i just think we have a requirement, not only to help with people where plants have closed, which at that is huge and important, but also the many communities and dealers that are getting shafted in many ways. i do not think that we, as taxpayers, would want to have that result. i would hope that you would be very strong watchdog, their behalfs. thank you. >> thank you, senator hutchison. >> gentlemen, i don't envy you your task. let me just make it clear i recognize how difficult all of these issues are. thank you for diligence and your attempt to get them solved. you have probably been around washington long enough to know that that is a set up for what is coming. >> the first 24 hours. >> just picking up a little

quickly on what senator hutchison had to say, we will now, in utah, have no price for dealers from loss vegas and provo. all right, it is a rural area. there are a lot of rural areas. and a lot of miles, but by virtue of that decision, that guarantees that there will be no possible way for chrysler to come back in that very large stretch of population, and i've talked with some of the dealers there, and they're making the same point that senator hutchison's making, that if the market says okay, there needs to be a dealer there, the dealers that have been serving chrysler diligently for all of these decades, who have been shut out

now, will not be allowed to set up the new dealership that comes along and some new kid will show up -- new kid, not necessarily by age, but come along and say okay, i have this very large market now exclusively myself, i don't know what you can do about it, but i'm working with senator hutchison and the nada to see what we can think about doing about it. we're going to be talking to you about that. i just warn you that that may be coming. >> forewarned. >> okay. let us talk for just a minute about the whole question now of the viability of general motors. i take your point that the market cap can be achieved with much better, cleaner balance sheet so that we don't have to compare the new gm to the old gm, but i would point out to you that in terms of a true vulture

capitalist, lot of people don't like that term but that's basically what you are here as the government, as a true vulture capitalist, you have gone exactly the wrong way. general motors, if a true vulture capitalist, i'm quoting from holman jenkins but i like what he says. he just happens to put it better than i can. >> i admit to reading it. >> you admit to reading it, okay. he says the bailout has deeply politicized the business model by -- domestic relations saddled by the uaw, you may not like that term, over its money-making foreign ones. a truly commercial vulture investor would have done exactly the opposite, dumped north america and kept the promising businesses in china, russia, europe and latin america and i have talked to general motors people in these other countries and they are profitable in these other untries, have been

profitable. it's the north american activities that have cut us, have hurt them, and if indeed you were to take general motors production out of north america out of the $9 million car market that senator bunning was talking about, it would increase the market share and thereby the profitability of all of the others. now, the outrage politically would have been enormous for that but if we're going to talk in straight market terms, that would have been the thing to do. i remember, i'll just say this, then get your comment on it, reading i cannot tell you the date now but it's four or five years ago, a cover story in "fortune" magazine called the demise of general motors. and they outlined at that time when the economy was doing very well that general motors was

doomed for a variety of reasons. and one of the interesting things they said was about the quality of general motors cars and how everybody said general motors cars were terrible quality, that at that time, general motors quality had gotten back to the point where it was as good as toyota or honda or any of the rest of it and they quoted an expert who said the quality is very, very good and no one will buy them because the reputation had come along. and we're now facing a situation where that legacy of the market is still there, and i read columnists who say well, now the government will insist that general motors make good cars. i think general motors has been making good cars for the last four or five years. but they're running into that problem. >> let me try to -- >> as you deal with all that, do

you have a reaction? >> yeah, i do. let me start by trying to agree with you. may not end there. but i think you're right. i think general motors has been kicking problems down the road for a long time. i think that is an accurate description. i think very intelligent, thoughtful people have been talking about general motors deep in systemic problems for a long time and they have not been listened to, and i think the president was clear, these problems have been kicked down the road for a long time. i also agree with you that as little as three or four or five years ago, gm's quality by a lot of measures was up at toyota's, up at anybody. the problem is as you know, consumer sentiment lags reality because for a long time, when the transplant cars were better, gm was living on reputation, then it flips. so these are problems that are not addressed overnight. and i think that -- and so you're right, this is going to take some time to evolve.

the government is not going to insist that general motors make good cars. that's not something a government can insist. what we can do and i believe what we have done is help the company to rethink its business model and to restructure its balance sheet. so i think -- >> let me just quickly because i don't want to take too much more time, but isn't the government going to focus on north america and -- >> let me -- let me answer that question. i don't think it's accurate to say we're castrating general motors overseas. i would just observe to you for instance that their european operation in fact is also deeply troubled and provisions are being made without united states taxpayer dollars to deal with their european operations. they do have profitable operations in other parts of the world. we're encouraging them to grow those but not with u.s. taxpayer dollars. the decision to make an investment in gm and its north american operation is obviously because these are united states taxpayer dollars and so while we are a vulture capitalist, we're

an american vulture capitalist and the determination was to get them competitive in north america so they can make money in north america. that's the focus of the activity. that is the only justification for taxpayer dollars, because we're trying to preserve american jobs in american communities and american suppliers and american dealers. because it is american taxpayers. but the insistence as any good vulture capitalist would do before he put money in, was to insist that there was a path to profitability. and to get competitive, whether it be dealers or be employees or be debt level or be suppliers or be white collar, whatever it was, to insist that general motors get competitive so their good cars can find space in the marketplace and can be successful. that's been the effort. that's what we have tried to do. >> thank you. >> thank you, senator bennett. before adjourning, senator shellby has one question. i have one question.

