closer today. i wanted to remind our colleagues to focus in time -- just over a year ago this congress passed the american recovery and reinvestment act. as a result of that, more than two million jobs were saved or 2 r

this january we lost 20,000 jobs. we don't want to lose any jobs. we want to be on the upside. we want to be creating jobs. the point is following the passage of the american recovery and reinvestment act and other initiatives taken by the boirks and this congress -- obama administration and this congress, a difference of over 250,000 jobs. 779,000, january, 2009. 25,000, january, 2010. in the final quarter of 2008, in the final quarter of 2008, the final quarter of 2008 before president obama took office, america's g.d.p. shrank by 6.2%. g.d.p. for that quarter was negative 6.2%. just one year later, the g.d.p. grew in the same period by 5.9%. over 12% change in the growth

of g.d.p. thanks to the american recovery and reinvestment act and, again, other actions taken. you know, when we were debating the recovery bill last year around this time, earlier in january, february, the stock market was around 6500, 7000. it's 10,000, an increase of over 3,000 points. and yesterday we learned that america's manufacturing base grew for the seventh straight month and was now at its highest level in five years. still we must be unrelenting in our efforts to create more jobs. too many americans are unable to find work. in some cases we're talking about putting people back to work. in some cases people haven't had opportunity. coming out of school they have not been able to enter the work force. it's not just about putting

back to work. it's about creating a broader universe of jobs to have many more americans participate in the economic prosperity that we hope for our country. today, we are taking another step in creating jobs along the foundation for long-term growth and prosperity. with the $15 billion in critical investments, this bill includes a payroll tax holiday for businesses that hire unemployed workers, to create some 300,000 new jobs. with that privilege alone. and an income tax credit of $1,000 for businesses that retain employees. specific support to small businesses with tax credits and accelerated write-offs, extension of the highway trust fund. this is very, very important. allowing tens of millions of dollars -- tens of billions of dollars in infrastructure investment. $15 billion bill, but it triggers -- it triggers tens of

billions of dollars more by eliminating the rescission of last year, by restoring the interest to the trust fund that was -- it was deprived of and by triggering contracting, tens of billions of dollars, probably one million jobs in this bill alone. in december, the house passed the main street act, jobs for main street act, a broader measure for creating good-paying american jobs paid for by redirecting tarp funds from wall street to main street. . our key element to get americans back to work and strengthen our economy. i believe both sides of the aisle understand the urgent need to create jobs for our country and today we have an opportunity to do so.

i know that some people have some concerns on one side of the aisle or the other about this provision or that provision, but the fact is that a million jobs will be created by this legislation. vote for jobs, vote aye on this legislation. i thank mr. etheridge and all concerned. mr. oberstar, the distinguished chairman of the transportation committee, so many others for making this important legislation possible. it's difficult. it's challenging. and more is yet to be done. but i urge my colleagues on both sides of the aisle to vote for jobs, vote aye on this legislation. with that, madam speaker, i yield back the balance of my time. the speaker pro tempore: the gentleman from california is recognized. mr. nunes: i'm going to have to yield myself 30 seconds. the speaker pro tempore: the gentleman is recognized. mr. nunes: i would like to remind my colleagues here in the house that last year there was a provision offered that didn't cost $1 trillion, didn't cost $1 billion, didn't cost $1

million, didn't cost $1. that was a provision to let water flow to mike constituents in the san joaquin valley of california so people could go back to work. but instead nearly every member, every democrat from california in this congress opposed that amendment. last summer we had tens of thousands of farmers and farm workers standing in food lines in the most productive ag land in the united states. the speaker pro tempore: the gentleman's time has expired. mr. nunes: i would like to yield an additional 15 seconds. the speaker pro tempore: the gentleman is recognized. mr. nunes: so, a zero cost provision could not go under this bill. and now we have farm workers eating carrots imported from china. so all this, talk about jobs, it's all phony. the american people have had enough of this nonsense. i would like to yield three minutes to my good friend from ohio, mr. latourette. the speaker pro tempore: the

gentleman from ohio is recognized for three minutes. mr. latourette: madam speaker, i thank you very much. i have spent many times on this floor about my great admiration for the chairman of the full transportation and infrastructure committee, mr. oberstar. and he knows that this bill isn't fair. and he knows that this bill isn't fair because he produced a chart last week that has all -- has 15 states plus the district of columbia, so it's 51, and 22 states get nothing under this bill. and four states walk away with 58%. not surprisingly i heard the speaker likes the bill, california gets 30% of the highway funding under this bill. and any member who is interested is more than free to come and purr you ruse this at their leisure. i give the chairman great credit. he was unhappy with this last week and he fate with his leadership and he has produced today a letter from senator reid saying he's going to fix it sometime in the future. now, two things, that's the

second big lie. the check's in the mail. the other thing is i hope the majority understands a letter from senator reid just doesn't fill us on this side of the aisle with warmth and fuzzy feelings. if you want to fix the problem, fix the problem. and the problem is not fixed. this is not a jobs bill and i also admire the speaker of the house, but i admire her more today because she did not break into laughter when calling this a jobs bill. this is a no jobs bill. this is a faux jobs bill. i look forward to the unemployment statistics tomorrow because i believe that within about 100,000 americans will have lost their jobs in the last month despite all these great successes. and continuing with my admiration for chairman oberstar, my favorite part of the speech that he gives on the stimulus package is, all those jobs which he created through the infrastructure spending and stimulus, 8% of the funding, so that means, you'll have to figure out math, but that means in an $800 billion bill, half the jobs were created by 8% of

the funding. and that's thanks to you and the work that you and your colleagues do on the committee. the other half were created by about $750 billion. that's a strange, strange, strange investment. mr. oberstar: would the gentleman yield? mr. latourette: i would be happy to yield. mr. oberstar: just briefly. if the gentleman, madam speaker, could assure us there would be no senate filibuster or hold on the bill, senator reid would have been happy to accept our changes. but he estimated he couldn't get that through the senate. so he agreed to fix in a subsequent bill and he put it in writing and we have to accept his written commitment. mr. latourette: my pleasure. my appreciation of you grows every day. i will tell you what, if you can crack the code of the senate, republican or democrat, then you deserve much more money than you make as chairman of the full committee, because they are a strange bunch. it doesn't matter who is in charge. they don't seem to do anything. i want to get to process now because the president down at

this health care summit at player blair house said nobody cares about process. i got to tell you, i have never seen this. this is my 16th year in the united states congress. mr. etheridge made his motion, mr. etheridge of north carolina moves that the house concur -- the speaker pro tempore: the gentleman's time has expired. mr. nunes: an additional two minutes. the speaker pro tempore: the gentleman is recognized for two additional minutes. mr. latourette: i appreciate it. mr. etheridge of north carolina moves that the house concur in the senate amendment to the house amendment to the senate amendment with an amendment. that is really a procedural mouthful. you know what it means? it's a procedural way to screw the minority, the republican party in this house, not only can't we amend your bill, not only did we get it at 9:30 this, we can't offer a motion to recommit. you know what mr. hoyer would be saying if we pulled that on him when we take the majority back next year? he would be screaming bloody murder and he would be right. madam speaker, as a result of that i would like to offer an amendment to this bill.

the speaker pro tempore: the gentleman from north carolina would have to yield to that request. mr. latourette: i'll request the gentleman from north carolina to yield to me to offer an amendment to the bill. and if the gentleman doesn't think i'm sandbagging him, let me tell you what it is. i would move to add mend this bill to transfer the $13 billion in the sham tax credit that's not going to create one job and the dumbest idea i ever heard to infrastructure spending. i would further have in that amendment that the infrastructure spending now at $14 billion be distributed pursuant to the house proposal that mr. oberstar has proposed which means every state in the unedown benefits not just california, not just states that are walking away with a bunch of money. mr. etheridge, will you yield to me for the pumps of offering an amendment? mr. etheridge: would the gentleman yield? mr. latourette: i sure. mr. etheridge: i thank the gentleman for his willingness to help. the rules do not provide for that. the speaker pro tempore: the gentleman from north carolina would have to yield to a unanimous consent request.

mr. latourette: mr. etheridge, we'll give it another shot because we are not going to be able to hide behind the rule. the rule doesn't provide for amendment. it doesn't provide for motion to recommit. the only tool in the minority's toolbox. so, mr. etheridge, i ask unanimous consent -- i guess you need to yield to me for a unanimous consent request. would you yield to me for a unanimous consent request? do i have to ask him to yield to me or do i yield to him to yield to me? the speaker pro tempore: the gentleman from north carolina would have to yield for any unanimous consent request. mr. latourette: mr. etheridge, i'm asking you to yield to me so i can make a unanimous consent request that you can deny. mr. etheridge: it's your time. mr. latourette: i'm asking you to yield to me -- mr. etheridge: no. the rule does not provide for it. mr. latourette: that's nonsense, first of all. because the speaker just indicated if you yield to me i can make my unanimous consent request. the speaker pro tempore: the gentleman's time has expired. mr. nunes: i would like to yield an additional one minute to make his unanimous consent request. mr. latourette: i'm going to

tell you what, mr. etheridge. here's the deal. if you would yield to me, which apparently you can under the rules but don't want to because you think the rule says so which it clearly doesn't, read the bill. i want to make a unanimous consent request that the $13 billion in this worthless tax credit be transferred to infrastructure spending and further that that additional $13 billion be distributed pursuant to the house plan as opposed to the senate plan. the house plan -- the senate plan rewarding only four states with 58% of the money, 22 states getting zero. mr. etheridge, i'm asking you to yield to me for that purpose. mr. etheridge: what was the gentleman's question? mr. latourette: i'm asking you to yield to me for the aforementioned unanimous consent request. mr. etheridge: the gentleman is trying to dot same thing that happened in the other body.

you are trying to slow down this process. mr. la tourt: is that a no? is that a no? is that a no? mr. etheridge: the rules do not provide for that and need a u.c. to do that. mr. latourette: that's a soup sand writch answer. the speaker just said you could do it. the speaker pro tempore: the gentleman's time has expired. mr. latourette: madam speaker, this is nonsense. the speaker pro tempore: the gentleman's time has expired. the gentleman from north carolina is recognized. mr. etheridge: i thank the gentlelady. i now yield two minutes to the gentleman from rhode island, mr. langevin. the speaker pro tempore: the gentleman from rhode island is recognized. mr. langevin: i ask unanimous consent to revise and extend my remarks. the speaker pro tempore: without objection, so ordered. mr. langevin: i thank the gentleman for yielding and for his outstanding work on this important bill. madam speaker, i rise in strong support of h.r. 2847, the hire act which will strengthen our economy by limiting job loss and creating new employment opportunities. in addition to provision that is will spur investment and infrastructure in construction

projects, this bill provides much needed assistance and attention and support for small businesses in america. this bill includes a payroll tax holiday for businesses that hire unemployed workers. and tax cuts to help small businesses expand and hire more workers. small businesses, madam speaker, have borne the brunt of this economic crisis and their inability to act as credit to keep their businessesx

that's a significant step for both parties to have a spending bill offset. i want to get that out of the way. now, having said that, i got to say that i am very leery of another government spending program to address jobs. we are here because last year we spent nearly -- we did spend $800 billion on a stimulus program that was supposed to keep us from going to 8% unemployment. now we are at 10% unemployment. the stimulus program before just added 31 brand new federal programs and increased spending. i'm the ranking member of the agriculture committee and spending in the usda has gone up 26%. at some point we are going to figure out the federal government doesn't have the solution for everything.

this is not our only stimulus proposal or jobs proposal. in may of 2008 we had $168 billion stimulus program that did not work. in march of 2008, the federal reserve said we are going to shore up wall street with bear stearns, $29 billion. in july of 2008 the democrat congress and president bush came in with a $200 billion bailout of fannie mae in order to shore up real estate. and not to be outdone the federal reserve a month later with the a.i.g. bailout, $85 billion that is now up to $140 billion that was supposed to avert financial collapse. and yet it did not. and then in october of 2008 we had a $700 billion tarp bill. then in january, $410 -- january, 2009, under president obama, $410 billion omnibus spending bill that was supposed

to shore up the economy. and of course that brings it back to the other stimulus program. after a while we are going to figure out, everything we do is like cash for clunkers, it just doesn't work. if we want to help small businesses, we got to quick spending money. -- quit spending money. number one, number two -- the speaker pro tempore: the gentleman's time has expired. mr. kingston: 30 more seconds? mr. nunes: an additional 30 seconds. the speaker pro tempore: the gentleman is recognized. mr. kingston: number two, we need to let community banks be released from some of the overbearing and unnecessary regulations in which they have to comply because that causes them not to be able to lend money and thus small businesses are tied up in a credit crunch. number three, we've got to let small businesses compete. we set rules, big business and big government, sets rules so that small businesses can compete. there are things we can do, things we can do together on a bipartisan basis. we need to vote this bill down so we can get through them. i thank the gentleman and the speaker for the time.

