i will now ask leader cantor to join us to make his remarks. please join me in welcoming him. [applause] of welcoming you to the podium, sir. please join me in >> good morning. it is great to be here. thank you very much for that warm introduction. thank you for all of your efforts here at heritage. it is a pleasure to be here. all bus i know, enjoyed the momentous occasion of seeing the president of the united states come to capitol hill. i know, enjoyed the momentous occasion of seeing the president of the united states come to capitol hill. always a treat for the nation. and really a lot of nice words and positive thoughts from the president about going forward and supposing and proposing the possibility we all work

together, which i'm hopeful of. but in my book, aions speak louder than words. and we will have to, i think, see how it is that this president and his administration are going to carry itself in light of the current situation in this country and the election we've just been through. >> last year for the first time ever, as mike just indicated, the united states fell from the ranks of the economically free countries of the world as measured by the index of economic freedom. this year, our overall score fell again, in large measure because of the increase in government spending. this is a wake-up call for all of us in our country. and for all of us in elected office. and restoring economic freedom and prosperity is a top priority for our new house republican

majority. today, i don't hesitate to say that we have arrived at a critical moment in american history. we are a nation at a crossroads. a host of obstacles have been thrust upon us, calling into question our ability to carry out the mantel of global leadership in the 21st century. how we respond is the challenge of generation. it truly will determine what kind of country we will be. america's always been the land of of the free and of all nations. the eagerness on the part of the american people to work and to pursue their ideas despite the risks they might fail has spawned unprecedented economic growth from which we all benefit. the resulting prosperity and job

creation have benefited us for sure in our country, but also has benefited the entire world. it defines who we are as a people. it represents also our best hope to the future. last year i received a note from a university of michigan graduate who was living in call mizzo mizz kalamazo michigan, who has gone on to get his mba at stanford. he had spent some time working in england. he was amazed how differently entrepreneurs are regarded abroad. he said, starting a business, even if you fail in the process, is a badge of honor for us here in the united states. but in europe, entrepreneurship is frowned upon, and consequently the best and the brightest are actually afraid to take a risk. he goes on to say in his letter that many of my european friends

who are very smart and educated, but when i asked them about their career path, no one ever mentioned starting a business. they don't think any new products or businesses will come from t uk in the next 50 years. that letter had a big impact on me. and it ended with a pointed request from this student. he said, please, please be careful that our government not do anything to discourage entrepreneurship and innovation in america. now, we all know there's a lot being written today as some are actually asking whether the united states is really losing its competitive edge. and over the past years, when i've talked to entrepreneurs around the country, when i meet with people making decisions of where to allocate capital and whether to put money to work,

they're actually questioning whether it's worth the risk for them to do so here in the u.s. why is that? because over the last several years, the u.s. marketplace has been increasingly defined by runaway debt, but ever-increasing regulations coming out of this town, and, frankly, in any competitive tax structure. the recent mterm elections that we just experienced was about many things. health care, government spending, deficits, lackluster job growth. but above all, i'd argue that it was a repudiation of an agenda that responds to these problems by siphoning money away from the private sector and therefore reducing opportunity and freedom and concentrating the power and resources here in washington.

now, for us conservatives, this election represented a golden opportunity to show america a better way forward. we've got a second chance to produce first-rate results by applying our common sense conservative principles. when you redistribute wealth and impose stringent regulations, it comes at a direct cost to freedom and to economic opportunity. right now our government is growing so large that it is crowding out the private sector. that's why our first priority in the majority is to arrest the ever-growing government spending and debt which resul and ensure that it is not higher taxes which we all must face. that's why we are intent on removing a dark cloud that has formed over our country and our economy and we are committed to getting our country back on

track towards the path of opportunity, responsibility, and success. in short time, it's my hope that this congress under a republican majority, will become known as the cut and grow congress. cut spending and job-impeding regulation and grow private sector jobs in the economy. now, this idea of cut and grow can be put into contrast, perhaps with some of what the president said last night and certainly what some in the white house have been talking about for the past several days. he envisions, they envisions that administration to be about cut and invest, that somehow we have to go about cutting spending so we can invest it from washington somewhere else. now, all of that gives most of us pause, because using the word

"invest" in this town through the prism of federal government, to me, means more spending. so that's why each d our response in the new majority is to wake up and ask three questions. one are our actions focusing on jobs and the economy? two, are our actions focusing on cutting spend? and three, are our aions focusing on shrinking government, and thereby protecting and expanding freedom. and if our actions do not fall within one of those three lanes, we must ask ourselves why are we doinit. during the current fiscal year, as you know, we have pledged to return spending to fy 2008 levels or less. we've got many more miles to go, but in our first month, we've cut our own budgets by 5% in the house. we he renewed our moratorium

on earmarks, eliminating billions of dollars in pork barrel favors that have always been used to buy members' votes on larger, more wasteful spending packages. we've implemented new house rules that make it easier for congress to cut spending and grow the economy. for example, all mandatory spending increases must b offset by spending cuts elsewhere in the budget. no more new taxes. we've moved to repeal the health care bill, because it threatens to bankrupt our country and serves as an impediment to job creation. we've already instructed our committe to start work on a replacement. and that starts with patient-centered care with an emphasis on lowering cost and affording more flexibility and choice for all americans. the coming weeks and months will not be easy. we need to wean america off its

dependence on debt, loose monetary policy, and government programs. and we must blaze a new trail, rooted in long-term investment, strong businesses, innovation, entrepreneurship, and exports. we must remember that the strength of our republic resides not in a vast government safety net, but in the innovative spirit of our people. not in our people's desire to take from the government, but in their drive toward self-sufficiency and controlling their own destiny. my pledge to you today is that we will act to restore america as the freest, most prosperous nation on earth. and we in congress are going to count on groups like the heritage foundation to come forward with your best ideas to help us, to help our country do what it does best, to innovate, compete, and lead in this 21st

century. no doubt about it, th stakes are very high. but we all must commit ourselves to do all we can to preserve and protect this country that we love and that starts by committing ourselves to protecting and expanding freedom. thank you very much. [ applause ] >> thank you very much. that was really great. that's got a nice ring to it, the cut and grow congress. representative cantor has time for two or three questions. he has to go back to the hill to vote. who would like to go first? yes, the young lady right there. >> congressman, thank you for your leadership on spending cuts. i'm just wondering if you'll support congressman jim jordan's amendment for a true $100 billion worth of cuts in the cr debate? >> yes, we are -- that is in reference to the cr debate,

which will come to the floor february 14th. we announced yesterday, well in advance. the purpose of my announcing earlier is to make sure that all of our members, on our side of the aisle, as well as others, have the ability to proffer their vision as to how we cut the deficit. and budget chairman to hold us all accountable for spending levels. and we said that we want to be at least 2008 levels as our party committed to during the election and the pledge for america, and we said 2008 levels or less. as you know, we are in the situion we are in five months practically into the fiscal year, because the former democratic house failed to produce a budget. and so we have now found ourselves in a continuing resolution environment that has held constant 2010 levels. so, we are looking at the

appropriators to come up with their versio of how we cut this budget. again, they have the limit of saying 2008 or less, so let's see what they do, and the reason why i'm so insistent to say orless is because we all have to be very focused on making sure that we find new ways to cut spending and to do more with less. in response to the question in that context, we are going to accomplish $100 billion cut on an annualized basis. >> who else would like to ask a questi? yes, right there. a hand in the back. >> good morning, congressman, james reid, a reporter for the campus radio for george washington university. >> good morning. >> the president briefly spoke last night about the education sector that he plans on making that a part of the initiative in the next year. as a university student, what republican initiatives can, will

the majority of republicans in the house take? i know that meg whitman, the california gubertorial candidate said that education in our country is the innovation engine and i know you endorsed her, so i would hope you would speak about that. >> yes, the president spoke about education, and secondary education and spoke about th need to access to secondary education and most are goals that americans would support. the reality is that we are spending billions and billions of dollars in this area. the first order of priority is to figure out why if we are spending this kind of money, it is not working. the answer should not be to refleckir flexively say, more money. we need to know how the money is being spent and how the

administration promulgating expenditures that is impeding the results that the american people expect. we are very focused on the role that the republican majority plays in the unchecked an unfut fettered result in the last two years and looking for a better future to strengthen the academic institutions in our country, because yes, we are the crucible of innovation heren the united states. >> a thank you. yes, right there. last question. no, no, right there. >> thank you, mr. leader. eric potter with the american heritage foundation. we have seen a change from those of the left to tax rates and the president sees pro growth economic policy tied to lower tax rates and we have seen it with the extension of the bush era tax rates and in the rhetoric of corporate tax rates

and, mr. leader, have conservatives won this battle? >> i would not rest on our laurels that we have won any battle. if you remember that the tax package that passed in the lame duck session was one that had things in it that all of us, we didn't embrace all of it. we did say priority one is to make sure that taxes didn't go up on anybody. we did accomplish that. we didn't accomplish any permanen reduction of rates. we didn't accomplish any permanent elimination of uncertnty. and what we want to focus on and where we have not yet won the battle is we want to focus on an environment where risk takers are willing and confident to go and put capital to work and grow jobs. again, the reason why we have become the envy of the world is because here more than anywhere else, it is that innovation that

has translated to people taking action and creating value, and creating jobs and a better life. we have not yet done, that because in the seech last night, you heard, again, some rhetoric that may hint at the left's continued insistence that washington should be about equal outcomes, and when we believe in equal opportunity. that is a battle that is yet to be won. thank you all >> president obama continued his bush wednesday for government support of renewable energy research and manufacturing. he spoke at a plant in wisconsin that makes lighting equipment. this is a little less than half an hour.

