locally, and be an old soldier, i made hardcopies. so i took them down to the detroit va and stood behind the gentleman at the photocopy photocopied a stack about eight inches tall of medical records. it was within 60 days i had my disability 50%. as a congressman, i toured the facility and got the dog and

pony show. they were very gracious rational. i saw a lot of new improved and to the va. but what i talked to my constituents that comment, handling their case work, it was the same i saw in 1973. >> i have a question. java and the military, are you familiar with 1015? >> not off the top of my head. >> okay. if the officer's bible. staff organization on chad organization and operations. can someone handed if your chapter four? page one. i circled it for you. could you read that for me, please? i circled it. >> the commanders is possible for all his staff does or fails

to do. he cannot delegate this responsibility. final decision as well as the responsibility remains that the commander. >> if you carry that armatrading wiki to the va. >> correct. >> anytime you like they are responsible for those under them? >> because we're placed in a position of responsibility ever must occur that responsibility for every action. >> of the military, but actually in the commanders authority are often directly it should to the leadership culture of the group, correct? or are you >> to be a star exception. the disgraceful attitude like a concert concern over wasting tax payers funds can only be explained by the fact that the leadership of the va is flawed. until the stagnant attitude at the very top are laminated, we hope to eliminate the problems plaguing the va. that in the end are hurting our veterans the most. so let me ask you this. i'm new to congress.

i was a taxpayer, worked in the service. served my country into wars. nic the irs, epa, energy department and now the va wasting taxpayers money. what do you think i should do? what can i do to stop that from happening? because what i think of a break to fire you all and start over. but reality as it got to work with you. how am i going to get improvements, 100% improvements? at 100% improvement to gonzales sought is 30% improvement over the last 30 years. do i have to wait until 2083 to get 100% for the va clinics >> congressman, i believe that the department is working and we plan to work faster than that. >> i've heard that for 30 years.

actions speak better than words. what are you going to do tomorrow to eliminate that backlog, to get it done? that backlog is the same backlog we had in 1973, 1974, 1975. you know, if you want something screwed up, let the government do it. that's the way i look at it. that's not what may taxpayers are expecting. i want quality service to veterans not tomorrow -- tomorrow, next week. not in 2083. >> i thank the gentleman daniel speck the balance of his time. >> thank you very much, mr. chairman. just let me say as i began a series of questions, that's one of my concerns because this agency has been given responsibilities it did not

have. it did not have in previous administrations, when i thought initially, when i heard initially there was to be a hearing, it must be funded with claims. of course, the reason we look so closely now at the va is the president hearing all the complaints about poster mom back syndrome. change the standard, making him more possible for veterans to show ptsd. it's not in the same backlog. it's always in a backlog. but that's the reason this agency is under very real scrutiny. we've had hearings here. in fact, two of my committees on

conferences. i know this conference was held in 2011. so perhaps the va was not unshared notice. in april of 2012, they were hearings about the psa conferences. those hearings resulted in literally the beheading of the top of the agency, the very top of the agency administrator, gsa administrator and the person who headed the main division of gsa, publix serving. these occurred in 2011. there was some evidence that this kind of conference goings-on has been systematic and federal agencies for many years now. what made us take very special note was of course the outlandish gsa conference, but

also the fact we went in there several times and still are. now, mr. griffin, you have testified that there was in most of these instances failure of senior officials to give a proper oversight. now, one begins to wonder about conferences and hard kinds and about conferences the patient is at an additional backlog. the additional backlog. now, i have staff as far as i could figure out, mr. griffin, basic training that occur and make it about 12% costing in the wage. with most of it going to training.

is that correct in these conferences? >> i can't put a percentage on it for you, ms. norton. they did have recessions begin and in the morning. >> were these conferences largely devoted to training which we understand the va staff may have needed for ptsd. our was a disproportionate amount of time spent on its other activities? >> i wouldn't say it was disproportionate. four hours of classroom training if you will each day. >> four hours each day. >> right. does a plenary session in the morning and a plenary session at the end of the day. >> was the plenary come you count the four hours? >> no. >> so it is important to note this isn't agency working on a

move for disability that the va had not fully recognized the foyer. now, i ran a federal agent he and i am with those who say that of course you don't want to wipe out all opportunities to have some funds. particularly people who were under the kinds of pressure the asunder. it is important to note these people may have seen to that of head that stuff out of context never tells me anything. you know, because if that happens, for example, and one of the 12% of the time, i'm not so sure that would've been so bad. so what it tells me much more is what we did not learn from the tsa conference and that is most of the time it was spent as

apparently it was here on training and i must say immediate training. now of course, if you have a government agency in uber overburden and you are a senior official, they may designate someone else or hire someone else. they have designated a conference certifying official and he has all kinds of duties. mr. griffin, this is to other conference certifying responsible for the after action review, seen special training. that's not a new higher, if it? days farrisee, that's not a new higher? >> no, it is not a new higher. >> mhs suggests that as important as the training is, and i appreciate your indulgence

, it is difficult to understand how somebody who has the agency's mandate now with this extra backlog in addition to whatever backlog you may have had, it's going to be very difficult to do what is the essential function of the agency and pay a lot of attention as you may require given what has been discovered. the conference in the agency has got to look very carefully at what i would normally regard as a very important tv. and see if the training can be done as training perhaps in the locations. i just don't see how this conference certifying official is responsible at that designation as to be able to do that and do it with congress really looking i eat to get rid of this backlog and deal with our veterans.

>> i think the gentlelady. mr. duncan. >> well, thank you very much, mr. chairman. i first want to commend mr. sepulveda for speaking out in no way in which he did. apparently, there are sound or maybe many employees of the va that think they are made from criticism because they know that all members of congress want to support the veterans. and i can tell you that my father with state legion commander in 1954. my uncle joe was state legion commander in 1963. and those were times in the 50s and 60s and the american legion's around the country were huge. i am a product of boys state and now i think it's only about 19% of the congress who are veterans. i'm proud of my surveys and i

appreciate the education and opportunities that i got from them. i know that most veterans don't want to see the tax payers abuse or money wasted, even in the va. we have this -- i want to commend mr. griffin for the work they've done. they have the report that says there was an e-mail and much one department employee said where large agency with deep pockets. this e-mail response was indicative of a large problem throughout the plant has disregarded any budgetary concerns and engage in out-of-control spending. they exercise stewardship of taxpayer dollars. that's a very disturbing report.

farrisee, and attend a massive $7 trillion debt to set up a notch higher, much faster than ever before, how does this statement with deep pockets. had he think that reflects on the department? >> it's a very troubling statement, congressman. i cannot believe it reflects well. i do not believe that is the thought process today. i believe that fiduciary responsibilities are taken seriously in the policies put in place will eliminate those types of thoughts. >> well, another e-mail obtained by the committee, a department employee stated in this place you have to get it all when you can. we've heard that and read that the 6.1 million on this

conference is, planters, i think mr. griffin said 760,000, was that it? >> the total overspend the 762 as far as we could determine. >> but it could have been more. >> we have in this report that the planters were using these trips to these various resort locations by the taxpayers. it seems to me that this type of act two days needs to be stopped and needs to be restricted if the employees of the va are patriotic, dedicated employees.

general farrisee, why do you think conference said six were able to maximize spending on this promotional products. does any supervisors stepped in to say these amounts were too high? did they just not control this much at all? >> congressman, i believe there is a lack of oversight to the whole conference planning. there is not enough leadership attention to other details. >> well, we certainly hope that this stops. all of this money, instead of it being paid vacations for va employees as others have said could've been spent in many, many better ways. thank you, mr. chairman. >> thank you. recognize the gentleman from nevada, mr. horsford. >> thank you, mr. chairman. on october 1st, 2012, the

inspector general's office publicly released a report issuing 49 recommendations on conference oversight, internal controls and spending. mr. griffin, how many recommendations did secretary nation's psyche occur with? >> the secretary concurred with all the recommendations. >> in fact, the va had issued a conference oversight memorandum that began implementing many of those recommendations when the report was released, is that correct? >> we shared our draft report with the department in august. they have an opportunity to see what the issues were. nsa previously testified, they did generate an aggressive memorandum laying out new guidance to try and address a lot of the issues. >> how many of the 49 recommendations as the department finished

implementing? >> we got a lot of flurry of act to that in the past two days, which is a byproduct of hearing so we are grateful. roughly half is my belief, but we look at you an answer at the precise number for the record. we track these recommendations on a quarterly basis. we send a reminder to the department that this is an open recommendation and how are you progressing on getting to closure on it. it's a process that we've had in place. i'm told now by my colleagues at 26 of the 49 are open. >> 26 out of 49 remain open. there's been some exchange of information back and forth between our follow-up staff and the department, were indications of the progress is being made, but we have not gotten enough information to say they've met the requirements of the

recommendation geared >> so their 23 still in process? >> no, they're a 26. 23 a close. 26 the rope in. >> of the 26 that are open, where is the department in the process, and the progress and what is the follow-up on the implementation until they are completed. >> i can't speak to all 26 of them. i've seen some of the responses and as i've indicated, there is progress being made, but we're not going to close those recommendations until you're satisfied that satisfied that they've nailed it. so far that's not the case in all of them. they involve personnel actions, which i understand the department intends to conclude tomorrow. >> is their date certain when they have to be completed by?

