and now with this agreement to get relief for homeowners. that issue, i think, is a good one to ask your congressman, your senators. they are federally created, they're federally run, they're federally overseen, and the ways in which a resolution can be reached with them is probably going to have to be also at the federal level. >> so that's the headline. after mortgage settlement, fannie may and freddie mac faced renewed pressure on principle reduction. women's work, usa, make no mistake, ms. coakley, we want to see ws crooks in shackles. no pats on the hand, no fines, no promises to do better. she's a democrat in st. louis, missouri. go ahead. >> caller: good morning. i'm calling concerning the lack of monitorship with the states, for example, with the governor of wisconsin taking some of this money for his own state's budget. how is that going to be amended

and who is going to monitor that the state part of that is going to go where it's supposed to? >> and that's a good question. it's based on a certain formula depending on the size of the state, the number of homes involved. but states are getting a certain amount of money in this agreement that they can use for penalties, so it is appropriate in some instances, that states get relief for, as i mentioned earlier, the damage that state governments themselves have felt in cities and towns because of the fallout from homes on the tax rolls abandoned properly, it goes on and on with all the fallout. states and cities and towns have had to pay for it. some of that can and will go to states. by and large, i think my

colleagues and i will just have to be used for enforcement, implementation, making sure the banks' money goes where it should go, to make sure we're able to do this as fairly and quickly as possible. one of the things the states stand for, i think, is we know our communities best, we know our not-for-profits, we know the ways in which in our own states we'll be able to implement this as fairly and quickly as possible, so there is some leeway given on two states. beyond that, we all work together on this. there is a national monitor, but i know from the colleagues i've spoken to on this, we're all committed to getting in our own states the ways we can implement and oversight it. when the banks tell us how to do it, i respect all my colleagues as attorneys general, and i respect that we are going to act in the best interests of our states and the constituents in our states on this issue.

>> martha coakley, here is a headline today in the "washington post." fha is a $1 billion beneficiary in this settlement. is it appropriate that part of this $26 billion settlement, a billion of it is going to help plug a shortfall for the federal housing administration? >> well, i think the federal housing administration and the secretary play a huge role in bringing about this agreement. i think that the cost and expense at the federal level for the kinds of fallout from this foreclosure crisis, i think it's appropriate, and i think that they will -- i hope and i believe they will be transparent about how they're using that money. but the costs involved for the cleanup of this, again, it's just not the robo signing and the piece that went before it, but the cleaning up of this should be done quickly. the federal housing authority can do this, i think, at the

federal level, and i think we'll all have to answer for how we use these funds, but i believe we're all committed to putting it to where it will best help individual consumers and start to turn this economy around. >> let's go to andrea, a republican in hazel, texas. andrew, thanks for waiting. >> caller: you keep saying you're looking into criminal activity. how many thousands of people, after four years, how many thousands of people in massachusetts alone do you currently have on indictment for this? i don't just mean the ceos, i don't mean the brokers, i mean the people who sign these loans. >> i'm sorry; i missed the question. individual homeowners? >> i think he's talking about banks. how many people, individuals, do you have under indictment in the state of massachusetts? >> well, it's an interesting question, because for a long time since i came in in '07, we've been fighting to get, frankly, a mortgage fraud statute. i think you have to understand that for many states, the criminal tools are well behind

the 8-ball and because much of this activity has been really preempted by federal regulation, states, and including states like massachusetts, haven't had all of the tools to go after criminal behavior. i've been a prosecutor for a long time. i brought tough cases on tough corruption. i'm going to continue to pursue that. if i can bring in a criminal case, i'm going to do it, but i have to have the discovery available, i have to have the facts on criminal cases, i think, people misunderstand, are always difficult to make. we will continue to do that. i also know that we have to pursue the civil remedies to make sure that we get the economic relief for people. if you are being forfeited, if you're being foreclosed on and thrown out of your house, it's small comfort that after two or three years, someone has gone to jail. i'm not saying we've done both things, but we have to do both things. >> let's go to mark, a democrat in california.