>> ladies and gentlemen, the president of the united states. [applause] >> hello, everybody. thank you. thank you so much. thank you. thank you very much, everybody. have a seat. it is wonderful to be here. it reminds me of home with all that snow out there. [laughter] let me begin by acknowledging

some of the special guest who are here. governor scott walker, where is he? [applause] he says he is the mayor. [laughter] i am looking at the guy. i do not this is true, but i will introduce them anyway. [applause] i looked at a kid like that -- i am way behind. [laughter] the mayor of green bay is here. [applause] gus frank is here. mr. chairman, thank you so much. [applause] now, let me start by clearing

something up. i am not here because i lost a bet. [laughter] i just want to be clear about that. i have already gotten three green bay jerseys. [applause] i mean, i have only been on the ground for one hour. [laughter] i have three jerseys. one of them says, "see you in the white house." [applause] let me just get it out of the way, sunday was a tough day for

bears fans. i see one guy with a lot of guts. even if it did not go the way that i wanted, i am glad to see that one of the greatest rivalries in sports is still there. we will give you next year. i am just letting you know. [laughter] congratulations and in the spirit of sportsmanship, i wish you good luck in the super bowl. last night i gave this little speech that i have to do everyone senate -- every once in a while. [laughter] i said that in this new and challenging time when america is facing tougher competition from countries around the world than ever before, we have to up our game. we are going to need to go all- in. we are going to have to get

serious about winning the future. the words of the man that the super bowl trophy is named after it has something to say about winning. he said, "there is no room for second place. there is only one place in my game and that is first place." that is the kind of determination to win that america needs to show right now. [applause] that is what we need to show. we need to win the future. that means making sure that all of our kids are getting the best education possible, not only because we need to get every child the chance to fulfill their potential, but because we need to make sure american workers can go a head-to-head

with any workers on earth. we have to be more productive and, more capable, more skilled than any other workers. it means making sure our infrastructure can meet the demands of the 21st century. rebuilding our crumbling roads and bridges, connecting america and the american people with light speed rail and internet. it means doing what we try to do i get our own lives by taking responsibility for our deficit, by cutting wasteful spending wherever we find it, and it means reforming the way our government does business so it is an efficient and responsive to the needs of americans. instead of being responsive to the needs of washington. as important as these urgent priorities are, we also have to make sure that the technological

breakthroughs that come to define the 21st century, that they take root here in america. we have to lead the world in innovation. that is al we will it create the jobs of the future. that is how we are going to build the industries of the future because we make smaller products using better technology than anyone else. that is how we will win the future in the 21st century. [applause] i came here to manitowoc to glance at future. it was right here almost 50 years ago -- i could not make this up. it was not until i was on my way here that i found out that a

chalk of metal came crashing to the earth right here. i promise you, we did not plan this originally. the press will not believe me. it was part of a satellite called sputnik that landed right here. it set the space race into motion. i want to say to you today that it is here more than 50 years later that the race for the 21st century will be one. this is the place -- [applause] this is the place that has been doing what america has always done throughout its history. you have reinvented yourself. back in 2003, one of the largest employers around moved their

operations abroad. that must have been a really tough time for this town. jobs were lost, families were hurting, the committee were shaken up. i know from my home state of illinois, when a candle loses its major employer, it is hard to bounceback. many younger people start moving away looking for opportunities someplace else. when you fast forward to 2011, a new manufacturing plants and new hope are now taking root. it is part of the reason the unemployment rate here is 4 points lower than it was at the beginning of last year. that is good news. [applause] we have plants like the wind

that our manufacturers. it is a company that has grown by several hundred workers in recent years. the aluminum plant that has hired more than 70 workers since it took over part of an old plant. it has plans to reach 100 workers by the end of this year. i am look forward to visiting those folks later today. first, i wanted to come to orion. [applause] that is all right. -- that is right. orion is a leader in solar

power and energy efficient technology. the plant is just very cool. [laughter] i just took a tour and get a feel for what you are doing. i saw where the metal was cut and the pilots are assembled. i met some of the outstanding workers like so many of you who have made this company a success. in 2004 when orion moved its manufacturing operations here, i am told there was one employee to oversee the development of the manufacturing floor. today, you have more than 250. you are hoping to have more than 300 by the end of this year. that is good news right here at orion. [applause] these are not just good jobs

that can help you pay the bills and support your family. these jobs are good for all of us because they make everybody's energy bills and cheaper. they make the planet safer. what you do is sharpening america's competitive edge all around the world. the jobs you are creating year, the growth you have achieved has gone through hard work, ingenuity, and a single-minded focus on being the best at what you do. but i think it is important because this is part of what i talked about last night when i said that all of us as a country has to invest in innovation. it is important to remember that this plant, this company has been supported over the years not just by the department of agriculture and the small business administration, but by tax credits and awards we

created to give a leg up to energy companies. [applause] it is one thing to have a good idea, but as we were talking, a lot of times on wall street does not want to take a chance on a good idea until it has been proven. sometimes the research that is required -- nobody wants to pay for it. that is why we have to step in. america needs to get behind of entrepreneurs like neal. [applause] we need to get behind clean- energy companies like orion.

we need to get behind innovation. that is how we will get to the goals i set last night and make sure that american's electricity sources, from clean energy sources by 2009. if that is a goal we must meet. [applause] that is how we will make america the first country to have 1 million electric vehicles on the road by 2015. in five years, 1 million electric cars on the road. that is hell america will lead the world in clean energy. i have said before, the nation that leads the world in clean energy will lead the global economy in the 21st century. this is not something beds i am making up just to fill up time in a speech. china is making these investments. they have already captured a big

part of the solar market partly because we fell down on the job. we were not moving as fast as we should have. those were jobs that could be created right here that are getting shipped overseas. orion tells a different story. this is the model for the future. i told the story of orion a few decades ago. neal decided to try clean energy. it seem far-fetched to people back then. he bought a couple of solar panel distributors. but the them went under. he did not give up. he capped at it. a company a orion, that would not only distribute, but manufacture its own lights.

you have probably all heard this story, but i will tell that to everybody else. it was around 2:30 in the morning that neal drove to the factory in plymouth. it was a moment when the future could not wait until the morning. he grabbed whatever tools he could find -- a couple of boards and broom handles -- is this really true? the broom handle part? [laughter] he says it is true. he started tinkering around until the engineers showed up. what he came up with is one of the signature innovations -- a new lighting feature -- fixture that gave twice the light with half the energy. that was only part of the project. he had to find loans and customers who believed in his improbable pitch.

in doing all of that, the time, patience, and persistence -- it took determination to succeed. fortunately, that is not something he has a small shortage of -- determination. as he said himself, the difference between orion and other companies is the difference between playing to win employee not to lose. he said that orion are playing. that is what sets neal apart. it is what sets orion apart. it is also what sets america apart. here in america we play to win.

we do not play not to lose. part of what i wanted to communicate last night is having gone to a tough time, having gone into a recession, having seen so many jobs lost, and seen the financial markets take a swoon, you get the sense that a lot of people are playing not to lose. we cannot take that attitude. if we are on defense and we are playing not to lose, somebody else is going to laugh at us. there are a lot of hungry folks out there, a lot of countries that are gunning for us. we have to play to win the future. it is -- it ought to producers keep sticking with debt and small businesses keep breaking new ground and we as a country continue to invest in you, then

at i am absolutely confident that america will when the future in this century as we did in the last. keep it up orion. thank you and god bless you. god bless the united states of america. [applause] ♪ [patriotic music playing]

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>> living standards are going down in america. we owe it to the country to show them a different path. >> paul ryan was chosen to be the new chair of the house budget committee. he responded to the president of the state of the union address.

see it online at the c-span a video library. it is washington your way. >> now, a house budget committee hearing on how the health care law is affecting the federal budget. the chief actuary for the centers of medicare and medicaid services was present. this is about two hours. >> this hearing will come to order. welcome to the first house budget hearing of the one of the 12th congress. i want to thank the minority member for his cooperation in getting the committee's roles adopting. we are starting early so we can get a headstart on the day. why is this focused on health

care? let's put it very simple. our fiscal problem is a health care problem. health care spending is driving the explosive growth in our spending and our debt. the new health care law was sold under the guise of fiscal responsibility. the claim was that the government that spends trillions of dollars will add millions to a government controlled health care program start two new entitlements. most americans understand that something is not adding up here. today but the hearing is intended to peel back the layers of the law. many try to distort our criticism of the health care law and say that we are criticizing the cbo. i actually, quite the opposite is true. the cbo does a very good job. we ask them to do a lot under short notice and they perform admirably. the analysis performed by the

cbo enables us to reveal the true fiscal impact of loss. we face a choice with the dead of futures. nowhere is a clearly defined and in health care. it is a government run system on the verge of bankruptcy. there is an alternative path. it leads to true to -- choice and competition in health care. it puts patients first with providers competing for our business. before we can get there, we must reject the notion that a centrally planned health care system can produce more favorable outcomes that one in maize by doctors and patients. do we want a system that is price control by government or do we want a system where the patient is the center, with the patient is sovereign, or they get to decide?

where providers, doctors, hospitals, and insurers compete against each other for our business or do we want them competing for favoritism from a shrinking pool of government resources. i want to find solutions to these problems. that is why i have worked with other democrats to come up with other proposals to try and find solutions. alice rivlin and i worked all proposals. we tried to come together to find a way to fix some of the problems to address our health care problems and our fiscal problems. i know we continue to build bipartisan support for policies to reduce costs and promote patient satisfaction. it is an honor to welcome our first witness, rick foster. his unbiased reports have proved difficult to square with the claims made by the law's components.

after his testimony, we'll hear from three witnesses -- the newly confirmed secretary of health services from wisconsin. he has served as a medicaid director under the previous administration. he will give us a sense of what the impact of the law is on the survey -- on the states. next, someone who made a compelling case in the consequences of this blot. we will hear from the center for budget and policy priorities. paul has an impressive background and i welcome his thoughts. i look forward to today's discuss it. i thank our witnesses for starting early. all like to turn to represented van holland for an opening statement. >> thank you, mr. chairman. i want to welcome mr. foster and the other witnesses appear

today. i have to say at the outset that many of us are disappointed that the first hearing of the budget committee, rather than focusing on jobs and the economy, is focused on looking backwards and repealing the health care reform bill. as the president indicated last night in his state of the union address, there are going to be issues that arise with the health care reform bill and we should work together to address those issues as they come up. -- litigating the whole health care reform bill and we think is a mistake and does not focus our resources, energy, and attention on the present problems for the american people -- getting people back to work and getting the economy back in full gear going forward. that being said, we do believe that today's hearing will help eliminate many of the misunderstandings that came up

in connection with the health reform legislation. we on the democratic aisle a few weeks ago before the vote had a hearing where we invited our constituents to testify on that bill. it was an unofficial hearing because the majority decided to press forward with were built without having any hearings in this congress, listening to the benefits that have already begun to kick in for millions of americans. we heard testimony from mothers, fathers, sisters, and brothers to light the fact that no longer will their kids be kicked off of their health insurance policy or deny coverage to begin with because they had a pre- existing condition like asthma or diabetes. we heard from parents who like the assurance that there kids to stay on their health insurance policies until they are 26.

we are from small businesses in or providing more affordable coverage for their employees. a recent forbes article indicated that the tax credit benefits it has succeeded beyond expectations. we heard from senior citizens who as of january 1 get a little bit more help in covering the cost of their medicines when they fall into the dough thanut. many americans are recognizing the important benefits of the legislation. our colleagues on the other side of the aisle say they are going to get rid of this. the reality is, between the years 2000 and 2006, health care premiums in this country doubled. congress did not think during that time. under the health care reform bill, if you look at the cbo's

january letter, you'll find that over time premiums will begin to come down in the employer- insurance market and people's out of pocket costs will go down over a period of time. we believe we should be focused on trying to fix those areas like the 1099 small business burden. there is common agreement that should be changed. we should not be litigate the whole issue. just a word on the deficit reduction benefits of the health care reform bill because the congressional budget office most recently in its january letter indicated that over the first 10 years we would reduce the deficit by $230 billion under the health care reform law as passed and over a 20-year period, it would be $1.40 trillion in deficit reduction.

