the principles of the global health initiative to broaden the scope of aubrey think of supporting health systems and setting priorities based on medical need and what are the biggest lagging indicators will help guide our work in this sector going forward and i appreciate your comments on that issue. . . a i believe for global health of skilled attendance at

birth than focusing on the needs of women and girls will create a strong strategic priority in that space. thank you. 's be the time of the gentleman has expired. the gentleman from georgia, \mr.{~}{-|}\mister scott is recognized for five minutes. >> thank you \mr.{~}{-|}\mister chairman. dr. shah let me first of all commend you and the obama administration for the very quick response to the situation in haiti. i would like to ask you a few questions about that if i may. first of all, as of today, how much money has usaid spent in the disaster relief in haiti? >> i believe the overall federal commitment has been just over $600 million, maybe just over 600 and 30 million. of that amount, i think usaid has been approximately 350 million with the majority of the alternative part of that

being department of defense spending. >> and which leads to my next question, where has that money been spent by category? >> i would have to provide you more specific rate down but the more areas have been a disaster relief account which immediately supported priorities for urban search-and-rescue. we sent our to train international search-and-rescue teams but also for five other teams that were stood up by fema so that we had at any one time more than 500 american search-and-rescue professionals with heavy equipment and specialized training at work for an extended period of time. we made significant investments in the health space spending resources to take disaster assistance team from the department of health and human services and put them in place, supporting the treatment of more than 30,000 haitians in that context and then food and water were immediate priorities that accounted for a large bulk of that spending. we successfully supported the

discretion of food to more than 3 million people who are at risk and had some have some immediate and aggressive procurements to make sure people had as much access to water in the camps as possible. we think we successfully met the needs around water and that was a big concern in the early moments of those up in the big areas of disaster assistance spending and in addition to that the department of defense with its personnel and its other resources and the comfort hospital ship also cost items we are tracking. >> going forward dr. shah, where do you feel the priority should be now? where is where's the greatest need now for the people of haiti? >> the immediate needs are into areas. one is in the collective effort to remove rubble from and other waste from critical sites, whether they are elevated sites where people could live or whether they are drainage systems that will be critical when it rains, and link to that of shelter and sanitation.

we are aggressively pursuing those three priorities with the common goal of reaching every haitian was shelter materials first by march 8 and then an expanded set of materials by april 8. that is a top priority in the second priority is public health. we have vaccinated more than 150,000, trying to reach 150,000 and have reached 80,000 so far in advance of the rainy season. >> there have been some reports coming to us from haiti that in our efforts to really move forward and help them particularly in our food export area and particularly in the area of rice which is a major farming product of the farmers in haiti, and there has been some concern that maybe our efforts to do that have undermined the basic farmers in haiti because we have oversupplied the market and thereby putting disincentives in for the haitian people themselves and farming to

produce their own food. can you give us an assessment of that situation and what are we doing to make sure we correct that? >> it is an incredibly important.. what we did is initially upon sending food we also sent some experts who could track market prices of different food commodities including rice, vegetable oils beans and track the flow of charcoal and cooking supplies and markets to make sure markers to make sure we are pursuing and assistance strategy that did not impede local market systems and resilience. we have been tracking that closely. we do think we have had an aggressive response. the data on the rise and beans and vegetable oil is that we have not had a significant price effect and complementary to this effort we have accelerated our major program to support the agriculture sector including trying to get fertilizer support and cedes another agricultural support out to farmers in this farming season and we will continue to track the price of

rice closely to make sure we are not distorting incentives for local production and you are right to point that out as a critical issue. >> we do have effective monitoring and evaluation and measurement systems in place to measure what we are doing? >> as best we can in an emergency environment. we were getting wildly different price estimates from different markets which would not take place in the normal setting so we are doing our best. >> thank you and i commend you for your excellent work. see the time of the gentleman is expired and the gentleman is recognized. >> secretary clinton studied that we hope to put ourselves out of the ad business because due to our success countries will no longer need this kind of help. can you give us some examples of how a need in initiatives have been successful and permanently breaking the cycle of the pendants by impoverished countries, and also maybe in your answer, microfinance is

something i have a lot of interest in. >> certainly, thank you. i think that is the long-term goal for anyone in the assistance business, which is to put ourselves out of assistance because countries effectively graduate. the most commonly cited examples are not always the most generalizable ones like western europe after the world war and after the marshall plan for south korea and some other east asian and east asian economies that were usaid beneficiaries and now are becoming donor countries. so, that is an important example and we are trying to learn lessons from there to apply elsewhere. the guidance and dispense commission report offers a lot of interesting parallels of how we can pursue work differently in other parts of the world to achieve those outcomes. in terms of more specifically, areas like global health initiative or are feared security initiative that where we are trying to use that principle in a more sector specific matter so in global

health in the country repaired ties we will look at our full fort-- portfolio and partner deeper with countries and in and develop a financial sustainability plan and do our best to identify an exit strategy for our partners in their own financing. at maybe a long exit strategy but an exit strategy so we are not, so we are aiming against the common goal on a more sector specific basis. i appreciate your raising microfinance. this is an important area and the ranking member made reference to the credit authority. we recently completed a transaction that provided credit authority support to microfinance institutions through the grinning bank and its global network. that will leverage more than $160 million and provide institutional support to institutions around the world to put resources in the pockets of women and vulnerable populations around the world that have a surprisingly high repayment rate and in the financial system that even though it is banking to the

poorest it is an incredibly safe bet to make in terms of repayment rates and risk the communities take. in the development of other services for the poor. most notably insurance products and savings products that have recent data and research have shown are critically important to reducing the vulnerability of all kinds of shocks and wrists to the experience on the daylight so we appreciate your comment. >> very good. one of the other things i have experienced in traveling to various countries and this is certainly not true of all areas, but it does seem like there is a duplication of services. you get into turf battles where usaid is doing a certain function and you see duplicative activities by perhaps another branch of the state department. do you see that is a problem?

is that something you have experienced and if so how do we solve that problem and how do we get people to sidetrack it right now all of us being so aware of the finances, the limited finances that we have god. again i would appreciate your comments on how we tackle that problem. >> i appreciate that. there clearly are in certain parts of the world significant duplication of services and what is a clear priority for us is trying to get to a place where we are predatory sink outcome and using resources as effectively as possible. i think you do that they really three things. the first is you set clear to set clear and specific development goals and develop hierarchies, and we are expanding our efforts to do that both in our hiring of expertise that usaid ended developing better policy planning and evaluation systems. the second is, we aspire to serve as a whole of government

platform two-point resources against those goals and an efficient and not non-duplicative manner. the learnings from haiti accelerate the need to do that. the health sector in haiti is a good example where we have unique capabilities at the department of health and human services that were brought into the field and we have been able to transition those capabilities to local ngo partners to expand their ability to provide more services to patients. we need more examples of that kind of partnership for effectiveness and outcome. the third is really to focus on scale as we implement our programs, so we have restructured our policy planning to do that on a program by program basis. >> thank you mr. chairman. >> the time of the gentleman has expired and the gentlelady from california is recognized for five minutes. >> thank you mr. chairman and dr. shah, welcome. i have really admired your stewardship of usaid. i've been in several i have been

in several informational hearings with you, and you give us inspiration that this program is working well. i want to relate now to the lantos hyde act and if you remember it mandated a five-year strategy to treat 4.5 million cases of tuberculosis under the ots and 90,000 multi-drug-resistant tb kate-- tb cases. the global health initiative on the other hand proposes to treat only 2.6 million tb patients and only 57,000 mtr tb cases. moreover tv will soon need new drugs to combat the rise in highly resistant tb. so, what specific initiatives are planned to strengthen country responses to reemerge in

infectious diseases such as tb and how will tb treatment be incorporated into a health system, strengthening approach. >> thank you. i very much appreciate that. i got my first experience in tuberculosis working on a program and burr south india and number of years ago and recognize how critical and important this issue is and the importance of the legislative targets. i would say the distinction between the targets in terms of the 4.5, 2.6, 90 and 57,000 with respect to npr is primarily i believe the distinction between what we think we can achieve in our bilateral programs with current technology and implementation protocols and what we would hope to achieve by getting more efficiencies out of the global health initiative, and we can get those efficiencies in two ways. one is as we repackage our complete programs to be more

systems oriented i fully expect especially given the relationship between tb and hiv that will actually have more resources that are currently not counting going towards the joint treatment of tb and hiv and getting those numbers up. the second is i think we will partner better with the global fund and do more shared strengthening investments that would strengthen their capacity and hours to reach tb patients. i believe those numbers, the 2.6 and 57,000 our floors upon which we can build his begets more efficient and as we partner more effectively. the second one i would make is we will increase their research and development investments. i am particularly enthusiastic about new diagnostic technologies that i think will detect tb earlier allowing more cases to be treated in the general platform as opposed to mtr requirements of that would lower dramatically the cost of each treatment episode. i also believe with new drugs and treatment protocols over time the length of time needed to treat an mtr patient will come down significantly

potentially to as low as nine months and if that happens that would significantly expand our capacities to offer treatment more broadly so we will track these things very closely and try to learn from some of the more innovative efforts taking place around the world with tb. >> ar#@@ and country led are also in the mix

and in addition, aid is coming from me for i.d. of sectors. ghi, pat farr, and the global fund and so forth. can you tell us what country ownership and its many dairy nations means to you in the administration and how will this be reflected in your policies, and can you expand on how health initiatives will be coordinated within countries already receiving other forms of aid in and keeping in mind the country ownership concept? >> thank you. the global health initiative will include all the investments to achieve that goal. quickly the four components of ownership to us our country plan, specific guidance from countries that informs her own strategic investment and restructuring our contracts and programs to abide by those guidances and sharing data information and personnel

against a common strategy and learning platform. i am enthusiastic about my ability to work with tom frieden at the cdc and erica goos be in order to do that more effectively going forward. >> we are out of time. thank you so much. >> the time of the gentlelady has expired and we recognize the gentleman from california, mr. sherman for five minutes. >> i believe in foreign aid development because it is the right thing to do but we are told to go to our districts and sell it as a necessary component in the war on terrorism, something we do for national security not just out of generosity. frankly, if the american people were convinced that it was only all true a stick, i think we would have an even more difficult time selling foreign aid. now, the proponents of foreign aid put forward the idea that any alleviation of poverty in the world reduces terrorism. this fits a western orality view

of the world. we all desperately want to live in a reasonable world. so something like terrorism must be that just and reasonable response of desperate people who are desperately poor. unfortunately we live in an unreasonable world. poverty does not correlate with international terrorism. both be christmas day bomber and bin laden come from some of the richest and most powerful families in the world and a majority of those who struck us on 9/11 come from a country that has received far more infusions of cash then usaid has ever dreamed of putting into one country or all countries. namely saudi arabia. they were middle and upper-middle-class kids from a country that gets an awful lot of american cash. somalia is kind of a separate case, but looking at the world

as a whole, the poorest 10% of the world's people cause less than 10% of the international terrorism. so, simple poverty alleviation itself cannot be justified as a good investment in the global war on terrorism. another problem we have is the bureaucracy of usaid. it took strong political push to get them to put the flag on the back. they did not want to say, this aid is from the american people. they just wanted to give out the aid. so many of your staff are people that wanted to work at oxfam but wanted a retirement plan. what can you do to make sure that when we select the countries and the projects, when we design each part of that project, and when we publicize

the efforts and decide how much resources to put into publicity rather than putting the money and telling the people that you are doing good that we are in fact honest with the american people that this is an effort to win the global war on terrorism and to protect them. because, as good a goal as alleviation of world poverty is, and as much as i would supported i don't support telling the american people we are doing it to stop terrorism and then failing to select, design and publicized so that we really are. if even your elected drucker see, what are you doing? >> thankb. thank yous or for tht comment. i do believe that our budget presentation prioritizes the intersection of the development investments in specific places in parts of specific civilian and military strategies that are designed to defeat al qaeda and

support a stronger and more effective local security environment for our country. it is why we present our budget in the context in afghanistan and pakistan, where that is being carried out as a frontline state. i would also note that we have looked carefully at the data following the intimations and ami and i doubt you were involved in it, with the relief effort. the branding effort around usaid 's giving in that context more than doubled our favorability rating among the intonation people and in that same six-week period after this nominee reduced by half the favorability of the indonesian people. >> i have limited time. i would like your answer and i hope you will extend it for the record. i just want to urge you to do everything it can to make sure every aspect of design and selection reflects what we are telling the american people and i want to put forward one idea. in the impoverished world people have to pay for kids textbooks.

