and as well as i think they're looking to put on some more financial sanctions that we once had in the north korean regime that would actually hurt the regime itself on bank accounts and that sort of thing. .

host: gamble and all of the american enterprise institute, thanks for joining us. we want to show you this scene from capitol hill, a scene that is expected to get underway momentarily. this is a committee that will be hearing travel from elizabeth warren, the chair of the congressional oversight panel. the focus is t.a.r.p., the troubled assets relief program. there is a story that is going to allow 10 banks to repay the tarp funding, according to mayor bloomberg. the money has been called "a scarlet letter" referring to the public backlash and scrutiny that came with it. you mayç remember the president

obama talked about this about a month ago saying that he did not want the banks to pay back to soon, for fear that it may jeopardize any efforts by the treasury department to stabilize the financial institution. again, that is one of the lines of questioning that we expect to hear from elizabeth warren driven the house will be in for morning business at the bottom of the hour, 10:30 a.m. east coast time, 7:30 a.m. for those of you on the west coast. the senate also in session today and the president at the white house. he will have a meeting later this afternoon with democratic members of the house ways and means committee. he will also be talking about his pay go plan, an effort by the white house to ensure funding that has been put forth -- put forth. thanks for being with us. live coverage starting momentarily. we are back tomorrow morning at 7:00 a.m. east coast time. 4:00 a.m. for those of you on the west coast. have a good tuesday.

[captioning performed by national captioning institute] [inaudible] [captions copyright national cable satellite corp. 2009] >> waiting for the joint economic committee to gavel in. carolyn maloney of new york will chair -- today, she is the chair of the committee. she left from a moment ago. harvard law professor elizabeth

warren heads the congressional oversight panel. a washington post -- "washington post" reports this morning that the government should repeat its stress test of the nation's largest banks if the subject of severity of the economic downturn prove too rosy. representative maloney and is worn in the room. live coverage here on c-span. -- and miss warren in the room. live coverage here on c-span.

>> i want to compliment you on your research and all of your work in support of credit cards reform and your testimony and support were very important to the passage of the credit cardholder bill of rights. thank you. this is the third in a series of hearings this committee has held to examine the degree to which the troubled assets relief program has succeeded in its goals. the june report is the result of the government stress test, which were designed to evaluate the balance sheet of financial institutions. and to provide recommendations for further action. the results of the stress tests have gone on long way to restoring market confidence. huge losses shook confidence in the banking system because it was not clear that some of our

largest banks would remain solvent. the federal reserve treasury -- the federal reserve treasury and ftse have taken steps to provide banks with liquidity for -- and fdic have taken steps to provide banks with liquidity to insure debt issuance and capital injection concerns remain that a deepening recession could threaten the solvency of some banks and amplified the financial crisis. confidence in large measure is determined by the current and future shape -- a future state of bank balance sesheet. it is important that banks have a clear picture of whether they current downturn. it is welcome news that the obama administration is set to announce that some of the nation's largest banks will soon be able to repay billions of tarp funds. however, the fed has imposed

additional requirements on banks that proposed repaid capital that they receive under t.a.r.p. since the stress test enable them to raise the money needed by bains, this raises questions about what is assumed about repayment of t.a.r.p. funds. some banks seem reluctant to perform their normal rules as providers of credit. i was honored to justify recently in new york city examining problems in commercial real estate. i am very concerned about a ticking time bomb we face in commercial real estate. an estimated 4 madrid billion dollars in commercial real- estate debt is set -- $400 billion is set to turn over this year with more in june. we could expect to see the default rate on commercial

mortgages climb much higher. that, in turn, would translate into potentially crippling bangkok -- bank losses that are recovering financial system is still too fragile to withstand. even the news that the banks have raised, or announced some $50 billion in new private capital since the relief of the -- the release of the stress test results. the slimming crisis in commercial real-estate lending could lead to an all familiar -- all too familiar predicament where banks suffer losses, major owners of hotels and shopping centers are forced into bankruptcy, foreclosed properties push realistic prices and further down for -- downward and a perfect storm of all those forces combine to inhibit our economic recovery. the testimony we will hear today points out that trump -- transparency and accountability are critical in a crisis such as this. to increase transparency and to help restore confidence in our financial institutions, i have

introduced the tarp accountability and disclosure act. this legislation would require the secretary of treasury to create a centralized data base for the existing park recipients, enhancing our ability to better determine how these funds are being used in a real-time basis. i'm very interested in hearing your thoughts about how this bill wouldo1,s( you do your job to help set -- safeguard taxpayer dollars and whether additional transparency measures are needed. professor warren, i'm also interested in your views to the extent of toward accomplishing of ross debility, increasing the flow and availability of credit and reducing foreclosures. we look forward to your testimony and i now recognize mr. cummings for five minutes. >> thank you very much, madame