the cbo is independent, nonpartisan. i think we would all agree that we would have budget and fiscal chaos if we decide that our own whim and initiative to throw out cbo numbers. today we are going to focus on what the cbo was given to score. i think this will help illustrate the fact that the cbo numbers are real. hopefully we will have the cbo, at some point encourage testify rather than take an indirect approach to those numbers. i think what we will find -- i am looking for to the testimony of mr. foster -- that indeed the cbo numbers are something that while they cannot be independently verified, we

believe they are important assumptions. there are two quick slice of what to look at on the outset. then i will conclude my remarks. this first one is based on the analysis that mr. foster did in april of 2010. it takes a chart of total national health care expenditures in the year 2019. that is that the health care bill is implemented as enacted. the columns to the right or the number of people who will now receive health insurance and be able to get preventive care just like members of congress can get through their insurance and get the health care they need when they needed to their insurance. the estimates are between 32,000,034 million americans. mr. foster says 34 million.

americans will get that additional coverage. that is on the right. we've heard a lot of talk about how this was known to be a huge expenditure. if you look at national health care expenditures, in the year 2019, nine years from now, you are talking about a 1% difference with the health care reform bill. that is in getting 32 million to 34 million americans covered. if you look at the remainder and get into the out years and you begin to bend at the cost curve, you actually get to a point where the national health expenditures as a result of passage and implementation of the new law actually will be less than if we had done

nothing. we look forward to the testimony of mr. foster and others as we go for this morning. i conclude with this light, which are the cbo numbers which showed the savings for the first two years and the savings for the second 10. thank you, mr. chairman. >> we have a difference of opinion on some of these things. i appreciate the gentleman's remarks. i know they do not want us to get into really getting the health care law, but i think everybody will agree the debt problem is a health care problem. we are going to have to we litigate that to get to a real solution. we have not fix the debt problem yet. i want to welcome a brick. we appreciate your professionalism. the floor is yours.

you have to hold it down for a few seconds. >> can you hear me? >> iraq to pull a closer. -- you have to pull it closer. can he pull it a little closer? we cannot hear you that well. >> is that any better? ok. they always come through in the end just like congress. >> we will see. >> chairman ron -- chairman ryan, representative dan holland, distinguished members of the committee, thank you for allowing me to testify today on the health care reform act.

the office of the actuary provides actuarial economic and other technical assistance to policy makers of both in the administration and in congress. we do this on an independent basis objectively and also in a non-partisan way. the office of the actuary has performed this role for more than the last 45 years, even before the enactment of the medicare program. i am appearing today and i realized -- i am appearing today as an independent adviser to congress. i am joined by the director of light medicare and medicaid process group in the office of the nashiri. my statements are my own and do not necessarily represent an official position of the department of health and human services. over the last couple of years,

we generated a lot of information about finances and coverage of the affordable care act as it was finally enacted. might written testimony has a lot of detail. there is a more detailed than that in the memorandum that representative fan holland mentioned -- van hollen mentioned. the medicare trustees' report has a lot of information about the financial status of medicare under the affordable care act. we also have a september 2010 article that has projections of national health expenditures under the new legislation. we recently came out with our 2010 actuarial report on the financial outlook for medicaid which is now available on our web site.

the affordable care at has a major impact on the coverage status or the insurance status of the people of the u.s. wheat estimate that by 2019 the number of people who lack health insurance will be reduced by about 34 million people because of the affordable care act. as part of this, it increases in medicaid enrollment by an estimated 20 million. it would also provide private health insurance through the health insurance exchanges to an estimated 15 million people who were previously uninsured. the overall impact on people who currently have employer- sponsored health insurance is mixed. for many people, they will now have the opportunity to get that coverage or they will be more inclined to take the coverage that is currently offered.

four other people, however, their employers may be more inclined to drop the coverage that already exist. on balance, we sell only a small reduction in the total, but that is made up of an increase followed by a decrease. the affordable care at has effects for federal expenditures and within that the medicare and medicaid programs. it will also have effects on total u.s. health care spending. our estimate for the fiscal years 2010 through 2019 during which the reforms are only partially implemented, our estimate is the coverage expansions through medicaid and through the exchange coverages would increase federal caused by

a total of about $828 million. that takes into account the additional penalty receipts we would receive from employers or individuals who did not offer or have a health insurance coverage. about half of the $828 billion is due to the expansion of medicaid coverage and the other half roughly is due to the federal subsidies that will be available for people with exchange coverage and lower levels of income. the projected medicare savings under the affordable care at all are estimated to offset about five under $75 billion of the total cost we just mentioned. -- $575 billion of the total

cost we just mentioned. will save about to enter and $33 billion. the act also specifies lower medicare advantage benchmarks, the private health-insurance plans are judged against. we estimate that would save $145 billion over this time. then there are higher hospital insurance payroll taxes in addition to 0.9% with people of high levels of earnings. that will generate another $63 billion. there are a number of other smaller and tax both within medicare and medicaid and also in the immediate insurance reform, the long-term care insurance program, and so forth that we can talk about in more detail if it is helpful. we have estimated, as we saw all

on the chart earlier from rep van hollen, that the affordable care ag would cause an increase in total national health expenditures in the u.s. the total is estimated to be $311 billion from 2010 until 2019. as you would expect from our conversation just now, there is a substantial increase in total health spending associated with the coverage expansion. people, individuals and families who have health insurance dentist been considerably more on health care that people who do not have insurance. you would expect a higher level of expenditures. that is offset somewhat because many of these people will be on medicaid or the payment rates to providers are very low. it is a relatively inexpensive way of giving people health

insurance coverage and it has its own set of issues that we could talk about.

[hhe first hearing for

both chairman assa and ranking member cummings, so i ask all of your indulgence as we go through a number of first time mistakes and undoubtedly i will make. the chair notes that pursuant to the rules there will not be opening statements. however, with members may have seven days to submit opening

statements and extraneous materials for the record. we will now recognize our panel. >> mr. chairman? >> yes. >> parliamentary inquiry, mr. chairman. i know this is our first meeting and i just want to make sure we're clear. we had a lengthy discussion. >> will the gentleman state his -- >> i'm trying to do that. we had a lengthy discussion yesterday with regard to opening statements and the chairman, i thought we had reached a wonderful agreement where the chairman had said that he would provide us notice with regard to opening statements, whether we were giving them or not. and this is our first hearing and some of the members and, of course, i am wondering exactly why we are not having opening statements and, two, we were given notice just about a half an hour ago or so that there will not be opening statements. i'm just wondering so that --

the. >> i thank the gentleman. the chair is waiving opening statements, including my own. all members will have seven days in order to place their opening statements into the record. on a very personal note, i felt that it was most important on this first hearing to start off by listening to the witnesses as though this -- and i know that the special ig, this is his 20th visit. however, for the purpose of all of us, including the freshmen, i wanted to start off by listening first. i recognize that tradition is that we hold the members -- the witnesses here for sometimes an hour through opening statements. that is a tradition that i intend to break. that doesn't mean that there won't be opening statements in the future, but for this first one, i wanted to make it perfectly clear, if you will, that we're interested in listening to our witnesses first. and i appreciate the gentleman's partmently inquiry. >> mr. chairman, for the

parliamentary inquiry, pursuant to what you said yesterday, and i have the transcript, will you give us more notice with regard to that? i mean, i thought we were very -- we had a gentleman's wonderful discussion yesterday where you said you would give us proper notice. and i was just wondering what should we expect in the future? that's all. >> as i said, that we will intebd to give notice to all things. in this case, we only organized yesterday, less than 24 hours ago. in the future, i would expect there will be greater notice and i appreciate the gentleman's question. >> will the chairman yield? will the chairman yield? >> at this time, i'm going to introduce the witnesses. mr. timothy -- >> mr. chairman? >> mr. chairman? >> for what purpose? >> an inquiry of the chair with respect to procedure. >> the gentleman will state his parliamentary inquiry. >> i've been in the congress for 14 years and i've never -- it's just unprecedented that rank member not be permitted to give

an opening statements or for a chair to suspend with the opening statements pp so that people know -- >> does the gentleman have a parliamentary inquiry? >> i didn't make a parliamentary inquiry. >> then the gentleman is no longer recognized. >> mr. chairman? on a point of order. >> yes, point of order. >> i certainly understand if the chairman has decided that he has nothing to say. but can you cite one example, any single example in the history of the congress, if you would, where a minority ranking member has not been given -- not been afforded -- not been given the respect of an opportunity to make a brief opening statements? >> the chair will respond for the record with an appropriate list of the times in which opening statements have been waived or ranking members have not been able to -- >> but you can't think of one right now? >> the gentleman is no longer recognized. we now turn on our witnesses. mr. timothy bassette from the

office of financial stability and chief troubled asset relief program. mr. massed assumed the title of assistant secretary on september of 2010 after her better ellison stepped down from the position. before that, mr. massett served as the chief counsel for the office of financial stability. prior to starting his government work, he was -- he worked at the office of -- let's see. worked at the onset of the 2008 financial crisis. mr. massid was a partner at kraf it's, swan and moore where he had a diverse corporate practice with an emphasis on security offerings and bank financing. counseling, underwriting security issues. mr. massed received an ab

degree, magna accumulate lady from harvard college and his jd from harvard law school in 1984. mr. neil barofsky, no stranger to this committee, was sworn into office of december 2008 as a treasury department inspector general to oversee the troubled asset relief program. prior to that, mr. barofsky was a federal prosecutor in the united states attorney's office for the southern district of new york for more than eight years. in that office, mr. barofsky was the senior trial counsel who headed the mortgage fraud group. mr. barofsky also was -- has extensive experience as a line prosecutor leading white collar prosecution during his tenure as a member of the securities and commodities unit. mr. barofsky led the

investigation that resulted in the indictment of the top 50 leaders of the revolutionary armed forces of columbia on narcotics charges. a case described by then attorney general as the largest narcotic indictment filed in u.s. history. mr. barofsky received his ba from the warton school of business and is a magna cum laude graduate of the new york university of law. pursuant to the committee rules, all witnesses will be sworn in before testifying. please rise. raise your right hand. this is my first time. do you solemnly swear that the testimony you will give about -- you are about to give this committee will be the truth and

the whole truth and nothing but the truth? thank you. you may please be seated. >> as is accustom to this committee, we would ask that your full written statements be placed in the record and that you limit your opening statements as close as possible to five minutes. as was the custom of my predecessor, you will see three lights. green means continue to go. yellow is the warning that you should not run through our intersection and red in all 50 states means stop. thank you, mr. chairman. the normal rule of committee is that we go in order of rank. mr. massed, i believe you would, by protocol, be first. >> thank you, mr. chairman.

