well mainly down mexico this@@@ officers. he had a right to carry concealed firearm in pennsylvania. despite having been discharged from of the marine corps during basic training. he was also subject to a protection from abuse order

filed by the next girlfriend. he killed three pittsburgh police officers. he was saying concealed weapons -- concealed carry per monte. it in march michael killed 11 people including the wife of a deputy sheriff before taking his own life following a gunbattle with police in alabama. where he had a concealed weapons permit. this is his picture with, he killed 10 people in rural alabama including his mother it and five family members. he was a concealed weapon permit t. the sooner i hear people on television saying only the good people get these permits, that is simply not true. one in my view these unstable man should have never been

permitted to own any weapons for any reasons and, of course, in february of this year frank garcia of killed four people in a shooting rampage in an upstate new york. he held wrote concealed carry permits. we would i think these tragedies quote and totally as i understand 26 people have been killed this year by people who carry concealed weapons. we don't want others these concealed weapons permit the use in this state of california. we have 30 million people. is a diverse disparate population, guns do not help. i believe it is unlikely that these men and would have obtained a concealed weapons permits in my state and candidly we want to keep it that way. no mr. president, what i would

like to submit for the record a letter from the governor of our state on all schwarzenegger opposes this amendment along with 400 united states mayors and the international police chiefs association and zaun. and believe the amendment is reckless and irresponsible and, i move it will lead to more weapons and more violence in the streets of our nation. and mr. president and i hope and pray that this body will turn down this very ill-advised amendment. thank you, a yield the floor. >> and the time remaining is 25 minutes four seconds. >> on the other side? q1 32 minutes 37 seconds. >> of mr. president de, i yield up to 15 minutes gimmicks senator of virginia. >> mr. president, i rise some support of this moment. i'm believe when it is

reasonable what we, believe it is not as draconian in its implications as many of my colleagues of whom i greatly respect in terms of their concerns are anticipating the. i would also like to say there has been a lot of misinformation on the senate floor about this amendment to the effect it will allow felons and people are mentally defective and another dangerous individuals to carry weapons on the streets of american cities and also to buy a branson chance for them to places with the senator schumer mentioned like new york city and. my colleague from new york gave an example about in his terms with establishing residency would then create a permanent to carry a weapon with impunity. and think the reality will of the particular situation is the

gang members have their guns. they don't need this bill will. in fact, this amendment has protections that would prevent those who engage in criminal activity such as gay members when taking advantage of this legislation. with respect to standards of conduct, and specs of criminality in issues of mental health is important to note that there is a federal floor and jenny this amendment that guarantees certain standards met regardless of during state standards. if you read the eminent in states along that a person who was not prohibited by federal long from possessing, transporting, shipping and receiving a fire arm any other conditions that may be granted reciprocity.

if you going to the federal with blond wood and am going to read from her 27 cera our section 4781 this is the current standard in terms of being able to possess a firearm or ammunition. anyone who has been convicted in any court of a crime punishable by imprisonment or exceeding one year not possess a firearm. anyone who is a fugitive from justice and unlawful use her went to to control substance will adjudicated as mentally defective are committed to a mental institution, anyone who is an alien illegally quote were admitted him to the u.s. and non it an increase of four discharge under this honorable conditions are having a citizenship of the u.s. having renounced that citizenship, any was subject to a court order that restrains the

person for enhancing or threatening an intimate partner or child, and such an intimate partners are convicted of a misdemeanor crime of domestic violence cannot lawfully receive possess or chance point a fire arm. in addition the personnel under indictment with or information were punishable by imprisonment with cannot lawfully receive a fire arm. it those rare are the federal guarantee aswirl the floor under which this reciprocity legislation operates. senator lautenberg has said in his comments that passing this legislation is akin to allowing someone from another state to come into your state and follow their speed limits. this is not an accurate interpretation of this moment. this specifically provides that anyone carrying a firearm into another state must all the laws

regarding firms uses in that state and i quote from the imminent in a state that allows residents to obtain licenses or permits to carry concealed weapons in person gain reciprocity is entitled to carry a firearm subject to the same laws and conditions beckham in specific places and manner in which it may be carried one of the say in which the firm is caring. i would say it but the better analogy and work is the driver's licensing process itself, the states decide the conditions under which they can be granted within nature of interstate travel allows license to another state and recognize across the country so long as the holders be of the loss of the state in which there driving. , i also keep hearing this amendment will increase the number of purchases of handguns

and other weapons. one of like to clarify as someone who holds a concealed carry permit me to carry does not allow anyone to purchase a firearm automatically. one still has to go to the entire process with a background checks as if he did not have a permit. illegal firearms sale my separate matter of this body to address. one that we clearly should be focusing on what they fall outside the parameters of this amendment. want the issue of gun usage in our country understandably divides me. we usually of the lines of those who believe any relaxation of gun laws will benefit from violent activity in worse is those who believe gun laws need to be modified to allow law-abiding people to defend themselves i have a great deal

of emphasis with those who been the victims of gun violence and have worked with citizen groups as well as on governor in the aftermath of the virginia tech shootings to focus our approach it is significant improvements in the losses include a working to modify privacy laws which was the primary concern in the virginia tech shooting and improve in in some background check process and will continue to work on these areas. i also believe strongly with the violence we see in our streets and our neighborhoods must be addressed but very little about it has been caused by the 60 permits to carry and as i mentioned before the people who are perpetrating that violence are and have their guns. their access is a matter we should focus on. but few criminals are going to go down to the courthouse and the 60 permits to carry and who

are within and the federal guidelines specifically address in this bill seems to do so long to protect themselves and the models we see on our streets. i've been saying one of look at this amendment a couple clear examples come to mind. one as my father will who in his later years lived in florida and then arkansas but no drive alone in his car and visit me and my brother who lives in minnesota. that was usually into a churning. my father was older one, he was by himself and the car, he was a classic targets were potential criminal activity. he carry a firearm when he traveled and when he stopped at night he went to a motel and check to the motel and people will start looking into. and i don't think that people

who are in that situation the two wonder if they're committing a felony. by having to be a will to defend themselves when they're in that situation. some male suit comes to mind when of the truck drivers that we see on the rose any time we're on the interstate. these are independent contractors of their making a living in the hard way. the cause of the across state boundaries. then have to worry about whether their cars are going to break down and have to wonder whether they might be victimized as they go to sleep in the cannon of their truck. they can legally carry many of them and their own state because they have to worry if they crossed another state boundary trying to defend themselves in committing a felony. this is the type of situation that i believe this legislation is attempting to undress. i believe it will have a

beneficial effect and that we need to work together in this body to address other situations of gun violence in this country one and i am glad to have and never in sight i can have two this body to do so the support this legislation and will vote for it. >> you have nine minutes to the center from new jersey. >> mr. president i come to the floor saddened by the tragic death yesterday of a mark, one of five of the jerseys the finest police officers shot last week by a gunman. he was killed not by a law-abiding gun owners and a sportsman or a hundred like millions of americans but by one loan on the man who was willing to pull the trigger to kill

another human being in cold blood. last night with a 94 gunshots were fired in jersey city and anywhere three people were victims of gun violence and the statistics are staggering. in one year 30,000 in hundred 96 people died from gun violence and 12,791 were murdered. another 69,863 people survived and injuries. 14,676 people were injured in a gun attack. according to the. campaign in one. 20,784 american children and teenagers for shot and murdered an assault, suicides and accidents, police intervention. homicide was the second leading cause of death for young people from ages 10 to 24 years old, and 84 percent of the victims were killed by firearms. and amazingly fire on homicide

is the second leading cause of death for young people ages one to 19. these numbers are shocking. mr. president, i think about what this does, and i cannot help but ask who is it that feels the need to carry a concealed weapon and for what purpose? one must ask how we would ever want to permit as a matter not of state but federal law those whose motives may not be purer with to walk into a playground or private stadium in any state license under federal law carry a concealed weapon in their coat pocket or nine. to be honestly believe that person will be the priest or rabbi? do we think will be the mother taking her jonassaint i have the huskies and myself on? libby the law-abiding sportsmen to use their guns were for a

time it practice? don't need to conceal their weapons. so would we really think will benefit from this amendment? whom we believe will carry a concealed and perhaps into a playground or a stadium. it will not be that mother or the hunter or that's portman. as president of the break campaign so aptly pointed out in will be someone like richard the white supremacist armed with ak-47 who allegedly murdered three pittsburgh police officers on his front porch. he was a concealed carry permit holder. he will be the suicide shooter he went on a rampage in alabama and her 10 people and he was a concealed weapon carry permit holder. you'll be criminals like charge of first-degree murder in the shooting death of his wife is inglis minnesota. she had an active restraining

order against her husband because of a history of domestic up." he was a concealed carry permit holder as well. mr. president, we're being asked to seriously consider an amendment that would benefit those criminals, not their victims, and amendment that would override state laws and federally mandate states to recognize the concealed weapon permits of people like these three notorious criminals, even though they may not be residents of that state, even though they might be legally barred from possessing weapons in that state? let us make no mistake, this amendment is a blatant infringement on state rights, a stealth repeal of states' hard-fought gun laws. it strips legislators and governors duly elected by the people to represent the best interests of their constituents to make sound, competent, informed judgments about how to best regulate guns in their own

state, to make those judgments based on the recommendations and input of law enforcement officials who know and understand the specific situation on the ground on the street in their cities, in their communities. even the congressional research service has found this amendment would have a preemptive effect on state reciprocity laws. they said, an and i quote, "this amendment is broad enough such that it would allow certain firearms that are banned from purchase or possession in one state to be tbliewt that stat -e brought into that state. one could legally purchase, possess a concealed permit for a firearm that is banned in states like california, connecticut, hawaii, maryland, massachusetts, new jersey, and new york." in my view, this would turn the clock back on reasonable, responsible gun laws that states

like new jersey have passed to protect us from men like richard poplawski, michael mclendon, and others. career to the usual approach of my republican colleagues to maximum states' rights, this amendment will trample the right of states to pass their own laws to keep guns out of the hands of criminals. mr. president, too many times for too long we have seen blood on our streets from senseless, pointless, lethal gun violence. we have tried in our states and in this chamber to mitigate it tried in our own ways to stop it. we've all been outraged at those who with language, attitude and demeerng seem to accept it as part of american culture. i do not. we cannot stand down from the battle being waged by law enforcement in every city and state against gun violence in our streets. our charge, our solemn

responsibility, is to end the violence, not toad it. there are too many guns on our streets as it is and there are also too many people willing to use them. irsay to my colleagues, let us not make it easier to carry a concealed weapon against the wishes of the people of a state whose elected representatives express their will and say "not in our state." to legally have a federal mandate that would permit them to cross state lines into your neighborhood or my neighborhood. the evidence is before us in the names of richard poplawski, michael mclen done, both of whom have permit permits to cara concealed weapon. why should they come into my state and create the opportunity to murder some innocent family when my state, my governor, my legislature has determined that in fact there is a better way to

protect our citizens? when we go down this road, it is a slippery slope. some day, some federal issue will come in your state and you won't want the federal government to tell your state how to protect your citizens. if you permit this to happen today, then it will happen tomorrow in a way that you won't like. that is a dangerous precedent. that's a precedent i don't think that we want. and finally, let us remember the victims. let us remember officer mark denardo and all the victims of gun violence that are out there protecting us eve and every day. they won't know the good guy from the bad guy. they will just know that if this passes, someone could have a concealed weapon on them. and at the end of the day, their lives will be greater at risk. that is not something i want on my conscience. i don't know what member of the senate wants it on theirs. i ask unanimous consent that the entire statement be entered into the record. the presiding officer: without objection. mr. thune: mr. president? the presiding officer: the senator from south dakota.

mr. thune: i don't want to get in the weeds here but the gentleman mention michael ijime who did not have a carry permit. and another gentleman, willie donaldson, the court recognized that the person acted in self shf defense. the point is that criminals commit crimes. that's what they do. criminals kill people. this isn't directed at criminals. this is directed at law-abiding citizens who want to protect themselves and the statistics i mentioned earlier make it very clear. if you want to look at the studies, there is a lot more defensive gun use by victims than there are crimes committed with fire jamplets it is further estimated that there are as many as 2.5 million defensive uses of firearms in the united states each year, many of which go unreported. but i think you have to come back to the point that of the 5 million people in this country who are concealed carry permit holders, and if you assume that every instance of reported crime

by a gun control group, of improper firearm use by individuals with a conceal carry permit, every one of those is true. it can be debated. but let's assume that it is true. over an entire year, there would be one -- one -- improper use of a firearm and to put that another way, concealed carry permit holders would be 15 times less likely than the rest of the general public to commit murder. the point i'm making, mr. president, is criminals commit crimes. that's what they dovment they're criminals. criminals kill people. what we're trying to do here is allow law-abiding citizens to protect themselves from criminals when they travel across state lines, striking the right balance between federal -- the constitution, which protects an individual's second-amendment right and state laws. we aren't preempting state laws. illinois and wisconsin, have -- they preclude or prevent anybody from owning a concealed carry permit or having a concealed

carry permit in their states. this amendment doesn't even apply to them. nobody could carry a concealed carry weapon in either one of those states. it recognizes the rights of all states. most states have place and time restrictions. my state of south dakota, for example, you can't carry in a place that serves alcohol, you can't carry on schools, you can't carry in courthouses. so to suggest that somebody is going to transport a whole bunch of guns -- which would be a violation of federal law to start with because there are laws against trafficking -- into an area of a statepublic school or someplace like that, these are just wild exaggerations and scare tactics that aren't based on any evidence. the evidence we have -- the data we all have suggests the contrary. mr. president, i yield such time to the gentleman from wyoming, as he may consume. the presiding officer: the senator from wyoming. mr. barrasso: thank you, mr. president. today i rise in support of the thune amendment of the thune amendment to me is very straightforward. it does not restrict state concealed carry laws.