if we were to print all the elementary school and middle school textbooks a we could make sure the content, while not entirely politically correct perhaps from an american perspective is good and secondly would be helping education and third we would we-- we would be reducing corruption because it is hard to steal textbooks and turn them into cash. >> thank you. >> the time of the gentleman has expired. the gentleman from california, mr. costa is recognized. >> thank you very much mr. chairman for this important hearing and thank you dr. shah for the good work you are doing. i want to cover your efforts and a host of countries that were focused and i would like some quick responses. obviously it was noted earlier about our efforts with regard to gaza and the west bank. how would you assess the results of the infusion does far of aid that has been provided and the

palestinians ability to absorb the large amount of american aid , quickly. >> we track that very carefully. >> we made note of that earlier. how would you assess it? >> i think there has been more success in some areas than others. there hasthere is that there han success in infrastructure and development of road networks and building schools and there have been successes and health. in particular building a stronger health system and i think there are real challenges especially in gaza where there for a brady of the reasons have been issues with both transport mobility of goods and individuals as well as some interference, and so there is much to do to improve the effectiveness of those efforts and we are working for a tuple medic channels to help improve that. >> i would like to provide a letter written, both of those challenged areas. in afghanistan and pakistan obviously those are harsh

environments. many of us have visited those countries in the past. it is mind standing that usaid personnel were only there for a year in length, however as we know after the year ends most people are getting their feet on the ground at some level of understanding of local knowledge do you think that is too short of a time period as they are just becoming experts in their field or are you considering extending the time? >> we would like to encourage staff to stay for an extended period of time. we are doing a number of things to facilitate a more effective personnel situation in afghanistan in particular related. >> that could be an administrative change could that? >> we have to balance that with our recruiting and process of making sure we have enough numbers. >> wouldwhat if an individual ds in pakistan or afghanistan they would like to stay beyond the year? >> they absolutely can if they would like to. >> as-- i have had experience

with some folks from my area and have taken the time and contributed to build a hospital in afghanistan outside of kabul. i have seen where some of the money has been spent by us where we have had a lot of problems with corruption. it just seems to me that we don't have that right it right yet in terms of how whether we are building a road or building or school or housing or in this case a hospital. for $2 million they are able to build a state-of-the-art hospital, 100 and 20-- 120 beds with no corruption involved. whether you guys doing to figure out how you can avoid or learn from past mistakes? >> first i will say i am aware of that hospital and appreciate the advanced but that represents in the work for members of your district. i do think our work in afghanistan is tracked quite closely. health is a good sector example.

we were very selective in working with the ministry of health. it took a number of years to build the procurement system and other tracking systems to give us the confidence we can enter into the agreement we entered into with them last year. we have now started to flow resources through that ministry, but we track every procurement action quite carefully. we monitor every strategic decision and in addition to that we have a series of audits that take place both from our ig and the special inspector general to major that those resources are being spent effectively. as a result of our health sector investments we believe we have more than tripled access to the health access for afghanistan, for the population of afghanistan and we think that is a tremendous achievement. we are optimistic. >> quickly before my time expires, mr. chairman i would like to see more work as it relates to determining how well we are applying the smart power and to ensure that the money is

going into the right places. which brings me to iraq. what would you say as we ramp down and usaid ramps up in iraq are the lessons learned from the experience the department of defense? >> wells the or i think there are a broad range of lessons learned. some related contracting in the risks of very large and poorly supervised. >> you are going to sue apply those lessons? finally what you think your biggest do you think your biggest challenges are this year? >> our efforts in afghanistan and pakistan in haiti as well as our health and food efforts, when you put that together will severely strain our workforce so building a strong workforce and our ability to do that will be critical to success. >> thank you very much. >> thank you mr. costa. the gentleman's time has expired and now the gentleman from minnesota, mr. alice is recognized for five minutes. >> let me add my voice to

everyone for the speedy response in haiti. i represent minneapolis, minnesota and we have a large somali community there. they are all, not all but mostly all concerned about what is going on in somalia. and i realize that the u.s. reduced its funding to somalia last year after ofac expressed fear that the extended supply line and insurgent heavy areas were operating that it could be diverted to al qaeda linked groups, but on the other side of the coin, the people in the u.n. have expressed concern about that because it results in a net reduction to food to people who needed desperately. what are the things that you think could be done to straighten the situation out, and do you care to offer some

views on this? >> certainly, thank you. first i will start by saying we will follow and respect the law and the guidance around protecting and stewarding effectively u.s. resources. we have been in a very in-depth conversation with the world food program and they are our primary food distribution partners as you point out that they have been clear with us that this is not, that our policies are not impeding in any way their capacity to distribute food at this time. they are not distributing food margaret sibley in southern somalia for their own safety, security and logistics capacity to do so in a difficult operating environment. so that is not the current constraint. we will work with them if that becomes the constraint and they have the ability to distribute food that we have offered to them. if they agree to do that then we will work with them to make sure we have a policy in place that supports those efforts.

>> i'm going to submit this article for the record with unanimous consent or go. >> without objection. >> i will send it to you and perhaps we can flush out a stronger answer because i would like to get to the bottom of this because it seems there was some sort of a technical requirement that we are being restricted and i am sure you are aware of the complaint. it sounds like you are saying it maybe is not a valid complaint. >> i am sorry, what i was suggesting is we will work rr

of things we can do to improve the operations in gaza that include working with partner agencies, u.n. agencies more aggressively and working with diplomatic channels to reduce some of the issues. >> forgive me sir, i am sorry doctor. usaid is working through circuits now. i want to know do you thing it would be an advantage to having usaid personnel in gaza since we are our ready and other tough areas like afghanistan and iraq and others'? >> i think the core constraint for us right now is actually mobility, getting items in and a series of specific issues with respect to interference from hamas and others in that

environment. in that context it is not clear that sending our people and is the immediate resolution to that. i think the immediate resolution solving those problems as a precondition for that so we are working with others to do that. i am happy to review that more specifically though and come back to you with a more specific answer. >> yeah and usaid does operate in gaza, and do you feel that an rot is doing all it can to keep materials and supplies away from hamas? >> we believe it is an incredibly important partner and needs to be successful with their partners so we work in coordination with them. i think we all can do a better job in any number of things in god's which is a different -- make difficult operating area.

>> the time of the gentleman has expired and the gentleman from new york is recognized for five minutes. >> thank you mr. chairman and director it is good to see you again and i've want to join in the chorus of all those who have thank you and your agency for the work you are doing in haiti and resolving, responding to the emergency there as well and the people of chile and need your assistance as well. america is doing that, and you put a little polish on the reputation of our country in being able to respond in an effective manner and that is something the american people are grateful for. i also want to thank you for your assistance in the search-and-rescue team to get down to haiti and the resolution under the chairman's leadership commanding usaid and the civilian emergency response team as well as the military response team and we are grateful for that. dr. shah i want to follow-up on the gaza questions that my

colleague from minnesota was asking. the presidents request included $400.4 million in economic assistance for the west bank and gaza. to "matt strength in the palestinian authority as a credible partner in middle eastern peace and continue to respond to humanitarian needs in gaza. to request dates that this assistance will "matt provide significant resources to support the stability of the palestinian authority, economic development of the west bank and increase the capacity of the palestinian authority to meet the needs of its people. dr. shah i would like to reiterate the importance of setting this funding and of course according israel. just yesterday the u.n. undersecretary for humanitarian affairs john holmes dismissed hamas' cross-border raid. the kidnapping of staff sergeant and hamas' call to israel's destruction by condemning israel. of course he completely

neglected to mention the fact that despite hamas' aggression israel allows daily shipments of food medicine and supplies. given a statement sent to follow-up my colleague from minnesota how will usaid make sure that this funding does not end up in the hands of terrorists, specifically when we are partnering with organizations like unra. what sort of safeguards are in place if you can be as specific as possible and also if you could provide an assessment of the effectiveness of usa to the palestinians over the past several years. which economic projects have been effective and which have not? as u.s. assistance helped increase popular support for moderate palestinians in the west bank, a goal which we all support and what role does the united states aid hope to strengthen government institutions in the west bank? basically are we making a positive impact? >> thank you for those comments with respect to aid in your

questions with respect to gaza and the west bank and israel. we do have, as i noted, we have a very rigorous system for vetting partners and for tracking any cash disbursements all the way through to bear and use. on partner vetting, we have a very sophisticated system that has been in place for more than two years attracts the names of all of our partners that clearly that's all key personnel and in a partner organization against a larger database and that allows us to follow-up on any positive hits that occur in that striking system. after we get any positive hits we have an aggressive process of investigation and review before going forward. so that is a very robust system. the cash tracking system is similarly robust. we track any authorized disbursements. we transfer resources through an israeli-based banking account into a special treasury account and a palestinian bank and then

monitor all flows out of that account by every single disbursement being track specifically to its end-use. most of these disbursements, all of these disbursements are used to pay off creditors as soon as those resources go back out to other places. the question with respect to how are we coordinating with other partners and what can we do to improve effectiveness, i will just say i spoke to john holmes before he went to make the point you are making better goal is about effectiveness in that environment and that we need to look at the whole picture. it is the prm program that primarily partners with unra and not usaid although we believe that is an important partnership going forward. we will continue to have the safeguards in place. on effectiveness, there is some areas we think have been more effective than others, health and education and perhaps more effective than some full portfolio of infrastructure investments, although there have

been some success stories there as well in the west bank in particular. in gaza with mostly humanitarian missions, it is a different operating environment. >> the time of the gentleman has expired and an impressive and-- impressive show of efficiency of time mr. conway, 45 seconds after entering the room is recognized for five minutes of questioning. >> thank you mr. chairman. i'm sorry i'm late that we had a weekly breakfast meeting with the speaker and it went a little bit over so i'm pleased to-- dr. shah for allowing me to come in late and allowing me to continue nonetheless. dr. shah, what one of the concerns i certainly have a 90 other members of the committee do as well as that in some ways usaid has been hollowed out in the last decade. and, i would hope that part of your mission is to turn that

around. he had secretary clinton here in her first appearance before the committee. she has been here since, who is certainly committed to doing that but we have seen for example a proliferation of age-related missions that are not however part of usaid. the millennial project in the aids project and on and on. i would even argue that an awful lot of sort of funds that are used by the military in afghanistan and iraq are to be projects managed by our military and hopefully well, but those are so substantial, one is concerned about what could go wrong. may be preferably we would have them in the hands of professionals. i wonder if you could address that whole question of how do we consolidate, how do we make sure you are the go-to person for bilateral and multilateral

assistance and we make any i.d. into a cutting edge development agency that actually does something and isn't just a place that facilitates contracts with others? >> thank you very much for that comment and that statement. i believe that right now is an incredibly unique time to seize the opportunity. we have a president and secretary and administrator completely committed to that goal and we have such strong leadership and support in the congressional committees and in congress to achieve that outcome. i also believe development is a discipline and i think it is a professional mull discipline that has the needs to benefit constantly from the learnings of the past and the learning learnings of the present and we need to represent excellence in the practice of that discipline on behalf of all development activities. our game plan for reestablishing our effectiveness in their

transparency and their accountability and our operational excellence it's really to focus on a handful of strategic priorities. we will focus work in afghanistan and pakistan and try to show clear results against clear strategic metrics. in haiti and our series of key issues like health, food security and climate change. in each of these areas usaid can show through restructuring how we do our work that we can have more impact for less, that we can serve as a whole of government platform that invites and other partners in a matter-- manner directed against specific outcomes and makes tough choices about how we use resources so we get the most bang for the buck and are spending as we have tried to do with the relief effort around haiti. we are also pursuing a set of operational improvements and i want to thank the congress for its leadership in allowing us to have the development leadership initiative and rebuild the actual warren service corps which you are right to point out has been decimated over the past

15 years. we think we have a strong position. we have more than 4000 servers nationals that represent people with ph.d.'s and medical degrees and are entirely capable leaders that any other private company would think of is a tremendous as a tremendous core asset for a more globally impacted world. we need to rebuild our foreign service. we are doing at the midcareer technical level and do the dli. >> if i may interrupt you, count me as an ally in that effort. believe development agency as far as i'm concerned as has to be usaid not the state department. you are the hands-on guys, you are the people with experience and you just enumerated that in that is what we have to work with. in my 49 seconds left one thing i want to put in your cab usaid does provide funding to andy i do various bigots. one of the concerns i have had about their work is the modernization works from the bottom up and not the top down. i would like to see a much

enhanced effort at working with the local governance in those programs. quite frankly i think we haven't done such a good job over the years and doing that. we have tried but it is a hard mechanism but they are going to take the lead from where the money flows and i would hope you take a look at that. if we really mean it about democratization the place you build that is at the local level. thank you mr. chairman. my time is up. >> the gentleman's time has expired and i thank him for echoing some of my sentiments on these issues, and an unusual occurrence. and, given the time, if it is all right with you i'm going to recognize myself-- no, i am sorry, mr. rohrabacher is here. you are next mr. rohrabacher. the gentleman is recognized for five minutes.

>> thank you mr. chairman. how much aid have we provided to afghanistan since 2001? >> i am not sure the precise number since 2001. >> how much have we provided this year? >> this year we are proposing in the fy2011 budget that we would be spending 3.9 billion dollars, and that is down from 4.4 billion in 2010 when you include the supplemental amount with the inactive amount. >> okay, and how much will we be providing iraq? >> i believe that is going down as well from $700 million to $400 million but i will doublecheck those numbers for you. >> so iraq-- what are some of the programs we are spending

400 million for in iraq? >> which programs are priorities in iraq? our immediate priority is support for the@@@@@@@ rrg$#

be receiving? >> sure. have restructured our afghanistan portfolio to be aligned with and very much a part of the president afghanistan strategy. we had two major strategic reviews in march of last year and then december when the president strategy was announced by the president. the priorities going forward are agriculture, which is the largest employer of individuals outside of the government in afghanistan. our investments investments they are have peaked this year at around $820 million and will come down to $425 million in the 2011 spending but that continued pipeline of investment will be the single greatest investment in growth activity sectors in agriculture and we are encouraged by some of the early outcomes with respect to performance in that sector. we also have major investments in both continue with major investments in health and education.

the health sector is a sector we are partnering with the ministry of health. it has been a number of years in the making to develop a robust partnership with strong auditing trails and financial accountability for our spending and our priorities are on building an effective tertiary old system and primary health system and getting health access out into the rural areas to serve the needs of women and children in particular to most effectively reduce some of the disproportionate health arms in that context. we have a broader range of activities in partnership with other departments in the state department that include security, rule of law and counternarcotics but the aid administered programs will focus in the areas i describe. other economic growth priorities include roads and power as well. >> have we had-- how much did you say is being spent on agriculture?