chair, and i also want to thank you, professor warren, for joining us here today. in the work of the congressional oversight panel of the government accountability office, and especially the inspector general, continue to provide congress with critically violations of the financial recovery efforts. in the latest monthly report, it is an impressive assessment of the stress test conducted by the treasury and federal reserve on the 19 largest bank holding companies. the report observes that the basic methodology and economic assumptions underlying in the stress test are reasonable and conservative. the report goes on to identify logical and important criticisms of the test. the panel's finding that concerns me most is that it calls for increased transparency. i have long been an advocate for the highest levels of accountability and visibility in

the vault -- in all aspects of the economic recovery. i've often said that in order for the obama administration to come out of this crisis, the public must have a sense of confidence, they must feel that they are a part, they must feel informed. time and time again the public has been asked to accept the notion that the stability of a global economy depended on the induction of the unparalleled sums of public funds into the private markets. correctly, this congress has asked that in return for our acceptance of the public rescue of private firms, the recipient companies exercise transparency in their spending enjoy a willingness to be accountable for the use of hard-earned taxpayer dollars. the washington post reported yesterday the repeated requests by the largest banks to return tarp funds will likely be honored by most, if not all, of the banks that have been deemed

adequately capitalized under the stress tests. now we are asked to accept the contention of the banks and their regulators that the stability of the global economy is not jeopardized by the withdrawal of the same public funds from private funds -- firms that were considered so critical to the survival of our economy just a few months ago. accordingly, in order to mix of these claims, we again require transparency regarding the actions of all players. the oversight panel'ì report indicates that more openness is still required moving forward. the panel notes that while there has been an unprecedented level of disclosure regarding the stress test, it is at the same time impossible for others to replicate the same tests using different assumptions and scenarios, or to apply these same assumptions and scenarios to other banks. i believe that the credibility of the credit -- of the banking

supervisors is tarnished if their findings cannot be recreated by observers and critics alike. the oversight panel also notes that the results of the stress tests have only been released under the adverse economic scenario. while having the results of the ivers scenario is preferable only to have been the result of the baseline scenario, the credibility of the supervisors is again a blemish by the release of disinformation. further, worsening economic conditions such as the increased unemployment rate already see those assumptions used under the stress test adverse scenario. the stress tests were, to an extent, an exercise in establishing a public confidence in these keystone institutions. that public confidence would be strengthened by another in duration of the test and a

reassessment is required. this display of transparency and openness would again regain confidence in the legitimacy of the process. banking regulators have found many of the nation's largest institutions to be in good financial health and will be permitting the return of taxpayer dollars to the taxpayers. however, i remain concerned about the lack of transparency in this process. i look forward to during more details about the oversight panel's assessment today. and i thank professor warren for her unfailing commitment to transparency in all aspects of the bill in process. i thank you, madam chair, and with that, i yield back. >> thank you, the chair recognizes mr. -- mr. hinchey for five minutes. >> thank you very much. professor warren, i want to stay

stuck with what my friend mr. cummins said just a few minutes ago. we very deeply appreciate all that you have done. all the analysis that you conducted and the recommendations that you are performing are very helpful. and they are very well. i wanted to ask you a question about the stress test solution and whether you think that the stress test solution is going to help in aiding banks get through the financial crisis. and to what extent there are sort of an sillery objectives involved in the stress test. -- ancillary objectives and of the stress test. >> this is just opening statement in the context of opening statements, i want to -- this is just the opening statement. >> in the context of the opening statement, i want to of the size everything that you have done here. this is a very serious

situation. although there are some indications that circumstances are improving and getting better, there are also some underlying circumstances that indicate that there is a very strong likelihoodç that the situation is not only will not continue to get better, but that they may continue to get worse. all of those things are very important to us and everyone across this country that we represent. it is also very important for the fact that you have been appointed to this particular job, the congress passed this supposition because recognize how important it was to have this kind of analysis and we also recognize how affected you have been already and how effective you will continue to be. i want to keep this very short. thank you for everything that you have done. >> thank you, and mr. brady is recognized for five minutes. the crux madam chairman -- >> madam chair, which your permission i just want to enter my marks for the record. courts in the interest of time.

-- >> in the interest of time. mr. brady is recognized for five minutes. >> the sound is working, so now i would like to introduce professor elizabeth warren. she is the legal gottlieb professor of law at harvard university. she has written eight books and more than 100 scholarly articles dealing with credit economic stress. her latest two books, "the two- income trout" and "all your worth" are both best seller wilbooks. she has worked with more than a dozen private foundations. warren was the chief adviser to the national bankruptcy review commission. schuster -- she serves as a commissioner on the account -- but at the fdic. she also serves at the national

bankruptcy conference. thank you so much for your work and we look forward to your testimony. excuse me, they are seen -- saying that we need to break because the sound system is not working properly. and we want to be sure that we understand everything that you are saying today. and 5 minarik for the sound system. -- a five minute break for the sound system.

but the joint economic mitty holding a hearing this morning with elizabeth warren -- >> the joint economic committee holding a hearing this morning with elizabeth warren. they are apparently having some problems with the sound system. we will resume live coverage when they get experience in about 10 minutes, the u.s. house will capeline for morning our general speeches. we will break away for that coverage. this will continue to stream online at c-span.org and we will also would back after the morning session with the house. the house comes in with legislative business today at noon peake -- a 12:00 p.m. eastern. there are about 15 bills scheduled today for the house, including one that offer cash rebates to those who trade in

their older cars for new work, more fuel-efficient vehicles. -- for newer, more fuel- efficient vehicles. you can follow senate coverage on c-span2.