it does not create a national concealed carry permit. it simply allows law-abiding individuals. law-abiding individuals who lawfully carry concealed firearms across state lines while following the laws of the host state. just like a driver's license -- and this is my wyoming driver's license -- just like a drivers license, the thune amendment is a license for self-defense across state lines. this means my concealed carry license from wyoming, i will not be limited to wyoming. just like a regular driver's license, just about the same -- photo identification issues. the only difference is this one from wyoming says "concealed firearm permit" and it has on it a picture of a handgun. well, today we are hearing the same arguments against the thune amendment that we heard from the people who wanted to ban assault weapons. during that semi automatic assault weapons debate, we heard all of the scare tactics.

we heard there would be blood all over streets, terrorists would be able to purchase uzi's and ak-47's. the lives of law enforcement law enforcement will be in danger. this is simple plt not the case. -- this is simply not the case. a study for the department of justice found that 40% of felons had not committed certain crimes because they feared that the potential victims would be armed. the national institute of justice conducted a survey that found that 74% of criminals who had committed burk burglaries or violent crimes said they would be less likely to commit a crime if they thought the victim could be armed. in states where concealed carry permits are issued, it is a fact that the crime rates go down. let's take a look at illinois and florida. illinois does not allow concealed carry permits. the number of murders last year in chicago -- 511.

since florida passed their concealed carry bill and signed it into law, violent crime has dropped by 32%, and murders in florida dropped 58%. mr. president, criminals do not get licensed to carry guns. criminals do not fill out the paperwork, go to the courthouse, get fingerprinted and wait weeks to receive their concealed carry permit. criminals issue their own concealed carry permits. in the district of columbia, crime rates are high because the criminals have the advantage over the victims. the gun laws in the district outlaw law-abiding citizens from self-defense while people walk home from work or from the store. they know it is highly unlikely in the district of columbia that the victims will be carrying a gun for self-defense.

mr. president, this is a commonsense amendment. it makes sense for law-abiding gun owners all across the country. i would urge my colleagues to vote in support of the thune amendment of thank you, mr. president. mr. durbin: mr. president? the presiding officer: the senator from illinois. mr. durbin: i have 13 e unanimous consent requests for committees to meet during today's session of the senate. theft approval of the majority and minority leaders. i ask that these requests be agreed to and printed in the record. the presiding officer: without objection. mr. durbin: i now ask that the senator from new jersey being recognized for nine minutes and then after an intervening speaker on the other side of the aisle, the senator from california be recognized for five minutes. the presiding officer: without objection. mr. lautenberg: mr. president? the presiding officer: the senator from new jersey. mr. lautenberg: mr. president, i rise in strong opposition to the amendment that's being offered because it would override our safety laws, gun safety laws in my state and other states across the country. the thune amendment is an outright violation of states'

rights. this -- the fact is that this vote isn't about the second amendment. it's not about gun rights. it's about respecting local communities and letting them make their own decisions about how to keep their streets, their homes, and their businesses safe. mr. president, as this dangerous amendment gets pushed to a vote, we are seeing opposition grow across this country. in addition to newspaper editorials, we're seeing governors and mayors and local law enforcement calling on the senate to vote against this amendment. this placard shows the wide manufacture ranging groups opposing this amendment. groups opposed to the thune amendment -- over 450 mayors, people who have responsibility for those in their community, major cities chiefs association, international association of chiefs of police, state legislators against illegal guns, national network end to

domestic violence. in a letter to the senate, the international association of police chiefs implored congress to "and i quote -- "act quickly and take all necessary steps to defeat this unacceptable legislation." that's from the international association of chiefs of police. they know what to do about concealed guns, and they will decide within their own communities. but the thune amendment doesn't just steal states' rights, their right to create their own laws. it abolishes state laws that are on the books right now. the thune amendment throws state laws out the window. for the 35 states that have chosen to keep criminals with misdemeanor convictions from carrying concealed weapons, this amendment abolishes their laws. for 31 states that have chosen to keep alcohol abusers from carrying concealed weapons, this amendment abolishes their laws. the thune amendment would force

our states to accept the weakest standards in the country and it brings about a race to the bottom. mr. president, many of us represent states that do not want lax standards on who can walk around our communities with a weapon hidden in their garments. to make matters worse, the thune amendment not only overrides the states' concealed weapon law, it could also override a state's assault weapons ban. that means if we ban them in my state, someone gets the concealed weapons permit, they can bring an assault weapon into our state. this means even if a state has a ban on assault weapons, under this amendment someone could legally enter that state wahiden uzi or assault weapon and travel around it. think about it, if your state's residents are not permitted to carry a particular weapon, but

someone can come into our state with a weapon that now is prohibited in our state, mr. president, that's one of the reasons why more than 450 mayors across this country expect -- present their alarm about this thune amendment. as these mayors explained in a letter to the congress -- i quote it -- "each state ought to have the ability to decide whether to accept concealed carry permits issued in other states." i don't want it in new jersey, and i think that people across this chamber will say, "no, i don't want it in my state as well." now supporters of this amendment like to claim that only law-abiding citizens get their hands on conceal weapons permits. but that's not true. in alaska, for example, criminals who have repeatedly committed violent misdemeanors

are permitted to carry concealed weapons. and in alaska, criminals who have repeatedly committed sex offenses are permitted to carry concealed weapons. according to a news study during the two-year period between may 2007 and april 2009, people holding concealed handgun permits killed at least seven police officers and 44 other innocent people across this country. and just recently, we've seen several gruesome examples of senseless murders committed by people holding concealed weapons permits. a few months ago, a 28-year-old concealed weapons permit holder went on a murderous rampage in alaska. first he shot and killed his mother. then he gunned down ten others, including two young mothers and a father and an 18-month-old girl. a few weeks later another concealed weapons permit holder went on a killing spree in

binghamton, new york. this gunman drove a car up to a citizenship service center and barricaded the back door with his car so that the innocent people who were inside would be trapped as he proceeded to kill those who were in his -- to shoot at those who were in his sight. the gunman sprayed gunfire throughout the center. he killed 13 people, wounded several more before taking his own life. the next day another conceal carry permit holder destroyed more life. in pittsburgh police officers arrived at a house to quell a domestic conflict. 2002 officers were ambushed and killed by the gunman who held a concealed weapons permit. minutes later the gunman shot and killed a third officer who arrived at the scene. mr. president, the special interest gun lobby is hanging its hopes on the prospect that this chamber will abandon common

sense and pass the thune amendment. but this gun lobby's dream is really a nightmare for our country. it violates states' rights and it will make it easier for gun traffickers to move firearms. if the thune amendment becomes law, traffickers could now load up a car, smuggle -- take guns across state lines legally as long as the driver has a concealed weapons permit in any state. mr. president, history will record that this senate was asked to decide today whether to put families further in danger or keep them safe or whether to savage state laws or honor them and whether to usurp states' rights or preserve them. i hope that my colleagues will do the right thing. i urge my colleagues to vote "no, no, no, no" on the thune amendment. thank you. a senator: mr. president? the presiding officer: the senator from south dakota.

mr. thune: i yield ten minutes to the senator from oklahoma, senator coburn. mr. coburn: mr. president? the presiding officer: the senator from oklahoma. mr. coburn: i think a little bit of history is really important for us now. let me give you a quote of what thomas jefferson had to say. and it's important for us to hear him. we recognize his wisdom in lots of what he did for us as one of the founders of this country. and here's what he said about guns: "gun control laws disarm only those who are neither inclined nor determined to commit crimes. such laws only make worse for the assaulted and better for the

assailants. they serve rather to encourage rather than to prevent homicides, for an unarmed man may be attacked with greater confidence than an armed man." now granted that was in a different day and a different time, but his words ring true. to those who are opposing this amendment, who truly believe we ought to have a total ban on firearms in this country, i recognize that as a legitimate position for some of those people. but what i find both disingenuous and also curious and funny at the same time is the number of my colleagues who now come to the floor to state, to preserve states' rights when 95% of their roets in the last congress and this congress and the congresses that preceded

that voted to take away those very same states' rights in every other area of freedom in this country. the second amendment -- we just had a hearing on a supreme court justice, and she got it wrong on the second amendment. the second amendment is written into our constitution in the bill of rights. the 14th amendment -- and it's important, a history lesson here -- why was the 14th amendment even brought up to congress? the historical debate shows during reconstruction, freed black slaves were losing their right to own a gun simply because they were black, simply because they were a freed slaves. and many southern states passed laws taking away those. the due process of the 14th amendment came about so that we could preserve the right of

individuals to own arms and defend themselves. what i find ludicrous in the debate is any discussion of assault weapons ban or assault weapons, first of all, you can't conceal one. that's number one. number two is we had the senator from new jersey mention it's illegal to own an uzi in this country. so you're already a criminal. you're already a felon. you're already one of those individuals jefferson was talking about when you claim to say that we're going to step all over state law. you know, we had a vote in terms of honoring states' rights, in terms of the national park bill on guns. 29 of my colleagues, 13 of which now are defending states rights

stepped all over states rights with their vote against the coburn amendment when it came to allowing people to have supreme their state law in terms of national parks. so, nobody comes to the floor a purist, but i will tell you that the vast majority of people who are debating against this on the fundamental principle of stepping on states' rights have a voting record that 98% of the time they don't care about states' rights. they care about the federal government. and i have an offer. any member who wishes to vote against this bill, this amendment, if you will all endorse the enumerated powers act and see that we pass it through congress, then you can

demonstrate your fidelity to the 10th amendment, except nary a one of those who are opposing this amendment has endorsed the enumerated powers act in this congress or the last congress. so that the arguments ring hollow when we talk about the 10th amendment, because the actions, the true action would be to recognize the limited powers of the federal government to enforce the 10th amendment, and we wouldn't be having this debate at all. but states' rights are convenient only when it comes to something we don't like. they're rarely utilized to tpraoul defend states' rights. the final point that i'll make is that you have to follow the laws of the state that you're in. that's respecting states' rights. for every incident and tragedy

of somebody who had a concealed carry permit, we can give you 10,000 tragedies of those where gun control allowed the criminals to have guns, but the innocents not. so i hope the american people will look at this debate and say, number one, there's a fundamental right in this country, which the supreme court will get right in this next session, that is guaranteed to us as part of our liberty. it was inculcated -- inculcated into everything that our founders did,. knowing it to be true, it was written into our constitution. and many of the rights that we have today, that we cling to so dearly were never even considered by our founders but have come about as a result of what the judicial branch has

said. so if you're going to use states' rights as a position to defend your vote against this bill, what i would suggest is that your constituencies look at all your other votes on states' rights and see if there isn't some real big dissidence with that position, because you will find it in every case. with that, i yield the floor. the presiding officer: the senator from california. mrs. boxer: mr. president, i'd ask that i be yielded 7 minutes rather than the 5. i've cleared that with senator durbin. just two more minutes. not to the debate, just to our side's time. mr. thune: mr. president, how much time is left on the other side? the presiding officer: 8 minutes and 35 seconds. mrs. boxer: 8 minutes? i would then go to 6 minutes if i could instead of 5. the presiding officer: without

objection. mrs. boxer: i agree with the senator from oklahoma on one thing. i hope the american people are watching this debate. i truly do. because we're talking about a radical proposal that is opposed by democrats and republicans in my home state, i have never seen the phones ringing off the hook. i ask unanimous consent to place in the record a statement by the california police chiefs association as well as a phrer by governor arnold -- as well as a letter by governor arnold schwarzenegger, a republican letter. the presiding officer: without objection. mrs. boxer: the police chief's letter is tough and strong. the california police chiefs association is strongly owe potioned to the thune amendment. the legislation would require california to honor concealed carry permits granted by other states even when those permit holders could not meet the standards required by california law. the thune amendment would empower gun traffickers and threaten the safety of our

police officers. and if there's one thing we should do for our police officers, is not make their lives any tougher than they are. we recently lost four police officers in oakland, and i can tell you that the whole community suffered along with those families. and when my police chiefs talk about this -- and i'm quoting -- "a trafficker holding an out-of-state permit would be able to walk the streets of any city in america with a backpack full of loaded guns, enjoying impunity from police unless he was caught in the act of selling a firearm." this is one of the strongest letters i've ever seen from my police chiefs. and this debate isn't about the right to own a gun. that has been settled by the supreme court in the heller case. it's about allowing our own states to determine our own laws. and i totally get why some more rural states with fewer people

would have different laws on conceal and carry than a state of 38 million people in my home state of california. leave us alone. leave us alone. you want to have conceal and carry with very few requirements, fine. we have conceal and carry with many requirements, and it is working. some states don't have any limit on the number of weapons you could carry with one conceal and carry permit. so someone could come into my state, go into one of my schoolyards and open up duffel bag full of legal weapons. we have 3,300 gun deaths each year in my state. let me repeat that. 3,300 gun deaths each year in california. each one of them has a story. of tragedy behind it. a lot of them are kids.

so don't come down here and tell my state what we should be doing. i i support your state. you should support my state. and that's exactly what governor schwartzenegger says. he says, we have a right to write our own gun laws. 34 california mayors and 400 mayors nationwide oppose the thune amendment. as do the international association of police chiefs. you know, we have a lot of two, do here. we've got to work on health ca care. we've got to work on energy independence. we've got to work on bringing down the deficit. we have to work on bringing down the debt. we have to work on educating our kids. but oh, no, we are spending hours, mr. president, on an

amendment that is offered that tells our states that their laws are not to be respected when it comes to conceal and carry. do you know there are some states that allow a spousal abuser to carry a conceal and carrconceal-and-carry weapon. do you want that spousal abuse, maybe in a stage of rage, to walk into another state with a duffel bag full of weapons? and my senior senator as she read this -- and she's a pretty good expert on this -- says you could have an assault weapon in there. is that what we want? it's ironic, as we deal with the health care issue, do you know what it costs to try to sew up somebody and heal somebody who's been a victim of a gunshot wou wound? we are training our doctors who go over to iraq and afghanistan in our cities.

