i spoke on the second circuit employment circumstances. didn't indicate what or give any summary on that. another one, quote, i folk at the federal court on access to justice. close quotes. not clear what that was in anyway. i participated in a panel on how to practice safe employment. similarly, no additional information. next, quote, i spoke on the united states judicial system. next, i spoke on the topic of lawyering for social justice. i discussed my life experiences and the role of minority bar organizations, close quote. i spoke on the discussion of judgments of conviction. i spoke on the implomenttation on the hague con veng in the

united states and abroad. i participated in anarch c.s. panel on senate guidelines. i participated in a roundtable discussion and reception on the art of judging at this event. that would be nice to know what she thought about the art of judging. quote, i contributed to the panel, the future of judicial review. the view from the bench at the 2004 national con veng. the official theme was liberty and equality in the 21 of the century. -- 21st century. that's some of the things that i think are inadequate to the questionnaire's requirements. this questionnaire is one we use for nominees for both parties for a number of years. so the chairman justice ours rushed schedule because of the need, he says, to allow the nominee to respond to unfair criticism of her record. but the chairman and all our

democratic colleagues noy know that the republican senators who will be voting on this nominee, i am confident and certain, have been nothing but extremely fair and courteous and respectful of the nominee. even when she made mistakes like omitting several things from her questionnaire, we haven't criticized her for that. so i am disappointed we are being rush today complete this in a time period which i know not to be a wise approach. i don't believe it is a good way to dwin the proceedings. i look forward to working with my colleagues on this date. perhaps we can do better as we move forward. it is an important process. it is the public's only opportunity to understand this. i think we ought to do it right and not rush it. i thank the chair and we yield the floor.

>> coming up next, the chairman of the congressional oversight panel discusses the troubled asset relief program. >> treasury secretary geithner talks about the department budget. >> and president obama discusses the federal deficit and his support for pay-as-you-go budget ruleds. -- rules. >> on tomorrow's washington -- "washington journal," we'll talk with tom coburn, and former d.n.c. chairman howard dean. it begins at 7:00 a.m. eastern time here on c-span. >> there's still time to get your copy of c-span's 2009

congressional directory with information on the dab cabinet p. supreme court justices, plus district maps. it is $16.95, online at c-span.org/products. or qullu call 1-877-on-c-span. >> now the chairman of the congressional oversight panel, elizabeth warren. congress created the oversight panel to supervise the t.a.r.p. program and the treasury department. mrs. hartman was the full witness. this is an hour. >> i should start by saying, i

am not scripted, so you should take my comments as my comments alone and not necessarily reflecting those as -- of the panel. i will do my best to reflect the views of the panel, but otherwise you should understand you are hearing from me. we are the smallest of the oversight units here, especially as compared to the inspector general. what we try to do here is a fact-based analysis of the operations under the toxic relief program and the impact of that program. we're really trying lard to see what the effective necessary -- we're really trying hard to see what the effectiveness is and ways to make it more effective. we return to the same theme that we started with our first report about transparency, accountability, and clarity throughout the system. and they appear again in a report that we issued today. so i thought i would start with

a brief overview of that report, and quickly a dance flu our -- through our earlier reports and be here here for whatever questions might be useful. you may reb remember that back in early february treasury and federal reserve announced scap, yet another acronym, this time to assess the ability of the 19 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 had been working on it now over a month, since the program was initially announced. and here are sort of our headline findings. you had a chance to look at the reports, but i want to make sure it is out there. we looked first at the model for calculating a report.

we looked at the economic assumptions in it. we looked at the questions of replicability. we looked at the limitations of the data used in this stress test, and we made some recommendations going forward. but as to transparency of the test, and appropriate circumstances, perhaps, for repeating the stress test. so let me start by giving you some good news about the stress test. and that is, it's always good to believe things that you are told, but it is good to verify them independently. so we were very concerned about just the model of the stress test. you know, there is a lot of dispute in the economic world, in the academic world, about how stress tests have been used and whether they have been very effective. so we asked two interest experts.

