for social security and medicare does not count as an income tax. >> i'm not talking about social security and medicare. i'm talking about, you know, your federal income tax that you get and file on a 1040. >> well, i don't think we're really disagreeing. it's true americans pay different types of taxes. they pay an income tax and they pay a tax against income for social security and medicare. >> that's right. >> and most americans, vast majority of americans pay both those taxes. >> so the vast majority of them. so you disagree with the statistic that says that half americans do not pay any income tax. >> i do because it doesn't count their social security and medicare taxes. >> okay. yeah. and i think we, you know, that if you -- but if you don't count those two taxes, do they pay anything? >> but why would you not count them? >> because i don't want to count them right now. i'm just asking you a question. let's just have a hypothetical question that you don't count

those, do they pay any? >> well, you can count them or not, but they pay taxes for those things. those federal programs as a share of income. they pay them every two weeks. >> okay. all right. let's go on to something. according to the treasury department, chrysler's paid their bailout. >> well, we -- we did take a modest loss on the chrysler programs and we will take a loss on the gm programs too. but the auto industry -- >> well, what do you consider a modest loss. >> on the chrysler -- i don't recall the actual numbers in chrysler, and of course, in gm it depends how things turn out over time, but both of those companies have hired a huge amount of people back to work, they're doing well. >> let's just talk about chrysler. what's a modest loss that you think the eventual will be? what do you think is modest? >> it's done and it's booked. and maybe this is a way to think

about it. more than fully offset by the more than $20 billion in investment income we earned on the investments in banks. thad be one way to think about it. >> i don't know if i'm not asking the question right or you just don't want to answer it, but what amount does -- do is the government going to have as a loss from chrysler? >> well, i don't want to get the number wrong, i'd like to give it to you in writing, but it's already a matter of public record. >> is it close to -- >> maybe a little bit higher. >> yeah, $1.3 billion. that's more than modest to me. i mean, i just -- i don't want to argue with you, but i do appreciate you coming and you've got great experience -- >> time of the gentleman has expired. the chair now recognizes the gentleman from texas for five minutes. >> thank you, mr. chairman. >> thank you, secretary geithner for sharing your testimony today. much of the focus of the media

like cnn and bloomberg as well as this congressional body has been on the tremendous debt crisis in europe. however, substantial lack of economic growth and low gdp also looms large over the economic recovery of the euro zone. in the fourth quarter of 2011, the eurozone's economy contracted albeit at a slower pace than expected, some of those countries had their ratings downgraded because of those big problems. what's your prediction for the duration and the depth of a eurozone recession in 2012 and what sort of drag would a

european recession as they have today have on the growth of the united states economy? >> well, if you -- let me start with this. if you think about where things were in the fall of last year when most of the world thought we were living with the real risk, europe would suffer a catastrophic financial failure. we're in much better shape today. because they have been successful in calming those financial tensions and people are more confident they're going to do what's necessary to hold the thing together. but even under the most optimistic scenario of the impact of those reforms, this is going to take a very long time and growth in many of those countries is going to be very weak for a long period of time. and that's why it's so important -- and if it's weak, it hurts us, hurts the rest of the world. less than we feared, though, six months ago. and that's very important. so even -- even though they got a long ways to go, we face less risk of damage to the united

states into the global economy because of the cumulative impact of the actions they take. and you're right to focus on the growth prospects and, you know, i think it'd be -- it's good to -- we can hope that now that they have a bit more breathing room because they've taken off the table the risk of a catastrophic financial failure, maybe they have some more time now to try to focus on things that would improve growth over time, that would be good for us. >> i agree with you that the situation six months ago versus today that we're much better off. but i'd like to hear your thoughts about any measures being considered in the eurozone to address the severe unemployment which we understand that they have, especially in its young people in countries such as greece, portugal, and ireland. how concerned are the eurozone leaders about the international financial system and the possible long-term effects of

