have six party talks. what is your reaction? >> we want to see the talks be constructive. i am not sure you would call it a precondition. we want to make sure there is a firm understanding among all the parties and an expectation that progress can be made. as we said, one of our indicators to demonstrate it would be fruitful to have these kinds of conversations would be a demonstrated seriousness of purpose by north korea. one way to demonstrate that would be to reduce tensions that currently exist between north and south korea. >> a high-level intelligence official told lawmakers that kim jong il has invited china to

visit beijing. we do not know when. are you concerned about those reports? >> i do not know why we would be concerned about those reports. north korean leaders go to china all the time. >> is the u.s. appointing a resolution to suspend the iranian membership in the u.n. council? >> there was a discussion about iran's abysmal human rights record. i do not know if there is any initiative being put forward at this time. >> the egyptology is an minister

of antiquity resign. -- each ethologist -- a prominent minister of antiquity has resigned. is there a fear of getting of egyptian museums? >> i cannot say there has been discussions with egypt on the subject. our approach in the case of egypt in the ongoing efforts that we have had with the international community to preserve assets of egypt, we are taking steps to preserve assets for the people of egypt, for the people of libya, and for others. we think these are cultural assets that belong to the egyptian people they should be

-- the egyptian people. they should be protected. i am not aware of the concern for theft of antiquities at this point. >> [inaudible] >> we have diplomats in the courtroom observing the ongoing legal process. i have not gotten a readout from them today. >> i was wondering if you can update. there are continuing to be protest there. what would be the impact on the u.s.? >> president saleh remains the president of yemen.

there is some negotiating going on. this is exactly the kind of give and take that is necessary so that governments can be seen as responding to the rule of their people. >> what about the protesters that were killed in yemen? >> there have been some fresh reports of protesters killed at the embassy there. we are trying to verify those reports. we have been monitoring the clashes between the pro- government and anti-government protesters. it has been going on for some time. we support dialogue between governments and opposition figures. we want to see these efforts done peacefully. in the pursuit of more responsible representative

government. the violence needs to stop. >> one of the greatest concerns to national security to the united states in him and right now. where is the impact of those concerns? >> i am not sure i get the link between the el. what concerns -- between the hill. what concerns are they? i am the spokesperson for the executive branch and not the legislative branch. >> i am aware of that. the concern in yemen has been prioritized by a number of officials. what impact does the address have on the security concerns? >> they are not mutually exclusive. there is a security concern in

him and that is a concern for human and the united states. in the last handful of terrorist attempts in the united states, there were links back to him and. we are working with yemen and have been for some time to improve the counter-terrorism capabilities. we are cooperating fully in that. [cross talk and chatter] >> this is fascinating. we are in the dark. part of the solution to yemen is more effective governance, a broader economy, greater opportunity for people who live in yemen so they will choose to work constructively and not jews extremism. these things go hand in hand.

-- and not choose extremism. >> there have been reports of a taliban representation in turkey. what is your reaction to that? >> a taliban representation in turkey? i do not know a thing about it. it is something i am unfamiliar with. >> the ambassador of india [inaudible] students are asking the state department. what is the future? >> regarding what happens to students who are not implicated in the ongoing investigation, those are a matter under active discussion in the department of

home box -- department of homeland security. have a nice weekend. >> president obama visited miami central high school today. he stopped in on a science class and talk about shared responsibility in investment in education and why he believes freezes in domestic spending should not include education. we are going to show you all of those comments tonight beginning at 8:00 eastern on c-span. the treasury department official in charge of the neck instability told a watchdog panel that the government's troubled assets release program has been a success story and the

cost of the program would be a fraction of what was initially projected. a portion of the final oversight meeting. the federal regulators explaining their involvement of the program. this portion is 50 minutes. , deputy director for complex financial institutions monitoring. patrick lawler and william nelson. thank you all for joining us. please keep your testimony to five minutes so we will have ample time for questions. we will begin with mr. cave. >> chairman, members of the panel, i appreciate the opportunity to testify on behalf of the fdic. a significant could trigger to

the financial crisis was the destruction of credit markets would significantly impair the ability for even creditworthy companies to refinance their commercial paper and long-term debt. the fdic program was one of several measures taken by the u.s. government in the fall of 2008 to address the crisis in the financial markets and bolster confidence. the fdic program helped to unlock the credit markets, calm fears, and encourage lending. the tlg provided a guarantee for a limited period of time for certain unsecured debt issued by financial institutions. we designed this program to be as inclusive as necessary to ensureredit between banks began to flow again. this was becoming the perfect form, where by creditors refuse

to -- demanding more collateral at the exact time banks needed these funds to continue to finance their operations. additionally, the program fully guaranteed certain interest- bearing transaction accounts, providing stability to insured banks, particularly smaller ones, enabling their customers to continue to do business without disruption. the creation of this aspect of the program was necessary because we were seeing that smaller, healthy banks are losing these accounts to their much larger competitors because of uncertainties in the financial system. at peak, the fdic guaranteed almost $350 billion in debt outstanding. the total amount of remaining fdic guaranteed debt was $267 billion. of that amount, $100 billion or

37wi mature in 2011 and the remaining will mature in 2012. the tlgp has worked as it was intended to prevent private investors have resumed their role as a credit providers at market terms. financial institutions are in the pross of repairing their balance sheets, increasing cas'' positions, and reducing the liance on short-term debt. these neededpports improvements. given that $267 billion remaining outstanding, it is important that plan into institutions continued to replace government guaranteed debt with private funds. the ic is closely monitoring the plans to ensure that tlgp can be fully repaid through the

private credit markets. the next two years will be importing given the significant amount of debt that is coming due. the potential system benefited from a prompt, cored and it responds across financial agencies. -- the system benefited from a prompt, coordinated response across financial agencies. we are working with the federal reserve to review the dividend plans at large banking organizations. we believe a comprehensive review across large firms is critical since these payments were a large drain on cash reserves prior to the crisis, leading to financial institutions more vulnerable to the disruptions that followed. this is what the dividend plan review and the repment plans are intertwined.

in conclusion, while the measures taken by the fdic and other agencies to address the crisis were unprecedented in nature, these measures were successful in stabilizing the credit marke and creating an environment that allows for economic recovery. now we are actively working to ensure the program winds down in an orderly fashion by the end of 2012. thank you and obliquely is to answer any questions from members -- thank you and i will be pleased to answer any questions from members of the panel. >> thank you for the invitation to present. i am going to be referring to some charts in the back of my testimony if you have that handy. tarp was greeted when financial markets or in the midst of the

crisis. tarp program made important contributions for reestablishing stability by increase in confidence and adding liquidity. the oversight board included that without tarp the severity of the crisis and its impact on the economy would have been materially greater. given the origins of the crisis, the conservatorship of fannie mae and freddie mac were designed from the start to maintain access to funds for sound mortgages. fhfa worked with the treasury and others to develop a series of programs, which used to our funds for loans. in all cases, fhfa has been guided by its responsibilities

to limit actively for those that are safe and sound and are consistent with the goals of conservatorship. these programs have benefited the enterprises by mitigating risks and reducing both direct losses on loans were foreclosures are avoided and indirect losses on properties where housing markets are stabilized, reducing defaults on other loa. as shown in figure one, with these and other programs, including the federal reserve's large program for purchasing mortgage securities, the cost of mortgage borrowing declined absolutely and relative to yiel on treasury securities. in figure two, financing and stability programs helped stabilize house prices almost immediately. by other measures, within a few months. in figure three, delinquencies continue to derive sharply in

2009 as the recession worse and. inventories of houses currently or potentially for sale are very high in portions of the country, so significant risks remain. the enterprise has snificant responsibilities with respect to tarp through their implementation of making home affordable programs for mortgages on their own books as well as through their roles of financial agencies it. turning to figure four, the enterprises completed near the 1 million foreclosure preventions, nearly 2.5 times the number of foreclosure sales in the 2010. actions intended to keep are worse in their homes. while hamp does not produce the volume of modifications the

treasury department hoped for, we believe it has been instrumental in standardizing and streamlining the industry's modification process. in that way, it has contributed greatly to the sharp rise in non-hamp modifications that have taken place over the last two years. the quality of the modifications also seems to have improved. the defaults have been much lower since the implementation of hamp previously. in addition to foreclosure prevention programs, harp has been used to help homeowners whose property values have called to take a pitch of historical low interest rates by refinancing their mortgages which can help them avoid future defaults. the volume of finances has also been much less than the treasury

department anticipated. fhfa has worked closely with the treasury department on critical issues brought on by the housing crisis and financial disruptions over the past few years. the interactions have been frequent and respectful, but collaborative toward our common goal to bring stability and liquidity to housing markets and seek alternatives whenever feasible. thank you in there will be happy to answer questions. >> thank you. mr. nelson? >> [inaudible]

[inaudible] -- under tarp. when the financial crisis intensified in the fall of 2008, investor demand mortgage-backed securities the evaporated. issuance dwindle near zero. the credit provided was pulled back, could trigger an to the severe contraction in th economy that followed. among the many actions taken by the federal reserve and treasury in rponse to these events, and with the creation of the talf, the federal reserve bank of new york provided loans to investors for the purchase of certain abf's. had maturities

ranging from three years to five years. providing investo an incentive to repay the loans as a country conditions re-normalized. several layers of risk controls were built into the program and are detailed in my prepared remarks. the talf contributed iortantly to the revival of markets and renewed slow of credit for households and businesses. issuance jumped to $35 billion over the first three months of talf lending in 2009. during its initial month of operation, talf finced about half of the issuance. over the life of the program, it supported nearly 3 million auto loans, more than 1 million student loans, nearly 900,000

loans to small businesses, 150,000 other business loans, and millions of cret-card loans. when the pgram closed in june 2010, $43 billion was outstanding. as a result, in july 2010, they agreed it wasmpornt for the treasury to reduc the credit protection provided under the tarp from $20 billion, 10% of the program, to $4.3 billion, a 10% of the loans outstanding. as a noted, the interest rates were set at spreads chosen well above tse that prevail in normal conditions. the talf has earned nearly $600 million to date. if there were to be any losses, the losses would firste and absorbed by the accumulated net income.

the experience to date suggests the risk controls built into the program have been effective and losses appear unlikely. because market conditions have improved, loans appear expensive as intended, and more than two- thirds of the loans have been repaid early. all of the collateral back for the outstanding loans have retained their aaa ratings. the market volume of the collateral has remained well above the loan amount. we see it is highly likely that the -- that it will be efficient to cover any losses that occur. in conclusion, we believe the program represents a highly successful use of tarp funds. thprogram help restart the market, thereby supporting credit and millions of american households and businesses. it careful design has protected

the taxpayer, and the program will certainly bring it a net profit to the treasury. thank you for the opportunity to discuss the program today. i will be pleased to take any questions that you have a pretty quick thank you very much -- you have. >> i thank you very much. what has to be done before that should go forward? yes, thank you, i would be happy to answer the queion. right now, again and, the federal reserve is the lead agency responsible for administering the stress tests and revieof the divend plans. we are involved as well. we think this is a positive program. before the crisis, you had institutions that paid out

significant amounts of cash anin dividends and capital repurchases, leaving them more vulnerable when the crisis did hit. the process that is being used before institutions can begin to increase dividends and capital reyment, that they have a prgramatic approach to that, we view as an improvement over the past and we are very much involved in that as well critical y talk about the timing -- >> the stats are working presently on this. it is a priority. there is an interest in having responses of institutions for the first quarter of 2011, so this is a very important time. >> mr. nelson, do you have any comments on that?

>> no, i do not. >> mr. lawler, what is your view about fannie mae and freddie mac about their roles of treasury agencies? >> i do not think it creates important conflicts. they are investors. they do have an interest in trying to reduce foreclosures to the maximum extent possible. i think it is very consistent with the treasury department's goals with these programs. they are working together to try to create programs that will work to keep people in homes and reduce costs to taxpayers. >> there are conflicts involved with the services -- do you agree? >> with servicers? >> yes. >> servicers have some conflicts in certain parts of

the process. for example, if they hold a second lien on the property. that is a conflict and certainly an issue pretty qui. >> it was very effective. in a research that was just released on the website yesterday, my colleagues and i at the federal reserve found that it had a very consequential effect on lowering abs sprea ds. in other reserach, my colleagues have demonstrated a link between the issuance of talf abs and lower loan rates. finally, i would add that we talked to issue worse when the progm was in operation and asked them with the effects of the program were for them. the indicated the program help them to lower rates and witho the program that would have lent

less and could of been a much more severe contraction of credit brickwor. >> are you concerned about getting troubled assets off of the balance sheets of banks? >> i think what we are seeing is some improvements in a troubled asset levels from the crisis th our latest review banking profile that we released last week showed that, again, we are seeing some improvement in delinquencies and ndeet charge-offs from historical levels and there sti remains were to be done to continue the process of balance sheet repair. >> thank you very much. >> following up on deck, these troubled -- following up on that, these troubled assets, do

they pose a systemic risk to the economy? >mr. cave? >> again, i think that compared to wheree were with troubled assets during the crisis, we are at a point where levels have receded. it is still very much something that we monitor closely at the ensurend look to interes institutions have enough capital and liquidity. it is something that we look at very closely. >> it sounds like a no to me. answer.s liekke a no it is not that of the troubled assets pose a systemic risk today.

is that a fair statement? >> we would need to get additional information out to you on that brickwort. mr. lawler and mr. nelson, do you have any thoughts on that? >> no, sir >>. >> because fannie m and freddie mac are currently under conservatorship, they a not currently creating a systemic risk. >> but if the bailout of fannie mae and freddie mac suddenly went away, then the answer could be different. >> that is a hypothetical. >> ok. >how about the problems and a breach of representations that we read about a l a couple of months ago? do those create a systemic risk? >any opinion?

>> if the foreclosure process or to stop functioning entirely, that would create some significant problems. my understanding of those issues where that the processes were not followed correctly, but if they can be corrected so that they do work properly, then that is not a systemic risk. if we were unable to foreclose on properties, then that could create more serious problems. >> what about the systemic risk that could develop when the financial institutions, the servicers, the originators are sued, particularly the financial institutions are sued?

investors were materially misled and they are asking for a significant amount of damages it. i understand lawsuits happen over time. is the cumulative effects of this lawsuit present a systemic risk to these financial institutions? >> again, not to fannie mae and freddie mac -- >> what do you think? >> in our view, this is very much a question for the financial stability oversight committee. as you have noted, this situation involves various financial market participants as well as regulators, and we believe this is something that should be a question for them. >> what is the fed's view of this? >> this is not an area of my expertise in.

