i would allow him to play a role in the future of iraq if he cooperated with me. that fed his ego. it fit perfectly within his culture and his individual motivations. he decided to cooperate. a couple weeks later, there are some more details after is that. we went backwards after we went

forward. he told us his best friend was abu masab al-zarqawi's religious adviser. that is how we found him. >> thank you for your presentation. very interesting. i am a graduate student at george washington. my question is not related to my experience. i have a friend going over in the capacity of the counterintelligence officer. what advice would you have for someone in his position who just finished school and is going over for the first time after a bit of language training? >> interesting enough, the night before last, i was at army reserve interrogators course telling students soon to graduate who they may deploy in the near future some advice.

it was similar to the speech you heard today but i told them trust your training. i believe in military training. i think it can be improved but we do a good job stretching ethics and abiding by the law and fighting in accordance with our principles. the other thing i would say is go over there with the attitude that you are going there to learn something. john nagle calls this the learning environment. the learning army. our ability to learn faster than our enemies is an asset. if you go over with preconceived notions about who our enemies are and how they fight and how they are organized, you will be static. you should go over with the mindset that you are over there to learn something while you are doing your job and you are going to use the knowledge you learn

while you are there to return your processes or ethics. >> psychologist for social responsibility. i will be interested, when you promise somethingç tnç somebod like this man who is tied up and offer him the chance -- what happens then? is anybody able to carry through with the things you promised if he comes through which information? >> that is a great question. let's clarify that. by killing abu masab al-zarqawi he played a role in the future of iraq. i feel wholeheartedly--i honestly believe i upheld my part of the bargain. let's also talk about that deception. a lot of criminal investigative techniques are based on

deception. we have people write statements and alter them. we make up information even in the army field manual, a dossier approach, take a folder and have documents and it is a bunch of blank paper except for one and you pull one out and show it to the detainee and make it look like you have a bunch of information. deception is a part of warfare. in world war ii we built a base of wooden fighters to deceive the germans into thinking we had forces there. there's nothing wrong with deception in interrogations. courts in criminal cases have ruled you can use deception as long as it doesn't rise to the level of shocking the conscience. you can use deception as long as it doesn't rise to the level of inhumane treatment. i can't tell you how many times detainee's caught me in a lie or i caught them in a wilie and we

get over. we both expect that. the section is just one tool that we use but ultimately what we have to get to is the negotiation in a tray of information. do i think we should follow through on promiseds? yes if we can. we don't have enough ability to do that. a can't offer more than a blanket or a pillow. indonesian's can offer promises they can keep. after i left iraq a did start dealing with people more, detainees. the problem is we have a hard time as americans getting over people who attacked us and

commit acts of violence against american soldiers. yet that is a part of warfare, to turn enemies into allies. i do think we have to deal with a follow through on the promises we make and make them real. we can't do that unless we see interrogation as an exercise in negotiation rather than an exercise in retribution. >> do a week for the mikait for? i am a writer. how do you think you are affecting the course of our behavior specifically with the likelihood there will ever be any kind of accounting and the

influence of the policies of condition which i understand are not renounced and may still be on going? >> the latter question, rendition is a topic that i never engaged in or had anything to do with. i oppose it simply because i think it is against the law and it is wrong. it also violates our principles. i think we should have the courage if we detain people, we should detain them and process them. do i think the message is reaching people? yes. but how many people is the question. most polls -- you asked about polls and i want to address something. the polling is actually extremely dependent upon the wording of the question.

we know that if we phrase a question that is do you support interrogation techniques that keep americans save, people say yes. what is loaded in that question, talk about loaded questions, they work or they don't recruit new terrorists that down the road make us less safe or they are enhanced interrogation techniques and not torture. >> the current administration -- >> there's no softer heart in this argument. defective and non effective at those arguments have to be made in the short and long-term perspective. people have said to me i think we could use advanced interrogation techniques but if your message work better and faster, than i am ok with giving

up on those. that is fine as a band-aid but the question goes back to why do we torture? what would somebody tortured another human being? that goes back to prejudice and that is the long term fight in this argument. how do we eradicate the prejudice? we didn't torture people after the attack on pearl harbor even though other attacks were imminent and you could make the argument it would have saved lives. >> we will take questions we're almost out of time. you have a question? >> since the debate over torture surfaced in the united states after 9/11 it seems there is a growing class of interrogators like yourself who take positions on whether torture works and they lined up on both sides of this issue and i would like you

to diagnose the divergence that explained whether it is more your emphasis on the long-term effects of using torture or is it that the interrogators lineup on both sides of this debate have had different experiences and feel differently about whether it works in the short-term as well? >> i am rachel and i want to ask if you had any thoughts about the lessons of your own experience in this arena which is trying to detect and deter people in the process of radicalization within all countries. jihad jane was on the front page of the washington post this morning and i am doing work in western europe where we are looking at ethnic profiling and the role of a focus on religious practice. and efforts to detect persons in

the process of radicalization and we have been critical of what we see as an excessive and stereotypical focus on religion in looking at behavioral patterns and when people are brought in for questioning, they are often asked a great deal about their religious practices. it was suggested to us by an intelligence officer that the police should simply be barred from asking about religion and should focus on actions or behavior's instead. i will be interested to get your thoughts on that. and if there are key lessons and a conversation here, they have been looking at these issues. the nypd brought out a major report a while ago about this. >> let me answer that question first. what i learned in iraq is people

join and resort to violence for very personal reasons. it can be in the case of the one imam, because his best friend was assassinated and forced him to move from his house and give up his business. he sent suicide bombers against she a civilian the marketplace is. he later admitted to me that his mother was shia. imagine the feeling she must have had inside that he had to overcome to participate in that activity. it was extremely personal to him because of the assassination of his friend and a loss of everything in his life and his pride and honor in supporting his family. they are very personal reasons and i would say the most drawing reasons, most powerful reason for al qaeda to recruit are intangible. the same way my most powerful weapons in interrogation, my most powerful incentives are

intangible. sometimes i could throw $10,000 on the table and that wouldn't move anybody at all. if i appeal to their honor and respect and their pride, that would be much more powerful. the reasons people join al qaeda, the biggest learning curve in iraq, was that it is a convenient convergence. i told general casey when he visited our prison, he asked why people join and an intelligence officer gave him the standard appeal about al qaeda ideology and the establishment of what have you. i disagreed. i said there is a convenient convergence of a lot of different factors from social, economic, some religions, but they are very personal factors to each individual. the first question was why do interrogators differ on the

opinion of whether torture works and the reason is we differ over the definition of the word works. if you are talking about short-term, i know someone who was special forces in vietnam, lot of clandestine operations, he told me a story of when tortured did work. very brittle story but it worked. and he got the information he needed and saved somebody's life. he will now tell you he never should have done it. the cost of using it in the long term far outweigh -- in algeria, groundbreaking stuff where they stopped terrorist attacks but lost the support of the population. we are differing over the term works. somebody in the world will talk

if you hand them a stick of gum. if uss probability look up the short and long term effects. >> that was great. [applause] >> is your book here? how to bring the terrorist out. >> i didn't bring books to sell but you can get them at amazon.com and barnes and noble. >> we have the magazines here for the synopsis as an article. [inaudible conversations]

[inaudible conversations] [inaudible conversations] >> an update on the $787 billion economic stimulus program passed into law more than a year ago. $350 billion have been committed to various projects. just $195 billion have been paid out. we have a web site devoted to following stimulus money.