chairman issa, ranking member cummings, members of the committee, thank you for the opportunity to testify today about the troubled asset relief program or t.a.r.p., as it is commonly nope. i am the acting assistant secretary for financial stability at the treasury, which means i am responsible for overseeing the program on a day-to-day basis. i recognize that t.a.r.p. has not been popular. there is good reason for that. no one likes yood using taxpayer dollars to rescue financial institutions. flun the less, sitting here today, more than two years after a bipartisan congress passed the legislation that created t.a.r.p., it is clear that the program has been remarkably effective by any objective measured. first and foremost, t.a.r.p. helped prevent a catastrophic collapse of our financial system and our economy. in the fall of 2008, we were staring into the abyss, lending by banks had practically stopped. our credit markets had shut

down. and countless financial institutions were under severe stress. this the was a crisis not only for wall street, but also for main street. simply put, we were at the risk of going into a second great depression. today, people no longer fear that our major financial institutions or our financial system is going to fail. banks are much better capitalized and the weakest parts of our financial system no longer exist. the credit markets on which small businesses and consumers depend, auto loans, credit cards, student loans and other finances have reopened. businesses are able to raise capital and mortgage rates are at historic lows. of course, the economy is not yet fully recovered and there is still much work to be done. unemployment is unacceptably high and the housing market remains weak. but the worst of the storm has passed. second, we will not use all the money congress made available for t.a.r.p. and we are exiting our investments and the private

sector far faster than anyone thought possible. let me briefly summarize a few key facts. congress originally authorized $700 billion for this program. we will spend no more than $475 billion. and of the money spend to date, much of it has been repaid. approximately $270 billion. we still have about $166 billion invested in various institutions and i am hopeful that we will recover much of that over the next two years, depending on market conditions. finally, the ultimate cost of t.a.r.p. will be far less than anyone expected. the total cost was initially projected to be $350 billion. that number, however, will steadily decline over the next few years according to the most recent estimates, the overall cost of t.a.r.p. will be in the range of $25 to $50 billion. and the direct fiscal cost of t.a.r.p. as well as all the other interventions to address this crisis is far less as a

percentage of gdp than the cost of resolving the snl crisis in the 1980s. in addition, t.a.r.p. cost will be primarily attributable to what we spend on our housing programs and our efforts to help responsible american families keep their homes. we expect that all the other t.a.r.p. programs and investments, when considered as a whole, will result in very little or no cost to the american taxpayers and possibly a profit. in all of these efforts, t.a.r.p. has been subjected to unprecedented oversight. when congress created t.a.r.p., it also directed four different oversight bodies, including the special inspector general for t.a.r.p., mr. barofsky, cho is sitting with me today to carefully review all of our programs. in addition, t.a.r.p. has been subject to vigorous congressional oversight by this committee and several others. we welcome this oversight. individually and collectively. it has helped us to develop,

implement and constantly improve our t.a.r.p. program. and we have strived to be transparent by providing a wealth of information about the program to the public. in particular, i look forward today to discussing mr. barofsky's most recent quarterly report. i am pleased that the record concludes that t.a.r.p. helps, as he put the it, head off a catastrophic financial collapse. and that the program financial prospects are today far better, he says, than anyone could have dared to hope just two years ago. the other oversight agencies have reached similar conclusions. the report raises a number of concerns about the h.a.m.p. program and the so-called too big to fail issue and i'm happy to discuss those, as well. t.a.r.p. succeeded in what it was meant to do. it was not designed to solve all our problems and we recognize that many americans are still suffering. nonetheless, thanks to a

comprehensive strategy and decisive action, our economy is far stronger today than it was two years ago. both political parties deserve credit for these achievements. congress enacted the program at a time when the financial system was falling apart. in that moment, leaders from both parties stood up, stood together and did what was best for this country. thank you again for providing me the opportunity to testify here and i welcome your questions. >> thank you, mr. barofsky. >> chairman issa, ranking member cummings, it is an honor to present here once again and to present to you our most recent report to congress. for sig t.a.r.p., we've made great progress in striving to meet our goals of transparency, oversight and enforcement. with this, our niepth quarterly report along with 13 separate audits, it helped shine a light

in some of the darkest areas of government's response. it's included some of the important recommendations which when implemented and adopted have resulted in great savings for the taxpayer which resulted in great fraud and abuse. our investigation unit has been similarly busy. we've been able to secure fraud charges against 45 individuals, 12 different companies and to date, 13 criminal convictions. we've also been able to either recover or prevent from loss of fraud more than $700 million. thereby assuring that sig t.a.r.p. as an agency will more than pay for itself. and with 142 ongone criminal investigations, including those into executive at 64 different banks that either applied for or received t.a.r.p. funds, we still have a lot more work to do. for treasury and t.a.r.p., the results have been more mixed. while it's certainly good news as mr. m assed noted, the estimates of t.a.r.p. costs have declined and significantly it's not the whole story.

and too often, with treasury in its statements and in its testimony has too much of tunnel vision focus on the financial c decline of those, obscuring the very significant and very real nonfinancial costs that will arise out of the troubled asset relief program. first, it ignores the very significant, wholesale damage to government credibility that has arisen from treasury's mismanagement of parts of the t.a.r.p. program. too often these programs have been marked by loose compliance, failures in transparency and questionable decision making. it's those avoidable failures, ago anything else that account for some of the deep unpopularity of t.a.r.p. the second cost is perhaps the most significant of t.a.r.p.'s legacy, the continued existence and the moral hazard associated with institutions that are still deemed too big to fail.

when secretary paulson and secretary geithner spoke to the financial markets and assured that they would not allow the financial institutions to fail, they did more than reassure troubled markets. they sent a powerful message that these banks would not be left to suffer the consequences of their own folly. as a result, not withstanding the passage of dodd frank last summer, these still envoy an advantage with enhanced credit ratings as a result of that implicit government guarantee. t.a.r.p. has mixed the cocktail of implicit guarantees that led to the disasters at fannie mae and freddie mac.

i agree with treasury that they have met the wall street goals, they did help prevent a collapse of the financial markets and that undoubtedly had a benefit not just for wall street but for main street. t.a.r.p. has not met the goals set forth for congress for main street. the most significant main street goal of preserving home ownership, its failures there have had some of the most devastating consequences. the home modification program has to date been a failure with estimates that over the life of this program, we're going to see probably well in excess of 10 million foreclosure filings on 10 million families, when compared with the congressional oversight of panel's recent estimate that no more than 7 or 800,000 permanent sustained modifications, hope is slipping away. treasury's administration of this program gives little cause for optimism. they continue to refuse to adopt even the most baitic metrics and

goals and benchmarks to measure success. they appear to be afraid to rein in penalties who everyone agrees has been nothing short of abysmal. as a result, we continue to see spiralling downward participation quarter after quarter after quarter. mr. chairman, ranking member, members of the committee. i thank you for this kpubt r opportunity and i do look forward to answering any questions you have. >> i thank the gentleman and i thank him for the accuracy of five minutes. i now recognize myself for five minutes. mr. massad, since you're here on behalf of treasury as the person most knowledgeable, can you explain to us the secretary's statement on december 2010 on the subject of t.a.r.p. and related bailouts when he said "in the future, we may have to do exceptional things again if we face the shock that large. you just don't know what's

systemic. i repeat, you just don't know what's systemic and what's not until you know the nature of the shock." does that mean that the secretary expects that if a housing crisis occurs again or some other shock, we're not talking about an external force, but some other shock to the community, that we still have systemic risk, too big to fail and the government will come in and bail out the large and allow the small to fail? >> mr. chairman, what the statement means, in my view, what i believe the secretary was saying was that we cannot predict what the future issues will be in terms of risks to our system. >> isn't that exactly what dodd frank and all these other legislation have done? we were supposed to eliminate too big to fail, systemic risk was supposed to be managed by an analysis, if you will, of

vetting of whether entities were robust enough now and in the future, and it's the reason that some companies are still around and some were folded. isn't that true? >> you are correct, mr. chairman, that that is dodd frank's purpose and that's what we're pleimplementing. it gives us the tools. >> right, but the secretary said this well after dodd frank. for example, we've had bank of america here before us on multiple occasions. we've rolled country wide into b of a, i'm not for breaking up companies or taking a heavy hand, but if bank of america is too big to fail, shouldn't we be suggesting that, i'm not suggesting this, but shouldn't we be suggesting that they find a way to not be too big to fail in whatever kind of dw

divestitures. rather than putting them in the category of those who enjoy less expensive costs of assets. >> i think dodd frank gives us the tools to regulate any financial institution, regardless of its size, imposes systemic risks and gives us the tools to shut down such financial institutions. it gives us precisely the tools you're talking about. if i can respond more broadly. i think the concerns that mr. barofsky raised are those that animated the congress in passing dodd frank. those are the issues congress debated in passing dodd frank. >> as somebody on the conference for dodd frank and somebody who has been there all along, dodd frank was not altogether that bipartisan as you can imagine. i appreciate it can shut down entities after the fact. it has a heavy hand to determine who is a financial entity. perhaps the next time general motors gets in trouble, we can shut them down rather than save

them as a bank. moving on to ham, as the ig reports pretty thoroughly, we cannot get money back from loans to insolvent companies. we have to look at the money we won't get back an the suffering of people who won't get a loan modification if they can't afford a home or an elganltsz exit that won't destroy the neighborhoods as we seek somebody who can afford it. i have december 31st, 2010 results and i would like you to comment on them. the goal of hamp 3-4 million loans. modifications cancelled, almost 800,000. can you give me your view of hamp based on those figures? >> it's remarkably disspiriting. this was the program that was supposed to be to help main

street. when t.a.r.p. was originally enacted, when you gave the treasury $00 billion, the idea was the treasury was going to buy toxic assets. the idea of including a goal was to address the fact that treasury was going to own so many of these mortgages that they be able to do these modifications themselves, being able to have that impact on main street. instead we have a program, the numbers you just indicated, it's just not working. out of the $50 billion originally allocated, only a billion dollars have been spent. i hesitate to use the word only a billion, but the numbers are -- we're running out of hope. there's no way we're going to ever get close to the 3 or 4 million that was the original expectations. even more frustrating is treasury will not give us their expectations. they must know what the run rate of what they expect the total number to be.

they must have a goal. if they don't have a goal, they need to have one. we can't fix this program until we have specific benchmarks as to what the program is trying to accomplish of keeping people in their homes. not people who get trial modifications who fail, which was one of the benchmarks, not the number of people who get offers for trial modifications. how many people are going to get modifications who truly keep them in their homes. >> i recognize a member of this panel who has a deep interest in the modifications becoming permanent. >> thank you. the title of today's hearing is bailouts on the financial crisis. we have encouraging news. sig t.a.r.p. has increasingly favorable assessment of t.a.r.p.'s financial successes. is that right, mr. barofsky? >> absolutely correct. >> here is what it says, i quote