>> fair enough. it sounds like no one is saying -- with the exception ofmr. lawler because his client has unlimited checks from treasury, that the answer is simply on certain. let me ask one final question. if you had to do this all over again and you were back in 2008, would you do anything differently? would you have different programs? what would you tweak in some way? mr. cave? >> from our perspective the tlgp program has been a success and has done what it was intended to do, on locking credit markets. what was happening prior to the crisishere the balance sheet liabilities were getting shorter, funding was getting more complicated, and so, again,

we think it was successful in addressing that issue. there is still more time to go. we still have an exposure, and we are monitoring very closely. i think that is working as expected. the dodd-frank has provided us with greater authorities to do things that we could not do prior to the crisis. we've you very much the implementation of dodd-frank as a key thing to do as we move forward. >> mr. lawler and mr. nelson, any thoughts? >> putting fannie mae and freddie mac into conservatorship was the right thing to do. we did not at that time appreciated when we put them into conservatorship how serious the recession would be and how bad unemployment would be and what the implications would be for the housing market from that

point forward. we did move with the bush administration to start this free line mortgage modification program, but as we did that and move into hamp, we learned a lot of lessons about how to institute such a program. we have never done anything remotely like this before, getting servicers in the country working on a single progr and doing things the same way with systems that were entirely different. so we learned a lot as we implemented that. had we gone through the experience before, we would have been able to do it faster. >> thank you. my time is up. >> mr. silvers. >> this hearing is focused on two really major issues that i want to address with you all. one is the question of the

stability, the house of the banking system, and the other is the question of the continuing foreclosure crisis. let's start with the housing market. mr. lawler, let me make sure i understand the gse's position correctly. they have obligations to the holders of gse-issued securities, and the gse's bought some stuff running up to the collapse. am i right in understanding that the more foreclosures there are the more housing prices fall, the more of the value -- the more the gse's have difficulty meetingheir obligations to their security holders and the lower of the

assets they purchased fall? is that basically right? >> right. if they can prevent unnecessary foreclosures, that will help the market. >> if housing prices fall secular leap across our economy, the loss that the gse's will ffer will increase, right? >> right. >> from the perspective of the the est of the gse's, fiduciary duties of those entities, it seems like there is a compelling reason to do everything they can to keep housing prices from falling further. is that right? >> yes. onlye gse'sre really the providersf a secondary market of any consequence for mortgages

in the united states. is that true? >> conventional mortgages. >> but there is not a private- label mortgage market of any consequence today? >> that is right. amoo the gse's have a fair unt of market power right now. would you agree that that is true? >> yes. >> is it consistent with the business purposes of the gse's and the duties owed to them by the government's of the -- the gse's?eance of the does that make sense? >> well, it does. the prices directly affect what

their earnings or losses are as well, so there is a balance. >> in totality, they ould be managing their business to minimize the losses they are going to incur. am i right? ok. so, would you agree then that because of foreclosures, as a general matter, some foreclosures are unavoidable, but as a general matter, they contribute to falling housing prices and greater losses to the gse's? they have to make sure no honest error foreclure occurs at critical unnecessary is an important word -- it occurs. >> unnecessary is an important word. >> as a pure business matter for them, you agree that is true? >>

x that is what the programs are designed to do. >> thank you. mr. cave, your testimony, which i found interesting, expresses concerns about dividends, and not surprisingly, the fdic seems concerned that loans they have guaranteed be paid first. i am concerned further beyond that about the quality of earnings at the large banks that are proposing paying dividends. does the fdic share my concern? >> thank you. what i would say it is, again, based on our recent quarterly banking performance report, the state of the industry -- the earnings have improved. we saw 2010 as a turnaround year

with strong earnings, but a portion of that was due to reductions in loan loss provisions, which again have a benefion earnings. revenues have not seen as much improvement. that is an area we are looking at closely to ensure those reduions and provisions are appropriate, given the current risk of the assets. that is an area where further work is needed, but we are looking at that closely. >> my time is expired, but if i could just clarify that as for the non-regulators that might be listening. what we a talking about, and tell me if i'm wrong, is that a fair amount of the earngs does not reflect cash that has gone into those banks. it reflects a change and -- and assumptions about future losses.

the dividends would be actual money, not assumptions. a one hand, you have no money coming in, and on another hand, dividends would involve real money coming out. in a simple-minded way, is that we were just discussing? >> i think that would be a fair representation that dividends would be cash coming out, and, again, there are various attributes of the earnings stream that have various levels of quality. >> i am concerned about that. thank you. >> dr. troske? >> thank y. let's start with you, mr. nelson. in a recent paper, it was estimated dead ducks cpp program along with the temporary liquidity guarantee program increased the value of the programs with $40 billion

represented an indirect tax subsidies to banks. it seems clear that many of the programs implemented by the federal reserve, including the purchase of mortgage-backed securities, also provided significant financial assistance to banks. you think the assistance from these other programs and other agencies enables large banks to repay their t.a.r.p. funds more quickly? i know these efforts were coordinated between treasury, the fed, and the fdic. was there some discussion about this, and if so do you think these other programs allowed some of the costs of t.a.r.p. to be shifted to what i would call less-scrutinize programs? you have any thoughts on tt. -- on that? >> the federal reserve responds could be brought -- divided up into two categories -- one would be the liquidity through a discount window.

those facilities were intended to increase the liquidity of financial markets, and ultimately allow for greater credit to flow to consumers and businesses, as i discussed the purchase -- discussed. the purchases of mortgage-backed securities, where government guaranteed. those were designed to act like traditional monetary policy, by lowering interest rates, encouraging spending, and lauren unemployment. at -- lower in unemployment. i do not know anything about additional objectives. >> certainly, it is the case that they entered into a market, the mortgage-backed securities market, that was closed to non- functioning, and i am not arguing that that was part of an

act of monetary policy and that that was not the right policy to adopt, but clearly that had to have some effect on the liquidity that the banks had with these mortgages and allow them to move them off of their balance sheets. >> dr. troske, i respectfully disagree. the government-guaranteed mortgage-backed securities market function very well during the financial crisis, and liquidity was maintained. there were government-again -- guaranteed assets. there was a demand for the safety and security of government-guaranteed assets. at the same time, it is true that by the nature of the actions -- lower interest rates raises the prices of securities -- that is how it works. with lower interest rates, anyone holding those securities would have had an asset that went up in value, but that was not the objective of the program.

>> the same question to you, do you think the fdic actions benefited large banks, and in some sense allowed them -- to more quickly pay back their t.a.r.p. funds? i am not arguing that was the main purpose, but was that a consequence? >> i do not believe that was a consequence. again, the tlgp was very much programmatic, systematic program that provided help to the markets, not just for large institutions there were two parts with the temporary liquidity program -- a debt guarantee program, with the main purpose of as money was coming do very quickly, as dad was getting shorter, this allowed institutions to refinance.

institutions were becoming less liquid. that was important. there was also the transitional account program that benefited large banks and small banks very much as well. we were seeing issues there with these accounts. again, that provided some stability, not just to large institutions, but too small institutions as well. taking that combined, we thought that these were brought programs that provided improvements to the situations we were seeing at that time. >> mr. nelson, let me ask you one more question. throughout the crisis, it seems as if, and perhaps rightfully so, there was a blurring distinction. the fed conducts monetary policy. treasury conducts fiscal policy. many of the programs of the fed looks like fiscal policy, like lending money to aig.

the financial stability of the treasury looked a lot like monetary policy in an effort to remove liquidity from the market. does that concern you? e boring of the distinction about who does monetary policy, and who does fiscal policy? perhaps it was necessary, and do we think at some point we could put the genie back in the bottle and get back to more traditial roles? >> dr. troske, i agr this is a good question, and it is important that the independence be maintained. being a lender of last resort is a very traditional role of a central bank and of the federal reserve, which is part of the reason it was created. you mention the primary dealer credit facility. that was a facility created using our emergency authority, but nevertheless looked like a traditional discount window facility, rather than lending

to depositary institutions. we lent to primary dealers, who are generally large investment banks, for very short terms, with very good collateral. all of the intervention of the federal reserve were against good collateral, and the loans, art from the telephones, which i have discussed, have all been -- talf loans, have all been repaid, with no cost to taxpayers. i would argue the federal reserve's tions have been consistent with the traditional role. in the ce of the t.a.r.p., and the talf, which we're discussing today, that was important in allowing the federal reserve to participate, yet maintain their position as a liquidity provider. >> thank you. superintendent neiman. >> thank you. i would like to shift to another

area, and probably when you are not expected -- the critical lesson we learned on the link between safety and soundness, and consumer protection, and the fact that loans that are made to individuals, either on owners' terms call or those that cannot be paid back, have a clear impact on financial stability. one of the most pronent steps to fix these problems in dodd- frank was the establishment of a consumer financial protection bureau. regulators, particularly some of the witnesses here today, are clearly not off the hook when it comes to consumer protection. certainly, the institutions below the $10 billion level continue to be reviewed for compliance by their existing federal regulators. what i am interested in, and

maybe we can start with mr. cave, as deputy director of the complex institution unit at the fdic, is how do you incorporate consumer protection into your risk assessment that these large institutions, particularly those over $10 billion, were you no longer have authority responsibility for direct compliance examination? >> i would be happy to answer that question. fdic we do safety and soundness and consumer protection to go hand in hand. we have made changes in our structure, recently creating a new division -- conmer protection -- to continue to give that a very -- very much focus, as necessary. it is an important issue. i think the reason for closure

situation highlights the fact -- foreclosure situation highlights that what can happen o consumer issues can have an impact for the large institutions, and it goes to show the importance they have with structures and controls in place to deal with those issues. again, regulators are looking to ensure that those are in place, because they very much could have risks created for these institutions. how will the actual supervision change going forward? i assume there will be a formal process for sharing examine information -- examine the information when they take on that responsibility, but you are still responsible for assessing risk within those institutions and management. how can you assess management and ratings without having a clear understandi of the

processes and controls are around risk? wod be beyond simply reply -- relying on the information? >> again, with the large institutions, our role will be in a backup capacity. we are used to that role, having to work with other regulators, to insure that we have the information we need to assess risk. from that standpoint, we have some experience. we have made some improvement, to where there might have been areas where things were not as enhanced. we continue to work along tho lines. >> thank you. i do not want to exclude other witnesses. when blame is assessed, there are often fingers pointed across the board with respect to institutions, credit rating agencies, and regulators are certainly not left out of that list. one of the issues that comes up

frequently is the ability of regulators and examination personnel to stay current -- be able to have the expertise to understand the complexity of transactions at some of the largest, sophisticated financial institutions in the world. i would like to get your sense -- is that an issue? are you changing either the incentives, the hiring -- what are the issues around being able to stay ahead and on top of these complex transactions at some of the most sophisticated institutions in the world? >> we are indeed trying to develop new programs of examiner training been internally to address those kind of problems. >> mr. cave? >> fdic, we recently created the office of complex financial institutions. i am the deputy director of the monitoring.

there are a few other things that are important to note. we are part of a group that is responsible for having the on- site presence -- teams at will look at specific institutions and look at all of the risks associated. we will create a stemic risk branch that will look at institutions horizontals, to see where there might be out lyras, areas of risk, certain portfolios that require on site teams to devote more attention to buy looking both vertically and horizontally, -- 2. by looking vertically and horizontal, itill feed into our group that is responsible for the resolution plans, to provide them information t say "we are seeing things here that concern us, and we need to look further to see how the institutions are dealing with it."

we have at hand in hand. the other area we are dealing with is the international seion, having scored a nation beyond u.s. borders. it is essential to win short that the plans will mean something when they're needed. we have a grp that will be dedicated to working with international regulators to make sure we are talking the same language. >> i am totally confident that regulators have the ability, that the type of people they are attracting, have the ability and experience to stay current to provide that oversight will, but it is not something he should lose sight of, and it will continue to be a challenge, but certainly one that she always be a top priority. thank you. >> i should also add that all of the regulators that are developing -- are developing

units to assess risk issues that go across the units. >> thank you. >> thank you. thank you for being witnesses, and thank you for your public service. it goes without saying that one of our features of our the mark to see is we have read the letters that have to work. the sacrifices made by people in the regulatory agencies is something that i have always been amazed that. i want to thank you again, and we will bring up the next panel. [captions copyright national cable satellite corp. 2011] [captioning performed by national captioning institute]

[captioning performed by national captioning institute] [captions copyright national cable satellite corp. 2011] >> c-span will announce the winners wednesday morning. we will stream all the videos. now a briefing with the crews of the space shuttle discovery. discovery is on its final mission to the space station delivering spare parts and a human knowledge robot. they talked about their experiences. this is half an hour. >> we hear you loud and clear.

welcome aboard the international space station. >> we will start up questions with robert coleman. >> this is a question for the discovery crew mates. outside of times on the media asked about this being the last mission, how prevalent has the finality of this place been during the course of the mission? have there been times where the legacy of the vehicle has struck you? >> we have been very busy tearing our mission as all shuttle missions are. mostly, we had spent 95% of our time on just doing the work and getting it done. when you are really busy like that, if you focus on doing the tasks correctly and getting everything done.

there are times personally when i have been reflecting about it being the last mission and what a wonderful the hit " it is. when we were coming up and docking, you can look out the window and see the day and the weems and c. "discovery" written on the wings. "discovery"ee written on the wings. it is bittersweet and sad knowing that when we land it will be it for this vehicle. >> thank you. a question. they say a picture is worth a thousand words. we got to see when you took a glance at the discovery of doubt to the station during your space walk. would you describe what it was

like to see discovery there and to reflect on the past 365 days in space? >> system have discovered right there, it is a magnificent ship. they are working on and around it. it seems like a blessing. >> it look like a was maybe

south america or the amazon basin. it was just a beautiful. i cannot take in the scenery. it was exciting and a hard to tear my eyes away from it. >> what was your most challenging task? were there any surprises? of the most surprising moments so far? >> it has been a pleasure so far. i think the most challenging time year -- the challenge looks very complex.

i think those are the most challenging times. we get to do with no problems. >> what has been the most challenging part and the most rewarding part of your shuttle ? >> the most challenging part was getting up to speed and trying to get up to speed with everything else. this was clearly the most

difficult part. the best part was getting to work with the crew. this has been great. it has been fantastic. >> not a question for the west coast. >> we are consulting. i think the favorite story for this mission so far was -- and i am sure there are more to come -- when he was taking a pump

module off of a transporter on the segment. mike verot and scott were driving him on the robotic arm. about the time the release of the model, the entire space station robotic arm crashed. it means you is that they are holding this for what seemed like a really long time for him. he was stuck there for probably 30 or 35 minutes holding this pump module loose. it gave us an opportunity to joke with them and make fun of him while he was out there stuck with no where to go.

>> i just want to add one story. that is from today. we are outbidding the giant model. one of these steps is to install it. there are six boats on every bracket. it is a tiny little workspace. steve has been in there all morning long during every one of them. at think there are 60 of them. i think he just finished. he works and in small spaces and gets things done. >> what is great about this is we have been working together. we watch him get to work.

explain how of the extra time benefits the station. >> in the original plan, -- we were going to really be in a time crunch to get all of these metal structures and things he wanted to expose. by having the extension, it gives us extra days of six people. that is a lot of time to get all that stuff done before they

leave. it helps us maximize our time. >> can someone explain where it ends up? it is my understanding it is the last. >> it is right here. it is the last one. it has a small refrigerator.

. >> what is great is that it is not specific. it is very modular. it is a size of a refrigerator and there are doors that are interchangeable. now that we have the big refrigerator in place, smaller things can come up. everything is provided. it gives us a lot of different locations. >> thank you.