so all my colleagues on the other side who come here and talk about big brother -- big brother going into their states and telling their states what to do, this is the case of big brother. clear and simple. if i need to protect my people in california, i want to leave it to my people in california. i don't want to come in and tell them that they have to live with other state laws that are weaker. it's just wrong. it flies in the face of states' rights. it flies in the face of common sense. and, again, supreme irony is it's coming from folks who say they love our states, they respect our states, the federal government has too much power, but i say it's big brother. the presiding officer: senator, your time has expired. mrs. boxer: i hope we will vote against this because this is not what we need in america: more

gun deaths and more police being put in the line of fire. i yield the floor. mr. thune: mr. president? the presiding officer: the senator from south dakota. mr. thune: how much sometime left on our side? -- how many time is left on our side? the presiding officer: nine minutes. mr. thune: mr. president, i yield myself five minutes. the presiding officer: without objection. mr. thune: mr. president, the senator from california has made some comments -- actually, both senators from california talked about assault weapons. and assault weapons, the senator from california pointed out, it's very difficult to conceal an assault weapon. it's not going you're going to be running around, and obviously when you get into the state of california, those weapon are illegal. and i think it's fair to point out again that any state can impose restrictions on the people who come into their state with the conceal carry permit from another state. so state laws still trump when it comes to manner, place, where guns can be carried. and states can also say to this issue of multiple guns being

brought in that there's only -- that the permit only applies to one gun. obviously that's an issue that a state can -- can rule on. secondly, the -- the issue of multiple guns i would think would fall under the rubric of trafficking, which is a federal offense. it is illegal. people who have committed crim crimes, that's illegal under federal law. they can't get guns in the first place. or at least they're not supposed to be able to get guns. it's a federal crime if they do. people who have history of mental illness, all these issues are addressed in federal law, which provides a floor against all these types of things that are being suggested. much have been -- much of what has been suggested here really is scare tactics. it's fearmongering. there's no basis on which to make many of the arguments. they're totally speculative, that somehow this amendment is going to lead to all kinds of people, thugs and -- and gangsters getting guns and then transporgt them someplace else in -- transporting them someplace else in the country. i will tell you, i don't think that there are too many criminals -- and by the way, criminals commit the crimes. the senator from new jersey talked about the thousands every

year that are killed by guns. most of them are killed by criminals. there may have been an exception or two. somebody had a conceal carry permit. but relative to the general population, it is minuscule. and if you think about the number of crimes that are committed every year by criminals, what we ought to be doing is focusing on criminals, the people who commit crimes. criminals are not going to go down to the courthouse in sioux falls, south dakota, and say, i want to get a conceal carry permit, or anywhere in this country, for that matter, because almost every state, with three exceptions, by law do a background check. so in order to own a gun or possess a gun, you have to go through a background check. and -- and so to get a conceal carry permit, you also have to go through a background check. i don't think that most criminals are going to be going down and say, i want to get a background check 10* that i can get -- check so that committee get a gun so that i can haul it and commit a crime in another state. that's just ludicrous. think about the logic of that. obviously anybody that has a

criminal check, th record, the d check is going to reveal that. so that means there's going to do what they usually do and that is get those firearms illegal willing, commit crimes, felonies, because that is what criminals do. mr. president, i want to just mention some of those who have endorsed this amendment. the n.r.a. has endorsed this amendment, gun owners of america. i have a letter from them endorsing this amendment. citizens committee for the right to keep and bear arms has endorsed this amendment. the owner-operator independent drivers association, which, as i've pointed out, represents a lot of the truck drivers across the country. this is a real issue for them because they're traveling across state lines in -- in interstate travel on a regular basis and this is something that they've advocated on behalf of for a long time. the passenger cargo security group, which, of course, represents a lot of the association -- those who fly cargo in this country has endorsed it. go crowd has endorsed this amendment. and the pink pistols group has

endorsed this amendment. so a number of groups, organizations out there who've endorsed the amendment who believe, like i do, that it represents a balance, a commonsense approach that balances the styl right that people in -- the constitutional right that people have in this country to keep and bear arm. the second amendment right, it's in the bill of rights, all of the other rights apply across state lines, or all of the other amendments in the bill of rights. and it seems to me at least that this one should too too. subject to restlaiksz are imposed -- subject to restrictions that are imposed by the individual states. this does not preempt any of those. every state has different restrictions that apply and restrict the -- the place and the manner in which firearms may be transported into their states. and so what we're simmerly trying to do here -- and so what we're simply trying to do here, mr. president, is clarify this patchwork of different regulations and laws and requirements that different states have all over the country so that people, law-abiding citizens, not the criminals that are being referred to here who commit the crimes in this country, but law-abiding individuals who want to defend

themselves against those very criminals have the opportunity to do so by being able to possess a firearm if they have a conceal carry permit. and as i said, every state is a little different about how you go about getting one of these permits, but every state has its own requirements. and all of the states, whether the -- the presiding officer: the senator has used five minutes. mr. thune: -- with a couple of exception haves a background check as a part of that. i reserve the balance of my time. the presiding officer: the senator durbin 245z minutes and 14 seconds remaining. mr. durbin: mr. president, around washington this morning, hundreds of lobbyists strapped on their suits and ties and went to work waiting for the thune amendment and his theory and their theory on keeping america safer by putting more guns on the street. across america today, thousands of law enforcement officials strapped on their guns and their badges and went out on those mean streets to risk their lives to keep us safe. would you listen to the group that has endorsed the thune amendment? do you know what's missing? not a single law enforcement

group supports john thune's amendment. the men and women who are risking their lives for our safety every day do not support his amendment. they oppose it. and do you know what y they oppose it? because they realize that there are different standards in different states for conceal carry and in some states almost no standards at all. they realize that in 17 states, you don't need to even prove that you know how to fire a gun safely. and under thune's amendment, those people can go into states that require a test or even a test on a firing range. 31 states that require it, they can carry a gun without any evidence that they know how to use it. there are also some 35 states that prohibit people convicted of certain misdemeanor crimes from carrying conceal firearms. that means that 13 other states can send their people in with convictions for these misdemeanors, they can carry a firearm legally under john thune's amendment. and let me say final, they realize that that i too that ifn

to be a drunk driver in that state, 17 states, drunk drivers, you can still get a conceal carry permit. doesn't matter how many times you've been convicted for d.u.i.'s. whether you're a habitual drunk a reasonable doubt, an alcoholic, you can still get a conceal carry permit in 17 states. senator thune wants those people to be able to drive into your state where you say, frankly, you can't have a conceal carry permit if you can't handle alcohol. he wants them to be able to come into those states and to have the right to carry a firearm. will that make us safer? the men and women in uniform who went out this morning -- the presiding officer: senator, your time has expired. mr. durbin: -- right now who are throughout protecting us say no. and that's what we ought to say to the thune amendment, "no." mr. thune: mr. president, i would point out what i pointed out earlier and that is that this does not apply to the district odistrict of columbia. but i also want to come back to the basic point and that is how did we get here today, why are

we sneer well, we're here supposedly talking about the defense authorization bill. but last week, the democrat leadership decided to put a hate crimes amendment on the floor as the first amendment to the defense authorization bill. unrelated, ungermane, nongermane to the underlying defense authorization bill. now, the hate crimes bill, it could be argued cramps a lot of state laws because a lot of state laws have their own laws with regard to hate crimes. but we decided here, democrat leadership did, that it was more fortunate talk about hate crimes legislation than it was to talk about defense-related amendments. well, my view was, they're going to offer a hate crimes amendment to the -- on the floor of the united states senate, what better way to prevent hate crimes than to allow the potential victims of hate crime to defend themselves against those very hate crimes. and so i was going to offer this amendment, this conceal carry amendment, as a second-degree amendment to the hate crimes amendment that was put on the floor last week by the democrats. the leader filled the tree preventing us from doing that and so we worked it out to have

this debate and to talk about this amendment today. but it ties in very closely to the hate crimes amendment, the legislation that we had on the floor of the united states senate for the last week when we should have been talking about defense authorization issues. but that being said, i'll come back to my basic, fundamental point. this is a commonsense amendment that strikes a balance between the constitutional right the people in this country enjoy under the second amendment to keep and bear arms and which has been supported by the supreme court, i might add, and the rights of states under federalism to restrict that according to tier ow their own s and laws, and every state does that differently. this does not preempt those. the states of wisconsin and illinois prevent conceal carry permit holders and so anybody -- there isn't anybody in any state in this country that's going to be able to travel through illinois or wisconsin and have -- and carry a gun because they just don't allow it. so it respects the rights of the individual states but it does allow law-abiding citizens in this country to exercise their constitutional right under the second amendment, and that right

should not end at state lines. state borders should not be a barrier to an individual's right to defend themselves. and i believe this -- the studies are very clear, as i've >> and i believe the studies are very clear, as i've said earlier, mr. president. when you talk about all the -- they're all talking -- speculating about all the crimes that are going to be committed, if you look at the data, they are 15 times less likely than the rest of the public to commit murder. criminals, mr. president, commit crimes. not law abiding citizens. not people who go down to their courthouse to get conceal and carry permits so they can defend themselves against the very criminals who break the laws and possess firearms illegally so they can commit crimes. this is a reasonable, commonsense balance which i believe strikes the right balance between the constitutional second amendment

right that citizens in this country enjoy and the states' abilities to restrict that right and any conceal carry holder, and any resident who travels to any state has to abide by and is subject to the laws that are enacted by that individual state. so mr. president, i hope that my colleagues will vote for what is is a commonsense amendment that allows people across this country who are law abiding citizen to see defend themselves from the very criminals who break those laws and try and commit these crimes. mr. president, i yield the floor.

>> next, a hearing on the troubled asset relief program known as the t.a.r.p. witnesses include the treasury department official in charge of the program and special inspector general. this is two hours.

>> this hearing of the subcommittee on oversight investigations of the house financial services committee will come to order. our hearing this afternoon is entitled t.a.r.p. oversight, warrant repurchases and protecting taxpayers. we'll begin this hearing with members' opening statements up to 10 minutes per side and we'll hear testimony from our first witness. after that members will each have 5 minutes to question our witnesses. i will then excuse our witnesses and invite the next panel to continue with witness' questions. the chair advises members that given the busy afternoon schedule i'll be keeping myself to 5 minutes. without objection all members' opening statements will be made part of the record. i now recognize myself for up to 5 minutes for an opening statement. the past month or two it's been nice to see some good news regarding the t.a.r.p. after some upbeat results from the stress test on the largest

financial firms, 10 of the largest bank holding companies were authorized to pay $68.2 billion of t.a.r.p. funds. if you include smaller banks they a total of $70 billion has been repaid to the taxpayers. when congress enacted t.a.r.p. last year, we authorized the treasury department to request that firms receiving t.a.r.p. funds issue warrants. this provides an opportunity for taxpayers to share on the upside for their investments. these warrants give us right to buy shares at a set point in the future. as you might imagine whenever the government is the key actors in executing these warrants, there are a number of other policy issues and concerns that we have to be -- teal with and have to be weighed. even though i'm firmly committed to ensure taxpayers are fully repaid on. may 8 all national bank corps became the first recipient to

repay the t.a.r.p. the bank paid $1.2 million to buyback these warrants but what concerned me is a professor analyzed this transaction very closely. he determined that the warrants were worth at a minimum $1.5 million and as much as $6.9 million. so at the low end treasury was off by $300,000 and the worst case treasury missed a return of an additional $4.5 million. $5 million might not sound like a lot of money when we're trillions of dollars of financial rescue aid but when you consider the 600 events that will eventually need to repurchase these warrants it is a big return to the taxpayers. i wrote a letter to secretary geithner that he act to protect the taxpayers' investments in these firms by maximizing returns in these warrants. i carbon copied t.a.r.p., gao and two weeks later received a joint letter from the special

inspector general barofsky expressing their concern of transparency. they will review whether those warrant repurchasing procedures will provide fair value to thetacious. i was glad to see a report entirely focused on t.a.r.p. repayments. similar to the analysis done by professor linus, copp found treasury was receiving only 66% of what they could receive from taxpayers. but if this trend continues taxpayers could miss out on an additional $2.7 billion worth of returns on their investment. but on the same say the report was released we received some good news when the wall street reported jp morgan chased decided to pursue repurchasing its warrants through a public option. they were frustrated with the treasury department for demanding too high a price for their warrants. i'm glad the treasury department

is holding a tough line. and today goldman sachs announced they'll pay $1.1 billion to redeem their warrants representing a return of 23% for u.s. taxpayers. that sounds pretty good. but is it enough? i'll keep pushing to make sure every single t.a.r.p. dollar that helps stabilize our factory so our children and grandchildren are not left holding the tab. i look forward to hearing the witnesses. mr. herb allison has one of the tough jobs in the country and how they weigh these decisions to stabilize the financial sector while protecting taxpayers and a strong oversight congress put in place when we created t.a.r.p. continues to publish what amounts to thousands of pages of oversight reports, all free and available online examining every angle and aspect of t.a.r.p. just this week sigtarp published their third quarterly report. i now recognize for 5 minutes