the speaker pro tempore: the gentleman's time has expired. the gentleman from north carolina is recognized. mr. etheridge: madam speaker, i yield myself 10 seconds to remind the gentleman that how we got here was the american people lost somewhere in the neighborhood of 15-plus trillion dollars in the value of their homes and assets over the 18 months through july of last year. and until we passed something it started to turn around. since they gained about $5 thrill but we have a ways to go. i yield a minute to the gentleman from kentucky, the gentleman, mr. chandler. the speaker pro tempore: the gentleman from kentucky is recognized for one minute. . mr. chandler: i rise in support of the hire act. this piece of legislation will help our small businesses heal during these tough economic times and help unemployed kentuckyians find good local jobs. the hire act cuts taxes for our

small businesses and makes it possible for them to hire new employees making our small companies stronger and creating jobs for out-of-work kentuckyians. madam speaker, the unemployment rate is around 11% in the commonwealth of kentucky, and we have to do all we can to create and save jobs throughout this nation. small businesses are the backbone of our economy and the engines of job creation. investing in the long-term health of our small businesses is one of the surest ways to economic recovery. this legislation isn't just about small businesses, though. it's about helping that mom, that dad who was laid off in the midst of this recession find a good-paying local job. the speaker pro tempore: the time of the gentleman has expired. mr. chandler: 15 more seconds. mr. etheridge: i yield 15 seconds. mr. chandler: i urge members on both sides of the aisle in favor of this legislation today because it's a vote for middle-class families, for

small innovative startups and the long-term economic health of central kentucky and the nation. thank you. the speaker pro tempore: the time of the gentleman has expired. the gentleman from california is recognized. mr. nunes: thank you, madam speaker. i'd like to yield myself 30 seconds. the speaker pro tempore: the gentleman is recognized. mr. nunes: madam speaker, i still have yet to have someone explain to me from the other side of the aisle how the trillion dollar stimulus bill passed last year that was supposed to create 3.7 million jobs, instead we lost three million, and how this bill that spends $13 billion or so, still a lot of money but not nearly $1 trillion, is going to create a million jobs as they continue to repeat on that side of the aisle. i'd like for someone to answer the question. i yield back -- i reserve my time. the speaker pro tempore: the gentleman from california reserves. the gentleman from north carolina is recognized. mr. etheridge: thank you, madam speaker. i yield two minutes to the gentleman from oregon, mr.

defazio. the speaker pro tempore: the chair recognizes the gentleman from oregon. mr. defazio: well, i ask answer the gentleman's question. the emphasis is on small business, which is an incredible economic engine in my state and other states across the country. and secondly, there is an extraordinary emphasis on transportation infrastructure. the gentleman may be unaware that in august of this year, the transportation infrastructure trust fund is going to fall short of funds, delaying reimbursement to the states and stalling out needed projects and investments across the country. this bill fixes that and once and for all we will get interest on money borrowed from the highway trust fund. that's what people pay gas taxes for. we are not going to reclaim that money. we are going to put people back to work and rebuild the crumbling infrastructure in this country. it will give us $1 billion more a month. i heard the gentleman from california talk about 58% of the bill. no, what he was concerned about was 58% of 1.2% of the bill

which is .7% of the bill which under the agreement the chairman has reached with the leader of the senate will be fixed in the near future. and in fact ohio will get an extra $38 billion -- $38 million because of that and my state will get less. >> will the gentleman yield? mr. defazio: i will not yield. >> ok. mr. defazio: i thought it would be fair to put that in the overall formula so that all 50 states would benefit because almost every state is suffering from unemployment including the gentleman's state. this will bring an extra $38 million to his state. and for every $1 billion we spend in infrastructure we put about 33,000 more people to work. we sure as heck need those jobs. so i stand here saying we need to pass this bill. yeah, the senate's dysfunctional, it's a mess and it would be cleaner to do it

all at once but it's the best we can do dealing with a body that's just ridiculous. with that i yield back the balance of my time. the speaker pro tempore: the gentleman from california is recognized. mr. nunes: mr. speaker, i'd like to yield knives 15 seconds. the speaker pro tempore: the gentleman is recognized. mr. nunes: madam speaker, if you are going to spend $13 billion to create a million jobs, then why don't we just spend another $200 billion and we'd create 16 million jobs and everybody would have a job? i'd like to yield two minutes to my friend from ohio to clarify an earlier point. the speaker pro tempore: the gentleman from ohio is recognized for two minutes. mr. law torette: thank you, madam speaker. -- mr. law torette -- mr. latourette: thank you, madam speaker. oregon gets $40 million under the bill of the $1 billion and over $11 million under mr. oberstar's proposal. are you going to give me a 7% -- are you going to yield to me if you say it's not true?

mr. defazio: i signed up on the chairman's agreement and my state would not get those other funds. mr. latourette: that's what i'm saying. mr. defazio: i get about $30 million less. mr. la tore receipt: that's -- mr. latourette: no disrespect to your majority but you have not done such a great job passing bills so waiting for another bill to come -- try not to be partisan about this -- but this mess was created by george bush and perpetuated by president obama because his transportation secretary says they don't want to deal with the six-year bill until march of 2011. 30% of the construction trade in this country is out of work. why would you do this? and to my distinguished friend from oregon is transfer the $30 million and put it in the infrastructure. put these guys to work. actually build something. and again, going back to mr. oberstar's wonderful speech that he always gives, jobs with

1% of that. wouldn't it be great if we could give him $14 billion rather than coming up with a goofy tax credit, if you hire someone for $30,000 you can save $1,300 if you give someone a bill. this bill is wrong. that's what i was talking about. i yield back. the speaker pro tempore: the gentleman from north carolina is recognized. mr. etheridge: i reserve. the speaker pro tempore: the gentleman reserves. the gentleman from california is recognized. mr. nunes: i have no further speakers at this time. i'd reserve the balance of my time. the speaker pro tempore: the gentleman reserves. who seeks time? who seeks recognition? the gentleman from california is recognized. mr. nunes: madam speaker, if there's no additional speakers i'm prepared to close. the speaker pro tempore: the gentleman is recognized. mr. nunes: madam speaker, during this entire debate today, as the gentleman from ohio said, this is just a sham.

and to sit here and complain about the senate and procedural things, i mean, we ought to do another sham wow summit at the white house. maybe that would clarify and fix the problem. we're not senators. we don't control the senate. i don't understand the math that you guys use. and no one's answered it yet. you guys spent $1 trillion last year, said you'd create 3.7 million jobs but lost three million jobs. now you say you're going to spend $15 billion and create a million jobs. so let's go over some math just so we can clarify things because i know that we're going to continue to hear that republicans are obstructionists, republicans have no plans. so let me just go over some math that perhaps folks will understand. the democrats have 250 some-odd votes in the house. it only takes 218 votes to pass a bill.

and the u.s. senate, you still have almost a supermajority with 59 votes. so what's the problem? quit calling republicans obstructionist. you have the white house, you have the senate, you have the house of representatives. no more sham wow summits, madam speaker. let's get back to work. vote no on this bill. this is a scam. and i yield back the balance of my time. the speaker pro tempore: the gentleman yields back. members are reminded to direct their comments and debate to the chair. the gentleman from north carolina is recognized. mr. etheridge: thank you, madam speaker. madam speaker, today we have an opportunity to start the process of putting people back to work. and i would remind and encourage my colleagues on both sides of the aisle to support this piece of legislation. a piece that some my colleagues

have disagreed with will put people back to work. i'd remind you that there were nine republicans on the other side who joined as co-sponsors in the piece of legislation. so it was bipartisan in the senate side. and the hiring act does four key things. let me remind my colleagues of this in closing. first, it will give direct tax incentives to businesses to hire new workers. a provision still to the bill that i introduced earlier this year. it also restores full value of direct payments, options for certain tax credit bond programs, including a program that has been supported for previous congresses. it really goes to the heart of what we're about. you know, if we really believe and say we are for children, if we really say we're for jobs, there are $22 billion worth of 0% school bonds, tax-exempt school bonds in this bill and this bill fixes the problem so

they can go directly to the treasury and get the credit. those bonds can be sold. we can put people to work across this country building schools and infrastructure. that's in addition to the highway dollars we have just been talking about. and finally, madam speaker, it would give small business tax incentives to buy new equipment and to grow. that is an important piece. if we truly believe we are for small businesses, today's the day we get a chance to put a vote on the board. are we for them or are we against them? they can tell very quickly because this bill will go to the senate and then it's going to the president of the united states for signing. and finally, it would fwiff our state and local -- give our state and local governments certainty for funding highway projects. you know, i've long believed if we invest in schools now it will save money in the long term and make our economy

stronger and make a difference in the future. i served eight years as state superintendent of the schools in my home state. i co-authored the provision that we're talking about here. we can now fix that problem. madam speaker, i urge my colleagues to vote yes on this piece of legislation for jobs for the american people, schools for our children and the chance to help heal and

>> in less than a half hour, the tarp oversight commission hears from the ceo of citigroup. after that, a briefing on operations in afghanistan from the commander of the troops involved in the marja offensive. and how the president's budget will affect low-income people. a couple of live events to tell you about tomorrow. the british-iraq -- the british iraq inquiry panel hears from gordon brown at 1:00 p.m. eastern. mitt romney at the national press club. his new book is titled "no apology: the case for american greatness." as an international correspondent, t.r. reed has

traveled the world. -- t.r. reid has traveled the world. join our 3 our conversation -- our three hour conversation on c-span2. >> health and human services secretary kathleen sebelius met to talk about premium increases. she spoke with reporters before the meeting started, and again afterwards. this is about 20 minutes. >> good morning, everybody. i first want to start by thanking the executives of health insurance companies in america for being here on short notice to have this conversation, and also

colleagues from the national association of insurance commissioners. the meeting was prompted in part by the rate increases which have been announced around the country. the response i have had from people across america who higher frightened -- who are frightened about being priced out of the market -- they want some information about how this is happening and what strategies we have for looking at it in the future. they are terrified that there might be -- what is going to happen next? in a one-company situation, an individual in a smaller market is seeing multiple-digit rate

increases across the board. it is one of the reasons that the president is eager to have a comprehensive health reform bill that, among other things, has a new market rate. it is an opportunity for people to be pulled together. in the meantime, i think it is important to figure out what ideas there are, what kind of information you can share with me and i can share with americans about what exactly is happening and how we can deal with this going forward. so i appreciate the effort that you have made to be here. i think we are eager to talk about what is happening in the marketplace, what you are seeing in terms of cost trends, lost trends -- loss trends. i have had some experience.

i know a number of you, both as a governor when i governed a large state employee plan and we negotiated with your companies, as insurance commissioner and as former president of the national association, dealing with health insurance during that time. i had opportunities for these conversations. i did not ever realized i was going to be in this situation. we also have major programs that we run, medicare and medicaid. we are involved in this. i think this conversation is not only critical to the american people, but a timely opportunity for us to be together. i look forward to exchanging ideas and information to figure out where we can go to make sure that americans can afford insurance -- that they have options for affordable health coverage into the future.

with that, in the great state of kansas, she became a member of the insurance commissioner when i became governor. we have known each other throughout two terms of the past president. she still chairs the health committee. i thank you for being here today. >> thank you, madam secretary. it is a comfort for those of us at the naic to have you in your position, because we know you understand insurance and the critical role that we play. think you for holding me and inviting our colleagues. it is an important discussion. the american people are reaching out and are reaching the

breaking point when it comes to health care and the cost of health insurance. it becomes increasingly important for regulators to fairly and objectively review insurance requests for higher premiums to insure that the increase is justified by actual medical expenses and does not unfairly discriminate against any existing policyholders, especially during this financial downturn. state regulators are in a better position than many of us. some of them have not been given the opportunity by their state legislators to review and deny stock -- to review and deny increases. we believe a federal law could encourage those legislators to give that authority. what is critical is that a state will promote competitive markets.

the only thing worse than paying a high premium for health insurance is paying a high premium and having the insurer be unable to pay your claims. rate review must be done on an objective actuarial basis that accounts for underlying cost. we have been working with the administration and with mr. feinstein -- with senator feinstein. we believe their proposal will be the kind of partnership that is necessary to protect the consumer. as important as rate oversight is, it will fail unless the markets are stabilized. key provisions of the president's plan and the bills in congress would help provide the stability by ending discrimination based on health status, bringing everybody into the market, and insuring that most of the premium dollar goes

to pay medical services. in the end, the key will be the cost curve. you have all heard that term. our delivery systems must provide better quality care. unless we do so, premiums will continue to rise uncontrollably, with or without reform. again, we thank you for a holding this important meeting and including us in the discussion. our colleagues at the naic look forward to working with you and the congress to bring this effort to fruition. >> thank you, sandy. ron williams, the ceo of aetna, is going to give some comments. i appreciate him not only being here but being a part of this dialogue for the past year or more. i had the pleasure of working with ron over a number of years. welcome.

>> madam secretary, i appreciate the opportunity to be here on behalf of my colleagues, the opportunity to work with you as well. we really share common hurdles. we need to make sure working families have access to affordable health care. we recognize that our issues, particularly in the independent insurance market -- the industry last year came forward and supported many reforms to eliminate employment as a condition for getting help insurance. to make that work, we need to look at the overall health insurance pool. we are only a successful -- we are only successful when we meet our customer's needs. that means affordable health insurance. we want to get bureaucracy out of health care.

it is $2 billion to make sure that everyone has access. fundamentally, we want to make sure the insurance market works for everyone. in order to do this, we believe the access issues remained important. we need to get at what is driving that cost and recognize that consumers experience -- the rate is reflective of the other parts of health care -- the pharmaceutical costs, the hospitals, the physicians, the device makers. they all need to be part of this collaboration on how to make health care more affordable. i think last week i was struck by the comment of warren buffett. he said it best. insurance is helping the problem. insurance is not the reason health care is so big a share of

gdp. we do things that do not need to be done in paying for procedures instead of results. we need to apply the best judgment and the best quality care for all our citizens. i want to follow by thanking the commissioners for working with us. they all make certain we are complying with all state laws, all state regulations. they should tell us when we are not doing things we should be doing. through this elaborate process, i think what we need more of is everybody at the table, collaborating and working together to make certain that the rate increases slow down, which means the cost of care must go down. thank you. >> thank you very much, ron. i think we will pause for a minute. we will let the press exit.