go to www. c-span.org for stimulus. you will find news conferences and hearings and congressional debates as well as government and watchdog groups tracking the spending. treasury secretary timothy geithner testified on capitol hill yesterday urging u.s. banks for consumer fees. his testimony is next and the senate is back this morning at 9:30 eastern to continue work on federal aviation programs. live senate coverage is live on c-span2. >> obama and his socialist ideas of the madrid -- government and car companies and banks and deciding salaries, this is a life lesson in progress right

now. >> founder and president of the policy institute on her work to promote conservative women in leadership roles sunday night on c-span's q&a. >> treasury secretary timothy geithner testifying about next year's budget request for the treasury department. under the president's plan nearly $6 billion will go to enforcement programs that the irs. jose chairs the subcommittee on financial services. >> the subcommittee will come to order. mr. secretary, before we go on, i join miss emerson in having you convey to the folks at the irs our deepest condolences. it was the tragic situation, and

one that can never be tolerated regardless how anyone feels about anyone in government. please let them know as we told commissioner schulman that our thoughts are with them. our prayers are with them and personally, and i know joanne feels the same way, we respect and admire the work that they do on a daily basis. >> thank you for what you said and i agree with everything you said, that we owe them our support, gratitude and respect, they are a remarkably dedicated group of public servants who take great pride in their work and no one in that position should have to face what they face and they showed great bravery in the evacuating the building quickly and saved tens of lives by how they acquitted themselves in that moment of

panic in attack. they were strong and brave and remarkably dedicated and committed to the work of the service. >> let me also say that all of the families and employees are in our deepest prayers and our thoughts every day and they showed remarkable resilience in my opinion as well and often times bureaucrats are not treated with the respect that they are do but in this particular case it points out to the hard-working people there are working for all of us on a daily basis. >> the sub committee meets to consider the budget request and

conduct oversight over the department of the treasury. we welcome secretary timothy geithner back for his second appearance before the subcommittee. the treasury department is requesting authority to spent $14.1 billion, an increase of $151 million or 4% above 2010. i welcome the requested increase for irs enforcement, efforts to prevent offshore tax evasion. most americans rely on salaries for employment, attacks before they receive their pay check, many wealthy individuals and businesses use offshore accounts to hide billions of dollars in income generated by investments and income from abroad. i know the treasury's budget request also proposes to reform our taxes on international activity and to counter the use of offshore tax havens. these proposals would increase

revenue by $120 billion over the next ten years. these are good initiatives. i welcome your proposed increase in funding for financial and technical assistance and look forward to learning more about the proposed new initiatives on a healthy food and banking. i believe the cbs eye has done the most important work in lifting of the advantaged communities and discussing this work with you today. the treasury budget request has other notable increases including 13% increase for treasurys and department officers after a 9% move this year. i am concerned that the treasury but it proposes to reduce grants, tax counseling for the elderly and volunteering income tax assistant grant programs. all three programs assist low and moderate-income taxpayers.

i believe supporting these taxpayers is of paramount importance and have made them a priority in my years as chairman of the subcommittee. i am dismayed that the administration has included a $106 million proposal to tax all stores selling alcohol and tobacco, this same amount regardless of their size. i am opposed to charging my neighborhood the same flat fee as big suburban lawmakers stores and congress under both parties has repeatedly objected as a practical matter under the current budget circumstances. i would probably have noticed li's but to consider budget cuts elsewhere to make up for this unrealistic proposal. mr secretary, you have come to the federal budget but we never allow you to leave without a discussion of economic policy. you are the highest administration official with a major role in economic policy

required to testify before congress. from the outset you have been at the center of the debate on how to respond to the financial crisis first as president of the new york fed and treasury secretary. much of that debate in congress has concerned the troubled asset relief program, t.a.r.p. which is the point of great interest among members on both sides of the aisle. it seems perhaps the worst of the economic crisis is behind us yet we have plenty more to do to get the economy back on its feet again. to that end over the course of the last year you have announced initiatives to respond to the concerns of everyday americans. small business credit, mortgage relief and limits on executive compensation and rescue by the taxpayers. many of the next steps are in the hands of congress. there is a matter of practice, we must trust that you are looking out for the american people on that day to day basis.

i feel confident you are doing so and look forward to discussing the administration's efforts on behalf of the american people with you today. with that i turned to my colleagues. >> thank you for being with us this afternoon. i know it is treasury secretary, you are facing many daunting challenges including the attempts to reinvigorate bank lending to consumers and small business, trying to stabilize housing and commercial real-estate markets and protecting the american taxpayer, their investment and preserving the financial health of the federal government and you and your staff have been working extraordinarily hard on these issues in -- we appreciate your dedication. regarding the financial condition of the federal government i am very concerned there does not appear to be a short or long term plan to address deficit spending. the administration's budget

estimates that the fiscal year 2010 deficit will be $1.6 trillion with deficit spending continuing to exceed $700 billion through fiscal year 2020 when it increases to at trillion. this will increase our debt free gdp ratio to almost 80%. the highest level since 1950. how is this level of debt sustainable especially as more and more of the baby boomers reach retirement age and are we on the same fiscal pact as greece? are we damaging opportunities for future generations? regarding unemployment i am concerned with the administration's confusing message with regard to job creation. the federal government is running up enormous debt in an effort to stimulate the economy however on the other the administration is pushing for massive new regulations on

health care, greenhouse gases and the financial industry. these new regulatory policies don't stimulate growth or small business lending. they are creating a lot of uncertainty among lenders, among the many small businesses with whom i speak on a daily basis and consumers. i agree there are some common sense reforms needed in all of these areas massive new government intervention in these areas will hinder short-term economic growth. the had illustration is trying to spend our way out of the recession and high unemployment at the cost of future generations and you are also advocating policies that will hurt short-term job growth, not stimulate it. you face a lot of challenges in managing the government's finances in attempting to reinvigorate the economy. i hoped to work collaborative

the wish you. >> your full text will go in the record and that will give us time to grill you as time goes on. >> it is a pleasure to be here today. thank you for the support you have given us in the past. i am committed to working with you very closely as we go forward meeting many challenges the country faces. i want to begin with a few remarks on financial reform. many of you have read in the paper that we saw the large banks today decide to sharply limit the practice of charging customers outside fees for overdraft. we welcome these efforts by banks to begin the process of restoring trust and confidence of their customers and we're seeing banks try to get ahead of the present financial reform

effort working its way through congress. after years in which we saw many financial companies competing to exploit colorable borrowers it is good to see banks want again competing to benefit their customers and i want to urge other large banks to follow the lead of their competitors. voluntary action is not enough. progress today can easily erode as memories of the crisis fade and that is why the president proposed a strong set of reforms for wall street including an independent consumer agency charged with making sure customers get better access to information and better choices with clear rules enforced across banks and nonbanks. the house has acted and we hope the senate will support the efforts to act now. we can't afford to go through another period where we see a race to the bottom across our financial system. all little over a year ago when president obama took office the challenge facing the company was preventing a second great

depression. the american economy was shrinking at an annual rate of 6%. in the fourth quarter of last year we saw the economy grow again. this was the result of forceful action by the president and congress under the recovery act and the result of the steps we took to prevent the collapse of our financial system but we face the enormous challenges as a country. it caused enormous damage. millions of americans are out of work. many face foreclosure. many struggling to keep businesses open. they're living with the consequences of the worst recession in many decades. that is why job creation remains our principal focus. working with congress we propose to expand and extend tax cut for job creation and investment. a $30 billion small-business lending fund an expansion of sba programs. the budget peruse investments in

american innovation and education and export infrastructure that laid the latest foundation for future economic growth. we are proposing to make these investments and reforms in a fiscally responsible way. the president proposed to freeze non security discretionary government funding for three years starting next fiscal year and this with other steps to restore fairness to the tax system and what we hope will be the recommendation of the bipartisan fiscal commission will limit the growth of government spending in the future and reduce our deficits over time. the treasury department plays a central role in this agenda of job creation encouraging innovation and investment and strong economic growth and restoring responsibility to our nation's finances and i want to highlight the key features of the treasury department's budget request for 2011. i asked the senior staff to identify e efficiency gains,

program cuts and reforms and as a result of this process program cuts and new reforms that would generate half a billion dollars in savings and revenues for the department. to site two examples we propose to cut $100 million by not funding the capital magnet fund--$43 million through electronic filing. we are proposing to use these savings to fund a series of targeted modest investments in the internal revenue service, the institution fund, global economic security priorities and rebuilding the treasury department's professional staff. the resulting budget amounts to a modest but significant 3.5% increase over last year.