>> we have to follow up until they're done. there's not a deadline. we sent a list of the congress every quarter to bring it to their attention that some of these things have been out there for a long time and we seek to get any assistance we can in making sure that the department understands the importance and takes care of the problem. >> mr. farrisee, mr. griffin just indicated the department now has additional reporting requirements to congress regarding these conferences. how often is the va required to report and conference spending? >> i'll have to pass that question on conference spending. >> we have to report conference spending quarterly and annually to the congress as well as a one

b. >> what kind of information is now included in this report is the duty they >> committee some veteran affairs. our reports go to the oig. reports go to omb. the detailed breakdown on conference spending caused by categories elaborated in the statute. >> so the oversight is therefore the conference spending on a quarterly and annual basis? >> i believe it is. i actually believe there's a lot of oversight before conference is ever proved, which is where i think the key oversight belongs is are there alternative method to do this? is there another way to accomplish this training short of traveling in leasing a facility in incurring all those

incumbent costs. we make a very strong -- we require the activity make a strong case there first. and then we make them -- if they make the case and it's good learning outcomes. there's good learning important outcomes that can be measured. their analysis is a different venue. so i think that's where the control exists. >> thank you geared >> i thank the gentleman. the gentleman from north carolina as recognize. >> thank you, mr. chairman. i thank you each of you for coming. i want to start off by saying there's a tremendous amount of dedicated workers. i don't veterans affairs committees a number of dedicated employees. our committee staff here is unbelievably dedicated. they do a great job truly for the american people. so i don't want anything to be misconstrued or route they are but there's not an appreciation for those who serve our country and work in government because

these hearing can come out that way. at the same time, we must address a few of these issues because i've got other governmental agencies seen one in the world do they get to travel? i've got people in the blue ridge parkway who can't go from one end of the blue ridge parkway to others in their service area without having to come back because of the unbelievable spending that goes in other areas. with that being said, we've got some $762,000 was spent according to the ig report. ms. farrisee, you've said and mr. murray, u.s. said as well that top officials didn't know about it. there wasn't the proper oversight. could you put up an e-mail fly here -- despite here. this is the senior official e-mail to conference planners that says, and i quote bottom

line, you don't have to worry about a thing. now, when a top official asserts to conference planners that they don't have to worry about the funding, does that not send the wrong message. mr. murray. >> absolutely. it's totally the wrong message. okay, when do i get to tell the veterans in north carolina, which you do not have a good track record of processing claims in north carolina. many of the veterans i talked to have to wait, some has been a 600 days to get their claims handled. when do i get to tell them, bottom line, you don't have to worry about it in. when are we going to get to that point? does this type of spending,

ms. farrisee, one with another word like this, what does that tell the american people when we say bottom line doesn't show we have it on but it budgeted va clinics >> congressman, we absolutely don't have an unlimited budget. i think it shows a past history of bad decisions, bad leadership that controls have been put on. >> i agree. how many people got fired because of the bad leadership and bad decisions? how many? i think i know the answer. how many got fired for bad leadership and bad decisions? >> non-fire that i'm aware of. >> okay, mr. murray. how many in your organization got fired? .. organization. >> how many got discipline greatly, mr. murray? >> or wisdom discipline. >> so no discipline, no firings, but yet we have bad leadership and bad decisions. let's go further because i'm

even more troubled by the next slide. if you keep this up. here's an e-mail that the department approved a $450,000 marketing budget for a conference. now why do we need such a large marketing budget to make employees go to the conference that they're required to go to. why would they do that? who makes that decision? who would make the decision to approve that? >> the leadership at the time would've made that decision. >> okay, they are still employed, right? this is a good decision on their part to market it? >> air no longer with the va. >> you were very kind, ms. farrisee in the way you respond. i want to thank you for the way

you've responded. mr. murray, i'm a little trouble because as we see these e-mails coming out, don't ever play poker because you are there rolling your eyes and hasina and having disdain for the ig as these e-mails come out. do you think the organization is a great job, mr. murray >> my organization, whenever we become aware of these issues, we find weaknesses in internal controls whether the ig finds that, general accountability office and say, internal or external auditors find it. we immediately take actions to correct, mitigate, fix these deficiencies. we have a good collaborative relationship with the ig in their work in a transparent and accountable fashion. >> your demeanor today at this hearing doesn't show that. after watching you. i watch people the time. your demeanor would indicate you are frustrated by these e-mails as they rollout is there telling a story.

do you agree with the story that this is indicative of those making decisions that they didn't have an accountability for costs? >> the employees i work with, the leaders i work with have a strong accountability for the cost for their actions, exercise good judgment. so i find this very dismaying, very disappointing, sir. that's the expression of that to convey. >> so when does the strands late into my veterans in north carolina being able to count the moms and dads, the children counting on those being taken care of? when are we going to get our act together? not just on conferences. i yield back. >> thanks the gentleman. waiting patiently, last but not least i think a day older after celebrating her birthday, the gentlelady from new mexico,

missed one question, your recognize. >> thank you, mr. chairman. and thank you for recognizing that yes indeed i am another year older, which i want to take. i had a nice time last night. i know that being may be the last person to talk, that you are clear that both sides, my colleagues on this committee are clear that in the best of circumstances, our job in yours, no matter how much resource as you have or don't have is to use that funding in the most effective and streamlined way that you can then further i would agree that where you have the flexibility to know this much is your administrative funds, including training and conferences into the direct services and benefits for you are actually making a difference

for veterans and families direct way. .. i'm a big fan of having appropriately trained and a productive public and private workforce that are doing the

best possible job. so i'm certainly not going to be your advocate and i don't think anybody here is will be spending a nearly a million dollars on a conference that had marketing and we know that is never going going to happen again and your jobs are to make that happen. in a public system there are limitations how you deal with accountability and i think that is an area we ought to do a better job too in terms of holding folks accountable. so thank you for being here. thank you for owning this problem and thank you for implementing as many of those recommendations but i'm boeing to take a different twists which is, i think the omb's reaction might cause harm and not get to the real issue which is, we expect you to be effective and smart and professional about how you spend all of your money, regardless what it is and what it is intended for. and so i'm going to remind folks last year omb ordered federal agencies to reduce travel and conference expenses by 30% by 2016. my district is home to the

national laboratories which is one of the critical players in the nation's complex energy, national defense, cyber security and employs some of the country's best and brightest mind. i will reed you an excerpt from a letter, the director of the laboratories wrote to me about these restrictions. he shares my concern that these will harm the ability of the national labs in their research, their scientists and engineers to share knowledge and collaborate with their peers in academia and industry. these interactions are critical to keeping our researchers at the cutting-edge in their field. he shares my desire to insure that we are spending our taxpayer dollars wisely while effectively helping the government accomplish its missions. dr. homert suggests developing standards for evaluating managing and risks of conference travel spending. i ask, mr. chairman, unanimous consent to place the whole