>> fy2010, when you include the supplemental is around 820 and the fy2011 request is around 425 that is agriculture and food security, and including alternative livelihoods in rural communities, not including counternarcotic activities. >> could you give us an example of some of the agricultural spending that we have gotten? >> we have programs-- first we work in partnership with the u.s. department of agriculture providing technical support to the ministries and the public sector and we are very focused on supporting the private sector. we have farmers support programs that are getting seed and fertilizer out to farmers to read voucher-based private sector system. we have programs to help farmers produce high-value products like apples and then export them in the region so they have sources of cash and income in addition to the reduction of basic foodstuffs and they are working to develop improved access to agricultural credit though that

farmers can support their own pathway out of poverty through development. >> thank you very much mr. chairman. >> i am going to recognize myself for three minutes and mr. smith for three minutes and i just want to follow-up a little more specifically on some of the points raised by my colleague from virginia. in the context of what the secretary is referring to as a key foreign-policy priority, that is development and rebuilding usaid as an institution, specifically could you talk about the restoration of a budget development capacity and a policy planning capacity within a.i.d. and also in the

rebuilding of the staff with the goal of doubling the number of foreign service officers through the development leadership initiative, you are priorities for hiring and recruitment of new people at a.i.d.? >> thank you mr. chairman. we have a strong effort underway through the partner some of our staff with members of the bureau to identify really a revised and improved budget process that would allow usaid to be financially accountable for the resources that spend so it goes without saying in order to be the world's premier development agency we have to be able to account for our spending and be held to account for resources that are spent in a transparent and clear manner, so we are actively working on that through the qddr and other processes. >> what about on the impact of developing-- accountability is

very important, but the question is are you handed a budget or do you get to develop a budget? >> we will get to a place where we have the opportunity to develop a budget, working in partnership with others but we clearly need to be able to make strategic resource trade-offs in order to be held accountable for the performance of the agency. on policy planning, similarly sir we are building an active policy planning capacity. i am pleased to announce we have been real leaders in the field from the global development that just joined our team. we hope to have a world-class, innovative that valuation capacity that helps us learn from direct program beneficiaries through text messaging, all the way through doing a range of other efforts to do randomized control program trials to understand the impact of our work most effectively and rebuild their policy planning

and evaluation capacities. on staff, we have hired 420 individuals do to a dli. we respect the leadership congress has provided. my prayers are to be look at how we do deployment in more rapidly deploy the visuals to our poor strategic operational priority since shorten the length of time that they are and current training program. >> my time is expired. the gentleman from new jersey is recognized for three minutes. >> thank you very much. dr. shah as you know w.h.o. estimates that health care in africa is provided by faith-based organizations. the catholic health care alone in africa constitutes about 40%. we know a number of other groups , world vision and others are doing yeoman's warfare. they provide expertise infrastructure trust to the people and an enormous number of volunteers that otherwise might not be fair and their ability to

expand its incredible. what is your view of increasing the partnership with faith-based organizations and ngo's especially as it relates to implementing the global health initiative? >> thank you for that observation. i believe the partnerships and bringing those partnerships into a whole health system construct will be critical to the effectiveness of the global health initiative so i would see whether it is in kenya or other countries where there are significant egg-based organizations running hospitals and doing that work and where we are involved in providing support. our goal is to bring that support within the context of the health system and to make those more formally part of the integrated national health plan, so it absolutely involves expanding and deepening our partnership. >> i would hope you would be mindful that in some countries where church opposition to human rights abuses have been very strong. when integrated in partnerships and are formed in the

government, health ministries and others might be less quick to want to embrace the faith-based community. i would hope that they would play a very positive role in suggesting when it comes to health care, you want the maximum impact certainly and it seems to me, i know places and i have been throughout africa. usually when there is corruption or human rights abuse by a dictatorship or authoritarian regime, it is reflected in other parts of that government when it comes to partnering, so they shun those partnerships in some instances so i would hope we would hope to overcome that. >> thank you. we will. >> finally and 40 in 40 seconds, and reading the micro-enterprise results reporting, i understand it is a real problem with meeting to 50% goal for providing microfinancing to the

poorest of the poor. could you take a second look at how we might be able to reach out to those ngo's that are actually meeting-- we headed by -- big fight and i know because that was my bill and there was a lot of tugs and give-and-take, but when it comes to the ngo's that are there on the ground providing maximum benefit to the poorest of the poor, the goal is a real one and i think it is achievable so please take a second look at that. >> we will. >> the time of the gentleman has expired, because of the service for our late colleague, congressman murtha we will adjourn the hearing and we thank you very much for being here. we look forward very enthusiastically to working with you in the future or co-markup tomorrow at 10:00, and the committee hearing is adjourned. thank you. existing footprint

at all airports. do you plan on doing a one on one replacement for metal detectors? how does this move forward? finally, let me just recall the situation we faced when we wanted -- wanted quickly to be able to screen checked baggage after 9/11. you recall tsa placed explosive detection machines in less than ideal locations in a number of airports on a temporary basis, which created a series of problems and ultimately made permanent solutions more costly and time-consuming. i'm sure that experience is on your mind as you look forward here to how we're going to do

the ait project. how are you going to avoid repeating these same mistakes as you deploy the ait equipment at already existing screening checkpoints? >> yes, sir. so let me start by talking about the work that's been done to date. we gained a tremendous amount of knowledge from the pilots that we ran over the last couple of years in terms of how to process the passengers through, how to measure the wait times. from the time the passenger enters the queue to the time they leave the checkpoints, there are pult pell processes going on, once is walking through the advanced imaging technology, but the other is the screening of their carry-on bags. it's the combination of those processes working in parallel for the passengers that go through that tells us that we don't -- do not believe that deploying this ait is going to significantly he increase the wait times for the passengers. we also believe that deploying the tsos in the right positions

in the checkpoint to inform the passengers how to properly divest to go into the ait is going to contribute to keeping those wait times down. the integration of the ait equipment into the checkpoint has been something that we have looked at as part of our piloting and as we're looking at this deployment. we have airports around the country now that have raised their hands and said they're ready to take this technology and put it in their existing checkpoints. we're confident that those that we're rolling outd this year can be done and put into the existing check pointses and not have to go through major construction issues, not have the kinds of things we had where we had the the checked baggage technologies in lobby areas, et cetera. we're also very much focused on how do we educate the traveling public so that when they show up

at the checkpoint, they understand exactly what they can expect as they go through the ait machines. so it's the combination of looking at the entire process within the checkpoint, looking at the public education element, making sure we have the tsos properly stationed in front of the equipment so they can make sure that the passengers are properly divested. this technology gives us such an improvement in the detection capability that we are -- we are looking to make sure that the processes, the technology, and the people are all well integrated so that is an effective he screening process as well as very efficient. >> the footprint of these machines, though, is greater than the metal detectors. >> yes, it is, sir. but what we've found is that in a lot of these airports, as the checkpoints were built, they actually had more room in them. you know, more room within the

checkpoint footprint itself. so the initial deployment is to look at those checkpoints that are ready right now to handle this equipment. >> and the idea is that the carry-on baggage will still go down the line and be screened, but that the time the individual spends in the ait machine will parallel or be concurrent with that time used for carry-on screening. so that's how you come up with the very little net increase in time spent? >> correct, correct. and it is something that we will be very, very focused on, frankly, as travel -- as passenger loads increase over the next couple of years. we will look to make sure we're properly managing both of the queue lines. as we set these machines up, we will also have the ability to direct the passengers either through the advanced imaging technology or through the wall-through metal detector and receive alternate screening.

so we can manage the process that way as well. >> these pilot efforts that you've made in the last couple of years to check out this technology, has that also included talking right nows the deploying of the machines and passenger acceptance of the new technology in general? >> yes, yes. i am very, very pleased to be able to report to you that the passenger response to this technology has been overwhelmingly positive. that was part of our pilot. i believe that we had over 90% acceptance rate by the traveling public when they opted to go through the equipment. this has been a great piece of technology for persons with disabilities going through checkpoints. so during our pilots we looked at both the configuration, we looked at our officer training requirements, we looked at the

passenger through-put and we look at passenger acceptance. >> and by passenger acceptance, you're also referring to the measures taken to protect privacy? >> yes, sir. and we have signage up in the checkpoint area that informs the passengers that, first of all, this is optional. they do not have to go through -- the advanced imaging technology if they choose not to. it informs them that the officer guiding them through this technology will never see the image that the officer in a remote location is viewing for the detection purposes. we have made sure that those privacy -- those privacy concerns have been addressed with the public. we have had a privacy impact statement out during this deployment of the technology and pilot phase, and again, we have worked very hard with privacy groups as well as the traveling public to ensure that they accept and understand the private he see measures that are

in place. >> thank you. mr. rogers. >> so continuing on the private see aspect, the machine makes an image, which is telecast, if you will, to a room where just one person is located, correct? that's the only place where this image is shown? >> correct. >> to the one person in a closed room, an employee? >> that's right. >> and the face is blurred? >> correct. >> now, you say that this is optional to a passenger. suppose they say no, i don't want to do that. what do you do nen then? >> they're directed through the walk-through metal detector. they could have hand wandering and a full-body patdown so we ensure that an alternative and

comparable form of screening is applied to that passenger if they choose not to go through the technology. >> so every person that refuses the full-body imageer scan would be patted down? >> possibly. they could be patted down. they could have a review of their carry-on luggage, and there's a variety of alternative measures that we would have that would be applied depending upon, again, you know, the particular technology that's available in the checkpoint. >> now, is this new machine, is it as effective as a patdown? >> from an effectiveness stand appoint and an efficiency standpoint, it's better. it allows us to go -- view the images quickly. it identifies anomalies on the

body, it identifies anomalies that maybe in sensitive parts of the body and it's a very -- it's much faster than doing a full-body pat-down on somebody. >> considering the christmas day bomber, would this machine have detected the bomb on that person? >> without going into the specifics of that, because of the ongoing criminal investigation, i will tell you that the experience we have had both in the labs and in our pilots, our officers are identifying objects on the body that are comparable to what that threat was. >> every time? >> our officers are doing a very good job, and the -- >> every time? >> i'd have to get back to you, but, you know, we don't -- we have very, very good measures in place for evaluating our

officers. >> well, contrary-wise, if you had patted this man down, would we have found the bomb? >> today we do not do a full-body pat-down that goes into the sensitive parts of the body where that bomb was secreted. >> now, this machine is not fool-proof, correct? i mean, it's not 100%? >> it requires the experience of the operator as well, yes. >> and we may be getting into some confidential matters here. what i need to know as well you can state it in these circumstances, is this machine the end-all? >> this machine gives us an increased detection capability

that is significantly greater than what we have at the checkpoint today. what we -- in working with industry and these manufacturers, we are driving these manufacturers to continue to improve this technology. because of the demands we have for aviation security. >> if a bomb were secreted in an oracle of the body, the machine would not detect that, of course, would it? >> inside the body? >> yes. >> correct. >> correct? >> correct. >> now, on the footprint the machine would not replace the magnetometers, correct? >> right now we do not have plans to fully replace all the wall-through metal detectors, that's correct. >> so you would have the metal detectors as well as the full body imageer? >> correct, right now. >> why would you need both? >> well, part of it is so manage the flow of the passengers so that we would be able to have an

alternative -- if a passenger says they don't want to go tloo the advanced imaging technology we have the walk-through metal detector and couple that with other security measures, but also what we're looking at right now is as we're deploying these, maximize the use of the advanced imaging technology but also get passengers through the walk-through metal detectors in checkpoints so when a passenger shows up, the security advantage is when a passenger shows up in the kueue line they will be directed by the officer or the walk-through metal detector. they won't know. the advantage is they can't predict which line they'll go through. long term we provide us with the technology with the walk-through

metal detector capabilities would be part of the advanced imaging technology equipment. >> so you would have a machine? >> that would be a great setup down the road. >> why haven't we donna? >> we are pushing the industry to do that. the industry hasn't@@@@@@@@ rr

>> what the budget requests includes, money for constructing a viewing room, you know, within the checkpoint area. what we're doing, for example, is in a lot of places we're taking a supervisor's office, we're using other, you know, pieces of the real estate there close by to the checkpoint to create that alternate viewing room. but the budget does have some money in it to request to cover some of the infrastructure costs to build out the viewing room. >> what about the airports? what will be their financial involvement with this change? >> the airport's financial involvement? >> yes.