>> the joint economic committee here waiting to resume, looking at the troubled assets relief program. they are hearing from elizabeth warren, who heads the congressional oversight panel. our other live coverage includes at about 10:30 a.m. eastern on c-span3 will have live coverage of the spent -- of the spending. treasury secretary timothy geithner will speak. the president today will make comments on the economy and tax policies with future spending obligations. that is live at 1:00 p.m. eastern from the white house on c-span2. then once again this also will be on c-span3 at 2:30 p.m. this

afternoon. kathleen sebelius will testify about her department's budget. that is live at about 2:30 p.m. eastern on c-span3. >> elizabeth warren is recognized for as much time as she may consume. >> thank you, chairwoman maloney, representatives. i appreciate the invitation to be here today on behalf of the congressional oversight panel and to be as helpful to you as i can. i should start by saying i am not scripted. since i do not have a preapproved script, you should take my comments as my comments alone and not necessarily reflecting those of the panel. i will do my best to regret -- to represent their reports, but

otherwise, you are hearing from me. what is the congressional oversight panel? we are the smallest of the oversight unit here, particularly compared with the special inspector general. what we try to do is a fact based analysis of the end -- of the operations under the toxic acid relief program andy -- the toxic asset relief program. ob;we return to the same things that we started with are very first report about transparency, accountability, and clarity throughout the system. and they appear again in the report that we issued today. i thought we would start with a brief overview of that report and then very quickly, a little dance through our earlier reports to remind you what they have been about and to be here for one ever questioned by be useful. you may remember that back in

early february, treasury and the federal reserve announced s-cap, yet another acronym, this time to assess that ability of the 19th largest bank holding companies to remain well- capitalized, even under adverse circumstances. the results were reported just recently and so, for our june oversight report, we examined the stress test. we went back and took a hard look at the stress test. we have been working on it for over a month, since the program was initially announced. here are some of the headline of paintings. i know you have had a chance to look at the report, but i wanted to make sure that itç was out there. we look first at the model of the report, with a duck the question about replica ability, that is, how robust is this test. we looked at the data that was

used in the stress test and we looked at recommendations going forward. both asked the transparency of the test and the brick is our intent is for perhaps repeating the stress test. but mr. briza giving you some very good news about the stress test. that is -- let me start by giving you some very good news about the stress test. that is, it is always good to believe the things you are told, but it is also good to verify them independently. we were concerned about the model of the stress test. there is a lot of dispute in the economic and academic world end -- about the stress tests and whether they have been very effective. we asked two independent experts, professor eric tally, and professor johann walden, people who are known internationally, to take a look at the model the treasury used and the way treasury constructed its model and give us an idea of

what they thought about it. it was a very conservative model. conservative meeting a dependable model, a good model for stress testing. -- conservative meaning a dependable model, a good model for stress testing. we have put a lot of that into our report as part of appendix one and integrated into our work. but they identify limits from the stress test, as we do in our report. the first is the question about the worst-case scenario. the part of the point of the stress test -- there is a family sitting around with the stress test. you have to think about what are the worst case options? you may get laid off, a credit interest rates may go up, you may be in default on your mortgage -- what is it that we need to worry about here? the stress test said one of the

key economic indications of the worst case scenario would be an 8.9% unemployment rate. we are now 9.4% trude the projection made in february -- we are now at 94 -- 9.4%. the projection made inventory rose more than anticipated. the average for this year is 8.5%, which means we have not actually broken through the worst case scenario, but let's face it, the numbers are bad and we are headed in the wrong direction. this is a real concern, that the worst case scenario right here in 2009 is, in fact, not the worst case. we are going to see worst numbers than that. the second number is -- modeling is always tricky. the further are you try to model is like predicting the weather. the further are you try to go, the more possibility there is error.

on the other hand, if you particularly have reason to know that there are things you should be concerned about in the future, you can ignore that future time only at your)b peri. the point of a stress test is to tell you about the financial health of these institutions and whether or not they were -- they will be able to survive going forward. our concerns to not stop with december of 2010. but the stress test does, the time frame. that is particularly worrisome because of the state of the commercial real-estate mortgages. they are on a longer period for when they will come up to be refinanced, so that numbers -- we were supplied numbers from a representative from deutsche bank. the r & r annual report. the numbers for -- they are in our annual report. the numbers for 2012, 2013 are