letter in the record and in addition -- >> without objection, so ordered. >> thank you, sir. and i have another letter that is from the center for association leadership, a watchdog organization, who is also looking at these balances, clearly we don't want these mistakes made but we want to be careful that we don't minimize opportunities that make us a more efficient and effective government. i would ask unanimous consent to put the letter in the record, mr. chairman. >> without objection so ordered. >> that is really my statement. i only have 30 seconds and i'm not sure if there is anything to respond to except i hope what we leave this hearing with is, the kind ever issues we identified should never come before this committee or anyone else again. we're expecting, wise, smart, efficient effective leadership in all of our public entities and we want to be sure that the recommendations that you put in place do, effectively prohibit this kind of waste but don't limit the opportunities to have

a well-trained, well-recognized, productive workforce. my fear is we will go too far and we won't do health research, scientific research, and we won't find the best way to serve our veterans and their families. thank you very much, with that, mr. chairman. i yield back. >> i thank the gentlelady. does the ranking member want to close? seeing none, miss farise, i'm informed by staff reviewed sent to us, as quote, the manual, entitled, memorandum, without objection be placed in the record. with all due respect i had to have manuals under iso 9000 that complied. this ain't it. this isn't even close to it. is there some other document that we are aware of that would reflect a manual? you can confer with your staff. >> mr. chairman, the handbook

was included in the oig response on october 23rd. >> we did not receive that response. october 23rd was pretty recent. mr. griffin, do you know something about this? >> as i mentioned in our absence, mr. chairman, there's been a flury of documents being sent to us as a result of the hearing for which we are grateful. i -- >> in other words if we keep hauling them in you will get what you ask for? >> i can't say i have personal knowledge of receipt of the manual. i don't question the integrity of the answer given but i haven't seen it myself. >> well then, i hope you will pledge to forward us a copy if you find it in that last-minute dump in anticipation of this hearing. >> we'll do that, mr. chairman. >> thank you. before i go to the ranking member, i do want to thank you for being here. i expect we'll see you in the future. because, it is the intention, i

just talked to chairman of the veterans affairs committee. it is the intention of both of our committees to both continue looking at what is driving backlog down, if it starts really going down. and continued look about the question of the va's drive to change the culture. and, mr. griffin, i would suggest that, you might keep us informed whether the culture of timely delivery of your requests are being met because the idea that something arrives just before, but not in time for you to review it for a full committee hearing again begs the question of whether you and mr. ave are being treated with respect to your own department we expect all igs to be treated with. with that i recognize the ranking member. >> thank you very much. i think it, miss farise, check with your staff, how long is the handbook? how many pages is it?

about, just give me an approximation. >> it's about 40 pages. >> 40 pages, i see. i just want to, first of all, mr. griffin, i want to thank you, inspector griffin, i want to thank you and your staff. i got to tell you miss farrisee, we can do better. i would think you would agree with that, don't you, inspector general? do you agree? >> i agree with that. >> we can do better. i think that it would be legislative malpractice if we stood on this side of the dais and said, okay, everything is okay. it is not okay and we're hoping that you will take that word back to your agency and, we realize that you probably got a lot of balls up in the air but, i got to tell you, well first of all as far as conferences is concerned, i see there, you're not spending as much money.

you seem like you've gotten pretty good control, it seems that way. we'll see when you submit documents that you will be submitting. but we also are concerned about the backlog and the chairman talks about you know, this whole culture, what kind of culture we have there. at veterans and we want to make sure that that culture is one that believes in efficiency and effectiveness, that believes in making sure that the taxpayers dollars are spent in a prudent way, and, and, make sure that money is spent to enhance the lives of our veterans. they have already given their blood, sweat and tears, and so many, we have so many families who have lost a loved one. so, again, we see this as the

urgency of now. i got to tell you, when we were talking about the handbook, i didn't feel a sense of urgency. i know we got a draft. i asked the question about a document that was due 12th, i mean october 1st, 2012, and it seems as if, you know, we'll get to it when we can. well, that's not good enough. and so, again, hoping that you will go back and that you will address these issues with some sense of urgency. with that, mr. chairman, i yield back. >> i thank the gentleman, and i thank all the participants today, and particularly our witnesses. with that, we stand adjourned.

>> in about 90 minutes president obama is set to meet with iraqi prime minister nouriel malaki at the white house. the two lead remembers expected to discuss the strategic framework agreement between the two countries and a number of other regional issues. a preview of that from a "washington post" reporter. >> tell us what the goal this is and what you're expecting to see out of it. >> the goal from the iraqi's perspective is to get some more military hardware and other associated u.s. help for the fight against a really alarming spikeg of terrorist-driven violence inside iraq and the argument that the president and nouriel mamaliki, the president is making this is a threat that affects not only iraq but syria but u.s.ot interests elsewhere n the region. and beyond. draws in iran.

it's really. this is organization that grew out of al qaeda in iraq branch of al qaeda and now calls itself variously al qaeda in the levant or al qaeda in iraq and syria. so, by its own moniker it is calling itself something larger than iraq. the goal from the u.s. side is genuinely help maliki. the u.s. agrees that this is a much larger threat than it was even six months ago. and i worthy of more u.s. suppo. the challenge is convincing congress to go along wit because of a very, very long list of complaints that congress particularly in the administration behind ite with the way mall flick can i has governed.

>> host: anne, how great is al qaeda's influence in iraq? >> guest: political influence is not great at all. but illt has resurged in rather spectacular fashion about over the last six months. as recently as a year ago al qaeda in iraq was not dead but really not a, not a daily presence. you would see anc bombing here d there. it wasn't something that nouriel malikith worried much about and wasn't something the u.s. took as a major threat either to his governance or to u.s. interests. that's really changed and one of the ways it's changed is the very effective, outside influence that organization has been able toe garner from forein fighters. it was clearly, the work of some foreign advisors who were able to help al qaeda in iraq stage this amazing jailbreak last

summer in which the high leadership of al qaeda in iraq was rolled up, has been rolled up over the previous three or four years was picked up and, excuse me, was released and they're out and running the show again. >> host: anne, we'll take a the primewhat minister said yesterday here in washington. i would love to get your thoughts. >> translator: so we're talking with the americans and we're telling them that we need to from their experience from the intelligence information, from training for those who are targeting al qaeda in a developed technical scientific way. the iraqi people are ready to give blood in following the terrorists but iraq needs its friend to benefit from experience and training. and also weapons that are necessary specifically for counterterrorism because

counterterrorism has specific needs, weaponswise. it is not about abrams tanks or long-range missiles or artillery or f-16s. it has specific weaponry. so aside from mobilizing the people and the political forces in our national union we need also intelligence information that will help us to target the strongholds and the cells and the groups of terrorists. >> host: anne, your thoughts on those words. >> guest: well that is polite and eliptical way of saying give me the apache helicopters i really want and the administration told me privately i can have. and apache helicopters are the first order of business for maliki during this visit. it is an old technology but it is, he's right, an absolutely effective one against small group terrorism. it is one of the, the army's

most effective counter terror weapons. it was the bird of choice in, in afghanistan. you often used to escort u.s. patrols because the insurgents know that they are way outgunned by it. it has precision hellfire missiles as do drones. it basically operates like in many ways, like a drone. can target one car, one militant, one guy with an rpg much has very powerful cameras. all of those capabilities make it something that many in congress have said, why in the world would we give this to, sell this to iraqis, sell it to maliki who has shown in the past that he will go after sunni militias? and further his own shiite power

base. and also why would we reward him a few months ahead of, what is expected to be his run in april for a third presidential term whenes he hasn't fulfilled the promise that is he made two years ago, not long after he won his last one? and so that's really the, what this week is about, is can maliki with u.s., with white house support overcome those qualms in congress and get the apaches and beyond that some wider intelligence and other counter terror capabilities shared by the u.s., freed up from a relick can't congress. >> host: anne, one more question, earlier this week six senators wrote to president barack obama in a letter urging him to press the prime minister to,tt quote, formulate a comprehensive political and security strategy that can help

stablize the country, enable iraq to realize its vast potential and help safeguard our nation's enduring national security interest in iraq. take us through what their concerns are and what congress wants to see on the issue of iraq from the white house as we head toward the meeting early later today? >> guest: that was a remarkable letter. it was signed by the most influential republican and a couple democratic leaders on foreign policy in the senate and it was a real warning shot. it was a letter to obama but it was really a broadside against maliki and it said, you know, he's doing any number of things wrong. he's, he hasn't fulfilled previous promises. he is governing, these were not the his words but he is governing as a sectarian warlord and the u.s. is not holding him to account for it and he is

