be open is what got us in this place. deleverage that was allowed by the sec -- the leverage that was allowed by the sec in 2004. i appreciate what you are trying to do here. we are starting from scratch in a way. we are trying to get here instead of a short-term view of our economy and business markets, we are trying to get a long-term view and encourage responsible behavior. i wanted to start first with the stress test. the announcement of them cause a lot of stress in our state. we have some small community banks that are doing well. do you foresee a need to continue to do these stress tests? i've is very concerned when they were announced that they had an effect on banks that had not

gotten into messes. i think it has even out now with the results of these stress test being released. can you talk about that in terms of going forward? the you see this as a good sign -- i think the estimates is that billions of dollars have been raised since the announcement. how do you see stress test working going forward? >> we embrace the stress tests. i know they made everyone nervous at the beginning. the consequence ultimately was to put more information into the marketplace. information that had more reliability than what was circulating. everyone is worried that all of the banks may fail and be nationalized. it has a terrible effect not just on the market but across

the country. what financial institutions will lend to small businesses under those circumstances? pour information puts us in a position of trading in the scale rumors. i am a strong believer that the more information we can get out there and the more reliable that information is, there will be some bombs at the beginning. not only will there be a readjustment, we begin to rebuild on a solid foundation. my view, and noour view is we le the stress test. we think they could be stronger. we think they should be used in more ways and more often. >> one of the other things you have talked about before is this idea of systemic risk how if you

actors can do some bad things in the whole system starts going under. we of looking at reforms for regulating the market and we want to do it in a prudent way and quickly. what do you think we should be doing? >> i am going to start with this. the cut -- the tricky part with this one is to identify what is that puts us at risk. is that size, concentration, the kind of industry work in? we have big companies fail. enron failed. it was huge. world, failed. those businesses were liquidated in a barely short time frame? they had very serious consequences. i am not saying it is not done

without pain, but enron was making the argument shortly before it was forced into bankruptcy that it would cause systemic failure. it was such an important player, but that was not true at all. what i want to emphasize is the importance of identifying what the risk is. make sure we know what the problem is before we get the solution. i know i am over your time, but can we go back to where you just guarded which is at the household level. we are not only at increased risk for large institutions and, we did it for american households. they now stand at 0.130% of

their annual income in total debt. -- now stand at boeinowing 130%f their annual income in total debt. we want families more economically stable and not introducing into these high risks, high profit instruments. labonge we can deal with systemic risk with a lighter touch -- weekend deal with the systemic risk with a lighter touch as a result. modest changes at the front end could mean that we require less intervention and less supervision overall if we make

this system solids from the beginning, it will be solid throughout. >> thank you very much. i think this is a very interesting idea. thank you. >> they give for your leadership. we have many hearings taking place on financial regulation, health care reform, and energy. we are going to be presenting our future questions to you in writing. we thank you for your time, dedication, commitment to public service. you'd have had an incredible influence on financial reform. thank you very much. >> thank you. >> i will let my opening statement to be inserted into the record. >> absolutely. everyone has the opportunity to submit their questions and the

meeting is adjourned. [captioning performed by national captioning institute] [captions copyright national cable satellite corp. 2009]

>> coming up on c-span, treasury secretary on capitol hill talks about economic recovery efforts and his department's budget. president obama discuss the federal -- the budget deficit and pay-as-you-go rules. senators discussed the supreme court nomination of sonia sotomayor and to announce the beginning of confirmation hearings next month. >> congressional hearings on c- span3 tomorrow to tell you about. one is discussing single payer health care systems. that begins at 10:30 a.m.

eastern. later, the senate banking committee holds a hearing on the u.s. auto industry. they will hear from representatives of the white house and the treasury department. you can watch a live at 2:30 p.m. eastern on c-span3 and c- span.org. >> every weekend at the latest books and authors on c-span's "book tv." the washington d.c. the delegates will be interviewing this offer. and dole resenberg -- joel rosenberg will be discussing his book.

foreclosure nation, a florida real-estate attorney is speaking on the housing crunch and where it is headed. every weekend is filled with books and authors on this show. look for our schedule online at booktv.org. >> how is c-span funded? >> private donations. >> i do not really know. >> donations. >> i do not know where the money comes from. >> federally? >> contributions from donors? >> 30 years ago america's cable companies predecease been as a public service, a private business initiative, no government mandate or money. >> it now a senate appropriations subcommittee hears from treasury secretary jim kessletimothy that thergeit.