>> thanks, guys. >> i wanted to come and report that i just completed a meeting with five ceos of the largest health insurance companies in america. the meeting was really focused on what is happening with the kind of job dropping rate increases -- the jaw-dropping rate increases people are seeing, particularly in the individual and small-business market. i think it was a helpful conversation. ceos were joined by rep -- a representative of the leadership of the national association of insurance commissioners, who has the oversight responsibility in the marketplace. we talked about some of the rate trends. we talked about some of the cost

issues. at the end of the day, i still think there is a concern that the medical trends do not match the rate increases. the medical trends are ahead of inflation costs but still well below what is being filed in the individual and small group market. i asked companies, and will follow up with an official letter, that they file online error rate requests -- file online at their rate requests along with actual -- along with actuarial data that supports those increases. at a minimum, until we have comprehensive health reform, a new marketplace, some rate review and oversight, people should at least understand what is going on. the president stopped by the meeting briefly to share his concerns about what he hears,

the fact that the current situation is unsustainable. that was acknowledged by the company presidents. as rates continue to rise dramatically, more and more people are leaving the market place and making the situation far worse for those left in, who are often the sickest and oldest patients who have no place to go. this is a step in a conversation. i hope it will be followed by some greatly increase transparency about what is going on in these marketplaces, why it is that companies who have very healthy profits -- the top companies filed for a $12.70 billion profit in 2009, and then have given dramatic rate increases that will hasten the

decline of private insurance in america. >> i had a letter from a woman whose premiums increased from -- increased by 40 percent -- by 40%. how did the ceos react? >> this was a constituent who wrote from ohio, a cancer survivor who had been cancer free for 11 years. her premiums went up 25% this year. they are going to go up another 40% in 2010. she is already paying $7,000 plus. she is paying most of her medical expenses out of pocket, paying for pharmaceuticals. she has the highest deductible possible and still is seeing extraordinary rate increases. the president said this clearly is unacceptable and unsustainable. they admitted it was unsustainable. we talked about why this market is divided, 6why sick people are

segregated. it is something the president addressed at the summit. it is a big disagreement between the republican strategy and the president's strategy. the republicans, at the end of the day, feel it is acceptable to have a risk pool that only has six people in it. you put folks with pre-existing conditions in a high risk pool. that would be their strategy, going forward. the president says we need a different marketplace. we need to pool risk. we need leveraging power, the same power that individuals and small business owners -- give them what members of congress have right now. in the meantime, we want to shine a bright light. i am hoping the ceos respond to calls for putting their information up on a website. tell us what your loss trends are.

tell us what you are paying out, spending and overhead, spending in salaries and advertising. >> lowering rates -- they admitted it is unsustainable. did they say anything specific about how they will act? >> when we began to question the wellpoint rate increase, which was filed in california, they withdrew that for at least two months. what happens at the end of two months, i am still not sure. i know the california insurance commissioner has opened an investigation and is asking for a lot of data. at the very least, a spotlight, having some transparency, having companies come forward is a helpful step for consumers. what we really need is comprehensive reform. that is part of what this discussion was about. >> what do you say to the people who still are very concerned

that the savings out of this reform package, which i think is still calculated at $500 billion, is going to come at some of the cost to services people are already receiving? >> that has been part of the misinformation that has been circulated. again, we have seen some statements recently about the enormous profitability of medicare advantage plans. as you know, the cost savings is not to eliminate medicare advantage but to stop -- to stop overpaying insurance companies for delivering products to seniors. we are subsidizing insurance companies and not improving the health of seniors. we are reducing costs for pharmaceutical companies, not limiting access to drugs but lowering the cost of those drugs. we will help to close the

doughnut hole. the dollars saved are mostly dollars that are in the current system but being spent on products, devices, waste, fraud, and abuse, that are not contributing to the help of anyone, but over paying for everything. thank you all very much. [captioning performed by national captioning institute] [captions copyright national cable satellite corp. 2010] >> also talking about health care today was senate minority leader mitch mcconnell. >> the american people are asking us to start over on health care. been trying to force on them. they want us to focus on cost instead. that has been their clear message now for over a year. but yesterday, democrats in washington said they know better. the president and his allies in congress made up their minds to turn aside any pretense of

bipartisanship and plow ahead on a partisan bill. a partisan bill, by the way, that americans don't want. in a last-ditch effort to get their way, they stake themselves to a flawed vision of reform over the wishes of the public. and what is that vision? it's a vision of health care whereby the federal government would become more involved in health care decisions of every man, woman, and child in america. where small businesses get hit with new job-killing taxes, where medicare is slashed for millions of seniors, insurance premiums go up and federal taxpayers are required for the first time ever to cover the cost of abortions. the administration and its allies in congress have tried

repeatedly to jam this vision of health care through congress without success. now they are doubling down. they have got one more tool in their arsenal. they have got one more tool in their arsenal, and they are deploying it. meanwhile, the american people are watching all this in utter disbelief. the american people are watching all of this in utter disbelief. americans do want reform, but they don't want this, and they are fed up because the longer democrats cling to their flawed vision of reform, the longer americans have to wait for the reforms they really want. and the longer they will have to wait for us to focus on jobs and the economy. the president did a very good job of laying out the problem yesterday, but the heart of the problem, as he himself described it, is the high cost of care.

and the simple fact is the bill he wants doesn't lower costs. on the contrary, the administration's own experts say the democratic plan increases costs. this alone should be reason enough to start over, start all over and put together a list of commonsense, step-by-step reforms that will actually lower costs. now, the good news is we already have the list. at last week's health care summit at the white house, both parties acknowledged a handful of reforms that all of us could agree on. that's where we should start, on the things that we agree on. unfortunately, even before the summit began, democrats were already intent on pushing the same old vision, the same old version they were pushing before the summit by any means

possible. they couldn't get the old version over the finish line, even with all the back room deals, the kickbacks, the buyoffs, so sometime after the massachusetts election, they hatched a plan to win over wavering democrats in the house by promising to use some legislative sleight of hand that will only require a slim partisan majority in the senate. this is outrageous on two counts. first, because the method they are proposing has never been used on such a sweeping piece of legislation. and second, because americans have already told us loud and clear that they don't want this partisan approach. what about public opinion do our friends in the majority not understand? the american people are saying loud and clear they don't want us to do this. what's worse, many of the same democrats who are now pushing

this party-line vote are on record as being four square against it for major legislation like this. here's what one senior democratic senator had to say about party-line votes on major legislation just a few years ago. "i have never passed a single bill worth talking about that didn't have a -- as a lead cosponsor a republican," he said ." and i don't know of a single piece of legislation that has ever been adopted here that didn't have a republican and a democrat in the lead. that's because we need to sit down and work with each other. the rules of this institution have required that. that's why we exist." i couldn't agree more. americans expect big bills to command big majorities. americans expect big bills to command big majorities. and that's why this isn't a fight between democrats and

republicans. it's a fight between democrats inside the beltway and their constituents beyond it. this is a fight between democrats inside the beltway and their constituents beyond it. there is a better way. there is a better path to reform that none of us will regret. it's time to listen to the american people. it's time to work together on the kind of step-by-step reforms they're asking for. americans aren't stupid. they know the option they are being presented with. the option of some massive bill or nothing? that's a false choice. so let's drop the partisan plan. let's drop this unsalvageable

bill and let's start over.

>> later, house debate on a $15 billion jobs bill. >> on "washington journal" tomorrow morning, we will talk about the political future of representative charles rangel and new york politics. the head of the u.s. agency for international development will discuss his agency's budget priorities and efforts in haiti. more about the health care debate with representative john dingell of michigan. the chairman emeritus of the energy and commerce committee, and our series on the president's budget continues with the head of the institute for women's policy research. "washington journal" is live on c-span every day at 7:00 a.m. eastern.

now, an oversight hearing on government aid to citigroup, the financial-services company that has received $45 billion from the tarp program. witnesses included the citigroup ceo. his testimony comes up about half way through this three hour hearing. >> the march 4 hearing of the congressional oversight panel will come to order. good morning, i am elizabeth warning -- elizabeth warren, the chair of the congressional oversight panel. congressional oversight panel. as everyone in this room knows, in late 2008, a financial crisis threatened to bring the worldwide economy to its knees. sity's special special role in this is on october 28 of 2008,

as one of the nine large financial institutions that received extraordinary assistance from the united states government, treasury injected capital into citigroup of about $25 billion. eight weeks later on december 31st, it injected another $20 billion, and on january 15th, 2009, it extended guarantees of $301 billion. this was not the first time that citigroup has needed government assistance to survive. during the great depression, citigroup then national bank, stayed alive only because of the generous policies put in place by the u.s. government. again, in the 1980s, citigroup then operating as citicorp, benefited from regulator decisions to waive standards during the debt-developed credit crisis. today we have citigroup, the

largest financial service company in the world. it has 2 million customers spread across 100 countries. it is really three different kinds of businesses combined. a commercial bank, an investment bank and an insurance company. it's worth noting that the merger of these three companies required special permission from the federal reserve in order to occur, and that to operate, it required ultimately that the glass steagle laws be repeal soed citi could do its business in this new form. citigroup appears to be returning to profitability. last december, citigroup repaid $20 billion in t.a.r.p. assistance, and terminated the asset guarantee arrangement.

treasury planned to sell its remaining 27% stake in citigroup in december, although it was delayed because citigroup share price in december was well below the price that treasury had paid and it would mean a certain loss for the united states government. the shear magnitude of citigroup's operations and the company's history of receiving extraordinary government support has led this panel to an inescapable conclusion. ci scitigroup along with a handful of other institutions enjoys implicit government guarantee. thus that the united states gooft will bear any burden and pay any price to ensure citicorp does not fail. standard and poor's issued citigroup a rating of a, three

grades higher than it would have rated the company, "to reflect the likelihood extraordinary government support were needed, it would be forth coming." in other words, citi is too big to fail and it is measurably affecting its credit rating. were it not for the market's view that citigroup enjoyed this implicit government guarantee, a view reenforced in dramatic fashion by the bailout this panel oversees, then it would be viewed as a riskier investment and frankly, it would cost citigroup more to do business. we will ask a number of questions today about how citigroup used the tax dollars it received and continues to hold today, and most importantly, what are treasuries and citigroup strategies for ensuring the american taxpayer will never again be asked to

fund another bailout for this institution. to help the panel examine these issues, we will first hear from assistant secretary of the treasury for financial stability herbert n. allison jr, then citigroup chief executive officer vikram pandit. we thank you for join us and appreciate your willingness to help us learn from your perspectives. allow me to offer my colleagues an opportunity to provide their own opening remarks. i want to say that i understand that mr. atkins has been caught in traffic, so i will ask mr. mcwaters if he would like to make an opening statement. >> thank you, professor warren. i appreciate the attendance of secretary allison and mr. pandit and look forward to hearing their views. the taxpayers repeatedly heard the phrase too big or too interconnected to fail ascribed

to certain financial institutions and they have no doubt wondered what is captured by certain concept and why these merited the investment of hundreds of billions of dollars of taxpayer source t.a.r.p. funds? today we have the opportunity to learn why citigroup was considered too big or too interconnected to fail, why treasury allocated $45 billion of t.a.r.p. funds to the institution, and why treasury, the federal reserve and the fdic guaranteed over $300 billion of its assets and liabilities. although i doubt if citigroup's credit card branch banking or its commercial lending division created the too big or too interconnected to fail problem, it is critical the taxpayers fully understand why the failure of specific investment strategies and business operations within citigroup threaten the underlying financial stability of our country. the taxpayers are also interested to learn treasury or

financial markets considers citigroup as presently structured to big or too interconnected to fail and yet eefr reversal will necessitate additional t.a.r.p. funds. perhaps the troubling aspect is the moral has yard risk arising from the implicit guarantee generated by the willingness of the united states government to bail out excess risk taking in all considered business decisions undertaken by certain financial institutions. in addition, the implicit guarantee afforded those financial institutions considered too big or too interconnected to fail may place such institutions at an inappropriate competitive advantage over their smaller peers. as long as the possibility exists that treasury or the financial markets may consider citigroup is too big or too interconnected to fail, it's critical that citigroup clearly articulate to the taxpayers what actions it has taken to eliminate such status as well as

the possibility that its directors, officers and employees will engage in needlessly risky behavior that may impair the continued viability of the institution and our overall economy. citigroup should disclose what risk management and internal control policies and procedures that is implemented so as not to require a future bailout from the taxpayers. in my view one of the principal causes was risk, firm reward where employees were motivated to structure transactions so as to surpass all the risk of loss embedded in such transactions to their employer or to third party investors while earning significant personal compensation derived from the initial closing of such transactions. it will be interesting to learn how citigroup has modified its compensation structure so as to appropriately link remun ration with the inherent risk arising

from the underlying transactions as well as the performance of the institution as a whole. it is also my expectation that the taxpayers will learn today whether citigroup will require additional t.a.r.p. funds. whether citigroup is solvent on a fair market value basis after considering contingent liabilities. whether citigroup would be required to raise additional capital if the stress test were repeated using current and existing economic conditions. whether citigroup has sold any mortgage-backed securities the federal reserve, treasury orphany or freddie at excess of their fair market value. where treasury has a rational exit strategy for its investment in sit why i group and whether a hands underwriting standards and drop in demand for perspective borrowing led to material decrease in consumer or commercial lending. thank you for joining us today. i look forward to our discussion. >> thank you, mr. mcwaters.