>> we have been talking is a space shuttle. there are different modules on board. one is from the european space agency. after we finished it, what is amazing is how big the structure is. they take pictures. they marvel at the segment. it was brought up piece by piece. >> congratulations on a

successful mission. i do not think people can appreciate what the living space is a bal. maybe you can talk about terms they can use. >> just to start off, this space station here is the largest pressurized volume in space in history. it is huge. if we spread ourselves out, you can spread across this vehicle and not see another person. it is equivalent to be in syria -- in -- it is equivalent to the

interior. as a total volume work space, we can use every single one of these modules in a way we cannot do on the ground. it makes for a wonderful resource. >> i have a question about a rural garbage. how much trash does it generate? where do you put it? do you recycle? >> we do recycle certain things. we recycle our water and turn it -- our year in and turn it into water. that is very helpful. disposing of any trash is quite a challenge. right now, we do not have a

whole lot of common trash on board. that is the garbage we generate from our food and clothing. that is because the recently had to progress vehicles depart. our colleagues are very efficient in getting them loaded. we have about 11 are 12 very large garbage bags filled with trash. we are able to get rid of those. generally, the trash days in a certain area. if there is a certain area in the russian segment for the trash days. we can dispose of it probably on average every two or three months when we have a vehicle that apart -- that departs and burned up in the atmosphere. >> that concludes questions.

by for a voice check. >> how do you hear me? >> we had you loud and clear. welcome. i am with the associated press. there is great interest. will the robot unveiling be moved up with all the interest? how excited are you to work with the robot? >> we have all been boating to move up getting him out of his box. we are sure be heard scratching from the inside. there is an elaborate choreography. boats on the ground working hard

on that. we will see if we will able to bring it out before discovery leaves. i am for it to working with him. one of the reasons to bring robots is to understand how to work with them and get the mechanics of how they work and how it is affected by a 0 g. it'll take both of these tickets as further out into the universe. this is a good first step. >> thank you. it has been a real whirlwind for you. >> you have had a chance to go space walking. how are you going to make it? >> i am pinching myself.

there is no possible way i can make it up to 10. they made an incredible job getting this together. they did a fantastic job. if there is anything i can do for him, i am willing to discuss it. >> it is cbs news. i have a question for alexander and scott. were you looking forward to be shy around it? were you disappointed a got called off? how you balance the risk of the benefits? >> we were right about this. now we have no decision for the separation.

it will be a unique picture of the space station with the modules of all the information. unfortunately, we do not do this. >> i think the value of those pictures -- it is clear there is a value to it. it is hard to measure it. it is very subjective. the rest is something you can quantify. we never got far enough along for be to actually see the hazard analysis associated with doing the fly around. there are advantages and disadvantages. but problems weighed those and came up with the decision not to do that. i am not familiar with the details of how they came to the decision.

we support the decisions that are made by our leadership. >> i wondered if you could describe as you begin your reentry and feeling the effects of the atmosphere for the first time, what are you guys going to be feeling physically? what types of things will your buddies be experiencing? how difficult that the from the other return? >> that is a great question. that one came after about 6.5 months. i had that much time do decondition in the environment and train hard with my majors. with a 13 day flight, you do not deconditioned that much. you also do not get on top of your game for countermeasures.

i will look like a typical people we see coming down. we are seated upright. the craggy -- the gravity radian is pulling the plug out of our head where did they going to our chest which is friendlier. the loads are quite a bit gentler. there probably about 1.2. -- may are probably about 1.2. will feel like 3 after being up here for a while. we have suits that would keep the blood flowing to our heads. we have fluid loading that we do that tries to get our volume -- vascular volume up again. hopefully, you will see six that the people walking around after landing. >> that concludes questions.

please stand by for a boyce m esa >or ru-- fro >> this is from rome. how do you hear us? >> we had you loud and clear. welcome aboard. >> thank you for participating. how is it having components from all programs? >> i think it is one of the great things about this program. it is an international program. it shows how countries that cooperate can do great things. building a space station is one

of the most significant engineering achievements that people have been achieved. we have done this with this international partnerships. >> >> what are the first operation assessor going to happen on the ensnare? >> we are working very hard on the module. it came in a flight configuration. everything was fastened to secure its.

we are removing all the packing materials. we can still it in the japanese model. we are using all the astronauts better staying here to help us with that. >> good evening. in less than two weeks, it is 150 years of the unity of italy. how do you plan on celebrating aboard the space station when it is so important for the nation? >> surely this is a very important holiday for our country. i am a little limited and being able to celebrate.

i have brought a little fly that i will be able to fly on that day. seen fit to leave from up here is a beautiful view. ing it chilly from up here is a beautiful view. it is easy to see how beautiful it is from a geographical point of view. we have to keep it in that way. >> good day to everyone. ucb son -- you see the sun rising and setting every day. do you realize that? how do you manage to keep the

time? >> we are here inside the space station. we have some ports that are not always open. most of the time, that they have to stay closed because we are maneuvering outside. we live our days based on the clock in the time that is given to us which is fixed on the grid which -- greenwich time in london. we usually work from 8:00 a.m. to 8:00 p.m. with about an hour break for lunch. in this way, we can fix our day. we go to the cupola, it is strange. we are looking outside. it is they are light and depending on where you are. you are a little disoriented from this coming and going of sunsets. it is really beautiful to see

the world turning around you. -- within the time of one day. >> i wanted to know if you have touched the men in -- the moon rocks that the astronauts have brought back? >> yes. it is on the cupola. the moon rocks have been on top of mount everest. it has been all over the place. i have tested and seeing it. it is interesting. it is stimulating to know that the rock has been on such a tour. it is with us today. it also shows as we need to continue our exploration, go to the moon, and go to mars.

this will be our goal in the future. >> skype 24. some people are going to be leaving soon for what will be a tourism trip. what do you think of that? do you think their dreams coincide with some of your dreams? >> i am convinced that space tourism will be one of the frontiers that will be open in space. when i got here, when i had more time to be used to the absence of gravity, i really thought that it is a shame that so many people on earth can not see this. in the future, surely this will change. it to be a pleasure to have the opportunity for everyone to come up here and spend some time here and be able to see earth

and experience the absence of gravity. this is surely something that'll happen in the future. i hope it will happen sooner rather than later. >> earth scene from up there is beautiful. a lot of things are happening on earth that are changing. in north africa, there are very important changes. how do you perceive these changes of their? --up there? >> we are isolated. we do see news. we have pieces of newscasts that pvc. i read newspapers. it is interesting to understand how the world keeps building. from up here, it seems still.

it is still going. sometimes, i look down when we fly over north africa. i try to see if i can see something but i do not see anything more anyone. i like to be able to see people and what is going on. we all know that things are happening. this is history continuing on. we are certainly with down those -- with all those down there trying to have a better light. >> -- a better life. >> what do you expect at this point? are you missing earth at this time? >> yes. my halfway point was passed a few days ago. i am beginning to not feel like i just got here so i do not have

to ask scott where things are and questions about this or that procedure. i am feeling a little more at home now and not such a guest any more. i also like working. i find more enjoyment and working. initially, i was afraid of what i was doing. i did not want to create some disaster. now i am a little more comfortable. i expect that this will get even better. i expect that i'm going to have a little more time to enjoy the views on the outside and the work inside. bore the time being, i'm not missing earth. i do talk to my wife and got turned -- my wife and daughter.

i would love to see and hug them. it is not a feeling of missing. miss >> this is houston. that concludes the event. thank you. >> next, president obama talk to miami high school students about the importance of education. then a congressional hearing on the tour program. after that, a state department briefing with the latest on the middle east. >> now, for that obama audrey --

president obama this is a miami high school to discuss the importance of education. the president toured some of the class's with the secretary of education and former florida governor, jeb bush. the students shared some of the projects they were working on. here is a look. >> how are you, sir? what grade are you and? -- what grade are you in? >> [unintelligible] >> are we going to do a little demonstration?

>> this is programs to do a step ladder. >> ok. all right. nice. >> the program we used [unintelligible] >> you guys program this yourself? >> if yes. did it take the most of the semester to put this together? >> [unintelligible]

>> it took half an hour. >> ok. it might take me longer. [laughter] what do we have here? >> this will move upward and 2898 degrees been and come back. >> ok. oh. oh. [laughter] good performance. that is outstanding. excellent. how did you get such a big one? >> i had been programming for two years.

this is called a portobot. it picks up little donuts. >> i see. you can operate this manually. >> yes. >> does anybody have any donuts left? [laughter] dunkin donuts don't work? [laughter] you had been at this a couple of years? >> if yes. what we have here? >> mine is pretty simple. [unintelligible]

>> it takes it right to the edge. what we have here? >> this robot is made for competition. i have been working on this for about two years. it is still in the design process. it weighs about 15 pounds. we have a demonstration going on right here. >> ok. >> we are going to take this to be fair next year and hopefully win. >> if you guys might want to take this to detroit. excellent. what you have here? >> this is going to go forward and come back. >> ok. you're taking the match into account then? >> yes. whoa! [laughter]

>> i did not touch it. [laughter] that is outstanding. >> it is hard to get the numbers right. >> right. as you are constructing this your incorporating math. you can't end up using this for a whole bunch of different skills sets that you will be able to use, right? >> yes. >> how many people want to go into engineering? we are a lawyer. i can say this. we need a lot more engineers. we need fewer lawyers and investment bankers and more engineers. you are a good example of our

future. keep it up. good job. [applause] >> later, the president spoke at a student assembly about a shared responsibility in investments at the state and local level. jeffrieses in spending should not affect education. this is about 20 minutes. [applause]

>> good afternoon, everybody. secretary daunting, president obama, i am incredibly honored to be here to welcome such distinguished guest to our beloved state and introduce you to incredible students who are leading the state of florida in terms of education achievement. ofause of florida's system high expectations for students, a command focus on reading, accountability for schools, rigorous college prep courses, and a broad array of choices for families, sunshine state students or above the national average in reading, math, and more students are graduating than ever before. but there is a lot more to do. a lot more to do. mr. president, as you have said, education achievement is not a republican or democrat issue, it is an issue of

national priorities. states must be held accountable for setting high expectations for all students. every child, regardless of their zip code or family income, should have access to quality education. it is vital that high-school students graduate with the knowledge and skills to be successful in college and their careers. children only have one chance to receive a quality education. they deserve to learn from excellent teachers and those teachers deserve to be rewarded for their incredible work, equipping the next generation. basketball of the teachers a round of applause. -- let's give all of the teachers a round of applause. [applause]

we know this is possible. we know it is possible because we are seeing get happened here at miami central high under the leadership of principle turner. [applause] secretary duncan, thank you for your commitment and service to our country. without further ado, i give you the president of the united states, barack obama. [applause] hello, rockets. thank you. thank you, everybody. everybody, have a seat, have a seat.

have a seat. it is good to be here today. i'm excited. [applause] i am thrilled to be here, rockets. bonswa. it is good to see all of you. i want to, first of all, thank somebody who i think is going to end up being one of the best education secretaries that we've ever had, arne duncan, for being here. [applause] we also have -- your congresswoman, frederica wilson, is here. give her a big round of applause. [applause] congresswoman debbie wasserman- schultz is here -- give her a big round of applause. [applause]

your outstanding school superintendent, alberto carvalho -- give him a big round of applause. [applause] and a very, very impressive principal -- renina turner. give it up for renina turner. [applause] i gather we also have some members of the football team here. [applause] i understand you guys were state champs -- is that right? [applause] they look pretty big.

[laughter] and some of them aren't smiling, you know -- they've got their game face on. [applause] we are also honored to be joined here today by another champion of education reform, somebody who championed reform when he was in office, somebody who is now championing reform as a private citizen -- jeb bush. and we are grateful -- we're grateful for him being here. [applause] aside from being a former governor of this great state, jeb of course is best known as the brother of marvin bush. [laughter] apparently the rest of the

family also did some work back in washington back in the day. the truth is i've gotten to know jeb because his family exemplifies public service. and we are so grateful to him for the work that he's doing on behalf of education. so, thank you, jeb. [applause] now, i just had a chance to take a tour here at miami central -- met your outstanding principal, ms. turner. i talked to some of the great students who are here. we went through a lab -- they had robots, they had computers with vectors and this and that. and i was a little confused, but i nodded, pretending like i understood what was going on. [laughter] and it's inspiring to think about where you were just a few years ago and then where you are today.

right? [applause] you came together to turn this school around. and i think the rest of us can learn something from that -- because that's what we're going to need to do all across the country right now. we are at a pivotal turning point. we just came through a tough recession that's taken a big toll on families here in florida and all across the country. and to accelerate our recovery in the short term we took some essential steps to spur hiring and economic growth, including tax cuts that are making americans' paychecks bigger and letting businesses write off their investments -- and i am proud -- i'm proud that republicans and democrats came together to get that done. and you're already seeing those

steps make a difference. this morning we learned that the unemployment rate fell to its lowest level in nearly two years. [applause] our economy added another 222,000 jobs in the private sector. that's the 12th straight month of private sector job growth. so our economy has now added 1. 5 million private sector jobs over the last year. and that's progress. but we need to keep building on that momentum. and in a world that's more competitive, more connected than ever before, that means answering some difficult questions:how do we attract new jobs? how do we attract new businesses? how do we attract new industries to our shores? how do we grow our economy and out-compete countries around the world? how do we make sure all of you

-- all of our students, whether they go to miami central or anyplace else -- how do we make sure you have a chance at the american dream? that's why i'm here today. that's what i want to talk to you about. because in today's economy, companies are making decisions about where to locate and who to hire based on a few key factors. they're looking for faster, more reliable transportation and communications networks, like high-speed railroads and high-speed internet. [applause] they're looking for a commitment to innovation and investments in basic research -- so that companies can profit from new ideas and new discoveries. but most of all, the single most important thing companies are looking for are highly skilled, highly educated workers.

that's what they're looking for. [applause] more than ever before, companies hire where the talent is. now, i want all the young people here to listen, because over the next 10 years, nearly half of all new jobs are going to require a level of education that goes beyond a high school degree. so, first of all, you can't drop out. you can't even think about dropping out. you can't even think about dropping out. [applause] but it's not going to be enough just to graduate from high school. you're going to need some additional education. and a good education equals a good job. if we want more good news on the jobs front, then we've got to make more investments in education.

as a nation, making these investments - in education, in innovation, in infrastructure -- all of them are essential. now, what makes it tough is that we're in a difficult fiscal situation, as well. for too long, the government has been spending more than it takes in. so in order to make sure we can keep doing our part to invest in miami central, to invest in your schools, to invest in pell grants, to invest in your education, then we're also going to have to get serious about cutting whatever spending we don't need. so what i've done is i've called for a five-year freeze on annual domestic spending - and that freeze would cut the deficit by more than $400 billion over the next decade, and it will bring that kind of spending to a lower share of our economy than has been true for the last 50 years.