dr. montgomery, you feel like you're sitting there alone with little to do. >> i would like to get back quickly on how we get out. we are in, we the taxpayer, the government, is in big time. we know this. how much thought went in just roughly from your judgment, went in to getting in to gm and chrysler and how much thought went in, how do we exit, how do we get out? i think the term was used earlier could this be an economic vietnam. in other words, easy to get in, hard to get out. >> i think that's a very fair question, senator, and again, i

want to try to talk about our process. there was a tremendous amount of thought and debate about whether or not an equity stake was the proper vehicle. but again, i think when you walk down our decision tree, if you decide that you're going to invest in the company because today's capital markets are not going to provide capital to this company, the need of the company for capital is not determined by us. it's determined by an analysis of the business but at the end of the day, the company has a forecast, you beat it up all you can but eventually, you got to decide there's a certain amount of money that's needed. once you decide the money is the x, then you have either got to do it as debt or equity. you could do it as a gift but that seems crazy. so it's going to be debt or it's going to be equity. the problem is when you look at toyota, when you look at daimler, when you look at honda, you find companies that are not levered so i think you are driven to equity by the decision to try to maximize the return,

have a successful company. as far as the exit, it's going to be orderly. it's going to take advantage of a profitable company and our private capital markets. >> what's it going to take? i know you don't know how many years the government will be in. you don't know exactly whether or not there will be more money. in other words, gm and chrysler, things don't work out quite as you maybe thought they would, and they need more money, and you go back to the well, what will it take to get them on their feet and the money back? it will have to be a pretty rosy scenario, would it not? >> no, sir, i really don't think it is. i want to emphasize that. >> describe the scenario you would think. >> we believe that using a conservative set of assumptions about market share, about overall market, about margins, about costs, about all the

things that would go in, we are strongly believe that this is the last money that gm will require. now, i can't make a promise about the future but i can assure you that it has been a vigorously debated and thought about question and it is our best judgment that that's the case, that this is it. >> you say you believe, it's your judgment, you don't believe they will need more money. now, what's your best judgment? i know you don't know, but your best judgment on when the exit will come on behalf of the taxpayer and will the taxpayer ever be made whole? >> senator, i don't have a point estimate best judgment about when we'll be able to exit. i do believe that there is a reasonable probability that we can get most, if not all, of our money back. that's the way i would say it to the president and that's the way i said it to him and the way i say it to you here today. >> do you believe it's very

important for the government not to be owner of a huge industrial company? >> i believe it is profoundly important that we exit this investment as soon as as is practiable. >> i wil ask my one question and ask senator corker if he can keep it under three minutes, if possible. dr. montgomery, i want to talk about for a moment the issue of suppliers, some of their concerns. i chaired a hearing last month with economic policy subcommittee, the banking committee, on manufacturers and access to credit. one of the witnesses was an auto supplier and the message he and his members get regularly is if you supply for autos, you're on a black lis and banks won't loan to you. the administration stated that the updated sba loan programs a source of credit for them. that's not what we found typically because loan eligibility is determined by banks and banks are not making those decisions affirmatively

for them. i want to know what the administration plans are for sba specifically for loans for them, are there other things we can do beyond promoting diversifying into new clean energy areas through mep, through the manufacturing partnership, what's the plan to provide financing, are there national emergency grants for nontraditional auto related workers like dealers and suppliers, are there new authorities from congress like the defense production act? i just want to pick your brain for a moment on how do we get this, how do we get suppliers financed when credit is still pretty frozen if you're an auto supplier? >> my impression, senator, is that obviously the issue that you raise about suppliers and having access to credit is one that we hear a lot. i hear it a lot, as i have traveled through the midwest states.

to the sba expansion to the floor plan for using -- all three of which are trying to provide various different participants in the industry credit pretty -- in the industry credit. you mentioned grants, a national emergency grants, those are typically available for retraining, not as a matter of collateral. there are ways that you can support the work force and the dealers to the provision of national emergency grants. the states of ohio and michigan have come in for a national emergency grants and have used those. minnesota came in for a national emergency grant to support a pooling of dealers, all of cold war relatively small in size, aggregate, the total effect was fairly significant in terms of dealer layoffs and so they did come in for a national emergency grant. so there are a variety of different mechanisms. the sba is one.