this is about one hour and 25 minutes. >> we know the irs commissioner is here and prepared to testify. i will wait the remainder of my opening statements in the interest of time and allow my colleagues to say a few words so we can catch up with the schedule. >> thank you, i am very pleased to welcome you to this hearing. i thank you for your service to our nation. mr. secretary, you have so many

challenging responsibilities that it is difficult to know where to begin. you are responsible for reinvigorating bank lending to consumers and small businesses, stabilizing the housing market, overseeing the automobile industry and encouraging sustainable economic growth. you must try to promote -- protect american taxpayers and their investment and promote the long-term financial security of the united states at a time of unprecedented death. the current financial crisis is rooted in a tangled web of high- risk financial instruments backed by high-risk loans, issued by high-risk individuals. to emerge from this crisis and to overcome its the facts, we must restore trust in our nation's financial institutions and financial markets. in my view, that would require

significant reforms in our system of financial regulation. that is an issue of want to discuss with you today. there is a dangerous increase in our nation's long-term debt. i supported the short-term fiscal stimulus as necessary to get our economy back on track, i am troubled that the president's budget proposes to double the debt in five years and triple it in 10 years. i am concerned that the long- term debt of this administration poses a threat to the sustainability of our economy. where will the money come from to pay these debts? china, saudia arabia? will this public borrowing cried

out -- crowd out private investment and slow the recovery? who will pay for this? our children and grandchildren? we need to assess what we are doing to our country's long-term financial health. i remain very concerned about the management accountability and transparency of the tarp fund. tarp was envisioned as a fund to prevent our largest banks and financial institutions from failing. and to increase liquidity in our credit markets. today it encompasses 12 different programs, not just for banks but also for insurance companies and automobile manufacturers. it involves government funds combined with private funds adding up to almost $3 trillion. it is disturbing to me that we really cannot assess what the

impact of tarp funds have been on recipients, whether it has increased lending. the treasury department has yet to articulate how it will measure if this injection of capital has been an effective use of taxpayer dollars. i am concerned that we are being asked to simply trust that this large infusion of capital into the economy will lift us out of severe financial crisis is complex origins are still being untangled. you both face great challenges in an attempt to reinvigorate our economy. these are truly extraordinary times. i am. to work very closely with year and pledged to do so as low as with our chairman to make sure

you have the staff, according, and resources knew need to serve the american people. thank you. >> thank you. eithner. >> you have taken on a formidable task. i think the bottom is going your way. we are quite a distance from the ninth inning. slowly beginning to show signs of a possible recovery and the challenges still remain. this recovery will require strong reforms to face our financial system on a firm footing. we have got to give the regulators the tools that they need to predict and prevent financial crisis. we have got to change corporate culture that says the people, the leadership at the top, can

often take its compensation without regard for what happens with the employees or future investing or the wellbeing of the company and taxpayers. i am still on the board at columbia business school. i was out of the senate for a couple years, took the hius, and what i proposed was that salaries at the top be related to salaries at the bottom and instead of letting the ratio split as it has from 40 times typically in the '80s to 400 times, recent times, and also, and i don't know, mr. secretary, what kind of latitude you have or what kind of authority you

have to suggest conduct in the ceo's office, but one of the things i think that we have to look at while we change this corporate culture is to make it clear that when an executive retires, that the reward ought to be, my view, in the performance of the company after the leader leaves and the bonuses should be expanded as time goes by, and not simply related to stock price, because stock price may be at the expense of investing in the future of the business. anyway, we're glad to see you here. i urge you to carry on, work hard. >> senator nelson? >> thank you, mr. chairman. secretary, we're glad you're here. we appreciate the effort that you are providing and the progress that we hope will come,

will in fact come. when i go home, i have people come to me complaining about the bailouts, complaining about t.a.r.p., complaining about putting the auto industry into bankruptcy, and they're all concerned about that. they're concerned also about the growing deficit and the increasing budget. the one thing that they're now becoming alarmed about is government ownership of stock and when we come to the questions, i've got some questions about that, because they come to me and say look, aren't we drifting into socialism at a rapid rate, and i assure them that our goal is not to hold the stock holdings or warrants or any other financial instruments that we shouldn't be holding, that our goal is to get these companies so that they're functioning on their own so that they're either publicly traded

or that they're privately owned, but not government owned. so i'll be asking you for reassurance on that side, because i hope and i believe that our goal is just as i've stated it, to help these companies get on their feet and when on their feet, to become private once again, not to have the kind of public ownership that we currently have. so i'll be anxious to get your take on that. thank you, mr. chairman. >> senator tester? >> thank you, mr. chairman. mr. shulman, secretary geithner, good to have secretary geithner and commissioner shulman here today. i got to visit with secretary geithner on several occasions. i look forward to the one today. we have just experienced over the last little over a over a year the biggest economic downturn since the 1930s. we have seen the responsiblity on wall street, and we have seen irresponsibility with lack of regulations and no regulation. we are one step forth in the

t.a.r.p. program and you were in the eye of the storm. i look forward to visiting with you about all those things that impact the economy and where we're going from here and i appreciate you coming before the committee. thank you. >> senator bond? >> thank you very much, mr. chairman. ranking member collins. welcome, secretary geithner. everybody knows over the past year we've had a major economic storm raging and what great damage to everybody. the federal government has responded to the economic crisis with aggressiv and unprecedented, but unfortunately, i believe ad hoc, actions to taxpayer-funded bailouts are too big to fail private corporations, a trillion dollar stimulus, foreclosure rescue programs to name a few. we've seen positive signs of green chutes, but there's some wonder whethering they'll wither away with continuing problems in the housing sector and consumer debt remaining high and