mr. silvers? >> thank you, chairman warren. good morning. like my fellow panelists, i am pleased to welcome secretary allison to the panel and citigroup chief executive officer vikram pandit. the thoughtfulness of both witnesses' written testimony. this is one of these extraordinary washington moments where i confess i am not sure i have much to add to my colleague mark mcwaters statement. i want to congratulate him on the throwness of his washings. because this is washington, i can't resist making my own. citigroup played a unique role in the history of t.a.r.p.

despite, and i think in comments i submitted for the written record, i go into this in some detail. in essence, the uniqueness of the role as defined by the fact at the time of 2008, under t.a.r.p. a systemically significant failing institutions program, andity i group's obvious status at the time as a failing systemically significant institution, citigroup was not given aid under that program. instead it received additional aid beyond the capital purchase program described by my colleagues a moment or so ago. it received that additional aid under what appeared to be more favorable ad hoc terms. mr. allison was not present at that time and the decisions at that time were made by secretary paulson and his team, but these events have helped define t.a.r.p. from its inception. the citigroup bailout and bank of america bailout that followed and was modelled on it raised

and continued to raise serious issues of transparency and equitable treatment of various size and political clout. more recently, up until december of last year, citigroup's regulators were unwilling to allow citigroup to repay t.a.r.p. funds, thus emerge from t.a.r.p.-related oversight. the regulators reversed themselves in december 2009 and citigroup completed a common stock offering whose proceeds were used to repurchase the government-owned preferred to being that nod only been converted to common, but the government was left as citigroup's largest common stock holder. now, today, in the aftermath of that transaction, it appears clear the obama administration treasury department managed t.a.r.p.'s holdings in citigroup to effect what is a limited balance sheet restructuring. effectively requiring or inducing citigroup's preferred stock holders to become common stock holders, not just the government but the private preferred stock holders that proceeded the government on the

balance sheet. now, this step, this move diluted common stock holder share of future products substantially. this is something i strongly support from the perspective of fairness and moral has yard and some of the considerations my colleagues were mentioning a moment or so ago. these transactions did not substantially alter citigroup's total tier one capital as a percentage of citigroup's risk adjusted assets nor result in any consequences for citigroup's bond holders. as a result, i remain concerned that citigroup's balance sheet remains vulnerable, that citigroup is only intermittently profitable. i note in the report that our chair referred to a moment or so ago, a relatively sympathetic report, standard and poor's noted its credit rating for citigroup was three notches higher than it would have been were citi standing on its own.

that citigroup remained on the well less capitalized end of its peers. i think it is a critical fact and standard and poor's believes this. i want to explore this later with the witnesses. with the outlook for citigroup remain negative. these events leave many unanswered questions, more than we will be able to address today. i hope we will be able to focus today on the following key issues. one, what aspects of citigroup's business model prior to the financial crisis made the company particularly vulnerable to that crisis? do those vulnerabilities remain? two. has citigroup's balance sheet been sufficiently restructured? meaning has a hard enough look at the assets been made per my colleague's comments and have the liabilities been dealt with adequately to reflect the true state of the assets? and third, what is the proper strategy for the treasury department now in relation to its current continuing role with

citigroup's largest shareholder. in light of this history, what steps should the treasury department take so citigroup is treated fairly in the way other banks large and small >> mr. atkins? >> thank you, madame chairwoman. i would also like to add my thanks to mr. allison and to mr. pandit for appearing before this panel today. your your voluntarily, and taking valuable time out from your very busy schedules to be here in washington. we and the taxpayers thank you for helping to bring some openness and personal connection to our oversight role. citigroup has had huge challenges during the past couple of years. without the u.s. taxpayers, citigroup might not be in business at all today.

citigroup's stopped short last year project stock chart so is a sad decline. represents a huge loss for shareholders, ultimately retirees on fixed incomes, parents saving for college, and people putting money away for a rainy day fund. fixed income, parents savings for college and people putting money away for rainy day fund. it also mean as huge loss for employees, many who lost much of their most important assets. it's difficult to rebuild loyalty and enthusiasm, innovation and motivation in that sort of environment. a financial services firm may have lots of assets, but ultimately like any company, it's only as good as the quality of the people that it attracts. does a huge stake owned by treasury help or hurt that effort? a financial services firm ultimately like any company is only as good as the people that it attracts. there are many risks to taxpayers, shareholders to an enterprise such as citigroup

which has made many changes. holdings of self-described noncore businesses have decreased by some 40% over the last year or two. there is, of course no assurance that this realignment will be successful or that it will reposition citigroup for success in the future. that's the risk that an equity holder takes, analyzing management's decision-making in deciding whether or not to go along for the ride. of course the taxpayer in this case is both as treasury terms it, a reluctant shareholder and a totally inexperienced shareholder. it's certainly not treasury's core expertise. i should make a couple of points regarding regulatory risks because citigroup corps like a lot of people in business face business risks, credit risks, counterparty risks, exchange risks and political and regulatory risks. congress is considering several bills that could reshape the regulatory landscape significantly. i strongly disagree with some of

the positions that citigroup has taken in this regard. i'm concerned that citigroup is allowing itself to become a politicalized entity. it's difficult to avoid the impression one of the motivations that the country curry favor from the hand that feeds it, regulator, resolution authority or whatever, my fear is that citigroup is curing favor at the expense of enterprise and all shareholders. just last year here in washington, the tellers all had several copies of a book by barack obama at their stations. when asked if that were a political statement, the teller told me, no, we are giving them away to people who open new accounts. well that certainly is a political statement or at least an amazing example of sychoph

sychophancy. i look forward to exploring these issues this morning. thank you very much. >> thank you, mr. atkins. superintendent neiman? >> today's hearing is a unique opportunity. in addition to the reasons stressed pie my panel colleagues, my hope is that it will be able to view critical oversight topics through two different perspectives. that of the department of the treasury, the creator and administrator of the t.a.r.p. program, and that of citibank, one of its largest recipients. having assistant secretary allison and mr. pandit here together is an occasion to consider whether t.a.r.p. strategies are working and determine if we are taking the right steps going forward.

i will be especially interested to hear whether our witnesses believe larger banks like citi turned the corner. after the public confidence inspired by the stress test and subsequent earnings reports, our larger institutions still in need of t.a.r.p. support? does the return of many larger institutions to profitability signal a return to sustainability in their business model or are temporary trading gains masking continuing weaknesses and losses in loan portfolios. citigroup has engaged in serious realignment and reorganization efforts, both through the creation of citi holdings and in divestiture of business lines. has the taxpayer stake in citi been well served by these actions? are there lessons learned that could apply to other intuitions? finally, we must take advantage of mr. pandit's presence here today to question him, not just from the perspective of our

ownership interest in citi, but as home owners and consumers. citi has a large number of mortgages at risk of foreclosure, so i intend to fully explore citi's modification efforts under alternative programs. citi is also a large and important consumer lender, so the public will gain a great deal by exploring their lending practices and their view on how regulatory reform should protect consumers. if we have learned anything from this crisis though, it is that risk can materialize where it is least expected. therefore, a strategic vision for institutions, for t.a.r.p. and for broader regulatory reforms, must creatively think about the range of developing risks and how best to protect consumers and taxpayers. i look forward to your contribution to this process through your testimony today and the answers to our questions, and i personally want to thank you again for your attendance.

>> thank you, superintendent neiman. mr. allison, if you would hold yourself to five minutes, we will take any written remarks and include them in the record. thank you. >> thank you very much, chair warren and members silvers, neiman, atkins and mcwaters for the opportunity to testify today. i will discuss treasury's investments in citigroup, our reasons for making these investments and progress toward exiting them. in september 2008, the nation was in the midst of one of the worst financial crisis in our history. the economy was contracting sharply, and fear of a possibility depression froze financial markets. the u.s. government took unprecedented steps to prevent the complete collapse of the financial system that threatened the economy. in one of the most important responses to the crisis, congress enacted the emergency economic stabilization act or

eesa which granted treasury authority to restore liquidity and stability through the financial system through the troubled asset relief program. since t.a.r.p.'s creation, treasury made cash investments of $245 billion in 707 banks. there is broad agreement today because of t.a.r.p. and other governmental actions, the united states averted a potentially catastrophic event. treasury invested a total of $45 billion in citigroup and agreed to share loss necessary a portfolio of approximately $301 billion of citi's assets. in february 2009, treasury announced stress tests for the 19 largest u.s. bank holding companies to measure how much additional capital each institution would need in order to remain sufficiently capitalized if the economy were to weaken further.

the stress test results announced in may indicated that nine institutions had adequate capital and that other ten would have capital needs totalling $75 billion. of this amount, citigroup's additional capital requirement was $5.5 billion. after the stress test was completed last may, citi conducted a series of exchange offerings from preferred shares to common, and significantly improved its tier one common equity. treasury converted $25 billion of its preferred to common at $3.25 per share. large banks have subsequently raised $110 billion of new common equity and $43 billion of capital in other forms. the bank's renewed access to capital in the public markets enabled them to make repayments to treasury, totalling $169 billion to date representing 70%

of all t.a.r.p. investments in banks. while the financial markets have not yet fully recovered, conditions have significantly improved. treasury has notified congress that it does not expect to use more than $550 billion of the $700 billion authorized for t.a.r.p., and is terminating the capital purchase asset guarantee and targeted investment programs. in december of 2009, the federal reserve agreed to allow citigroup to repay treasuries exceptional assistance and terminate the asset guarantee. to be permitted to take these measures, citi was required to have a post repayment capital base at least consistent with the stress test standard, and to have further demonstrated its financial strength by issuing senior, unsecured debt for a term greater than five years, and without the backing of fdic guarantees. today citigroup has repaid the

$20 billion and exceptional assistance and has paid $2.8 billion in dividends to treasury. taxpayers earned a profit on these investments. the government's contingent liability for the asset guarantee has been terminated at no loss to the government. in fact, taxpayers have made a profit from this guarantee. additionally, treasury has announced plans to divest the the government's holdings of citigroup common shares in an ordinarily manner over the next 12 months. decisive actions taken by the u.s. government have created a financial system far stronger than a year ago. however, the financial system is operating under the same rules that led to its near collapse. these rules must be changed to address the moral hazard posed by large, interconnected financial institutions that present risk to the financial system. the administration has proposed

comprehensive financial reforms that seek to force these institutions to internalize risks, remove expectations of government support, and protect taxpayers from having to finance future interventions. thank you very much. >> thank you. we appreciate your being here, mr. allison. i would like to start this morning with treasury's role in overseeing the t.a.r.p. generally and overseeing citi in particular. on october 14, 2008, secretary paulson announced the creation of the capital purchase program. and the infusion of cash into nine financial institutions including citi. under the program he announced, these are the words he used, "these are healthy institutions, and they have taken this step of accepting taxpayer money for the good of the u.s. economy." as these healthy institutions increase their capital base, they will be able to increase

their funding to u.s. consumers and businesses. on october 28th under that statement, citi got $25 billion, was pronounced a healthy institution, and yet on november 23rd, which i think is three weeks and four days later, the secretary of the treasury announced that citi was, citi and citi alone was in such dire straits it would need additional $20 billion and that was then followed by another $102 billion in guarantees. what i want to understand is no you we describe citi as a healthy institution. what does healthy mean now that it didn't mean on october 14th, 2008? >> thank you, chair warren, for your question. as you know, the treasury does

not make comments about the financial health of any particular institutions. in having the funds repaid -- >> i'm sorry. i was quoting the secretary of the treasury on the health of citi and other financial institutions. >> i think at the time that was an extreme situation. i'm not going to comment or second guess what the secretary of the treasury at that time had to say. >> so your position is that we declared it a healthy institution and now we take no position on the financial health of citi? >> it's not our policy to comment on whether any institution presents a systemic risk or on its particular health. i want also to say because we are a large shareholder we can't make comments on the prospects of citigroup. >> but you were making the decisions at treasury of citi's backing out of the t.a.r.p. program. >> i think it's very important to point out that is not the case.