proffer eric tally and people who are known internationally to take a look at the model that treasury used. and the way treasury constructed its model, and give us an idea what they thought about it. and they came back and said it was a conservative model, conservative, meaning a dependable model, a good model for stress testing. they gave it a lot of support. we got a long and detailed report from them and we've put it in our report as part of appendix won one and very much integrated it into our work. but they identify limits from the stress test as we then do in our report. the first of them is the question about the worst-case scenario. part of the point of a stress test is any family that sits around and runs a stress test trying to figure out what can hp happen, you have to think, what are your worst economic assumptions, that you will be

laid off? that you may be in die fault on your mortgage? what is it that you need to worry about here? well, the stress test said for 2009, one of the key economic assumptions under the worst-case scenario would be an 8.9% unemployment rate. we're now at 9.4%. now, the projection made back in february, it seemed like a reasonable projection set at the time. unemployment obviously rose more quickly than we had anticipated. the average for the year to this point, counting the earlier months when it was lower, is 8.5%, which means we have not actually broken through the worst-case scenario. but let's face t. the numbers are bad and they have headed in the wrong direction. so this is a real concern, the worst-case scenario right here in 2009 is in fact not the worst case. we are going to see worse numbers than that.

the second factor is the limited time horizon. model is always tricky. it's like predictinging -- it's like predicting the weather. the further out you go, there is more possibility you may not be accurate. on the other hand, particularly if you have reason to believe there are thins things to be concerned about in the future, you can ignore that future time only at your peril. the point of the stress test is to tell us about the financial health of these institutions and whether or not they are going to be able to survive going forward. our concerns do not stop with december of 2010. but the stress test does. the period of time. that is particularly worry some because of the -- worriesome because of the state of the real estate markets. so that numbers -- we were supplied numbers by representatives from doimp bank,

they are in our report -- from deutchbank. the numbers are deeply worrysome. and the question of the ad casey of capital reserve, looking at potential losses into the future, it really does stay, the stress test would be stronger and more meaningful if they reached across a longer period of time and dealt with this issue. the third problem of -- that we are concerned about, is the inability to replicate the tests. i'm afraid i'm going to expose once again my academic background, i do a lot of impeerk cal work, and one of the most important things you want to do in any model is establish that it is robust. and what we mean by "robust" is just, if something changed slightly, you altered the time period a little bit, the g.d.p.

crags or growth shifted just slightly, you have relatively similar results. different results but within the same beark. -- ballpark. if you do, you have a lot of confidence that the test is measuring something real, that is that it is robust. the problem is, you can't rerun those tests unless you have a lot of details about them. so we have pressed very hard on the fed, who is really the consensus toedian of this stest test, for more information not f, not about specific banks, but about the operation. how exactly. i mean how these mathematical form has work, how the pieces link into each other. we have not been able to get that information, and without that information, others outside erds, are not able to push on the stress tests in the same way. and then finally, we would be remisif we fail to note --

remiss if we failed to note this is not independently verified information, and it is overseen by the same regulators that we have had in place throughout the process. this raises questions about confidence overall. so that brings us to our recommendations here. we recommend the stress test should be repeated under more difficult circumstances and over a long time period, for oh, obvious reasons, to test it to see how it works we recommend that the test should continue as long as the banks continue to hold large amounts of toxic assets. this is a risky situation, and an appropriate time to repeat these tests. we recommend banks be required to run internal stress tests between official reporting areas

and share results with regulators. nirtsdz, i want to make it clear here. bhile we have concerns about the stress tests, we think there are ways to strengthen them, and we embrace the stress test. we think the stress test was a good move by treasury and the fed, and it has brought us important information. in depeed, as i push for more transparency, because that's the second biggest -- more transparency, treasury should release more details of their methodology and results and publicly track the results of the macro-essential val quagsewation. that's just an important part of doing this. we want the analysts so run these tests independently. we had trouble when we first started the congressional oversight panel back in november and in december that we had a treasury department that was not