for the irs we propose to strengthen enforcement within $250 million investment to increase voluntary compliance, an effort that would produce $2 billion in additional tax revenues. other target investment to approve irs customer services and technology to enable the irs to process insurance more quickly. we propose to expand the cds 5 fund which is a record of leveraging private money to attract private investment to the country's hardest hit distressed communities. on the international side treasury plays a key role in advancing u.s. economic interests abroad and protecting national security interests and our budget request would provide funding for the department's efforts to improve international cooperation on financial reform and make sure we have adequate resources in our national financial sanctions program which was designed to deprive terrorists, nuclear proliferators and other illicit actors of access to financing.

treasury entered this crisis with professional ranks seriously depleted. the worst economic downturn in generations was answered with an example, 25 economists in the economic policy which is a third fewer in 2000 a decade ago. by comparison, similar offices at the department of housing and urban development have 140, 330 economists respectively. federal reserve has 500 economists. another example, two the offices of domestic finance and tax policy keep immodest levels of stacking below the levels of the level in the past. we have a long tradition of operating with a lean staff and we are proud of that tradition. we have no intention of changing it considering financial restraints the country faces as

a whole but we have to make some targeted investments in rebuilding the treasury if we are going to have an adequate capacity to respond to future economic challenges. we proposed a modest additional investment to rebuild and strengthen in a targeted way those three offices. domestic finance, tax policy and our economic policy division. i have the honor of leading a team of very smart dedicated individuals working everyday to make the government more effective and make the economy more fair. treasury officials work every day to help restart small business lending to working to contain the nuclear ambitions of iran and promoting job creation and investment and extending the benefits of growth to the hardest hit communities in our country to promote an american exports around the world from cracking down on mortgage scams to providing technical

assistance to the government's of afghanistan and pakistan. we have accomplished a lot but a lot of challenges ahead. the investments we propose in this budget will give us the tools to meet those challengess more effectively in the future. >> let me ask when they devised t.a.r.p. our friends on the authorizing committees provided an open-ended funding stream. in the report language for fiscal year 2010 financial services bill the committee required the department to provide a full accounting of t.a.r.p. spending and staffing and your projections for next year. that report is do with your budget request last month but unfortunately the committee has yet to see this information. do you have a timeframe for

providing this information to the committee? how much have operational expenses for t.a.r.p. cost to date and how much the went dissipate operating expenses for the t.a.r.p. program for the rest of this fiscal year and next? >> we will provide that as quickly as we can. but we are now in the process of winding down t.a.r.p.. we have been able to achieve this recovery in the financial system at dramatically lower cost than we expected. the costs of this program have fallen by over $400 billion from the initial estimates a year ago. we have $170 billion coming back to the taxpayer by forcing banks to replace the government to invest with private capital. we are seeing a substantial return to the american taxpayer on investments made in banks. even though we have seen a lot of healing in the financial

system, as you said in your opening remarks small-businesses across the country faced additional trouble getting credit or housing market's still in the process of recovery. we are going to need to continue to make some carefully designed targeted programs to support additional credit expansion in those areas most damaged by the crisis. the administration costs are going to be a fraction of what they were at the peak of the crisis but the overall program was achieved, dramatic improvement in stability at much lower cost than anybody anticipated. as congress joins with the president in adopting this to recoup any losses from the nation's largest banks you can tell your constituents and the american people they won't be exposed to a penny of loss in this program. >> let me ask you a question on that. experts in the field tell us

that consumer confidence and investor confidence is what drives our economy. people are afraid it doesn't work. they don't invest and they don't purchase. at the same time there is another part to that. it is the part that fall on members of congress and the administration to create consumer confidence that what we are doing is correct. on one hand it might be and it is in many cases so much of what is going on is beginning to take hold. but the public thinks we threw money away in many cases and we bailed out people we shouldn't have. how can we work together? how can you help us to get a better message out if nothing else? why is there such a disconnect with what many believe to be what is really going on to what the public thinks is going on? >> even though the economy is not growing again and even though you are seeing job losses

fall from 3 quarters of a million american losing their jobs to we are at the verge of the economy starting to create jobs again but the crisis caused a huge amount of damage to confidence of the average american family of the average business. we are going to be living with a lasting effect of that damage to confidence for long period. it will take time for that to heal. it is very important that we are able to demonstrate to the american people that the programs congress authorized in the recovery act and to help rescue the financial system are delivering what they were supposed to do. the best measure of that is the economy was shrinking at an annual rate of 6% a year to growing. you're seeing the cost of credit to municipal governments to someone who needs to borrow to get a mortgage to buy a car for their kids through college coming down dramatically. credit is more available to an average business today than it

was when we took office when the congress came into power a year ago.ç 3p(hose are substantial returns. they are the direct result of the actions congress authorized and recovery act. it was a third in tax cuts that went to 90% of working americans and businesses across the country and roughly a third in infrastructure investments. and support to state and local governments. and to help those people hardest hit by the recession. those things are generating a substantial return and you would not have the economy moving this quickly from deep contraction on the edge of the great depression to an economy growing at an annual rate of 6% a year. we have a lot of challenges ahead but the best thing we can do is make sure we can draw people's attention to the concrete aspects of those programs. when you ask people whether they support tax cut for working

families, whether they support targeted infrastructure investments to help rebuild schools. the rebuild bridges, when you ask if they support a system for local government, the american people support and welcome those investments and it is important to draw their attention to the specifics. it is hard to understand when you limit the debate to these broad programs and one more thing. the efforts we took to stabilize the financial system were never going to be popular. when we came into office and when this congress took office, the government had substantial investments in the banking system and we brought back more than two thirds of those investments already. we did not write a check to a major u.s. bank since we came into office. we did not give another dollar of the tax business money to the nation's major banks. we have a bunch of problems to

solve and things we had to dig out of but we had to be very careful in managing this very unpopular program in ways that allow us to get the american people's money back from the financial system to save them over $400 billion in potential losses. we are in a stronger position as a country today. we saved dramatic amounts of money we can use to meet the many challenges we face as a country today. >> i want to keep going but i will defer to ms. anderson because we will have many members today and the chairman should set an example for the 5 minute rule which i just broke. >> i was hoping you would go over so i could as well. let me switch gears for a moment and come back to t.a.r.p.. as i mentioned in my opening remarks i have great concern

about where we are going to end up in 2020, where our federal debt held by the public will be 77.2% of gdp which would be the highest percentage since world war ii or 1950 when i was born. three questions on would like to ask with regard -- it is probably four. i know you will end all. given the size of the federal debt, crowding out investments in the private sector, obviously to what extent our investors buy treasury bonds instead of investing in businesses. with trouble in the economy how difficult it is to attract buyers of treasury debt and are you increasing interest rates to attract those investors and who is investing in treasury debt and areçç you concerned about dependence on foreign investors and sovereign wealth funds and

the like to finance our deficits spending? >> excellent question. let me start by saying when i was here last year that you were right to point out that our deficits are too high. they are unsustainably high. if you look over the next ten years they are unsustainably high and get worse if congress doesn't act to reform our medicare and social security. they get dramatically worse in succeeding decades. they are unsustainable and if we do not address them, we will face greater challenge as a country. america will be poorer as a country. you are right to highlight these challenges and we are committed to starting the process now and building consensus on policy to bring those deficits down. you asked is government borrowing today crowding out private investment? it is not. in a financial crisis and recession like this, the only fiscally responsible way to act

as a country is to make sure you are providing temporary targeted support to get the economy back on track growing again. the best measure which answers your second question is the long-term interest rates, really remarkably low. it reflects the fact that for the moment, given the echoes of this crisis the most responsible thing to do is make sure we are providing the support and investments to lay a foundation for strong sustainable private sector growth and these things need to be temporary and targeted which is why we proposed in the present budget to begin the process in fiscal year 2011 to bringing down the deficit over time. to your third question, today the american people are providing most of the financing to our deficits for temporarily exceptionally high deficits. over in the last year or so we

have seen the savings rate of americans start to rise again. it has risen from a modest negative to the positive 4% territory. our current account deficit which we are borrowing from the rest of the world has fallen sharply. if you just step back what you have seen so far is a very high level of confidence among foreign investors in our financial system and a willingness of americans to provide financing the government needs to get through this crisis but you are absolutely right to underscore the fact that these are unsustainable and as soon as we are confident we have a self sustaining recovery led by the private sector it is important we shift to bring those deficits back down to earth. >> i appreciate your answers but if we are still at a trillion dollar deficit at 2020, when