in fact, under the law passed by congress, we have no decision making with regard to citi's repayment to treasury. that authority is given to the regulators of these banks. they make that determination hdá@ @ @ @ @ @ @ @ @ @ @ @ @ @ >> so you see the role of treasury as passive on the question of citi's overall economic health? >> we are strongly advocating a financial reforms to prevent this situation from happening again. by assuring that no single institution can threaten the financial system. >> i appreciate that, but are you telling me you are exercising no supervision over

citi in its financial obligations today, no oversight of the financial health of this institution? >> as you know, madam chair, we are very reluctant shareholder. we wish to dispose of the shares in the public market as soon as circumstances permit in an orderly manner. we have agreed with citigroup in the contract and we have stated publicly this is the general policy of the u.s. treasury. we are not going to interfere in the day to day management of these companies. active shareholder. we are not going to interfere in the day-to-day management of these companies. we will only vote in a proxy on certain well-defined and limited circumstances. >> so the health of citi is not your department. that belongs somewhere else in government? >> again, we are concerned about the financial system.

we are concerned that no institution should be able to present significant risk to the financial system, and that's why we are strongly advocating financial reforms that we hope will be enacted by congress shortly. >> i understand that about going forward. let me ask one more quick question. under the stress test citi was required to raise $58 billion in an exchange offer another $5.5 billion in fresh capital. if citi had not been able to raise that money, what would treasury have done? >> i think that is a hypothetical question. >> yes, it is. >> citi did make these exchanges. we participated in that exchange. >> what would citi have done if it had not raised the money. >> i can't speculate on that. >> you can't speculate. thank you. my time is up. >> thank you, madam chair. i wanted to explore a little

about the offering that citi group did last fall, last december, i guess it was. i just wanted to get your explanation. there was obviously it looked like not as smooth as probably either you all or citibank wanted it to go. i wanted to ask your explanation for how that hiccup happened in the offering process? >> well, again, citi managed the offering. that was their decision. we did announce at the time that we intended to sell not our entire offering, but $5 billion perhaps alongside citi's offering. we decided that because of the behavior of the stock at that time it was not in the taxpayers' interest to make that sale on our part. as to their offering, i wouldn't comment on the offering.

they did succeed in placing $20 billion of new shares and obviously, shareholders were willing to make that investment in the public market. and what is really important is they were setting the stage to replace government capital with public capital, which we think is much stronger capital. we don't want to be a shareholder in that company. we think that companies are far stronger if they're financed out of the public rather than the government. >> when we look now then at the situation with respect to the stock, there's some 27 billion shares or so outstanding, the most shares of any that i know new york stock exchange listed company, and the government owns about 27% of that, so have you all considered once the lock-up period ends how you will tackle

such a large type of disposition of shares, especially with a share price being below $5? >> yes. mr. atkins, we've begin this very careful thought, as you can imagine. i'm not in a position to make a public statement about how we will dispose of our shares. that is not in the taxpayers' interests. we have looked at many different alternatives and consulted widely, and we will be making our decision apparent over time. >> so you intend to hold perhaps a number of offerings rather than one? >> as much as i would like to be responsive to your question, i don't think it's in the the taxpayers' interest to do so, sir. >> i agree. as far as your involvement with respect to management and the board of citigroup, could you sort of explain to me how often you have contacts and what sort of contacts those are? >> we have contacts with citi as

we do with many other banks. we are taking a very limited role as an investor. we are not getting involved in the day to day management of citigroup. instead, we will only be active as a shareholder in voting for directors and voting on major corporate events, in voting on issuance of significant new share holdings in major asset sales. in changes and bylaws or charter. other than that, we intend to act as any public shareholder. >> when we had a hearing last week with respect to gmac, and the government took the position of gmac, clearly a bank holding company, they took seats on the board and are increasing the number of seats because of the number of the amount of holding has increased in gmac. citibank, of course, is a

different position. two board members are now, they recently announced are leaving the board. is there any plan for the government to have members of the board? >> we have the right and the ability to vote on directors. that's the position that we'll take at the appropriate time. >> so you have no plans to put a government representative on the board? >> i would note citigroup's board has changed significantly in recent times. in response, i presume, to this crisis. >> but that was not due to government prompting or -- >> i cannot comment on that. i don't have that information. >> okay. my time is up. thank you. >> mr. silvers? >> thank you.

assistant secretary allison, i'm somewhat disappointed by the way you appear to be narrowing your testimony in response to questions from the chair. i'm looking at your written testimony now. i want to make sure that i -- it appears to me that the statement on page three of your written testimony in response to in relation to the treasury's investment in citigroup, treasury believed its actions were warranted and necessary, represents a taking of a position on several questions related to citigroup. i'm going to try to unpack what i believe the position you are taking is. for starters, would you concur with the statement in november 2008 citigroup was a systemically significant financial institution? >> i would. >> at least we established something here. would you con k cure with the statement november 212008, citigroup was a failing institution?

>> i think that the entire banking system was at risk. virtually all major banks were having difficulty or would have difficulty funding themselves. i think that was probably the most significant financial crisis. >> did any other financial institutions contact the treasury department november 21, 2008, and express the view they were going to fail within a week? >> mr. silvers, i was not there at the time. i cannot comment on that. >> can you check the phone records and see if anyone else happened to made such a call? >> we'll be happy to respond to your question, yes, sir. >> there are voluminous press and i think now book accounts and for all i know songs and tv shows in which this, what i just stated to you has been asserted. do you have any reason to believe citigroup did not do that? >> i have no reason to believe either way. i have no knowledge of it and therefore i cannot comment, but we will respond to your

question. >> you said the entire financial system was failing. do i interpret that to mean you agree citigroup was failing on that date? >> i believe incredibly strong action was necessary at that time to prevent a catastrophic failure. >> that is not my question. my question is -- i don't disagree with you, by the way. strong action was needed at that time and during that period. i'm asking you, was citigroup a failing institution? this clearly can't be that complicated a question to answer. >> i'm trying to comment on a broader issue. i'm asking you about a specific firm, the subject of this hearing. >> i would like to respond to your question, if i may. >> sure. >> i think citi and a number of other banks, many banks, were on the brink of failure had the system not been underpinned by

actions of the government, including the federal reserve as well as the u.s. treasury. >> but no other -- >> the treasury department took the type of action you are talking about a month earlier. the fed took certain other actions. a unique step was taken that week with respect to citi. >> in the case of citi that week where action was taken, citi was in a position where it was and it did communicate this to treasury. i know this. that they were having, they could have difficulty funding themselves at that time. their debt spreads widened considerably. so in the opinion of their management, they were facing a very serious situation. >> these sounds like euphemisms for failing. i have the great respect for the

work you've done and t.a.r.p. but i do not understand why it is the united states government cannot admit what everyone in the world knows which is in that week citigroup was a failing institution. i don't understand why, since no one denies they called the treasury department and asked for extraordinary aid and said effectively they would run out of cash, why it is that we can't all agree they were failing. can you explain to me why that is? >> i'm not trying to take issue with your characterization. >> then let's move on. >> i am trying to describe what the actual situation was. >> we agree they were failing. >> they were a failing systemically institution. now, can you explain why they were not placed in the program that treasury had at the time -- again, i know you weren't there,

but you devoted a substantial part of your testimony defending these actions. can you explain why a systemically failing institution was not placed in a failing systemically institution program? >> there was a program, the targeted investment program, which -- >> mr. secretary, that program did not exist on that date. >> i don't have the details on the particular circumstances around that investment. it's my understanding that investment, if you're talking about the additional $20 billion, was characterized as part of the target investment program. i would be happy to look at that. >> six weeks after it was made, mr. secretary. i know my time has expired if you can indulge me five more seconds or ten more seconds. i just find it extraordinary that it's not possible to simply have a straight forward conversation about this. >> i'm trying, but mr. silvers,

what is not there. >> i know you were not there. i am trying to find out why you are so protective of decisions that don't make any sense. >> i'm not trying to be protective. >> mr. mcwatters? >> thank you. mr. allison, do you have any reason to anticipate citigroup will require additional t.a.r.p. funds? >> none. >> i'm sorry, i don't understand your response. >> i have no reason to expect and we have no plans whatsoever to make further investments in citigroup. >> fair enough. on a fair market value basis after considering contingent liabilities, do you believe citigroup today is solvent? >> again, we rely on the determinations by the regulator, which i know carefully reviewed their financial situation before they agreed to permit repayment to the treasury department by

citigroup. >> we cannot comment on their condition or their prospects. >> if the stress tests were conducted today using current economic conditions and the expectation of future economic conditions, would citigroup be required, most likely be required to raise additional capital? >> that would be a determination by the regulators, not by the treasury department. >> so what do you think? have you thought about this? >> i would like to be as forthcoming with you as i possibly can. i am here to provide you with information. we cannot make a comment on citigroup's prospects for their financial condition as a shareholder in citigroup at this time, and as an institution that is not their regulator. >> but after the taxpayers invested $45 billion, $300

billion guaranteed, your answer is the financial equivalent of the fifth amendment? >> no, sir. what i would point out is that citigroup has repaid the u.s. treasury $20 billion, and we have terminated a guaranteed for $301 billion. so today, we are a shareholder. >> which is the reason i ask if they are solvent and if you anticipate additional money will be required from tarp. >> i have said that i do not anticipate any additional money will be required from tarp. ey will be required from t.a.r.p. we have no plans in that regard. we are intending to dispose of our investments in citigroup as rapidly as we responsibly can. >> what do you anticipate the exit strategy will be? >> again, as we said, we intend to dispose of our hold

holdings in a responsible, careful manner within the next year. >> okay. >> have you thought about completing another round of stress tests under current economic conditions? >> we, again, understand and know that the regulators are carefully monitoring these banks. it is not our role to perform stress tests for the banks. that's done by the regulators in close consultation with those banks. >> but i mean have you thought about the issue? have you made a recommendation? do you think stress tests should be run again, or is everything okay? >> we believe that the -- that the financial system is in far better shape than it was before, evidence that have is the fact that banks have been able to raise substantial amounts of equity and also have been raising debt funds without government guarantees. and therefore, as we look forward while we, as a testified, still see some problems in the financial

system, it's far stronger than it was a year ago. >> are the -- have the current stress tests been audited by gao? are they in the process of being audited? >> i don't know whether gao has audited those stress tests. we will get back to you on that question. >> okay. i would like to know when you expect the results of the audits, what you anticipate they will say and whether or not there was an under statement of required capital. >> again, i can't speak for other agencies. >> i understand. >> of the u.s. government. >> i understand. i only have a short time left, but why specifically do you think that citigroup needed to be bailed out? what happened? what was the problem? again as i said in my opening statement, it wasn't brank banking, it wasn't credit cards i don't think. it was something else. what was that, and las it been fixed? >> well, i think what we saw was

a great deal of risk in the financial system that the time. it became quite evident as the markets began to seize up that these institutions were facing large exposures in a variety of ways. and that their capital could be rapidly deplooet pleated which led to the t.a.r.p. program where congress itself agreed that this was an unprecedented crisis and that the u.s. government would have to step in to provide support. >> okay, my time's up. superintendent nieman. >> thank you. mr. allison, as you know in our next panel we're going to be hearing from one of the largest banks in the country and one of the largest t.a.r.p. recipients. i'd like to explore the dynamics around large banks both in terms of current market conditions and the future direction of t.a.r.p. the question ask, how do you view the trend of repayments

from stel but also the larger institutions that have repaid tarps? and specifically how much of it will reflects a return to health and how much of it reflects or as s a reaction to against program standards or the stigma of participating in snarp. >> well, first of all, we are pleased to see that large banks have succeeded in raising substantial amounts of equity capital in the public markets and that they are replacing government capital with public capital. to the point that we've now received back 70% of the government's investment in banks at a significant profit to the u.s. taxpayers. and as they replace government capital with public capital, the quality of that capital is certainly far better and it provides a base for them to do additional capital raises going forward. so we are highly encouraged and pleased by the progress that has

been made in these banks recapitalizing themselves in the public markets. >> so does that return of capital and in many cases to profitability, does it reflect a return to sustainable profits in their business model, or do you see it as a reflection of temporary trading gains that may possibly be masking continuing weaknesses and losses in loan portfolios? >> well, if we look at their capital ratios, the large banks have shown material improvement in their tier one common equity ratios which is the most important type of capital, they're able to raise funding in the markets. the markets are also observing the health of these banks and what we've seen is evidence through these capital raises of greater public market confidence in the health of these banks. >> and what does it say about the quality of the earnings? is that sustainable as to where it's coming from?