good morning, mark. >> caller: good morning. i have two questions. when are we going to split up investment banks and the banks that we bank at. there was a law that president clinton signed where he let investment banks and the banks merge. what happens to the people that lost their homes and some of those people had a lot of money invested in their homes, and they got closed -- foreclosed on improperly and they didn't have the paperwork. and especially veterans. i'm a vietnam veteran, and i know for a fact that there is a

lot of people that were overseas that got foreclosed upon. i think it's disgusting. i know there's a law out there that prevents that that should be looked into. >> martha coakley? >> sure. in reverse, mark, i totally agree with you. i'm committed to saying no veteran, no man or woman who is serving her country, his country overseas or out of state should ever be foreclosed upon. there are federal rules and state rules. we try to enforce that. i know that many of my colleagues, my colleague in oregon, john kroger, has made that a big issue. but all of us owe that to our veterans, and we in massachusetts are on the lookout for that, and there is -- there are penalties for banks. i agree with you, that is disgusting that that happened. secondly, there are people who were wrongfully foreclosed upon.

it's one of the reasons why we insisted in this agreement that we carve out two of the claims that we brought in massachusetts on that very issue. we've had a court ruling here that says if you do not hold the mortgage, you can't legally foreclose on it. and so this cutting of corners, robo signing, rush to get everything done has created chaos in the market and as the caller from california just pointed out, illegal behavior for people who have been wrongfully for closeclosed upon. those are issues that still need resolution. in terms of banks' accountability, we're going to continue to pursue that. the question you asked about relations issue, that's an issue that will have to be resolved on a federal level. >> jim said on twitter, from what i have read, this does not

reduce principle but lowers payments only if you have payments 31% of gross income. why? >> that's not exactly right. as i said earlier at the top of the hour here when we started, this settlement is going to provide, we hope, relief for two sets of folks. one, those who are about to default or who are already delinquent, the people who need a loan modification of terms, but there's also a second group of people who are under water. and because their home is now worth less than their actual mortgage that it will include for those folks a principal reduction. there are formulas involved in this that are too complicated to get into here, but i suggest if you're one of those folks who think you can survive with a principal reduction, you should call your lender asap. get on the phone, get in line and start working on a loan modification that would include a principal reduction if you are

eligible for it. i appreciate that question, and it goes to the idea that many of these homes at the time they were purchased aen overinflated value. because now the market is back to where it was before this housing bubble was created, we believe, and the banks have agreed, that it makes commercial sense to write down some of those principles and keep that homeowner in his or her home. if you're in that category, you should immediately contact the bank that has your loan. and if you have trouble with that, contact your attorney general in the state in which you live. >> speaking of contacting the banks, we showed this earlier, but we want to show it again, the phone numbers of the five banks that settled with you and the other state attorneys generals. so if you have questions, one of these banks are your provider, the phone number is on the screen for gm arkgmac, bank of america, citibank, and wells

fargo and jp morgan. these are the banks that participated in this $27 billion deal. a tweet, won't this settlement make bank rates increase overall? what about those of us who kept up with our mortgages? >> that's part of the reason why there is a monitor, why we're going to watch this. that question comes from i guess what is a really cynical population, and rightfully so, about the banks passing on fees and losses. we see that all the time in consumer protection. we see that, obje -- obviously, of america understanding they might find another place to pass a fee on with a debit card, decided they weren't going to do that. i think this is not just about this settlement and about what we say as attorneys general, i think this is a really important consumer moment for people like

that caller to say, you know, this is different ways in which we hold banks accountable, including for the fees that they charge, the prices that go up, and you do have options. look, we've had some issues with the national banks and the mortgage companies. take a look at what your community bank, your savings and loan, what your credit union is doing in your community. people and consumers can take their assets elsewhere. they can go and do their business elsewhere, and i mean this in terms of let's have some transparency about where this money is going in this settlement, what it did goes to, and u.s. consumers, if you don't like this principle or the policies of what your banks are doing, be vocal about it. it does have an impact, and i think this is a time for consumers to get he heducated a what they paid for using bank services. we tried to do that when we reached an agreement as we do here. i don't think this should be passed on to consumers.

it is a market, and some of this happens. but consumers play a role here and i encourage you to get educated about some of these issues and stand up for your rights as consumers here. >> the new consumer protection bureau is out for a new rule for mortgage servicers in the "washington post" this morning. the government consumer watchdog outlined its plans to regulate mortgage servicers who come under fire for foreclosure practices. the bill will be sent out and a disclosure is required for some complicated mortgages. it's also drafting new rules for impropering charging homeowners for homeowner insurance. martha coakley, what do you make of these new rules? >> first of all, i've been a big supporter of the bureau, and my former colleague, the head of it, understands these issues. i think he and the staff there understand the need for this kind of consumer-oriented