the ranking member of the subcommittee, my colleague, a friend, from illinois ranking member judy big, bigga -- biggert. >> thank you for holding the hearing, a hearing which is intended to focus on a specific aspect of the t.a.r.p. program. it is in the taxpayers' best interest that as soon as possible the federal government gets out of the trillion dollar bailout business and out of the practice of owning and running private businesses. this is something the administration also supports. how soon can we withdraw taxpayer money and end the practice of taxpayers propping up industries? treasury, the fed and the fdic must communicate to the markets and taxpayers the exit strategy and a timeline for it. we need to put an end to the federal government picking winners and losers in the marketplace which has facilitated one fair competition and competitive advantages for some businesses and completely

abandoned others. and that treasury return the best possible return on its investment. i think we'll hear some criticism from some of our witnesses today that treasury is shorting taxpayers on the investment. from what i understand this may or may not be true. the accusation may be more on headlines than true and a difference in opinion as to the best modeling methodology to value warrants. whatever the case, taxpayers must be assured that treasury is using the best means to recapture taxpayers' money. and i hope mr. allison will provide us with those assurance today. and i agree with many of our witnesses today that taxpayers deserve transparency. with regard to warrants and with regard to what t.a.r.p. recipients are doing with taxpayer money. at the same time, i want assurances from today's witnesses that as they work to improve t.a.r.p., transparency and while t.a.r.p. is still active, they will not jeopardize treasury and taxpayers negotiating position to secure the best return on their

investment. it is also vital that we prevent any individual, federal entity or business involved in t.a.r.p., from making a profit based on insider information especially when it is at the expense of the taxpayer. that's unacceptable and i want to know what is being done to prevent this. finally, i'm disappointed with legislation that would syphon off t.a.r.p. returns when we still don't have a guarantee that t.a.r.p. will ultimately produce a return or loss for taxpayer. at a time of record deficits and unemployment reaching 10% nationwide, any profit on this tremendous risk should first and foremost go towards paying down the deficit. for that, i would like to yield the balance of my time of the ranking member of financial services committee, mr. bachus. >> thank you, mr. moore, convening's on today's important subcommittee hearing on the oversight of the t.a.r.p. program. i also like to recognize ranking

member biggert's fine service. she's been particularly, i think, helpful on the issues involving the sec and the cftc, and i thank you. last fall, congress required recipients of assistance under the capital purchase program to issue warrants to the treasury. i have a particular interest in this program because i first proposed it or something like it on september the 18th and felt like by setting, you know, a dividend or at least a repayment at a certain percent, i felt like we would be best assured of receiving a fair return. as opposed to a more fluid definition. for instance, when you buy toxic

assets -- and i said that in the very first meeting with secretary paulson and chairman bernanke, you know, what do we price these at. if you price them too low, it doesn't help the banks with their capital. if you price it -- if you pay too much for them, it's a bad deal for the taxpayers. so i always thought this was our best opportunity of safeguarding the taxpayers yet coming to the aid of the banks and i think time has shown that to be correct. and chairman frank and i and others worked on a bipartisan way on this along with representative roy blunt, and this was done so the american taxpayer would have an opportunity to benefit the warrants, particularly, on the

upside as these companies returned to financial health. although, we were hoping that was the case. now some of them had a spectacular return and you saw today with goldman sachs paying back the money there was a 23% annualized return. now, that's going to be unusual, i think, but it certainly was good news for the taxpayers. however, many questions do remain about how to properly value these warrants to ensure that taxpayers receive a proper return on their investment. and i know professor warren or dr. warren -- you had proposed that they be placed on the open market for sale to the highest bidder and certainly that is, you know, one option that, you know, has some appeal, particularly, if the treasury and the party cannot come to

some agreement, i think that's p and normally i'd bet&ñ in favor letting the market decide asset values in all cases. and i do think that the oversight panel's formula for setting the option price could result in the government having to hold the warrants for an extended period of time and then you have the risk of another economic downturn so if you knew that the economy was going to continue to recover or the company's prospects, i'd say yes, you know, but you look at the commercial mortgage market and others and it's really -- you're -- it's a somewhat speculation. particularly, if the treasury sets a price and it's accepted, let the taxpayers get their money back.z ÷ back in the treasury where it can be used to pay down the deficit.

in the july report on additional views, my colleague explained that the valuation of the warrants is ay÷ñ highly complex all approach may not yield the best results for the u.s. taxpayer. i agree that's true. while the july report seems to paint a picture that÷[÷ some mo may be left on the table if its valuation formula is not used, i believe a fair result for the american taxpayers as i said is to go ahead and as soon as possible get the the federal government outqsce)q9sñ busines of holding stocks and warrants of the financial institutions and treasury has indicated that's also their policy. institutions. and treasury's indicated that's also their policy so to get just the government's investment back

as soon as possible. let me conclude by saying, mr. chairman, as institutions begin to pay back their t.a.r.p. assistance and really capital purchase program moneys, we need to end bailouts, return the money to the taxpayers, not recycle the funds back into more bailo bailouts. part of that will be regulatory reform to ensure that we don't have anymore bailouts and i think protection of consumers is frank, i believe that what we ought to be doing is saying to the regulatory agencies, which have the skill and the means and the resources to enforce consumer protection, that we give them the charge to do it and tell us how they're going to do it. and if over the period of six months to a year we see that's not working, then we could address it in a more novel way.

but let's be clear about another fact. although the capital purchase program may earn a profit, the t.a.r.p. program overall will not. so for that reason, i believe that all these dividend payments ought to be given to the treasury as soon as possible. mr. chairman, thank you for your indulgence. >> thank you as well, mr. chairman. >> this is one of the hearings that we ought to have a lot more press coverage and attention that we're having a pleasant discussion about the t.a.r.p. and the scenario where not only there are large banks are probably put in a more solid position in what happened in september. the consideration is not only paying back the initial capital but what's going to happen with the bonus? that's the warrants and for those people that aren't familiar with the warrants

that's the upside that we've been talking about all along. there's a very positive discussion going on here today and i'm glad members of both sides of the aisle can recognize. it isn't mean that things are good for everyone. but this is a little bit of silver lining that the taxpayers in the united states who put all this money on the table are going to get not only the money paid back but will share in the upside. now, that being said, i want to in my mind and i appreciate the witnesses today and had a chance to meet with many of you and talk to you about some of the specifics and i thank you for your service. it's a very important part of the oversight here is making sure that the taxpayers receive the maximum return for the risk that they took. not everybody wanting to go along with this but we did what we had to do. and those people who said we didn't need to do this, that's a matter of history to judge. but at the present time, we want to wish all of our businesses and banks in the united states success. we want them to succeed. we want them to lend more and a strong message i would like to deliver to the banks that our

t.a.r.p. recipients is start lending. start moving along here. we have a liquid issue in the united states that's still out there. whether you're paying back the money or the warrants are going to be exchanged in some form or fashion we need you to be part of that recovery. that being said, the fairness part of this is making sure we get the maximum bang for the buck. whether it's for an auction or a wait, again, i'll leave that to some of the professionals who can help us realize that we get the maximum bit of value back from the banks that end up taking this money. some are recording historic profits. we wish them well. we want that success to filter out to others as well, but we want to make sure that the taxpayers in this country who literally went on the line to make sure the recovery was going to begin and it seems to be beginning now, that we can put some of this money back in the till and those banks that may need some additional help and

others around the united states may get that help but other than we get the maximum dollars back. thank you, mr. chairman. >> thank you, mr. klein. the chair now recognizes ms. mary jo kilroy for 2 minutes. >> thank you, mr. chairman. thank you for conducting this hearing. although i was not part of the 110th congress and voted no on the house plan to release more money from the troubled asset relief program, i understand that the american taxpayers took on some risk when we worked to bail out the banks. many of whom made decisions that have heard ohio's families and hurt ohio's economy and hurt our country's economy. now as main street still awaits for the economic recovery and the job that it deserves, some banks are back to making record profits again after receiving our help. and i think that it's appropriate that the american public receives a return on the investment that they made with the t.a.r.p. money.

i find it unacceptable that the downturn hurt main street hardest. yet, the recovery seems to be benefiting corporate america first. this issue, the repayment of the taxpayers and the upside of warrants is one situation where the taxpayers deserve to reap the full benefits in an open and transparent process. according to the reports that we have received from dr. warre dr. warredr. warren -- instead of allowing the transfer and the trading to happen on the open market and allow the market set the price. we don't know they are producing the benefits that we are owed, however dr. warren has found we are getting 66 cents on the dollar for investment and the total shortfall to our constituents could be as much as

$2.7 billion. a market-based approach would remove the secrecy and the special interest and maximize it is return on taxpayers investment. that is why i introduced with six of my colleagues what we call the profit hackett -- act. this logical and commonsense bill would maximize profits for our taxpayers and ensure transparency by requiring an open process eliminating loophole allowing banks to negotiate behind closed doors with treasury. the public auction would be such a transparent open market and i think that one of our witnesses, assistant secretary allison, stated earlier this year in his testimony that in relation to toxic assets on bank balance sheets, quote, we have our theories but in the last analysis that's why you have financial markets. you have to have liquid interchanges and then the truth will come out as to what assets are actually worth, quote.

i look forward to today's testimony. and i suggest to the panel and to my colleagues that now is the time to act to close this loophole. according to the congressional oversight panel which dr. warren heads, less than 1% of the warrants, those stock options for the american people have been sold. this is the time to push treasury to open the process with transparency and to make sure americans get the deal that they deserve. thank you. i yield back. >> thank you, miss kilroy, for your statement and it's now my pleasure to introduce our first witness, mr. herbert m. allison, jr. the newly confirmed secretary for financial stability. mr. allison is responsible for developing and coordinating treasury's policies on legislative and regulatory issues affecting financial stability including administering t.a.r.p. mr. allison most recently served

as president and ceo of fannie mae as well as chairman and president of cia of tiaa. he held positions in merrill lynch, and time warner and the stock exchange. and he served a officer in the united states navy and a year in vietnam. your written statement will be made part of the record, mr. allison. mr. secretary and assistant secretary you're recognized for 5 minutes to provide a brief summary for your statement. >> thank you for your opportunity to discuss to stable and repair the nation's financial system. congress passed the emergency economic stabilization act or eesa last october establishing the troubled assets relief program or t.a.r.p. and giving treasury the necessary tools and flexibility to stabilize the financial system and restore the flow of credit to consumers and

business. our mandate in eesa is twofold. to stabilize the financial system while protecting the taxpayers. today i want to update you on our progress. in 10 months treasury h$10 mont invested more than $200 billion in 657 financial institutions including over 300 small and community banks through the capital purchase program. we reopened it recently for small and community banks recognizing the critical role these banks play in our communities. we provide and support the three systemically significant institutions. we launched an unprecedented housing program to help millions of homeowners. we assisted with restructuring of both general motors and chrysler through the bankruptcy process and as a result, both companies are better able to compete today. we helped to restart the securitization markets, a key source of credit to consumers and businesses.

we launched a public and private investment program to help remove legacy assets from the balance sheets of financial institutions so they can redeploy their capital to support lending. and we issued regulations guiding executive compensation at all firms receiving t.a.r.p. funds. we have allocated about $643 billion to our eesa programs. we've actually invested $362.6 billion of that amount to date. we've also received over $70 billion in cpp payments from 34 institutions and $6 billion in dividend repayments. from participants in all the t.a.r.p. programs and finally we're beginning to receive proceeds from the sale of warrants through the ccp and as was noted today, we received $1.1 billion from goldman sachs representing a return of 23.15% of the taxpayers money. as you can see, treasury has accomplished a great deal all

while building a new office of financial stability. however, we have much more to do. as described later in my testimony. i would like to briefly discuss treasury's process for selling the warrants it has received through the cpp. i've attached our policy statement and our frequently asked questions on the subject with my testimony for the record. treasury has communicated its consistent and clear process for valuing warrants in a manner that protects taxpayers. we apply the same process consistently for all banks, large and small. treasury is committed to getting fair value for the taxpayers for these warrants and we made that process public on our website. when a publicly traded institution repays treasury's investment under the cpp, it has the contractual right to repurchase its warrants as fair market value through an independent process directly from treasury. one source of complexity in

valuing warrants is that the warrants do not trade on any market so they don't have observable market prices. models by themselves cannot give us reliable estimates of the realizable price in the marketplace. so we're using a comprehensive approach to estimating these values. which involves variety of inputs including a set of well-known financial models. in developing our valuation and repurchasing process, we counsel with numerous market makers and industry participants. treasury also consults with third-party market participants as to what they'd be willing to pay for the warrants and we obtain full, independent valuations from outside investment managers. treasury decided to sell the warrants within several months after the eligible for sale. rather than hold them for a substantial period. our guiding principle is the president's belief that the extraordinary government interventions necessitating by the crisis should be unwound as quickly as is consistent with

treasury's mandate under eesa to restore liquidity and stability to the financial system while protecting the interests of taxpayers. as with all aspects of our financial stability programs, treasury welcome back the recommendations and comments of others as we continually strive for improvement, transparency, and accountability in all of our programs. earlier this month, treasury announced the selection of nine asset managers for the legacy securities public/private investment program also known as ppip. it's a critical element of treasury's financial stability plan and is designed to support marketing pricing in the asset-backed securities markets allowing other institutions to extend new credit to households and businesses. treasury took a number of comprehensive measures to

enhance the potential of this program. and to protect the taxpayer. we consulted closely with the sigtarp as we developed a robust framework for the compliance, governance and controlling conflicts of interest. treasury also ensured that there included a spectrum of women, minority-owned businesses that represent our communities. the t.a.r.p. has been key to stabilizing the financial system and preventing greater deterioration in the availability of credit to households businesses and recoveries. the first sign of recovery we've seen improvement in spreads, that is the measure of risk in the financial system. we've also seen the issuance of corporate debt has increased sharply. there are also some signs that the economy is beginning to mend. consumer confidence has increased frequently. housing starts have moved higher. house purchases have begun to pick in some parts of the economy. nevertheless, our financial system and our economy remain

