prince george's county hearing.

the information has been redundant for the worse -- for the most part with the exception of your february report. i think the panel has failed to bring transparency and clarity. the result is and is exemplified by, there is no public confidence as to how the bailout of dollars are being used. there is no congressional support, which is why i think they are going through a extraordinary lengths to not ask for any more dollars, because there is no public support or congressional support for this. i frankly believe at this point, given the course we have seen, i think the panel needs to be abolished, and it needs to be reconstituted and formed to

actually create real insight and analysis of a program that has only grown larger now with the repayment of the financial dollars begins to be a revolving fund. that is my feeling on this issue. >> i want to thank the gentleman for his statements and concern about transparency and to welcome him to co-sponsor with me a bill 1242, the tar accountability and disclosure act. this bill would require the secretary of the treasury to create a centralized data base for the existing financial report of tarp recipients enhancing our ability to better understand how these dollars are being spent. as a professor pointed out, she has no subpoena power. if she request information, it is not necessarily coming forth. this is the opportunity for us to require by law that this information be made available for members of congress on both

sides of the aisle for others to study and understand. i think this would be a step in the right direction. i invite professor warren to look at this and get back to us with your recommendations on how we should move forward with it. >> i would support that. i did hear the professor say it is too late to hold them accountable for the dollars. i think that is a great approach. >> i think it is important to understand what happened so we have a better policy going forward. we need to have a research and accountability disclosure act to be expanded so that we can better prevent such actions in the future. i welcome your support. thank you very much. >> i join you as well. i agree. the last thing i want to do is abolish oversight. that is the thing we need the

most. the american people watching this, i hope they understand this congress is concerned about oversight. i can understand his point regarding effective and efficient oversight. we have to make sure we do what needs to be done. on that note,, professor warren, i want to thank you for what you have done. i think you have done an outstanding job. i understand there are certain limitations. you talked a little bit about foreclosure in the march report. something interesting happened about 40 miles away from here. we have a foreclosure prevention meeting where 1000 people who were losing their homes came in came into morgan state university. an interesting thing happened. we were able to help at least

500 people modify their mortgages. they had the opportunity to sit down with 19 banks or mortgage companies or service companies. during my exit interviews, we discovered that the banks or reducing mortgage payments between $300 per month and $1,100 per month. i am trying to figure out in talking to the banking people, i was a little bit surprised that they were so anxious to make these modifications. i was shocked. i am just wondering, -- we are getting ready to do it again. is there a new approach when these things happen? have you seen anything from

these mortgage lending people whereby -- when they want to modify alone, whether they are dealing with that in a different way on their books? >> this is one where we kept thinking the mortgage modifications would occur, because they made sense economically. it hurts to take the hit. you are not going to get a payment of $120,000 at 19 prison some interest over time. -- 19% interest over time. it is from the point of view from the mortgage company. you hope that it will have a lower level but a steady payments that will occur. we thought they would occur. they just did not in the numbers

that we expected. that is why the administration tried different plants. -- different plans. the key seems to be finding a way to get the homeowners and the mortgage lenders, somebody who really has the authority to make changes and get them in one place at one time. in the hearings we have held about this, the research we have done, over and over, we hear about this, we are trying to modify and you cannot get anybody over the phone. every time they have to start again, they are told one thing by one person and something else by somebody different. this notion of bringing people together whether it is physically or finding someone who can get them together on the telephone seems to be a promising avenue that we have. i applaud you on behalf of the

500 families who will be better off and the mortgage lenders who will be better off under these circumstances. i hope we can continue to look for ways to scale that up and make sure that happens across t. >> should there have been a stress test on gm and chrysler? >> it is an interesting question. part of the confirmation of the chapter 11 plan is something called feasibility, that is this plan is going to work and this company is expected to survive going forward. in case of large chapter 11, in general, there are a lot of ways that that occurs that those

tests are conducted. in affect, the industry's, the companies and their creditors have been running very -- variations on stress tests for a long time with a financially troubled institutions. i would be surprised if there is not some variation on it in case of the auto companies. >> thank you. >> let me ask you this.