severe social unrest that we see on tv in athens, greece, and london, and italy, in portugal and other european countries. thousands, thousands out in the street where they claim that the -- that the middle class has shrunk and the gap between the rich and the poor has expanded. those are concerns that i have. >> and we share those concerns and to do the leaders of those countries. and i think it's important to recognize that the biggest threat to those people still unemployed or risk of losing their jobs is a financial crisis europe allowed to burn. and the necessary essential, most important action they have to take to reduce the risk of further damage is to do what they've done to cool those financial tensions. that makes it much less likely that growth -- they go into a deep depression. that's not enough, though. and across europe, less so in

ireland which is a dynamic economy, but certainly in spain, portugal, and italy and greece, they have to make it easier just as an example for businesses to be able to start a business and to grow a business because that's the most likely way they're going to be able to get more opportunity created for those people still out of work. and they have a long way to go in that context. but they have to do things to cool the financial pressures, make sure the supporting overall growth in demand, alongside these reforms to help make their economies work a little bit over the long run and it's going to take years and years. >> will barack obama's administration allow us to increase the number of student visas from these european countries to come to the united states and see the way that we are handling this financial crisis? which has been very, very hard for us. i think that education seems to be the solution that works for us as i believe would work for the european countries.

>> good question, i'd be happy to ask somebody to respond to the specific impact of those visa policies on that objective. but it makes sense. >> the time of the gentleman -- >> i just want to note -- and i appreciate the efficient way you've run this hearing. with the secretary's time thing, i want to let everybody know here on the democratic side will be accommodated. and please recognize those who have stayed here, and i want to advise the members who are here, i believe we have five more members and we have enough time and that'll be it. i would urge you to recognize those five and he'll be here until 12:30. we'll get everyone here who has been good enough to stay. >> chair recognizes the gentleman. >> thank you, mr. chairman. thank you, mr. geithner for being here today. and just to follow up on a couple of questions with regards to the economy of europe. it seems to me that we have in place a plan and you say the pressures have been released and are lessened, anyway, from what

people thought was going to happen. but actually has debt started to decrease at all? >> good question because many people pointed out when growth weakens because of the shocks of the crisis, then that tends to increase the level of debt relative to gdp. but these countries have dramatically reduced the size of their actual deficits and projected deficits. >> so what they've done is actually get their budgets under control, but the amount of debt has not started to go down because their economies haven't gotten to a point where they can start paying down, is that accurate? >> in some countries it's starting to come down, in others, it's going to take the debt a while to come down. but the deficit's coming down as a necessary path to that. >> they have a path to get themselves out of this mess. okay. what's the impact of gas prices going to be in europe because the iranians if i'm not mistaken have said they're going to not sell them any oil and so where do you see that going?

>> well, gas prices in europe when they go up, it's not good. but it has much less damaging effect even than it has in the united states for a lot of different reasons about how they tax gasoline in europe in particular. yes, it's not good. but europe decided on its own to cut off their imports of oil from iran because they're committed to trying to put as much pressure on that government. >> okay. with regards to the fault credit swaps that are there. a lot of our banks in this country have some of the swap credit swaps with regard to the european countries and specifically greece. greece basically is in default because they're being asked to take a haircut on of at least 50% or 53% or something like that. what's the impact of that going to be to our banks, our financial institutions here in this country? >> no material impact. u.s. financial institutions have dramatically reduced their exposure to the countries and crisis in europe over the last 18 months or so.