forthcoming with information. that has commade. the treasury department has been forthcoming. they have given us far more information. i don't just mean to the congressional oversight panel. they have made sprable information under the stress tests on -- an unprecedented amount of data. this is very unusual for the federal reserve to make the results of tests like this available, other than simply to make announcements at the end, as the fdic does when a company has been placed on a watch list or closed. we are simply asking for more. we thought the tests were a great idea, but we would get more from them if we made these tests stronger. one last recommendation i want to mention here, we also want to point out that as much as we think happened on the ad quastequassy of the reporting is important, that testing is

important, banks should not be forced into counterproductive fire sales that they sell under enormous pressure in order to try to raise nuffer cash. so we see the importance of dealing with institutions that do not have enough cash. our summary posed 10 primary questions to the treasury tept about their goals and their methods to stablize the markets and reduce foreclosures. i think it is fair to say that secretary paulson's answers were

often nonresponsive, they were incomplete, and in some cases elusive. information on bank accountability, transparency, asset valuations, foreclosures and strategies must be provided. we have been pushing on that from the beginning. the february report evaluated whether or not the securities that treasury will received in exchange for the infusion of cash under the initial healthy banks program, the capital infusion program, and then ultimately the support for a.i.g., whether or not what the taxpayer received in response was fairly valued. secretary paulson in his response to our inquiry about this in december responded by saying that all of those transacks had taken place -- transactions had taken place at

or near -- for every $100 put in the american taxpayer received $100 worth of stock. we did an independent valuation and discovered that for every $100 put in on average we received $66 in stoks stock and warrants. so it is important to report on valuation. i should say very much arguing in this report we would have known we were creating these very subsidies from the way the program was structured from the beginning. there have not been additional infusions under that program since february. the third, the march report, examined the foreclosure crisis with particular focus on the impediments to the mortgage mit gation, why it is we're not able to stop these foreclosures, what we can do to help with these

foreclosures. this report came out only a few days after the administration's foreclosure mid indication program was announced. we had established some criteria for evaluating that, and we talk about some ways we think the administration's program was good, but sm some ways in which it very much had to be strengthened. in our april report we highlighted the benefits and the problems of basic approaches to dealing with financial if institutions in trouble. we had experts in to talk with us about how japan dealt with its banks when they were in financial chris dwristyifments experts from sweden. we had someone who had been part of the r.t.c. here in the united states when the savings and loan collapsed, and someone who was a specialist on the great depression. we did lots of other times in other circumstances. we came away from that saying

that the zessful efforts to -- successful efforts to deal with failing financial institutions had always been marked by transparency, assertiveness in dealing with the financial institution, demanding greater accountability from the financial institutions, and clarity in the programs. what it is that the government was about and what it is trying to do. our may report, the last report before this one, considered the state of small business in consumer lending and whether the program was well designed to attract new capital. we concluded that there are serious problems in the small business lending area. we thought it was a much more mixed picture in terms of consumer lending. with small business lending, our conclusion was that the program was not likely to make a big difference in the availability of credit for small and

mid-sized businesses. once again we concluded in a crisis that transparency, accountability, and a clearly delineated plan is what will be essential for getting us out of the economic crisis. that's a description of 0 you are earlier -- that's a description of our report, and i am glad to help if i can with any questions. >> thank you for your testimony, professor warren. one of your principle recommendations is to repeat the stress test as long as banks continue to hold large amounts of toxic assets. yet, the stress tests take bank accounting value as their starting point and explicitly avoid marking certain toxic assets to market.