"on the financial side, t.a.r.p.'s outlook as never been better. not only did t.a.r.p. funds head off a financial collapse, but t.a.r.p.'s direct financial cost to the taxpayer have fallen substantially while treasury's ultimate return on its investment depends on a host of variables that are largely unknowingly at this time. t.a.r.p.'s financial prospects today are far better than anyone could have dared hope two years ago." this is great news for the american taxpayer, but the report correctly warns that there is still hard work ahead. it's important that we continue strong oversight. i've long demanded stringent oversight of the t.a.r.p. program, a program proposed by president bush in 2008 and enact the after improvements by congress. i previously requested, gentlemen, that sig t.a.r.p. audit the hundreds of millions of dollars aig expended on

bonuses. i led 26 of my colleagues audit the counterparties. that said, i'm very concerned about the serious allegations of abuse by the mortgage service industry. today's sig t.a.r.p. report calls their performance abysmal and describes daily accounts of errors and more serious misconduct. the sig t.a.r.p. report also says this, "anecdotal evidence of their failures has been well chronicled, from the repeated loss of borrowed paperwork to the plate apt failure to follow program standards to unnecessary delays that severely harm borrowers while benefiting themselves." mr. chairman, we cannot do a comprehensive examination of the foreclosure crisis without hearing from the industry. that is why i sent a letter on december 21st asking you to hold the committee's first hearing on

the widespread utilization of fraudulent practices throughout the mortgage industry. this has been my number one priority, as you said. i assume weould move forward. it's the same reason i sent you another letter on monday asking ayon industry witness. i understand that you were not prepared to do that at this time and i understand that. mr. chairman, and to our witnesses, let me go to you, mr. barofsky, the servicers, what are you all doing about them? i mean, government has a role, the servicers have roles. i'm wondering what's happening with that? i ask you the same thing, mr. massad? >> be brief. >> we have, at sig t.a.r.p., we exercise our jurisdiction as we can. our one area of jurisdiction is one to investigate them if there's any criminal conduct. we do have ongoing investigations in that area. the second thing we can do is use our audit function to do reviews of the servicers, we

have that ongoing as well. we're doing a review of their performance under the net present value tests and other aspects of their performance. what we cannot do is what treasury can do. you yield a big stick as well as the can carrots it offers and yield significant, tough penalties. we have to keep this program from being voluntary, not just in participation for the servicers but in compliance as well. >> mr. massad, what are we doing with regard to the servicers, because there have been horrendous stories about what servicers have been doing and what impact do they have on these numbers? >> congressman cummings, i agree it's been abysmal. this is a voluntary program. congress didn't give us the tools to impose fines as mr. barofsky is suggesting. what we have is the ability to withhold payment when they enter a permanent modification. a lot of the problem was, we

couldn't get them to get the permanent modifications done. we worked with them to change their performance. now, there are a number of other things that are going on in terms of the performance of the servicers. interagency task force that is looking at all the wrong things they've done in foreclosures, there is talk about having standards. we can't through hamp change the entire industry's behavior. this is a model, it's an industry that's broken. it didn't work. >> can you tell me this? is the justice department involved in anything you're doing? >> yes, they are. they are involved in the interagency task force, as are all the federal bank regulators and there's a lot of work being done on what types of reforms are needed. there's also work being done by the fhfa in terms of the business structure. they simply weren't prepared for this crisis and aren't able to deal with people. nevertheless, i think we've got

to remember that hamp has achieved over half a million modifications. these are people that make $50,000 a year. to write it off and say it's a failure i think is not really appropriate. now, the reason we haven't reached 3-4 million is basically, we have eligibility standards. the pool today of the people that are eligible is about 1.5 million. what are those eligibility standards? we don't help people who make enough money that they don't need government help. we don't help people who have million dollar mansions. we don't help people who have vacation homes. when you go through that and realize that's the eligible population, we've actually reached a lot of them, we're continuing to reach a lot of them. we had a thousand people turn out for an event in las vegas. while we've tried to incorporate mr. barofsky's suggestions, other than the one where he said

people should thumb print people, we didn't feel that was appropriate, i think the program is helping a lot of people. >> thank you, mr. chairman, i think my time has expired. >> the gentleman, from ohio is recognized for five minutes. >> thank you, mr. chairman. gentlemen, thank you for being here and addressing these important issues we have. both of you get a sense of the anger of the american people but also the sadness of the issues we're dealing with. when we look at your the "new york times" issued a quote and it says "the greatest tragedy would be to accept the refrain that no one could have seen this coming and that nothing could have been done. if we accept this notion, it will happen again. " "what's sad is we approached this as it was unfolding.

these things were knowable. i know i and many members of the congress were sounding the alarm of the mortgage foreclosure crisis and capital had to be lost as families were losing their economic future and their homes. when you look at t.a.r.p. and what is happening and how it's progressing, i do really -- i can't understand how treasury can claim its successes when it's had so many undefined executions. i voted against t.a.r.p. i voted against t.a.r.p. because i'm from ohio. ground zero from the mortgage foreclosure crisis. when they came and said they were going to buy toxic assets and they were going to have value, i knew they did not. i walked the neighborhoods and talked to the family who lost their homes. the short t.a.r.p. bill was not defined, as justify said, mr. barofsky. i greatly appreciate that you not only look at what you're trying to unwind but what they started with. this was an undefined bill and

process. i think there are billions that have been lost. i'm very concerned about the hamp program because if we look to what the commission said that this was avoidable, that means families were taken advantage of. that means families were taken advantage of and lost their financial future. hamp came forward as supposedly a government answer that's going to help them. we recognize there was a federal issue here. as the banks, all of the people, due to their greed, had perpetrated this, we were going to step in and help them. but it's not helping them. mr. barofsky, i want to thank you for the detail you provide us. when you get these final numbers and do the division, we're going to have spent an unbelievable amount for each of the loan modifications that occurred while doing nothing to stop the record foreclosures that are still occurring. first off, mr. barofsky, i think, when we look at the ultimate numbers, we want to figure out what percentage of these people who did ultimately

get loan modifications could have gotten them in the market meaning there was no subsidy that would have been needed. two, how many of these are going to fail anyway, because those are lost dollars also. what are the per unit costs in the end? could you speak to that for a moment as to how we're going to actually assess what was spent and -- we can always tell its a failure. thank you for your words on that. how are we going to assess the waste. >> one of the good news aspects of the hamp program, to the extent there is good news, it's reflected in cbos loss estimate is that the program won't spend even close to the amount of money that's allocated for it. money only gets spent when there's actual success. the remarkably low numbers of modifications means that a remarkably small amount of money will be spent. that's why we've only had -- it's only been a billion dollars out of the 45 that's actually been spent so far.

to the extent there is good news, it is that it will not cost 9 taxpayer anywhere close to the allocated amounts. that distinction really bears any type of claim of success for the remarkably modest numbers of modifications that are coming from the program don't match up with what was originally intended. the advantage of not having real goals or benchmarks is you can claim success wherever you want and say that's a success. i do not mean in any way to demeanor say that this program isn't very important to those people who are enjoying it and have the benefit of these important sustainable permanent modifications in had any way, but i think the idea the reason there aren't more is because there are millionaires living in mansions and that's why. there are a lot of people out there who are struggling very hard who could benefit from these modifications. >> mr. massad, i believe that the mortgage foreclosure crisis when it's ultimately analyzed

will turn out to be the largest theft of history. now we have t.a.r.p. and treasury is involved with this, and we have sig t.a.r.p. looking at it saying you're still managing this without measurable outcomes and are not being very forth coming in how the program is being evolved? >> i'm happy to respond to that. first of all -- >> puck do so briefly. >> as mr. barofsky noted, we only pay money if there's a permanent modification entered into, if we actually help someone enter into a permanent modification. we only pay for as long as that modification continues. there's a built-in taxpayer protection element to this. your question about unit costs, very good question, sir. in fact, it's structured so it is a unit cost program here. we won't spend all the money if we don't enter into enough

modifications. that money won't be spent for anything else. it will go back to repay the debt. that's number one. number two, as we said, the eligibility criteria here are another way to protect taxpayers. we only pay for people that we think are greatly in need. as to your overall question here on the mortgage crisis, obviously there's a lot of study of this, fcic released its report today, and i think it noted that there's blame to go around in a lot of places. we must remember, t.a.r.p. was just set up to provide the resources to stabilize the system. didn't change the regulatory structure. we now have dodd frank, which gives us new tools to regulate the financial industry so as to prevent this type of problem in the future. >> the chair now recognizes the former chairman of the committee, long-standing member of the committee, mr. towns of

brooklyn, new york. >> thank you very much, mr. chairman. let me first thank both of you for being here. i get the feeling that we sort of blaming each other. that bothers me because people are losing their homes. i wish you could just come and spend one day in my office. and just listen to people who are coming in and the stories that they're telling. some of the things they're saying, they made an application, all of a sudden, the application is lost. they call and they say no, we never received the papers when they actually presented the papers. the other one, which is really going becoming a problem is when they call back the third or fourth time, the person no longer works here so you need to find out who you were dealing with and of course, if the person is no longer there, how can you find anything? i noticed you indicated, mr. massad, that the congress didn't give you the power. i understand that as well.

but what can we do now to fix the situation that we're in? i mean, this is a crisis. i'm hoping that -- i want to join you, ranking member, in asking for a foreclosure hearing, where we can bring people in and let them tell their stories. for some reason, i don't think that the message is getting out in terms of the seriousness of this situation. >> congressman, i agree with your concern. i think you're absolutely right. we've tried to do what we can through hamp to put in a lot of borrower protections. we've required the servicers, if you're evaluating someone for hamp, you can't foreclose on them. we put in call centers, escalation centers, and aa lot of calls we get are from people who aren't eligible for hamp. in terms of the overall industry, a lot of attention needs to be paid to this. more work will be needed.