allowing too much influence by next door iran which of course is also shiite as is he, as is his government-led coalition n fact they called that aid maligned influence which is one of the stronger terms applied recently. and the, the concerns really are, as i laid out in the context of the apaches, look, i mean, since 2011 maliki has promised any number of times to have a, inclusive power-sharing government. in fact one was nominally set up, by the, account of john mccain and others who wrote that letter. maliki hashn said about systematically either dismantling that government or undermining it. and although he is accompanied here on this trip by a, sunni

defense minister and a kurdish foreign minister, representing twois other major ethnic and sectarian blocs in iraq and those who he has allegedly subverted in the past, you know, the charge is that, that's just for show and that he really intend to continue to govern from a shiite-first perspective and that so far he's, been able to essentially use u.s. resources and u.s. cover to help do that. >> host: all right, we've been talking with anne gearan of "the washington post." thanks for joining us today. >> guest: you're very welcome. >> coming up later today at 3:45 eastern we'll bring you a senate hearing examining security in senate buildings in the wake of the shooting at the washington navy yard and others injured.

here is ale short preview. >> so what's the answer? one of the answers has to be, doing the job that we do better, one.wh number two, the other has to be, using data that is available. the form, where is that form? this form, 20 bucks you can get 90% of the information on the internet that is in this form. we pay 2400 bucks for top secret clearance, is that right? that's about what we pay. of it is about $2400. >> for top secret more than that. a little over 4,000. >> four thousand. for a secret, what do we pay? >> 262. >> and for $20 you can find out 90% of this stuff online right now. and so the question is, maybe we need to step back and say, first of all, we got way too much stuff classified. way too many people have to have

clearance. number two, how we're doing it is not utilizing data that is out there today that is readily available. number three, we had a response from director clapper they will start coordinating with the irs. well, most people would say, that ist kind of a no-brainer. that would be one of the things you want to check. you have a form. it is in the form, have you paid your taxes but looks to me like s referencedcros that with thk.e irs. nobody ever checked to see if the data was accurate. all that is computer check. so i guess my question to you is, and my final point is this. creating the expectation that your clearance is tentative on the basis of you passing some type of renewal, and not knowing when that's going to be. the cia used to have random polygrapho tests. they don't even have random polygraph tests now. you're noticed. i can pass any polygraph tests

with two drugs in me and you won't ever know it. so the fact is, we need to create an environment where, numberou one, we lessen the numr of people that need a clearance. we do a whole lot better clearing. we need tohe create a expectatin that is you will be randomly checked to see if in fact you still deserve to have that clearance. that is the system. the details are difficult, i'm not saying it's not difficult but how we do it and how much it costs and holding contractors accountable for doing the very job we're paying them to do doesn't seem to be happening. and my question, i would just like a response from you all. how do we solve this? you all laid out where we are but how do we rollsolve it? you know, we have all these areas, the form, this form, three pages of instructions. seven pages where you live. five-pages name. seven pages unemployment.

29 pages on relationship. 21 pages of foreign activity. two pages on emotional health. seven pages on police records. 11 pages on drug and alcohol. eight pageshi on financial records. five-pages on association and three signature pages. i know you're reforming the form but the point is, is what we want to do is go for the gold and so, not all of this, first of all, is checked from a quality assurance check. and number three, or number two would be, is can we create a process that gets to the gold and not to rely on a form as much as we candidate at that that is already out there, that the government already holds? i mean i'm amazed, are all amazed that 8400 people in this country have a tax debt that makes them vulnerable to divulging secret data and top secret data and they have clearances today? does that bother anybody here? that puts us at risk.

so my question is, whoever wants to answer my broad commentary remember or at least educate me in a different direction, i would love to have it. >> that was just a portion. you can see the entire hearing this afternoon here on c-span2, starting 3:45 eastern. it is also available online anytime at c-span.org. earlier this week national intelligence director james clapper and nsa director-general keith alexander discussed the nsa surveillance program and spying on foreign governments in testimony before the house intelligence committee hearing this week. you can see that hearing tomorrow beginning at 10 a.m. eastern on our come pan one network, c-span. tuesday, carol ga lawn at this, said before the house financial services committee a recent $1.7 billion cash infusion by the treasury department was required by law but based on outdated housing market data. republicans accused the fha failing to comply with federal law and misleading congress in

previous hearings. they became a source of home mortgage credit in housing crisis and fha blamed losses during that period for its recent short fall. >> committee will come to order. without objection the chair is authorized to declare a recess of the committee at anytime. the hear something entitled, the federal housing administration implications of a $1.7 billion taxpayer bailout. i recognize myself for five minutes to give an opening statement. on february 6th, this committee held its very first hearing of the 113th topic of the declining fiscal health of the federal housing administration. we heard from witness that is fha was ignoring warnings about its solvency, failing to use its existing tools to price insurance appropriately and failing to minimize losses. today eight months later your witnesses have been proven correct. the fha is indeed broke. it is officially bailout broke. 29 days ago fha became the

recipient of the latest washington bailout, funded courtesy of hard-working taxpayers to the tune of $1.7 billion. on february 13th when our witness, commissioner galante came before us to discuss the state of fha single family insurance fund she testified that fha was making changes to quote, accelerate the fund's recovery. regretly, seeming the fha accelerated national bankruptcy by act tell rating the national debt clock, seen on monitors both to my left around my right. when commissioner galante last stood before us the national debt was 16.5 trillion. mere eight months later the national debt stand at a staggering 17.3 trillion and counting. over $140,000 per american household on average. 1.7 billion of that is courtesy

of the fha bailout. our spending-driven national debt is the greatest extensional threat facing our nation today. the former chairman of the joint chiefs of staff has said that the greatest threat to our national security is our national debt. the democratic co-chairman of the president's fiscal commission, erskin bowles said the debt is like a cancer. quote, it will destroy this country from within, unquote. just last month the congressional budget office warned us yet again that our federal debt sun sustainable. yet a number of my democratic colleagues have asked to have the debt clock, removed, taken out from sight. reflecting a see no evil attitude and in fact, president obama has said, quote, don't pretend if america is going bankrupt, unquote. itch no doubt similar words were spoken in both greece and detroit. barely a week ago the congressional budget office delivered more bad news, reporting that fha has consistently missated its projected recovery.

mortgages are insured now. over fha is insured past two decade have a net cost of $15 billion. . . a little bit hollow.

the taxpayer who bailout reinforces everything that many have said about fha for some time that it is high risk to tax payers and mortgage insurance and high risk to our economy. the government accountability office has underscored those points in february when it added the fha to its list of programs considered high risk due to the former devotee, waste, abuse, mismanagement and the need for transformation. the $1.7 billion bailout of fha and reinforces the need for the protected him to the taxpayers at one. the pass act will have needed objectives for the administration. it would put fha on a sound financial footing and keep it there and defines fha's mission to ensure the agency is serving first time homebuyers and low to moderate income. it shifts away from tax payers

and into the private sector by reducing the fha footprint and making sure the industry is complementing the private sector, not competing with it. it ensures that runs its single-family insurance fund according to the basic temmins of the mortgage insurance. under a mandate the entrance of the 30 year fixed mortgage maintains the countercyclical will. the american people want to end these destruction cycles of bailout batt washington policies have helped foster. they do not want an economy lee of loci on sustainable levels of debt. regrettably fha as it operates today operates both. the fha has come from backstop in the market to supplanting the market. the time for the fha reform is now and we can wait no longer. the chairman recognizes the gentleman from georgia mr. scott

for two minutes. >> thank you very much -- >> i don't think your microphone is on. >> first let me thank you for coming down to atlanta to the home for closure prevention in tent where we say right on that day as you recall 6,000 homes were being foreclosed upon. i really appreciate you coming down being with us at that time. first of all i want to say this is not a bailout. it's easy for us to try to use that kind of a language. this is a required mandatory appropriation of nearly $1.7 billion in appropriations from the united states treasury that is required, that is needed and is very timely for our recovery. to the chairman of's point, my fact just to recall the credit reform act of 1990 required that

