i was surprised when voices of dissent in iran were met with comments from the president that we had nothing to say. i cannot imagine ronald reagan or bill clinton having nothing to say. [applause] i was surprised when our best friends in the world went to their own public populations, explaining to them the importance of a missile defense system or the desire of the west to establish that system and receive support, i was surprised, perhaps in an effort to reset relations with russia, we pulled out of that commitment, and we got nothing from russia in terms of their support for tough sanctions in the run. -- eurand -- tough sanctions on

iran. when they said that israel should not build settlements in the west bank, he had nothing whatsoever to say about hamas launching rockets into israel. . . it is almost as if china has given as a credit card and is smiling as we keep on borrowing and borrowing massively more than we have any right to be spending.

secondly, we have to deal with our debt not just the deficit and unfunded liabilities. we need to make the sustainable not by changing the deal for retirees but for those who are young and coming along, they need to know the truth. thirdly, we need to get ourselves energy independent. we have been talking about it forever. we need to be serious. fourth, we have to take on health care. i'm not talking about getting people insured but the extraordinary burden we have on >> -- extra health care costs. america's health care is about 18% of our gdp. the average is 12% of gdp. that is a six. gap. -- that is a 6.0-. that is the gap between health-

care costs and other nations. i am disappointed to see him taking on the insurance companies as if they are the reason. i am sure there are some companies to deserve blame and we could find them out but this is an issue than it -- that is broader. it talks about the nature of our system and the cost of delivering that care which we need to take on if we want to get america back in a position of strength. finally, i mention education. it is unsustainable to have it schools failing their children year in and year out. reface extraordinarily challengs that we have not dealt with over these last months or multiple years. it is time to deal with that. we need to insist that public leaders take on the challenges we face.

i am encouraged by the passion and enthusiasm prancing around the country. my party is to talk about too much spending and borrowing. not a lot of people got excited about that and they responded appropriately. that message is now much more broadly accepted and responded to. you are seeing people saying that government is too large, spending is too great, these deficits are too overwhelming. i am happy to see that kind of passion. i'm convinced the american people will do what they have always done which is to rise to the occasion when we understand the problems before us. we have seen the sacrifices of the great generation and how they rose in the world war to bring us security and lay the foundations of our current prosperity. i'm afraid if we do not change course we could become america's

worst generation that put in place entitlements, obligations, and spent some much for ourselves that we give to our children in america where the dream is impossible. i do not think we will do that. we, my generation and your generation, recognize that and we will not leave that legacy to our children. we insist the american dream is alive and well. we room -- we will preserve that. we will make sure that america is, as it has always been, the hope of the earth. this is the work we have to do. i appreciate the work of you here in the media. i know there are some who delights in stories that certain members of the mainstream members, i am not one of them. i liked we have a strong and ample mainstream media that checks multiple sources and will write the names of the sources,

generally but not always. that is a good thing. i like to have a paper of record. i like to test some of the things being spoken of. right now, given what we face and the challenges that america has come of we need the mainstream media and all sources of media to get the real facts out there and have the american people understand the alternatives we have ahead of us, the choices we can make, and where they will leave. i appreciate the work we do -- the work you do. hopefully we will go down as one of america's great generations and not one of the worst. thank you so much. good to be with you this morning. [applause] >> thank you very much for your words, governor romney. we have many questions being

asked here today. please keep them coming from the audience. our first question coming have been making a lot of appearances because you are promoting your book, "no apology." one of the challenges in writing a book is when it is focused on current events that events continue to change. in your book you criticize president obama's visit with the dalai lama. you talked about his apology tour. since then he has met with the dalai lama and gave his speech in oslo which was praised as stating america's role in the world. i wonder if there are any opinions which you see a little differently now after publication. the second question, do you feel president obama has been improving in his performance or what did you like about his first year in office? >> a number of things.

the book was written between january and july of next year. -- of last year. that is the nature of publication. i probably would have adjusted my comments on toyota somewhat. [laughter] i happen to wonder whether the fact i made it very clear when i was writing a book called "no apology" thinking it was time for the president to say that he would not apologize for what america is. i am glad when he speaks out in a more forceful way for our values. recast to be matched with action. -- rhetoric has to be matched with action. i have not seen the kind of adjustment and action on a run -- on iran north korea yet. columbia, one of our best

allies in the effort to try and dissuade chavez and his ambitions in latin america, we have not gotten closer to them. we're going to tell the afl-cio to stand out on this. we're going to build stronger relations with colombia. there are a number of things that can be problematic. on the other hand, the president extended the patriot act. he did not talk about that during the campaign. his decision to provide additional troops, a surge if you will, is one that i support. he did it in a way that has made it more difficult to ensure the success of our troops there. what do i mean by that? it took him not long time to make the decision -- it took him a long time. if the military had come to the president and said the minimum is 40,000 i would not have thought about giving him 30,000.