significant deleveraging occurring in the financial sector and lingering question about the solvency of banks. are we seeing a dead-cat bounce in the markets? economic and financial experts are telling us that economic recovery cannot occur until we've addressed the root cause, the credit crisis and that's what t.a.r.p. was supposed to do, but it got out on the wrong foot last fall, in my view, and it's still there and president obama told us in january we can't have a recovery until we get the toxic assets out. this is the -- these are questions i want to follow up with. the size of the stimulus also is now causing questions from the federal reserve if we get in a position of monetizing our debt, we will face an unprecedented disaster an got way, perhaps of argentina and tripling the debt in ten years seems to me to be a

risky approach. we've seen the united kingdom which was recently warned about its credit rating and perhaps that's the coal mine for our nation's own future. thank you, mr. chairman. >> thank you very much, sen. mr. secretary, the floor is yours. it's a pleasure to be before you, my first time appearing before you about the treasury's budget and i look forward to having a close working relationship and i look forward to having to answer the very important questions you raise in your opening statements. while we see some initial signs of economic improvement, and i think you could say that the force of the storm is weakening a bit. and although the financial system has begun to heal, our country faces substantial economic and financial challenges. the president and administration are working to meet these challenges and we're working

hard to get our americans back to work and to get our economy back to a growth path again by committing to restoring fiscal discipline and fiscal recovery and by making the health care reform in energy and education necessary to improve the productive capacity of our economy and to ensure that over the longer term we enhance the competitiveness of the u.s. economy. to achieve these goals we're working to repair and reform our financial system so it works for, not against recovery. we're working to restore growth and meet our fiscal goals by redesigning our tax code, bolstering enforcement. we're working to advance our interests globally, working with other countries to promote economic recovery and financial repair and to ensure more open markets for u.s. businesses and to protect our nation's national security interests, we are deploying all of the tools at our disposal to exclude terrorists, proliferators and others from the international financial stage and thereby

secure financial system and promote threats to our security. the fiscal year 2010 budget, the year before you will allow treasury to pursue these core missions. the $13.4 billion request includes a $676 million or 5.3% increase over the enacted 2009 levels. just a few brief highlights about the budget request. of the increase we're seeking $14 million would bolster the tax policy offices. these offices, domestic finance and tax policy are at the center of the administration's efforts to support strong design, rigorous analysis, improve the financial system, reform the financial system and implement reforms to our tax policies and tax code. we include in the budget a $137 million request to more than double our community development financial institutions and our cdfi fund to ensure that the benefits of our financial

efforts reach beyond major bank and businesses to help economically distressed communities. these communities were underserved by our financial system before the current crisis and they've been deeply hurt by the failures that the crisis has exacerbated. we propose a total of $332 million for new irs enforcement efforts including a $128 million to add 800 new irs employees to combat off-shore tax evasion and improve compliance with the u.s. international tax laws by businesses and high-income individuals. another $130 million would go to bolster the security of irs information technology and improve the efficiency of its business systems and upgrade its fraud detection capability. although not directly under the jurisdiction of the subcommittee i wanted to note also that our budget includes funds to meet our international obligations and have a global response to the crisis in this global economic system that we live in today.

as we seek these additional funds we've cut back on programs that are either ineffective or we believe can be safely delayed. just one example, even as we're trying to increase capital investment for the irs our budget would open the capital by 65% for a savings of $17 million. i want to say a few words about the treasury staff. i'd be honored of leading a team of exceptionally smart and dedicated individuals who are working very hard to make our government more effective. they're performing a great service for our country under challenging circumstances. i'm very grateful to them, and i think if you look at the scale of what we set in motion in the last six months they've done extraordinary things in a very short period of time. thank you, mr. chairman. i'd be happy to answer any questions. >> mr. secretary, many of the questions we ask will be policy questions, somewhat global in

scope. i'll try to bring those home to the actual budget aspects of this hearing as best i can. let me start with a topic you won't be surprised and i'm interested in, mortgage foreclosure. i have brought before the senate twice now unsuccessfully an attempt to change the bankruptcy code so that we can create more incentives for renegotiating mortgages in foreclosure. i failed in both efforts and the last effort was opposed by virtually all of the banking institutions of the united states, save one, citigroup, to support our efforts. the mortgage banking association reported that 10.7% of mortgage loans were delinquent or in foreclosure in the first quarter. the highest level ever recorded since the survey was launched in 1972. also, for the first time, most mortgages in foreclosure were prime loan, 49.8% compared to 42.2% subprime which we

initially identified as our major concern. foreclosures bounced up 32% to 342,000 during the year over year period ending in april according to realty track. the obama administration's making home affordable program has resulted in only 55,000 mortgage modifications in the last two months. according to the washington post, experts say foreclosure prevention programs will not be successful unless they address homeowners who owe more than their properties are worth. i sensed that this was the catalyst that led us into this recession. it is my feeling that the previous administration and so far this administration, has failed to come up with an approach which is dramatically and could dramatically turn around this increasing number of mortgage foreclosures. a year ago the estimate was 2 million. this year it's 8 million. ultimately one out of every six home mortgages