>> some of them are providing us the room, and you know in some cases we're providing them nominal amounts of money to pay for this infrastructure costs. but i think for the most part if the investment is tsa's we're making in the checkpoint area. >> so will you pay the airports for taking more of their space? >> i don't believe we are. i'll get back to you on that, though. i not seen that cost factor as we're looking at these deployments, but i will get back to you and double check. >> thank you. mr. rodriguez. >> thank you very much. madam secretary, thank you for your service to our country and thank you very much for the great work you've been doing. we just had a recent incident that occurred in texas, in austin, the irs facility there, and it could have taken a lot more lives. it took the life of a wonderful individual veteran who served

our country well. in 2008 tsa had proposed a plan to propose new rules for some other 15,000 planes including requirements for jet operators to check passengers and watch lists and those kinds of things, and this proposal was met with a he great deal of opposition in the private pilot industry groups and others. when were the tsa's new proposal for regulating private aircraft be made available? number two, what changes, if any, will be taken into consideration as of the results of the incidents that occurred at austin at the irs facility? >> yes, mr. congressman. in answer to your question first, we have our -- we are going to go out with a supplemental or a second notice of proposed rule-making on the general aviation large aircraft

security program, and we're hoping to have that through the administration and posted by the end of the year. we did receive a lot of comments on the first round, and we've had a terrific collaboration with the industry and with ga pilots on comments and really looking at that. in the aftermath of the austin, texas crash and that incident, we actually went back to the homeland security institute that had done the engineering studies for us and asked them to take a look at the specifics of that crash and if it should formulate any changes in that proposed rule-making. we're waiting for the results of that staudy, and that may help s and inform us as to any changes we may need to make in the rule. >> what kind of security do we

have, if any, in some of the small airports that we have in terms of any kind of assessments that we might make at the present time? >> right now in most very small ga airports, we don't really have any. >> we don't have any at all? >> no, sir. >> do we have some kind of assessment of the number of -- i guess we have the number of flights that go out of there. we don't have any way of checking to see who flies out there and who doesn't and those kind of things? >> mostly the faa knows who is flying. they know the registration of the small planes and they would know generally who the pilots are. the pilots have to be certified by the faa. so most of the regulation to date has been via the faa's programs. >> so we've not even once a year or twice a year do we check it it or any spot-check on any of those? >> we have done on occasion for

national security events, for example, with the inauguration last year of president obama, we actually went and visited every general aviation airport on the route from the train that he took from philadelphia to d.c. when there are -- during the olympics the planning for the olympics that just ended we did working looking at the general aviation airports and we did that with state and local law enforcement in concert with our inspectors. so depending upon national events, significant activities in an area, we will go and look at the general aviation airports. if intel suggests something, we definitely then work in looking at them. >> if i can just follow-up on that one again. when you refer to intel, are you in direct contact, for example, on the border with border patrol and others? >> yes. yes, we have a very close working relationship. >> in terms of the number of flights coming over the canadian border also? >> yes. >> thank you very much.

thank you. >> thank you. >> thank you. in the american recovery and reinvestment act, the committee provided tsa with $25 million for airport screening machines that have been discussed rather thoroughly to be deployed at airports across the country. however, last tuesday it was reported that not one of these devices has yet to be deployed. i was really shocked to read that because we know the importance of quickly deploying this technology to our most traveled airports including kennedy, laguardia in new york. why did it take seven months just to purchase 150 advanced imaging technology machines? you mention a time frame for deploy heiing this technology i boston and chicago. what about new york? if you struggled to spend the 25 million, what assurances can you give this committee that you can

quickly and effectively spend the more than 214 million being proposed by the president to deploy nearly 1,000 machines across the country? >> thank you. yes, congresswoman, we bought 150 of the machines last september, and we are in the process now of receiving those and they will be this first group to go out to the airports. the reason that it took some time is we put in the order in september, and the manufacturer has been delivering those. we have made sure that they are ready and equipped the way we need them to be for deployment to the airports. we also have -- we're in the process of awarding a contract for what's called an integration contract, and that will be a contractor that will be their expertise is in deploying this kind of technology and rolling this out and supporting us to do

that. so we have two qualified vendors with this technology today, and as we make these purchases, we will be able to use that vendor's list. in the meantime, our lab is continuing to certify additional vendo vendors. that's why the industry is responding very quickly to this demand, and with our integration he contract we believe we will be able to deploy those. it's going to take all of our energy and commitment, but we're very, very committed to doing this. >> you mentioned boston and chicago. how about new york? >> i don't have the schedule in front of me, but i'll be happy to provide it. secretary napolitano tomorrow will be announcing the deployment to 11 airports and our team is working on the deployment of all 150 machines plus those that we will be receiving this year and hopefully next. >> i hope it will be the decisions are made according to threat. >> they are. >> just wanted to check that

out. another issue. secretary napolitano testified last week before the authorizing committee that dhs did, in fact, have the authority to grant tsos collective bargaining rights administratively. could you tell me what is holding up the department from taking this action when president obama stated many times over during the campaign that he supported it? i mean, it seems to me the threat to the traveling public is the terrorists, not the the unions and the fact that you can't even get someone to head up the agency because of this issue just doesn't make sense. could you respond? >> yes, madame congresswoman. the secretary has indicated that she wants to get a permanent t srstsa administrator in place. >> that's a good excuse.

well, okay. >> i'll tell you what i have done in my tenure as the acting secretary. i have held meetings with ntu and afte in the last year where the leadership of the unions brought in officers from around the country that they have -- that are members of their respective unions. we have sat down and had just great dialogue with those front line officers and the leadership of both unions on issues of mutual concern. and i will tell you that you put me in a room with a bunch of tsos and it is a great exchange. we have had -- i consider the tsa to have a good relationship with both unions. >> i thank you for the response but i see the chairman is going to crack the whip. i want to remind you customs, border protection, the pentagon force protection agency have

collective bargaining rights. you're aware of that? >> yes. >> thank you. >> thank you. mr. farr? >> thank you, mr. chairman. i probably fly more than anyone on this committee. i go home every weekend, so i have a lot of experience with tsa. frankly, i have been critical of the air marshalls wondering what the cost effectiveness of them. it would be like us having to have a marshall to take us from this room to the floor. after you have gotten into this building the building's secure. after you have gone through the airports, you should be secure. we have locked down cabins and armed cabins. i don't think in the christmas bombing it would have made a difference because the air marshalls sit in first class and that happened in the back. the committee asked for a report

on essentially the cost effectiveness of the air marshall program. we have not received anything yet. in your request you want 85 million more dollars for air marshalls. i don't think our committee ought to give it to you until we get that report back. i just wondered if you want to comment on what we're getting out of that program. i mean, this is a priority of issues and while i'm a fan of law enforcement, i don't think this is the best -- actually, from what i understand talking to the air marshalls, they have nothing to do with -- they're not flying, not reviewing rosters or helping with the no-fly list and things like that. they have no access to information of who's on the plane. they are always shocked to find out that i'm a congressmember. they find it out because they sit next to me and read my material and ask me afterwards why didn't anybody tell me.

i said, well, there were five other members of congress here, too. you probably didn't know who they were either. i guess that's what led to the issue of wondering why we ought to keep beefing up this program. >> so, congressman, i would be happy to come myself and bring the leadership of the federal air marshall service to give you a briefing including some of the issues you questioned there, but i don't want to talk about in an open setting. i will tell you that the air marshall service is an extremely well trained law enforcement professional -- >> i don't doubt it. >> when they are not in mission status they are doing things including training. they are supporting our operations in airports and they have -- they work closely with the fbi. they are assigned to the jttf in the interest of aviation security. we do have a number of deployments when they are not in the air. but they are --

>> why don't you submit the report we asked for and then we can have a meeting after that? >> we will do that. i will follow up on where that report is. >> the other -- wondered how the tsa is addressing language @@@ 2$b)ddressing language countries during the

vancouver olympics? >> during the vancouver olympics, we're in the process of doing a lessons learned now. we had great cooperation from the general aviation and the commercial airports back and forth to vancouver. we had a great intergovernmental, interagency cooperative effort and the lessons learned are being reviewed now immediately in the aftermath of the olympics. >> can you report those to the committee? >> yes. >> lastly, private aviation. >> very, very quickly. we have a vote coming up. >> as i mentioned to congressman

rodriguez, we are in the process of preparing the supplemental notice of proposed rulemaking for general aviation for later this year. >> thank you. >> thank you. >> thank you, mr. chairman. we really appreciate your service. thank you for the job you have been doing. there is a lot of concern that the christmas day bomber was on a terror watch list and got on an airplane. how did that happen and how can we make sure if they are on the list they don't get on the plane? >> sir, he was not on a terrorist watch list. he was neither a no-fly nor a selectee. we didn't have visibility into him. >> he had a valid visa but it was my understanding he was on a terror watch list. that's not correct? >> no, sir. >> he was on a british watch list. are we looking at watch lists from other countries? >> right now i probably shouldn't answer that in open session. i will tell you that right

now president obama did direct that the u.s. government, both the department of homerand security and the intelligence community look at the process. we are in the process -- that review right now is ongoing to see how we can do that. >> it does seem like -- and i'm glad you're doing it, but common sense if they are on a watch list it's automatic pilot. you shouldn't let them on an airplane with my wife and kids, anybody's wife and kids. >> one of the things tsa will have implemented by the end of the year is the secure flight program which will ensure no-flies and sleblgt selectees aren't permitted to fly. >> i hear about it and my colleagues do, just common sense. it is frustrating to see the tsa apply these restrictions to all of us. frisking and searching, you know, 70, 80-year-old woman. there was a case of a medal of

honor winner, a gentleman who served his country and was searched and harassed, yet young muslim men particularly like this guy traveling to pakistan are not treated any differently. what statute, what federal regulation prevents you from singling out young muslim men and giving them more attention than an 80-year-old medal of honor winner? >> well, sir, when i hear of circumstances like that, as you described, it troubles us. we want to make sure that our officers are respectful of passengers. in reality we are required to screen all passengers. tsa does not profile and therefore we do not -- >> right. >> -- single out different categories of individuals. >> that's what i was asking. is there a federal statute that prohibits you from singling out a group of people or particular

characteristics or is there an internal regulation? is it a federal regulation or statute that prohibits you from profiling? >> i would have to get back to you. i know as a matter of policy we do not profile. >> it is disturbing. i mean, it's something that needs to change. i got here in 2001 and was on the transportation authorizing committee before i joined this wonderful committee. right after 9/11 we brought in the head of -- i think you were there with me, mark. we brought in the head of the israeli security. it was terrific. remember that? [ inaudible ] >> yeah. we heard terrific input from the head of israeli security. they just don't have this problem. if you're an 80-year-old grandmother, they don't bother you. they obviously will screen you and check you, but as i recall they have a security professional that actually talks to them and if you're -- yeah. you fit certain characteristics,

you're going to have a conversation with officer lewis here. you will have a special visit. it just defies common sense. what do we need to do to make that happen? we do not have a problem with baptists, hindus or buddhists blowing up airplanes. it's just common sense. what needs to happen so you can let your officers use their own common sense and good judgment and zero in on the population that's the problem? >> so let me answer that a in a couple of ways. first of all, we have consulted with the israelis frequently on the security measures that they have there and what we can do here. we have also -- we have a behavior detection officer program that hats officers looking for behaviors that would warrant us to give somebody additional screening. in terms of what legislative remedy would we need for this, i would have to get back to you. >> please do, real specifically. where's the problem? and let mr. kirk because he's

knowledgeable and this is a naval intelligence answer. >> mr. kirk, we'll try to get your question in before we vote. >> i have to ask since the second busiest airport in the world is in my state. we had the head of security at o'hare jim maurer say it was the least secure airport in america. this was on the front page of the chicago sun times today. can you comment on his charges? he's got some pretty specific complaints. >> yes, congressman. i'm familiar with the statements that he made. i will tell you that o'hare has an airport security plan. tsa inspects for that plan. they are in compliance with that plan. any time that we have something reported to us or we notice that there are inspections that they are not in compliance with we would take it up with the airport authority. >> one specific thing i want to

raise with you is he says, quote, o'hare is the only armt in the country that allows private vehicles to park on the secure side of the airfield. >> i'm aware of the parking set-up there. basically right now they have a security plan that they are in compliance with. >> do you have regular liaison with your european counterparts? >> yes, sir. >> one thing i would hope we do and it would be the initiative of this country is if you're on a british no-fly list at a minimum you should be on the selectee list for the united states. >> and i believe that that is part of what we are looking at in terms of how do we share information across governments and how do we make sure that information gets to the united states that we could work with. >> this may take money, foreign liaison and some work, but i think -- especially the no-fly

lists of nato allies should immediately trigger membership on the selectee list of the united states. >> thank you. i will take it back. >> we ought to take that up. it would be expensive in liaison, but think the public would support it. >> the recommendation the gentleman is making doesn't depend on this, but i'm told as a matter of fact abdulmutallab wasn't on the british no-fly list. >> he was even worse. he was denied a visa. >> he was denied a visa because of a related problem. >> that even means that the foreign office had its act together. >> he was on our tied list but it didn't turn into the no-fly list. we'll straighten that out. >> basic point is you ought to have the resources to -- when they update their list they immediately go on the selectee list for us. >> and tsa actually does not

nominate and maintain that list. but it is something that i will take back to the committee. >> thank you. >> i apologize for having to take a break. we'll make it as brief as possible. we'll come back for one final round after two votes.a7

this is live coverage on c-span3. >> the march 4th hearing of the congressional oversight panel will come to order. good morning, i'm elizabeth warren and i am the chair of the congressional oversight panel.