regulation that will help consumers become better educated so that, first of all, we don't have the kind of bubble that happened last time around in this housing crisis. we also, and i think rich understands and we need to make sure that banks continue to make loans, that they will continue to provide money to businesses and homes who are trying to borrow money. we don't want to go so far to the other end that we slowed the economic recovery around, either, but there's been a sore lack of regulation that focused on this unfairness piece on the consumer side. there is an incredible focus at the federal level on making sure that institutions are sound, that the banks don't fail. i appreciate that, but these things aren't mutually exclusive. if you look at what happens where the regulation focused only on, are the institutions sound without looking at the unfair products that were being made and sold, we had the crash. and so this requires both things

as we have federal regulation over banks and institutions, this particular bureau's mission is to make sure that products marketed, made and sold are done fairly. that's the function of a good market. i'm encouraged by these kinds of regulations. they will help consumers get back on their feet and be able to compete fairly, which they hadn't been in a marketplace that was just pushing products out, saying, buy these products, don't worry about them, they're good for you. >> massachusetts state attorney general martha coakley. thank you so much for talking to our viewers. we really appreciate your time. come back again. >> my pleasure. see you soon. on washington journal tomorrow morning, we'll focus on chinese vice president's trip to washington. our geruests will be the co-chas of the chinese working group, representative rick larsen of washington and louisiana republican representative,

charles boustany. kelly field, the washington reporter for the chronicle of higher education, will look at what's in the president's proposed budget for community colleges. and you can call in with your questions about the pentagon's budget to anna mulrine, defense correspondent for the christian science monitor. washington journal is live on cspan every day at 7:00 a.m. eastern. in january, president obama headed up mr. cordray. it is being disputed who said that congress was not actual until recess at the time. this on us oversight and government reform hearing resounds the recess appointment.

>> good morning, the committee will come to order. the oversight in government reform committee's mission is that we exist to secure two fundamental principles. first, americans have the right to know that the money washington takes from them is well spent. and second, americans deserve an efficient, effective government that works for them. our duty on the oversight and government reform committee is to protect these rights. our solemn responsibility is to hold government accountable to taxpayers, because taxpayers have a right to know what they get from their government. we will work tirelessly in partnership with citizen watchdogs to deliver the facts to the american people and bring genuine reform to the federal bureaucracy. this is the mission of the government reform committee. i'll now recognize myself for an opening statement.

president obama, on january 4, executed a political power play. he put us in uncharted territory. at the very least, it creates uncertain environment and significant risk by his own attorney's writing. although, as i know too well, if you shop enough, you can always get an attorney to give you the opinion you want. you can go to enough attorneys, you'll get it. if you hire a good attorney, they'll even tell you you can pardon a criminal that is still a fugitive from justice. we know that from history. we know that from recent history now that you can get an opinion that is exactly the opposite of centuries of precedent, exactly the opposite from your predecessor, exactly the opposite of still majority

leader reid's own view of recess occurring or not occurring. vice president biden in 2005 said, in president is entitled to the appointment of anyone he nominat nominates. no president is entitled by the mere fact he has nominated someone. that's why they wrote the constitution the way they did. it says advise and consent. the senate did not consent. the senate shows specifchose specifically not to act, even bringing to a fact and failing to get closure. ultimately, we will decide nothing here today. we are here to evaluate the risk to the american people of a government that has appointees who may not be able to act on behalf of the american people with the rule of law.

the courts will soon decide, and the sooner the better, whether or not these appointments are valid, and if so, whether or not a law limiting taxes to the american people is valid. because there can be no doubt the two cannot be valid. you cannot be in recess and not in recess. you cannot choose while in recess to pass the law and then choose to not be in recess for purposes of recess appointments. ultimately, these and other issues will be decided. but the committee is here to understand the risk, to understand the likelihood, and at least to ensure that government begins facing the real problem of this uncertainty, this uncertainty that may last only a few weeks or may last for the rest of this

administration. on december 23rd, while in pro fo forma session, the senate passed, and president obama signed, the anti-terrorist act of 2007. i'm just concerned they did not collect those taxes when clearly they were in recess, according to the president. this creates another constitutional question. the constitution did not consider partial recess or recess for this purpose and not that purpose. you're either in recess or you're not. more importantly, the senate may not act to be in recess to the exclusion of the other body. we, in fact, act together. we either are together as required by the constitution, or we are not. there is no such thing as the house is in session and the senate is not. because if we are in session and