at the end of each fiscal year every government credit agency which includes the fha efficient reserves to cover 100% of anticipated future losses. the fha programs, like all federal government direct loan guarantee programs are subject to the federal credit reform act and they can take advantage of kermit and the fed authority to cover increases in costs for outstanding loans and loan guarantees. that's all this is. this of authority allows access to treasury funds without congressional approval for any funds needed to balance its books. that's what this is. that is what is in oh-la-la. it's no kind of bailout and i think it's important that we be honest with the american people so that the of that this is

codified in the federal credit reform act of 1990. >> the chairman recognizes the gentleman from texas of the housing insurance subcommittee for two minutes. >> thank you mr. chairman for holding this hearing. several points. one, everybody recognizes fha has played a valuable role helping the home by years and low-income families enter the home ownership. but also what we understand is when these couples purchase their homes and help them set down their roots and began to raise up their family which is good for our neighborhoods and communities. and that is why it's important that we have a healthy fha. fha plays a vital role in that area. the bottom line is not on sound financial footing and that jeopardize its ability in the future to provide this first-time home buyer or low-income family financing. now, you are going to hear today

that the fha is not broke that that is not the case. they have a negative ratio of 8.4% and are supposed to have a ratio of 2 percent and many private mortgage entrance companies have to have a capital ratio of 4%. they also have a negative net worth of $6.3 billion. you are going to hear the of $48 billion in the bank. there's a lot of companies in bankruptcy that have money in the bank they just don't have enough to cover all of their liabilities. and so, what we need to do is pass the act. what does the pass act do? it begins to make sure that we have a strong and healthy fha for the future so it can help these families and it also makes sure that the tax payers don't have to underwrite these mortgages in the future and it puts them on sound footing. it gets the fha back to its original core mission. it's important that we have this discussion today but what is more important is that we need to know exactly where it is

because i don't think anybody knows. we've told when it comes to the fha things are fine, things are getting better. we had people tell us the same thing about fri and fannin. things were fine and a great, but that turned out not to be the case and what this administration has done is miss the mark on the projection after projection of when the fund is going to be backing to its statutory limit. with that mr. chairman i yield back the balance of my time. >> the chair recognizes the gentleman from connecticut for two minutes. >> thank you mr. chairman and i welcome the witness to come before us today to talk about a very important question. a couple of observations, number 1i sit down and listen to the majority talk to it so much concern from the debt but most of them of course voted last week to the fault upon questioning i think whether we should take any protestations of

responsibility and prudence coming from those that voted to the fold on the united states debt with perhaps a rather large grain of salt. but to move on to the topic of this hearing, it is important of those let are watching it are to become understand that when the word bailout is used it is not being used terribly accurate. what is occurring here is that in an accounting entry i'm not saying this is a good thing. the fha like the pricing to the to private housing and fannie mae and freddie mac is paying a tremendous price and the government's involvement in the realistic act and the years 2006 and before and after that and what is the most significant dislocation that we experienced since the 1930's. so it's not shocking that they are looking for $1.7 billion in capital. if you believe the real-estate market takes another massive

downturn and should be concerned that that will never be reversed. however, the decades and generations of experience with fha show two things. one, this is and cash, this isn't cash going to maryland for bank of america or any of the other fishes to financial institution that received a bailout. this isn't an accounting entry this is an accounting entry whereby the fha says we have a call on cash from the treasury. two things can be pointed out about that. one is the entry that if you look at history of the fha has always been the opposite. for most of its existence it has been we've operated a surplus and funded important affordable housing programs. so, as we talk about the bailout keep in mind that this isn't cash and as an accounting entry. >> the time of the gentleman is expired. the gentleman from new jersey, the chairman of the capitol market subcommittee mr. garret. >> commissioner appreciate you

being here today, of course i wish it was under happier circumstances. but instead, we are here in the aftermath of what is it to be the first taxpayer bailout of the fha in its 80 year history. one of which would never happen and earlier this year we were told also that would be about half the size. so, i'm troubled by what it says with the fha and i even more troubled now and in byrd about forcing the american people once again to come and rescue another field government housing agency. to couple with that what is even more alarming is the fha pattern of underestimating of the losses. i can see two possible explanations to be either the fha is really bad assessing the risk which is basically what the core mission is, or for the years you knew what the real risks were and you are simply downplaying it each time that you came to the congress. a stress test conducted earlier

this year a test i might add the basically tried to cover up the federal reserve estimated that in a severe economic downturn would need not one and 7 billion but $115 billion while we can't predict this could happen or not it is clear that the fha does pose an enormous potential liability to tax payers. one of the most important steps in congress to take would be to refocus the fha on its core mission of helping low to moderate income borrowers and first-time home buyers and we do that with the pass act. how many times we have to burn before we learn the government guarantees don't make markets safer. they make them more dangerous. if we can't actually get someone at the fha to admit this bailout, use that forbidding word in this town, that is only $1.7 billion in some people's mind that is just pocket change. on top of all of this, we are supposed to believe that this is the only bailout that the fha is ever going to need it.

of course the fed doesn't believe so, nor do point i yield back. >> the chair recognizes the ranking member for four minutes. >> thank you mr. chairman. commissioner, i'm very pleased to have appeared before this committee today. i would like to applaud your work in managing the federal housing administration which has provided an affordable pathway to home ownership for hundreds of thousands of low-income americans. during the worst of the 2008 crisis was the private sector left the market. the federal housing administration set up and provide the liquidity that kept our struggling housing market afloat. this is the countercyclical role of the fha as it has been throughout the course of its nearly 80 year history. despite the action taken in recent years, the severity of the financial crisis weakens the help of the mutual mortgage insurance fund. recently the fha announced a number of changes designed to

shore up its finances. since that time, the fha has raised premiums on multiple occasions, strengthen the downpayment and credit requirements, enhanced underwriting and increased measures could. they had letters for the equity conversion program to have stabilized the segment of the business which is accounted for the majority of the fha losses. as a result of these reforms, fha 2011 through 2012 have been the strongest in the administration history. moreover the business is estimated to continue that trend. but nevertheless on september 20th, 2013, the fha was required to take a mandatory appropriation of approximately 1.7 billion puna although this one time transfer of funds it is important to note that fha is

far from bankrupt. in fact it holds over 40 billion in cash on hand and the agency continues to generate revenue. this is only required because the fha is bound by law to hold the revenue necessary to pay any potential claims over the next 30 years without taking into account future business. moreover, the calculation used to determine whether a mandatory appropriation is required is completely outdated. based on assumptions about low performance and recovery, made in december 2012. the member does not incorporate recent performance improvements or current economic factors. these significant changes are likely to have improved the financial health of the mutual mortgage insurance fund. for instance, expectations of home price appreciation have

improved significantly. and in conjunction with rising home prices the policy changes have boosted recoveries on foreclosure. it's implemented measures including the ten basis point guarantee fee hike earlier this year and more aggressive pursuit or push back on the liquid of loans to shore up the mutual mortgage insurance fund. the interest rates are likely to reflect positively on the fund as existing borrowers prepay more slowly and insurance premiums. as a result, this accounting transfer is not reflecting an up-to-date view of the mutual mortgage insurance fund performance, its long-term fiscal health or its current position. above all we must strive to have a healthy fha that continues to facilitate helm ownership while standing ready unfortunate event of other housing downturn. i look forward to your testimony today and the yield back the

balance of my time. >> the chair now recognizes the gentle lady from west virginia the chair of the financial institutions subcommittee for one minute. >> thank you mr. chairman and i want to thank the witness for being with us today and thank you for your service in the housing industry. i am very concerned about the bailout of $1.7 billion. i've been on the housing subcommittee for many years and have sought through testimony after testimony to say that we would never reach this point. even when the red flags were raised that we were stooping below the 2% ratio, under questioning we were assured that with the housing market in breitling, the decreasing capital reserve, the return to normal levels and we would never need a bailout, yet here we are. so i would say $1.7 billion may be an accounting move but 1.7 in my book is $1.7 billion if we