in the counterinsurgency it is essential that the public that you were trying to encourage have confidence that the government has been duly and appropriately elected. we had all the troops there with an election going on and yet it was not deemed to be fair and uncorrupted. that made it more difficult for us to be successful. there were things the president did that i would have taken in a different direction. he cannot be right 100% of the time. overall, i am concerned that the policy he has adopted on the national stage has presented the appearance of american weakness and not american resolve. he has given the impression of timidity rather than strength. i think he will have an opportunity to say he will be tested. it was not a test which resulted with people around the world sing this nation as being committed to principles of the past. i hope this president is able to

be more forceful, not just in his words, but his actions in the coming years. >> the question from the audience on a clarification. did you miss a beat -- >> has said we said never supported prior dictatorships i would have misspoken. american has a dictated other nations. i do not believe american dictates to other nations. i believe america has freed other nations from dictators. >> -- >> we have had numerous questions on health care. have you -- had given president, not knowing if you have ever contemplated that scenario, with your experience as governor how

would you have handled the health-care issue? as a follow up, does the government health care work in massachusetts? >> a lot of questions. two big problems in health care, at least, as i see it. one is the problem of tens of millions of people who do not have health insurance. the other is a problem of the health-care costs being way out of line with other nations. but still with the first one and the easier one which is getting people insured. that is something which we took on in massachusetts relatively successfully with some parts going well and some parts not as well. i happen to believe, as i indicated, that the best way to get them insured is to do so on a state-by-state basis with the federal government giving more flexibility to states and the monies that go to the federal government to the states with fewer strings attached and be able to care for their own

people without insurance. i like the way we dealt with it, by the way. i think it is working pretty well. there are some big adjustments i would make. some of them would be to make it more consistent with my original proposal was met with the legislation forward. the legislature made changes, i vetoed them, and they put them back in. the other issue of how to get the cost down, not just for the people who are uninsured. the previous are all lower in massachusetts and they are able to get coverage at a reasonable price. -- the premiums are lower. how deep it the cost down and leave a level consistent with other nations? -- how do you get the costs down? there is a lot of work to be done and it has not been tested yet. i have my own ideas and i will

make it real simple. if you read a chapter of in my book on health care you would understand. the idea is this. vc costs rising and i think a lot of liberals and the president said let's take over health care so we can have cost control and keep the cost down. cost controls and do not work. the have not ever anywhere. that is not the right way to go. trying to get the health-care system to look more like the post office, fannie mae, or freddie mac is not going to work. it the way to get the cost of health care down is to apply the magic ingredient that applies to every other aspect of our economic life and that is to see if we can't get it to act more like the market. in the health-care you do not have the provisions of the market. the sick patient has virtually no stake in what the cost is of treatment. went to pay your deductible is free. but the hospital is going to

charge $5,000 or $50,000 you could care less. as a result there is no pricing mechanism or cost-benefit that goes on to allow the patient to have an input and allows this to work like the market. i would change that and the incentives for doctors and providers such that instead of getting a fee-for-service that it would decapitated. -- that it would be capitated. we're going to get congressional staffers together and change one-fifth of the economy. run to put this on the entire country and see how it works. let's see what we can learn from other nations and from our own states and see which things work and which things do not. but the mistakes we made in massachusetts and improve on them. ultimately, if we can't agree something is working the supply

that. this approach, and in my view, is not the approach any reasonably run enterprise would ever consider. >> which you term his health care approach socialism? -- would you term? >> i tried to avoid incendiary terms. [laughter] not always successfully, sometimes i succumb. i think the intent of the president's plan and that of the legislative leaders that are pursuing obama care is based upon a few that the only way we will be able to control health care in america is by having the government control its and set prices and usage. if we get that done we can finally bring it in. to look around the world rather features have been applied in socialist type systems and the