the senate is not, no law can be passed. our founding fathers anticipated us coming to washington or new york before that for a period of time and going home to our constituencies for a rather significant period of time. many americans, rightfully so, think that we were better off when we left town for a period of time and really got in touch with the people we represent. but that's not the issue here today. we are now a 365-day-a-year congress. we call to the president and are back in several hours. when we are in pro forma session, that is the anticipation. the anticipation that if needed, we will be back with a full quorum in a short period of time. u.s. senators were informed that, in fact, they could be called back. they were informed that they were not in recess and they made that decision. today we will hear from a

prominent united states senator, but more importantly, we'll hear from a constitutional scholar, the son of a constitutional scholar, about what he believes as a senator. then we will go on to hear from other witnesses, but most importantly, there will be a lively dialogue here today, because clearly, the decision now is on a very partisan basis. the minority will insist that both are legal while the majority will at least question that both cannot be legal and binding. one has to give. with that i recognize the ranking member for his opening statement. >> thank you very much, mr. chairman, and i thank you for holding this hearing, and to you, senator lee. welcome to our committee. mr. chairman, if the committee really wants to conduct an even-handed examination of president obama's recess reform, we need to look at a much bigger

issue first. the recess of the constitutional process, the republicans have raised constitutional concerns about the president's appointments, but the real issue here is the effort of 44 republican senators to sabotage the mission of a consumer protection bureau. in a letter the senators wrote last may, they declared their opposition to any -- any -- nominee that headed the consumer financial protection bureau. these republicans admitted that the president's nominee, richard cordray, was highly qualified for the position. as the attorney general of the state of ohio, he recovered billions of dollars for retirees, investors and business owners, and he was on the front lines protecting consumers for fraudulent foreclosures and financial predators. senator mike lee conceded that mr. cordray was well qualified

for this position. and i quote, my decision to oppose his confirmation has nothing to do with his qualificatio qualifications, said senator lee. rather, i feel it is my duty to oppose his confirmation as part of my opposition to the creation of cfeb itself, end of quote. this gang of 44 republican senators opposed the creation of the consumer protection bureau. according to existing law, once a department, affirmative director is put in place, the bureau will have authority to issue regulations protecting consumers from unfair, deceptive or abusive mortgage practices by payday lenders, debt collectors, private student lenders and credit reporting agencies. these are exactly the protection republicans wanted to block.

article 2 of the constitution says the president shall nominate and appoint officers of the united states both with the advice and consent of the senate, end quote. nowhere does the constitution authorize senators to block all nominees regardless of their qualifications because they object to the current law -- the current law -- of the land and do not have the votes to change it. constitutional scholar thomas mann calls this republican boycott, and, i quote, a modern day form and, i quote, there is nothing normal or routine about this, end quote. as our committee has heard repeatedly, there are millions of american families currently in foreclosure, many in my district, many of whom were subjected to widespread and illegal abuses by mortgage services. nearly 20 million consumers take o out payday loans from an

industry widely known as scrupulous behavior. they want to cut the legs out from the agency congress created -- congress created -- to protect the american families from exactly these types of abuses from mortgage servicers, payday lenders and credit reporting agencies. today's new concern about litigation arising from the appointment is a red herring. the corporate interest said oppose creation of a bureau, to begin with, are the same interests that are now aggressively challenging the consumer protection enforced. the consumer bureau has also opposed the entire mission of the national labor relations board and have blocked the president's efforts to block the board. in short rkts they have left the president with no choice. these reese appointments were the only way to accomplish the president's intent in

establishing fully functioning agencies. the fact is president obama has been very restrained in the use of recess appointments. president george bush made 171 recess appointments. president clinton had made 139 recess appointments. and president reagan had made 240 recess appointments. in contrast, president obama has made just 32 at this point in his presidency. i hope we can ask our witnesses today not only about the president's recess appointments but also about a much more significant issue. unprecedented obstructionism by a senate republican that is intended to cause irreparable harm to american consumers. with that, mr. chairman, i have a minority report that we produced, and i ask you if it wb inserted into the record. >> it doesn't appear to be a

report, but the documents you have, we've reviewed them and i have no objection. they will be placed in the record. >> thank you very much, mr. chairman. thank you. we now go to our first witness. our first panel is senator mike lee of utah. senator lee has spent his entire life both studying and participating in our judicial system. as a child, he attended arguments before the united states supreme court given by his father, rex, who was solicitor general under president ronald reagan. senator lee later clerked for judge -- justice alito, both when he was a member of a third circuit court of appeals, and later, a supreme court justice. after spending time in the private sector, he was asked to serve as the assistant u.s. attorney in salt lake and then as general counsel to governor john huntsman. few people with this type of experience a