this congress needs to consider it. a lot of people have talked about whether we should have national servicing standards. people have noted that the basic economic model of servicing doesn't work. servicing works when you've got performing mortgages. the servicers collect the payments and pass them on to the investors. when it comes to dealing with a crisis like this for foreclosures, they're not equipped to do it. we've got to look at things like servicing standards, interagency task force is looking at a number of problems, regulators are as well. there's a lot of activity here. we'll see it in the coming months. >> mr. barofsky, what are the penalties you're talking about? can we sort of look again at that? something needs to be done. >> absolutely. i think as mr. massad said, there's discussions of national servicing standards. i think chairman bahr of the

fdic have put out great ideas for all servicers. they could be adopted and put into the hamp program, but financial penalties based on withholding payments to the servicers. treasury negotiated a deal when it obligated about $30 billion for payments and that includes the ability to withhold payment and impose financial penalties. to the extent those penalties are not strong enough or good enough, that falls on treasury for not negotiating a better deal. this is not the most unpredictable possibility, when you have a program of this size and scope, there's going to be problems. treasury has repeatedly cited their ability to impose financial penalties is a stick that they have. we would encourage them to take the stick out. >> if i can reply to that. we are certainly conscious of that. we may withhold amounts in the future. let's remember, we can only withhold the amount that we owe them for permanent

modifications. if they haven't entered into very many permanent modifications, there's not that much to withhold. there weren't many permanent modifications, as this committee knows. people testified here in march. there were only 170,000 modifications. a lot of people said then the program was a failure. what we did since that time is we have had a number of remedial actions that servicers took. from that date, from late last march, we have increased the number of permanent modifications substantially now. as i say, we're over 500,000. the redefault rate on those is very, very low. >> mr. chairman, if there's something that we need to do, i think you need to say it, because we just can't continue to let people lose their homes. thank you very much, chairman. >> the chair recognizes the gentleman from north carolina

and the sub committee chairman of jurisdiction for this, mr. mchenry. >> thank you, mr. chairman. in consultation with the chairman, it's the intents of my sub committee to have field hearings and to hear from those that have been affected. we would welcome the treasury to invite individuals that have been helped. however, in my constituency and the constituents i've talked with, it's easier to find those hurt by hamp rather than helped. my question is, do you have adequate provision under current law to make sure hamp is successful. yes or no? >> congressman, it depends -- >> yes or no. >> if i can -- >> i've got five minutes, mr. massad. yes or no. let me begin by asking, do you think hamp is successful. >> i do. >> do you believe under current provision of law, you have

adequate authority to ensure that hamp is successful. >> i cannot solve the housing crisis with hamp alone if that is the meaning of your question. i think helping over 500,000 people enter into permanent mod modify indications, people who would otherwise be thrown out of their homes, people who make $50,000 and their neighborhoods would be hurt because they're now living next to a home that could be vandalized, it depresses their property values, it's a trag on the economy, i think yes, those are dollars well spent. >> thank you. mr. barofsky, in your written testimony today, you outlined that there are 2.9 million homes received foreclosure filings in 2010, up from 2.8 million in 2009 and 3.8 million in 2008. can you discuss your findings on the hamp program? >> yes, again, not to diminish the positive impact it has on those families and those that

are able to sustain the program, but you have to look at what the program was expected to do and the context of the entire foreclosure crisis. the advantage of never actually putting out meaningful goals, means you can declare success, even when you have looking at a total for this entire program of 7 to 800,000, when you originally expected to help 3 to 4 million. this program, it helps five people, that's great for those five people. what about all those millions of people who are not getting helped? the millions of people that treasury and the administration identified the very beginning of this program who they were going to try help keep in their homes by modifying their mortgages to a sustainable level. the numbers don't lie. when i hear them declaring success with these incredibly modest numbers, numbers that are so modest that they can't have enough money to pay to impose

financial penalties, it's heartbreaking, it means they won't recognize and make the changes necessary to make this a better program, because i hear from those people as well. >> thank you, mr. barofsky. moving on to the small business lending fund, well, in one of your -- in your report, you requested treasury remove t.a.r.p. assets and equity from the entity's balance sheet for purposes of evaluating its application for the small business lending fund, the intent of the small business lending fund is to increase lending. has treasury been open to your proposal? >> treasury has rejected that recommendation. >> mr. massad, why did you reject that? >> because we wanted to make sure we complied with congress's directives and the law. congress provided in the law

that existing t.a.r.p. recipients could refinance their loans into this small business lending fund. we believe we're acting in accordance with that. >> sure, but it's not a provision of law how you measure the removal from t.a.r.p. into this small business lending fund, is there? >> we did not believe that congress was instructing us to basically penalize those institutions that had already received t.a.r.p. funds. quite the contrary. >> mr. barofsky, under your reading of the law, do they have provision to do this? >> absolutely. congress specifically made a provision in the law that gave the secretary of treasury the ability to fashion certain regulations for t.a.r.p. banks to enter into sblf. there's nothing in the statute that gives you a matter of right by being a t.a.r.p. recipient that you automatically get to apply -- you automatically get converted into sblf.

it offers tremendous advantages to t.a.r.p. recipients to convert. the taxpayer loses out on a lot of those. our recommendation is a simple one. let's make sure the banks you take out of t.a.r.p. and put into sblf are adequately capitalized to meet the goals of this program. we're not saying penalize blanks, but we do think it's important for treasury to be very responsible and make sure that those that are going to get the benefits of being an sblf are well suited to be able to do the new lending, new incentivized lending from government capital and we believe those banks should be treated as other ap kabtss who come into the program. for example, when a bank applied for the cpp, it didn't get to take into account government capital. that should be the same standard here. the fact that these banks have the benefit of government capital, we don't believe that that necessarily -- that that

capital should count when making that evaluation. if they can fulfill the goals of this program, great, they should be brought into the program, if they meet the other conditions. >> mr. chairman, i know my time has expired. i would ask mr. massad to respond in writing to this very subject. we were interested in this committee and if you have concern that you don't have adequate provision of law, we would like to change that. >> i thank the gentleman. the chair recognizes the chair from new york. >> first i would like to thank the panelist for their public service and report some good news in that the dow just crossed 12,000 for the first time since june of 2008. that shows capital is flowing again and is a very good sign of economic recovery in our great country. from your testimony today, t.a.r.p. played a role in moving us in this good direction.

you pointed out that it not only averted a meltdown, but laid the groundwork for economic recovery which we're seeing today. i must say that during the dark days, i was getting phone calls in the middle of the night and all day long from constituents who were afraid of a collapse there was a run on the money market on some banks and i personally believe that my vote in support of t.a.r.p. will historically be regarded as the right thing to do and good public policy, although all of us who were on the campaign trail, many of us were attacked relentlessly for having supported this important program. i would like permission to put in the record one of the best report that is i've seen on the successes. it's bipartisan from blinder, a democratic economist and zandy, a republican one, on how the great recession was brought to an end.

also an article in the american banker which talks about the home foreclosures and a foundation that is working with hamp and others to help people stay in their homes. >> so ordered. >> i specifically would like to respond to the two problems that mr. paragra mr. barofsky mentioned in his opening. first the confidence in our government, transparency and other management mistakes and i would like to mention that i authored a bill in response to your first criticisms on this that would have computerized t.a.r.p. in realtime so we would know where the finances are. it passed the house, backed by the chamber of commerce and labor, and i truly believe we should do it for the entire system. if we should be able to track our packages in two seconds, we should be able to track our exposure in finances. i think it's an important bill. you also mentioned the too big

to fail, the fact that there were concerns that we may not have done enough. i would like mr. massad to respond to this, specifically in the dodd frank bill and likewise on the conference committee with the chairman, we created a financial stability oversight council to monitor the systemic risk and to set criteria to identify institutions that may be heightened risk. i would like you to comment on the status of where that is. we also, very importantly, established an orderly winddown, similar to what we had in the fdic. we had two choice, boil out an institution or let them fail. neither was a good solution. we want to be able to wind them down as we were able to do with fdic banks so successfully. i want to know, are the rules in shape and where does that stand? they'rely, we imposed capital requirements and leverage ratios

to ensure that large institutions aren't taking excessive risk. i believe those rules are coming out in july, correct me if i am wrong and where does that stand? where do you think the leverage and capital requirements will come out in your best judgment? and lastly, we called upon the sec to come up and we gave them actually new powers and authority and resources to go after bad actors so we could find the next bernie madoff and help protect our system. i would like you to respond to where these initiatives stand? what do you recommend, if anything else, we need to do to protect us from too big to fail as pointed out in his testimony, and if you have enough time, could you respond to t.a.r.p. as it relates to the taxpayer? we know it was a great deal for our economy. it was a great deal for averting economic risk. i'm the daughter of two parents who suffered in the depression.

their stories were terrible. we averted that in our economy, but was it a good deal for the t taxpayer? thank you very much for your service. >> certainly, congresswoman, i would be happy to respond to all of those things. let me start with the last point. i appreciate that people that are still suffering from this crisis, and there are many, may not feel that t.a.r.p. did anything for them. mr. barofsky also has asked what did it do for main street. i think the study you pointed out, the zandy study -- >> i would ask unanimous condition sent for an additional one minute for the witness to respond. >> it makes it very clear, we would have entered into a second great depression. we could have entered into unemployment of above 16%. the fact that we averted that is a benefit to main street. the fact that people can now borrow again and they couldn't as a result of this crisis is a benefit to main street. the fact that we have an auto

industry in this country and we saved a million jobs, not just at the auto companies but their suppliers is a benefit to main street. there are a number of benefits to main street. i don't think one has to look very far to realize that. as to the progress in implementing dodd frank, a lot of work is going on. i'm not responsible for that, but i'm happy to tell you what i know and make sure the proper officials of treasury give you additional information. the financial stability oversight council has been meeting actively in developing a number of rule makings to address these issues. they have the powers to regulate systemic risk and to look at what are the emerging trends in our financial system that need to be addressed, so i think you will see a lot of work going on there. as to capital ratios, they are working on that also. those will be higher. they are already higher. in other words, our financial system today is much better

capitalized than it was in the fall of 2008, and many of the institutions are much better capitalized than their foreign competitors. the other thing i want to note -- >> if you can summarize briefly. >> on small banks, we funded over 400 small banks under t.a.r.p. that's another benefit to main street, because those banks help local communities, small businesses and families and as to congressman mchenry's point on the sblf, obviously treasury supported this new fund. the only issue is a minor one that mr. barofsky is raising because treasury does make a new credit decision on whether a t.a.r.p. recipient is eligible. if a t.a.r.p. recipient hasn't paid its dividends it's not allowed to refinance, there is a new credit decision made. he's just raising a particular point which we felt the statute did not allow us to do. >> i thank the gentleman. the chair recognizes the gentleman from ohio, mr. jordan.