to achieve those savings, we've proposed eliminating more than 200 federal programs. we're freezing the salaries of hardworking civil servants for the next two years. we're finding ways to save billions of dollars, of tax dollars, by selling, for example, 14,000 government properties that we don't need anymore. and that's just a start. if we're serious about tackling our long-run fiscal challenges, we're going to have to cut excessive spending wherever we find it - in defense spending, in spending on entitlements, spending through tax breaks and loopholes. and i'm going to be sitting down with democrats and republicans to figure out how we can reduce our deficits. but i want everybody to understand, our job is not just to cut. even as we find ways to cut spending, what we can't do is cut back on investments like education that will help us create jobs and grow our economy. [applause]

we can't sacrifice your future. think about your family. let's say something tough happens -- somebody gets laid off in the family, or you have a medical emergency. if you're a family that has to cut back, what do you do? first thing you do is you give things you don't need. so you give up vacations. maybe you eat out a little bit less. maybe you don't buy as many new clothes. maybe you don't buy that new car that you thought you needed. but the last thing you give up on is saving for your child's college education. the last thing you give up on is making sure that your children have the books they need and the computers they need -- because you know that's going to be the key to his or her success in life, over the long

term. well, the same is true for our country. when we sacrifice our commitment to education, we're sacrificing our future. and we can't let that happen. our kids deserve better. our country deserves better. and over the course of march, what we're calling education month around the white house, i'm going to be traveling the country, and arne is going to be traveling the country, and we're going to be talking to parents and students and educators about what we need to do to achieve reform, promote responsibility, and deliver results when it comes to education. [applause] and i decided to come here to miami central to kick off education month -- because you're doing what i challenged

states to do shortly after i took office, and that's turning america's lowest-performing schools around. this is something that hasn't received as much attention as it should. but it could hardly be more important to our country. right now, there are about 2,000 high schools in america - about 12 percent of the total number of high schools in america-- that produce nearly half of the young people who drop out of school. you've got 2,000 schools -- about half the dropouts come out of those 2,000 schools. and we know these schools are often found in rural areas or in big cities like miami. many of these schools have lots of haitian americans and african americans, latino and other minority students.

and miami central used to be one of these schools. used to. [applause] but it's important for us to remember where we've been so we know where we need to go. i mean, this used to be a place where the problems on the streets followed kids into the classrooms. it was hard for young people to learn, where the dream of college was out of reach for too many, where there was a culture of failure that brought everybody down. now, turning around these schools isn't easy. a lot of people used to argue, well, all they need is more money. but money is not alone going to

do the job. we also have to reform how things are done. it isn't easy to turn around an expectation of failure and make that into an expectation of excellence. in fact, it's one of the hardest things you can do. and there is always plenty of naysayers out there who will say it's not even possible. who say that turning around a failing school means just throwing good money after bad. who say too many of these schools are beyond repair. who say we ought to give up on those schools and focus on places that have more breaks and have a little more going for them. here's what i say. i say i am not willing to give up on any child in america. [applause] i say i'm not willing to give up on any school in america. i do not accept failure here in america. [applause]

i believe the status quo is unacceptable, it is time to change it. and it's time we came together -- just like jeb and i are doing today - coming from different parties but we come together not as democrats or republicans, as americans -- to lift up all of our schools -- and to prepare students like you for a 21st century economy. [applause] to give every child in america a chance to make the most of their god-given potential. now, the good news is we know what works. we can see it in schools and communities across the country every day. we see it in a place like bruce randolph school in denver.

this was rated one of the worst schools in colorado three years ago but last may graduated 97 percent of its seniors. [applause] and by the way, most of them are the first in their family to go to college. we can see it in mastery charter school in philadelphia, where four times as many students are proficient in math, and violence is down 80 percent compared to just a few years ago. [applause] and of course, we can see it right here at miami central. [applause] a little more than a decade ago, when the state exams started, miami central scored a d in each of its first five years. then it scored an f in each of the five years after that.

halls were literally littered with garbage. one of the buildings here was called the fish bowl because it was always flooded. [laughter] in one survey, only a third of all students said they felt safe at school. think about that -- only a third. today, mrs. turner, all the outstanding students here, all the students here, you've put those days behind you. [applause] you've put those days behind you.

i mean, i know that -- i know you still face challenges. i know you still face challenges, things aren't perfect. but over the past five years, you started to excel academically. performance has skyrocketed by more than 60 percent in math, about 40 percent in writing. [applause] graduation rates went from 36 percent -- now they're at 63 percent. and i expect them to be at 100 percent. [applause] you are proving the naysayers wrong -- you are proving that progress is possible. it's possible because of your

principal, it's possible because of all the great teachers that are going above and beyond for their students, including the teach for america corps members who are here today. we're proud of them. [applause] to all of the teachers here, i hope you will stay with the miami central family as long as you can -- because this community has already benefited so much from your teaching and your mentorship and your dedication. you know, i was reading the other day an article -- this is just a couple days ago -- in the new york times about how teachers were just feeling beat up, just not feeling as if folks understood how much work went into teaching and how dedicated they were to the success of their students.

and so i want to be very clear here. we are proud of what you guys do each and every day. [applause] we are proud of what you do each and every day. we need to honor teachers. >> yes. >> countries that are successful right now academically, typically teachers are considered one of the top professions. now, let's face it, i mean, we also have to make sure there's accountability for our schools. and turning things around here meant replacing a principal and replacing some teachers. and that's tough work. it shouldn't be undertaken lightly. but your school did it the right way -- with a process that even had the support of teachers and their local unions, because

you recognized that partnership among teachers and school administrators and the community, that's the path to reform. it isn't easy. but i want to thank the school board and the superintendent and the union for working together to do the right thing for your students. you guys deserve a lot of congratulations. [applause] we appreciate you. progress has also been possible thanks to math and science coaches, and extra learning time in after-school, and saturday school, and summer school. i didn't get as much applause about that. [laughter] but it's good for you guys to get more learning and be in the classroom more. you still have time for the video games. you guys never catch a break --

you don't even get snow days down here, do you? [laughter] and you've got a technology program here that's preparing kids for the manufacturing jobs of tomorrow. i saw some of the work that was doing -- that they were doing in this lab. it was outstanding stuff. and it matched up with -- when i go to factories all across america, you can't work on a factory floor today if you don't have training in computers and you have basic math skills and understand technology. those are the jobs of tomorrow. you've got an entrepreneurship program that's helping students start their own businesses. and you have mentors from the local business community. you've set up a parent academy to make sure parents are meaningfully engaged in their children's education -- because you can't expect the schools to do everything, parents have to step up, too, and set high expectations.

[applause] i say this wherever i go -- when i hear people complaining about the schools, nothing we do at school will make a difference unless all of us parents step up at home -- and instill in our kids the self- confidence, but also self- discipline, and a work ethic that -- a work ethic that's at the heart of success in school and in life. school is not supposed to be easy. nothing worthwhile is easy. [applause] nothing worthwhile is easy. i mean, the football players understand that. i know training to be state champs can't be easy. but why is it sometimes we think -- we expect people to be working out hard on the football field, and then suddenly everybody is surprised when you've got to work out hard in the math lab. same principle applies. [applause]

you've got to work hard to achieve your goals. so outstanding teachers and principals, a common mission, a culture of high expectations - that's what it takes to turn a school around. that's what accounts for progress here at miami central. and that's why we are going to support you with what we call school improvement grants. you're one of nearly a thousand schools across america that we're helping turn around by spurring reform from the bottom up. the bottom up. [applause] and the approach that we're taking with school improvement grants and school turnarounds is the same approach that we're taking on all our education reform efforts. the idea is very simple. instead of pouring money into a broken system, we launched a competition that we call race to the top. and it basically says to

states:prove that you are serious about reform. we said to all 50 states, if you show the most innovative plans for improving teacher quality and student achievement, boosting low- performing schools, then we'll show you the money. and for less than 1 percent of what we spend on education each year, race to the top has led 40 states to raise their standards for teaching and learning. and those standards weren't developed by bureaucrats in washington, republican and democratic governors across the country developed these reforms. that's the kind of bottom-up approach that we need to follow. we want to work with congress this year to fix the current education law and make sure that it focuses on responsibility and reform and results.

and because we know the single most important factor in a student's success from the moment they step into school is the person standing in front of the classroom, we want to recruit and prepare a new generation of teachers, including 100,000 new math and science teachers over the next decade. we've got to get them in the classroom. [applause] with all of these steps, i am confident that by 2020, america will once again have the highest proportion of college graduates in the world. that's our goal. [applause] that's our goal. that's how we'll out-educate other countries. that's how we'll out-compete with other countries tomorrow. that's how we'll win the future for the united states of america.

so i'm going to keep the pressure on everybody in washington. i know jeb and superintendent and everybody here, you're going to stay focused on students in the sunshine state. and i know that ms. turner, she's not going to let up until miami central goes from that f- grade all the way up to an a- grade. ms. turner means business. [applause] mrs. turner means business. you know, she has that nice pretty smile, and she's all quiet. but you can tell she's like, "no, don't mess with me." [laughter] that's right. of course, ultimately, ms. turner, she'd say for herself she's not the only reason miami central has been making progress, she's not the only reason you're turning this

school around. the most important reason is you, the students here at miami central. [applause] a few years ago, when it looked like the state might have to shut down miami central, the students took matters into their own hands. you took control of your own destiny. you said some things that are worth repeating. here are some of the things that students said: "we're going to do more than pass the [state] test. we're going to kill it." quote -- "i don't want my school to close. we can't let that happen." "we really, really tried hard this year. we don't give up." "if we were going to get through this successfully, we've got to come together as a student body."

so that's what you guys did. you came together as a student body. you didn't give up. and that's why i'm going to be leaving here so full of hope. i'm full of hope about miami central's future, i'm full of hope about america's future, because i'm full of hope about your future. and, rockets, if you keep on reaching for success, and show the same passion, the same determination, the same hard work, the same devotion to excellence as you do, i'm confident we're not only going to lift up our schools, we will produce the best-educated people in the world, our economy will grow, our country will prosper, and a new and better day will come for the american people. thank you, everybody. god bless you. god bless the united states of america. [applause] ♪

♪

♪ >> now, more on the february

jobs report the president mentioned in his remarks. this is from "washington journal." washington journal continues host: unemployment right now at 8.9% down from a high of 9% what does this tell you about the economy. in february, slightly better than the forecast. ee con midst consider full employment.

we have a way to go to heal. slightly less? slightly more? we are seeing a little bit of growth in construction and manufacturing the state and local jobs as i'm sure your listeners know quite well. we saw 30,000 jobs lost in february in the state and local governments please call in

we had private survey reports polling for factory owners and service companies does it look positive? adp gave us a positive report on wednesday given that, expectations were quite high. looking for more like 240,000, 250,000 jobs i don't have the

exact figure in front of me encouraging businesses to spend some of the cash stockpiled in this economy we are starting to see strong gains in business investment showing up as well. we know a couple of years ago, some of t

>> next, a congressional hearing on the impact of the troubled assets early program. after that, a state department briefing on the latest on the middle east. then, from earlier this week, the supreme court were argument in ashcroft versus al-kidd. >> rea hederman will talk about his predictions on job growth this year. michael lefory puts that negotiations between national football league owners and players. meghan mccarthy talks about the struggle between the executive branch and state governments over medicaid. that is washington journal at 7:00 a.m. eastern on c-span. >> i find more and more the

behavior to be unseemly in the sense that they want hundreds of millions of dollars for the communities, yet they do not really participate in the problems of those communities. >> this sunday on "q&a", sally jenkins of the intersection of sports and public policy. >> the treasury department official in charge of financial stability says the government's troubled assets relate program has been a success story. because of the program will be a fraction of what was initially projected. the remarks came during the congressional tarp hearing on the overall impact of the tarp program. the oversight panel is due to issue its final report later this month. the former delaware senator, ted kaufman, the cheers this hearing. -- chairs this hearing.

>> we appreciate your willingness to join the troubled assets relief program. there is no doubt our economy is a challenges today. the stick a moment to imagine that those challenges could be far worse, and were far worse. let's imagine the s&p 500, which has ren 20% in the last year, had inste fallen by 30% in the last month. it has added over 1 million jobs in the last year. the highest financial institutions were beginning to topple like dominoes. it is fair to describe this in there as dire.

t, that is precisely these in their that faced our economy in late 2008 around the time congress passed t.a.r.p. into law. today, the panic of 2008 is a slowly fading memory, and t.a.r.p. played a role in turning that grim chapter in american history. or all of its programs successful? not that a long shot. even so, any hearing on t.a.r.p. shld begin by recognizing its greatest success, that in a moment of financial panic, it helped to pull our market back from the abyss. despite this accomplishment, the t.a.r.p. remains deeply despised by the american public. most of the anger is understandable, as the program is viewed for having done far more than -- for wall street than average americans. some of the unpopularity is due to misunderstandings about its track record.

a recent bloomberg poll hits the point in terms of anecdotal evidence. 60% of americans believe most of the t.a.r.p. money provided by banks will be lost. 33% believe most of the money will be recovered. many of t.a.r.p.'s greatest spectacle -- skeptics first were shocked at the price tag, $700 billion. the amount congress approved a bailout the financial system. what they may not kw is that the congressional budget office today estimates that t.a.r.p. will lose $25 billion. best, that is a sum of money, but it is far less than anyone expected. the news is not all good. most starkly, the t.a.r.p. has fallen short of its efforts to help home owners stay in their

homes. the president first announced the goals of t.a.r.p. to prevent 3 million foreclosure it is no wonder then that many americans view the t.a.r.p. as a program designed for wall street ceo's rather than home owners. it would be a mistake to account for just a taxpayer dollars lost. the program has a far more greater cost, moral hazard. that lingeng belief that america's biggest banks are too big to fail and the rules aly to everyone else in america do not apply to them. this belief continue to distort our financial markets, advantaging the largest banks on wall street, while disadvantaging everyone else in the country. the cost of moral hazard is not easily quantifiable, but it is real and reprehensible. today's hearing consist of three panelists. first we are joined by acting assistant secretary who

currently manages all t.a.r.p. programs for the department of treasury. i particularly hope that you will share with us your lessons learned after working with the t.a.r.p. for over two years. what can our nation learned from this ugly experience and how can we prevent it from ever happening again? our second panel includes witnesses frothe fdic, fha, and federal serve. these offices played a critical role during the crisis, often coordinating with additional t.a.r.p. programs. i hope these witnesses will help us place t.a.r.p. in its proper place. finally, we will be joined by four of the country's leading economists, who bring exceptional credentials to scrutinizing t.a.r.p. and it's a fax. i look for to hear your views. all of our with this testimony will provide material support

for the oversight hearing. the report will be issued to congress and the public later this month. before we proceed, i would like to hear from my colleagues. >> thank you, senator coulin. welcome to our distinguished witnesses. although the congressional budget office has recently estimated the cost of t.a.r.p. is down onl to $25 billion, such metrics should not serve as a sole determinant of success or failure of the program. we should remain mindful that the overall contribution of the rest to the u.s. economy was relatively modest, when considered with the hundred dollar- million -- multimillion hundred dollar bailout of fannie mae and freddie mac. the trillion dollar intervention of the federal reserve and fdic, as well as the impeccable

experts. it is particularly dficult to label t.a.r.p. or any other government-bonds a program aimed at an unqualified success when the unemployment rate hovers around 9%, the cbined unemployment and underemployment rate equals 16%, and millions of american families are struggling to escape foreclosure. it is of cold comfort to these families that the too big to fail financial institutions aided by the t.a.r.p. and other generous below market rate government bonds of programs are reporting a near-record earnings. to this day, t.a.r.p. carries a substantial stigma with the residents of main streethould come with little surprise. the professor and i noted in our views in september's oversight report that the payments to t.a.r.p. recipients advanced on

the program is a misleading measure of the effectiveness of t.a.r.p., and therefore should not serve as the standard by which the top -- t.a.r.p. is judged. the bailout by fannie mae and freddi mac's in the purchase of $1.25 trillion of gse- guaranteed mtgage-backed securities in the secondary market by the federal reserve under its first quantitative easing program no debt materially benefited the t.a.r.p. recipients and other financial institutions. these institutions were not required to share the cost incurred in the bailout of the gse's. in effect, the bailout of fannie mae and freddie mac permitted t.a.r.p. recipients to monetize their gse guaranteed prices above what ey would have received without the guarantees and used the proceeds to pay eir obligatis outstanding and under t.a.r.p.. there by arguably shifting a greater portion of the t.a.r.p.