as everyone in this room knows, in late 2008, a financial crisis threatened to bring the worldwide economy to its knees. sity's special special role in this is on october 28 of 2008, as one of the nine large financial institutions that received extraordinary assistance from the united states government, treasury injected capital into citigroup of about $25 billion. eight weeks later on december 31st, it injected another $20 billion, and on january 15th, 2009, it extended guarantees of $301 billion. this was not the first time that citigroup has needed government assistance to survive. during the great depression, citigroup then national bank, stayed alive only because of the generous policies put in place by the u.s. government. again, in the 1980s, citigroup

then operating as citicorp, benefited from regulator decisions to waive standards during the debt-developed credit crisis. today we have citigroup, the largest financial service company in the world. it has 2 million customers spread across 100 countries. it is really three different kinds of businesses combined. a commercial bank, an investment bank and an insurance company. it's worth noting that the merger of these three companies required special permission from the federal reserve in order to occur, and that to operate, it required ultimately that the glass steagle laws be repeal soed citi could do its business in this new form.

citigroup appears to be returning to profitability. last december, citigroup repaid $20 billion in t.a.r.p. assistance, and terminated the asset guarantee arrangement. treasury planned to sell its remaining 27% stake in citigroup in december, although it was delayed because citigroup share price in december was well below the price that treasury had paid and it would mean a certain loss for the united states government. the shear magnitude of citigroup's operations and the company's history of receiving extraordinary government support has led this panel to an inescapable conclusion. ci scitigroup along with a handful of other institutions enjoys implicit government guarantee.

thus that the united states gooft will bear any burden and pay any price to ensure citicorp does not fail. standard and poor's issued citigroup a rating of a, three grades higher than it would have rated the company, "to reflect the likelihood extraordinary government support were needed, it would be forth coming." in other words, citi is too big to fail and it is measurably affecting its credit rating. were it not for the market's view that citigroup enjoyed this implicit government guarantee, a view reenforced in dramatic fashion by the bailout this panel oversees, then it would be viewed as a riskier investment and frankly, it would cost citigroup more to do business.

we will ask a number of questions today about how citigroup used the tax dollars it received and continues to hold today, and most importantly, what are treasuries and citigroup strategies for ensuring the american taxpayer will never again be asked to fund another bailout for this institution. to help the panel examine these issues, we will first hear from assistant secretary of the treasury for financial stability herbert n. allison jr, then citigroup chief executive officer vikram pandit. we thank you for join us and appreciate your willingness to help us learn from your perspectives. allow me to offer my colleagues an opportunity to provide their own opening remarks. i want to say that i understand that mr. atkins has been caught in traffic, so i will ask mr. mcwaters if he would like to make an opening statement.

>> thank you, professor warren. i appreciate the attendance of secretary allison and mr. pandit and look forward to hearing their views. the taxpayers repeatedly heard the phrase too big or too interconnected to fail ascribed to certain financial institutions and they have no doubt wondered what is captured by certain concept and why these merited the investment of hundreds of billions of dollars of taxpayer source t.a.r.p. funds? today we have the opportunity to learn why citigroup was considered too big or too interconnected to fail, why treasury allocated $45 billion of t.a.r.p. funds to the institution, and why treasury, the federal reserve and the fdic guaranteed over $300 billion of its assets and liabilities. although i doubt if citigroup's credit card branch banking or its commercial lending division created the too big or too interconnected to fail problem, it is critical the taxpayers fully understand why the failure

of specific investment strategies and business operations within citigroup threaten the underlying financial stability of our country. the taxpayers are also interested to learn treasury or financial markets considers citigroup as presently structured to big or too interconnected to fail and yet eefr reversal will necessitate additional t.a.r.p. funds. perhaps the troubling aspect is the moral has yard risk arising from the implicit guarantee generated by the willingness of the united states government to bail out excess risk taking in all considered business decisions undertaken by certain financial institutions. in addition, the implicit guarantee afforded those financial institutions considered too big or too interconnected to fail may place such institutions at an inappropriate competitive advantage over their smaller peers. as long as the possibility

exists that treasury or the financial markets may consider citigroup is too big or too interconnected to fail, it's critical that citigroup clearly articulate to the taxpayers what actions it has taken to eliminate such status as well as the possibility that its directors, officers and employees will engage in needlessly risky behavior that may impair the continued viability of the institution and our overall economy. citigroup should disclose what risk management and internal control policies and procedures that is implemented so as not to require a future bailout from the taxpayers. in my view one of the principal causes was risk, firm reward where employees were motivated to structure transactions so as to surpass all the risk of loss embedded in such transactions to their employer or to third party investors while earning

significant personal compensation derived from the initial closing of such transactions. it will be interesting to learn how citigroup has modified its compensation structure so as to appropriately link remun ration with the inherent risk arising from the underlying transactions as well as the performance of the institution as a whole. it is also my expectation that the taxpayers will learn today whether citigroup will require additional t.a.r.p. funds. whether citigroup is solvent on a fair market value basis after considering contingent liabilities. whether citigroup would be required to raise additional capital if the stress test were repeated using current and existing economic conditions. whether citigroup has sold any mortgage-backed securities the federal reserve, treasury orphany or freddie at excess of their fair market value. where treasury has a rational exit strategy for its investment

in sit why i group and whether a hands underwriting standards and drop in demand for perspective borrowing led to material decrease in consumer or commercial lending. thank you for joining us today. i look forward to our discussion. >> thank you, mr. mcwaters. mr. silvers? >> thank you, chairman warren. good morning. like my fellow panelists, i am pleased to welcome secretary allison to the panel and citigroup chief executive officer vikram pandit. the thoughtfulness of both witnesses' written testimony. this is one of these extraordinary washington moments where i confess i am not sure i have much to add to my colleague mark mcwaters statement. i want to congratulate him on the throwness of his washings.

because this is washington, i can't resist making my own. citigroup played a unique role in the history of t.a.r.p. despite, and i think in comments i submitted for the written record, i go into this in some detail. in essence, the uniqueness of the role as defined by the fact at the time of 2008, under t.a.r.p. a systemically significant failing institutions program, andity i group's obvious status at the time as a failing systemically significant institution, citigroup was not given aid under that program. instead it received additional aid beyond the capital purchase program described by my colleagues a moment or so ago. it received that additional aid under what appeared to be more favorable ad hoc terms. mr. allison was not present at that time and the decisions at

that time were made by secretary paulson and his team, but these events have helped define t.a.r.p. from its inception. the citigroup bailout and bank of america bailout that followed and was modelled on it raised and continued to raise serious issues of transparency and equitable treatment of various size and political clout. more recently, up until december of last year, citigroup's regulators were unwilling to allow citigroup to repay t.a.r.p. funds, thus emerge from t.a.r.p.-related oversight. the regulators reversed themselves in december 2009 and citigroup completed a common stock offering whose proceeds were used to repurchase the government-owned preferred to being that nod only been converted to common, but the government was left as citigroup's largest common stock holder. now, today, in the aftermath of that transaction, it appears clear the obama administration treasury department managed

t.a.r.p.'s holdings in citigroup to effect what is a limited balance sheet restructuring. effectively requiring or inducing citigroup's preferred stock holders to become common stock holders, not just the government but the private preferred stock holders that proceeded the government on the balance sheet. now, this step, this move diluted common stock holder share of future products substantially. this is something i strongly support from the perspective of fairness and moral has yard and some of the considerations my colleagues were mentioning a moment or so ago. these transactions did not substantially alter citigroup's total tier one capital as a percentage of citigroup's risk adjusted assets nor result in any consequences for citigroup's bond holders. as a result, i remain concerned that citigroup's balance sheet remains vulnerable, that citigroup is only intermittently

profitable. i note in the report that our chair referred to a moment or so ago, a relatively sympathetic report, standard and poor's noted its credit rating for citigroup was three notches higher than it would have been were citi standing on its own. that citigroup remained on the well less capitalized end of its peers. i think it is a critical fact and standard and poor's believes this. i want to explore this later with the witnesses. with the outlook for citigroup remain negative. these events leave many unanswered questions, more than we will be able to address today. i hope we will be able to focus today on the following key issues. one, what aspects of citigroup's business model prior to the financial crisis made the company particularly vulnerable to that crisis? do those vulnerabilities remain? two. has citigroup's balance sheet been sufficiently restructured? meaning has a hard enough look

at the assets been made per my colleague's comments and have the liabilities been dealt with adequately to reflect the true state of the assets? and third, what is the proper strategy for the treasury department now in relation to its current continuing role with citigroup's largest shareholder. in light of this history, what steps should the treasury department take so citigroup is treated fairly in the way other banks large and small are treated under t.a.r.p. and other government-related programs. i look forward to hearing the answer to these issues. i want to express my thanks to the witnesses. >> mr. atkins? >> thank you, madam chairman. i would like to add my thanks to mr. allison and mr. pandit for appearing before this panel today. you are here voluntarily and are taking valuable time out from your very busy schedules, especially this time of year to be here in washington.

we and the taxpayers thank you for helping to bring openness and personal connection to our oversight rule. like the rest of the financial services industry, citigroup has had huge challenges during the past couple of years. without the u.s. taxpayer, citigroup might not be in business at all today. citigroup's stock chart of the last three years shows a sad decline for more than $55 per share in 2007 to $3 a share today. that represents a huge loss for shareholders, ultimately retirees on fixed income, parents savings for college and people putting money away for rainy day fund. it also mean as huge loss for employees, many who lost much of their most important assets. it's difficult to rebuild loyalty and enthusiasm, innovation and motivation in that sort of environment. a financial services firm may have lots of assets, but ultimately like any company, it's only as good as the quality of the people that it attracts.

does a huge stake owned by treasury help or hurt that effort? a financial services firm ultimately like any company is only as good as the people that it attracts. there are many risks to taxpayers, shareholders to an enterprise such as citigroup which has made many changes. holdings of self-described noncore businesses have decreased by some 40% over the last year or two. there is, of course no assurance that this realignment will be successful or that it will reposition citigroup for success in the future. that's the risk that an equity holder takes, analyzing management's decision-making in deciding whether or not to go along for the ride. of course the taxpayer in this case is both as treasury terms it, a reluctant shareholder and a totally inexperienced shareholder. it's certainly not treasury's core expertise. i should make a couple of points regarding regulatory risks because citigroup corps like a

lot of people in business face business risks, credit risks, counterparty risks, exchange risks and political and regulatory risks. congress is considering several bills that could reshape the regulatory landscape significantly. i strongly disagree with some of $)rr&'a)rrkgrra political statement, the teller told me, no, we are giving them

away to people who open new accounts. well that certainly is a political statement or at least an amazing example of sychoph sychophancy. i look forward to exploring these issues this morning. thank you very much. >> thank you, mr. atkins. superintendent neiman? >> today's hearing is a unique opportunity. in addition to the reasons stressed pie my panel colleagues, my hope is that it will be able to view critical oversight topics through two different perspectives. that of the department of the treasury, the creator and administrator of the t.a.r.p.

program, and that of citibank, one of its largest recipients. having assistant secretary allison and mr. pandit here together is an occasion to consider whether t.a.r.p. strategies are working and determine if we are taking the right steps going forward. i will be especially interested to hear whether our witnesses believe larger banks like citi turned the corner. after the public confidence inspired by the stress test and subsequent earnings reports, our larger institutions still in need of t.a.r.p. support? does the return of many larger institutions to profitability signal a return to sustainability in their business model or are temporary trading gains masking continuing weaknesses and losses in loan portfolios. citigroup has engaged in serious realignment and reorganization efforts, both through the creation of citi holdings and in divestiture of business lines. has the taxpayer stake in citi

been well served by these actions? are there lessons learned that could apply to other intuitions? finally, we must take advantage of mr. pandit's presence here today to question him, not just from the perspective of our ownership interest in citi, but as home owners and consumers. citi has a large number of mortgages at risk of foreclosure, so i intend to fully explore citi's modification efforts under alternative programs. citi is also a large and important consumer lender, so the public will gain a great deal by exploring their lending practices and their view on how regulatory reform should protect consumers. if we have learned anything from this crisis though, it is that risk can materialize where it is least expected. therefore, a strategic vision for institutions, for t.a.r.p. and for broader regulatory reforms, must creatively think

about the range of developing risks and how best to protect consumers and taxpayers. i look forward to your contribution to this process through your testimony today and the answers to our questions, and i personally want to thank you again for your attendance. >> thank you, superintendent neiman. mr. allison, if you would hold yourself to five minutes, we will take any written remarks and include them in the record. thank you. >> thank you very much, chair warren and members silvers, neiman, atkins and mcwaters for the opportunity to testify today. i will discuss treasury's investments in citigroup, our reasons for making these investments and progress toward exiting them. in september 2008, the nation was in the midst of one of the worst financial crisis in our history. the economy was contracting sharply, and fear of a possibility depression froze financial markets.