and they did buy protection against the remaining exposure they had, but that exposure is very, very small. but any investors around the world that had exposure to greece going into this exchange will be able to or at least almost all of them will be able to take advantage of the protection they purchased through cds. >> you know, it's kind of interesting from the standpoint that this situation's been prevalent for at least a couple of years i've been aware of. seems like we're allowing the american public to be aware of it. and i'm curious, why were we not being more outfront, talking about this over the last couple of years? say two years ago? i'm sure your office knew about this and knew the concerns especially after 2008 and knowing the intricacies of how complicated and complex the financial world is and how tied together we as the united states and the european financial world is together. how we're being impacted here. because to me it looks like we

just got done talking about the credit default swaps, the swap lines, you talked about direct investment by the banks. direct trade partners, we're connected to those guys every way except for being a state of the united states. >> you're exactly right. and this started more than two years ago, and we have been intensively engaged with the europeans, with the imf, with the fed, with the u.s. financial system and countries around the world over those more than two years and encouraging them to move more aggressively. and they have moved slower than we would've liked. but we've brought tremendous attention to it. so we were protecting the american financial system and tried to encourage them in ways that didn't put the taxpayer at risk. and i wish -- i wish they'd been able to move more quickly. it did do a lot of damage to us. if you look at the moments where the growth started to weaken in

the united states when europe was lighting itself on fire. so wish it had happened sooner, but we've been very actively engaged and -- you know, feels better now even though it's going to take a while. >> very quickly, i know that one of the other members of the panel -- of the panel here this morning asked about facta. just a quick question about that, where do you think this is going? i've got three quotes here this morning from the japanese banking association, european banking federation, institute of international finance all are very concerned that we're going to be impacting international investment with this -- with the proposed rules and i know we're not there yet, but can you elaborate a little bit on where you think it's going to go? and are you willing to consider a lot of these implications and minimize those? >> mr. secretary, if you could elaborate quickly. >> you've acted twice before the law was passed to give people more time to adjust and lessen the burden and compliance for the reasons you've stated, and

we're going to continue to work very closely with financial institutions around the world and their governments to try to make sure we can meet the test of the law without undue burden that would damage the united states. i don't think people are not competent we're fully there yet, but we're getting closer. >> thank you, chairman. >> the chair now recognizes the gentleman from georgia, mr. scott. >> thank you very much. chairman, welcome the secretary. let me say from the outset, while this is about international monetary policy, of course, we can't leave out what's going on right here at home in the united states. and certainly i want to touch upon -- get a progress report from you and share some information about the heart of the problem that caused this whole problem which was housing and mortgages and where we are. and as you know, i've really been on a mission myself and thanks to you and your help at treasury and getting folks home safe and with that regard, i do want to say if you would just tell your assistant secretary

for financial stability timothy messad that we appreciate the fine cooperation he's given to us along with ms. alvina mchale. we're going back and having the second foreclosure event in atlanta, georgia. i mention all of this because we were able to save 3,827 homes last time. this time, our goal is 10,000. and we can do this, secretary. a lot of things have happened since last time that i want to talk to you about. and i certainly want to just ask that whatever you can do to help us to reach that 10,000 goal and to help make this a successful event is going to be june 1st and 2nd. now, a lot has happened. we know we have some opportunities here to go to the heart of this matter and help many of our struggling

homeowners with the writing down of principle. we've had a settlement, mr. secretary as you know, of several billion dollars. but there's a lot of cloud there. we don't know. there are many people struggling homeowners out there who say isn't this to help us? how does it help? we want to use this event on june 1st and 2nd to really see what we can do to get some of this money out where it helps the most. and we can help reach this 10,000 goal. georgia, for example, will get 800 and $13 million of this money. i want to ask you, what does this mean? how can we use this money and the billions and every other state gets their share, but there's a lot of cloud of what it can be used for, what it can't -- how do our struggling homeowners get a piece of the action? >> well, you're going to be able to see a little more detail in the coming weeks. but alongside that, as you know,

we're working very closely with ed demarco at the fha to try to make it easier for people to refinance, take advantage of lower interest rates, to make it easier for people to stay in their home if they can afford to by having their payment obligation reduced over time, helping them if they need to leave their home to transition to more affordable options, or trying to get much more support to communities where they're still devastated by unoccupied homes across communities to get more refer sources into neighborhoods to help stabilize those communities. and we're going to help doing everything we can in this context. and we'll work very closely with you at the next event to try to make sure we're reaching more people. the settlement's part of it, but not the only thing happening. >> exactly. now, let me make sure we're clear here. some of this money can be used to help write down principaprins that correct? >> that's correct. the banks agreed they would have to provide some of the assistance by reducing the balance of principal owed by