from the recipients themselve, to the taxpayers. costs such as this should be thoroughly considered when evaluating the t.a.r.p. after reflecting upon the analysis conducted by the panel, its individual members and nel staff over the past two years, it is all but clear that the success or failure of the t.a.r.p.emains an open question, and that neither a favorable adjustment to the subsidy rate, nor repayment of the t.a.r.p. funds buy some recipients tells the entire story. it is critical to note although t.a.r.p. played a need for role in the rescue of the u.s. economy, during the closing days of 2008, its enduring legacy may have been to codify the guarantees of the too big to fail, notwithstanding the moral hazard risk arising from such action. the t.a.r.p. reinforced the bailout cycle, as the government's preferred business model. along these lines, the panel

offered the following observations in its june 2010 reports on the aig bailout. "the government possible actions in rescuing a.i.g. continue to have a poisonous effect on the marketplace. by providing a complete rescue with no shared sacrifice among a.i.g. creditors, the federal reserve and treasury fundamentally changed the relationship between the government and the country's most sophisticated financial players. the a.i.g. rescue demonstrated that treasury and the federal reserve would commit taxpayers to pay any price and bear any burden to prevent the collapse of america's largest financial institutions and to insure repayment to the creditors doing business with them." so long as this remains, the worst effects of a.i.g.'s rescue on the marketplace will linger. likewise, in the january 2011

report on the rescue of general motors and chrysler, the panel noted, "treasury i now on court to recover the majority of its automotive investments within the next few years, but the impact of the actions will reverberate for much longer. treasury's rescue suggest any sufficiently large american corp., even if not a bank, may be considered too big to fail, creating a risk that moral hazard will in fact the economy far bend the financial system. further, the fact the government help absorb the consequences of their failures has put more competently managed institutions at a disadvantage. for these reasons, the effects of treasury's interventions will linger long after the taxpayers have sold their last shares of stock of the automove industry. in closing, it is important to consider the reasons underlined

in the distinct and popularity and stigma associated with t.a.r.p. that the t.a.r.p. help to rescue the economy from collapse in the closing days of 2008 should not have served as a basis for the public outrage and scoring that shadows the program to this day. from my perspective, the public rejected a program because ndreds o often-l managed financial and other institutions, and their sharehders and officers, received taxpayer funded bailout as well as other subsidies from the treasury, federal reserve, fdic, on remarbly favorable terms. many senior officers of these institutions retain their lucrative employment, and although they suffered meaningful dilution, the shareholders of most t.a.r.p. recipients were not wiped out. the public intuitively recognize that such policies were an wherema anin an economy

investors retain their business profits without question, but are accordingly expected to bear the full lses with transparency and accountability, and without subsidy. main street quickly realized t.a.r.p. was heavily tilted in favor of wall street, while main street was that with unemployment, neighborhoods decimated by foreclosure, banks that refused to lend, and the general sense that the residents were left on the run." thank you. i look forward to e discussion. >> thank you, mr. chairman. good morning. this is the last hearing of the congressional oversight panel. i would like to expss my gratitude to senate majority harry reid, minority lead nancy pelosi, for giving me the opportunity to serve my country. i would also like to express my profound gratitude to our chair

and elizabeth warren for their leadership on our panel. also, to my staff. in pticular, my staff director, for all they have done in the past 2.5 years to make our panel a success. finally, i want to thank my fellow panel members. we have worked together as a team in a manner that is tragically rare in our national politics today and i am honored to have been a part of that. today, we hear from acting assistant secretary timothy masson, from representatives of the key agencies but worked together on restoring financial stability, and from some of the world's leading economists and experts on financial crises. while i am grateful to our witnesses for joining us today, i want to know, that over the past two and a half years, we have benefited from the assistance of professor masson,

stieglitz, and johnson, and is fitting that they should be with us today. before i conclude my remarks, it is important i unclear about mike final conclusions about the t.a.r.p. program. one, i believe t.a.r.p., through initial investments and large banks, securitization markets, was a substantial contributor to halting a global financial panic. it is frankly, irresponsible to suggest our nation would have been better off having taken no action. two, and there is overwhelming evidence to support our position -- that at the time these initial t.a.r.p. investments were made, the public did not receive anything like full value for our money. however, over time, management of these assets and execution of for the transactions by the team at treasury managing t.a.r.p. became systematically fairer to the taxpayer. the team at treasury, secretary

masson, his predecessor, deserve a great deal of credit for that. 3, the paulson treasury department was not truthful with the public when it said the capital purchase program funds were only going to help the institutions. the gang the treasury department has compounded this lack of candor by -- geithner treasury department has compounded the lack of candor by refusing to admit that citibank and others were on the verge of collapse. four, the failure to replace bank management, to do a rigorous evaluation on the state of bank assets and to restructure bank assets accordingly, has left the u.s. with a week major banks and a damaged sense of trust between the american public and our nation's elected leaders. 5, although more than half a million families have been helped by the foreclosure prevention programs, foreclosure prevention has been subordinated to the needs of the banks. the truth is, the continued foreclosures of homeowners are a

powerful source of systemic risk and and more pressure on our economy and jobs. in december 2008, this panel held its first hearing in clark county, nevada. we did so to make the point that the american people would judge t.a.r.p., not on the wealth of bankers, but on the help of our communities. in december 2008, unemployment in southern nevada was 9.1%. today, is 14.9%. in december 2008, 6.58% of all home mortgages in the data weren't delinquent. today, 10.06% are. the most recent statement of the better reserve's open market committee stas "the economic recovery is continuing, though at a rate that has been insufficient to bring about a significant improvement inabor market conditions. growth in household spending picked up last year but remains

constrained by high unemployment, modest income growth, lower house and wealth, and tight credit." that is assessing this and they're the majority of this panel warned in our april 2009 report, would be the likely consequences of failing to restructure the major banks. although this panel is going out of business, the task of managing t.a.r.p.'s the remaining programs of regulating the banks, of overseeing systemic risk, goes on. the mask foreclosures continue, but it is never too late to act to make change. thank you. >> thank you, senator coughlin. i would like to think by thanking the witnesses before the panel today. i recognize all of you are busy people with a number of other responsibilities, so i appreciate you coming to help us with our oversight responsibilities. given theocus of our last

hearing, it seems appropriate to comment on the overall impact of t.a.r.p. and financial rescue efforts in general. i was recently asked by a reporter about whether my assessment of t.a.r.p. would be different if it ended up costing $356 billion, instead of the current estimate of 25 -- i answered any complete assessment of the t.a.r.p. needed to take into account a number of factors, such as the role that t.a.r.p. played in preventing a collapse, the risk taxpayers were exposed to, the impact t.a.r.p. will have on the market, and the likelihood of future financial crises. so while the actual cost of t.a.r.p. is an important component, it is only one factor affecting one's evaluation on the success of t.a.r.p. so my answer was, yes, i could see t.a.r.p. as a success, even though the cost taxpayers $356

billion. if the government's actions were circumscribed by the expectations of the market, that in the event of a financial crisis the government would bail out firms whose bankruptcy threatened to increase systemic risk. these expectations were based on past government bailout of large financial firms. in fact, as i have argued previously, these expectations the fed and e severity of the finance a crisis since the market responded to these expectations by encouraging firms to grow until they became too big to fail, thereby increasing the number and size of systemically risky firms in the economy, and in turn increase in the amount of money need to stem the financial crisis. also, once they attained to big to fail status, the bill and guarantee provided these firms, give them incentive to increase risk behavior, thus increasing the likelihood of a crisis. ultimately, in my mind, the success or failure of t.a.r.p., in particular, the overall

rescue in general, will hinge on whether we are able to eliminate the problem that caused the crisis, too b to fail firms. unfortunately, at least so far, it appears we have not taken the necessary steps to end too big to fail. the first step to fixing these firms is defining exactly what we mean by systemically important firms or risks. that waythe market has a clear understanding of which firms will receive support in the next crisis and which will not. then the government needs to start charging market-based fees to these firms for insurance provided to them, very substantially higher reserve requirements, which has been advocated by prof. meltzer, among others, by requiring them to hold systemic holdings, as opposed by others, by charging the bailout insurance, or through some alternative

mechanism that forces these fis to pay t cost of the insurance that is currently being paid for by the american taxpayers. only by ending the taxpayer- funded survival guarantee for large firms, both domestic and foreign, will we return visit market discipline to wall street and ensure large french firms face the same competitive pressures faced by firms operating on wall street. inurn, this will ensure future financial crises will be less severe and the fixes to these crises will not involve putting trillions of taxpayer dollars at risk. since this is our last hearing, there are people that i would like to thank for their work with the panel. first, i would like to thank the panel staff and our executive director for their work. looking over the totality of the panel's port, one realizes this work will become one of the definitive source of information about the financial crisis, and this is due largely to the hard work and patience of our staff.

i would also like to thank my fellow panel member, mark waters, for having me become familiar with the issues. he was always available when i needed to bounce ideas off of someone, which helped to formulate my ideas around t.a.r.p.. leadership wasn's important to build on the spirit of cooperation that we first built under the first chair elizabeth warren. finally, special thanks to the longest serving panel members. richard had been a part of 30 report issued by the panel on damon has in the jim participated in 27. aftereing exhausted after a mere 10, i do not know how they had done it. reading over comments and reviews over each draft of the report. richard and damon have performed

these tasks while recognizing the import responsibility they had to detect the interests of the american taxpayers. so as one of these taxpayers, i would like to say thank you. i would so like to thank the witnesses once again for joining us and helping us with our discussion today. >> thank you. superintendent neiman? >> when the financial crisis hit in the fall of 2008, we had a republican president and a democratic congress. this panel was created by that congress, to help hold the administration accountable in implementing the t.a.r.p. program. there was no shortage of ideological objections from the left and the right when t.a.r.p. was passed and there are no fewer today. but the american public's concerns, it seems to me, has been far less ideological or partisan. rather, they have retained the pragmatic focus, asking the question, is the investment of

our money serving the public well? it would have been difficult for this panel to assist with answering that question if we ourselves got distracted from it. congress wisely placed both democrats and republicans on this panel to force us to be as pragmatic as the people we were appointed to serve. and our efforts toward that goal over two years, as the nation gained a new democratic president and then a new republican house of representatives, remain the same our five different perspectives and backgrounds could have led to more disagreement an agreement, and ultimately, a failure to shed light and create accountability regarding the most complex financial issues of the day. but one of the things that i will personally take away from this experience is a renewed optimism that people can still

work togetherfor the public good during the increasingly partisan times. even in the beginning, when ideology was at its height, prior panel members, who all had something important but different to contribute, found ways to come together. elizabeth warren deserve great credit for her leadership in the early days of this panel. we have not been perfect, however, and our oversight was always finite. so if someone asked me, what is the single most important public service we were able to provide? i believe th answer could only be one. i believe we helped to power the american public to fulfill their critical role as the true watchdogs of government. that is why we consistently called for more public data and more public transparency. we demanded more information on t.a.r.p. expenditures, mortgage

modifications, bank help and lending, and oth t.a.r.p. related areas. our goal was to obtain information on a systematic basis, communicated as clearly as possibl. with this, people can aess what is happening today and othersn the future can, with the benefit of time, truly assess what happened back in the fit global financial crisis of the 21st century. so our monthly reports and hearings come to a close this month but the end of t.a.r.p. oversight does not. i would humbly encourage our skillful fell oversight bodies and the many reporters and bloggers who so often got the facts right to focus on ways to empower the public with clear information that provides opportunitto understand and have an impact. the fact is, free markets work,

but the other fact is, they do not work as well as we would always like. a reason for this apparent inconsistency is often a lack of broadly available information that allows market participants and consumers to create a fully functioning markets. we need continued like shedding over inside and reforms to make free markets work. it is simply good for the housing market, the financial market, and the greater economy. i would like to conclude by thanking today's witnesses for the past and current support of their work, and by thanking all of our earlier witnesses. i feel compelled -- particularly compelled to express my gratitude to my colleagues for solidifying a belief that people with different philosophies can still work together for greater good in washington, d.c. thank you. >> thank you.

i am pleased to welcome timothy massad, the acting secretary for the office of financial stability. we asked that you keep your testimony to five minutes so that we can have adequate time for question period your statement will be printed in the official records. >> thank you, mr. chairman. chairman, members, thank you for the opportunity to testify today about the continued progress of the troubled assets relief program. as this is your last hearing, i want to begin by thanking you and your staff for your hard work in overseeing t.a.r.p. your reports have provided useful insight and your suggestions and questions hav helped us to strengthen and refine our programs. t.a.r.p. is a success story, and was made possible by the efforts of countless people at treasury and the other oversight bodies.

