we know now, we know you gentleman were pressured by the government, and depending on how we define pressure, we can put it a lot of different ways. it was very clear that ken lewis and attorney-general cuomo made the record reasonably clear that in fact, pressure was being applied. we also know that in the ordinary course of banking as we knew it before the meltdown, the $45 billion that is currently owed would be repaid, that in fact, our position of interest- bearing preferred stock would be
repaid, america would have been made completely whole by bank of america's investment, the stockholders of america would get a higher yield than ordinarily get on money that goes out from the government, far higher than the rate that t- bills pay on our debt. the arbitrage is positive, bank of america will pay back all the money that it borrowed during the bailout. having said that, the legacy of government intervention, and as mr. jordan said, one which he and i did not vote for, continues. long after you are eventually allowed to pay back the $45 billion, we will continue to have people in egypt and other countries where we have been telling them to privatize their banks for generation and telling them about how government does not create meaningful jobs and they need to have a vibrant
private sector. we will continue to have those countries ask us, did you really mean it when you set it, and what has changed? mr. chairman, i look forward to as continuing to look at the aig bail, where secretary geithner appears to have made a decision to pay for more in guarantees than the current market value, and the paper which was floating in some cases in the market had far less than 100 cents on the dollar went immediately to gains for those who held paper. mr. chairman, i hope that and the administration would like to have in to complete this hearing will come in due course. i think the gentleman for their time and for giving us a very effective hearing today. >> i would also like to thank the witnesses and for the members on their work as well. before i begin my own comments,
i want to make an observation with regard to mr. mayopolous, who was abruptly fired in the middle of this transaction. he does not know why he was fired. his boss, mr. moynihan, says he does not know why he was fired. the board members present do not know why he was fired. either it was divine intervention, or someone did not like his legal and buys. been i am from brooklyn, i am leaning toward the last. it looks to me like ken lewis and others at the company were not about to tolerate someone who might get in the way of what they had planned to do at this shotgun wedding. the central question of our investigation was how did bank of america acquisition merrill lynch, which started out as a deal between two private sector
companies, become 8 $20 billion federal bailout? after four days of hearings, hours of testimony, and review of a half million documents, it looks like the answer is pretty clear. the facts show that bank of america, one of the largest banks in the united states, was able to manipulate federal regulators to obtain billions of dollars in taxpayer money to help it go through with the deal that it intended to do in any event. in a way, it was quite a feat. bank of america will probably end up being held in business schools across this country as a result of their innovative approach. while the financial world was crumbling around them, they saw an opportunity to snap up merrill lynch, a leading company
in the field, and get the taxpayers to bear the risk. this has important implications for public policy, and how we approach problems like this in the future. billions in taxpayers' money was committed in secret. no one outside the privileged few knew anything about it until weeks after it was over. that should never, never happen again. as congress considers regulatory reform, i think we need to focus on the need to protect consumers and shareholders. thank you again for being here today. without objections, i enter this binder into the committee record, and without objections, the committee stands adjourned.
states by the federal government to spend on stimulus projects. over $136 billion has been paid out for those projects. atkins c-span.org/stimulus you will find links to government and watchdog groups tracking the stimulus. >> follow queen elizabeth ii as she travels from buckingham palace to parliament for the first day of the parliamentary session. she will deliver the queen's speech from the throne in the house of lords. the speech outlines its priorities for the coming year. members of the house of commons and lords attend. it is tonight at 9:00 p.m. eastern on c-span. >> thanksgiving week on c-span, and look at politics in america,
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