>> i want to thank the gentleman for being with us today. mr. barofsky, you and your staff in particular for the integrity and professionalism you bring to your job. we certainly appreciate that. your comments earlier were that the hamp and the making home affordable programs, their performance remarkably disspirits. in today's journal, the foreclosure efforts have been with problems and continues to fail -- fall dramatically short of any meaningful standard of success. it goes on to mention about the fha short refinance program which started last fall and has helped 15 people. i guess my question is at what point do we say this just isn't working? this just isn't getting the job done? would we be better off discontinuing the whole program?

after three years, 3-4 million goal, a few 100,000 have had help. the congress talks about the metric that they're using is offering people help. at what point do we say this is not working? let's just end this program. >> i continue to be a glass half full type of person. >> based on your comments, mr. barofsky, you wouldn't be a glass half full, you would be a glass 2% full or 1% full. i'm an optimistic guy too, we live in america. that's stretching it. >> i think hope is slipping away. if treasury couldn't respond to some of these things in a quick manner, your suggestion of ending the program and others''s suggestions is going to be a louder and louder chorus. we can't keep clinging for these noncredible declarations of

success and be straightforward and honest and say this is where we think the program will be at the end of 2012 or the end of 2017 when the program is done. this is the number of people we intend to have sustainable permanent modifications. this is how we're going to get to that number. then you and this committee and the congress and the american people can make the evaluation. is it worth it? is it worth it to continue? i think if they fail to do so, you're probably dead on right. >> you got more patience than i have. yesterday, introduced with the co-sponsorship of the chairman and the ranking member of the committee, we introduced legislation to end the hamp program, we think any objective look at this, it doesn't warrant continued spending of taxpayer dollars. i want to be clear. you have jurisdiction over the 45 billion in the t.a.r.p. program that affects the foreclosure programs, hamp being the biggest one. there's 25 billion that's available to treasury in the

housing and economic development -- recovery act. is that accurate? >> that money is money that goes to fannie and freddie. >> is any of that money, i understand it's not your jurisdiction, has any of that money been applied or used in any way for foreclosure prevention type programs, if so, are the results similar to what we've seen in hamp? >> yes, when we're talking about hamp, we're talking about both components, the gsc and the t.a.r.p. the gse part of the program is better than the t.a.r.p. part of the program. of this 520,000, approximately or 540,000 of ongoing permanent modifications, more than half of those are attributable to fannie and freddie and the gse. it's about 230,000 modifications that are actually t.a.r.p. permanent modifications. there is activity over there. we detail in our report, we break these numbers down, from gse to nongse, including the

money they've reported that they've spent on the modifications. >> the bottom line is, there is approximately $70 billion that has been appropriated for this type of program, the hamp program, 70 billion, not 45, 70 billion, and 1 billion is all that went out the door for a program that's hurt people it's supposed to help and in your definition, remarkably disspiriting program, what i would call a colossal failure. is that accurate? >> yes, i understand your frustration and share your frustration. i hope the treasury can hear what you're saying and come up and be honest about where this program is going, if it's going anywhere. >> i got 15 seconds. to put it all in context, $70 billion appropriated for this at a time, not helping the people it's designed to help, total failure, the guy who is charged with inspecting it, understands total failure, at a time we have

a $14 trillion national debt. at some point we have to say enough is enough and end this program. >> the chair now yields to the gentleman from ohio, mr. kucinich. >> isn't it true that hamp's performance is dependent upon the voluntary willingness of mortgage servicers to give loan modifications? >> yes. >> isn't it true that private mortgage servicers have found creative ways to frustrate attempts by distressed borrowers to save their homes? >> there certainly have been problems. >> is that a yes or no? >> i don't know if it's created but it's happened. >> since it's apparent that consumers don't get a fair shake, i can't understand why we don't have a representative from the servicing industry to explain that industry today. the minority requested that j.p. morgan chase, a major servicer

appear today but the chairman refused. i don't know how we can have effective oversight for congress or the american public, how can they can really understand the federal response to the foreclosure crisis, which depends on the private sector without asking the private industry to explain their actions that are impeding this program. >> would the gentleman yield? >> if the chair will let me have my time afterwards. >> of course. the chair made a decision that today would be fully involved with the government side and the special ig's report. we do intend on having, among other, servicers and a review of the hamp program. this is the first of our discovery and the gentleman's yield back. >> sig t.a.r.p.'s report and other reports of abuses by loan services raises serious concerns that these mortgage providers may be engaged in a pattern of

abuse. mr. barofsky, i would like to request that your office conduct a specific audit on this issue and i would like to, estimate, ask the chair if you would join with me on this request since you're saying you're willing to go forward with looking at the mortgage servicers. >> i'll certainly consider it. would you give me the request in writing in. >> i'll do that, because i want to point out, thank you, mr. chairman, is while the chair has the unilateral privilege to issue subpoenas, the chair has the privilege not to call certain witnesses. it's comforting to know you'll consider calling witnesses in mortgage service industry, especially since it's so relevant to the matter at hand. the chair also, as we know, has the privilege to deny documents, the production of documents to other members. for example, in this case, i'm not saying this happened, but my concern would be about the policy is that if there's any communication with the committee and j.p. morgan chase, that the

minority may not know about it. perhaps myself i wanted to address that in my opening statement. i didn't have that privilege. that's one of the problems in not having opening statements. i hope that as we continue down the road, this committee will understand the importance of tradition and procedure that respects the rights of all members because i think what it really does is it enables us to function more effectively. mr. massad, what is treasury doing to retool hamp to require service or performance? >> thank you, congressman for the question, it's a very important question. let me talk about some of the things we have done. we've required the servicers to, if they're evaluating someone for hamp, they cannot foreclose on that person. if they decide the person isn't

eligible for hamp, they have to consider other alternatives, short sales. it's only after they've certified they've done all those things, you can proceed to the foreclosure. we've required the servicers to have a process for appealing the decision. we've also set up our own centers so people can come to us if they feel they've been wrongly denied. we will run a calculation to give them a view on that. we have an escalation center that deals with complaints. >> let me ask you this. would you agree we'll never get to the bottom of this problem or figure out how to proactively deal with the foreclosure crisis if we don't examine the actions of mortgage servicers? >> i would agree, congressman, that we need to look at how this entire industry is functioning or rather not functioning. i think there is a lot of work going on in that regard. obviously through hamp, which is

a voluntary program, we cannot force a change on the entire industry, but we have learned a lot about what is -- >> mr. barofsky can examine it. >> yes, congressman. by the way, we do have an ongoing audit of the mortgage servicers. i will make sure my staff meets with your staff to make sure we have any concerns to incorporate. >> you have to communicate with the chair on that. is my time expiring or do i have 20 seconds more? >> the gentleman has 20 additional seconds. >> thank you. this is so important to my constituency, because cleveland, ohio has been an epicenter of the sub prime meltdown. people have lost everything they worked a lifetime for. when you get into a situation when they depend on hamp to try to save their homes and the mortgage servicers have a subterfuge to defeat that, it's important we call them to an

accounting. >> the chair recognizes the gentleman from florida. >> thank you, mr. chairman. i want to thank both of the witnesses for being here today. recognizing that we're in difficult times. there are lots of -- i'm sure -- let me say i'm sure it's not easy to sit there and take the questions, but there is a lot of frustration. i wanted to start off by saying this, that my observations so far is that what we're talking about is failed government regulations and programs, and today, what we're talking about, or some people are talking about is what other government programs can we add on top of that to try to make the failed ones work as if though more government regulation, more government programs is going to be the answer? i'll tell you, i've heard a couple people from ohio talk about ohio being the epicenter

of foreclosures, i would welcome them to come down to fort myers, florida, to lehigh, to cape coral. i'll tell you what my stilts are telling me, they're telling me stop. we don't want more of this government kind of control. we don't want the idea that government is going to solve all of the problems. when a lot of people feel like government is part of the problem. so if you think about what's happened, government started to push people and mortgage companies into making loans and putting people into homes that maybe weren't fiscally able to do that, either the company or the individual. then when we have a crisis, we then turn to more government in regulating. what you get is, instead of banks being able to lend, if you talk to community banks, they're

afraid to lend, because exactly what mr. massad just -- you got to think about what you said earlier. you said that we need to incorporate some national standards. when these lenders hear that, what they hear is more punishment. what they hear is more changes are coming. we don't know what the ground rules are. we're afraid to lend. when you bail out the big banks, it disadvantages the small banks. when you talk about the costs of t.a.r.p. or these other bailout programs, what you're missing is the cost of potential from other sectors. so you've got the big banks that you want to claim have, you

know, done so well, i don't know that i see it that way, but it's been at the cost of the small banks. now what we're seeing is lenders do not want to lend because they're afraid of statements like, now we need national standards. so again, what i'm saying is stop. what i want to hear is not what's the next regulation, what's the next program, what's the next acronym that we're going to start talking about that is a failure because government can't do it, i want to hear from both of you, if you would, very specifically, what should we repeal? what kind of repeals can we do that will help ignite borrowing and lending that is going to help small businesses or that are going to help families who are trying to put their lives

back together, instead of talking about what new programs we're going to pass, i would like if both of you, mr. massad, start with you, if you could tell me, what do you think we ought to repeal? >> thank you, congressman, i'm happy to do that. first of all, my responsibility is the t.a.r.p. program. not a regulator, but what i would say is this, i'm trying to get the government out of the business of owning stakes in private companies, and telling private companies what to do. >> excuse me real quick, when you say we need national standards, think about what you said and think about what people back home, think about the small banks, think about the people who are trying to make it every day, what they've heard is the rules of the game are going to change again. now you are saying we need national standards. >> i was referring to national servicing standards for the servicing of mortgages, which we already have some. you know, this business is mostly dominated by the big

banks. the small banks really aren't in it. >> yeah, because they can't compete because government has sided one over the other. >> i think the -- >> if you come down to southwest florida, the community banks are so important to housing, but they've been pushed out because government has come in and bailed out the big banks. they can't compete. >> congressman, i agree small banks are very important. that's why we funded so many of them under t.a.r.p. again, that was something we had to do. i don't think it was a good thing for the government to have to do that but we had to do it. that's why we're trying to get out of it so quickly. in terms of your comment on failed government programs, i think all we're trying to do is say we still are in the midst of a very terrible housing crisis that is a drag on our economic recovery. >> if i could, i'm sorry. >> the gentleman's time has expired. >> if i could ask -- >> i would ask unanimous consents for one additional

minute. >> i would say this to the chairman, if you would submit to this committee for us, please, in writing, specific things that we can repeal that's going to help, instead of submitting to this committee what other regulations and programs that we ought to be performing, i would like to hear what you think we ought to repeal. thank you, mr. chairman. >> if the gentleman would yield his remaining time. >> yes. >> as long as we're doing ask mr. massad, would you commit before the next quarterly special ig comes out, produce an estimate of how many loan modifications you expect hamp to produce, as well as a source of material to the special ig or in the alternative, make available to mr. barofsky the source material so he can bring us an assessment? >> yes, sir. i would be happy to do that. we've been working on that. i think a lot of that data is out there.