were told this would never have been the question is how do we get there? we would have been their last year had they not made an adjustment and i would like to have you speak to that in your testimony. and so, here we are again. i yield back. >> the chair recognizes the gentle lady from ohio for two minutes. >> thank you mr. chairman and ranking member and to the witness for being here. let me try and find other colleagues in thanking you for all the work that you have done in this industry. and i'm looking forward to hearing your testimony and having the opportunity to pose a few questions. let me be very brief in my remarks and say certainly it's you and the audience today can imagine that there are two sides to every story. i noticed an over emphasis on the bailout today. but what i have not heard is all the good things that happen

through your industry in providing low and affordable and come. also, with the portfolio looks like today and those dollars that are being taken from the treasury have the hobsons of the word legal. this is a legal way to observe those dollars but let me say what i was most impressed with as i look for your testimony and i am sure we are going to hear more about that today is when you say the ultimate of the portfolio is a function of the broad economic environment causing me to be reminded of when the government shuts down, the default on treasury is threatened and the economy performs worse. so hopefully you will have an opportunity to tell the other side of the story and share with us the history, but more importantly where we go from here. thank you. >> we welcome the testimony of

the commission of the federal housing administration and assistant secretary for housing at the department of housing and urban development. she appeared before the committee on to do 14th of this year so i believe she needs no further introduction. without objection, the written statement will be made part of the record after her oral remarks. you are now recognized for your oral presentations. thank you for being here. >> chairman hensarling -- >> i don't think your microphone is on. if you could pull it close to you. >> can you hear me now? >> yes pps >> ranking member waters, thank you for the opportunity to testify today on the recent mandatory appropriation to the mutual mortgage insurance fund. first i want to be clear that while we would have preferred to avoid the mandatory appropriation, these farms are not a bailout and they are not a failure of the fha model. this accounting transfer is the result of the static assessment as a part of the annual budget

process and it is based on an september 2012 portfolio characteristics using fall 2012 economic assumptions. this assessment determines the amount of reserves necessary to pay for up to 30 years of potential claims. today these assumptions are outdated as is demonstrated by the dramatic improvements in the portfolio performance including a 15% drop in delinquencies, 91% drop for the payment default, 20% reduction in foreclosure starts and 30% improvement in recovery rate. these improvements cannot be captured by the r. dee estimate calculation and right now fha has $48 billion in liquid assets on hand. the housing market was crippled by the reckless practices of private actors ultimately resulting in the worst recession that this nation has seen in over 70 years. the discussion we are having today would be very different

were it not for the serious losses on legacy books from 20062 early 2009. hud has testified many times about a significant impact of those years on fha. especially this summer from the down payment loans, programs that have heard serious projected losses because they lack the authority to expeditiously make the changes necessary to prevent them. the program accounts for 15 billion expected losses to the fund according to last year's independent actuarial report and were it not for the losses, the capitol reserve would have been positive by almost $3.5 billion. throughout the crisis, the fha has played its role in ensuring access to credit while providing a countercyclical support to the market just as it was intended to do. and since 2009, this administration has taken aggressive steps to ensure the

fiscal soundness of the fha. we have raised premiums five times, reversed the premium cancellation policy can't tighten credit requirements and made unprecedented efforts on enforcement actions. many of these actions were made possible because of the support of congress. i would especially like to thank the representatives heck and fitzpatrick for the reverse mortgage stabilization act making it safer for the borrowers and taxpayers alike. to be clear, while these changes cannot erase the adverse impact of the past origination practices or considerable strain the recession placed on the fund, they are ensuring that future books are much stronger. we are on the right track. new books of business continued to perform well. just two weeks ago the congressional budget office clearly noted a significant profit devotee of the 2010 through 2012 portfolio. in addition to focusing on ensuring strong and new books,

we have executed on our commitment to reduce losses on past box, keeping families in their homes when possible, while protecting the fund. improvements to the loss mitigation waterfall, settlements with lenders and expensive use of programs are directly responsible for significant portfolio improvements i mentioned earlier. we estimate the improvement and recovery rate alone is worth less than $5 billion. far exceeding the amount of the mandatory appropriation. actions we have taken since the peak of the crisis also have the effect of reducing the footprint. endorsements have declined 27% since the peak in 2009. no one is more concerned than i am with ensuring the fha continues on the trajectory towards rebuilding our capital reserve. to be successful run the future come fha needs to write tools and your support. indemnification authority for all of our lenders and improved

authority to terminate origination and underwriting approval will allow us to better identify risks and avoid unnecessary losses. authority when the fund is at risk to quickly revised requirements, the mortgage lender while rulemakings is under way will improve the fha ability to respond to new risks or urgent needs. giving the fha more control over its resources with administratively and legislatively such as the use of the wage scale or procurement flexibility will also help. i look forward to working with congress to give the fha the tools it needs to protect the housing market against another crisis and to make the dream of home ownership a reality for generations to come. mr. chairman, thank you for this opportunity and i'm happy to take any questions. >> thank you. the chair recognizes himself for five minutes for questions. ms. galante, i describe no

malevolent intent to you or your predecessors. i have no doubt that you and your staff work very hard, but in listening to your testimony, i am reminded of that famous line from the marx brothers film who are you going to believe, me or you're own eyes? what i've heard from you and your predecessor and the secretary from many years that all is well, and what i see with my own eyes is a congressional budget office report that shows a $60 billion swing from what was supposed to be a $15 billion savings, $45 billion savings as it has turned into a 15 billion-dollar cost. what i see with my own eyes is a

gao report. congratulations, the fha has been added to the series. what i see with my own eyes is your letter dated september 27th. i noticed that you and many of my colleagues on the other side of the all used the phrase required mandatory appropriation. that might be the phrase in washington, the freeze on main street is bailout. what i've known from you and your predecessor is you have been so wrong for so long when it had to do with the value, whether it had to do with your capital ratios, whether it had to do with the needed a bailout then when you finally acknowledged you needed one it turned out to be almost twice the size. with all due respect, why is the

testimony today and i particularly find it quite plain and in written testimony one of the last lines you have is the fha continues to be a reliable steward of tax payer dollars. what is different today? all that we have heard for the last four years of this administration? >> let me be clear that if you look at the testimony chart on page two, which is based on the cbo report that just came out a couple of weeks ago, what we did is added to the chart the 2013 and we broke down this chart to show you the changes in the economic value of the fund by year based on the actuarial report and the budget estimate this happens every year -- >> that's kind of the point, ms. galante. we've seen these charges before. for four years they have been wrong. so again, what is different today? why should the committee believe the testimony today?

it hasn't been credible for four years running. >> again mr. chairman, for -- since i have been here since the secretary has been here, but we have reported on our thus results of independent actuary. the results of annual budget the estimates that are done as part of the administration budget and the point that i want to make is the years and which this country was hit by the worst recession in 70 years, our portfolio took a significant hit. >> that the housing crash came in 2007. we are almost at 2014. you would acknowledge that for the entire time that this administration has been in office that the fha has failed to meet its legal standard of

maintaining a 2% capital ratio, correct? >> even though law says it might not. the predictions have been so wrong for so long for four years running you've been in violation of the law. has anybody in your agency been held accountable for this? has anybody been fired? has anybody been reassigned? has anybody have a reprimand? what is the level of accountability for these actions? >> so, mr. chairman, the 2% capital ratio is a requirement to the we have worked very hard over these four years as i've talked about increasing premiums, changing policies, changing credit standards. >> would you utilize those tools to bring the ratio of 22%?