has your panel disclosed to the american people whether or not tarp is working? >> we cannot disclose what is not known. we have disclosed as much as we can. we have addressed this in our various reports. there are some positive neck -- positive indicators and negative indicators in the economy. that is the best we can do. we see changes and try to document those. we tried to point out where there continue to be witnesses. this is not resolved yet. i am sorry. it is not. we are still in mid-crisis. there are up pharaohs and down arrows. >> -- up barrelarrows and down

arrows. >> the special inspector testified that there were almost 20 criminal investigations under way in connection with the tarp facility for the financial sector. his report said these investigations involve possible public corruption, corporate stock and tax fraud due to mortgage fraud. the stated that one of the probes and also bank officials who work allegedly fixing but in order to qualify for tarp money. fisher committee aware of this issue? do you have any additional information about these things? >> we work very closely with the special inspector general. we support the special inspector general's efforts. we are very pleased that he has asked for the top recipients to

account for the money they have received -- the tarp recipients to account for the money they have received. my only point is that it is hard to do that after the fact. we do not want -- it is different from what it would have been if we had asked at the beginning in terms of being able to account for where the money has gone. we work with the special inspector general and meet with him on a weekly or more often basis. i was on the phone with him yesterday morning. we are aware of their activities. we support their activities. we try to coordinate with their activities and be helpful in always that we can. >> is there any aspect of that that has been a surprise to you? >> it is always a surprise when -- perhaps the better word would be disappointment when we discover there are people who

have abused public trust. that is why we are here, to do oversight. that is why we have a special inspector general and a congressional oversight panel. we are here to call it out when we see it, and try to act as a deterrent so that there will be less of it. >> do you think you are better able to anticipate some of the problems that may occur in the future from what you have learned in past experiences? >> absolutely. >> are those procedures being employes today? >> we do, and we change not just with every monthly report, but revolves. we are a small panel and small group. we just. treasury itself has changed over the past seven months. the nature of the economic crisis has changed over the last several months. we have changed as we have learned and as new problems

have presented themselves. we have tried to be as responsive as we can and as nimble as we can to try to do with the problems when they arise. >> the issue of stock warrants has come up from time to time. the concern is that some banks were forced to accept tarp funds and provide stock warrants to the government and for these banks to now buy back these warrants, they would have to pay a price that would reflect a very high interest rate on funds that were held for only a few months. regarding that some of the banks did not need the funds in the first place, what do we do about the illiquidity of the warrants at these banks try to restore themselves to their pre- tarp status? >> let me say three things about this. first, the warrants take place

in the shadow of our february valuation of the stock and warrant transactions for the initial infusion of the $350 billion into the banks. i think that is important because it is a very public reminder to treasury into the financial institutions that there are ways to value this. there may be some differences, but we can review these transactions, and we have made it clear that we will review these transactions. that is the first thing to remember about the warrants. the second thing i want to say is that this is the subject of our july report. we have already worked on the valuation of warrants and some of the issues involved in that. we will have a report on that approximately 30 days from today. the third is to say, in you

raise the point that there is a larger issue that -- then simply did dollars of valuation. those are policy questions about the representations made at the beginning for the financial institutions as they entered this program and what is fair under the circumstances as well as what is right for the economy. i hope that is something we will be able to address in our report. i see the issue, and i think that is the starting place for having a conversation. >> what are some of the barriers to be a -- the gentleman's time is expired. >> what is the question? >> on your last point, we want to be able to evaluate those fairly. what are some of the barriers that might occur to prevent that? >> there are five people on this panel.

the issues they want to take on will depend -- we have to have at least three people who want to talk about that set of issues. i hope that this is an issue that we will be able to address, but i cannot commit my fellow panelists. >> i think that is important. i hope we will follow up. >> thank you for everything you are doing. you are very inspirational. i wish you had more power. it is clear that the economics circumstance that this country is facing were caused by the manipulation of investment practices some years ago. falsification of information and

that context of those investment practices. now we have some continuing falsification of information. he cited one not long ago with regard to getting back 66% rather than 100% of the money that is being put in. full accountability of the $700 billion. it was not issued by congress as a grant to anybody to use what ever -- however they want but keep as a loan to bail out of the banking circumstances, but as the bailout occurred, the repayment of the money to the country -- what do you think we should be doing to achieve those objectives? do you think we need some specific laws and rules and regulations put in? do you think it would be wise to give you some additional power to engage in the ethics that you are using? there is one other thing that i want to ask you in the context