>> we sure appreciate that. the chair recognizes the gentleman from massachusetts, mr. lynch, for five minutes. >> thank chair now recognizes lynch for five minutes. >> thank you, mr. chairman. mr. barofsky, mr. massad, thank you both for your great work and thank you for your service to our country. mr. barofsky, i'm more familiar with your work, especially, so, sir, the work that you've been doing. i want to take half a minute to really correct some of the revisionist history here on t.a.r.p. i voted against t.a.r.p. and when it came before the financial services committee and before this congress, the stated legislative goal of t.a.r.p. was to help main street, to help main street, the troubled asset relief program. and when we asked secretary paulson at the time, just before the vote, we said -- actually, i think it was the ranking member of financial services said, why don't you just take money and

stuff it into the banks? the $700 billion that you wanted? and mr. paulisson siaid, no, we not going to do that. and then ten days after t.a.r.p. passed, they did exactly that. they injected all that money into the banks. this was the bank shareholder relief program. and for people now to say, yeah, this is exactly what we voted for, this is not what we voted for. we voted to increase lending. that was the goal of the congress when t.a.r.p. was put on the floor. and many of us saw the failings of that. and to now say, oh, yeah, we supported t.a.r.p. for all the right reasons, i think you have to accept the fact that t.a.r.p. stuffed basically $700 billion worth of taxpayer money into big banks, helping out these shareholders. we paid 100 cents on the dollar

to goldman sachs because we pumped $14 billion into aig. it was a pass-through. it went right to goldman sachs. 100 cents on the dollar on credit default swaps that shouldn't have been worth half that. we also passed through hundreds of millions of dollars to aig fp employees who mispriced this risk as part of t.a.r.p. they got paid off. they got bonuses from taxpayer money. how you can take credit for that and say that that was a good thing. and it was never a question of, i know people said, well, if we did nothing -- well, we wouldn't have done nothing. we would have done something different. and i think there are a lot of weaknesses in this t.a.r.p. program. i think mr. barofsky, you've drilled down and got to many of them. but i want to take my last couple of minutes to talk about the service industry, because so much of the servicing industry is mentioned in this report. and i think it's spot-on.

i want to just talk about -- i'll just list all the investigations that are going on right now with the services. and we're not going after them in a meaningful way. i don't think treasury is. on october 13th, 2010, the attorney general of all 50 states announced the joint investigation to whether some of the nation's largest financial institutions are using flawed and forged documents to execute wrongful foreclosures. the federal reserve and the fdic and the office of the comptroller of the currency are now investigating whether systemic weaknesses in the industry are leading to improper foreclosures. on january 7th, 2011, the supreme judicial court in my own state of massachusetts voted home citizens, because the folks who were foreclosing couldn't actually prove they owned the mortgages. the united states trustee program has a similar program. the attorneys generals of arizona and nevada doing the same thing. the justice department. what are we doing about the

services, how are we going to clean up this city and correct these problems if we're not going right after the services? that seems to be where the problem lies. >> i'm happy to respond to that, congressman. >> please. >> thank you for the question. you've referred to the activity that is going on by a variety of federal agencies and it's under the auspices of an interagency task force that treasury cochairs. so that is very important work and i think we will see some results of those investigations and i think it will help us figure out what types of reforms are needed, and potentially some of those things will be coming before the congress. let me just also, though, respond -- i appreciate the fact that because this program was first announced as a means to purchase troubled assets, and then it became a program where at least, initially, what secretary paulson did under the bush administration was to

invest money in banks, people, were critical of that. and all i would say to that is a couple of things. one, under the circumstances, we had to make that change. there wasn't time to do the troubled asset purchase as it was originally contemplated. number two, we didn't do $700 billion, we actually spent for a less than that. >> $534 billion. >> we -- >> $534 billion. if you want an exact number that went directly to the banks. >> congressman, if i may -- >> if you would summarize your answer, please. >> sure. about $250 billion went to banks and most of that has been recovered and we will make a profit on those investments. >> thank you, gentleman. the chair now recognizes the gentleman from pennsylvania, mr. kelly for five minutes. >> thank you, mr. chairman. mr. massad, in your opening comments, you made a reference to the automobile industry, of which i am a part of.

i'm a car dealer in a small business. so while people talk about small business and their view of it from 40,000 feet, i'm actually on the ground. i can tell you this. the small business loan is not working. the most banks cannot operate out of fear. the regulations that have been posed on these people makes it impossible to get access to these funds. now, why do i say that? because i go through it every day. not only myself, but also the people i'm in business with. and while i'm an elected official today, in my real life, i'm a small business owner. i can tell you, with someone who has all the skin in the game, every day, i would suggest to you that while we go on with these programs and we live in this wonderful world of acronyms that really make sense inside this beltway, in real america, it makes absolutely no sense to everybody. and these loans simply are not available. so while we talk about that money that's available to help us survive, the reality of it is that it is not available to us. now, what's changed? it's the rules.

to me, too big to fail means that i'm too small to survive. most of the banks that i do business with are small banks. they are absolutely frozen with fear. the eregulations and the rules have put them in a situation whereas they cannot operate on a day-to-day basis. quarterly, the covenants change for me. and as we talk about small business leading the way out of this economic mess we're in, i will tell you, it is the uncertainty that all of us face. and i'm not talking about big corporations, i am talking about main street america. i am talking about the average person. the guy that gets up every day and worries about it, not just during business hours, but seven days a week, 24 hours a day. my only question to you, sir, and i don't know what you can do about it, but there has to be some way that we can free up these funds to make it possible for these people to survive. the people have lost faith in this system. >> congressman, that's a very

good question and you raise a lot of important points. let me say a couple of things. one is that what we tried to do under t.a.r.p. was in part restart the credit markets that helped small businesses, the securitization markets on which a lot of them actually depend for loans. and i think we have succeeded there. there's still a lot of work to do to help small business. i agree with you 100%. small business has been hurt in this crisis. small banks have been hurt in this crisis, and they haven't fully recovered. the small business legislation that was passed last year, which set up not only the small business lending fund, but also another program where the states are trying to help small businesses directly, i think, goes -- you know, provides some help. it may not be enough. so i'm happy to explore with you further things that should be done in that regard, because i agree, it's a problem that needs attention, and i think the treasury and the obama administration have tried to pay attention to that. >> and i appreciate your comments, but time is of the essence.

and we really do not have -- we are that close to the ground right now. there's not a lot of free fall left. i appreciate you so much for being here and i yield back my time, mr. chairman. >> and the chair appreciates that. the chair now recognizes the gent gentlelady from washington, d.c., ms. norton, for five minutes. >> thank you, mr. chairman. as predicate to my question, i want to note an article from the abilene reporter news, describing what appears to be the republican approach to the meltdown of homes. and i ask that this be placed into the record. >> without objection. >> mr. numberburger is the chairman of the association, he's a former banker hills and he's pretty frank. he essentially says that the initiatives aimed at cushioning

the blow have all failed. and so he says let the market take over. to quote him, markets aren't kind, but they're very efficient. should we go cold turkey and leave millions of homeowners out there to suffer the consequences? and i would like a short answer, because i have further questions. mr. massad, and mr. barofsky, who seems to just throw up his hands often. yes, mr. massad? >> thank you, congresswoman. no, i don't think we should just go cold turkey. that's why i would disagree with some of the comments that have been made, that because hamp has not achieved 3 million to 4 million modifications, that therefore we should end it. i don't think that makes sense. i think this program can still help a lot of people. i think it's constructed so that we only use taxpayer funds prudently and wisely to the extent that we do help people. i think it's helping the right

people. people who need -- let me go to mr. barofsky, then. >> i think it's an incredibly important -- you know, paerp was designed in part, just as much to help the wall street banks as to help struggling homeowners. that was part of the intent of the legislation. and i think treasury bears an important responsibility to fulfill that goal that congress set forth. >> so you don't think we should go cold turkey and just leave millions of borrowers out there? >> i would like to see -- >> to let the market do what the market always does? it does resolve all such as crises, one way or the other. >> i would like to see an incredible revamp of hamp, so it can achieve the goals that -- >> let's talk about that. because i'm essentially remedy oriented, and as i've seen in my own district how hamp has failed so many homeowners, people who work hard for their homes, got caught up in a crisis not of their making, it does seem that

the only way out of this is to take measures that protect both homeowners and investors. a recent "washington post" article, january 18th, as a matter of fact, suggested that the incentive structure for services is greatly misaligned. let me just quote that. studies have shown that foreclosure is often more profitable for a company known as a mortgage servicer that collects the monthly payments on mortgages and passes them on to investors who own the mortgages. how it is often not the best path for borrowers who lose their home or investors or investors who lose money. mr. massad, is it true that mortgage servicers often have a financial incentive to foreclose

on distressed borrowers, and at times of that program, your program actually gives them a financial disincentive to work with borrowers, and what are you doing about it? >> well, what we're trying to do is give them an incentive to keep people in their homes. and i think that the structure of the program has worked in that regard. and that's why, also, it has been emulated by the industry. you know, before this program was started, we had two years of this crisis. nothing was done. >> why is fhfa considering an entirely new compensation structure if this one is so fine and dandy? >> no, no, let me make sure i'm clear. i agree with what the fhfa is doing. and treasury has supported that. they are looking at the basic business model of the servicers. because it doesn't work. it is broken. it doesn't create the right incentives. hamp because also trying to change those incentives with respect to the loans we could affect.

and that is, i've said, a limited pool. it's not the entire industry. but one thing that has -- >> do you think the fhfa measures would have a meaningful impact? >> well, i certainly hope so, congresswoman. what they're doing is saying, look, we need to re-examine how servicers are compensated. because what's happened is, they're overcompensated for loans that are performing, but when it comes to the underperforming loans, they're not set up to deal with people, to resolve -- >> mr. massad, if this is not a win-win, it's not going to work. if it's a win-lose, and it appears often to be just that, then we're going to be stuck and that's where the borrowers and the homeowners are stuck. >> well, that's right, congresswoman, and that's why i've said wing there needs to be a lot of attention paid as to how this industry has failed us in a lot of ways. we've seen a lot of problems coming out of this crisis. >> and how your incentive structure has failed. >> the gentlewoman's time has

expired. the and chair would note we're expecting two votes at approximately 11:10. we'll work for about one more question after the vote is called. we'll leave, we will return, and as soon as there are two people on the dias, we will begin questioning again, as to be respectful of your time. the gentleman may continue. >> thank you, mr. chairman, and mr. barofsky and mr. massad to be here and appear in front of us. i had the dubious distinction to vote on t.a.r.p., to vote against it, i think for all the right reasons. i had the dubious distinction to be foreclosed upon in my election. and for the last two years, to hear the response of people that finally awakened to the fact that yes, there was a problem, yes, there was a significant concern, yes, there was a meltdown that was taking place. but frankly, their opinion was that it was the wrong approach to take, and it seems to have

borne out. mr. massad, i would ask you, and i hope this hasn't been asked while i was away, but what are the plans for the obligated t.a.r.p. funds that have not yet been spent? >> the only funds that have not yet been spend are those for the housing programs and let me just note, it's not $70 billion for hamp, our portion of hamp, there is a gse portion, our portion of hamp is 29. we've done a number of other housing programs. so there's $45 billion allocated for a variety of housing programs. there's still a very small amount that's committed for the public/private investment partnership. basically, we're no longer making new commitments. we're no longer doing new programs. our focus now is getting the money back, and we've gotten, as i say, a lot of it back, and i expect we will get a lot more of it back, and essentially