the u.s. government took unprecedented steps to prevent the complete collapse of the financial system that threatened the economy. in one of the most important responses to the crisis, congress enacted the emergency economic stabilization act or eesa which granted treasury authority to restore liquidity and stability through the financial system through the troubled asset relief program. since t.a.r.p.'s creation, treasury made cash investments of $245 billion in 707 banks. there is broad agreement today because of t.a.r.p. and other governmental actions, the united states averted a potentially catastrophic event. treasury invested a total of $45 billion in citigroup and agreed to share loss necessary a portfolio of approximately $301 billion of citi's assets. in february 2009, treasury

announced stress tests for the 19 largest u.s. bank holding companies to measure how much additional capital each institution would need in order to remain sufficiently capitalized if the economy were to weaken further. the stress test results announced in may indicated that nine institutions had adequate capital and that other ten would have capital needs totalling $75 billion. of this amount, citigroup's additional capital requirement was $5.5 billion. after the stress test was completed last may, citi conducted a series of exchange offerings from preferred shares to common, and significantly improved its tier one common equity. treasury converted $25 billion of its preferred to common at $3.25 per share. large banks have subsequently raised $110 billion of new common equity and $43 billion of

capital in other forms. the bank's renewed access to capital in the public markets enabled them to make repayments to treasury, totalling $169 billion to date representing 70% of all t.a.r.p. investments in banks. while the financial markets have not yet fully recovered, conditions have significantly improved. treasury has notified congress that it does not expect to use more than $550 billion of the $700 billion authorized for t.a.r.p., and is terminating the capital purchase asset guarantee and targeted investment programs. in december of 2009, the federal reserve agreed to allow citigroup to repay treasuries exceptional assistance and terminate the asset guarantee. to be permitted to take these measures, citi was required to have a post repayment capital

base at least consistent with the stress test standard, and to have further demonstrated its financial strength by issuing senior, unsecured debt for a term greater than five years, and without the backing of fdic guarantees. today citigroup has repaid the $20 billion and exceptional assistance and has paid $2.8 billion in dividends to treasury. taxpayers earned a profit on these investments. the government's contingent liability for the asset guarantee has been terminated at no loss to the government. in fact, taxpayers have made a profit from this guarantee. additionally, treasury has announced plans to divest the the government's holdings of citigroup common shares in an ordinarily manner over the next 12 months. decisive actions taken by the u.s. government have created a financial system far stronger than a year ago. however, the financial system is operating under the same rules that led to its near collapse.

these rules must be changed to address the moral hazard posed by large, interconnected financial institutions that present risk to the financial system. the administration has proposed comprehensive financial reforms that seek to force these institutions to internalize risks, remove expectations of government support, and protect taxpayers from having to finance future interventions. thank you very much. >> thank you. we appreciate your being here, mr. allison. i would like to start this morning with treasury's role in overseeing the t.a.r.p. generally and overseeing citi in particular. on october 14, 2008, secretary paulson announced the creation of the capital purchase program. and the infusion of cash into nine financial institutions including citi. under the program he announced, these are the words he used,

"these are healthy institutions, and they have taken this step of accepting taxpayer money for the good of the u.s. economy." as these healthy institutions increase their capital base, they will be able to increase their funding to u.s. consumers and businesses. on october 28th under that statement, citi got $25 billion, was pronounced a healthy institution, and yet on november 23rd, which i think is three weeks and four days later, the secretary of the treasury announced that citi was, citi and citi alone was in such dire straits it would need additional $20 billion and that was then followed by another $102 billion in guarantees. what i want to understand is no you we describe citi as a healthy institution. what does healthy mean now that

it didn't mean on october 14th, 2008? >> thank you, chair warren, for your question. as you know, the treasury does not make comments about the financial health of any particular institutions. in having the funds repaid -- >> i'm sorry. i was quoting the secretary of the treasury on the health of citi and other financial institutions. >> i think at the time that was an extreme situation. i'm not going to comment or second guess what the secretary of the treasury at that time had to say. >> so your position is that we declared it a healthy institution and now we take no position on the financial health of citi? >> it's not our policy to comment on whether any institution presents a systemic risk or on its particular health.

i want also to say because we are a large shareholder we can't make comments on the prospects of citigroup. >> but you were making the decisions at treasury of citi's backing out of the t.a.r.p. program. >> i think it's very important to point out that is not the case. in fact, under the law passed by congress, we have no decision making with regard to citi's repayment to treasury. that authority is given to the regulators of these banks. they make that determination after, as i mentioned in my testimony, they conduct additional tests of the capital add quas adequacy of the institution it is proposing to repay, we have no choice but to receive the funds and repayment. >> so you see the role of treasury here as passive on the question of citi's financial structure, passive on the question of citi's overall economic health? treasury is not at fault in

this? >> chair warren, we are strongly advocating financial performs to prevent this situation from happening again by assuring that no single institution can threaten a financial system. >> i appreciate that. are you telling me you are exercising no supervision over citi in its financial operations today? no oversight of the financial health of this institution? >> as you know, madam chair, we are a very reluctant shareholder as mr. atkins pointed out. we wish to dispose of those shares in the public market as soon as circumstances permit, in an ordinarily manner. we have agreed with citigroup in a contract that we stated publically, this is a general policy of the u.s. treasury. we are not going to be an active shareholder. we are not going to interfere in the day-to-day management of these companies. we will only vote in a proxy on

certain well-defined and limited circumstances. >> so the health of citi is not your department. that belongs somewhere else in government? >> again, we are concerned about the financial system. we are concerned that no institution should be able to present significant risk to the financial system, and that's why we are strongly advocating financial reforms that we hope will be enacted by congress shortly. >> i understand that about going forward. let me ask one more quick question. under the stress test citi was required to raise $58 billion in an exchange offer another $5.5 billion in fresh capital. if citi had not been able to raise that money, what would treasury have done? >> i think that is a hypothetical question. >> yes, it is. >> citi did make these exchanges. we participated in that

exchange. >> what would citi have done if it had not raised the money. >> i can't speculate on that. >> you can't speculate. thank you. my time is up. >> thank you, madam chair. i wanted to explore a little about thef#e))gg@@@@ rrgrra" @ @ @ @ @ @ @ @ @ @ @ @ @ @ å offering. that was their decision. we did announce at the time that we intended to sell not our entire offering, but $5 billion perhaps alongside citi's

offering. we decided that because of the behavior of the stock at that time it was not in the taxpayers' interest to make that sale on our part. as to their offering, i wouldn't comment on the offering. they did succeed in placing $20 billion of new shares and obviously, shareholders were willing to make that investment in the public market. and what is really important is they were setting the stage to replace government capital with public capital, which we think is much stronger capital. we don't want to be a shareholder in that company. we think that companies are far stronger if they're financed out of the public rather than the government. >> when we look now then at the situation with respect to the stock, there's some 27 billion shares or so outstanding, the most shares of any that i know

new york stock exchange listed company, and the government owns about 27% of that, so have you all considered once the lock-up period ends how you will tackle such a large type of disposition of shares, especially with a share price being below $5? >> yes. mr. atkins, we've begin this very careful thought, as you can imagine. i'm not in a position to make a public statement about how we will dispose of our shares. that is not in the taxpayers' interests. we have looked at many different alternatives and consulted widely, and we will be making our decision apparent over time. >> so you intend to hold perhaps a number of offerings rather than one? >> as much as i would like to be responsive to your question, i don't think it's in the the taxpayers' interest to do so, sir. >> i agree. as far as your involvement with

respect to management and the board of citigroup, could you sort of explain to me how often you have contacts and what sort of contacts those are? >> we have contacts with citi as we do with many other banks. we are taking a very limited role as an investor. we are not getting involved in the day to day management of citigroup. instead, we will only be active as a shareholder in voting for directors and voting on major corporate events, in voting on issuance of significant new share holdings in major asset sales. in changes and bylaws or charter. other than that, we intend to act as any public shareholder. >> when we had a hearing last week with respect to gmac, and the government took the position of gmac, clearly a bank holding

company, they took seats on the board and are increasing the number of seats because of the number of the amount of holding has increased in gmac. citibank, of course, is a different position. two board members are now, they recently announced are leaving the board. is there any plan for the government to have members of the board? >> we have the right and the ability to vote on directors. that's the position that we'll take at the appropriate time. >> so you have no plans to put a government representative on the board? >> i would note citigroup's board has changed significantly in recent times. in response, i presume, to this crisis. >> but that was not due to government prompting or --

>> i cannot comment on that. i don't have that information. >> okay. my time is up. thank you. >> mr. silvers? >> thank you. assistant secretary allison, i'm somewhat disappointed by the way you appear to be narrowing your testimony in response to questions from the chair. i'm looking at your written testimony now. i want to make sure that i -- it appears to me that the statement on page three of your written testimony in response to in relation to the treasury's investment in citigroup, treasury believed its actions were warranted and necessary, represents a taking of a position on several questions related to citigroup. i'm going to try to unpack what i believe the position you are taking is. for starters, would you concur with the statement in november 2008 citigroup was a systemically significant financial institution?

>> i would. >> at least we established something here. would you con k cure with the statement november 212008, citigroup was a failing institution? >> i think that the entire banking system was at risk. virtually all major banks were having difficulty or would have difficulty funding themselves. i think that was probably the most significant financial crisis. >> did any other financial institutions contact the treasury department november 21, 2008, and express the view they were going to fail within a week? >> mr. silvers, i was not there at the time. i cannot comment on that. >> can you check the phone records and see if anyone else happened to made such a call? >> we'll be happy to respond to your question, yes, sir. >> there are voluminous press and i think now book accounts and for all i know songs and tv shows in which this, what i just

stated to you has been asserted. do you have any reason to believe citigroup did not do that? >> i have no reason to believe either way. i have no knowledge of it and therefore i cannot comment, but we will respond to your question. >> you said the entire financial system was failing. do i interpret that to mean you agree citigroup was failing on that date? >> i believe incredibly strong action was necessary at that time to prevent a catastrophic failure. >> that is not my question. my question is -- i don't disagree with you, by the way. strong action was needed at that time and during that period. i'm asking you, was citigroup a failing institution? this clearly can't be that complicated a question to answer. >> i'm trying to comment on a

broader issue. i'm asking you about a specific firm, the subject of this hearing. >> i would like to respond to your question, if i may. >> sure. >> i think citi and a number of other banks, many banks, were on the brink of failure had the system not been underpinned by actions of the government, including the federal reserve as well as the u.s. treasury. >> but no other -- >> the treasury department took the type of action you are talking about a month earlier. the fed took certain other actions. a unique step was taken that week with respect to citi. >> in the case of citi that week where action was taken, citi was in a position where it was and it did communicate this to treasury. i know this. that they were having, they could have difficulty funding themselves at that time. their debt spreads widened considerably. so in the opinion of their

management, they were facing a very serious situation. >> these sounds like euphemisms for failing. i have the great respect for the work you've done and t.a.r.p. but i do not understand why it is the united states government cannot admit what everyone in the world knows which is in that week citigroup was a failing institution. i don't understand why, since no one denies they called the treasury department and asked for extraordinary aid and said effectively they would run out of cash, why it is that we can't all agree they were failing. can you explain to me why that is? >> i'm not trying to take issue with your characterization. >> then let's move on. >> i am trying to describe what the actual situation was. >> we agree they were failing.

>> they were a failing systemically institution. now, can you explain why they were not placed in the program that treasury had at the time -- again, i know you weren't there, but you devoted a substantial part of your testimony defending these actions. can you explain why a systemically failing institution was not placed in a failing systemically institution program? >> there was a program, the targeted investment program, which -- >> mr. secretary, that program did not exist on that date. >> i don't have the details on the particular circumstances around that investment. it's my understanding that investment, if you're talking about the additional $20 billion, was characterized as part of the target investment program. i would be happy to look at that. >> six weeks after it was made, mr. secretary.

i know my time has expired if you can indulge me five more seconds or ten more seconds. i just find it extraordinary that it's not possible to simply have a straight forward conversation about this. >> i'm trying, but mr. silvers, what is not there. >> i know you were not there. i am trying to find out why you are so protective of decisions that don't make any sense. >> i'm not trying to be protective. >> mr. mcwatters? >> thank you. mr. allison, do you have any reason to anticipate citigroup will require additional t.a.r.p. funds? >> none. >> i'm sorry, i don't understand your response. >> i have no reason to expect and we have no plans whatsoever to make further investments in citigroup. >> fair enough. on a fair market value basis after considering contingent liabilities, do you believe citigroup today is solvent?