vulnerable. even with the modest improvement in, unemployment and the level of home foreclosures remains high. strains in the commercial real estate market continue to build. this is why treasury must remain vigilant and press ahead. prior to taking office president obama wanted increased transparency in stabilizing the financial system. secretary geithner further underscored treasury's commitment to transparency in all our programs. one of secretary geithner and my priorities is to ensure that we enhance and provide transparency as our activities evolve. i will regularly update congress on our progress. we have productive working relationships with our four oversight bodies the special inspector general sigtarp, the government accountability office, gao, the congressional oversight council and the

financial stability board. treasury has accepted a great majority of the recommendations of those bodies. where we conclude that a recommendation is impractical, we find other means to achieve the same goal. treasury shares the concerns of congress and our oversight bodies that we see an increase in lending by banks. and we've required banks receiving a treasury investment to report their lending activities regularly. in january, treasury launched an important initiative to help the public easily assess the lending activities of banks participating in the cppp starting with the top 21 banks since they account for over 50% of lending in our communities. then in march we expanded the survey on to include all banks in the cppp and has now published three lending reports with data from over 300 banks. because these are critical in helping the public to help, we have asked 10 banks that have paid the treasury's cppp

investment to continue to participate through this sierra through the end of the year and they've agreed and we appreciate their cooperation. treasury is working urgently to maximize the impact on our programs on financial stability but we must allow some time for these programs to have their full effect. we recognize that we have much work ahead. to restore the flow of credit to consumers and businesses and alleviate the real hardships that americans face every day. as my colleagues and i work on this important financial stability effort, we will strive to be prudent very fares on behalf of the american people and the taxpayers who have entrusted us with so much of their money. here are the top priorities of the office of financial stability. first, we will carefully review the controls over taxpayers' money giving special attention to compliance with laws and directives given have governing risks and internal audits. in this regard we will work closely with congress and the oversight bodies. second, we will strive to

maximize the effectiveness of financial stability programs. restoring soundness to financial institutions and liquidity to our markets. and finally, we will emphasize transparency and interaction with congress so that the american people will know what we're doing with their money, why we are doing it, and how it's helping the financial system, the economy and their lives. thank you very much, and i look forward to answering your questions. >> thank you for your testimony, mr. allison. i now recognize myself for five minutes for questions. mr. allison, as you know goldman sachs is buying back their assets for $1.1 billion directly from the treasury. jp morgan chase is going to a public auction because according to news reports there's a feeling you are driving too hard a bargain which i'm frankly glad to hear. is $1.1 billion enough for goldman's warrants? would taxpayers have received more if they went to a public auction? >> thank you, chairman moore, for your question.

it's a question that we ask ourselves all the time. even though we're contractually obligated to go through this process of independent valuation of a bank if it chooses to do so, if a bank decides it would rather to auction the warrants, we are willing to go that route. we have modeled both approaches, of course, as i mentioned in my earlier testimony a month or so ago -- we can't tell for sure how the market will end up valuing warrants. we try our best if the process is going to be the independent valuation approach mandated by contracts to get market-based information nonetheless. and so that's why we go out and we ask market participants to give us quotes on these warrants. we are satisfying based on those quotes, based on analysis by asset managers and based upon our own use of valuation models similar to that used by the copp

that this is a very fair price for taxpayers. we're comfortable with that. and although i still can't tell you we would do better or worse out in the open market. nonetheless, based on the system we use for every bank and have since the beginning, we are very pleased with this outcome. >> thank you. mr. allison, what's your response to the paper from professor linus on old national as well as copps report the treasury could miss out on a $2.7 billion worth of returns for taxpayers. what policy issues does treasury consider when reviewing these warrant repurchases? and also i've heard some say auction should be held shortly after earning season providing transparency to all potential buyers. when will treasury hold these auctions? >> in response to our view of the process of the copp, first of all, we use a similar model to the copp. we respect their approach. we've had discussion about theirs and ours.

as the copp report pointed out, small differences in the assumptions that go into a model, especially when you're valuing warrants as long as 10 years can have a major impact on the result of the valuation. and in this case, one of the assumptions has to do with whether there should be a discount to the price because small banks have much smaller warrant positions that we hold. and when they're sold, there's likely to be less demand, less liquidity in the market and, therefore, a lower price. we factor in for small banks a discount for the lack of liquidity of those warrants. so that's one reason why there could be a difference between the model outcome of the copp and ours. i would also ask that you look at the comments of various copp members addended to the copp report where they point out some

of these issues. i think we have -- while we're all trying to do our best to try to value these warrants, we have to respect the uncertainty of a model and that's why we use alternative approaches such as going into the market and asking real market participants what they think the warrants are worth. >> and my final question, mr. allison -- i know you've only been on the job for a month but have you given the thought for a t.a.r.p. -- the law creating t.a.r.p. requires after five years the president must submit a legislative proposal to congress of how the financial services industry will pay for any remaining outstanding losses on the program. since we're nearing the one-year anniversary of the law do you expect we'll have losses on the program in four years? >> yes, sir. the eesa legislation provides that at the end of the year, we might end making investments in companies, however, the secretary of the treasury can make a determination as to

whether the program should be extended. that is for making investments until october of next year. the secretary will be deliberating that matter in the fall and will reach a decision. i should point out that the features of these investments either contain expiration dates for our investments or increasing costs to the -- to the bank in which we're investing so there are ininventoritives built into the programs for banks to repay treasury as rapidly as their financial condition allows. >> thank you, sir. my time is up and at this time i recognize ms. biggert for any questions she may have for you, sir. >> thank you, mr. chairman. this is sort of similar, mr. allison, the treasury is being criticized for not securing the best possible return on its investment.

in fact, i think in the congressional oversight panels, the copp recent report they accuse the treasury of reselling the warrants back to the banks at two-thirds of their actual value. is this true? >> thank you for your question, congresswoman biggert. this is a question many people are asking as a result of that report. we have, as i said, taken various approaches to valuing these warrants. the exact same approaches that we took in evaluating goldman sachs' warrants and we determined based on this approach that we were receiving a very fair value from those smaller banks. and that's why we accepted those bids. and we will eventually be disclosing more information that lay behind those bids and our decision. and we look forward to making that information available down

the road. >> is there a difference because the small banks have probably less liquidity than the larger banks? >> yes, that is true. in fact, we did as i mentioned, apply a liquidity discount in the model. that was also by the way reflected in the market indications that we receive. we did not approve the liquidity in the case of goldman sachs and the case of other banks because given the value of those warrants, they're more likely to enjoy liquid market if they were auctioned. >> okay, can you give the taxpayer -- the american taxpayers assurances is using the very best means to recapture the taxpayers' money? >> i can assure you that we're making every effort and this is our obligation to the american public to receive an appropriate and ample return for the taxpayer. we know they're the ones who put

their money at risk and we feel a great obligation as responsible stewards of their money. >> well, you received a fair value but was it -- is there a difference -- the best value. >> we believe that this -- that in each of these cases, these were ample values and we've applied the same standards to all. so we examined each method and the results that it produces and then we determine what is an appropriate price that we should demand from each bank and we stick to that price. >> as i mentioned in my opening statement, it's vital that we, you know, prevent any individual or fiduciary entity or business involved in t.a.r.p. for making a profit based on insider information, especially, when it's at the expense of the taxpayer. what's the treasury doing to prevent to interact this?

>> we've had many close consultations with the sigtarp. we have also invited the sigtarp's staff to meet with us and the -- and the candidates to be asset managers on the p pip program, for example. i think we've had a robust dialog with inspector general barofsky and his team about this. we are charged with promoting financial stability while protecting the taxpayers. our mandate and the reason for the law is to build and implement programs that are going to eventually help the american public and the financial system. and so with that in mind, we have decided on an approach where we and the sigtarp will have the access to trading data across each of the fund managers that we're hiring daily so we

and the sigtarp can check trading in the various funds of each of these fund managers to see whether, in fact, there are any questionable trades that might cause us to wonder whether we're getting full value for the taxpayers' money and whether the managers are trying to take advantage of our investments at the benefit of one of their other investments. so we have almost real time ability to intervene. we're also getting certifications from the managements of these funds. we are prohibiting fund complexes from having one fund trade with our fund as another control. so we have, we think, very robust controls to protect the taxpayers. >> in mr. barofsky's quarterly report, which was released yesterday, he highlights the fact that treasury has declined to institute barriers to prevent the conflict of interest with the managers of the ppif program. maybe this was before you worked

something out with them. but thinks this could have serious consequences with money laundering or the government's increase to losses with no corresponding increase in potential profits. is this accurate? >> well, we carefully considered sigtarp's recommendation. we welcome sigtarp's ideas. i may say that the sigtarp has suggested dozens of ideas to us and we look back and we've accepted in a way very similar accepted the sigtarp's recommendations. about three-fourths of the themes there are cases where we have determined that in the interest of financial stability and because we can find other ways of protecting the taxpayer, that we declined to implement and one of these cases has been the creation of a wall.

now, in many cases and here i draw on 35 years of experience in the financial services industry. in many cases it makes great sense to have a wall to separate asset managers in one area from asset managers in another. in the case of the asset managers we're hiring, on behalf of the taxpayer, we want to have their best talent working for the american taxpayer in the ppip fund but these managers in these fund complexs are already committed to other funds that they manage. the fund cannot take them away from those in order to focus on ours. conversely if we allowed the best managers to stay with the other funds we'd have to have them hire other managers without the track records why we hired those fund complexes. we have -- instead of having a wall, we provide transparency. the ultimate test -- and i've worked with walls. a wall can be defeated by people

determined to collude. they can leave the workplace and go out in the street and talk to each other. they can use cell phones to talk to each other. even if you have a wall you have to make sure the wall is working. that's why we're insisting on these managers making available these trades across the fund complex everyday and what they're doing, pin them right then and there if we see suspicious activity in order to attract the taxpayer. >> thank you. >> i'm going to have to advise the witnesses and the members that we have votes being called in the next 15 to 30 minutes. there are six votes which i suspect will take an hour. miss kilroy, you're recognized for 5 minutes. >> thank you, mr. chairman. mr. allison, thank you for being

here that have been. -- this afternoon. it's my understanding that the t.a.r.p. statutes initially permitted treasury to convert a warrant to cash or to exercise it when deciding to do the public reasonable gain and that the market was optimal for such assets. and that the goal of that was to maximize the value for taxpayers. is that correct. is that your understanding? >> yes, congresswoman. the law has changed several times since the eesa law was enacted. and recently we've been given the ability then, the flexibility, to sell the warrants at a time of our choosing. when we think it's in the best interest of the taxpayers. >> and do you believe that it's still -- despite the changes of the law, the goal to maximize return for the taxpayer?

>> we believe that selling the warrants relatively soon after we're repaid by the bank for its preferred stock investment -- that it is appropriate for us to sell the warrants in a way that will benefit the taxpayers. one of the reasons is that a warrant value is based on a stock value that incorporates the markets' expectations regarding the future performance of the stock. so even if we sell the warrants over the near term, we're not forfeiting the upside potential of the warrant. we also find if we hold the warrant for a long period of time and here it gets a little bit technical, the option value of the warrant declines. we also would engage in market time for holding the market for a long time. we are not long term investors in trying to wait the right time to sell the stock and there never really an agreement in determining the right time to

sell. >> separate and apart from the timing issue, is there an issue in protecting the taxpayer and protecting taxpayer confidence in the process of the methodology by which the warrants are sold or converted to cash? >> well, again, where we are going to be disposing of the warrants we first have to follow a contractual process where the bank that issued the warrants has the ability to bid to buy back their warrants. in most cases we have not accepted it. we have let them rebid if they wish. if they decide to no longer bid, we have the ability to go out and auction the warrants in the open market. >> the contractual process --

would you agree is more one-sided and giving the banks the methodology for the sale of the warrants? >> actually, congressman, i think it puts the treasury in a very good position to represent the taxpayers. we do not communicate what to us is the price that we require in order to sell in that process. the bank has to bid. we will not accept until there's a bid that reaches our considered price. and at that point, if they reach that price, and some don't, we will sell and we think at that point we are capturing ample value for the taxpayer. let me also add that -- i know there's concern and you voiced it about whether we're doing this in a closed room. we are going to be disclosing information about the

methodology and the actual calculations that we used in arriving at the appropriate warrant price. i mentioned at the appropriate time right now we're engaged in discussions with a number of large banks. we think it's in the taxpayers' interest that we defer that disclosure until a later date. >> you do understand -- would it be your understanding that the treasury would have no authority to enter into contracts with the banks regarding the t.a.r.p. money other than that flowed from the statute that set up that program in the first place in ? >> i'm aware that all of our actions on behalf of the financial stability and in the office of financial stability are carrying out the law, the eesa law. >> and that would include the obligation to protect the taxpayers' interests first and to use the phrase from eesa, to maximize the return for the taxpayer? >> absolutely.