and i think to the extent it's coming from lending versus trading i think is an important factor. >> again, if i start commenting on earning streams, i can -- some may interpret i'm commenting on citigroup. >> let's talk more broadly because we do have metrics and i think some of the more important once are those that have come out of the federal reserve from the fdic on lending sticks. their last quartly banking report issued last week shows historic drops in lending levels. in fact, it's the largest yearly decline since the fdic was createded. how would you analyze and interpret this data regarding decreased lending at lending levels? is it -- does it show a significant degree of lack of progress in financial stability or other factors in your interpretation? >> well, there are many possible

reasons for the decline in lending, and this has been widely discussed. is it can be due to a natural caution during a recession on the part both of borrowers and lenders. and we will, as i'm sure you know, have announced a program to provide to make available additional capital to mid-sized and small banks who do outsized amounts of lending to small businesses across the country. we've announces a $30 billion program. we're hoping to get congressional approval for aspects that have program and to move it forward as rapidly as possible. and that program is geared to lending because it will -- it provides for a sharp reduction in dividend payments to treasury on the part of banks that lend materially more than they are today. >> one important question on metrics. one of the important metrics that we have suessed is the

treasury's monthly snapshot of the banks who have been reporting. as i look at the data of february 16th, the snapshot now only reflects 11 institutions because it is no longer contains institutions that have repaid t.a.r.p. funds and i think in this report it was repaid in june of '09. >> yes. >> i think that will have limited continued limited usefulness, this dat as we go forth to the extent that institutions are examplituded from the report. is there any consideration to expanding? and i can see continuing asking institutions to continue to report despite the fact that t.a.r.p. funds may have been repaid. >> yes, in fact, when the banks began to repay last summer, we called the banks that were repay ang requested that they continue to report through the end of this year. and they all agreed to do that. we'll be happy to take your quell into consideration. >> yeah, i think earlier we've even encouraged expanding it more broadly and would be very concerned to the extent that is

limited. >> thank you. >> thank you, superintendent nieman. so i was struck by your comment, an siftent secretary allison, that the taxpayers made a profit on their deal with city bank. that will citi has a too big to fail guarantee that is very valuable right now. it shows up in their credit rating that the american taxpayer will not let them fail. what is citi paying the taxpayers? >> first of all, there is no too big to fail quarantine on the part of the u.s. government. and i can't account for any statement that some outside agency may make. we intend as i've mentioned, to dispose of our shares in citigroup as soon as possible. >> mr. allison, i understand that. but the question i'm asking is the market clearly perceives that there is a too big to fail guarantee and the market is rating citi higher because of that. that gives citi an advantage in

raising capital. that is very valuable to citi, and it is potentially very costly to the american taxpayer and i want to know if the american taxpayer gets paid for that. >> really what you're pointing out is the need for reregulation of the financial system. >> i understand that. >> it's essential that no institution is viewed as. >> i will take that as a no, that we are not being paid for the guarantee that we are providing citigroup. >> there is no guarantee of that institution or any other institution. >> ial take that as a no. so let me ask about, you said we have no more plans to put t.a.r.p. funds into citigroup. part of the reason citigroup had to be bailed out stemmed from the difficulty of entangingal counter party risks around the world. i'd like to know how has treasury managed systemic risk questions posed not just by citigroup bibi all of the large companies but particularly by

citigroup and consult tagsz with your regulatory counterparts around the globe. what are you doinging abouting thatting? are we any safer than we were a year ago? >> there are continuous conversations with financial leaders around the world. and i think you've seen them say that there's closer coordination today and much better communication. >> well, i'm glad that there may be more coordination. let me ask it in the more specific perhaps with citi. are you making any effort to separate citi's activities, its counter party risks and operations around the world that we say caused systemic failure or systemic failure would be caused if they failed? are we making any effort to segregate that say from their trading activity taelts a fairly high risk undertaking. >> again as you know, we've made many statements and taken the initiative to request major changes in financial regulation in this country, which could

address a number of those issues. for example, assisting on capital adequacy, comprehensive oversight of these institutions and very important, a resolution authority so that no institution with the government would not be put in a position of having to take over an institution or to somehow support it. >> almost assistant secretary. >> yes. >> i appreciate the need for reform of the financial system. and looking forward, i think that's exactly what we have to do. the question, however, is that we have a system in place right now. treasury came to the united states congress and said, in october of 2008, we have to h$2 have $700 billion or the economy will fail. one of the specific problems was that citi had this deeply

intertwined overseas operation that we were told as a people would, if we tried to unravel it, cause a systemic shutdown in economic markets, that the results would be catastrophic. and that was one of the principal reasons that the american congress went along with the t.a.r.p. bailout. so my question is, what are you doing about that now? what are you doing to isolate the part of citi and citi's operations that could cause systemic failure if they go down from citi's other high-risk undertakings? for example, their trading activities? >> yes, well, as you know, there is the volcker rule that's being discussed today. >> you're talking to me about the future and the future you're talking about is one that puts it back on congress to change the laws. i'm in favor of that, mr. assistant secretary. but we have to survive day to day, and it is treasury who is

responsible. we don't want you back here asking for money. >> chair warren, w that is why we are advocating that reform be initiated and passed as soon as possible. >> i am going to do this one more time. please do not tell me about advocating change for the future. what i would like to know is what are you being we do what are you doing to manage the risk of citi that face the american people right now? >> citi is under regulatory oversight, and the regulators are responsible for assuring that citi is being properly controlled and is that it has adequate capital. >> are you telling me there are no efforts to segregate the risky activity from the systemically critical activity? >> we are not involved in managing the citi on a day-to- day basis, and regulators oversee citigroup.

that is a question you might ask mr. pandit when he comes here shortly. >> thank you. i apologize for going over. >> i just have a couple more questions. with respect to -- there was an interesting article yesterday about a small midwestern banks. this is a little bit off topic, but it will get back to the topic in a second. . . read it. a small midwestern bank has negotiate with the treasury tore taxpayers to essentially buy the shares at an above market value price in an unusual transaction reflecting how the government's bank investments are entering a new phase. midwest bank holdings agreed to swap 84.4 million of preferred shares for securities that will convert to about only $15.5 million of common shares roughly

an 80% loss to taxpayers. it quotes hedge fund managers. there's a lot of funny stuff going on here. in section 101 of esa, it basically says the secretary shall take such steps as may be necessary to prevent unjust enrichment of financial institutions participating in a program including by preventing the sale of a troubled asset to the secretary at a higher price than what the seller paid to purchase the asset. so i was wondering if you have -- if you can elucidate us with respect to this particular transaction and does this portend a change with respect to treasury's view of the assets that it holds under t.a.r.p. and the remaining banks? >> as we looked at the situation of midwest bank, we determined that the best way to protect the taxpayers' investment would be to convert our position into mandatory convertible preferred

on the condition that that bank raise additional capital, a substantial amount of additional capital from public sources. so this is all about protecting the taxpayers' interests. and preventing, we hope, further erosion in our position. with that bank. >> okay. so again, i mean, i know you've said that you can't really speculate with respect to city bank and again we have huge interest in that particular company. and a huge number of shares are outstanding. so you might consider other sorts of situations liking this that might convert what we currently hold into other sorts of security interests in the company. >> well, our interests are protecting taxpayers and their investments. and there may be situations where we will look at what we might do in the way of protecting ourselves through a

structured recapitalization that we might participate in, but in each one of these cases, we're guided by what's in the taxpayers' interests. >> okay. so that gets me back to some of the other things that the administration is doing and whether or not that's really in the best interests of the taxpayer and shareholders in this case of city bank. and you mentioned volcker rule, so-called, which i guess i saw in a report that formal language was sent up to the hill today. what effect will that have on my interest as a taxpayer in city bank as a shareholder, a reluctant shareholder at that to the profitability of city bank and to its businesses. >> again, i think that's a question better asked to the ceo of citigroup and again, i cannot comment on potential impacts on the company in which we hold a large investment. >> it seems to me that the government's giving with one hand and taking with another

including now the -- with respect to resolution authority that you were talking about, the administration and you note this in your testimony that "the administration's proposals provide this resolution authority subject to strict governance and control procedures with losses absorbed not by taxpayers but by equity holders unsecured creditors and if necessary, through a fee on other major financial institutions similar to the financial crisis responsibility fee." so first of all, aren't proposals like these actually putting additional costs and burdens on banks at a time when insuring that banks are sufficiently capitalized should be priority one? >> well, we think that these measures are called forgiven the circumstances that the taxpayers have faced. we, by the way, we will intend as the treasury secretary has announced to give back every

penny that we have invested through t.a.r.p. and the financial crisis recovery fee is one way of doing that. we would also point out that many institutions have paid very large bonuses. they can afford, we think, to reimburse the taxpayer. >> well, unfortunately, you know, they also have to run a business, as well. but anyway, my time is up. we'll get into that later. thank you. >> thank you, mr. atkins. mr. silvers? >> i think it might be helpful, mr. assistant secretary to try to clarify what the taxpayers' interest is here in light of my colleagues' questioning. first, let me return to what may be a painful subject. do you agree that citigroup today is a systematically significant institution? >> again, mr. silvers with, all respect, we cannot comment on a judgment about whether they're systematically significant. >> you agree they were in the fall of 2008 though? >> the determination was made at

that time that they were systematically significant. >> your written testimony appears, you're not going to answer that question frontally. i'm going to infer it from your written testimony that you believe that. if you wish to tell me that you don't, that's fine. let's start with that. it would appear to me that the united states as has been frequently noted is a 27% common stock holder in citigroup and that that's a significant financial interest of the public at this point. i assume you agree with that. >> i do. >> all right. it would also appear that there is at least a significant probability based on historical events that we are some sort of guarantor of citigroup's obligations in light of i think what we agree that we did not allow citigroup to default on those obligations multiple times in the past and most rlsly a year or so ago. you're free to disagree with me. i don't expect to you confirm what i just said.

>> well, we did guarantee part of their asset foz for a period of time and well compensated for doing that. >> i'm suggesting we have a broader somewhat ill defined guarantee. certainly the credit markets or at least credit market analysts believe that to be the case. so we're not in the position as my colleague would appear to suggest it seems to me of being simply a stock holder in citigroup and then finally, if we believe that there is at least the possibility that will citigroup will turn out to be systematically significant today as it was in 2008, there's an even larger interest at play here. would you disagree that that's at least a possibility that there is a systemic interest here that the taxpayer has? >> well, first of all, let me say again that the purpose of the regulatory reform initiative is to assure that no institution could infer or the public can infer that there's some type of implicit guarantee of a financial institution by the u.s. government.

we want to remove that possibility. >> but as our chair has commented on that unfortunately, i think you and i agree, unfortunately this reform has not passed and today we live in a reformless world. >> yes. >> and i gather at least one of my colleagues would prefer to keep it that way that we live in a reformless world. but that's how, you know, the treasury has to function in that arena. seems like the public has three interests in play at citi. my question to you is, what is the -- how does treasury balance or manage, what strategy does treasury pursuing in light of these three somewhat conflicting interests? >> well, again, our strategy as a shareholder in citigroup is first of all, to dispose of our investment as rapidly as we can in a responsible way. secondly, not to get involved in the management of the company. we don't believe that's in the

shareholders' interests or in treasury's interests. we are casting our involvement very narrowly as a voting shareholder and voting only on certain items in a proxy statement. so we think that the best thing we can do, twofold, one exit that investment as rapidly as we responsibly can, and secondly, push hard for financial reform, let me say it again to, make sure that the u.s. taxpayer is never again put in a situation like we pais face today with citigroup owning 27% of that company. >> can i turn to a different matter then as my time is about to run out? i alluded in my opening statement to the fact that common stockholders of citigroup have been over time diluted. >> yes. >> and largely as a result of actions taken by in administration over the last 12 months although not exclusively. there was a little bit of

dilution involved in the initial suspect transaction. however, it appears to me that there is substantial differences nonetheless between aig, the other -- what i find to be the inevitable comparison in terms of a systematically failing institution. the dilution there and the dilutioning in citigroup and i would like to ask you to provide us with your analysis of the comparative of comparing the dilution in the two areas and in particular your analysis of the effect of the difference between what happened in aig where the treasury came in with debt, debt financing entirely, senior to the common stockholders and took a large common position through warrants and the citi situation in which preferred stockholders were converted into common and thus, essentially, more cash was put in with the common. obviously, i'm not asking you to answer that question now, but i'd like an apples to apples

comparison of the dilution in the two firms as of today. >> well, first of all, aig received assistance in the fall of 2008. the federal reserve actually made the bulk of that investment and the federal reserve owns preferred shares, voting shares that control about 80% of the voting rights is my understanding. and citi on the other hand we made these preferred investments in citi, as you well know and we had an exchange last summer as part of a number of exchanges of preferred for common that were done at the time to bolster citi's tangible common equity ratio. >> i'm going to stop you there if you can, mr. allison. we'll come back to this and we'll permit -- we'll keep the record open so we can add more detail on this. i just want to be disciplined about time. mr. mcwaters. >> thank you. plrm assistant secretary, during calendar year 2009, did t.a.r.p.

recipients sell any mortgage-backed securities to either the fed, treasury, orphanie or freddie? >> i don't have an exact answer for that, mr. mcwaters. i'll be happy to get it for you. >> if you would look into that and also look into the price that was paid. >> all right. >> the fair market value at the time or was it par, something in excess of fair market value is what i'm interested in knowing. >> okay. >> what actions has citi taken again specifically to negate too big to fail problem so we're not having this discussion again in five years? >> may i respectfully ask that you pose that question to mr. pan dit who is the ceo? i think he's in a better position than i to describe the actions they've taken internally. >> i know but i suspect you talk with him on occasion. >> actually, i have not talked to mr. pan dit about this

matter, no. >> okay. how did citi em employ the $45 billion of taxpayer funds? >> those funds were for general corporate purposes. they were part of the capital of citigroup. it was designed, that entire program was designed to provide additional capital to banks. >> okay. does citi use retail or commercial bank deposits to finance proprietary trading activity. >> again, i'd ask you to you ask that question of mr. pan dit. i don't have that information. >> but i mean this has been alleged as one of the causes of the financial crisis. and so it's not a question you've asked? >> no, it's not. >> okay. >> okay. do you have a view as to how the activity of short >> i do not have that information, sir. >> any view as to how the mark

to market accounting rules particularly, how they were revised in april of 2009 -- affected city group of financial reporting? >> i think you would have to ask the co. >> these are things you have not thought about? >> no, the role in treasury is to analyze investments and retrieve those investments as rapidly as we possibly can. >> ok, i can anticipate the response to this question. it has been alleged goldman sex sold collateralized debt obligate -- goldman sacks sold collaborated debt obligations. are you aware that they were engaged in illegal activity?