only way they have been affected is where they have come if you will, rationed care. that will not give acceptable to americans. i think a better alternative is to allow individuals to have a stake in their own health care and let market dynamics play. that is why health savings accounts have such potential. if they are sitting up an account they are going to pay a portion of their bill. when it comes time to decide which hospital or doctor they will ask the doctor how much it will cost and a look at one provider versus another. that drives the pervert predict that drives the providers to be cost and quality effective -- that drives the providers to be effective. >> how is this different than the social security system, high with system, other areas where there have been strong government involvement that have high satisfaction rates among the american people? >> i would choose to take

exception with high satisfaction rates with certain aspects of government run entities. whether that is the post office or amtrak or fannie mae or freddie mac, -- [applause] there are certain things that government alone can do like the fennec country. -- like to defend a country. government has a very important role. we have perhaps become carried away in our rhetoric. it those of us who are conservatives recognize the important role of the government. to set the rules for a market to work you have to have regulations, laws, rules of some of those who want to participate know what the guidelines are. efficient, effective markets require that.

where you have an opportunity to allow a function to be carried out in the private sector it will be more effective, efficient, and satisfying if you let market dynamics or the private sector actually manage that portion of the economy. i remember conversations i had with regards to prisons, for instance. i mentioned it to some legislators that i thought we ought to take that having the presence in massachusetts managed by a for-profit prison company. based upon my calculations they could save us a lot of money. the response of the individual i spoke with was that there would be higher costs by having state workers run the prisons? >> the present company have to earn a profit and we do not. >> i said, i do not think you understand how markets work. the profit incentive is would

encourages on first to do things better and come up with lower and lower costs ways of doing things better and better. that is the nature of our system and why they can make a profit and do the whole job better and at lower cost than we can. that is lost on way too many people and is something we need to communicate. as i look at fixing health care, let's let the state tries, not just to get people in short, but ways to bring the cost down by moving to something other than fee-for-service. the federal government today provides half of all health care in america. we already have creeping federal control of health care. medicare, medicaid, and through federal and fleas and others if you add that up that is half the market -- and through federal

employees and others. more and more people get more and more control of the system with the idea altman the of controlling it entirely. -- with the idea ultimately of controlling it entirely. >> you have discussed rhetoric and incendiary rhetoric and the mature in language. bad recently you told "the boston globe"that they must realize -- resist populism. she did outdraw you on tuesday. that might show you that populism has a popular appeal. what is your response? >> that i have to come up with better material, i am afraid. [laughter] [applause]

populism means different things to different people. if you mean appealing to the public and the voting majority that is something we are all in favor of. we went to solicit the support of the great majority of our citizens. by and large the american people to the right thing. after they study something at some length and listen to the alternatives the generally come to the right place. as winston churchill said you can always trust the americans to the right thing after they have exhausted all other alternatives. [laughter] that is close to what he said. i very much believe in listening to the american people and communicating to them that form of populism, if you define it that way. there is another branch of the world -- of the word populism. that is that there are some

people who are scapegoating who look for someone to blame for more fundamental problems that we have as a society. it may be a politician, a wall street banker, immigrants, a certain ethnic group. over the history of the world there have been state voters -- state governors-- scapegoaters. look, our health care problems are a lot broader than insurance companies. the big one in our state, blue cross blue shield, is not for profit. likewise you will see people take on immigrants and suggests that immigration is a source of america's challenges. our challenges are more significant than that and scapegoating in that view does not make sense. i see it coming from the white

house. anti business, anti ceo, and a series of rhetorical claims which makes it less likely for people want to create jobs. it is not the kind of rhetoric where you do not attack the job creator if you want jobs created. do i welcome people with different views? i am happy to hear their perspective, but from leaders in our nation i salute the work that is being done by those who are appealing to our best interests and not trying to scapegoat were demonized other groups or perspectives. >> is the tea party movement a helpful force within the republican party? >> i wish i could say it is decidedly within the republican party but we would all like to get them within our own party. that movement is, in my view, and encouraging development. the silent majority of america is silent no more.