will the savings actually materialize? >> for an economy like ours this is the critical imperative. we need to bring the deficit down to a level that stabilizes our debt burdens to the level that will be acceptable and not threaten future growth rates and that requires we bring our deficit to below 3% of gdp. it sounds like a magic number but given the structure of the economy that is what it takes to stabilize the debt burden to an acceptable level. we propose a series of detailed measures on the expenditure and resource side to bring our deficit down over the next four years to 4% of gdp. we are very explicit saying that is not far enough. that is one reason the president proposed to form a bipartisan fiscal commission and ask a set of national statement to step back from politics and take a

fresh look at measures that help get us down further over the next ten years and begin to propose measures to deal with long-term deficits in further decades which are clearly unsustainable and very damaging. >> you have great faith that that will work. >> congress has to enact policies that restorer gravity to the nation's fiscal position. we propose detail measures to begin that process but we are following the model of president reagan who proposed and ran and the best example of successful bipartisan social security reform and we are proposing that to build a consensus on things that will bring sustainability back to the nation's finances. >> one more quick question and i will be finished. in more philosophical question. how do you balance the desire for short-term benefits to the

economy versus long-term risks to the future generations increasing debt? i feel we are being greedy. >> an economy facing the risk of a great depression, living with the echoes of the worst financial crisis in generations, the only credible response of any government and the only thing that is fiscally responsible is to temporarily provide support on the tax and investment side to help establish a foundation for growth. that is what we did in the recovery act and our recovery efforts and we are in the period now where as an economy the best thing to do is provide some modest additional support for job creation and investment. that will not be effective unless we make people confident in the united states and around the world that we will find the will to bring those deficits down as we shift to growth that

is sustainable. the imperative is job creation reenforcing growth, but once we are confident the economy is growing again them the right thing for the country to do is bring those deficits down. if you make sure these investments are temporary and targeted and focused on things that will restart growth and job creation you are doing the responsible thing to help restore the nation's finances over the long term. these deficits are high today overwhelmingly because of the policy choices made by the country over the preceding eight years and the consequences of the recession. when we came in office before we did one thing, asked congress to propose one change to policy we have a deficit of $1.6 trillion. more than 10% of gdp. that was the legacy of the

recession and policy choices that left us with very high deficits and unsustainable debt burdens and we have to work across the aisle to dig our way out of that. >> a quick comment. not a question. seems to me we never had major wars where we didn't raise taxes so we are all guilty of the $2 trillion that it will cost over the next generation just to pay for the last involvement. there's one resolution on the house floor today that we can vote for to get out of afghanistan. the way i see this, your beloved phillies will play the cardinals to get beaten by the yankees and the fall. >> you have done an extraordinary job in a difficult

situation. we lost more than 1 million jobs and these two monthly have seen job losses of 50,000 in totality but a major increase in temporary hiring and an increase in the hours worked. all of this is a prelude. what all of us expect to see in job growth next month in going forward. the stock market was at 6,000 yesterday a year ago. it is now at 105. purchasing is of. manufacturing is up. if you look at all the indicators there pointing in the right direction and there are still some naysayers. people who are principally responsible for the condition we find ourselves in who are critics of the work of this administration but i want to go through the details. when the president was sworn into office a year ago, the nation's national debt was over

$10 trillion. we had a $1.2 trillion deficit for that fiscal year. eight years before that we had alan greenspan in the air and we had a discussion about the fact that a $5 trillion surplus could take the country to be debt-free at the conclusion of the bush administration. a bunch of decisions were made so rather than surpluses to up $5 trillion national debt in an intellectual discussion about the economics of profiling a nation that was debt free we had double the debt and as was the case at the end of world war ii in part for national defence no one should suggest we should have forfeited world war ii rather than run up some debt or concede to a osama bin laden and co. and sacrifice the lives of americans because we are afraid to spend money.

in part we spend on national security and we give tax cuts andç so on. the point i want to get to is there has been a lot of discussion with the ranking member about the deficit. the deficit is -- i am not talking about the national debt. we have seen the president set up the debt commission with senator simpson's. we have seen the vice-president say that this national debt is a national security issue. the secretary of state said it is a national security issue. you made comments about the challenges that it presents in the international framework of our dealings. i know that you are short a few economists in the tax policy office. previous treasury department's look at broad based tax reform. everyone knowledgeable on this

says we have to raise some revenue and cut our long term costs on entitlements and engage in a broad based tax reform. the ronald reagan treasury department and the bush treasury department, 20 years apart, said they were fatally deficient and would work and look at the flat tax and said it wouldn't work. my question to you is if we go forward we need to have a deficit commission which we have in place and i am happy to see that the leader has made appointments and republicans in the senate make appointments to look at long-term entitlements. that is great. what i am interested in is what you think of the idea of a dedicated revenue focused entirely on paying down the national debt going forward as part of a constellation of

things. we statute statutory pay go and so forth. specifically, i have proposed a transaction on non financial markets activity. dedicated entirely to the debt. i want to know what you think about that specifically. >> you are right to point out we have an unsustainable fiscal position and we need to bring our commitments more into balance over time. what we asked the commission to do is step back from politics and take a fresh look. everything is on the table. no preconditions. and to see if they can come up with recommendations that will help address both problems, not just the long-term problem of

the next week for decades but the more immediate problem of how we get the budget to a more sustainable level over the next ten years. both are necessary and both are part of the commission's mandate. not just the long problems of entitlement reform. they are going to look at a range of ideas from both sides of the aisle and we want to get a group of people who can step back from politics and take a fresh look with no preconditions. it is important to recognize we are strong resilient country. we have faced challenges like this and we have acted. the world has confidence in our ability to do that. we need to earn that confidence again and are have no doubt we can fix this over time. we need to get people working on it now because as the economy recovers it will be time to start to move.

we can't put this off. >> has treasury looked at any new ideas? [talking over each other] >> treasury is a great revenue raiser, a great pragmatic creative tradition in tax policy and elsewhere of looking at all ideas. we will provide some support to the commission as it goes through this but we will leave them the task of evaluating the options to educate the american people. >> i appreciate that. the commission has to have ideas rigorously analyzed and your department is most capable so they can make an informed choice. >> and we provide the traditional -- >> we get the proposal i have made, analyzed by your department and looked at to see whether it can be part of

addressing these issues. >> we try not to tear apart proposals but we will -- >> i ask the chairman to submit it to you. >> we will do that. >> mr. kirk? >> you met yesterday with the prime minister of greece. i am concerned as the washington post reported, its problems have only partially to do with speculators and more to do with false economic data, broken tax system, runaway spending, the greeks report only 5,000 people make $136,000 in their own country. i am concerned about the role of financial institutions particularly goldman sachs. as greece got on the air one of

goldman money, goldman was the crack dealer and did not disclose these increasing liabilities to the eu financial system or the fed. the fed. it would seem not only should we very carefully review any requests he has, you have laf >> now it is very important that

the united states work with your to put in place ut in place a comprehensive set of reforms to provide oversight over the markets. it is important to us and them and something that has to be done globally. in the house the have proposed a sweeping set of reforms that would bring oversight to all participants in the markets, move those parts on clearing houses, bring transparency, have the ability to police. that is very important. we are going to work very closely with the europeans to help support those reforms. part of the imperative is to bring as much transparency is recant. i'm coming to your question, which is that i can't comment on any ongoing investigations, but, of course, as you have heard that the federal reserve

chairman say people are taking a of very careful look at these things as you would expect them to do. i'm not going to comment on anything specifically, but i would try draw your attention te statements of the federal reserve board. >> as treasury secretary you oversee much of the enforcement of sanctions by the united states. we passed legislation in 1996 of the clinton administration to sanction any entity which invests more than $20 million in the energy sector of the run. congressional sources identified 25 companies that appear to have violated this. we now learn that the u.s. government has provided $107 billion to companies who are in direct violation, it appears, of the act. we also understand that