>> i am not. >> what is your view about the guaranteed it would have on the competitors of city grew? >> let me say again. there is no guarantee of citi group or any group on the part of the u.s. government. >> i said explicit. >> i am trying to be as precise as i can. implicit guarantee means. i'm trying to be as precise as i can. >> okay, fair enough. but so as far as you know, it has had no effect on competitors that -- i mean, let me ask it this way. is citi today too big to fail? i mean if the answer is no, it can fail and be liquidated then i would say it would have no effect on competitors. but is citi too big to fail today. >> as i've said before, i can't

comment on the condition of citigroup as a -- since the u.s. treasury is a major holder of their shares. >> okay. my time is nearing the end so i will stop there. >> thank you, mr. mcwaters. superintendent nieman. >> thank you. >> i intend to ask mr. pan dit about their progress in preventing foreclosures. i'm going to be particularly interested in their modification process and particularly around conversions from trial mods to conversions. and i think this is more than just a process question. i think some people tend to forget that the reason we are in this financial crisis is because of the foreclosure drives and until we soft housing and foreclosure crisis, we will never be assured of financial stability. so i think it is an important part of this hearing and an important part of the t.a.r.p. program.

can you share with me your assessment of citi's performance under the program? >> yes, sir. like other banks, we think they got off to a pretty slow start. they've picked up speed, actually, citi has today offered trial mods or made final modifications to about 60% of the eligible mortgages in its portfolio, which i believe ranks at number one in terms of their progress. nonetheless, they still have a long way to go. and we are actively involved with citi and the other major banks which hold the bulk of these mortgages to make sure that they are reviewing those portfolios, identifying eligible homeowners and offering them modifications and final modifications as soon as possible. i should also point out that today there are about 1.7 million people we estimate who are eligible for modifications under the h.a.m. program and the

servicers have extended offers to about 1.3 million there are over 1 million trial modifications in place today that are saving homeowners about, over $500 a month. >> thank you for raising that because due to the treasury's extension of that will three-month period by which borrowers have to make payments before they are converted from a trial mod to a permanent mod, that extension expired at the end of january. so we are anxiously all awaiting the numbers that could even approach a half a million individuals who we are awaiting how they were -- the denial, whether they were offered a permanent mod where if they were denied, what is the result of that appeal process. can you, any expectations of what we may hear from citi. >> and if you can't answer that, can you give us some idea and we expect that this data will come out in the next week or so, if

you can give us some idea of what our expectations may be with respect to that data. >> well, again, we're looking forward to the release of the monthly data for january. i'm sorry, february. and there is progress being made in decisioning the trial modifications, considerable progress and this will be taking place in the weeks to come, as well. and also, there are rights for homeowners who are denied to appeal their denials, as well. so we've tried to make this program as simple today as transparent as possible. we have been working very closely with the leading servicers especially to assure that they are moving as expeditiously as they can and they have the resources also to make decisions as rapidly as possible. we will know these homeowners are waiting. in the meantime though, they're still save agaverage of over $500 a month and we are. >> to the extent that they are

denied a permanent mortgage conversion, there's a question of whether they would have been better off pursuing another alternative, whether short sale and look to rent as opposed to staying in a trial modification for fee, four, five, six months. i do want to, becauses in recognition of the challenges in conversion and those low conversion rates, have you announced a new system going in june 1 that will now require documentation up front. and i think there are certain benefits to that. but do we run a risk of shifting the problem? yes, we will have higher conversions but will we have fewer people entering the process unless we really modify those documentations? >> i think that's a good question. it's one we've been concerned about, as well. that's why we've tried to simplify the documentation requirements and also, we provide the documents that a homeowner may need on our website as well as voluminous information about how to apply, how to go through the process,

how to make appeals. >> march 1 was the date i think we were previously given about having that web portal up and running so borrowers can identify. can you give me an update on the status of expanding that? i think we were told earlier there were going to be over 100 servicers participating by march 1. >> i don't have the exact number of servicers participating. but that program has been moving ahead very rapidly and will continue to make enhancements to that website going forward. i would also point out we've had millions of people access the website and also let me mention, we're working croesly with counselors around the country and holding events throughout the country to bring people in who may be eligible for this program. and help them have their mortgages modified as rapidly as possible. >> we look forward to the reports and your efforts of transparency understanding clear little how those individuals were treated. thank you. >> thank you. >> thank you, mr., assistant

secretary. have i one last question on behalf of the entire panel. and that is, are you saying today that no one in treasury monitors the financial condition of citi and that no one in treasury is trying to manage the systemic risk that citi poses, or are you saying that that's just not your job? >> we do look at obviously public information about citigroup. >> you don't have any private conversations with citi? >> i personally have not had. >> or request additional information from them? >> i think that there have been conversations with citigroup over time. i myself have not had conversations with citigroup management about the condition of the company and with the ceo about that subject. >> so are you telling me, that was my question.

>> yeah, yeah. >> that no one in treasury is systematically observing and monitoring the financial condition. >> no, i'm not. >> of city. >> citi does visit with us from time to time. >> but. >> and provide updates on their situation. >> so i'm still trying to understand. >> yeah. >> so that means we just had the wrong witness here todayed? there were other people within treasury who are engaged in these jobs? it's just not your job? >> i participateded in briefings in the past on citigroup's situation. we do have conversations with citigroup about their situation, yes, that is true. >> all right. i appreciate it, thank you mr. assistant secretary. i invite to you stay for the next panel. >> thank you very much. >> and hear from mr. pan dit. >> thank you. >> thank you. the witness is excused. mr. pan dit.

>> mr. pandit, gentlemen, if you could excuse us. thank you for coming today. is the chair recognizes you for five minutes if you'd like to make an opening statement. i'd ask you to hold it to five minutes. we will put your written statement in the record. whatever its length. mr. pandit, please. >> >> three seconds gone. okay. thank you, chair warren and members of the panel. thank you for inviting me here. citigroup today is a fundamentally different company from what we inherited two years ago. citigroup is now operating on a

very strong foundation to generate sustained profitability for the benefit of all our stakeholders. for us as for many other institutions the bridge to the other side to a sound footing came from the american people and i want to thank our country for providing is citi with t.a.r.p. funding. last year, we repaid $20 billion of t.a.r.p. investment. in addition, we paid the government $3 billion on as dividends and another $5.3 billion in premiums on the asset guarantee program that we have now exited. taxpayers still hold 27% of citi's common stock and we look forward to helping them make money on that investment. citi owes a large debt of gratitude to the american taxpayers. we have renewed our financial strength. we have overall risk management reduced our risk exposures, defined a clear strategy and we've made citi a more focused

enterprise. at the end of 2009, we are one of the best capitalized banks in the world with a tier one ratio of 11.7%, a tier one common ratio of 9.6 percent and $36 billion of ares. our leverage is 12 to 1, down from 18 to 1 when i became ceo. we cut the size of our balance sheet by 21% from its peak by half a trillion dollars and our riskest assets have been substantially reduced. citi's cash liquidity is now a strong $193 billion and we have reduced our operating costs by more than $13 billion per year. perhaps the most important strategic action we've taken is to mandate a return to basics, return to banking as the core of our business and as a result, we've sold more than 30 businesses and substantially scaled back proprietary trading.

citi is a better bank today. but for citi being better is not good enough. our customers and america's taxpayers need a different road mapp map. first, a lot still needs to be done to promote economic recovery particularly in the housing area. since 2007, citi has helped 824,000 families in their efforts to avoid foreclosure total loss mitigation solutions increased by 50% versus 2008 and we remain number one in active hamp modifications. in 2009, citi orange natd $80 billion of mortgages and provided $80 billion of credit card lending. and in addition, our company used t.a.r.p. funds specifically to support new lending to individuals to, families to, communities and businesses, taxpayers have a right to know how we put that money to use and

we were the only bank to publish regular reports on the use of t.a.r.p. capital. second, stel supports reform of the financial regulatory system. america and our trading partners need smart, common sense regulation to reduce the risk of bank failures, mortgage let me share with you three areas. first, the national institution of reform. let's address too big to fail once and for all, the creation of systemic risk, making sure banks are banks, focused on clients. second, market reforms. let's level the playing field with common standards across the financial sector.

let's create trends currency, particularly in derivatives markets, and third, consumer reforms. we support the need for a strong consumer authorities that as part of the regulatory system to promote greater transparency, sound practices, growth, and stability in the consumer credit market. banks and non-banks need to be more responsive. these are reforms that could be costly for the industry, but citi believe they are necessary. thank you for this opportunity to review citi's progress. >> thank you. we appreciate your time today. i would like to start with funds -- a quote from the tar act, where treasury is to assure its authority is used in

a manner that protects home values, retirement accounts, and life savings and preserves homeownership and economic growth. ushes home ownership and promotes jobs and economic growth." that was congress's statement about why t.a.r.p. was done and what treasury is authorized to use money to advance those specific goals. in a june 22nd, 2009 reuters article, you are quoted as saying we will be playing the two growth themes very clearly. one is globalization, and the other is growth in emerging markets. wilbur ross this morning referred to citi as essentially a foreign bank. so the question is, why should the u.s. taxpayer alone carry citi? >> madame chair, we're not a foreign bank. we're a global bank.

we're actually america's global bank. we started in business years ago helping it america's businesses export their products. and that's what we've been doing. in this particular time as we need growth, as we feed jobs, it's even more important that we help small businesses, medium businesses and large businesses make those exports. as we do that, we need operations on the ground and in many of these operations we raise deposits to help large companies in the u.s. get loans on the ground they need and as well, some of those deposits help us facilitate loans in the u.s. market. >> but you describe your growth as globalization and growth in emerging markets. that sounds like these are your words about where you plan to expand your activities. >> we are completely focused on making sure that we continue our lending to u.s. customers, make sure we're helping our clients, our customers through the issues

they're facing. now, it's also very clear that our clients are coming to us, small clients, middle-sized clients, large clients. they want to tap foreign consumer bases. the growth is coming from the foreign consumer. they believe that's how they will grow. that's how they create jobs, and that's what i meant. we want to make sure we support the businesses in america get to the other side. >> well, good. let me get some data on what's happening. how much does citi lend to u.s. enterprises for u.s. operations? >> our total loans outstanding for all u.s. businesses about $450 billion. >> can i shrink that up? it's not all u.s. businesses. the question i at least wanted to ask about is u.s. enterprises for u.s. operations, jobs in america. >> i think the number is $450 billion lent in the u.s. >> can you divide that into how much do you lend to businesses that don't have any foreign

operations? >> madame chair, i can't do that but i can get back to you. >> okay, that's fair. so can i ask one other thing about just the lending that you do. what will lending and other transactions has citi participated in involving the government of greece? >> we do business with a lot of sovereign countries who need our global expertise, including come together u.s. markets and so i know we've been doing business with greece but i don't have the details with me. >> do you know how much debt the government of greece, debt from the government of greece that citi holds? >> i don't know the exact number but i know it's not a large amount. not a meaningful amount in our entire operation. >> okay. not a meaningful amount. that's fine. mr. atkins? >> thank you, madame chair. thank you very much, mr. pandit, for being here today. it's a pleasure to have you take time out from your busy schedule

to be here. i asked this of assistant secretary allison last time. but so i want to explore it with you and this has to do with the offering back in december. it seems that the timing and experience that particular offering is something we'd like not to repeat and obviously the taxpayer now is the largest single shareholder of city bank. so as an executive with a background in equity markets and experience with the capital markets i was wondering if you could share with us your reflections on how the treasury department should think about monetizing its position in city bank common stock. going forward here. >> mr. atkins, of course, that's the treasury's decision in terms of how they want to do it. we do know that they'll be able to sell stock after march 16th, and they've announced publicly they do want to sell stock over the next 12 months or so. and there are lots of different

methodologists of doing it right from selling it in the market everyday but also we believe there's substantial demand for this stock. it is not a secret that the government wants to sell. it's not a secret that the stock price in the markets today are reflecting the fact that they're a seller in a large amount, and that we believe there are investors here in the u.s. who are getting ready for that offering as to how they do it, when they do it, with whom they do it, those are all the treasury's decisions. >> when you look back at the offering in december then, clearly it was a primary offer ang then trying to be coordinated with a potential large secondary offering there by the government. so as far as the interests goes in the marketplace, was there a large cover ratio for that offering at the time, or what exactly was the problem that we saw in december? >> mr. atkins thanks the largest common stock offering ever done in the u.s. >> right. >> and particularly when you

consider that as the percentage of citi's common stock outstanding, it was extremely large. don't forget, that was done in the face of the market knowing the government was going to sell its 27% in the not too distant future. so they had a choice, do i buy now, later. those are all the backgrounds. it was late in the year in doing that offering and by the way, when we did that offering, unfortunately, another bank decided they wanted to do a large offering right in the middle what have we were doing. but we got it done as the largest offer ang we were able to pay back the taxpayers and we were able to exit the guarantee program. i consider that to be a success. >> okay. well then now looking forward to you have a stock price of about $3 a share or so, which of course, puts it in a special zone as far as some institutions and the way the market views it. what do you all have as far as plans to address that price of the stock in relation to the