agriculture has ways to support rural facilities and getting credit out to them. so a variety of different mechanisms we are already looking at and obviously we are trying to monitor going forward. i have been told from small business administration that volume has picked up in the last couple months and i think there are some positive signs but clearly not out of the woods yet. >> thank you. senator corker. >> thank you, mr. chairman. thank you both for being here. my temperature got a little up when some of the revisionist statements about some of the past and i didn't get to the point of i do want to thank you guys for your service and even though i know that your political biases are showing in many ways throughout this bankruptcy, and i feel like that some of the decisions should have been made in different ways, that doesn't take away from the fact that you are away from your families and doing things that certainly are not as productive for you financially as in other ways. which sort of takes me down the

path, i know we have talked, i have a bill, if you guys decide to close every dealer i guess in the country, that's certainly your decision. i have a bill that just states and i hope i don't have to offer it, that states that you will at least make whole dealers that you close for their inventories and parts. we actually have talked some with gm. i think they plan on doing that with all of their dealers and i know they're going through a transition period. i do think that when you look at the history of chrysler and the fact that the executive there, jim press and others were actually pressing dealers to take inventory, and some ways even kind of threatening them. we have seen evidence of, you know, some pretty heavy-handed stuff that if you're going to be part of our dealer network, this was six months ago, then you have to take delivery of these cars so we can show them as

sales. and i think that the way again a political decision that you made, because the amount of money could not have been that large but the decision that you made in this bankruptcy to take these people all across the country that are small business people, that borrowed money, that have signage and may have borrowed $400,000, $500,000, couple million in some cases to revamp their dealerships and to basically say you're terminated, you're toast, and we're not even going to take you out of your automobiles and parts which we forced you to take during our time of need. that was a decision that you and this task force made. you decided, when i say god-like, 363 bankruptcy is pretty much a god-like kind of thing. you decide the winners and losers and it marches on. supreme court, by the way, just said they wouldn't take the case. they didn't say grace over the decisions. but back to the chrysler issue, is there no ill feelings on

behalf of the task force with those decisions about just saying to all these small owners across the country that have borrowed money, have taken inventory to try to keep the company alive and basically are saying you're toast because we don't need you anymore? >> well, again, senator, i think that as i said, the lt of victims of a failed corporation is very wide and it certainly includes dealers. i think -- >> we're not trying to get you to reinstate dealers you don't need but just -- >> i understand. i do believe that chrysler has agreed to buy back all of the cars from the dealers whose franchise agreement is not being renewed and i believe that's being effectuated. my understanding is there is continuing dialogue between chrysler and the dealer and others like you about what to do about the parts. i can assure you we will stay on top of it, we will continue to monitor it. these are not our decisions, but we are certainly in favor of the

company working, whether it be senators or dealer representatives or anybody, to try to achieve fair and equitable resolutions. i do think in fairness that the intervention of you and others has produced a better result for the participation agreement going forward on gm, has produced a better result for the cars for the chrysler dealers who are not being taken forward, and we would expect that dialogue to continue. and the role we're going to play is to continue to encourage the companies to work with affected constituents to try in a commercial way to deal fair and equitably but we're not going to insist that they do x or y because we're not running these companies. >> right. i know my -- >> i'm sorry, time's up. senator johanns. i apologize, bob. >> thank you very much. you know, i have to tell you, the end of this hearing and it's been a long afternoon and we appreciate your patience.

it is our government that comes across as heartless and indifferent. indifferent because you keep saying well, even though we own 60%, we don't want to be in the middle of this. we don't want to run it. but you own it. i don't know how you sustain that position over time. and then you know, senator brown asked a really good question about the products liability claims. it reminded me of a very poignant letter i got from a lady back home in nebraska, quadriplegic, injured in an accident with a chrysler product, battled for years and years and years, finally on the edge of getting into court and the bankruptcy is filed. and of course, she's not going to get anything from chrysler. you know that. yet you said in your testimony well, she probably won't get as much as she wished. come on, she's not going to get anything. you file a stay of bankruptcy,

then you file you file a discha the case is over. we put billions of dollars into this company and then jobs go to mexico. while people here in the united states are losing their jobs and yet we say, well, not going to touch that. we don't want to run this company. how you many years can this go on? >> well, i guess i would say this, sir. i'm sorry that you feel like we've been heartless. i think we have worked to save hundreds and hundreds of thousands of jobs and hows and thousands of dealers. the alternatives for this company, both of these companies, was nothing for anybody. the alternative we've crafted, which is very painful for many, very painful for many, preserves businesses that can be successful going forward, can provide tens and tens of thousands of americans with jobs, thousands of successful dealers, hundreds of thousands of supplier jobs, and strong