>> thank you. i yield back. >> the ranking member is recognized. >> thank you, mr. chairman. i just have a unanimous consent to allow two members of the general financial services committee but not of the subcommittee to participate. mr. broad sherman of california and mr. kenny march of texas. >> without objection, so ordered. mr. bachus, congressman bachus, excuse me, you're recognized next sir. >> i've been called worse than that. mr. allison, the act we passed back on october first the eesa that includes the t.a.r.p. and the capital purchase plan, it states explicitly that proceeds from the sale of troubled assets and revenues from dividends shall be paid into the general fund for the treasury for reduction of the public debt

and, of course, i was part of the bargain in passing that act. >> yes, sir. >> the treasury has interpreted that -- and this is according to mr. barofsky's most recent report, you interpret that the maximum amount of funding is $299 billion so as long as you don't -- you don't have that much funding out, that you can replenish the fund as opposed to returning it to the general fund; is that correct? >> the limit that was set on the amount of investments outstanding at any one time is $700 billion. >> yeah, okay. >> as i mentioned, currently, that number is $360 billion. >> okay. >> we have budgeted to spend about $643 billion to date.

however, we have also received repayments, as you know, of over $70 billion so far. and that together creates head room under the $700 billion outstanding at any one time of about $128 billion to date. >> so what -- you've interpreted that as -- when you get these dividend payments that you don't have to -- they don't have to be returned to the general fund? >> all the money that is we receive are returned to the general fund and then under the eesa law --. >> then you drawback out? >> under the eesa law we may make additional investments so long we don't exceed $700 billion outstanding at any one time. >> it's deposited in the fund? >> it's deposited and then there's a new decision and a new allocation. >> okay. all right. i'm sure you're aware chairman frank has introduced t.a.r.p. for main street.

>> yes, sir. >> which is legislation that uses the dividend payments and i guess the warrant payments,, too i'm not sure about that, to fund several public housing initiatives instead of the money being returned to the treasury or -- was this type of use of t.a.r.p. in your opinion ever envisioned by the treasury department? >> let me first say that the treasury is carefully looking at chairman frank's proposals. and we also, however, believe that it's important to maintain the head room that we have today keeping in mind that while conditions have improved a great deal, there's still strains in the financial system. banks are still facing pressures. but let me go back and say that we are carefully analyzing chairman frank's proposals and

we will be coming back to chairman frank with our thoughts. >> do you have any initial concerns with, you know, legislation that draws out of that fund for purposes other than what was authorized in the eesa? >> i think we can have more conversations about exactly what form that would take before i could draw a conclusion. >> it really sounds like you're not taking any hard approach that you're not going to reach into that fund for all sorts of new ideas? >> i would not presume at this point to speak on whether we might or might not be funding some of those initiatives out of the t.a.r.p. funds. and -- but we're considering it very carefully. >> sure, would you have conversations with the minority as you move forward? >> let me say, congressman, that i look forward to meeting with each member of the committee,

and i'd be glad to discuss and respond to any questions or suggestions that you may have for us. >> let me have one quick question. rahm emanuel said that the obama administration has rescued the economy. do you agree with that assessment? >> i would say that the -- that the eesa law has played a very important role in improving the financial markets and the soundness of the financial industry in the united states. which has already had measurable benefits for the american people. >>ñr sure. and i do agree the act that was passed last september has had benefits. i'm not sure that we can pronounce victory. our former president did that on a foreign policy matter and it came back to bite him. >> as this president has said, it's going to take time to heal this economy and to heal the financial system. >> thank you.

>> thank you. >> thank you, mr. chairman. thank you, mr. allison, for joining us this afternoon. i have been listening to the discussion. although i haven't been present in the room but i do have a couple of questions for you. the inspector general for sigtarp was before another committee yesterday. and he was very clear that no one in treasury has come over to review the surveys that he has received from every one of the banks in terms of how they are using t.a.r.p. money. i find that absolutely unbelievable and irresponsible that one agency of government has been able to access information, has the information and nobody from treasury has looked at it.

no one from your shop has looked at it and i want to know, why not? >> well, thank you for your question, congresswoman. ot? >> well, thank you for your question, congresswoman. first let me compliment inspector general borovsky. i'm happy to meet with him about this. >> so you're going to meet with the inspector general and review the material he has developed in the survey of 360 banks? >> i will be very pleased to meet with him. >> great. >> in his report that he issued yesterday, he said although treasury has taken some steps towards transparency and t.a.r.p. >> and fulfill treasury's stated commitment to implement tarp with the highest degree of accountability and transparency possible. now, one of the rexes is that --

recommendations is that treasury should require all tarp recipients to report on the actual use of tarp funds. treasury has declined saying that reporting would be meaningless, and i've got to tell you that my constituents probably don't think it's meaningless to know precisely where their taxpayer dollars are going. so my question to you is will you actually adopt that particular recommendation? >> well, first of all, we welcome the recommendations of the sigtarp and the other oversight bodies. as i mentioned earlier in my testimony, we have adopted or come very close with a few minor details to continuing about three-forths of the recommendations we have received -- >> well, there's only five, there's only four recommendations here, and he says you haven't adopted any of them. i just want to get a clear answer. will you or will you not make public how the money that's been received by these banks in tarp

have been spent? >> yes. let me, first of all, point out that every month we provide comprehensive information on our web site, financial stability.gov, about the actual lending activities of all the banks in which we have invested. >> mr. olson, with all due respect i just want a simple answer. either you're willing to do it or you're not willing to do it. >> well, we think that the most important -- >> either yes or no. will you do it? >> we are, we have looked at that possibility. our concern, which we have mentioned, is that if we -- let me give you some examples. this is a capital purchase program. its intent is to provide capital to banks. we disclose all those activities, every capital transaction whether we invest or whether we receive monies back is posted on our web site within 48 hours. there's voluminous information

about that. once the money has been invested on a daily basis the banks may be shifting the use of the funds. they're dynamic institutions. if they report one day the money has been used for this, another day it can be changing. furthermore, because the money is all placed in a cash account as it's received and money is fundable, while the bank may say that they have, let's say, put $50 million -- >> mr. allison, i hate to interrupt you, but my time is very limited, and you've just used up another 2 minutes. this is my request to you: mr. barofsky bereaves that you can -- believes that you can put this on a public place for public distribution. i'm asking you to work with him and find a way by which the taxpayers of this country are going to be able so -- to access this information and know how the banks are spending their money. i want to know, and i'm really

getting tired of many of the people in the administration and, frankly, some of my colleagues in congress protecting the banks. we should be protecting the taxpayers, and the taxpayers have every right to know how their tarp money is being spent. >> the gentle lady's time is up, and the next person who will be recognized is congressman mchenry for 5 minutes. >> thank you, mr. chairman, and thank you for your testimony, mr. allison. i think to my colleague's point here, you know, money is obviously fundable, right? so it would be very difficult for you to say that it's the $100 billion or the $1 billion that this institution got that they lent here, the whole deal. that's fair to say. is that correct? >> yes, sir. >> okay. now, the point that i think many of us have is we're concerned about what's happening on main street, you know, how that money

is actually being lent. so to get more precisely at my colleague's question, are you able to track lending standards for these various institutions? >> while we post the actual information on lending by all those banks which we think is very porn for the public to know -- important for the public to know, we are not the regulator for those banks. we don't oversee the banks' lending standards. our role has been under the eesa law to provide capital to promote the stability of those banks. not to manage the banks and not to regulate the banks. the regulation is handled by other regulatory agencies. >> obviously. but in terms of disclosure and tracking those lending standards, are you doing that? >> we are not tracking the individual lending standards of each bank. >> okay. >> i assume that the regulators are very much involved in monitoring the lending standards of each of those banks. >> yes. but we have you before the congress about tarp funds and

tarp funds which are then being lent out or not being lent out. >> that's right. >> and the sigtarp report says that, obviously, this can be done to track lending standards, and so we'll get so that on -- to that on the next panel with that i'd like to yield the balance of my time to my colleague from new york, mr. lee. >> that's very kind of you, sir, thank you. >> thanks. >> just a quick question, and it gets back to -- and i've got to tell you the taxpayers in my district are very frustrated with the what we are doing in washington and the concern over the debt that we have many this country -- we have in this country. at the end of this year the projections are close to $2 trillion, and understandably i think it is very positive news in the fact that we have, i believe you mentioned somewhere in the neighborhood of $70 billion being paid back. but overwhelmingly i hear from my constituents the need that we need to start paying down this debt rather than -- it sounds

like what i heard from you today is we just plan on keeping the program going on in perpetuity, or at least the next five years. dollars coming back potentially being reinjected into the market and going to places outside what their original purposes were stated. is that true statement? >> thank you for the opportunity to clarify that concern. under the eesa law, the treasury would no longer make investments in institutions after the end of this year unless the treasury secretary makes the determination that it is in the interests of the economy and of the nation to extend this program until october of 2010. that's what the law -- this is not an open-ended, unending investment program. and in the investments themselves there are built-in incentives to pay back the money. the cost of the funds in many of these programs rises over time.

in some the program itself expires over a period of time. so we are very mindful of the need to protect the taxpayers' interest to get the highest possible return we can, to be careful stewards of the money, and we also understand this program in terms of making investments will terminate at some point in the not too distant future. nonetheless, the government may still hold investments for a longer period of time. and we are preparing for that event callly to make sure we continue to have the procedures, the policies, and the personnel to be responsibly overseeing those investments. >> thank you. >> thank you. >> yield back my -- [inaudible] >> thank you. and the chair now recognizes mr. grayson for 5 minutes. >> thank you. and i will remind everybody in the room that votes are about to be called, so we'll probably go another 5-7 minutes after votes

are called and then recess the hearing and come back after votes are concluded. you're recognized, sir. >> thank you. on page 3 of your statement, mr. allison, you say we have provided capital to 657 institutions across 48 states including over 300 small and community banks enabling banks to absorb losses from bad assets while continuing to lend to consumers and businesses. we continue to invest in banks every week. in terms of that statement, mr. allison, i think of this myself as a distings between good banks and bad banks. good banks remain profitable through the economic disaster that we've experienced the past year and a half. well-managed, can assess risk properly, and they're fundamentally different from the bad banks who have basically taken bets often with taxpayer-provided money. they made bad decisions and, unfortunately for all of us, many of the people at those banks are still in charge of

those banks making more bad decisions every day. now, it seems to me that if you provide a dollar worth of capitol to a good bank, that bank might be able to make $10 worth of good lean -- loans. if you provide to a bad bank, it will try to cover its losses, maybe pay out more money to its bad management, maybe pay out money to its shower holders and not do what they're trying to do through this program, so why is it that we do something like enable banks to absorb losses from bad assets in this program? why don't we invest in the good banks, not the bad banks? >> congressman, thank you for the question. we are investing in banks that are deemed to be viable by the regulators. and banks voluntarily come to us. but they must be deemed to be viable banks. now, some viablebacks have -- viable banks have bad assets,

but they're still very important to their communities. and so as part of the financial stability effort, we're helping banks to recover, stabilize so that they can continue lending in their communities to businesses, large and small, and to individuals to keep the economy going. >> well, following this line of questions, wouldn't we be better off if we gave the same amount of money to good banks so that they could expand their operations and make more loans rather than propping up bad banks that have made mistakes that have cost all of us? >> congressman, these are viewed as good banks with bad assets and as banks that can be viable and ongoing and continue to serve their communities. >> how do we get to a point where a good bank has a bad asset? seriously, doesn't that reflect some really bad choices on the part of the management of that bank whenever they have a bad asset? >> i think that virtually every bank has some bad loans on its books, and what we've seen is

because prices of real estate have declined so much, commercial as well as residential, a number of companies have had to go out of business because of declining economic activity. loans that seemed to be quite good when they were granted turn out to be not so good in an extreme environment like today. >> and yet we have had banks that make the right decision. are you familiar with the concept of moral hazard? >> yes, sir. >> aren't we inviting serious moral hazard by continuing to prop up bad banks rather than helping good banks expand their operations and let l capitalism work? >> well, sir, we have to keep in mind that these banks have to pay us back. and we've been well paid back just today by one of them. and we're making every effort to make sure that the taxpayers who made these investments obtain an appropriate return. that's our responsibility, to work on their behalf. at the same time, these funds are going to help stabilize not just the banking system, but the economy which benefits all

americans. and we have seen that the banking condition has improved. we've seen that home sales are starting to stabilize in many parts of the country. the risk of the financial system has declined which is good for everybody. and we're hopeful that by continuing to provide the support as the banks need it that we're going to have a strong underpinning to begin this recovery that we're all so anxious to see. >> but resources are always limited, even for the federal government. wouldn't we be able to accomplish all of that and more if we directed our support to good banks rather than propping up bad banks. >> well, again, i believe that many of these were good banks that were active in lending in their communities, and we're now seeing a financial situation that this country hasn't experienced since at least the 1930s. this is an extremely serious decline in asset values that's

affected every american. we have to keep the economy going. the whole purpose of this program as enacted by congress last year was to inject capital into the banking system so it could not only survive, but stabilize as soon as possible. >> i see my time is up, but i would urge you, mr. allison, to give some thought to this subject. if you are continuing to informs in banks -- invest in banks every week, give some thoughts to investing in the good banks, not the bad ones. >> thank you for your advice. i appreciate it. >> mr. paulsen, you're recognized for 5 minutes. >> thank you, mr. chairman. mr. allison, you mentioned you could not comment on some of the existing negotiations and discussions you're having with some of the banks given they're trying to buy back some of the warrants they have outstanding. >> yes, sir. >> i've had some questions come back to folks i'm working with, but you also mentioned in your testimony that if treasury and these firms or these banks cannot agree on a fair market

value for these warrants, that the warrants would be sold by treasury on a public auction, correct? >> yes, sir. >> is there a timeline on that public auction of when that would be? is there a time frame that would be put in place when the auction would actually take place? are there guidelines, stipulations you can share? >> yes, sir. thank you for the question. we're actually working hard on those guidelines now. they're not yet completed. when they are, we will provide more information. we want this to be as transparent a process as possible, but we've had to give very careful thought since this amendment to the act was put into place on how we might best do this in a way that protects the interests of taxpayers. >> okay. and just knowing that it's in the interest of protecting tax taxpayers and repaying and reunwinding all of this that has taken place, you don't see this is going to be another year -- >> no, sir. >> okay. just kind of curious on that. from your estimation, all the

work you've done on this ire shoe, do you think that the tarp funds have been equitably reaching the smaller financial institutions? >> well, most of the institutions that have received tarp funds are small, and we have at least 300 quite small and community banks and other small institutions who have received these funds. nonetheless, we are concerned about making sure that small banks, which are so vital to their local communities communid account for an outsized portion of small his lending, are able to continue lending. that's why we reopened the cpp program in may, i think it was, to make it possible for these banks to -- if they needed -- tap into the cff facility. and -- cpp facility. and we've had a number every week who are coming to us for that funding. and giving us their preferred stock. we're also looking at other ways of assisting small business, and

we may have some announcements to make about that before long. >> and this was a question i was going to s also, for the next panel, but it seems at least i'm hearing differently from some of the smaller financial institutions about their inaccessibility for some of the opportunities of these funds. i was just curious on why i might be hearing that perspective from some of these folks? >> well, first of all, i'd like to know the names of those banks, congressman. we'll get in touch with those banks as soon as possible. they also should be talking with their regulator. we, we make investments on the recommendation of the bank's regulator. so the first stop should be the regulator. and then we will consider the investment. >> okay. thank you. i yield back. >> thank you. >> mr. marchant from texas, you're recognized for 5 minutes, sir. >> thank you, sir.