huge amount, i mean, are you now the, i guess have the largest number of shares outstanding of any new york stock exchange listed company. >> and therefore, we're also the most traded stock. on many days in the new york stock exchange. by the way, the stock last i came in was $3.44. >> sorry. >> and so, i think at the end of the day, stock prices are important. but what's really important is performance. what do you earn? sustained profitability, which is really what i'm focused on. my biggest job is to make sure we make money on a sustained basis and therefore, help the government make money. >> well, in your testimony, you mention that had you've sold out of citi holdings after having restructured your firm viewing those as the noncore businesses, about 30-some odd businesses. i think it will said more than 20 in your 10 k. so i was wondering, how did you all decide as far as you know,

what is core versus what's not core? >> and that was job number one for me coming into citi looking at the businesses trying to figure out what business are we in, what clients do we serve. what are we good at. you put all those things together, it turned out at the end of the day, we are a great bank that is basically in the business of helping people manage their accounts, providing them loans, providing them capital. providing them investment services and it became very clear that we were in a lot of businesses that were not directly related to being a bank. and so the fundamental decision that i made is that we're going to be a bank. we're going to be the global bank for america's companies. serving them here but also wherever they want to go. but not only for companies but the same capability should be available to individuals, as well. so that's the decision we made. and on the basis of that, it

became very clear what was not core. it was a large part of the company and that's what i've been selling very systematically over the last two years. >> my time's up. thank you. >> mr. silvers? >> yes, thank you, chair. again, mr. pandit, i want to commend you for being here and express my appreciation both for your presence and your testimony. you said a moment or so ago that in trying to focus on what citigroup is good at, that you viewed sort of a return to core banking as the primary direction you were headed. and you mentioned some numbers about loans. i have here the report i'm sure you're familiar with from standard & poors from last month that shows, and the numbers don't match so i wondered if you coax plain it to me, that shows that commercial and corporate loans by citigroup have fallen

dramatically over the last two years. from a level of according to s&p $206 billion at the year end 2007 t$2007 to $127 billion tod. or end of third quarter i believe, 2009. i don't think they had the fourth quarter numbers at that time. in view of the of my understanding that your divestitures have largely been unrelated to commercial loans, can you explain to me what's happening here? >> sure, mr. silvers. when we decide what was core, what's not, there were also assets that were part of what was not core to us, as well. there were either clients that we shouldn't be serving or they didn't need us or they were businesses that were not core to us. they were assets that were gathered through core businesses. and so those numbers reflect selling businesses that are not core to us. selling assets that were not core to us. taking any marks on assets that were not core to us.

let me reassure you, as well. >> mr. pandit, i don't understand how you can reconcile that will type -- the scale of that retreat from business lending which is after all in, my view, just absolutely central to whether or not t.a.r.p. is succeeding. the scale that have retreat from business lending with your characterization of a refocusing on core banking, because i look at other numbers, i don't see that type of retreat from other types of activity other than obviously things that you're totally divesting from. >> let me assure you, we will make any good loan that we see to a client. the regulators want us to make prudent loans. we are doing that. some of those were leveraged loans part of practices we shouldn't have been part of. they're not part of the banking mission. so it's very easy to look at those numbers and thing that they actually represent our lending appetite or our appetite to serve client but that isn't

so. that many reflects the narrowing and focusing of our businesses to what we should be as a bank. >> well, second question about this type of issue. in the area of commercial real estate, which has been a concern of this panel, again, my survey of the data suggests a kind of flat line in terms of the total assets in commercial real estate in the -- at the holding company level portfolio of around $75 billion, $80 billion. my question about that is that i wonder, have you taken any write-downs in commercial real estate and how do i understand this flat level in the -- and are we -- are write-downs coming? >> number of things. one, a lot of that portfolio is mark to market. we have taken write-downs. much of that portfolio is community lending, and that's money good, as well. there are some accrual loans that we've made, and those loans

are well reviewed against. let me also say that most of our loans are for office buildings against leases and some of the major metropolitan areas so that's a very well-scrubbed over portfolio. i'll make one more point on this, which is that that's less of an issue for citi. >> uh-huh. can i then turn to another question about your core strategy and i think my time will then expire. as i understand it, correct me if i'm wrong, you've been tellin you are going to continue to have a significant financial market with broad exposure to markets, and you are going to be continuing to focus on your global transaction services business, which has been the consistent part over the last year. am i reading this that correctly? >> that is correct. >> we heard a fair amount about

the extent to which the gts business mix of significant. it is my understanding that citi cannot be allowed to fail. can you tell may call that is connected and what appears to be taking something so systemic and tying it to something so risky? >> i do not recall making that statement to anybody, nor do a recall anybody directly working for me making the statement. the fact was this was the argument we made to the government. would you say as long as you're in city group, you would not come to the government in the

future and make the argument of the business requires being filled out should the other businesses go south -- being bailed out should the other commitments go south? >> yes. >> let me commend you for giving me a straight answer. it's a rare experience in my role. >> i think that's why we're here, mr. silvers for straight answers. i want you to hear from me what you're doing at citi and why we're doing the right things both for the country but also for our shareholder. >> but if my colleagues will indulge me, please explain nonetheless how those two businesses are compatible in your view. >> we do business for coke and pepsi. coke is in 250 countries around the world. they need to manage their operations. we do everything for them from cash management to custody, to clearing settling for them. they need foreign exchange management. they need liability management. they need interest rate management.

so we have to have those operations to be them in that particular way. the shift that i made was to make sure that our trading operations and our cash management operations and all our banking operations are geared towards doing those things that our clients need. and, by the way, if you do that correctly, having been in the business for as long as i have, those are the kind of businesses that generate good value for clients without creating the risk that has been created in the system historically. >> my time is way over. thank you. >> my goodness. i apologize. mr. mcwaters? >> thank you. and thank you mr. pandit for appearing today. do you have any reason to anticipate citi group will need additional t.a.r.p. funds? >> no. >> on a fair market basis is citi group solvent? >> yes. >> are any material divisions or

subsidiaries of citi group insolvent? >> no. let me be very clear. we look at the entire company, citi group. and what matters is that we're well cappalized, we have the liquidity and we stress ourselves very often to make sure that's always the case. >> speaking of stressing, if the stress test were conducted again today under current economic conditions, would citi group be required to raise additional capital, and if so, how much do you think? >> no. >> could you tell us why specifically citigroup needed a t.a.r.p.-funded bailout? what happened? what went wrong? >> mr. mcwaters, we came into this market -- city came into this market with assets on which it took substantial losses in

2008. now, we addressed that by raising $48 billion of capital in the market in early 2008. we sold another set of businesses, raised $10 billion in capital and we got $25 billion from the government in the first t.a.r.p. round. the result of all that was we had 10.7% tier one, and at the same time we had reduced our assets, reduced risks. fundamentally we were in the right place, and in any rational market that would be a solid balance sheet for the future. but we. >> reporter: not in a rational market. post lehman brothers, post wachovia breakup, the capital markets froze. there was a general sechx of concern about where the employees might go, where unemployment might go and different stocks at different banks started reacting to that. our stocks started going down in late 2008.

so on that friday in late november, our stock was at $3.37. now, in a market of that sort, unfortunately sometimes stock prices can have an impact on confidence on all sorts of stakeholders that are out there. and rather than taking the risk, as we talked to the federal reserve, as we talked to the treasury, the view was let's take that issue off the table. that's what happened. >> okay. what actions have you taken to negate your status as too big to fail? can we get to a point realistically where, if this happens again, citi is simply broken up, sold off or recan'tized by the private sector without government intervention? >> we have taken a number of steps, mr. mcwatters. first, it starts with capital. we have a strong capital base,

very strong liquidity, very strong reserves. that's the starting point. the second part is create earnings which is why we took $13 billion of cost out of there. the third part of that is change your risk profile. we've done that. we still have legacy assets. citi came in with a group of as sets into this virlt. we have changed that as well. liquidity on the ground, we work with our global regulators. so we made significant changes in the financial health of the company. we've made significant changes in the risk management of the company. but we've also targeted the company towards those businesses that help clients and really don't necessarily create the risk that has been created in the past. let me also say i do think we need regulation which is what -- why i said in my opening statement let's get to that resolution authority so that this never happens again. >> okay. one more quick question. you are a veteran of the capital

purchase program. what advice can you give for how that program can be improved? it's on going. i mean there's money out the door, not every institution has repaid t.a.r.p. funds. how can it be improved? >> the t.a.r.p. funds were, from what i understand, put in place. a lot of the reason was to inject capital into the banks, not only so they could lend and they could do the right things for the american people. but it was to create a sense of confidence, so we took the confidence in the financial system off the table. that was the point on that. for those people who still have t.a.r.p. funds, i don't have any other advice but to say that step in and make sure that you manage your business to take the costs out that you need to manage it as of efficiently as possible and start creating a story and a business model that

can translate into earnings, because that's the best way in which the capital markets can give you equity which you can then use to repay the government. >> thank you. >> thank you mr. mcwattes. superintendent niemann? >> thank you. if you were here and i believe you were in the back when i was questioning mr. allison, i highlighted that the mortgage crisis really gave rise to the financial crisis. for that reason i was very pleased to see in your written testimony as well as in your oral testimony, you referenced your efforts toward foreclosure mitigation and in your written testimony highlighted the fact that citi has the highest percentage of eligible loans in active modification, mortgage modifications, at 50% trial and permanent as a percentage of eligible mortgages. though you can be applauded for that outreach effort, i think a more important metric is the

actual conversion of trial mods to permanent, sustainable mortgages. i believe the last report from treasury has 110,000 of mortgages that are in active trial mods. with the extension of treasury through january 31, we are now awaiting results from all institutions, but i think anxiously awaiting your results as well as to how those individuals were treated. i think the important part is these are individuals who had been willing and able to make these reduced payments and are awaiting final determination. we know that there have been problems at servicers. we know that there are problems in the appeal process. so can you give us any information about what we may expect to see in the decisioning with respect to those trial mod sns. >> mr. newman, i completely agree with you that attacking

the issue of housing is important for the economy, but particularly for our customers and clients as well. we, as the assistant secretary one, we're number one in active modification right now. right now the ratio of completions is about 18% of that. we think that number is going to go up do 40% maybe pretty soon. that's where we think it's going to go. not everybody who has gotten into that program is necessarily going to qualify because they may not have the documentation, they may not have the information that's necessary to do that which is why what we've done is create a citi modification plan on the other side f. you don't qualify and don't have any standard, we still have modification programs and plans available for these people who are going through this particular change. >> do you see documentation? this has been an issue i've heard from other servicers. partly it's concerns on the resources and process of the servi servicers losing documentation. we've heard instances of

borrowers reluctant or producing wrong documentation. i'm also very concerned that the treasury has not given enough discretion to servicers and lenders to make that decision. have you found that or would make any recommendations in changes in the ham documentation process. >> let me say the treasury has made changes, positive changes that will have a positive impact on modifications as well. let me also say we have 4,000 people that are doing this for us. i've hired 1400 people in the last year to make sure we can help people get through these documentation issues. these are case by case issues. >> do you -- in your modification process are you utilizing principle reductions? could you share the percentage of modification that is use principle reductions? >> so the number one goal to us to keep people in their homes is to make those homes affordable. we've got to do that. >> you can do that through a

combination of interest and extensions or principle reductions. >> absolutely. interest rates, extensions of mortgages, delaying amortizizations of mortgages. >> would you agree decreasing the principle would reduce the default rate, keeping more skin in the game for the borrower? have you experienced that coming down to the same affordable payment but include principle reduction, and not just interest reduction has long-term benefit. >> what we've found is the most important thing that's driving redefault is unemployment rates. >> i agree with you on that. >> last year is not necessarily an indicator of redefault going forward. >> one more question before my time expires on this subject is the issue of second liens. this has been a real disincentive we're hearing from lenders on making particularly principle reductions. only one institution, and it was not yours, has signed on for the treasury's second lien program.

can you share with us whether you intend to join that program. >> first let me tell you we're modifying second liens actively. we've been part of the fdic program, part of our own programs to do exactly what you want. we said to the treasury that we're willing to work with them as to what this program is, we have just seen the details. i think it's prudent for us to go through that before we sign on. >> it's been out for a while. i hope it is a positive response and we'll keep track of that, thank you. my time has expired. >> mr. pandit, you started your testimony by saying citi is a fundamentally different company from the company of two years ago. but nonetheless, citi continues to pose significant systemic risk. in fact, citi is often cited as the poster child for too big to fail. citi is this combination of commercial bank, investment bank and insurance bank for which glass steagall had to be

repealed so you could follow your business model. i understand your response to mr. mcwatters was that we are dealing with the problem of systemic risk in too big to fail by making citi a stronger company. there may be those who agree. there may b so that no one piece is too big to fail. why not break it up? the markets are calm. this can be done in an orderly fashion. you will not have as big a company to run, but we can reduce systemic risk. >> shareholder value is really important. let me tell you we are doing that. we are selling 40% of bonilla company. -- 40% of the company. that is a huge fees. we are primarily in the financial business