>> again, we rely on the determinations by the regulator, which i know carefully reviewed their financial situation before they agreed to permit repayment to the treasury department by citigroup. >> that sounds like yes. >> i make no comment, as i mentioned before, about the state of citigroup. we as a shareholder cannot comment on their condition or their prospects. >> let me ask this. if the stress test were conducted again today using current economic conditions and the expectation of future economic conditions, would citigroup be required, most likely be required, to raise additional capital? >> that would be a determination by their regulators, not by the treasury department. >> so, what do you think? have you thought about this? >> i would like to be as forth coming with you as i possibly can. i'm here to provide you with

information. we cannot make a comment on the citigroup's prospects or their financial condition as a shareholder in citigroup at this time, and as an institution that is not their regulator. >> but after the taxpayers invested $45 billion, $300  billion guarantee, your answer is the financial equivalent of the fifth amendment? >> no, sir. i would point out citigroup paid the u.s. treasury $20 million and we today are a shareholder of citigroup. >> which is the reason i ask if they're solvent and whether you anticipated additional money will be required from t.a.r.p.? >> i said we don't anticipate any additional money will be required from t.a.r.p. we have no plans in that regard. we are intending to dispose of

our investments in citigroup as rapidly as we responsibly can. >> what do you anticipate the exit strategy will be? >> again, as we said, we intend to dispose of our hold holdings in a responsible, careful manner within the next year. >> okay. >> have you thought about completing another round of stress tests under current economic conditions? >> we, again, understand and know that the regulators are carefully monitoring these banks. it is not our role to perform stress tests for the banks. that's done by the regulators in close consultation with those banks. >> but i mean have you thought about the issue? have you made a recommendation? do you think stress tests should be run again, or is everything okay? >> we believe that the -- that the financial system is in far better shape than it was before, evidence that have is the fact that banks have been able to

raise substantial amounts of equity and also have been raising debt funds without government guarantees. and therefore, as we look forward while we, as a testified, still see some problems in the financial @@@@å1 other agencies. >> i understand. >> of the u.s. government. >> i understand. i only have a short time left, but why specifically do you think that citigroup needed to

be bailed out? what happened? what was the problem? again as i said in my opening statement, it wasn't brank banking, it wasn't credit cards i don't think. it was something else. what was that, and las it been fixed? >> well, i think what we saw was a great deal of risk in the financial system that the time. it became quite evident as the markets began to seize up that these institutions were facing large exposures in a variety of ways. and that their capital could be rapidly deplooet pleated which led to the t.a.r.p. program where congress itself agreed that this was an unprecedented crisis and that the u.s. government would have to step in to provide support. >> okay, my time's up. superintendent nieman. >> thank you. mr. allison, as you know in our next panel we're going to be hearing from one of the largest

banks in the country and one of the largest t.a.r.p. recipients. i'd like to explore the dynamics around large banks both in terms of current market conditions and the future direction of t.a.r.p. the question ask, how do you view the trend of repayments from stel but also the larger institutions that have repaid tarps? and specifically how much of it will reflects a return to health and how much of it reflects or as s a reaction to against program standards or the stigma of participating in snarp. >> well, first of all, we are pleased to see that large banks have succeeded in raising substantial amounts of equity capital in the public markets and that they are replacing government capital with public capital. to the point that we've now received back 70% of the government's investment in banks at a significant profit to the u.s. taxpayers. and as they replace government

capital with public capital, the quality of that capital is certainly far better and it provides a base for them to do additional capital raises going forward. so we are highly encouraged and pleased by the progress that has been made in these banks recapitalizing themselves in the public markets. >> so does that return of capital and in many cases to profitability, does it reflect a return to sustainable profits in their business model, or do you see it as a reflection of temporary trading gains that may possibly be masking continuing weaknesses and losses in loan portfolios? >> well, if we look at their capital ratios, the large banks have shown material improvement in their tier one common equity ratios which is the most important type of capital, they're able to raise funding in the markets.

the markets are also observing the health of these banks and what we've seen is evidence through these capital raises of greater public market confidence in the health of these banks. >> and what does it say about the quality of the earnings? is that sustainable as to where it's coming from? and i think to the extent it's coming from lending versus trading i think is an important factor. >> again, if i start commenting on earning streams, i can -- some may interpret i'm commenting on citigroup. >> let's talk more broadly because we do have metrics and i think some of the more important once are those that have come out of the federal reserve from the fdic on lending sticks. their last quartly banking report issued last week shows historic drops in lending levels. in fact, it's the largest yearly decline since the fdic was createded. how would you analyze and interpret this data regarding

decreased lending at lending levels? is it -- does it show a significant degree of lack of progress in financial stability or other factors in your interpretation? >> well, there are many possible reasons for the decline in lending, and this has been widely discussed. is it can be due to a natural caution during a recession on the part both of borrowers and lenders. and we will, as i'm sure you know, have announced a program to provide to make available additional capital to mid-sized and small banks who do outsized amounts of lending to small businesses across the country. we've announces a $30 billion program. we're hoping to get congressional approval for aspects that have program and to move it forward as rapidly as possible. and that program is geared to lending because it will -- it provides for a sharp reduction

in dividend payments to treasury on the part of banks that lend materially more than they are today. >> one important question on metrics. one of the important metrics that we have suessed is the treasury's monthly snapshot of the banks who have been reporting. as i look at the data of february 16th, the snapshot now only reflects 11 institutions because it is no longer contains institutions that have repaid t.a.r.p. funds and i think in this report it was repaid in june of '09. >> yes. >> i think that will have limited continued limited usefulness, this data as we go forth to the extent that institutions are examplituded from the report. is there any consideration to expanding? and i can see continuing asking institutions to continue to report despite the fact that t.a.r.p. funds may have been repaid. >> yes, in fact, when the banks began to repay last summer, we called the banks that were repay

ang requested that they continue to report through the end of this year. and they all agreed to do that. we'll be happy to take your quell into consideration. >> yeah, i think earlier we've even encouraged expanding it more broadly and would be very concerned to the extent that is limited. >> thank you. >> thank you, superintendent nieman. so i was struck by your comment, an siftent secretary allison, that the taxpayers made a profit on their deal with city bank. that will citi has a too big to fail guarantee that is very valuable right now. it shows up in their credit rating that the american taxpayer will not let them fail. what is citi paying the taxpayers? >> first of all, there is no too big to fail quarantine on the part of the u.s. government. and i can't account for any statement that some outside agency may make. we intend as i've mentioned, to dispose of our shares in

citigroup as soon as possible. >> mr. allison, i understand that. but the question i'm asking is the market clearly perceives that there is a too big to fail guarantee and the market is rating citi higher because of that. that gives citi an advantage in raising capital. that is very valuable to citi, and it is potentially very costly to the american taxpayer and i want to know if the american taxpayer gets paid for that. >> really what you're pointing out is the need for reregulation of the financial system. >> i understand that. >> it's essential that no institution is viewed as. >> i will take that as a no, that we are not being paid for the guarantee that we are providing citigroup. >> there is no guarantee of that institution or any other institution. >> ial take that as a no. so let me ask about, you said we have no more plans to put t.a.r.p. funds into citigroup. part of the reason citigroup had to be bailed out stemmed from the difficulty of entangingal

counter party risks around the world. i'd like to know how has treasury managed systemic risk questions posed not just by citigroup bibi all of the large companies but particularly by citigroup and consult tagsz with your regulatory counterparts around the globe. what are you doinging abouting thatting? are we any safer than we were a year ago? >> there are continuous conversations with financial leaders around the world. and i think you've seen them say that there's closer coordination today and much better communication. >> well, i'm glad that there may be more coordination. let me ask it in the more specific perhaps with citi. are you making any effort to separate citi's activities, its counter party risks and operations around the world that we say caused systemic failure or systemic failure would be caused if they failed? are we making any effort to

segregate that say from their trading activity taelts a fairly high risk undertaking. >> again as you know, we've made many statements and taken the initiative to request major changes in financial regulation in this country, which could address a number of those issues. for example, assisting on capital adequacy, comprehensive oversight of these institutions and very important, a resolution authority so that no institution with the government would not be put in a position of having to take over an institution or to somehow support it. >> almost assistant secretary. >> yes. >> i appreciate the need for reform of the financial system. and looking forward, i think that's exactly what we have to do. the question, however, is that we have a system in place right now.

treasury came to the united states congress and said, in october of 2008, we have to h$2 have $700 billion or the economy will fail. one of the specific problems was that citi had this deeply intertwined overseas operation that we were told as a people would, if we tried to unravel it, cause a systemic shutdown in economic markets, that the results would be catastrophic. and that was one of the principal reasons that the american congress went along with the t.a.r.p. bailout. so my question is, what are you doing about that now? what are you doing to isolate the part of citi and citi's operations that could cause systemic failure if they go down from citi's other high-risk undertakings? for example, their trading activities? >> yes, well, as you know, there is the volcker rule that's being

discussed today. >> you're talking to me about the future and the future you're talking about is one that puts it back on congress to change the laws. i'm in favor of that, mr. assistant secretary. but we have to survive day to day, and it is treasury who is responsible. we don't want you back here asking for money. >> chair warren, we totally share your concerns. and that is why we are advocating that reform be initiated and passed as rapidly as possible. >> i'm going to do this one more time. >> please do. >> please don't tell me about advocating change for the future. what i'd like to know is what are you doing to manage the risks that are in front of citi and that face the american people right now. >> well, citi, again, is under regulatory oversight comprehensive regulatory oversight, and the regulators are responsible for assuring that citi is being properly

controlled. and that it has adequate capital. >> are you telling me there are no efforts to segregate the risky activities from the systemically critical activities? >> we are not involved in managing citi on a day to day basis. and the regulators oversee citigroup. i think that's a question you might ask mr. pan dit when he comes here shortly when i finish. >> good idea. thank you. i apologize to panelists for going over. >> thank you very much. >> mr. atkins. >> i just have a couple more questions here. one with troept, there was an interesting article by reuters yesterday about a small midwestern bank called midwest bank holdings. this is a little bit off topic but it will get back to topic in a second. i want to read it. a small midwestern bank has negotiate with the treasury tore taxpayers to essentially buy the shares at an above market value price in an unusual transaction reflecting how the government's

bank investments are entering a new phase. midwest bank holdings agreed to swap 84.4 million of preferred shares for securities that will convert to about only $15.5 million of common shares roughly an 80% loss to taxpayers. it quotes hedge fund managers. there's a lot of funny stuff going on here. in section 101 of esa, it basically says the secretary shall take such steps as may be necessary to prevent unjust enrichment of financial institutions participating in a program including by preventing the sale of a troubled asset to the secretary at a higher price than what the seller paid to purchase the asset. so i was wondering if you have -- if you can elucidate us with respect to this particular transaction and does this portend a change with respect to treasury's view of the assets that it holds under t.a.r.p. and

the remaining banks? >> as we looked at the situation of midwest bank, we determined that the best way to protect the taxpayers' investment would be to convert our position into mandatory convertible preferred on the condition that that bank raise additional cap)l@@@ @ @ å#

company. >> well, our interests are protecting taxpayers and their investments. and there may be situations where we will look at what we might do in the way of protecting ourselves through a structured recapitalization that we might participate in, but in each one of these cases, we're guided by what's in the taxpayers' interests. >> okay. so that gets me back to some of the other things that the administration is doing and whether or not that's really in the best interests of the taxpayer and shareholders in this case of city bank. and you mentioned volcker rule, so-called, which i guess i saw in a report that formal language was sent up to the hill today. what effect will that have on my interest as a taxpayer in city bank as a shareholder, a reluctant shareholder at that to the profitability of city bank and to its businesses. >> again, i think that's a

question better asked to the ceo of citigroup and again, i cannot comment on potential impacts on the company in which we hold a large investment. >> it seems to me that the government's giving with one hand and taking with another including now the -- with respect to resolution authority that you were talking about, the administration and you note this in your testimony that "the administration's proposals provide this resolution authority subject to strict governance and control procedures with losses absorbed not by taxpayers but by equity holders unsecured creditors and if necessary, through a fee on other major financial institutions similar to the financial crisis responsibility fee." so first of all, aren't proposals like these actually putting additional costs and burdens on banks at a time when insuring that banks are sufficiently capitalized should be priority one? >> well, we think that these measures are called forgiven the

circumstances that the taxpayers have faced. we, by the way, we will intend as the treasury secretary has announced to give back every penny that we have invested through t.a.r.p. and the financial crisis recovery fee is one way of doing that. we would also point out that many institutions have paid very large bonuses. they can afford, we think, to reimburse the taxpayer. >> well, unfortunately, you know, they also have to run a business, as well. but anyway, my time is up. we'll get into that later. thank you. >> thank you, mr. atkins. mr. silvers? >> i think it might be helpful, mr. assistant secretary to try to clarify what the taxpayers' interest is here in light of my colleagues' questioning. first, let me return to what may be a painful subject. do you agree that citigroup today is a systematically

significant institution? >> again, mr. silvers with, all respect, we cannot comment on a judgment about whether they're systematically significant. >> you agree they were in the fall of 2008 though? >> the determination was made at that time that they were systematically significant. >> your written testimony appears, you're not going to answer that question frontally. i'm going to infer it from your written testimony that you believe that. if you wish to tell me that you don't, that's fine. let's start with that. it would appear to me that the united states as has been frequently noted is a 27% common stock holder in citigroup and that that's a significant financial interest of the public at this point. i assume you agree with that. >> i do. >> all right. it would also appear that there is at least a significant probability based on historical events that we are some sort of guarantor of citigroup's

obligations in light of i think what we agree that we did not allow citigroup to default on those obligations multiple times in the past and most rlsly a year or so ago. you're free to disagree with me. i don't expect to you confirm what i just said. >> well, we did guarantee part of their asset foz for a period of time and well compensated for doing that. >> i'm suggesting we have a broader somewhat ill defined guarantee. certainly the credit markets or at least credit market analysts believe that to be the case. so we're not in the position as my colleague would appear to suggest it seems to me of being simply a stock holder in citigroup and then finally, if we believe that there is at least the possibility that will citigroup will turn out to be systematically significant today as it was in 2008, there's an even larger interest at play here. would you disagree that that's at least a possibility that there is a systemic interest here that the taxpayer has? >> well, first of all, let me

say again that the purpose of the regulatory reform initiative is to assure that no institution could infer or the public can infer that there's some type of implicit guarantee of a financial institution by the u.s. government. we want to remove that possibility. >> but as our chair has commented on that unfortunately, i think you and i agree, unfortunately this reform has not passed and today we live in a reformless world. >> yes. >> and i gather at least one of my colleagues would prefer to keep it that way that we live in a reformless world. but that's how, you know, the treasury has to function in that arena. seems like the public has three interests in play at citi. my question to you is, what is the -- how does treasury balance or manage, what strategy does treasury pursuing in light of these three somewhat conflicting interests? >> well, again, our strategy as

a shareholder in citigroup is first of all, to dispose of our investment as rapidly as we can in a responsible way. secondly, not to get involved in the management of the company. we don't believe that's in the shareholders' interests or in treasury's interests. we are casting our involvement very narrowly as a voting shareholder and voting only on certain items in a proxy statement. so we think that the best thing we can do, twofold, one exit that investment as rapidly as we responsibly can, and secondly, push hard for financial reform, let me say it again to, make sure that the u.s. taxpayer is never again put in a situation like we pais face today with citigroup owning 27% of that company. >> can i turn to a different matter then as my time is about to run out?