could you just real quickly discuss the concept of head room that you were talking about earlier? you've got a $700 million, basically, cap on the amount of money that you can put out at any given time. >> yes, sir. >> so now that we're pretty far into this program you also have an inflow of money. >> crease. >> so you have kind of a revolving fund. so is it public how much the goldman sachs transaction was worth today? >> let me make clear that when money is repaid to us, it's put in the general account of the u.s. treasury. >> okay. >> and so the head room is the difference between the amount that we have budgeted, and the amount that, of the total limit which is $700 billion.

plus the amount that's been repaid. so we have budgeted totally about 643 billion, but we've also repaid money, and when you add the repayment to the difference, you end up with about $128 billion of what we call head room which we think is important to have at this point in this economic crisis in case banks find that they need additional funding in order to maintain their activities and preserve their financial strength. >> but when you define budget, you mean those are funds that you've already committed that have not been dispersed? >> these are funds that we have allocated, and we may use for certain purposes. let me point out that at this moment we have invested about $360 billion. >> okay. >> but, so the difference between the 360 and the 643, i believe it is --

>> well, when you say -- >> -- is what we have more or less earmarked for additional uses if necessary. >> so when you say allocated, it may be an asset-type allocation but not a specific obligation to fund a bank? >> as far as the cpp program goes, that is correct. yes, sir. >> so if the, if congress reauthorizes the extension to october 2010, is that correct? >> it would be the treasury secretary who has the authority to extend the program until october 2010. >> so if the treasury secretary authorizes the extension to 2010 -- >> yes, sir. >> -- then this whole dynamic process of head room and inflow and outflow remains the same. i mean, you've got that, you've got that pretty well fix inside the way you're going to do that? >> yes, sir. >> then 2010, is there a possibility to extend beyond

that? on the part of the secretary, or would that be a congressional act? >> i believe that treasury's authority, the secretary of the treasury's authority extends through 2010 to extend that. >> and then that's to disburse, and then the repayment follows that. >> payments could continue for some time. yes, sir. >> but then there's no longer any outflow, it is all in flow at that point? >> that's my understanding of how it works, yes, sir. >> and as far as what if you ended up with a situation where you had in excess of the 700 because the repayment of the tarp and the sale of the warrants and the redemption of the preferred and the interest paid? >> do you mean -- we would not be above 70 billion, we'd be well -- 700 billion, we'd be well below it. >> you've already forecasted --

>> there's a limit at the amount we can have outstanding at any time. we may not exceed that number. >> so it goes into the treasury -- >> yes, sir. >> -- in the general fund. >> yes, sir. >> but we've already rawzed the debt ceil -- raised the debt ceiling to include that appropriation, correct? >> sir, you're getting beyond my expertise when it comes to managing the debt scene. >> is there a snapback provision in the bill that says as the money comes back into the treasury, then the money is paid down on the debt? or do we not already have through the -- by raising the budget, isn't the money really captured in the federal government coffers? >> i will get back to you on that, but it's my understanding that as the money comes in that reduces the national debt as it comes in. >> okay. >> but let me, let me give you a

more definitive answer on that took place. >> okay, thank you. >> thank you. >> i thank the gentleman, and i would thank you, mr. allison, for your testimony. you're excused, and i invite the second panel to sit down. we have just a very few minutes before votes are called. we'll go as long as we can. >> mr. chairman? >> yes, sir. >> i'd just like to introduce into the record the special innocent general's report on the banks' use of money which does show that 83 percent of 'em told the sig that they were, had used it for lending. even the 4 percent that said -- >> have or have not -- they had or had not used it for lending? >> had. >> oh. >> so it does, i think, indicate at least some evidence that the u.s. banks are using the tarp funds to increase lending. some of them did it to maintain their capital levels and stay in business, keep the doors open. >> without objection, it'll be

received into the record. thank you. and thank you, mr. allison. at this time. >> thank you, mr. chairman. >> i'd invite the second panel to be seated. i'm pleased to introduce our second panel of witnesses for this afternoon's hearing. we'll start with and welcome back neil barofsky, the special inspector general of sigtarp. next, elizabeth warren, chair of the congressional oversight panel, and finally, we'll hear testimony from mr. tom mccool, directer for the center of economics at the government can't office. without objection, your written statements will be made part of the record. you'll each be recognized, and votes are now being called. you'll be recognized for a 5-minute statement summarizing your written testimony. inspector general barofsky, you're recognized for 5 minutes, sir. >> thank you, mr. chairman, it's an honor to be back before this committee. >> thank you. >> it's also an honor to be sitting next to two of our most

important oversight partners, of course, professor warren and mr. mccool from gao. this week we've introduced and presented our most recent quarterly report, and the oversight that we've been conducting over the past quarter. ucting over the past quarter. and so much of that is the result of the coordination that we've had with our oversight partners. one of the things we strive for is to coordinate the oversight. it's now being extended with activity of the federal reserve. we've strived to coordinate that oversight, working with gao, our important audit partner, trying to cover as much of this terrain governance utilizing

the experience and activity of both of our agencies and we've recently this month did a coordinated project with professor warren and the congressional oversight panel. the first part was -- i thought their excellent valuation report and their july report and the conclusions there. we're going to be using that as context for an audit that we've launched into the warrant repurchase process. basically in our report that we've just delivered this week, i'll just very briefly describe what's contained in there. we do a brief overview in what's happened in the last three months in the t.a.r.p. there's been a lot of activity from the bankruptcy to the auto companies from repurchase of more than $70 billion of capital -- in the capital purchase program. from the selection of the nine asset managers and $30 billion of taxpayer money in the private/public protection program. we attempt to put in that

context by giving detail surrounding approximately 50 other programs. you know, so often a particular t.a.r.p. recipient not only accesses the t.a.r.p. but will access other parts of the financial bailout from the government whether it's a loan guarantee from the fdic or borrowing money from the federal reserve and what we attempted to do in our report is bring transparency to that by setting out approximately 50 of the programs, most significant programs that have been implemented or discussed or described since the onset of this crisis. in section 5 of our report we give our recommendations. we go over our past recommendations and have issued several new recommendations. one of them which was discussed continued recommendation that treasury require t.a.r.p. recipients to provide information on their use of funds. as was also discussed we recently finished our audit which was completed and made public this monday and we've demonstrated that notwithstanding the inherent

fudgibility of money banks should or can report on the use of funds. contrary to mr. allison's suggestions we've demonstrated that this is a meaningful task and when we ask the banks what they did with the money they were able to tell us and they were able to tell some of the things that ranking member bachus that you described just moments ago. that they were able to explain how they were able to increase lending or at least stop the hemorrhaging, avoid further reduction of lending. banks told us they would have come to a standstill if not for these funds but they were able to explain other uses of funds, how they invested in money and how they're able to maintain capital cushions so they could withstand future losses. this is important data from our perspective and vitally important transparency. i understand the orthodoxy and the concept of capital accounts. and i understand that perhaps that is why treasury initially was so reluctant to adopt our recommendation. but now that we have the proof, now that banks when asked -- the banks themselves have said we

can report on how we're using the funds. we believe that these excuses and explanations for lack of transparency should no longer be countance. and in order to meet its promised goals to bring transparency to this program must adopt this recommendation. we also make other recommendations in the report relating to other aspects of transparency including the public/private investment program as well as some other íát(urjju that have been kicking around for some months including the basic one that treasury report to the american people what the value is of their investment. treasury receives monthly reports from its asset managers with estimates of what the value of the t.a.r.p. portfolio is and we believe basic transparency would require treasury to make that information public. thank you, mr. chairman. >> thank you, mr. barofsky. votes have been called. there's 10 minutes left for votes. we can hear one more witness and, professor warren, i'll ask

you to do a 5-minute presentation or less so we can go over and vote so we can reconvene and hear from mr. mccool and have questions -- >> we probably -- if she takes even 6 minutes i think she's in good shape. >> very good. [laughter] >> thank you. >> i think you know how fast i talk. thank you very much. thank you, chairman moore, thank you, ranking member. it is an honor to be here again today in front of this committee. i appreciate you're inviting us. i want to say as i always do to my gentleman to the left and right i'm part of a panel so when i'm here i'm not scripted which means i speak for myself. i will do my best to represent my panel but i represent only my views when i open my mouth. our job is to review the current state of financial markets and the financial regulatory system and to report to congress every 30 days. so far we have delivered to you eight oversight reports and two special reports on regulatory reform and on farm credit, both

of which are also required by law. we have also had nine hearings. we've been out in the field on your behalf. we will have our tenth hearing next monday in detroit. our contribution again our statutory mandate is a fact-based analysis designed to raise issues about the operation and direction of t.a.r.p. and about the broader effort to restore stability to the economic system. we call that asking whether or not t.a.r.p. is operating to benefit the american family and the american economy. we hit three repeating themes and that is the need for transparency, the need for accountability and the need for clearly articulated programs. we work closely with the gao and the inspector general -- mr. barofsky identified our coordinated effort which we're very pleased to participate in and that is an important part of the report we just issued on

warrant valuation. member bachus identified the key to what the warrants are about. we understood what the risks were when congress allocated the potential $700 billion to t.a.r.p., this is the american taxpayers one opportunity to participate in the upside. our statutory mandate is to look at the choices treasury is making and that really involves not just our july report but also our june report. our june report was on stress tests. the question about repayment in the first instance. and whether the stress tests were stressful enough. we then moved to our july report once the decision is made to take money back from these financial institutions. what should be the pricing on the warrants. in order to do warrant valuation, we thought it would be helpful in terms of oversight to do an independent valuation. to ask how it is that others

might value this, our own expertise within the panel. but also we were aided by nobel laureate robert merton and others who are all from the harvard business school, all advised us independently without consulting with each other. and they helped us review our model. they helped us review our inputs. ultimately we did all the calculations internally to the panel. and that's how we came up with the numbers we came up with. now, our finding that the price paid in the first warrants that were sold were about 66% of what our valuation would show was the current market value. if treasury got only 66% of current valuation as it went forward, that would be a loss of the american taxpayer of $2.7 billion. now, we're very careful in this report to point out some key features. the first is only a tiny proportion of these warrants

have been sold. and they are in very small banks in the first sales. we acknowledge there may be differences about what are the appropriate liquidity discounts to put into the valuation. we also acknowledge that there may be considerations other than maximizing the return to the taxpayer. for example, trying to get out of this business of holding warrants as quickly as possible and those could affect the valuation. i will say, however, that since we issued our report 12 days ago, chase has decided it wants to go to auction. goldman sachs has just struck a deal today which adjusted for the rise in the value of their stock prices over the last 12 days. is almost precisely at our estimated valuation. and i heard treasury announce in this hearing that they will be revealing more information about their negotiations over stock price warrants.

i think that means oversight works. so i mean pleased to be here today to give you our report, to answer your questions in any way that we can. and to talk about alternative approaches to valuing these warrants. i again appreciate the invitation to be here and i'm glad to take your questions. >> and thank you for your testimony. we are going to stand in recess until after votes and i would ask members to come back immediately after votes so we can reconvene this hearing and we'll finish up with the testimony of mr. mccool and have questions by the members. thank you. and i apologize for this interruption of our appearing but we do have to vote. thank you very much. and we'll see you all in a little bit. [inaudible conversations]