some of their borrowers. >> very good. now, the other area we're emphasizing is here. one of the fastest group of homeless people are our returning veterans. we set aside a part of this and coordinating with the v.a. to really structure what we got going that can help veterans stay in their home. it's -- it is the height of shamefulness. if after our young men and women go and risk their lives and they come back and as you know, they're struggling with homelessness as well as joblessness, what specifically are we doing in treasury to help with that specific goal? >> you're absolutely right and as part of the settlement and separately from that we've been working with the v.a. and the other housing bodies to make sure they have a chance to stay in their home and, you know, it's -- it's even worse than what you described, of coue, because, you know, we ask our service members to move a lot.

and it's very hard to move if your house is under water. >> right. >> so apart from making sure they're protected against people taking their home when they're serving their country overseas, we want to make sure it's easier for them to meet their obligations as an armed service member. that's still a very difficult time in the housing market. we have a lot more to do in that area. >> and finally hamp, is it succeeding? and what are the challenges? to making it better? >> it has helped modify mortgages for roughly 1 million homeowners now, less than we had hoped, still more to come, but the standards we set have helped encourage another 2 million to 3 million loan modifications across the united states. and so the broad impact is much larger than the direct programs in hamp now. just one thing and it's very important to realize. >> excuse me, secretary, the time of the gentleman has expired if you could submit that answer in writing.

>> happy to do so. >> thank you, mr. secretary. >> the gentleman from north carolina, mr. mchenry is recognized for five minutes. >> thank you, mr. chairman, thank you, mr. secretary for returning. now, i know we've got a lot of discussion about our european exposure. but the question of international harmonization. has this been a point of discussion? and concern about the stability of our financial institutions in the united states with our regulators moving much faster than european regulators when it comes to a whole myriad of market regulations. >> absolutely, it's a central focus on the council, and i spend a lot of time working with the fed on exactly that basic question.

i'm not worried the fact they're moving more slowly is going to do -- is going to undermine our efforts to get our reforms right in the united states, we want to make sure there's a level playing field. so we -- and this is true in derivatives in particular as i said earlier, we want to make sure that we're moving with them not too far ahead of them because if we use too far ahead without knowledge of where they land things, we may end up shifting that risk outside the united states and that would be against the intent of the law. so, yes, we're focused on it, and we're making progress. europe is actually very close to us on most of the key elements of derivatives oversight, but we want to make sure we're fully aligned. >> okay. you mentioned this with derivatives in title 7 with extraterritorial application of that. is it a risk that it would thin out our market? make it more volatile and therefore more risky? >> no, i don't think so. i think the real concern. you know, yes, say -- think

about a world in which we've raised our standards up to here and they stay down here. then what would happen is a bunch of risks would shift to europe and the world would be more risky. but i don't see that happening. i think that, again, on the broad strategy of derivative reform, they have largely embraced the architecture that the congress passed into law in the united states. and even though they're slow enough to adopt it, they're very close and we p want them to be as close as they can. >> so have you -- are you asking the cftc to work with s.e.c. more diligently? >> oh, yes. very good point. we want the cftc and s.e.c. to be as close as they can. so we're trying to get the s.e.c. and cftc to be aligned where they can be so we're in a stronger position to encourage the world, we're encouraging to