$4.5 billion has been extended to entities which have directly violated the iran sanctions act. of the companies that have violated the act, 49 of them have no plans to suspend any activities in iran. also just a few blocks from your office the world bank is about to send $258,000,000 to the finance ministry of the islamic republic of iran. since we on about 20% of the iprd, that is $50 million under the obama administration that would be paid to the treasury. we understand that dallion industrial made a $700 million investment in iran oil refineries, and in 2009 the u.s. army contract to $111 billion. petro bras invested over $100 million in iran oil.

five times the trigger level of the act. action bank provided a $2 billion credit. mazda is in business with the iranian revolutionary guard corps and yet still is winning u.s. contracts using u.s. taxpayer dollars. any update? >> congressman, let me commend you for the support you provided to strengthen those sanctions. you are right on that issue, and we are committed to working with countries around the world to put in place is stronger, more effective enforcement regime globally. as you know the nuclear front to support terrorist is a substantial threat to our national security interest, and we are working very hard, the president is working very hard with the secretary of state to build a starter you and solution. we are working with countries to encourage and to more aggressively enforce the

existing sanctions. the united states is running a very effective program now to tighten the existing sanctions using the authority we have, and we are going to work to build on that record. the treasury plans a very important role on the financial side. we have had remarkable success in making it much harder for those entities to get access to finance around the world because of the success to tighten up that sanction. >> but no success in stopping u.s. taxpayer money going from companies who are directly violating. no success whatsoever. i have raised this with you before. no success. no effort whatsoever. >> you know a lot about this, congressman. i know you have written the secretary of state of the concerns you begin with, which are enforcement of the iran sanctions act. let me just address the broad bank concerns erns directly. the world bank has approved no

new loans since 1985. >> that is not the issue. >> you're right. their only two legends of standing. those are to loans that go to water projects that are consistent with the sanitarian exemption that is under the u. . resolution permitted under the u.n. resolution. >> are you not even enough to think that the money paid -- >> i don't have a naive bone in my body, congressman. as you know -- >> are you now leave enough to thank the $258,000,000 paid for the world bank actually goes to those projects? >> the u.s. has worked very effectively across administrations to make sure the world bank was not authorizing a new loans for a long period of time. the only two loans outstanding

are these two loans that are permitted to support humanitarian and development project. i want you to know that we agree with you and share your objective to tighten the effectiveness. you're right to point out that it is an ongoing challenge. you can't stay still. you don't keep intensifying the sanctions people get a round the existing regimes. but for us to be effective we have to work with countries around the world. we are committed to that. >> i would hope that right now given the new york times article it is less to do about what is happening with other government and more that the u.s. government stops contracting with companies that do business with iran. >> we have more in common than we may have on many other issues. you are right to underscore the importance to our national security. the critical thing for us to do is to make sure we are using our authority to tighten up these sections to make sure we get

other countries to move with us as they are doing on, i would say, we are having some impact. it is getting some traction. >> thank you, mr. chaired. >> thank you. >> no reflection on you. no way that we can pass up this moment just to note that if any of those boats had invested $2 in cuba it would be a major scandal throughout the country. >> thank you, mr. chairman. thank you for being here, mr. secretary. i have questions in two different areas. the first is the proposal to use some of the t.a.r.p. funding to encourage small banks to lend to small businesses. i would like to know what the status of that is and what conditions or measures can be put in place to make sure that the small planks don't simply hold on to the money. i have heard -- well, we have all dustin unstoppable feedback from small businesses in our districts and institutions they have had long relationships with won't lend to them.

they are arguing that the regulators, the banks will tell them the regulators won't let them land. i don't know whether that is an excuse the banks are using our whether regulators are putting on that kind of pressure. i am also giving feedback that the small banks are saying, hey, you know, if we get the money we will keep it and we are not going to use it to land. in order to avoid some of the pitfalls that characterize the support for the big banks that did that always turn around and lend it what precautions have been put in place? the second question is on the jobs issue. this recovery so far looks different than prior recoveries. it has not been as robust even though the gdp growth last quarter was encouraging. still the job numbers are sluggish. i am interested to note your sense of why the jobs are bouncing back as quickly as in

prior recessions and what are the most significant things that we can do to stimulate the chubb group. >> excellent questions. first on small-business lending. we are proposing really four separate things to help address this problem. we have had a series of well-designed targeted attack measures, expense incumbent appreciation, zero capital gains. new jobs tax credit. the second is to expand substantially s.p.a. existing guarantee programs. a variety of specific proposals we think will be very effective. those are important, but they are not sufficient. we are encouraging the supervisors. they are independent of the treasury. we are encouraging them to try to make sure they are providing a more balanced amount of guidance to examiners across the country so that examiners don't over correct and contribute unnecessarily to a tightening of credit conditions that would hurt a viable businesses. in addition to that we proposed

a $30 billion small-business lending fund that would give capital to small community banks to commit to use that capital to expand lending. we designed this in a way to give powerful incentives to lend the money out. if you increase money to small businesses above the levels of a certain baseline than we reduce the dividend you pay the treasury over time. that is a pretty powerful package, set of proposals. we can't be certain that small banks will take a dollar of capital and increase lending, but if small banks to could otherwise raise capital and don't have access to capital then they kept landing. that has a pretty negative effect on business access to credit. some capital is a very effective way of helping mitigate this problem. >> on that last point, what baseline are using to measure whether the increase lending? and also, do you buy what the

banks are saying about the regulatory straitjacket they are in? do you think they are using that as a fallback? >> think of it this way. banks have been doing business for 30 years. the bank made a bunch of other decisions with a bunch of other clients that cost a lot of money it is going to have to cut back on assets and lending to survive. what do you say to your customer that has been a good customer for 30 years? it is easier to say that the supervisor is making me do it than to say i made a lot of bad judgment. in every recession what happens is there is a risk that examiners after a time where in hindsight they look like there were too easy, tend to over correct. i think it is clear that the leaders of our bank supervisors across the country, and this is the fdic, the fed, the sec, and

the a t is cannot make sure they are at me against the tendency to over correct. just briefly on the job front. >> what is the baseline? >> i'm sorry, the baseline. i have to a check. i think we said at the level in 2009 we designed that in a way. we think that is a realistic baseline. you know, the pipes of the price of this financial system are still clogged. you can't force money through the pipes. we can't force banks to lend. we think we designed this in a way that would substantially increase the odds that we are really helping mitigate the small business credit problem where it remains. on the jobs front you won't have jobs without growth. growth has to come first. there is always a lag. most economists would say we are on the verge of seeing a

sustained level of positive jobs growth for the company as a whole. i think the best story looking back of white unemployment increased so much and by job losses were so steep was that you saw it just shattering damage to business confidence. people were too scared to do anything. they cut back dramatically because of the fear that they face a very long time of no demand for their products. it is beginning to heal. you are seeing the early signs now. hours increasing, tampa employment increasing. >> one last for question period does this recovery look different to you? gdp growth was greater than expected, but still smaller than in prior recoveries. juane situation has improved. what do you think this but different? >> in many ways jobs came more quickly, starter, and more broadbased. in that sense it is encouraging

because this is a recession caused by a long amount of excess of borrowing a huge over investment in real estate, a huge increase in leverage in the financial sector there was no way that recovery was not going to be dampened by the basic forces. so as households across the country save more and start to reduce their debt burdens, as the financial sector digs at of this terrible mess it was in any recovery was going to face significant headlines. we are thinking that necessary inevitable consequence of a recession that is borne in part of a very damaging financial real-estate boom that was fed by an excessive borrowing and lending. >> thank you, mr. secretary. >> thank you, mr. chairman. thank you mr. secretar i heard you talk a lot this morning, this afternoon about the importance of bringing down

the deficit, controlling spending, and i appreciate you same as things. i wondered if you would tell us with the record, could you explain how the creation of the obama health care entitlement will help bring down deficits? >> that is not the way i would describe the health reform plan. i'm happy to answer the question. the cbo estimates that reforms that are in prospect now would reduce the long-term deficits, the ten year deficit, and would substantially reduce the rate of growth in health care expenditures. >> are you talking about the senate bill? >> i would say that you can take the senate bill to beat you can take the senate bill and suggested changes the administration but of a few weeks ago. they are all on the same basic