i alluded in my opening statement to the fact that common stockholders of citigroup have been over time diluted. >> yes. >> and largely as a result of actions taken by in administration over the last 12 months although not exclusively. there was a little bit of dilution involved in the initial suspect transaction. however, it appears to me that there is substantial differences nonetheless between aig, the other -- what i find to be the inevitable comparison in terms of a systematically failing institution. the dilution there and the dilutioning in citigroup and i would like to ask you to provide us with your analysis of the comparative of comparing the dilution in the two areas and in particular your analysis of the effect of the difference between what happened in aig where the treasury came in with debt, debt financing entirely, senior to the common stockholders and took a large common position through

warrants and the citi situation in which preferred stockholders were converted into common and thus, essentially, more cash was put in with the common. obviously, i'm not asking you to answer that question now, but i'd like an apples to apples comparison of the dilution in the two firms as of today. >> well, first of all, aig received assistance in the fall of 2008. the federal reserve actually made the bulk of that investment and the federal reserve owns preferred shares, voting shares that control about 80% of the voting rights is my understanding. and citi on the other hand we made these preferred investments in citi, as you well know and we had an exchange last summer as part of a number of exchanges of preferred for common that were done at the time to bolster citi's tangible common equity ratio. >> i'm going to stop you there if you can, mr. allison.

we'll come back to this and we'll permit -- we'll keep the record open so we can add more detail on this. i just want to be disciplined about time. mr. mcwaters. >> thank you. plrm assistant secretary, during calendar year 2009, did t.a.r.p. recipients sell any mortgage-backed securities to either the fed, treasury, orphanie or freddie? >> i don't have an exact answer for that, mr. mcwaters. i'll be happy to get it for you. >> if you would look into that and also look into the price that was paid. >> all right. >> the fair market value at the time or was it par, something in excess of fair market value is what i'm interested in knowing. >> okay. >> what actions has citi taken again specifically to negate too big to fail problem so we're not having this discussion again in five years? >> may i respectfully ask that you pose that question to

mr. pan dit who is the ceo? i think he's in a better position than i to describe the actions they've taken internally. >> i know but i suspect you talk with him on occasion. >> actually, i have not talked to mr. pan dit about this matter, no. >> okay. how did citi em employ the $45 billion of taxpayer funds? >> those funds were for general corporate purposes. they were part of the capital of citigroup. it was designed, that entire program was designed to provide additional capital to banks. >> okay. does citi use retail or commercial bank deposits to finance proprietary trading activity. >> again, i'd ask you to you ask that question of mr. pan dit. i don't have that information. >> but i mean this has been alleged as one of the causes of the financial crisis. and so it's not a question you've asked? >> no, it's not. >> okay.

>> okay. do you have a view as to how the activity of short sellers in the last quarter of 2008 affected the financial crisis and affected citigroup? >> i don't have that information, sir. >> okay. >> any views as to how the mark-to-market accounting rules particular little how they were reviseded in april of 2009 affected citigroup's financial reporting? >> again, i think you'd have to ask the ceo. >> so these are questions you've just not thought about or not -- even though that these are not obscure questions about short sellers and mark to market and the like? >> no, is the role of my area in treasury is to manage the taxpayers' investments and to retrieve those investments as rapidly as we responsibly can. >> okay. i can anticipate the response to this question. it has been alleged that goldman

sachs among others sold collateralrized debt obligations to investors while at the same time betting against or selling short those same securities. are you aware that citi is engaged in any of that activity? >> i'm not. >> okay. okay. what is your view about the effect the implicit guarantee from the taxpayers has had on the competitors of citigroup? >> well, let me say again, there is no guarantee today of citigroup or any part of citigroup on the part of the u.s. government. >> i said implicit guarantee, not expolice night well, i'm not sure i can comment on what implicit guarantee means. i'm trying to be as precise as i can. >> okay, fair enough. but so as far as you know, it has had no effect on competitors that -- i mean, let me ask it

this way. is citi today too big to fail? i mean if the answer is no, it can fail and be liquidated then i would say it would have no effect on competitors. but is citi too big to fail today. >> as i've said before, i can't comment on the condition of citigroup as a -- since the u.s. treasury is a major holder of their shares. >> okay. my time is nearing the end so i will stop there. >> thank you, mr. mcwaters. superintendent nieman. >> thank you. >> i intend to ask mr. pan dit about their progress in preventing foreclosures. i'm going to be particularly interested in their modification process and particularly around conversions from trial mods to conversions. and i think this is more than just a process question. i think some people tend to forget that the reason we are in this financial crisis is because

of the foreclosure drives and until we soft housing and foreclosure crisis, we will never be assured of financial stability. rr)@ @ @ @ d and we are actively involved with citi and the other major banks which hold the bulk of these mortgages to make sure that they are reviewing those portfolios, identifying eligible homeowners and offering them

modifications and final modifications as soon as possible. i should also point out that today there are about 1.7 million people we estimate who are eligible for modifications under the h.a.m. program and the servicers have extended offers to about 1.3 million there are over 1 million trial modifications in place today that are saving homeowners about, over $500 a month. >> thank you for raising that because due to the treasury's extension of that will three-month period by which borrowers have to make payments before they are converted from a trial mod to a permanent mod, that extension expired at the end of january. so we are anxiously all awaiting the numbers that could even approach a half a million individuals who we are awaiting how they were -- the denial, whether they were offered a permanent mod where if they were denied, what is the result of

that appeal process. can you, any expectations of what we may hear from citi. >> and if you can't answer that, can you give us some idea and we expect that this data will come out in the next week or so, if you can give us some idea of what our expectations may be with respect to that data. >> well, again, we're looking forward to the release of the monthly data for january. i'm sorry, february. and there is progress being made in decisioning the trial modifications, considerable progress and this will be taking place in the weeks to come, as well. and also, there are rights for homeowners who are denied to appeal their denials, as well. so we've tried to make this program as simple today as transparent as possible. we have been working very closely with the leading servicers especially to assure that they are moving as

expeditiously as they can and they have the resources also to make decisions as rapidly as possible. we will know these homeowners are waiting. in the meantime though, they're still save agaverage of over $500 a month and we are. >> to the extent that they are denied a permanent mortgage conversion, there's a question of whether they would have been better off pursuing another alternative, whether short sale and look to rent as opposed to staying in a trial modification for fee, four, five, six months. i do want to, becauses in recognition of the challenges in conversion and those low conversion rates, have you announced a new system going in june 1 that will now require documentation up front. and i think there are certain benefits to that. but do we run a risk of shifting the problem? yes, we will have higher conversions but will we have fewer people entering the process unless we really modify those documentations? >> i think that's a good

question. it's one we've been concerned about, as well. that's why we've tried to simplify the documentation requirements and also, we provide the documents that a homeowner may need on our website as well as voluminous information about how to apply, how to go through the process, how to make appeals. >> march 1 was the date i think we were previously given about having that web portal up and running so borrowers can identify. can you give me an update on the status of expanding that? i think we were told earlier there were going to be over 100 servicers participating by march 1. >> i don't have the exact number of servicers participating. but that program has been moving ahead very rapidly and will continue to make enhancements to that website going forward. i would also point out we've had millions of people access the website and also let me mention, we're working croesly with counselors around the country and holding events throughout the country to bring people in who may be eligible for this

program. and help them have their mortgages modified as rapidly as possible. >> we look forward to the reports and your efforts of transparency understanding clear little how those individuals were treated. thank you. >> thank you. >> thank you, mr., assistant secretary. have i one last question on behalf of the entire panel. and that is, are you saying today that no one in treasury monitors the financial condition of citi and that no one in treasury is trying to manage the systemic risk that citi poses, or are you saying that that's just not your job? >> we do look at obviously public information about citigroup. >> you don't have any private conversations with citi? >> i personally have not had. >> or request additional information from them? >> i think that there have been conversations with citigroup

over time. i myself have not had conversations with citigroup management about the condition of the company and with the ceo about that subject. >> so are you telling me, that was my question. >> yeah, yeah. >> that no one in treasury is systematically observing and monitoring the financial condition. >> no, i'm not. >> of city. >> citi does visit with us from time to time. >> but. >> and provide updates on their situation. >> so i'm still trying to understand. >> yeah. >> so that means we just had the wrong witness here todayed? there were other people within treasury who are engaged in these jobs? it's just not your job? >> i participateded in briefings in the past on citigroup's situation. we do have conversations with citigroup about their situation, yes, that is true.

>> all right. i appreciate it, thank you mr. assistant secretary. i invite to you stay for the next panel. >> thank you very much. >> and hear from mr. pan dit. >> thank you. >> thank you. the witness is excused. mr. pan dit. >> mr. pandit, gentlemen, if you could excuse us. thank you for coming today. is the chair recognizes you for five minutes if you'd like to make an opening statement. i'd ask you to hold it to five minutes. we will put your written statement in the record. whatever its length. mr. pandit, please. >> >> three seconds gone.

okay. thank you, chair warren and members of the panel. thank you for inviting me here. citigroup today is a fundamentally different company from what we inherited two years ago. citigroup is now operating on a very strong foundation to generate sustained profitability for the benefit of all our stakeholders. for us as for many other institutions the bridge to the other side to a sound footing came from the american people and i want to thank our country for providing is citi with t.a.r.p. funding. last year, we repaid $20 billion of t.a.r.p. investment. in addition, we paid the government $3 billion on as dividends and another $5.3 billion in premiums on the asset guarantee program that we have now exited. taxpayers still hold 27% of citi's common stock and we look forward to helping them make money on that investment. citi owes a large debt of

gratitude to the american taxpayers. we have renewed our financial strength. we have overall risk management reduced our risk exposures, defined a clear strategy and we've made citi a more focused enterprise. at the end of 2009, we are one of the best capitalized banks in the world with a tier one ratio of 11.7%, a tier one common ratio of 9.6 percent and $36 billion of ares. our leverage is 12 to 1, down from 18 to 1 when i became ceo. we cut the size of our balance sheet by 21% from its peak by half a trillion dollars and our riskest assets have been substantially reduced. citi's cash liquidity is now a strong $193 billion and we have reduced our operating costs by more than $13 billion per year. perhaps the most important

strategic action we've taken is to mandate a return to basics, return to banking as the core of our business and as a result, we've sold more than 30 businesses and substantially scaled back proprietary trading. citi is a better bank today. but for citi being better is not good enough. our customers and america's taxpayers need a different road mapp map. first, a lot still needs to be done to promote economic recovery particularly in the housing area. since 2007, citi has helped 824,000 families in their efforts to avoid foreclosure total loss mitigation solutions increased by 50% versus 2008 and we remain number one in active hamp modifications. in 2009, citi orange natd $80 billion of mortgages and provided $80 billion of credit

card lending. and in addition, our company used t.a.r.p. funds specifically to support new lending to individuals to, families to, communities and businesses, taxpayers have a right to know how we put that money to use and we were the only bank to publish regular reports on the use of t.a.r.p. capital. second, stel supports reform of the financial regulatory system. america and our trading partners need smart, common sense regulation to reduce the risk of bank failures, mortgage foreclosures, lost gdp, and taxpayer bailouts. i know these are issues that are being debated right now but let me share with you three areas i think are important. first, financial institution reform. let's address too big to fail once and for all through the

creation of a systemic risk regulator and a resolution authority. by making sure banks are banks, focused on clients. second, market reforms. let's level the playing field with common standards across the entire financial sector. let's create transparency, particularly in the derivatives markets with the use of standardization and clearing houses. and third, consumer reforms. we support the need for a strong consumer authority that is part of the regulatory system to promote greater transparency, sound practices, growth, and stability in the consumer credit market. banks and nonbanks need to be more responsible. these are reforms that could be costly for the industry, but citi believes they are necessary. thank you, chair warren, members

of the panel for this opportunity to review citi's progress. >> thank you very much, mr. pandit. again, we appreciate your being here today. i'd like to start with a little quote from the emergency economic stabilization act or t.a.r.p. as we've all come to know it. >> right. >> where treasury is to assure that its authority is "used in a manner that protects home values, college funds, retirement accounts and life savings. and president bushes home ownership and promotes jobs and economic growth." that was congress's statement about why t.a.r.p. was done and what treasury is authorized to use money to advance those specific goals. in a june 22nd, 2009 reuters article, you are quoted as saying we will be playing the two growth themes very clearly. one is globalization, and the other is growth in emerging markets. wilbur ross this morning referred to citi as essentially

a foreign bank. so the question is, why should the u.s. taxpayer alone carry citi? >> madame chair, we're not a foreign bank. we're a global bank. we're actually america's global bank. we started in business years ago helping it america's businesses export their products. and that's what we've been doing. in this particular time as we need growth, as we feed jobs, it's even more important that we help small businesses, medium businesses and large businesses make those exports. as we do that, we need operations on the ground and in many of these operations we raise deposits to help large companies in the u.s. get loans on the ground they need and as well, some of those deposits help us facilitate loans in the u.s. market. >> but you describe your growth as globalization and growth in emerging markets.