of this. the repeal of the glass stiegel act was one of the main reasons why we had this manipulation of investments and a lack of accountability. the elimination of that last stiegel act was intentional, purposeful, and designed to allow the manipulation of these investment practices to go forward and more aggressive and completely unaccountable ways. i would -- i know you probably thought about this. should we be putting back into effect some modern version of this act which would cause that separation of investment and openness of investment and honesty in investment and accountability? >> let me see if i can do all three of these questions. very thoughtful. the first one, it is obvious. we are your congressional

oversight panel. we are here at your pleasure. lou, if you want us to do more work through hearings -- if you want more federal reserve officials appear in front of us, we cannot do that without subpoena power. there is still plenty we can do without our subpoena power. we can write a report that exposed misrepresentation about the value of transactions that were occurring under a tarp. i think that has been very valuable. we have been able to evaluate other parts of the program and there have been will take -- there have been real changes in treasury. a real effect is out there. about the act, in my view, and glass stiegel was about systemic

risk regulation. the real point is that they understood during the depression that we had gone through these boom and bust cycles every 15 years or so, and the banks were big a risk takers. as long as they made money, their investors got rich. when it went down, they took everybody down with them. it's a done other depositors and a lot of local communities. the basic understanding behind it was that we cannot keep doing that. that is not going to work for us. you not only hurt yourself, you are taking down a lot with you when you do this as a financial institution. we will create this wall, and we will have banks that will run

much like public utilities. they will make modest profits, but they will be wharock-solid secure. the risk will be taken somewhere else where we do not have to worry about it. if they want to take risks, they will not take down anyone but themselves. financial institutions found a way to get around glass stiegel. the market's changed. dividing and long a bank and non-bank line is not the most effective way to do it. every time we talk about systemic risk regulation, we are addressing the same question that was addressed during the depression. how do we find a way to have a certain kind of financial institution that can hold deposits, be safe, be secure,

that we can put our paychecks in, write checks on, and how do we separate that from something that is risky and can be allowed to fail? how can we accomplish that? there is a lot of conversation about that right now. we have some recommendations on our own reglets terry -- regulatory reform report. i think that is the issue. it is systemic risk regulation for which last stiegel has kept us safe for more than 50 years. in a changed world, we will have to have a new version of it. >> thank you very much.

>> we went from being a to income family to a one income family. i appreciate the work you have done. i want to ask you about page 36 of the report. he said the most direct way for them to increase their capital base is to earn net income from a a banking business and add debt to its capital accounts. they are not going to be able to earn their way out of it as you look ahead. can the opposite occurred? -- occurred?

o occurr? ? the chairman has done wonderful work on dealing with credit cards. i think congress is interested in looking at what we would consider normal banking business now compared to what it was in the past and what it ought to be. can we go the other way in which we put -- we lower the income of banks to get rid of some of these predatory practices? are they putting too much of their business income in? >> we talk a lot about the transformation of the banking

world and the investment world from the wall street perspective. the real transformation has occurred at the household level. consumer lending is not look like if it did 30 years ago. the whole business model has changed. the notion that we carry in our heads that some lender look at you and a by weighted whether or not you would be able to repay this -- it simply is not true anymore. we have shifted over to a model where those who sell these financial instruments will identify three things you can see. the free gift, the relationship with the financial institution. the business model is to pump up

revenues and profits with all of the things hidden in the fine print. according to the wall street journal, and the focus has gone from a page and a ham to more than 30 pages today. that extra 30 pages were not there to help families. it is important in this crisis because and you really get down to the heart of what it means to have a working financial system. this problem started one house call at a time. one lousy mortgage, one that credit card, one bad loans at a time at the household level. those loans were put into trusts and sold up a line so that the

riskiness of the household level became magnified throughout the american economy and throughout the world economy. if we go back to a world where the basic consumer financial products art steady, they have a level playing field. nobody should be protected from making mistakes. if you spend $2,000 that you cannot afford, you should have to pay for that. if you buy a house that you cannot afford, you should have to pay for that or lose that house. but ordinary people will have done ordinary transactions deserve some ordinary instrument to do that. if that is the case, that will help us at the family level and it completely reform what our financial institutions have bought in giveth a far more secure financial system. >> a bank that has been making

their income off of taking advantage of families -- a whole credit markets will come out better? >> that is the answer. >> thank you. >> thank you for holding this hearing. trans. -- transparency and accountability is important which is what you are doing. we did not have that accountability and transparency in the past. there is a lot of criticism and we are in a transition time frame.