so maybe the line could have been in the right direction but didn't you have tools available to you that you could have used for other? >> we didn't even have the ability to raise premiums until 2010 to the we had to come back to congress to get the authority to increase premiums. >> my time has expired. was anybody held accountable? yes or no. >> my time is expired and i recognize the ranking member for five minutes. >> thank you very much mr. chairman. again, i appreciate you being here today. and i appreciate the fact that fha has been successful in its mission. i appreciate all of the changes that have been made but i appreciate more than anything else that the fha was there for the citizens of this country. we needed them when nobody else

was. and so, will you go over with us what you cited in your testimony about the success and improvements of the fha? >> as i mentioned in my testimony, we have focused on both tightened credit box for future loans that the ensure the best they can be. we've increased our costs on our vara -- borrowers. we have been balancing that with ensuring that the fund is rebuilt and the capitol reserves are rebuilt as quickly as possible given the economic circumstances. >> what kind of success have

those actions resulted in? >> the biggest success is this year we have spent a significant effort on the existing portfolio and reworking the loss litigation to allow more people to stay in their homes. we have done alternative disposition of the assets that have significantly improved the percentages come off 30% improvement in the recovery rate on our default loans. that is a success. >> that certainly is. would you one more time explain for the chairman of the committee who does not seem to understand that 2% requirement and why you had to get that appropriation and the fact that the fha is not broke? would you explain that so the committee understands that? >> yes, let me make two points. first of all, the requirement for the mandatory appropriation where we had a budgetary

estimates to pay for the 30 years' worth of potential claims we were just all that short of that total requirement. to get to the point of what is the difference between the 1.7, this is of a static estimate. the 22.4 requirement on the estimate was static. the the thing that makes a difference during this fiscal year of whether we were going to meet that three estimate with how much revenue we were bringing in to the fha in 2013 and we brought in $17 million worth of revenue. it was just shy of what we needed to fulfill that reserved. >> we may not have time to discuss it today but i always been concerned about the 30 year bailout requirement and it seems

to me we were doing our work in the congress we would take a look at that and try to understand whether or not that makes good sense, whether or not it is realistic and whether or not we should update and to be looked at that. again, would you explain to this committee how it is that you have to have an appropriation when you have $48 million? >> that's correct. this is required as a part of the process and is a part of the federal credit reform. so think about this, you've got to take money from your savings account to put it in your checking account so that is there available to pay your 5-year-old child's college tuition ten years, 15 years down the road. that is what we are required to do. >> let me just say that my chairman here, mr. hensarling

has talked about the need for somebody to be fired and questioned you about who your predecessors fired and let me just say to you that his army is as he described them if anybody needs to be brought to task it is perhaps the congress of the united states and this committee for not doing its oversight responsibilities and updating first of all the full year requirement and having an appreciation for how you are provided as a safety net when everybody else refused to participate in their housing market. thank you. i yield back the balance of my time to read >> the chairman recognizes mr. mr. neugebauer. >> i agree with the ranking member in the sense that we need to change this to what the credit accounting system that we are using at the fha. i would ask for the joint

meeting in supporting the path act where we go to the gap accounting which is what the rest of the world has to use and those numbers would be more negative that it's estimated that if the fha would have a negative 26 billion-dollar network. ms. galante, i want to point you out to the chart and it may be hard to read about the dhaka of lines or the previous year's where the fha has predicted what their progress would be and as you can see the red line at the top is the 2% mandatory requirement for the reserve and the blue line as you can see is the actual reserve ratio. so, the question is -- and going back to think what the chairman was saying, why would we sit here and as we listen to your testimony today we have heard similar testimony in previous years where the projections are as we see if there but the actual results are far from

that. i think it's like going to a doctor and your health continues to deteriorate but the doctor tells you you are just fine. would you continue to go to a doctor if he told you that your health continued to deteriorate? >> let me just answer that by saying that the actuarial projections are based on economic conditions given the economic conditions worsen if house prices don't go up as much as the project. things like that -- this recession, you know, lasted longer, it was deeper, more harmful for families. these are not our estimates. the independent actuary of ejected in the first example. so yes, these numbers are affected by external events. the external events of the shutdown, for example, those

kind of examples affected the economy by $24 billion according to the standard and poor's. if it has an affect on the housing market moving forward, that will affect the fha - lead. we are subject to the overall economic conditions. >> but the bottom line, ms. galante, is you are not currently in compliance with the 2% reserve, is that correct? >> that is correct. but again, this is the accountability -- >> it is a yes or no question. so, as the chairman said, when you look at the national housing act it states that the fha shall not, not made or could but it shall tall times maintain a 2% capital ratio. so in effect, the fha is not in compliance with law; is that correct? >> that has been reported for the years in our financial --

>> it's been reported to what is your position? do you believe that you are in compliance of the law? >> again, it is reported that we are not in compliance with that particular aspect -- >> it's been reported that you are the director so i just want you to tell me yes or no, yes i'm in compliance or no i'm not in compliance with all. >> i think i answered that question. >> i didn't understand the response. >> it is a yes or no question hearing yes you are or know you're not. >> our report says we are not in compliance. >> i think the question is if you are not in compliance and your projections haven't materialized, are you doing the right thing to get that reserve ratio not in violation of law?

the question is if you were a private company you wouldn't even be allowed to continue doing business because in many states to regulate the private mortgage insurance company once they get below a certain level they are not allowed to continue to write the insurance. so, what actions and how can we hold you accountable to getting that ratio back so that we are complying with law? >> we've taken aggressive action over the past five years and i can repeat them again that we have more than doubled our mortgage insurance premium to the point where i think anybody would see that continuing to increase the mortgage insurance premiums would have a difficult time for the new borrowers essentially paying for these legacy loans. so we give increased those premiums to the amount of we believe we can without totally

destroying access to credit in this country. we've been taking very aggressive action. >> recognize of the gentle lady from new york ms. maloney for five minutes. >> thank you brank and member for this hearing. as my former senator patrick moynihan used to say everyone is entitled to their own opinion but not their own fact the fha has succeeded in meeting its mission to strengthen the insurance fund and reduce its role as the housing market continues to recover so i want to complicate you, commissioner and your staff for your hard work. i want to point out that there were unexpected losses associated with the worst years of the housing crisis and a hit harder than any other sector in

our economy and while 1.68 billion mandatory appropriation was recently requested to ensure that at the end of the fiscal year 2013 the mutual mortgage insurance fund has sufficient funds to the capitol reserve account to pay for its expected future losses, these accounting projections are based on the data from the fall of 2012. it's not a bailout as the commissioner pointed out and it's not a reflection of the ability to pay claims on the outstanding loans insured by the mandatory fund but the appropriations is a reflection of old information, not the real time performance of the fund, and the improvements and recoveries alone are worth at least $5 billion. a value that is much higher than the recovered transfer of 1.7 billion. now, the chairman wanted to know if anybody had been fired.

well, they were not five-year but they were certainly furloughed. and despite the government shutdown which forced the fha to operate with a staff of 64 people out of the total of 3,000, they continued to perform services for the american public and this was of course in addition to the sequester cuts which resulted in 100 percent of the fha employees taking a mandatory cut and i would say undeserved pay cut to the majority party and in any event, i would like to ask you, commissioner about the role that the ranking member pointed out of the countercyclical role that the fha plays in times of crisis. the charts that i've looked at is this because you wind up and

help to the american people? and i would like to put in the record a statement by mark zandi from moody's but noted that the role of the fha according to moody's the average price would have declined an additional 25%. so i would like to thank the fha for helping to preserve the housing crisis and for coming in and meeting the role when the private sector wasn't there and now retreating as others are willing to come forward. so can you elaborate on the countercyclical role that the fha plays in times of crisis such as the one that we just lived through? >> the fha has helped since the start of the administration, 7 million people have become home owners as it's important african-american and hispanic home buyers and people with

credit scores, for example, that are lower than the norm while lower than the private market on its own would help so those credit scores, those populations had much deeper challenge of getting and the fha was there. was there for a broad group of borrowers that in good times don't need the fha. so i'd say the fha continues to accomplish its mission, the same mission that they had in 1934 which is the facilitating access to the sustainable mortgage finance particularly for the underserved minority communities and for worse and being a critical countercyclical mortgage lending during the times of crisis that we just lived through. if the fha goes ahead with its

plan to lower the limited for fannie and freddie on its own without even considering any input from congress, would that force the fha to lower its loan limit as well to maintain the constituency? >> let me say the loan limits will change on january 1st because the special legislation for fha expires on january 1st. islamic the time of the gentlelady is expired. the gentle lady from new jersey, the chairman of the capitol market subcommittee for five minutes. >> again, thank you mr. chairman. the phrase so wrong for so long will be that take away from today's hearing. for so long the fha has come to this committee and has given wrong information time and time

again. the chairman started with the reference and i will start out with a familiar einstein reference which is doing the same thing over and over again and expecting different results and that is what we have been hearing from the fha and this administration for the last number of years coming in with positive charts that things aren't getting better to use your own words we are on the right track i believe i have heard those words year after year after year from this administration getting very short and now i guess it's got him to the point it means a bailout, i'm sorry not a bailout with a county irregularity. so, first of all, do you believe that the fha, you and your predecessors have been honest with congress and the american people over the last five years? >> yes, i absolutely believe that we have been honest. we've reported on independent reports and we have tracked the

portfolio performance and we have reported on all of those activities. >> with regards to those tracks, one of them was your estimates of the worst case scenario. what is your agency's estimate of the worst case scenario on the losses? >> i don't have those numbers in front of me, but i will say i am talking about in the actuarial study we've looked at the 95% and i think the negative value is around $60 million. >> that is the fed study? >> i'm familiar with a draft in the early actuarial. >> did you ever install the final result? >> the only thing i ever received was a draft of a charge. >> if i told you the number wasn't 60 something that was