individuals were concerned with the scale and spending with governments say enough already. we are born to meet up, talk, and do so in a respectful way. we're going to do so in legal ways and make sure that people hear what we have to say. i know the president is fond of talking about republicans responsible for gridlock in washington. to recognize that he did not need one single republican vote last year for any legislation he wanted. he could rely entirely on democrats. we could not filibuster or stop a bill in the house. t partyers and average american citizens were letting their voice be heard loud and clear and telling their democrat senators and congressman what their views were. those democrats were listening and responding. i'm delighted the tea party movement has been successful and

vital in our political discourse. i hope we can capture that sentiment in our party and we will elect people in our primaries people who are right for america. [applause] >> one more question on dealing with political discourse. yesterday, a gunman who has railed against the government on the internet shot and wounded two police officers. with that type of violence, do you see a connection between those actions and some of the more extreme political statements he might be hearing? >> certainly buy them. i am not sure if you mean the statements by them are typically detached from reality. there would be disturbed individuals that do things that are inexplicable. i cannot imagine limiting free

speech on the basis of such paranoia. i can tell you that the rhetoric and the discourse that is most alarming on the globe today is that which comes from radical violence jihaddists. whether it is on the network that carries their voices that the hague and vitriolic comes from these radicals off lead to suicide bombings and death. i can assure you that it is essential for us to stand up against this kind of misinformation and that america should make it very clear that we stand for principles which are lofty and good. while we are not going to cut off the ability for these people to speak, we are going to cut off their ability to attack our fellow countrymen.

when they come here carrying bombs with that intent, the first words they should hear art, "you have the right to remain silent." [applause] >> is domestic terrorism, ranging from fort hood to obama city, a concern for you? >> no concern. that is the key heightism -- that is the jihaddism i am speaking of. i will not try to recall from memory the number of countries where there have been attacks by different kinds of jihaddist organizations. this comes from very different strains, local concerns, some have broader concerns. almost always these various jihaddist groups have several principal police. one is that we are the epitome of evil.

they see american as being the great center. they see democracy as being in complete isolation of god's will. therefore they see american as the great satan. they also want to see the elimination of israel. ultimately, most of these organizations seek the establishment of a global jihaddist leadership for the world with a hit in the mom -- with a hidden imam guiding the world. there's no question we will overcome this. i believe there are signs of progress even in the world of islam against these radicals. they threaten the world, in part, because of the weapons increasingly available to them.

we shudder at the thought of them having access to nuclear technology. a lebanese american scholar and author of a number of books dealing with the jihaddism, in his -- it is his belief that if they get their hands on nuclear technology they will use it. they will not threat, they will use it. i do have a great deal of concern. we seek the apparent lack of reason on those people who carry out these attacks and we can only be thankful the weapons they used so far have not inflicted even greater casualties. yes, it is an enormous concern and a reason, in my view, for our involvement in iraq and afghanistan. >> what actions can be taken against those who would not be considered a jihaddist or as those who might be hitting the

local government? >> i do not know if i have a great answer for how to fight a timothy mcveigh or individual attackers. from our olympics in 2002, that sheds light on our perspective. by the way, the number of attacks that have been prevented will underscore this same story. when it came time to host the olympic winter games in 2002 we had just endured the attack of september 11th. would we be attacked at the opening ceremonies? with our 10 venues be attacked? would citizens be attacked on the streets? we put up fences and magnetometers. there are a limited help. someone with a mortar could launch a shell from 1 mile away. this magnetometers and so forth could be helpful against a lone

shooter but not hopeful against the more violent weapon. what give me confidence, however, was that the fbi worked at great lengths in the years working of to the olympics to identify sources of potential threat. they were assuring through good intelligence work that we were safe. great intelligence is the best source, in my view, of the protection of our people and property. therefore, i become very alarmed when i see our justice department decide we are going to go after our own cia members. this is i time for us to be causing our intelligence officers to be having a concern about the support they receive from their government and people. we should be standing arm in arm with intelligence. that is what has stopped attack after attack since 9/11.

it is will protect our soldiers around the world. thank you. [applause] >> he called for four% -- you call for 4% of the g.d.p. to be spent. with that spending, what would your top priority bee? >> one of the things i do if you get the chance to take a look at the book is to look at our military missions. i realized there going to have to think about what our priorities are. i not know if you know how much spending government does. i was surprised. we are a free nation where the private sector create the wealth and opportunity for our citizens whether they are starting in brand new jobs are people at the top with the executive ladder. government is roughly 33% of the

total gdp of america. the federal government spends about 20% of gdp. i would make sure we draw a hard line there and not allow the federal government to take a larger share of our overall economic activity. if the government is going to spend about 20% roughly of gdp, how much should be allocated to our military? my view is a 4% of that 20% should be directed towards our military budget. we can spend it better. we buy a lot of military projects that are not desired by the pentagon. we can be wiser in the way we spend our money. i'd like to see as have an additional 100,000 troops. the reading i have done of others who have studied this in greater depth on the number of missions we have and have stretched our military is, i