work very closely with the europeans and the asians and the british to make sure those reforms largely match ours. >> do you -- you mentioned the difference in regulations between europe and the united states. if there's that difference for a period of months, you would see a flow out of our markets to theirs. so -- is it important those dates match up? or is it important they're close? can you speak to that? >> excellent question. >> and i know you've spoken a lot about this. that's one area where -- i think what you're saying is matching up with a very wide bipartisan group on capitol hill. >> you're right. we've got to make sure if we're ahead of them in implementation that doesn't create a huge advantage for their competitors. we're looking at that now. i think based on what we know now, before the crisis, the gap was like this. i think it's much closer on

capital, on liquidity, derivatives, on all the material, the things that matter to running a financial business. it's not perfectly there yet. so, yes, we're going to work to make sure the deadlines implementation are aligned as we can, but not at the expense of leaving americans more exposed to risks than they need to be. >> okay. my colleague asked about hamp. many of us have grave concern. we -- i sponsored a bill and we passed it out of the house trying to eliminate hamp because of the impact it has not on those that it's helping, but the 50% that enter in the program are left off materially worse off by being kicked out of the program and having to pay fines and the accrued interest and penalties for missing payments. would you categorize hamp as a success? >> let me just say on this one point. and i'd be happy to talk to you in more detail about this. but the performance of modifications under our programs

is much better, much better for the homeowner and a much better success rate than the standard outside of those programs. and i'm very confident, but sounds like we should spend time together on this, that you're better off being in a hamp program than not because the depth of relief you get is better and that's partly why the performance rates on those modifications are so much higher than in the private market. >> time of the gentleman has expired, the chair recognizes the gentleman from texas, mr. green for five minutes. >> thank you, mr. chairman, and i thank you, mr. geithner, for appearing today. and i want to especially thank you, especially thank you for speaking up for hard-working americans who pay 1.4% of their income, income in taxes. and for those who are now paying 4.2% for social security, it was

6.2%, but we have a holiday that will end, and pay 6.2% at the end of the holiday, and they will do this up to $1,110 thereabout. $110,100. i thank you for speaking up because to them it really is an income tax. we can phrase it and frame it, but it's an income tax. and they pay it. and we ought to appreciate them for what they pay just as we appreciate billionaires for what they pay. i think anybody that pays taxes ought to be appreciated. somehow we tend to believe that poor people who pay all -- a tax on all of their income somehow they're not paying as much of what they make in taxes. when, in fact, on a percentage basis they're paying more because they can pay the 1.45%

on all of their income, others will too. but when it comes to social security, if they make say $30,000, they're going to pay that 4.2% on everything that they make. whereas a person who makes $110,101 will pay it only on the first $110,100. so if you make $1 billion, you pay it on the first $110,100. >> well, it's even worse than that because as any businessman will tell you, the employer side of the payroll tax comes out of the wages they pay their workers. so it's not just the 6.5% after the temporary holiday, it's another 6.5% or whatever it is on the employer side which comes out of the wages. it is true to say that the vast majority of americans pay taxes against their income to help

support the broad programs americans have supported. >> well, again, i thank you for making these comments clear. because poor people merit some appreciation for the taxes they pay too. >> a certain billionaire made about $3 billion one year and i'm happy for him, i'm proud. it would take a minimum wage worker to make that $3 billion about 198,000 years. i'm happy for the billionaire who made his $3 billion, but i do think that it's fair for the billionaire who made the $3 billion to pay a fair amount of taxes on it. and i -- i somehow cannot grasp the argument that the billionaire pays too much taxes.

how did he become a billionaire? if he's paying too much taxes. >> well, nobody likes to pay taxes whether they're rich or poor, but the -- the stunning thing about the united states today is that the effective tax rate you pay is a share of income is very low historically, low relative to another country, particularly for the most fortunate americans. so we have proposed, as you know, to raise modestly that effective tax rate on the most fortunate americans because we can't afford to go out and borrow the trillions of dollars over ten years it would take to maintain, and we're not prepared to cut medicare to finance those taxes. i don't see a way to solve our nation's problems economic and fiscal without raising that effective tax rate on the richest americans modestly back to where it was, for example, at periods in our history where we did well as our country.