as you noted, there is some symmetry to this moment. i appear before you today as the actg assistant secretary for financial stability, but i begamy work with you in december 2008 when i volunteered as your special legal adviser to help prepare the first under nearly 30 reports. it has been an interesting journey for all of us, and i think we can conclude the program was successful by any objective measure. first, t.a.r.p. help prevent trent -- catastrophic collapse of our financial system and economy. in the fall of 2008, we were falling into the abyss. now we are on the road to recovery. t.a.r.p. was not a solution to all of our economic problems, and there is still more work ahead. unemployment still remains unacceptably high and the housing market remains weak. but the worst of the storm has passed. second, we accomplished all of this using much less money than

congress originally provided, and we are unwinding t.a.r.p. faster than anyone thought possible. congress authorized $700 billion, but we will spend no more than $735 billion, and we have already recouped two-thirds of what we spent. third, the ultimate cost of t.a.r.p. will be far less than anyone expected. the total cost wasnitially expected to be approximately $341 billion. according to the latest estimates, the overall cost of t.a.r.p. will be between 25 and 0 billion, and most of that will represent the mon we used to help americans keep their homes. finally, our financial system is in better shape today than before the crisis. it is stronger and on a path to recovery, and congress had adopted the most sweeping overhaul of our regulations in generations, which will give us the tools that we did not have in the fall of 2008. this work is not yet complete,

but we have made great progress since this panel held its first hearg. t.a.r.p. was a bipartisan success. the bush administration acted quickly to stop the panic. when this administration took office, we adopted a broad strategy to restore economic growth, free of credit, and return capital to the private system. today, people no longer fear our financial system is going to fail. banks are much better capitalized and the weakest parts of our pension system no longer exist. the credit markets on which consumers depend are open. businesses are able to raise capital and mortgage rates are at historic lows. we have moved quickly to reduce the dependence of the financial system on americans to support. we have already recovered almost all of the funds invested in the banking system. wherthis administration provided funds to particular companies, we did so with tough conditions. those companies are stronger today and we have already begun

to recoup those investments. for example, the assistancee provided to aig, one of the government's most controversial actions, was necessary because the failure of the a.i.g. at that time in those circumstances would have been catastrophic t our financial system and economy. now two years later, the company has been restructured, and taxpayers are in a position to potentially recover eve dollar invested. d now, it's not impossible. similarly, we provided assistance to general motors and chrysler on the condition they fundamentally restructure their businesses. our actions helped prevent the loss of as many as 1 million bs and helped restore the company and industry to profitability. and we have completed a highly successful initial public offering of gm and are working to exit our investments in chrysler finly, i want to respond to the struggling american homeowner by reducing mortgage rates a

providing incentives to avoid foreclosure, our policies have helped hundreds of thousands of families stay in their homes and have helped to change the mortgage servicing industry generally. we have not held as many homeowners as we it estimated and much more work needs to be done, but we remain committed to doing so, to help as many eligible home owners as possible, in a manner that safeguards taxpayer's assets. mr. chairman, the panel members, t.a.r.p. succeeded in what it was meant to do, bring stability to the financial system and laid the foundati for economic recovery. our comprehensive strategy and decisive action made our economy far stronger today than it was two years ago. we are proud of our actions and appreciate all the help he provided along the way. thank you for the opportunity to testify. i welcome your questions. >> there are a lot of different reasons for this hearing.

we are going to go back in history. what i wld like toocus in my opening questions are, what are the lessons learned? this is difficult to do. when t.a.r.p. was originally set up, everybody at treasury and the fed wasn't under incredible pressure. a lot of decisions were made. i am not here to be a monday morning quarterback to look at these decisions, although i am sure it will be in the report, but in terms of lessons learned, how in the area of moral hazard, which everyone has referred to, what does treasury believe you could have done differently, if, in fact, you were faced with this problem again? >> that is a good question. something we have thought a lot about. the main lesson we learned is we

did not have the tools to deal with this crisis at the time. unfortunately, that is what necessitated this program, which nobo wanted to do, but we had to. we have now passed dodd-frank, the most comprehensive overhaul of our regulation system, which gives us a variety of tools which should allow us to minimize these sorts of conditions again. much work remains to implement that. but,o me, that is the principal lesson we learned, the way we are tryinto address the moral hazard issue, which many of you have rightly noted. >> specifically, wh with dodd- frank would reduce moral hazard? >> the fact we have resolution of order with respect to non- bankingnstitutions, the fact that we have a manner for regulating systematic risk, the fact that we have the office of

the venture research, oversight council, higher capital standards -- all of those measures, i think, enable us t say we now have the tools to try to prevent and minimize the effects of crises like this in the future. therefore, render the sort of assistance we had to provide under t.a.r.p. unnecessary. >> how about the method of the assistance? how would that have changed? with dodd-frank, would you have done it differently? >> dodd-frank gives you the tools to dismember a non-bank. that was a problem we had with a.i.g. now we have that authority. >> when you listen to economists talk about our economy, what do

you believe the two big to fail? >> moral hazard is a serious issue that we have to continue toook at and address. i think, though, the focus now should be on implementing dodd- frank. >> i understand that. i am just trying to figure out what you learned specifically. you are saying that all the ings treasury would like to have had, that would have helped them resolve -- eliminate or minimize moral hazard? >> i guess i would say that w have all the tools congress decided to give us. >> this is your chance to lay out anything in the bill that you would have liked to have, if we're move forward with this. >> i do not know that i want to read litigate the battle over dodd-frank. the main thing is we did achieve, in a short time, a dramatic overhaul. i think our focus should be on implementing that.

now, at a future date, we may look at, was that enough, do we need to do more? those are great qstions and we will continue to address those. >> there is a widespread perception that main street did a lot worse than wall street. things that treasury could have done at the beginning of the program to provide better balance of what was going to main street as opposed to wall street? >> the main benefit to main street of this program was that we did stop the panic. again, when i say this program, it is in conjunction of all the other actions taken. we stopped the panic and we stopped a second great depression, which could have resulted, as many economists havestimated. on obliterates 16% and higher.

it also allowed us to get credit flowing again. -- unemployment rates 16% and higher. under the capital purchase program, we invested in 500 small banks, banks that small businesses and communities depend on. i agree, the perception was that this program provided support to wall street and many people did not think it did much for them. i understand that. this is still a tough economy. people unemployed are in danger of losing their homes feel that way. we understand that. >> it is a tough economy on wall street, may everywhere else, but not on wall street. >> thank you, senator. following up on dodd-frank, if i may quote -- and i hope i am not doing so out of context --

professor stieglitz's testimony. he says resolution a party has made little difference because few believe the government will ever usehe authority at its disposal with these too big to fail banks. so we have dodd-frank, a blueprint to take down not only financial institutions, which we have the authority under fdic to do before, but now a.i.g. and others. would there be courage in a time of panic to aually do this, take them down, as opposed to simply another bailout? >> iould certainly hope so. i believe now on these tools are ve good ones. but obviously, it remains to execute on this. it remains to promulgate the regulation necessary and to act. and it will require regulation

that is nimble. regulation that is responsive to changes in the industry as we go forward. but i think we have come a long way, and we should give these tools a chance to work before we judge. >> i know in one of the foot notes to my opening statement, i make the observation that there was not the courage to take down some of the most insolvent fincial institutions in the early to mid-2009. i do not mean the last quarter of 2008 when the markets were frozen. that may have sent another message. but once the markets stabilized, begun to stabilize more in 2009, and certain institutions came back and say, by the way, we are still insolvent, by the tune of many billions of dollars, at that

point, there were rules on the books for the fdic to take out these institutions and they were not. it makes me question -- now you have new rules for new institutions. when it comes around to it, will that happen, or will more checks simply be written? and as more checks are written, more moral hazard will b created? any thoughts on that? >> certainly. you referred to the events in 2009. the obama administration did not provide a single dollar to a large bank. all of the money provided to the banks -- most of the money -- was provided under the bush administration. i think they made the right decisions under the circumstances, although i was not involved. the obama administration provided a $11 billion in additional funds to banks. most of that went to small banks.

where we provided assistance to additional terms, we did so with tough conditions. if you look and what we did with the auto industry, we imposed some tough conditions required them to restructure. general motors is not profitable. first full-year profit since 2004. chrysler has an operating profit. so i do not think there was a lack of courage. i think we acted forcefully and decisively. >> there were other action going on underneath the surface, underneath t.a.r.p. admittedly, t.a.r.p. was grabbing the headlines, that the fdic was taking action, federal reserve was taking certain actions, quantitative easing, where the federal reserve purchased trillions of dollars of mortgage-backed securities, government-backed mortgage- backed securities, which would have not been purchased at fair market value if fannie and freddie would have been permitted to fail.

so the bailout of fannie and freddie, seems to me, to have a direct correlation to the help of financial institutions and their ability to pay back funds. so there were a number of things going on here. >> happy to respond to that. first of all, i agree with your opening comments, that one must look at the cost of this in termof all government programs, not simply t.a.r.p. but when you do that, the overall cost currently estimated at 1% of gdp, which is far less than the cost to resolve the s&l crisis. secondly, you mentioned the pricing of credit. in the crisis, the government is acting because private capital is not falling. so we are pricing that under what the market would charge. the trick is to still price it properly so that we do not

enurage excessive reliance on it, number one, and to impose conditions so that we do not create a " bigger moral has a problem than is necessary. i agree any government comes with a moral hazard problem. particularly, when the obama administration launched the stress tests and provided the capital assistance program, we said that will come with tough conditions. no one took the money. >> my time is about up. i will leave it by saying, i think there were some profit market participants, mr. buffett, among others, who cut better deals. >> thank you. mr. silver's. >> mr. secretary, before i asked any qstions, i want to expand on my opening remarks and the work of you and your predecessors.

i think it is no secret i have been critical of the economics of t.a.r.p. transactions. but i want to come on the record, commend you and your predecessor for the work you have done since thepring of 2009 in managing the t.a.r.p. assets that you, so to speak, inherited. the execution of the transactions that occurred since you and your predecessor came to work managing the t.a.r.p. i think, particularly, the improvement of the economics in the public's perspective. the way in which both citi and a.i.g. investments have been handled as purely investment assets. so i want to be clear that i think you have done a fine job in that respect. the overall cost numbers that you are siding are substantially driven by that achievement.

now i want to return -- the exchange that you just had with my colleague mr. waters. it is important, in this final hearing, to maybe shine a light on a couple of key moments in history of t.a.r.p. do you agree, -- i take your point, and i have noted, under the obama administration, there was not significant additional capital in fused into large banks. but do you agree there was a set of decisions made by the obama administration on what to do with the large banks, government investments in t.a.r.p., in the early months of the administration? >> there were decisions made by treasury and regulators, but as you know, with respect to the obama administration and treasury, particularly under t.a.r.p., we inherited those

investments. our focus was on managing those investments and exiting them. the regulators really had the primary responsibility to look at the helpf those institutions -- >> that is not exactly what i was asking you. the treasury department released a plan in early spring of 2009 which included the stress tests. the centerpiece of that plan. the regulators executed that plan in substantial part, but it was an administration and treasury department plan. is that correct? >> yes, that is correct. >> to me, that represents a key decision making moment for the administration. could you amplify that a little bit? if you believe it is true, those

strategic decision that were made at that time by the current president's administration? >> certainly, it is a very good question. a central component of the financial stability plan was to re capitalize the financial system with private capital as efficiently as possible, and to do that, we worked wh regulators to formulate the stress testsor the largest 19 bank holding companies. those tests were done with an extraordinarily and unprecedented transparency. without those tests, the market was not willing to reinvest in these institutions i think the record of the stress tests, and what followed is evidence of the success. banks were able to raise a large amount of private capital following the results of those tests. so i think it was a very good strategy and executed successfully. >> i would just observe that i

hink another of mr. waters' dispute with you -- perhaps my evaluation of t.a.r.p., has to do with that set of decisions, with respect to the question of restructuring banks. i do not want to spend what time we have arguing about that, but i want to be clear for the record, that is the key question. before my time is expired, going forward, what are your greatest concerns? what worries you, about t.a.r.p. and about the issues t.a.r.p. was meant to address? >> i am very focused on our housing programs. we have not helped as many people as we would like, but i think the programs are very important and continue to help tens of thousands, and i am concerned about efforts to eliminate those. without those programs, many,

many americans, who otherwise could be held into an affordable mortgage, will not have the opportunity to do so. secondly, i am very focused on managing and exiting our remaining investments as quickly as we can. i think it is important to get the government out of the business of owning stakes in private companies. i think we have got a very good record there, we have made a lot of progress, but we have a lot of work to do. in particular, with respect to our smaller banks, their path to recovery has been a little harder. we need to continue to work with them on that. >> thank you. my time has expired. >> dr. toske? >> thank you. hopefully, we can come back to the questions about the stress test, but i wanted to start

about talking with t.a.r.p. mandate. in addition to the goal of restoring liquidity to the financial system, legislation directed treasury to consider such goals as maximize the overall returns and minimizing the impact of the national debt, protect american jobs, savings, retirement security, help families keep their homes, stabilize communities, and on and on. do you think the mission of t.a.r.p. was too broad? clearly, a number of people have indicated -- iterms of stemming the financial crisis -- agree that it is a success. we will hear some comments later on these other things that seems to be where the economy is struggling. i tried to throw all that into a single piece of legislation, in some sense, did that do t.a.r.p. to get the stigma that it has

today? >> that is a good question we interpreted the consideration that you referred to as things that we should take into account in how we went about executing the authorities we were given. the authorities we were given were narrower than that. the authorities we were given was to purchase troubled assets from financial institutions. we were not given $700 billion and told, reduce the unemployment rate in any way you see fit. we were given a specific mandate to promote the stability and liquidity of the financial system, we were given the authority to do that through the purchase of troubled assets, and in doing so, we were supposed to take those other considerations into account. i do agree that because of the breath of those, many people did

feel it was up to t.a.r.p. to solve all ofhese economic problems, important economic problems we needed to resve. but i do not think it was the job of t.a.r.p. to do that alone. >> do you think treasury has done a good job communicating its action regarding its actions -- to the public? do you feel the treasury could have done a better job of articulating itsbjectives? >> again, a good question. we certainly could have done a better job explaining what we are doing, why we were doing it. i think there is a tenncy, when you are focused on a crisis like this, taking action, to assume tt people know a lot about what you are doing, no more than they may know. i recognize most people in this country do not follow what goes on in washington, day-by-day,

the way that many of us who live in washington do. they are focused on their families, homes, keeping their jobs, getting the kidthrough school. we certainly could have done a better job communicating what we were doing. >> i want to return to the question about the stress test. i do not know -- there was a column in wednesday's's "new york times" alleging that banks supplied the measures used in the latest round of stress tests, ensuring they would look good, rendering the test rather meaningless. i think part of this comes from the fact that these latest rounds of stress tests, the results have been kept somewhat private and not as public the first time around. i guess i would like you to address why -- obviously, this is the fed's decision -- but whether treasury pushed to make them public, what are the

benefits and costs to making these results public? do you have any idea why the fed thinks the benefits were less than the costs to making the results public? >> the current rnd is being conducted by the fed. it was designed by the fed. i had no involvement and treasury generally did not come to my knowledge. so i cannot really answer why the fed structured it the way they have, their decisions about what they were going to publicize, other than the fact -- i would note the following. traditionally, bank supervisory information, testing that our regulators do -- and they do so on an ongoing matter -- is not made public. the exception was the stress tests of spring 2009. we did that, at that time, given the gravity of the crisis. >> but as you noted, you

attributed a lot of success to that. one would >> and i think oneas to do extraordinary actions in a crisis. in the crisis, it was appropriate to conduct those tests with the transparency in which we did it. i think there are good reasons why we have a model in this country of bank regulation and supervision in which a lot of the detailed information is not made public but other concluons are made public. >> one of our later panelists who won his nobel prize for his work on it asymmetric information is going to be interesting to hear his take on keeping information -- >> i look forward to that. unfortunately, i cannot stay but i look forward to reading the

transcript later. >> thank you very much for your role. i was here when you volunteered your work on the panel which was very helpful at the time. by also very much appreciate the fact that you continued in that role when asked to serve up by treasury. i went to the knowledge the work of your predecessor for his efforts and coordination with this committee. i want to follow up with your answer to damon's question. the first point you mentioned a related to the housing program, your concern that those could be eliminated. that is my area of interest because this week there were calls from lawmakers to eliminate treasury foreclosure programs.