ballpark. a meaningful reduction in the ten year numbers and a very substantial reduction. that is because as you know the biggest driver of our long-term deficits is the rate of growth on health care expenditures. it's much more important than the fact that our population is aging. there is no fact that this does not go through health care reform. >> the reductions they see in the future are all based on a some reductions in health care expenditures in later years. >> again, they're doing what they always do, take proposals congress is considering and quantify those estimates on future spending by the congress. >> and you recognize that those proposals until six years of spending with ten years revenue? >> i'm not trying to characterize your proposal. >> ceos. but the most important thing to

point out is that if you care about the fiscal position of the united states your word about the long-term deficit, there is no way to deal with that without reforming the health care system in a way that reduces the rate of growth. >> for those of us on the fiscal conservative side bridget from the perspective of making health care affordable. i want to be able to buy coverage for my carrier. that law needs to be changed. we want to focus on that. medical malpractice. protect doctors from frivolous lawsuits. allows small businesses to pool their ability to negotiate better rates together. we could do those things and bring down the cost of health insurance and make it affordable and portable. for hours perspective as fiscal conservatives that is where the focus its to the. you know, i have to tell you, the credibility of the administration is not very high on in the administration

attempts to persuade taxpayers who are, you know, the pay attention. this defies common sense to believe that as your proposals to we expand coverage to 20-30000000 new people. brought in to this new entitlement which is clearly the mother. this is the mother of all entitlement programs. you bring in 20-30000000 new people. you are going to reduce deficits. i mean, this is just it is not credible. it is just not credible. >> all i am saying is the estimates. >> do you believe those estimates are accurate? >> there are the best we have. they are a fair and independent are richer. so you can challenge those things, but those of the ones congress will rely on to score your proposals. >> we are, as you have said, in an unsustainable fiscal position. i am as concerned as i know everyone on this committee is.

>> there is no risk of that. that will not happen to the united states. >> we are spending money. we are running the nation's credit card. if you look at the available revenue everything we spend beyond that point is borrowed money. it is a fact, and i have to say also in your opening remarks earlier, we are kicking the bush administration. you can't just blame others for this tail of the deficit. the deficit that you inherited was way too high. i voted against practically all of those spending initiatives. spent over $2.5 trillion in one year. that is just the big ticket items. he spent more money in less time than any administration in the history of the magistrates and created more debt than any other administration in your budgets

than any administration in the history of the country. it just isn't credible. >> i would be happy to measure our record on fiscal responsibility with the record of the previous eight years. out just give you one example. i was a career civil servant in the treasury department. i left in 2001. at that point the projected cbo future surpluses of $5 trillion. eight years later those surpluses turned into a $8 trillion. i would be happy to compare the basic records of what we achieved in that amount of time in fiscal responsibility with the record of this exceeding eight years. it is just a fair thing. the important thing to recognize is over that amount of time we demonstrated and were able to produce surpluses. we saw a record of strong private investment growth, strong productivity growth. >> tax cuts.

tax cuts. >> no. >> the bush administration. >> no, i was comparing the growth record of the previous eight years. did not compare favorably. it was worse on grove, worse on any basic measure or return. again, the thing you care about a lot which is on basic test of fiscal responsibility. you and i can't change the past. i know you voted against a lot of those proposals. right now we need to stand together and admit that deficits matter. tax cuts aren't free. we have to pay for step we propose to enact. we need to bring our fiscal deficits back down to the point where they are sustainable. >> we want you to live up to those words. that's all. >> mr. crenshaw. >> thank you, mr. chairman. welcome back to committee. i have two questions. one has to do with philosophy of

managing these assets can and the other is a quick question about tax collections. you mentioned that the t.a.r.p. funds are being repaid quicker and in a greater amount than first thought. i think that is good news. i think we ought to do everything that we can to maximize those dollars. it looks like there are two different. when you look at aig it seems to me, we are a majority, i guess, shareholder. so i guess we are involved in their decisions. it seems to me as i read they sold to let companies last week, $51 billion. that is it news. but if the philosophy there is to sell off these assets it seems to me sooner or later you will run out of assets to sell. you will have a company that is in the downsize. you wonder what kind of capability it will have to make any further payments to back i

think they have over $100 billion. i think they paid back 15. so we are still on the hook. on the other hand when i look at general motors as i understand it if you take general motors, chrysler, and g mack we may be gave them $80 billion. about 50 billion of that. you are probably going to lose $30 billion on general motors. it seems like if the philosophy there is to gm has reinstated some of the dealerships. they are increasing their sales. navy market share is going to increase. that is one way to deal with the situation. you would think if they become an ongoing entity and grow and increase sales and market share they will be in an even better position to pay back the 50 billion. maybe they end up paying it all back. help me understand the two

different philosophies. we must be involved in those decisions. is it shortsighted? i am not asking whether we should just, you know, broke it up early on. we don't. we want to get paid back as much as we can. those are two different case studies. explain to me how it is working and how you think that works in the long run. >> excellent question. it is a difficult judgment. the two basic objectives are to maximize the returns of the taxpayer, minimize the risk of loss, and we want to frankly get out as soon as we can. those two objectives will sometimes be in conflict. these companies, we are reluctant shareholders. the precise strategy we adopt respond to differ because of different conditions. we try to make sure we manage this in a way to minimize risk of loss, maximize the achievable return. we want to get out as quickly as

we can. we don't want to have the american government involved in a lot the necessary. we will do it as quickly as we can. you a right to point out that we are making remarkable progress. i was to the board of aig is making remarkable progress in reducing the risk and restructuring the company in a way that is going to reduce the expected loss of the taxpayer. they have come down dramatically. we are still exposed to substantial risk of loss, but we are going to be very careful managing this in a way to balance those. again, i think we are being consistent in applying them. where they differ is because of the inherent differences in the company's and the and opportunities we have to get out earlier. >> the same question. i read in your testimony where there are going to be some new initiatives in terms of tax collection.

he spent $250 million which will, according to testimony, bring in another $2 billion. every time the reason that i can't help but kind of ask the question, how do you determine that spending $250 million on compliance is doing to end up bringing you $2 billion? based on that how to you decide instead of spending, up and down the scale. so i am just curious. my colleagues know that from time to time members of congress use the tax gap as a piggy bank. all you have to do. i have always wondered. are there any facts and figures that verify that? how do you decide to limit and say that will give as $2 billion? well, four times that would give you four times the money. >> i ask the same questions.

i think what he will tell you he told you when he was up here before and i will be happy to provide in more detail. those are pretty conservative estimates based on experience in the past of putting more enforcement resources in targeted areas to generate better compliance. i think there pretty conservative. i have seen much higher estimates. why not more? part of it is just their judgment about the pace at which they can really bring on cable people to do this. there are some constraints on how quickly you can scale up the operations. we are trying to be relatively careful to do it in ways that we are confident you are going to see a higher return. that is the best answer i can give. >> i appreciate that. you have stolen the ideas of all the members of congress. we can't go and talk about spending an extra 250 million to give an of the 4 billion.