communities. so i think, while it has been exceedingly painful and i would not debate a word you say yabou the particular circumstances or dozens of others that i'm sure exist, i think when you balance it out, what has happened here, while very, very difficult, has been a remarkable act of trying to save two great american companies. at great sacrifice to many but in the aggregate i believe it is far, far better than the alternatives that we faced. but that's our judgment, and i certainly respect people's right to disagree with it. >> i'll wrap up you wiwith this the 20 seconds i have. hard decisions are best made in a transparent part of way. for congress to wake up you like the the rest of the the american public on monday and found out over the weekend that we had bought general motors, with all of the problems associated with it, is really outrageous. really outrageous.

thank you, mr. chairman. >> thank you for both of you for remaining. if you have further questions, either of you, anyone else, the record will remain open for seven more think of her service, mr. blum. [captioning performed by national captioning institute] [captions copyright national cable satellite corp. 2009] >> it bipartisan commission on wartime contract and said that u.s. operations in iraq and afghanistan have created opportunities for waste, fraud, and abuse. that hearing is next on c-span. after that, senators meet at the white house for health care legislation. and later, an aviation safety hearing.

>> how is c-span funded? >> private donations? >> taxpayers? >> from public television? >> i do not know where the money comes from. >> federally? >> how is c-span funded? 30 years ago, america opposing cable companies greeted c-span as a public service. a private -- and america's cable companies created c-span as a public service. >> the u.s. military contracting system in iraq and afghanistan continues to be susceptible to waste and fraud. the government appointed commission on wartime contract in testified before a house oversight subcommittee. this is about one hour and 45 minutes. today. is an hour and 40 minutes.

>> the quorum being present the subcommittee on national security on wartime contract income interim findings and path for relook come tort. finance consent only the chairman and ranking member of the said committee be allowed to make opening statements and without objection sword. eyes finance consent the hearing record be kept open for five business days of members will be allowed to submit a written statement for the record. without objection, so ordered. good morning. i want to thank all of you for being with us here today. as i promised you, you were there and i am here, but i did have to restrain mr. shays on that. so today the subcommittee on national security and foreign affairs is going to continue its sobersided defense spending issues. with a hearing to discuss what is becoming all too familiar issue in recent years, aways, fraud abuse and lack of accountability in wartime contract thing in both iraq and afghanistan. with hundreds of billions of dollars the united states taxpayer dollars invested in

these two theaters since 2001 and more to come, it is critical we continue to strengthen our oversight in contracts in these areas. before i begin my remarks i want to address a procedural issue for the benefit of subcommittee members and the public. we did have an arrangement with the commission earlier on that we would have the report released to us and not by the press until the evening of this hearing. that did not occur, and i want to apologize to the other members on that. were about to find out why that didn't occur a we wanted to give the members in opportunity to be prepared and to ask questions of the committee and to work on that, so we are going to find out what happened there. i still suspect members of that and opportunity to prepare themselves notwithstanding. united states reliance on contractors has reached unprecedented levels of the last eight years, reaching upwards of a court of a million contractors on the ground in iraq and afghanistan from the department defense alone.

that does not even include those working for the department of state in the united states agency for international development or other agencies. it is an extraordinary number by all accounts but civilian contractors in a contract endermic elwell members of personnel related expenditures as the land the opposite trend occurred with respect to oversight. the united states national security department allowed their program oversight staff and expertise to dwindle to the point in many circumstances contractors have been hired to oversee other contractors work. report after report had identified the key need to rebuild branch oversight capacity but as yet we have seen little to show for it. we need to fix a broken contract and oversight function in the executive branch and add to it a oversight from independent sources of congress. that was the product of efforts by several of us in congress dating back to 2005. at that time it became clear to

us we needed an entity that could provide sustained over the side of wartime contracts similar to the efforts of the truman committee during the 1940's. waste fraud and abuse in wartime waste fraud and abuse in wartime contracts transcends oversight should not be the luxury of the divided government and languish when congressional majorities in the president share a common political party. wiesel the disasters as we initiated in prosecuted action in iraq. i have by expectations for the contract thing can accomplish and we are here to assess progress to date. the commission's interim report highlights a number of issues related to management and accountability, logistics', secure in reconstruction efforts in iraq and afghanistan. one interesting case described in the reports as the costly construction of a duplicative dining facility at the cost of $30 million. that certainly is represented in such issues. ism portsmouth commissioner mckracken krampert others nuss in sync grading alvis i did the deed that merely duplicates the work going on