some refer to the appximately $50 billion set aside for american homeowners as a waste of money. you mentioned that very little of the money has been spent, and that lack of spending frustrates us that it is essential for further stability and economic recovery. with only $1 billion spent so far, and nearly 600,000 mortgages permanently modified, it is difficult to conclude that it has been a waste of money. that is around $2,000 per mod. we know there are certainly other more complicating factors , a default rates, incentives, and the role that the g's he played. can you comment from a cost- benefit analysis of the value of those dollars spent on those

600,000 permanent modifications? >> i think it has bee dollars a very well spent. let me say that the money is spent over time. once there is a permanent modification of a mortgage, the payments a made over time as long as the homeowner continues his or her payments. we estimate that over time it permit modification will cost the government about $20,000 -- a permanent modification will cost the government about $20,000. we expect more people will enter. keep in mind it also, we have the reallocated some of that $50 billion, actually $46 billion total, but weak reallocated debt to other programs -- but we reallocatedhat to other programs. we are looking at the total cost

we think will be spend. it will be below the 46 but it will be significantly higher than where it is today. >> can you caught -- can you talk about the benefits of tse programs? >> certainly. this is the worst housing crisis we have seen since the great depression. what we are trying to do through these programs is to help people modify the market where it makes economic sense to do so. by doing so, you avert a lot of cost. a foreclosure for any family is a terrible economic loss and a great social, psychological, and emotional loss. the community suffers from it because neighboring house prices fall particularly where you have a vacant home. it hurts the community. the situation is a drag on our

economy as a whole. the more we can help peopleet into a sustainabl modifications which is the focus of our program -- it is not simply kicking the can down the road. we are helping people get into a sustainable situation. i think our coury is much better off. >> could you comment on the impact of ending those programs would have on the economy? >> certainly. i think it means tens of thousands of people who could otherwise get help directly will not get that help -- >> do you see a direct correlation -- >> absolutely. excuse me. absolutely. i think one of the things our program has done is set standards that have now been followed by the industrywide the. there were no modifications getting done prior to the launch

of this program. dual track, for example. the procedure where some of the servicers were talking to a homeowner about a modification at the same time they were foreclosing. is very confusing for the homeowner and very frustrating. the elimination of the program could certainly jeopardize -- >> absolutely. >> thank you. >> i saw a quote by secretary -- thner and died jus in the future, we may have to do things. is this backing away from the fact that no time, no way are we ever going to bail out a bank again? >> a very could question.

i talked to the secretary about that statement. he was referring to the tools under dodd-frank. i think it is clear that we do not kw what the next crisis will be. we believe that the tools we now have under dodd-frank give us the ability to minimize the effects. it requires, as i say, in an effective implementation of those tools. >> is there any concern or what could believe that there are still banks that are too big to fail? the people all over the world -- i know there is a new study coming out which has not been dealt with in dodd-frank and would be -- any kind of the concern in terms of moving forward? >> certainly. i think the moral hazard issue is a very significant one. as you all have noted, it is a

very significant issue in light of what we had to do. again, i think it is up to us now to take the tools that congress has given us and work to minimize that risk. >> one of the frustrations that everyone has is the fact that we went in and helped out the banks and corporations, and then the jobs did not come. the banks held on to the money. is there some way tarp could ve been structured? it sounds like trickle-down to a whole lot of people and it did not trickle. >> i think the key thing was tarp alone wasn't enough. >> again, we are just focusing on at tarp.

it could tarp have been structured in some way so that we would have at least mitigated this? >> i think policy makers, historians, probably this panel will explore that issue. i think it is one that we should explore sitting here today. i am very focused on -- >> one final thing. one of the simple things right in the beginning was there needs to be better support for tracking of funds. thinking in retrospect, tough times, everyone running around, looking back two years, doou ink there would have been a better way to track the funds better? >> we implemented the recommendations in this regard. it was done later after a lot of the money went out the door. on the lending point i would

simply note that the lending issue is n simple a suplly of capital issue. it is also a demand and regulatory issue. you are going to see that fall in a recession. these are complex problems. while it may be that we may have ne things differently under tarp, i think the focus now should be to work with the tools that we have -- >> what i am trying to get at is a history so that if something happens again, we do not have the best suggestions. walter some of the things we could've done to have mitigated th -- what are some of the things we could have done to have mitigated debt? >> i will go back to the written testimony, first page, and i

will read a quote, and there would like to hr your comments. toward the bottom of the first paragraph, the professor says the normal laws of capitalism where investors must [unintelligible] for their decisions or aggregated. a system that speciales losses and privatized gains is not fair nor efficient. admittedly, the big banks were given money -- were given many enormous gifts of which tarp was only one. thenited states government provided money to the biggest of the bank's during the times of need in generous amounts and on generous terms. but they have been forcing ordinary americans to fend for themselves. do you care to comment on that? >> certainly.

first of all, i agree that we need to have a financial system where firms can fill regardless of how big they are. the question is when you were in the midst of the crisis that we faced in the fall of 2008, what should we have done? ain, i think the actions taken were appropriate in light of the situation we confronted in the tools that we had it. we obviously have to work toward a system where that never becomes necessary again and where firms do fail if they have taken excessive risks. >> ok. moving to the testimony of anothe professor, page three, the last full paragraph of the

page. tarp was the largest welfare program for corporations and their investors ever created in the history of humankind. some of the problems have been donad -- worker unions does not make it any better. it makes it worse. it was premeditated pillaging of defenseless taxpayers by powerful lobbyis. do you agree with that? do you not agree with that? >> i do not agree with that. >> on what basis? >> again, i think we were confronted with an extraordinary situatn in the fall of 2008, and we took actions tt are necessary to prevent the collapse of our financial system hadterribleof beehave effects in thicountry. >> my time is up.

i do not think any one of these gentlemen are saying that in october 20 the response was to do nothing. it is more of a nuance issue as to, ok, once the meltdown threat is or, just a few months later, from my recollection, then we need to be able to turn on a dime and apply the rules somewhat differently. my time is up. i will end their >>re. >> we have had a lot of confrontations in this room probably with the treasury department which end with the issue or proem that it is a good idea but we do not have the power to do it. in that vein, as you look at the powers you have and do not have to manage tarp after this

committee disbands with the notion that congress is listening, what powers would you like to have that you do not have? >> well, i guess i assumed we are not amending thearp. >> we are trying to build a record. >> i think the work that remains to be done in the area of housing is obviously critical. >> let's take housing. i think a lot of us agree on that. the idea that youxpressed a few minutes ago -- let's take housing. you have agreements, a legal stcture with participants. if you could not rewrite those agreements today knowing what you know, what would you do? >> if we were to rewrite the agreements again, within the

framework of the power that we have, we would have simply -- >> as soon as someone ves you magic wand. what would you do with it? >> it is difficult to answer the hypothetical is in terms of regretting the history. in terms of going forward, i will leave it to the congress. i do not mean to dodge the question, but i think there is a variety of things that is been considered it. we concluded that we could not even use tarp funds to pay for legal aid and broad counseling in the housing program. >> would each have been a good idea to do that? -- would it have been a good idea to do that? >> you know, i think there are a

range of things reform of the bigger to coach, so that -- range of things, reform of the bankruptcy codes, but i think we can certainly provide you with potentially others. i am very focused on executing the authorities that we have the. >> i do not know if i am allowed to ask one more question, but several witnesses have suggested that we ought to have a sliding scale capital requirements for larger banks. that was in this panel's regulatory reform report. it is within the powers granted to the bank regulators and the systemic risk regulators. what is your view of that proposition? >> i will leave that one to the regulators and to the financial stability oversight council.

i think it is a very important question, but i would note simply that we have raised the level of capital in the system significantly since where we were. banks are better capitalized today, but as to the exa details as whether there should be a sliding scale or what it should look like, i would defer to those with that power. >> if the treasury department has a view on the question, i think we would appreciate that in writing finally, we had a number of back-and-forths with you about strategic cisions made into a dozen men. our expert witnesses have had a lot to say about that -- about

strategic decisions made in 200010. >> thank you. >> i want to refer back to the quote that chairman kaufman referred to. treasury secretary geithner did say that you do not know what is systemic and what is not until you know the nature of the shock. this statement seems to be sort of in contrast with some of the calls by many economists including some of our next panel and myself in my opening statement, that the government needs to clearly define what it views as a systemic risk so the market has a very clear understanding of what that means and what we vw thaas systemically risky.

could you tell me why we think -- why are we not defining what we mean by systemically risky? >> i think there is a process going on to address that. it is not simply a quantitative determination or is simple determination. it is also going to be a determination that changes over time. i think the dodd-frank legislation gives us the ability to do that. i think the initial work in that area has indicated there will be a variety of criteria used that is both quantitative and qualitative, involvement look at capital levels, leverage, intercnectness, and other factors. i think the meaning of this statement was simply that it is a complex determination. >> i guess -- do you do that at some point there will be a clear

statement to the market's that this is what we view as systemically risky so that someone outside looking in would come to approximately the same conclusion of the firms that are systemically risky? >> that is a subject that the financial stability oversight council and its members will look at and consider and will have more to say about in the future. >> going back to the original tarp legislation, both involving the purchase of troubled assets and toxic assets off the books of banks, that is not the way it was implemented. i guess those troubled assets presumably are still sitting on banks' books. do you have a sense of how big the problem is today? do you have a sense of whether the federal reserve's alta meant purchasing of the mortgage

backed securities was in addition to the other effect on the way of removing those troubled assets from banks' books and shipping them to the fed's books? >> it is a very good question. we have seen it substantial write-offs from the industry. number two, we have seen asset quality improved. number three, we have seen the performance of the big banks, at least, has been better than what the stress tests predicted. they were designed to look at what was of the riskiness of those assets and the bank situation. is there more work to do? i would refer to the regulators on that. we are obviously still on the road to recovery. >> thank you. >> i would like to come back

again to the foreclosure issues. as i mentioned in my opening, i think the best thing this panel can do is establish a precedent in the process to get good information to the public. that is why some of our greatest frustrations are around the program have been with respect to the release of this obtaining of information. the first around modifications. i think in defense of the program, you rightfully point to the fact that not only did you create a system for modifications, but also the fax pointing that it encouraged non modificationsutside of the program. despite our continued calls for information, and it is been pported by the secretary himself -- secretary geithner acknowledged how important that

kind of information was, and he pledged to us we will look for ways to get better information out there to acss these programs. what progress has been made since december? >> thank you, mr. neiman. that is a very good question and i know it is an issue that you have been focused on. i agree that we need more information on those non-hamp modifications. they are outside the reporting system that we set up. there was no reporting on any modifications in this country prior to hamp. we have suggested that to several of the services it. i know you raised it with your conversations. i know the regulators are also looking at that issue. >> ain, i think we would

encourage you to ctainly put a process in place. this is something that certainly, if not voluntarily, submitted should be a high priority to find a way to require that information to be submitted and publicly released. the other area -- we have been talking about this web portal to allow not only housing counselors and borrowers to submit data directly through a web-based system to their servicer, but more importantly to allow them to assess t status of that modification. we continue to read and hear about the slow implementation and even the slow pickup on usage. can you give us an update as to how frequently the usage is on that system? >> let me get back to you on

that. i know that it is taken a lot of work to get to where we want to be. there are issues of making sure that if not all the works but it protect privacy. i would be happy to beack to you on that printer >>. >> regarding the need for a national foreclosure data base -- have been given a polite responses each time. what is it? what would be the reluctance of starting a program that would provide mortgage performance data across the board,cross state or national, all lines, banks and non-banks? again, a very good question, mr. neiman.

to see awe are going dramatic change overall which will lead to things like national standards oa number of these issues. it has been clear throughout this crisis that we did not have data or standards and that is been a large part of the problem. i think there is a lot of work going on on a number of fronts to look at those. i cannot give you a specific prediction of where we will be when, but iraq think we will see some significant changes there. >> i look forward to your followup response on the web portal. >> thank you for being here. thank you so much for your public service. one question i have the -- you said you raised bank capal requirements significantly. if you could submit in writing what you did to raise bank capital requirements -- >> certainly proved what i meant

was bank capital levels have increased -- certainly. what i meant was bank capital levels have increased -- >> of the next panel come forward please? -- would the next panel come forward please? >> i am very pleased now to

welcome our third panel of distinguished economists. joseph stiglitz, nobel laureate, and professor parrot allan meltzer, -- professor. allan meltzer, a professor at carnegie-mellon. a senior fellow let the peterson institute for financial economics, robert c. mccormack, from the university of chicago. thank you very much for coming. i want to thank you you off. keep your oral testimony to 5 minutes. we'll begin with mr. stiglitz. >> thank you for this opportunity to share my views about the success and failures of t.a.r.p.. the t.a.r.p., and the recovery of troubled assets were not ends in themselves. t.a.r.p. was justified to the

american people as necessary to contain the flow of credit. it was hope that it would play a pivotal role with mortgage foreclosures in the collapse of the real-estate market that led to the financial crisis. in these alternate objectives, the t.a.r.p. has been a dismal failure. three years after the onset of the recession, unemployment remains unacceptably -- unacceptably high. lending to small and medium- sized enterprises is still constrained. while big banks were saved, smaller, to in the regional banks are in trouble. the mortgage market is still on life-support. t.a.r.p. has not just failed in exclusive objectives. i think the way the program was managed has contributed to the

economy's problems. the normal laws of capitalism whereon -- where a system must be regulated. t.a.r.p. has made systems less competitive. there were six critical fair winds of t.a.r.p.. -- critical failings. first, they did not restrain bonuses. they put no demands that they lent money that were given to them. they did not restrain the predatory practices. secondly, giving money to the banks, they should have demanded appropriate compensation for the risk borne. is not enough to say we will be repaid, or almost repaid. we demand arm's length terms, such as warren buffett outlined when he provided funds to goldman sachs if we did that, our national debt would be lower.