you have maxed out on that. >> cbo is the arbiter of the extent to which you can actually justify investments on some return like that. you guessed it to decide based on those estimates. >> thank you. >> thank you, mr. chairman. the board that you have been doing with t.a.r.p. fund and the recovery act funds is an obviously certain to take hold. we have that the bullpen hole of a light at the end of the tunnel that we are going to hopefully as recovery funds continue to get out there we will have light into the tunnel. that having been said i come from the state of florida where the foreclosure crisis definitely puts a break on the progress that we have been able to make, even with those t.a.r.p. and stimulus funds out there. the data that i have seen

nationwide is about 20 percent of all homeowners are upside down. in my state is 46%. so the home affordable modification program is struggling because you have so many upside-down homeowners. can you talk about the hardest hit funds and have that is trying to start to address the problem in a more effective manner? specifically just to give you an example the foreclosure crisis in south florida, we have more than 97,000 foreclosures file justin by three county area in the last year. we have got to get that turned around. one of the most frustrating experiences that people will have, with both programs, the banks just refuse to work with homeowners. they will modify loans. they give them the runaround. i have dealt with constituents to spend months and months

tamale constituency can afford to make mortgage payments but to the bank will absolutely not work with. why not walk away? what is the point of continuing upside-down? >> you are exactly right. i agree with everything you said. it is important to step back for a second and look at what happened over the past year and emphasize this before i respond to wreck the to your question. i think a year ago today if you look at expectations of what is happening with house prices in the future people fought house prices might decline. instead we have seen more than six months of relative stability in house prices across the country on average. that is very, very important to confidence. of course houses are such an important source of economic security to the americans. as you know the program has provided very substantial cash flow relief to 1 million americans. 1 million americans are getting

an average of $500 more a month in their pockets because of this program. not just that they are able to stay in their homes, but they are having substantial reduction in the size of their mortgage obligations. we are seeing very substantial increases, not as much as we would like. you are right to emphasize that there is just a huge amount of pain and damage across the country, not just in florida and the other states targeted by this initiative. it is still just devastating damage. people who did not bar a two much who are irresponsible, test the victims of the broader collapse. we have an obligation to do everything we can to help those people who we can legitimately help stay in their homes. this program targets five states with the problems are most

acute. rio providing substantial resources to help reinforce state efforts to experiment. modify mortgage programs. we want to support innovation at the state level. there are some lessons for that. we are also looking at and looking carefully at a series of other enhancements to the existing program to try to reach more people who are unemployed and to help deal with the substantial number of americans do, because they are under water, can't refinance, can't sell their homes. we are looking at ways to try to reach more people, but it is very terrible. it is important we keep working at trying to make sure we are reaching more people. of what and where you end it. it is very important to do a better job at helping these people get help. >> but they're not. >> and again the one thing that is very important. you can see now in the public

domain every month very, very detailed numbers. you can see how one bank. they look and see if their bank is doing well. i will just say my view is that none of them are doing enough. the need to put substantial more resources in this program. the need to do a better job of making sure they are reaching the people. >> mechanically how can we ensure that happens? i stand in a town hall meeting after town hall meeting where i have constituents was an early stand up and say we bail them out. but they could not even be in business anymore. >> a variety of things. we have a detailed second like to make sure people who are eligible aren't being denied. we make sure we have teams of people that go into the services. we try to put enormous pressure on them. >> just one more question,

mr. chairman. i know you are going to be shocked. i feel a sense of obligation. in the last week or so we have the tragic death of a man on an 85 day hunters trek do along with other dissidents continued to protest the abuses of the castro regime. i am particularly concerned about the pro-democracy efforts on the island and getting the funds that we have appropriated for the last two fiscal years. what is being done to expedite the process to ensure the direct assistance and aid is being sent quickly to those pro-democracy organizations? the money is sort of being set on right now. i realize that we need to be careful and make sure that they are going to legitimate organizations and insuring that there is a pro-democracy

movement. it is sitting in the treasury in washington. >> i share your concern and would be happy to try to respond in more detail to what we can do to mcilroy be happy to come talk to you. >> that would be great. >> i no there are strong feelings on both sides of the debate. >> especially in this room. >> and we are doing our best to make sure we are enforcing laws as written and meeting objectives of the congress. >> you can follow up with me in more detail? >> of the happy to listen more carefully. >> okay. of what to pursue a little bit more. there are funds we have appropriated that are not being spent. >> i am not trying to be unresponsive. i have to talk to my colleagues more. >> the article that had just read the other day talk about how the, your department is making sure that there are

safeguards put in place and that we have the accountability measures. it is an extraordinarily long time to be examining that. >> careful people, and their obligation is to make sure they are implementing a line following congress. i am sure that is what they're doing. i will take a careful look at it. >> thank you, i hear back, mr. chairman. >> mr. secretary, as i noted in my hearing a couple of weeks ago i am concerned by several proposed cuts to programs that provide important services for low income and working families including the volunteer income tax assistant grant program and tax counseling. do you believe that these cuts reflect the appropriate priorities as we struggle to recover from the economic downturn? and let me just say that irs, similar to the immigration

department, some of those agencies, not that they have bad reputations, but they have people complaining about them all the time. so when i saw the irs began to move in this direction i say what a wonderful way not only of helping people but helping the image of the agency because now you are going to assist those who need help. so in terms of is it a real savings in that budget and the message that it sends out, the people who need help the most because out. >> mr. chairman, i understand your concerns, but the commissioner and i both believe that these are sensible proposals because they help us to increase resources to improve taxpayer services more generally. we think that will help the same people that these programs help. our be happy to talk to you about it in more detail. we are making difficult choices

we are progressing very substantial increases in programs to improve taxpayer services generally command we think that will help reach some of the same people that these programs you referred to are designed to reach. >> right. but these programs were created with the intent of both helping and shelling that there was a desire to help. one is not necessarily the same as the other, but they can work toward the central. aren't you concerned about the message you are sending? at the very time the irs was beginning to gain more respect from the public? >> the irs will continue to work very hard to do the right thing. one way they can do that is to make sure they are working very hard and we are giving them the resources they need to improve service and make it easier for americans to meet their

obligations. that is an objective that the commissioner and i both share. the commissioner has done a very good job in helping improve the record of service. again, i expect respect your concerns. i appreciate your support, and we will work with you to make sure we come up with the right balance. >> avenue. you know, if this was a course and let such a politics professor would say this is not going to do well. i suspect there are other folks to feel the same way. this is one statement we can make on behalf of a community andy's help. let's talk about the tax gap. how big do you think the tax debt currently is? and how much international activity accounts for that? where are the best of rigidities for closing the tax gap? >> we have that a very detailed report in the last year that

went to the last estimates. as you highlighted in your opening statement the president's budget has proposed a variety of ways to help make progress reducing that cap. one of those proposals is to reform the tax treatment of overseas earnings of american companies. the basic premise underlining that proposal is if you have to companies in your district. one in this overseas and the other in this in your district, you don't want to create a tax cut to create incentives to shift jobs overseas. we proposed changes to the program. there are a range of proposals. we are making a lot of progress, not just with switzerland but a range of countries to reduce the opportunities. we are committed to this. we are going to keep at it. the report really doubt last year is a very good, detailed

analysis of the sources, principal drivers of the gap and the policies that we think would have the highest return in such a close the gap. >> look, before i turn it over and let me ask mike to the question. i want to make my one comment. you don't have to respond. so much of what we discussed around cuba is helping people inside cuba opposed the government. that is what it is. i often wonder how we would react to a foreign government funding groups here to oppose our government? i would be a little upset. but that is another issue. last year the department followed the lead of this subcommittee and allowed to travel to cuba by cuban americans visiting their families. the department is also implementing an appropriations division that partially relaxes

the terms under which payments baby received. mr. secretary, please update us as to have implementation is proceeding with respect to these two areas of u.s. transactions with cuba. >> i can't do that in the hearing today, but i am happy to do it in writing. my sense is that it is doing reasonably well. of course it is open to other perspectives. that would be happy to respond in more detail in writing. >> abcaeight. we will hold you to that and ask you to write to us and tell us what is going on. >> thank you, mr. chairman. mr. secretary, looking back on the financial crisis i would like all of my colleagues our very upset with the lack of regulatory oversight that led to the climate which our entire financial system was undermined. our small banks survived pretty well. we are tough.

we have got some good people. light still isn't getting a lot easier for them. the burden of bank foreclosures falls entirely on the banks that survive this crisis. surviving banks continue to do their best to serve their customers. i do hope the treasury and the fdic we will give every consideration to fair descriptions of the risks they face and deposit insurance and d assessments that are based on this mission is a risk. i would also hope that wicking and the ultimate analysis of the financial crisis something would be done in the future to allow fdic to get more involved with or offer guidance to american banks do are identified as facing increasing risk by putting the bank back on the right track. we could limit the amount the banks that must close their doors to be made whole.