would like us to see at least 100,000 more boots available for operations around the world. for me, that is a member we should plan on keeping in mind. it is down to 3.8% and is projected to continue to fall over the next decade. our spending grows and grows. we simply cannot allow our entitlement and desires to eat up the entire federal budget and put at risk our ability to defend and protect ourselves against threats wherever they might arise. >> in your address, do you believe the united nations was founded on christian principles and that they are an important part of our dna? >> i believe that judeo- christian principles described in the old testament are a part

of the culture. i do not believe that we, as a nation, have ever adopted a stance that a particular religion or even branch of religion is an aspect of being an american. i believe that religious principles including christian principles, and those of other great religions are a part of our culture. the ideas of honesty, integrity, family, commitment, patriotism, serving for things > one's self, those are part of the american culture. i know they have roots that flow back into religious cultures, as well. i am not going to assign that to any one religion. i do believe those elements flow from those original sources. >> we are almost out of time. thank you again for the time spent with us today. before asking the last question we have some important matters to take care of. on march 8th, we have lisa

jackson the administrator for the environmental protection agency. on march 9th, we have embassador ron kirk who is the trade ambassador. on march 15th, we have dick armey chairman of the freedom works. second, i'd like to present our speaker, this is always the most exciting part of the program, with the traditional national press club mug. [applause] >> thank you. >> the final question has to do with looking ahead. i know you have been very busy, governor, with your book tour and believe in time for reflection and your family. vacation spots possibly in 2009. wondering if you are considering the morning, manchester, at cedar rapids, or c city? what could be your travel plans for the upcoming year?

-- cedar rapids sioux city? [laughter] >> some of those places are lovely in the summer. this is a critical year for people like myself who are conservative. as a result, for people like myself and hopefully for a number of you in this room and others across the country, we're going to be working in our various states to elect people who share our views and values about the country. you can expect me to be in a lot of states. for this book i will be visiting 49 cities during book signing in speeches. the book is about the challenges i think america faces. in my view, we have to stop apologizing for who we are, our values, for what america has done and instead stand tall and our belief that america is right for our children, grandchildren, and for the world. we have to strengthen the foundation of what has made america strong and such a model

for the world. i'm not going to avoid being in new hampshire because i have a summer home there. i certainly will make a trip to iowa as a part of that tour. i am going to be in states not where presidential primaries are sow key but we're certain elections are key. we have some places where there are some pretty critical elections. we need to bring back to washington the kind of balance that is essential to make washington work. by the way, that is something that is a key point here. we get things done in washington is not to have one party had unilateral power to push everything for. that is not the right way to make things work. the right way is to have two parties and have common ground to make sure we are moving towards the middle and have the support of the american people. if instead the take a sharp turn, america will say no. let's see some bonds in washington.

let's agree she the fact that a republican is here today. >> thank you. [applause] >> thank you, governor romney. i would also like to thank the national press club staff including its library and broadcast center for organizing today's event. for more information about joining the national press club and how to acquire a copy of today's program come of it -- visit our web site and www.pres.org. thank you for attending. we are injured. -- we are adorned. >> the polls are closed in iraq 's parliamentarian elections this morning. the press reports that despite tight security and surgeons were

able to set off a number of attacks that left 31 people dead. president obama will have remarks and we will bring you those comments live starting at 3:00 p.m. eastern here on c- span. now, citigroup c.e.o., vikram pandit, testifies about the $45 billion they receive from tarp. this is two hours and 45 minutes. >> this march 4th hearing of the congressional oversight panel will come to order. good morning. i am elizabeth warren and i am the chair. as everyone in this room knows, in late 2008 s financial crisis threatened to bring the worldwide economy to its knees. 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 are treated under t.a.r.p. and other government-related programs. i look forward to hearing the answer to these issues. i want to express my thanks to the witnesses. >> mr. atkins? >> thank you, madam chairman. i would like to add my thanks to mr. allison and mr. pandit for appearing before this panel today. you are here voluntarily and are taking valuable time out from your very busy schedules, especially this time of year to be here in washington. we and the taxpayers thank you for helping to bring openness and personal connection to our oversight rule. like the rest of the financial services industry, citigroup has had huge challenges during the

past couple of years. without the u.s. taxpayer, citigroup might not be in business at all today. citigroup's stock chart of the last three years shows a sad decline for more than $55 per share in 2007 to $3 a share today. that represents a huge loss for shareholders, ultimately retirees on 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