[inaudible conversations] >> we're going to reconvene. i thank you, for the witnesses, for staying around for the hearing and we got back here just as quickly as we could. mr. mccool, you're recognized, sir, for 5 minutes. >> thank you, mr. chairman. chairman moore, ranking member biggert and members of the subcommittee, i'm pleased to be here today to discuss our work on the troubled asset relief program. the economic -- i'm sorry, the emergency economic stabilization act that authorized t.a.r.p. requires gao to report at least every 60 days on findings resulting from our oversight and the status of actions taken under the program. my statement today is based on our fifth mandate report issued

on june 17th which follows up on our previous recommendations and covers the actions taken as part of t.a.r.p. through june 12th, 2009. our oversight work under the act is ongoing. and our next report will be issued in the next few days and will focus on t.a.r.p.'s loan modification program. specifically, my statement today focuses on the nature and purposes of activities that have been initiated under t.a.r.p. including repurchases of preferred shares and warrants and treasury's efforts to establish a management structure for t.a.r.p. as of july 10th, 2009, treasury has dispersed about $361 billion of the roughly $700 billion in t.a.r.p. funds. most of the funds, $204 billion went to purchase preferred shares and suborednated ventures of over 650 financial institutions under the capital purchase program. this program continues to be office of financial stability's primary vehicle for stabilizing financial markets. at the same time the treasury continues to purchase preferred shares in institutions, other

institutions have made over $70 billion to repurchase shares. as of july 10, 12 of the 33 institutions who purchased their shares from the treasury had repurchased their warrants and three others had repurchased of their warrants of about a return of $80 million. although the office and the financial stability and its regulargators have approved cppp applications the criteria for determining when institutions can repurchase preferred stock from treasury lack adequate transparency. this is an area in which we made a recommendation for did treasury and the coordination to ensure consistent criteria in the consideration of repurchases. while treasury has provided some limited information about the warrant valuation process, it has yet to provide a level of transparency at the transaction level that would address questions about whether the department is getting the best for taxpayers. this is another area in which we

recommend treasury provide such transparency in the process by publicly disclosing more detailed information about warrant prices. i was pleased to hear mr. allison suggest earlier treasury seems to be moving forward in that effort. although it's unclear whether any institutionless choose to participate in the capital assistance program the federal reserve did conduct stress tests of the largest bank holding companies to see how well they would withstand a more arduous than expected economic conditions. while the federal reserve disclosed the stress test results, it had no plans to disclose information about the institutions going forward. what information if any is disclosed will be left to the discretion of the affected institutions raising a number of concerns including the institutions could disclose inconsistent or only selected information. moreover the federal reserve had not developed a mechanism to share with the office of financial stability about the companies that continue to participate in t.a.r.p. programs. for this reason we made a recommendation to the federal reserve to disclose to the

public information on the companies against the more -- i'm sorry, adverse scenario and on a going forward basis. while the office of financial stability has made progress in establishing its management infrastructure, continued attention to hiring remains important. especially, within the office of the chief risk compliance officer and the homeownership group. those are areas where their hiring has not been up -- what they themselves say are their requirements. they still have a number of vacancies and they need to fill them as rapidly as they can. treasury has also continued to build the network of contractors and financial agents to support t.a.r.p. administration and operations that have been key to ofs's efforts to develop and administer the t.a.r.p. programs. treasury has provided information to the public on procurement contracts and financial agency agreements but has not included a breakdown of cost data by each entity. as a result, treasury has missed an opportunity to provide additional transparency to its t.a.r.p. operations and that's another area in which we made a recommendation to treasury to improve transparency.

mr. chairman, ranking member biggert, that concludes my statement. i'm happy to answer any questions. >> thank you, mr. mccool. at this time i'll recognize myself 5 minutes for questions. professor warren, once people recognize the transaction, do you have any sense $1.1 billion paid by goldman sachs will be enough for taxpayers? do you think we could have received more if goldman went through a public auction and are there other policy issues that should be considered? >> thank you, mr. chairman. i think it's a good question. using the valuation metric that is we laid out in our report, the goldman price comes in almost precisely at what we had recommended. i believe the goldman prices is $1.1 billion and using our valuation, it would have been $1.08 billion so we're within rounding error on that.

and that certainly increases our confidence. that treasury is using a strong valuation approach here. i do want to say, though, that there are these other issues that lurk in the sales process. and it's hard to find a substitute for the benefit of a public sale. public sale reassures everyone that this is the market price. but i certainly understand congressman bachus' point, there are times when we decide that we don't want to delay. that we want to be able to move faster -- these are costs and benefits and ultimately policy choices not just for treasury but for congress to weigh in. we think as your oversight panel the best we can do is outline it and give you than independent valuation that we have done and put the factors in front of you which we've tried to do.

>> mr. barofsky, do you have different thoughts about that or do you agree with what professor warren said? >> i defer to professor warren, her report and her study, i think, was comprehensive. i thought it was very instructive. we haven't done a similar effort. we do have an ongoing audit that will address different issues but i would certainly defer to professor warren and the panel on this. >> okay. mr. barofsky, another question. i noticed that in addition to your quarterly reports you issued this week you also concluded the use of funds audit that you conducted. what did you learn from that audit and what steps should treasury take to increase accountability in the t.a.r.p. program? i want to ask you that, sir. >> i think the most important thing we've learned i think we definitely proved that despite the inherent fungibility of money banks can when asked report on how they're using their funds. and that they can provide a great degree of transparency and answer that question. we saw that banks -- although treasury as mr. allison noted

does provide lending snapshots of each month, that's not the only thing that banks do with their t.a.r.p. funds. according to the banks themselves they use it to maintain capital cushions, assurance for a rainy day for future losses. they use it to acquire other financial institutions. they use it to invest in securities, you know, all sorts of different things that our survey helped provide a necessary level of transparency but it's only part -- our survey was a snapshot as of february but we don't have the resources to do this on a regular basis and it was voluntary. my recommendation treasury finally adopt my recommendation and require financial institutions who are receiving t.a.r.p. funds to report on a periodic basis on how they're using the money. >> with the sigtarp's use of funds audit and what copp learned when reviewing the lending process and when it affects families and small businesses? >> yes, mr. chairman, we did. in our field hearings and our

earlier reports, we have documented the constriction of the business lending and the activity used thus far by the treasury to try to stimulate small business lending. we think this is entirely consistent, what we have found and reported on with what it is what mr. barofsky has found and reported on through a different mechanism. >> my time is up and at this time i'll yield to questions from mrs. biggert, please, the ranking chair. >> thank you, mr. chairman. mr. barofsky, in talking about the audit of the warrant and valuation and sales, when can we expect to see this? >> you know, we're basically evaluating the timing. when we first launched the audit it was unclear when sort of the larger institutions were going

to be either purchasing or going through the audit process. now that we're seeing some of these repurchases, i think we want take a look and see what the auction process for it to be the most useful audit, i think i'd like to see that process being used before we project an end date. >> okay. and can you ensure that the audit will not compromise the treasury department to negotiate the best possible price for taxpayers? do you think there's any chance of that happening if the audit is out there and they're negotiating? >> with everything that we do, including this and any of our audits -- and really with our recommendations, it's inherent upon us. i think it's very important for us to take into consideration the point that you just raised. we would never make a disclosure midway through a negotiation -- anything that could possibly impact in a negative way on the taxpayers' return. our job is to protect the taxpayers' interest and we're very, very sensitive to these types of issues and protecting

confidential information to the extent it may impact or be a detriment to the taxpayer. >> thank you. and professor warren, the july report issued by copp states that the best manner to sell these warrants is on the open market. and as my colleague stated in his additional views to that report choosing a one size fits all method does not seem to be the most appropriate method to value these warrants given that each repurchase negotiation will have different circumstances. don't we need flexibility in the process to help determine the best value while getting the taxpayers out of the business of owning bank stocks or warrants? >> congresswoman, i actually think the report says exactly that. that there should be flexibility. we talk about the advantages to an open market process but we acknowledge that there are circumstances that may differ. i assume that is part of the

reason that congressman voted for that and he cited that report extensively. >> in determining like fair market value, do you use, you know, financial models or is it just the one size fits all -- i mean, like black shoal do you take into that consideration? >> our financial models are laid out in many, many pages in our report and as i said in my testimony, they were independently reviewed -- the models were independently reviewed by three highly renowned specialists in modeling all from the harvard business school. >> okay. and three members of the panel, representative hensalling and sununu voiced their support for

the administration's and treasury stated objective to exit warrant hearings as soon as practical after banks repay the preferred stock. it didn't seem it was stressed in the july report. >> it depends on the cost. there's always a judgment to be made and exiting in the fastest possible way in return for getting the lowest cost for the taxpayer may not be ultimately beneficial. on the other hand, i certainly understand the point about not hanging onto the warrants for 10 years. and the political as well as economic implications of that. so i think the main point in the report was that there are advantages and disadvantages to speed. and to going to the market in order to try to sell these warrants. ultimately, though, we did

emphasize the point that when there is a market-based auction no taxpayer needs to wonder what happened behind closed doors or whether the -- >> i guess my point is that it seemed like that was the majority and it wasn't really stressed in the report what they said. and next, the panel's press release for the july report contained the headline so far treasury has sold warrants at 66% at panel's best estimate of fair market value. and i think the headline seemed misleading since the banks have all redeemed their warrants, the banks have redeemed their warrants represent less than 1% of the value of all the warrants outstanding. it sounded like 66%. >> actually, i believe the press release makes exactly that point. but let's keep in mind when that press release was issued, the immediate response was that chase said we'll go to a public

auction. goldman, 11 days later, said we'll sell at the panel's recommended price and treasury said we will release more information about our sales process. if the consequence of this report is to encourage those sorts of responses, then i'm very happy about that. >> thank you. and the chairman next recognizes congresswoman speir. >> thank you. i want to thank you for being true public servants and incredible guardsians of the american taxpayers. having said that, i find this discussion very interesting 'cause on the one hand some of my colleagues often call upon us to think about small businesses and lending to small businesses and the fact that we haven't had enough lending to small businesses and yet we can't seem to get access to information

from the banks as to whether or not they are lending to small businesses and would we want to know that? isn't that what our job is really all about? now, i think we've got to be very practical here. this is an arm's length transaction that goes on between these financial institutions and the u.s. government and these warrants have value. now, i think timing has everything to do with our success at maximizing the amount of money we get back for the taxpayers. and it's very clear to me that there are some of these arrangement -- arguments that will not be successful, aig comes to mind. so it's important, i think, to maximize profits to compensate for the ones that are clearly going to be under water forever. and i'm hoping that as you continue to evaluate -- if you believe we should be holding these assets, these warrants, that we should hold those. it's an arm's length transaction. if the banks are coming to us

now and saying we want you to exercise the option on the warrant or to redeem the warrant, they're saying that because they know they're on the road to recovery and it's only going to increase in value. so it behooves us to be smart investors right now. and i would like your opinions on whether or not there is something to be gained by holding onto -- just because they say they want them redeemed doesn't mean we have to act and redeem them. our first and only goal should be at maximizing the profits for the taxpayers. your comments? >> congresswoman, i think you've put your finger right on the ultimate policy question here. if that is the only goal and that is what treasury should be doing, then treasury should act like any other investor. they should take these to market when it's appropriate to take them to market when they make the judgment that they would be better off to hold, then they

should hold. there are those who believe there are alternative considerations. there are those who are deeply concerned about the notion that the federal government holds warrants. we ultimately believe that is a policy choice. there's a difference of opinion on which is the right way to go with these warrants. and my strong view on this is that we laid this out in our report and ultimately congress should advise treasury about what it thinks is the right way to go here. i think we do this through this hearing process. we want to say that if what they're trying to do is maximize value, we can point out ways that we think that is best accomplished. if they have other considerations, then let me be blunt. then they should articulate what those alternative considerations are and how much money is left on the table in order to accomplish that.

>> thank you. mr. barofsky? >> i could not agree with professor warren more. i think that's precisely right. i think the report brought transparency to the issue. a decision needs to be made and i think the really strong point that professor warren makes that i can't agree with more is that we need to be up front in articulating what the policy decision is. be up front with the american taxpayer that we think there's good reasons to liquidate these warrants now because for whatever the reasons are for the benefits of the banks, let the financial institutions off the hook -- whatever the justification is, to be up front and honest about what's happening. i agree with professor warren on this. >> mr. mccool >> again, i would agree as well. police are tradeoffs here and i think as long as you're transparent about the tradeoffs and everybody should be involved in thinking about those tradeoffs in the decision-making process then that's the way i think it should work. >> mr. chairman, i would just like to point out that, you

know, there are people who want to see the t.a.r.p. fail. they want to be able to say, i told you so. so there are people, i believe, that are going to make us try and take action that are not necessarily in the best interests of the public because they want to be able to say at the end of the process that we should never have done it in the first place. so i hope that we keep our eye on what's most important here and that is the american taxpayer. i yield back. >> i thank the gentlelady for her questions and the witnesses for their responses. now i next recognize the distinguishing ranking member of the full committee, mr. bachus. >> thank you. i think the theme here could be that oversight worked. i mean, it worked very well. and i think that's always true of accountability or transparency. it normally has a very positive approach.

and i think one of the confirmations we got today, i think, that the panel can be proud of is the goldman -- the price, it was exactly, you know, as you say. it was actually $20 million more than you said and so that maybe can pay for the panel. [laughter] >> this is a panel that actually is going to end up making the taxpayers some money. you know, often the consumer or the taxpayer is not at the table. you know, and i think they were so in this panel. it's interesting the history was this was originally a three-page bill without any accountability. that i think the congress -- we put that in there. we put that accountability in there. which was the board and i think it worked very well. let's see.

you know, one thing that we always -- if we could look in the future and see where the markets and the economy are going, it would be pretty easy to make a call on whether we ought to hold it. although, i personally don't think that the u.s. ought to be sort of investing or speculating in the market, which to a certain extent, you know, if you can get a good fair price, you take it. now, you know, if the market dropped 600 points tomorrow and 300 the next day, i would say hold onto them. and that is a policy decision that i think the administration probably would have to make. and, you know, it would be with -- 10 years we can probably tell what we should have done. you know, one thing that did strike me and i heard four or five months from a bank in alabama that he went to a seminar in georgia and there was a bank there in georgia wanting

to buy -- if you're for sale, we want to buy you and they were going to do it with their t.a.r.p. money. so you did have 4% that made acquisitions, you know, it'd be kind of interesting to maybe go back and take a closer look at that. and mr. barofsky, i think they'll probably tell you the truth because you have a right to prosecute them. and you have that reputation that you're a very good prosecutor so i think -- now, you know, there will be some, i'm sure, in that number that actually will, you know -- the fdic or other people said this is a failing bank and they probably -- i wouldn't assume that 4% was a bad thing in and of themselves. i think the treasury has to understand what we have to understand as a member of congress is that this is the people's money. so there needs to be accountability. this wasn't -- you know, this isn't just a privatein