115 billion, that would be new information? >> that would be in a chart. >> it's not whether they are right or wrong it's the determination was made by the actuarial that that was not inappropriate stress test. we are already doing the actuarial providing 99 or 96 percentile potential the activity and the stress test is meant for a totally different purpose. >> was reported in the wall street to rall earlier this year that a senior fha officials said that while the agency was familiar with the study they still wanted to present the research to the other government agencies but not to the american public. i quote from the article we just do not want the analysis to be in the actuarial review reports and congressional hearings and was quite possible the we would

be required to present this information on the record. it would be well after the review was released and the initial media coverage takes place. it sounds as though the information was had by this administration but waiting until after it is -- you come to congress and meet your presentations year and the media covers it than you would want to present the information. it sounds as though any positive sense you're putting a spin on it in a worst case to cover it up. what do you think the american public should have after the reports come out? that report was on a congressional oversight by the congressman's committee. that is is ongoing. i just want to say that the actuarial is an independent report. the actuary determines what information goes in. stress tests are not even

required as a part of the actuarial reports as conversations between the actuary and our staff. >> e-mail from the fha indicate they didn't want to believe the forecast as they put it in your own report and was the fha doubles holding the information from going into the report so your testimony right now contradicts what came out earlier saying that the fha new that the report wasn't being good and was directing your own actuaries wouldn't keep the presentation. is that not true? >> i can't comment on what other people's e-mail -- >> they work for you, do they not? have you looked into this? >> just to be clear i'm not going to comment on some deals's e-mail in a group of females that has been, you know, turned over to the investigative committee. >> can i just ask the chair -- i

know at the end of the hearing we are able to ask for additional questions in writing to the witness that we ask for at this point she present information to us on this hearing? >> without objection. >> of the chair recognizes the gentleman from new york for five minutes. >> thank you mr. chairman. i just don't understand how my colleagues on the other side -- if anything the fha should be given a praise because but for the fha it would have really destroyed this country. it was a prior administration that drove us into the worst recession since the great depression, not in this administration and much of that time when they were in charge. it had the white house, the senate and the house. they know this country down to where it was.

it took a new administration to bring us to a different path where we are now recovering. now, unfortunately, when you have this great recession, the fha that came into existence after the depression to help preserve the market. isn't that the original reason why the fha was created? >> it is, yes. >> now we have the same situation. the great recession since the great depression so we have to defend again as we did going back into the 30's the fha to help save the country. how did you do it? we had two parts. you are supposed to facilitate access that is available to the financing particularly for the underserved borrowers and act as a stabilizing countercyclical force during times of crisis and uncertainty. why it's a very nature, therefore, the ayaan agency that has more volume, what you did and more risk during the

economic crisis more obviously also experienced ups and downs in its own financial strength. within that be correct? >> yes. >> isn't it also the nature of the institutions and why we need them in the first place? because that is what you were created for. isn't that exactly when you did? >> yes, sir, thank you. >> what's think about this. 40% of all first-time home buyers, 50% of all african-american and latino home buyers. so if we were to the real cost benefit analysis if you will it wasn't, but you could assume the term bailout as my republican friend would like to call it even if you use that definition how would you rate to the return on investment our nation has

benefited from having 40 million americans able to own their own home and millions more benefiting from affordable long-term fixed mortgage rates are the tax base to the copay years getting a reasonable return on investment? >> let me also ask therefore since we are moving in the right direction and since we are seeing that we are starting to move and get past this financial crisis doing certain things the economy is picking up can you tell us what the fha is doing increasing dollars the model that you have, the system to ensure that the fha emerges from this worst recession since the great depression as a strong and more resilient organization? >> yes. we have with your help made changes to the reverse mortgage

program. frankly, without which we would have been even after all of the stress the fund has been under we would have been in a positive territory and we wouldn't have needed a mandatory appropriation. so, we would be making changes to that program to ensure that it is going forward and it continues to help keep the fha delphi. as i have mentioned earlier, we have been doing everything possible to increase recovery on that legacy portfolio loan so that again, we are bringing in more money on those properties to the fund to get the fund back up again as quickly as possible. we continue the investigations and enforcements. again, lenders that brought us loans particularly during this crisis when a lot was coming our way and we could use more help on that front from the congress

in terms of additional authorities. >> on behalf of the 40 million families who were first-time homeowners and on behalf of these african american home buyers we think the fha on behalf of what you do for helping the market, thank you for what you do. >> the time is expired. the chairman recognizes the gentleman from north carolina of oversight investigations subcommittee mr. mchenry for five minutes. >> thank you for being here today and for your testimony. there is a question about being a countercyclical force, you talk about legacy loans that you are dealing with now. now, what years are we talking about in particular? >> if you look at the chart on page two of the testimony, it is

very small -- >> 2001 and 2009. >> and not period of time there was a 3% down payment, no minimum credit score, lack of the risk-based pricing. is that correct cracks >> i'm not sure i heard all three of those but yes. >> what is different now? >> what is different now -- >> do you still have a 3% down payment requirement? >> 3.5% down payment and 10% if you were under 580. >> but under fight 80 -- so you are making lending to those under ytd for the score. >> today let me just be clear virtually none. >> virtually none or none? >> if you look at the changes we've made in the credit policy not just a down payment of

overall credit policies and the tightening but we have done, it is a large percentage, 30 to 40% of our portfolio in the past was lower fico scores and i don't believe a person is -- >> what is the cutoff for the fico scores? >> our average fico -- >> not average. what is the cut off? if i have a 550 fico s-corp can i get an fha loan, yes or no? >> yes only if you meet -- >> then it's not called sub prime. >> [inaudible] >> i'm asking a question and now i'm following up with this question and i would appreciate you answering. so if i have a 550 fico a score that is considered subprimal, right? >> he would be required a 10% down payment -- >> understand bet but i'm asking a different question than in fact you are answering and my time is limited. so if i have a 550 score the net is of prime.

it certainly -- >> you can't just take a score and say that is subprimal. >> under a qualified residential mortgage and qualified mortgage requirement, that would not be permissible not within the box. so, let me get to the point here. if we are talking about fha as a countercyclical force, wasn't in fact we have seen in the early part of 2000 and leading up to the crisis with fha following the market as a increasing to the bottom in terms of underwriting standards. >> that is absolutely not correct. >> consent to offer a "washington post" editorial from july 3rd of this year going through the very provisions of i'm outlining. >> can you explain to me in march of last year you testified

before the poor patients committee thanks to our efforts taking office the long-term outlook of fha and the mmif are now much better than they were in 2009. in 2009, the capitol ratio was 9.5%. today it is negative 1.44 and you are drawing over $1.5 billion from the taxpayers. do you still stand by your statement that the fha outlook is improving? >> i do believe it is improving. look at each book of business that we have done through 2011, 2012 -- >> you are saying you are in better shape now than you were in march of 2012? >> i'm not saying we are in better shape. i am saying we are rebuilding our trajectory. i want to go back these are based on economic changes in the environment. >> is the house market worse today than it was in march of 2012?

>> no. >> no, it certainly is not. let me go back to another question. the reserve in february of this year when you testified before the committee, the capitol reserves of $8 billion by the end of 2013. do you still expect that? >> again we will have a new actuarial coming out. it would have been mid december, mid november but given the shut down -- >> we are sitting at the end of october. ..