my question to you is, do you think an effort should be made to recognize the assets on these toxic assets many? >> this is the ultimate, and everything is related to everything. if we don't have confidence in the books and what it is that the financial institutions hold out possibly to be their worth, what their assets are worth and what their liabilities are worth, it undermines confidence in the system, it really does mean we are continuing to run risks. market-to-market is not the only way to develop some confidence in the value of the assets held for the financial institutions. but there is no doubt that any stress test, and frankly, any analysis of the current health of these financial institutions and how they trade on wall street, depends on some

confidence that these assets are correctly valued. so let me simply emphasize the importance of transparency. i will leave it to the accounts to continue to argue over the right way to get that. but to say without it we cannot rebuild our financial system. we cannot build it on clouds. we have to build it on reality. and reality is what those assets are really worth. >> so do you think that bank lending will be affected if they continue to carry the unrecognizeding losses on their books. >> to the extent that every time the banks raise capital they are concerned about these losses and they hold that capital against the future losses, they hold it in reserve, those are dollars that are not available for lending.

it is just that straight forward. if the banks are not in a stronger financial position, they will not lend. >> some said some banks were held in vehicles and only to be brought back as these vehicles experienced losses many do you think the stress tests have been successful in identifying where offer-balance sheeth problems may arise in the next two years? >> i want to say some compliment ri here. the good news, the stress test was designed to bring the off-balance sheet vehicles back and include them. i think that the stress test without that would have been a nonstarter. if we're going to continue to hide risks off the balance sheet. so that's the good news. they were brought back in.

i hope that everything has been included, but i have to say, these are self-reported numbers. i have no personal access. and my panel has no access. to any additional information or data outside what we're able to see. >> and today it has been announced that major institutions will be repaying their t.a.r.p. money, that they are cap sthrise fliesed and ready to repay the government. how will this repaid money be used? will it be recycled? what will be the use of this returned t.a.r.p. money? >> i believe secretary geithner has said that the money will be held at least to be available to be respent. i think that the statute is at best ambiguous on whether this money can be recycled or whether

this money must be returned to the treasury. and given the ambiguity, the treasury department certainly at least has grounds for terpg it the way they -- interpreting it the way they want to interpret it. so i think that's what they are going to do with the money unless congress tells them differently. >> thank you. my time is expired. senator brady is recognized. >> the bailout dollars, issued is this disturbing report that showed weak yess necessary in the design of the implementation of the bailout. he called on the treasury department to adopt recommendations and all the t.a.r.p. recipients simply account for the use of their t.a.r.p. funds. that they set up internal controls, and report periodically to treasury on the results with sworn certifications.

do you support those recommendations? >> yes, congressman, doy, but i do want to point out -- i do, but i want to point out, much of this falls on the smaller financial institutions and the responsible financial institutions whose horses never left the barn. the problem that we have is we're doing this six months after the fact. if we had set this program up last october to say, you only get the money when you describe in advance what you plan to do with it and give us met ricks on how we will measure that, we would be in ai different position today. today we're in the position of asking after the fact, how did you spend the money that you received? and quite frankly, after the fact, that's a pretty tough one to have much account kwlabblet for. -- accountability for.

[captions copyright national cable satellite corp. 2009] [captioning performed by the national captioning institute] >> it seems to me odd not to make sure these dollars are being used with clarity. i also question how effective the panel has been. over the past sick months of your existence, how many hearings have you heled with the treasury department as a witness? i understand it is only one? >> we have been able to get secretary geithner in to testify once. we asked secretary paulson

repeat lid. we have asked secretary geithner repeatedly. i remind you, congress did not give us subpoena power. we only have the power to invite. >> so you asked secretary paulson in the first month of existence? >> well, i believe we asked him repeatedly. we asked him in our first month, second month, and third plo. >> so you had one hearing with someone from treasury who is running and implementing treasury, the t.a.r.p., my understand sg one, and then how many hearings have you had with the relationship yents of the t.a.r.p. -- recipients of the t.a.r.p. funds? >> well, we have had various field hearings. >> just a normal congressional hearing trying to determine how they used the t.a.r.p. funds? >> right, i believe that would be our milwaukee hearing.