a very obvious lack of consumer confidence in financial products. my real question focuses on one enforcement aspect. do you all look at the financial statements of failed banks to see if they misrepresented the financial condition, if executives to unreasonable compensation or bonuses and out right before the bank failed? can you all drawback excessive compensation from such a bank? and obviously the alternative is the deposit insurance fund in such making up the difference when they tried to make depositors will. i think there is a senate effort on this. i am just curious if, in fact, you can clawback under certain circumstances to make. >> congressman, i think am correct in saying, in the recovery act i believe the

congress passed a series of provisions to provide greater constraints and encourage reforms in executive compensation institutions that took financial resources from the government. as part of that if i'm not mistaken the government was given the authority to call back compensation if there was clear misrepresentation of financial data. but i will tell you a lot more careful look at the way the law is written. it is a sensible provision. we are trying to make sure we are bring about fundamental reform and compensation practices across the financial industry. in the future be want to make sure you don't see a repeat of compensation practices that provided huge returns for taking lots of risk and no exposure on the downside. >> i appreciate that. i will be grateful to get a written response from you.

let me ask you about too big to fail. five banks control 80% of the u.s. preferred deposits. i guess that that brings in the moniker of too big to fail. am i incorrect? >> keep going. i will be happy to give the details. i think that is a little high. >> but still. >> i am going to support your concerns. >> all right. the financial crisis pretty well proved that too big to fail, the guarantee of huge amounts of capital from the u.s. government. if we keep borrowing money at the present rate we may even test the hypothesis of whether the u.s. treasury is too big to fail. let me ask you, is it good to have the institutions like this. it makes me think about the old ma bell which was dissembled in

1984. could you unwind those big banks that are too big to fail without government taxpayer assistance? >> critical issue, critical test of the financial reform plan, address this problem of too big to fail. you cannot have a financial system with the management of the firm expects the government to come in and in the event that they manage themselves to the edge of the cliff. that is something we have to fix and end. the only way to do it is to make sure, first, you have the ability and the authority to constrain risk-taking by those institutions ahead of the fall. that means much more conservative capitol requirements, constraints on risk-taking applied more effectively and evenly across those s those institutions. that is necessary. you also want to make sure that if they get themselves to the point where they can survive

without government assistance you want to make sure that government has the ability and tools and authority to take them over temporarily, break them up, wind them down, sell the businesses off, and make sure the taxpayer is not exposed to risk of loss. if the government is exposed to any risk of loss in doing that we should recoup that loss in the form of a fee applied to the financial system over time, as we proposed in the president's proposed fee on banks. so you need the ability to limit risk taking ahead of the crash. you need to prevent the future crisis. in the event that companies and still able to mismanage themselves, you step in and put them through a quasi-bankruptcy regime and the do that in a way that does not leave the taxpayer exposed. those are the things we cannot do today. >> i understand that.

i guess what i'm saying, and perhaps you don't want to directly answer my question. if we had to take apart those banks today would we have to use taxpayer funds to do so? >> well -- >> if we unwind those big banks >> i'll say it slightly differently, but i am being responsive to your question. right now we still do not have the authority to deal with the potential failure of a major firm, a future aig. we don't have that today. we can't fix that without legislation to give us the authority to do that. if we get that legislation we can meet your test. if we have the ability to manage its failure safely without leaving the taxpayer exposed to risk of loss or innocent victims across the country. >> you know, the analogy with ma bell, to me, rings pretty true. back in 1984 the congress said

this is anti-competitive. let's just go ahead and break it apart. to me five banks having, even if it is close to 80%, to me, is a monopoly. i don't think it is healthy for this country. i say that because i don't even know if the fdic, if one of these banks fail i don't know if the fdic would be able to handle the enormous liabilities of deposit insurers. i don't think they could. >> again, i am agreeing with you. a critical comparative of financial reform is to make sure we have the tools and authority to do just what he said without the taxpayer being exposed to our butts of the innocent victims, families across the country. >> instead of leaving allowing banks to become too big to fail perhaps we should give someone the authority. >> to limit their risk taking. you read this in january. right now we have a cap on the

share of the nation's deposits in the individual bank can hold that is unnecessary constraint. it is a good idea. it is a good thing. but it has this following a fact which is unfortunate. you can become bigger overtime as long as you find ourselves with other sources, not deposits. so it has the effect of still allowing size and concentration, but in more risky forms. we propose to complement that cap with an additional cap on total size so that you don't have a level of excessive concentration. again, just for some perspective we have a system of 9,000 banks in this country. a great strength of our system is that not only do we have a set of large institutions operating globally, much stronger position today than there were four years ago, but we have 9,000 banks across the country.

that provides a great source of competition, resilience. we very much wants to preserve that. >> and i appreciate that. mr. chairman, i have to leave for 20-30 minutes. i will be back. thanks. >> mr. fattah. >> thank you, mr. chairman. mr. secretary, i want to go back over, not go back over, but deal with some issues. first of all, i heard the priest finance ministry yesterday rdayn cnbc. he was asked about this question. what he said was the activities were perfectly legal at the time and were a part of the interactions that were taking place on behalf of a number of countries. i don't want, you know, to have on the record allegations

without any opportunity for a response because i am actually appreciative of goldman's efforts in another regard which i am willing to nail which is the small-business lending side. it's i appreciate that. along with the point that you made earlier on bank of america's decision on the debit card overdraft charges. we ought to be careful as we go forward that we delineate i wanted to get to prevent a number of dialogues. the program that i created in pennsylvania, the housing emergency mortgage foreclosure program which is run through our house and finance is see which

provides tax relief in terms of mortgage payments for people who are unemployed by no fault of their on has helped over a couple decades the end of dozens of families and in our state. at no loss to the taxpayers. tacks on to the back end of the mortgages those payments are as a small percentage. so there is no loss. it has worked very well. we have had a moment in time in which many of these mortgages foreclosures were because of lending practices. the vast majority of the foreclosures that we face now are related to unemployment. there is no ability for someone who is unemployed to pay mortgages. there has to be some effort. that is why i am so happy that the house agrees with me.

we passed some $3 billion in the reform bill that you complimented us on in your statement. i hope you also are urging the senate to keep that 3 billion in place. i was very pleased to see a billion and a half provided to what were termed to be the hardest hit states. now, states are a geographical place. they are hardest hit because there are a lot of ways we can delineate where people need the most help. i am for us helping the taxpayers to have been law-abiding, hard-working, who have saved enough money to buy a home and were making their mortgage payments. they lost their job because of a recession that they have had no fault in. for us to take, on the other hand, tens of thousands, close to $90,000 to foreclose on their home when we could intercede to help and we have a record of doing that in pennsylvania to the tune of an average of about $6,000 a family.

not ruin their credit rating, not destabilized neighborhoods. s just wanted to mention again and put that in the record. and ask you both to comment on that. to comment on in this new lending effort for small businesses whether or not credit unions and cafis or quasi-public entities in cities like philadelphia maybe could also be allowed. there you will get actual lending. you won't have to worry about the question of how much they keep per-capita or how much they lend out. they are in the business of lending. i would like to have your comments on that. >> i have heard great things about the program you describe. >> it is all true. >> that is what you said. very good experience. i compliment you for the design of it. you know, a good example of how initiative at the state level is a good thing for us to encourage

and incense and reinforced. we have support and will support the efforts to describe in the house bill to provide a little bit more oxygen and resources for those programs. you are actually right. one of the most effective ways he can give small businesses to increase and amenities for credit was the star of mr. this program. we have, as you know, not just put substantial budget. but we announced recently that we would give capital. we would provide a program to get capital from the treasury had a very attractive dividend rate. i think it is going to be a very effective program. we are putting in place right away. that is under the t.a.r.p. we think that would have a very good return in communities where typically what happens is investment dries up quickest.

credit flea's most quickly. a very good economic case for trying to make sure that we are getting resources targeted to those committees that can do a good job. un driver in philadelphia together highlighting one example of that kind of program. we are very committed to that. >> last question on commercial real estate which is that new, but the challenge of the greatest concern in the horizon now. where we have, and i know of instances in philadelphia. i am assuming they are not isolated. where you have commercial real-estate mortgages that have been paid that have, there are no issues versus hardship cases you know, i am not talking about hardship cases. where these deals are still