it should be judged as an see, not exposed. thirdly, there was a lack of transparency. fourth, there was a lack of concern for what kind of financial sector should emerge after the crisis. there was no reason. fifth, from the beginning, t.a.r.p. was based on a false promise, but the real estate markets were temporarily depressed. the reality was there was enormous bubble. it was inevitable that the breaking of the bubble, especially given the kinds of mortgages that had been issued would have enormous consequences that had to be dealt with. many opposed articles have been a result of building on that false promise. typically falls was a program designed to have a government

bear a disproportionate share of the losses. they would also receive a disproportionate share of the gains. the prices that would emerge would be the prices of options, not underlying assets. the standard wisdom in such a situation is summarized in a single word, "restructured." t.a.r.p. made things worse. the sixth critical failure was that some of the money went to restructure securitization under the cost program, without an understanding of the deeper reasons. these attempts to revive the market failed. it is not a surprise. evident at the time of the crisis, and even more so as time when on -- these approaches, had a been taken, would have led to a stronger economy today, and to our government to be in a stronger fiscal position. we might say that all of this is

water over the dam, but is not. we're not repaired our banking system, and increased region with increase global hazard, the economy remains very much at risk, in spite of dodd-frank. our economy is not back to health. this means we need a more competitive financial sector, and one more focused on its core mission of lending. there is a wide array of the important activities performed by the financial sector, but not all of them should be undertaken by government-insured banks. banks will not focus on lending if they can continue to make more money by publicly- underwritten speculation and trading, or exposing credit and debit card markets. to many of these oppose and i'm going restore our economy and

the soundness of government finances. we should not forget the process by which t.a.r.p. and this oversight panel was created. that political process does not represent one of the country's finest moments. at first, a short, a two-page bill was presented given discretion to the secretary of treasury without oversight and review. given the lack of transparency, and the potential abuses, that. even with full knowledge that there was to the oversight, one can only imagine what would happen to have their regional bill been passed. congress decided that it was incompatible with democratic processes. on the other hand, the political deals required to get t.a.r.p. past, which an estimated one and $50 billion in unjustifiable -- $150 billion bid on justifiable tax breaks, do not speak well for our economy. we think of the cost of

t.a.r.p., the tax breaks should be included. nor should we underestimate the damage or correct perception that those were -- who were responsible were the recipients. it is only reinforced public perception that something has happened. for these, and other filling the t.a.r.p., our economy and society have paid, and will continue to pay very high price. >> thank you, mr. meltzer? >> invitation to this hearing, like most discussions in the t.a.r.p. program as square carps exceeded. my answer is yes, t.a.r.p. avoided a potential financial disaster, my concern is the depression. congress should not start with the crisis that followed lehman brothers failure. it must ask and demand answers to other questions -- why was it

necessary to issue about $1 trillion of public money to prevent financial collapse? what if anything has been done to reduce the significance of the process that another -- prospect that another t.a.r.p. will follow? like many other bad decisions, the use of public funds to prevent failures began small. in the 1970's, the federal reserve began the policy and became too big to fail by preventing the failure of first pennsylvania bank. soon, banks and other financial firms recognize the becoming large was a way to reduce risk. some recognize they could take more risk. this is known as moral hazard. the process works like this -- i have been present for some of these -- bankers and treasury, or federal reserve staff warned the principal policy maker that failure invites a domestic or world crisis. sometimes, they say "mr.

secretary, your name will be on that crisis in the history books." i have never found a way of overcoming that when when the crisis happened or seems imminent. it does not help to point out that in the few occasions that there was no dog, financial crisis. , but no crisis followed. one example is the penn central railroad in 1970. was a major issuer of commercial paper. the federal reserve chairman, arthur burns, was anxious to protect the market by bailing out penn central. president nixon made the mistake of appointing an outside counsel from his old law firm. congressional leaders view that as an effort to assist the republican party. that ended the bailout. there was no crisis. the commercial paper market

decline, but borrowers got the accommodation at banks. no crisis happened. after a few months, the commercial paper market revived. with a major issuer of non- investment-grade debt at the time went bankrupt. other financial firms took over the business, and drexel went into bankruptcy. the main reason the policy makers resorted to too big to fail is regulatory failure. regulators do not require financial firms to hold enough capital. in the 1920's large banks held capital equal to 15% to 20% of their assets. many small banks, but no large banks failed. even in the early years of the great depression, very few large banks failed. stockholders, not the general public, bore those losses. that is as it should be, in my

opinion. after the recent crisis, congress passed the dodd-frank bill. dodd-frank did nothing to increase capital requirements. the international regulators said basel did better, but did not increase capital and off. dodd-frank put the secretary of the treasury at the head of the committee to decide on too big to fail. if that in beds two errors. the time to implement bailout is not when the crisis happened. it has to be established quality. we profess to believe in the rule of law. we need allow them beds a rule and a policy that applies it. secondly, the secretary of treasury is very often the principal person who favors too big to fail. nothing in dodd-frank changes his incentives. it continues bailouts and provides money for them. i'll repeat the proposal i have made in several hearings.

at some minimum size, to protect community banks, congress should require banks to increase capital relative to their assets as asset size increases. instead of subsidizing large banks, we should make them pay for the costs that they impose. it said bank increases assets by 10%, capital must increase by more than 10%. the proposal has three major benefits. first, stockholders and managers bear the losses, not the taxpayers and the public. second, the rule encourages prudence, and eliminates the improved and by replacing owners of failed banks. third, congress can eliminate many of the regulations in dodd- frank because they will not strengthen financial a institutions. more capital well. in most recent crisis, bear stearns was the biggest. the federal reserve took assets

onto its balance sheet, shifting losses to the public. the market read the decision as a sign that too big to fail remain the process -- the policy. they had a big shot. lehman brothers was allowed to fail. the seven policy change without warning in the midst of a recession created massive uncertainty. i believe secretary paulson and chairman bernanke were wrong to change policy without warning, but i praise the response called t.a.r.p., that provided the equivalent -- liquidity to all parts of the market. they avoided compounding the error. notice what has happened. chairman bernanke told us the t.a.r.p. funds were short term. they would run out in due course, thereby shrinking the balance sheet. instead of shrinking, the fed bought mortgages, more than offsetting the original t.a.r.p. funds. again, chairman bernanke told us off the mortgages would be repaid.

so, the balance sheet would shrink. again, that did not happen. qe two purchased more than offset the losses. i do not believe the federal reserve has a strategy to reduce the balance sheet. we face the prospect in future years of high inflation. how can congress continue to justify a system that makes the public pay for bankers' mistakes? second, remember that capitalism without failure is like religion without sin. does not work. third, congress should demand a detailed statement of how the federal reserve plans to shrink its balance sheet, including an estimate of how high market interest rates will have to rise. >> thank you. mr. johnson could >> thank you. i completely agree, and would like in -- like to endorse the views of both professor stiglitz, and prof. meltzer. let me frame my agreement in the

form of the following question. does anyone here think that goldman sachs could sell? if they hit a hypothetical rock, does anyone believe that it would be allowed to collapse, sale, go bankrupt unencumbered by any type of bailout now or in the near future? i have asked this question around the country and across the world, and i have yet to find anyone who realistically thinks it could fail. i have found some people who wish it could sell, but that is a different question. goldman sachs is too big. they have a balance sheet around $900 billion. it is 2-highly leveraged. -- too-higkly leveraged, and

cross-bordered. we do not have a cross-border revolution -- regulation authority. there can be no cross-border resolution authority in u.s. legislation. indeed a cross-border agreement. i know well the technical people, the g-20, the g 10, various responsible parties in the alphabet soup of international regulation. i know these people. i talked to them. there will not be a cross- border resolution in our lifetimes -- no mechanism, no. 40. you cannot handle, and an orderly fashion, the failure of a bank like goldman sachs, jpmorgan chase, or citigroup. you could let them collapse, but then you face another lehman brothers, where you could bail them out with some form were you

protect the credit, and that is the key point, and then you have all the complications that professor stiglitz and prof. meltzer put forward, or it gets worse. you enter another phase of what the bank of england now calls a doom loop, where repeated cycles lead you not to just some unfortunate situation where there was always a transfer from the public to the bankers, but it leads you to fiscal ruin. look at the experience of ireland if you do not believe me when three big banks became to times the size of the irish economy and blew themselves up. when we should have done, along with t.a.r.p., or in addition to it, is implement a form of leverage cap relative to gdp, just as was proposed in the amendment to dodd-frank, which failed on the floor of the senate, 33-61. we should also implemented a

cross-border framework. given that those resolutions have failed, we should do exactly what prof. meltzer and professor stiglitz have suggested -- which have higher capital in these banks. his astonishing, but unfortunately true that basel 3, with all of the supplementary questions and implementation we will see for systemically- important institutions, will, i believe, leave us with a tier one capital requirement below that which lehman brothers had the day before it failed. lehman brothers had 11.6% tier one capital, and we will end up between 10% and 11%. how can this make sense? the swiss national bank is acquiring 19%, the bank of england is actively pursuing and try to implement closer to 20% requirements?

-- requirements. it is not socially-costly. i know bankers claimed to the contrary, but they are wrong. you should consult research at stanford and other leading and universities from the top people in finance are not captured by the industry. they say we need more capital, it is not costly and we need a version of what prof. meltzer just laid out for you. we are not going to do it. in conclusion, let me quote larry summers in his 2000 lecture to the american economic association where he reviewed the experience of financial crisis around the world to that point, particularly in the 1990's when he was with the u.s. treasury. "it is certain that a healthy financial system cannot be built on the expectation of bailouts."

>> mr. segales. [unintelligible] >> we need to establish what is the counter-factor. what will happen in the absence of t.a.r.p.? chairman bernanke and then secretary paulson represented the alternative as the collapse. if that -- if the alternative is the abyss, t.a.r.p. was a success. even if we have escaped the abyss, we have to conclude the t.a.r.p. was a success. we estimate that the bankruptcy of the 10 largest banks would have wiped out 22% of their value, for a total of 2.4

trillion dollars. the financial system was at risk, and some intervention was needed, yet it is misleading to say that there were no walker alternatives. -- no other alternatives. there were feasible and superior alternatives. it made t.a.r.p. appear inevitable. i stated clearly -- by stating clearly where intervention was needed, it would of been possible to design plans that were more effective and less expensive. this is not hindsight. in 2008, i wrote a proposal to address the since instability of the financial system to an emergency reform of the bankruptcy court that could transform the debt of financial institutions into equity. the feasibility of this idea

lies in the fact that they are designed to deal with future bailout. the same would deal with the bankruptcy of gm and chrysler. i did not write a plan for aig because i did not understand what the role -- the real plan for the bailout of aig was. if we agree that other feasible alternatives did exist, we have to concede that the cost of benefits -- cost and benefits of t.a.r.p. the city alternatives. it cost $32 billion for the taxpayers. in spite of the enormous value created by the government intervention, taxpayers and a with a large loss. in older companies come the auto workers was the winner -- autoworkers' union was the winner.

the taxpayers were the losers, who lost $59 billion in the rescue. park was the largest welfare program for corporations -- t.a.r.p. was the largest welfare program for corporations ever created. it shows that this distribution was no accident. it was a premeditated pillage of defense taxpayers by powerful lobbyists. t.a.r.p. is not just a triumph of wall street, it is a triumph of k street over the rest of america. the worst impact is the incentives that it generated. it insured that led to the assistance recapitalized smaller banks. second, the way subsidies were distributed under t.a.r.p. showed any merges -- enormous

return to lobbying. any phone call from the 202 area code had one message. eventually, this request became government policy. third, the way the bailout was conducted destroy the faith that americans have and the financial system and the government. in a study conducted in 27 -- 2008, 80% of the american people said government intervention made them less likely to invest in the financial market. it enshrines the the large financial institutions cannot fail, and their creditors cannot lose. these expectations lead investors to invest money in the bank's most politically- connected, not the most financially-sound. this is the end of credit analysis, and the beginning of political analysis. >> thank you. now, we will begin questions.

the first question i have is -- moral hazard. one of the things that has been incredible about the way this panel has functioned since i have been here is how bipartisan things have been. moral hazard has been raised in every one of our discussions. this is kind of the history of t.a.r.p.. could you each talk about how t.a.r.p. impacted moral hazard? mr. stiglitz? >> i think the point that has been made by paul four of us, and we did not coordinate our testimony, and this is reflecting where the broad span of the economics is from, a whole spectrum, but we do agree that incentives matter. if you know you are going to get bailed out, no matter what your losses are, then you have an incentive to take on more risk.

the market gets distorted because the too big to fail banks get capital-letter a lower cost. -- get capital at a lower cost. money fails on us idea of connectedness, as professor zingales put it. it is manifested in every way. his also manifested at a higher level. the banks have gone much higher returns out of their political investments than any other corporate investment. you might say, from the point of view of a firm obligated to maximize your returns to your shareholders, where is the best way to put your money? it is on tasty. >> mr. meltzer. >> -- it is on case street. >> mr. meltzer? [unintelligible] [laughter]

>> i agree. he is right. those incentives will never come. we have to do something about it before. we have to have capital in the banks. we have to give incentive for bankers to be prudent in the risks that they take. no set of regulations is going to do that. i have given this talk to a lot of places, including the council on foreign relations, where i said regulations are made by bureaucrats, regulators, and circumvented by lawyers and markets. the first question was a man who got and said "i am a wall street lawyer, who do you think shows them how to circumvent them? we need to have capital so that the incentives are on the banker and the stockholders to

avoid. we started small. before the 1970's we did not bail out large banks. his only something that has been growing, growing, and grow it -- is only something that has been growing, growing, and growing, and it is time congress puts an it. to it get >> mr. johnson? >> it was recently said to be to fail is not a market, it is a government subsidy scheme, and it is an abomination. it should end. the new gse's, the government sponsored enterprises of today, include the largest six bank holding companies in the country -- bank of america, jpmorgan chase, wells fargo, goldman sachs, and morgan stanley. they should -- they can borrow more cheaply because they are

backed by the government. they have an advantage of about 50 basis points. they want to become more global. these are the things we cannot deal with when they fail. it is what makes it harder for any secretary of the treasury to refuse a bailout. jean farmer suggests that we should be looking at capital requirements closer to 40% or 50%. this is the% of their assets -- percentage of their assets financed with equity. they're not following the principles of basic finance. i would refer it to the website where it has been written about for a broad audience and explained to newspapers. the technical people get this, and bankers refuse because they want to get paid on a return-on- equity basis, so they can get a lot of cash out in the boom, and

walk away long before society bears these horrible alternate .ostost >> increasing dividends, how does that fit in? >> it makes no sense at all. the federal reserve and other responsible authorities have not yet determined what systemically-important financial institutions should hold. there are the issues discussed with the previous panel with various lawsuits and put? and so on. we do not know how much capital they will need to weather the next stage. why would you allow them to pay out any of this capital in dividends? this is allowing them to have more leverage in their business. the bankers want it because they get paid on a return on equity basis. if there is a put option, we write the put option, bear the

cost of that, and you are increasing it by allowing them to pay dividends. it is irresponsible. the federal reserve should back off from allowing this increase in dividends, which is apparently where it is internally headed towar. >> i look at this time to have mr. zingales comment. [inaudible] >> we always think about shareholders doing crazy stuff, but more authorizes on the side of investors. during the crisis, i was talking to a cfo who had to park liquidity -- this was in europe -- he had very large liquidity. he was worried and said i needed to invest in a safe place. what is a safe place? the banks with more capital of the banks that are more politically connected.

he is creating incentive for lenders to actually lend more to the banks that are politically connected independent of their safety. bankers who find that extremely cheap found -- find it irresistible. sometimes they want to speculate. sometimes they do not see the end in sight. in the case of lehman brothers, at the end, dick fuld was not playing on strategic risk taking. he was simply not seen the mistakes he was doing, but the credit market was not there to stop him because the credit market failed to insure by the too big to fail policy. let me add something that is slightly different to my colleagues here. i would say that it is not

feasible. it is like trying to stop a parent from sitting a child. we should not bailout our children. when their life is in danger, we cannot resist pre-- resist. even if we promise not to do it, eventually we will do it. the way to lay out this system is making sure a system is in place. it is not the they do not have the instruments. let's take a case where they did have the instruments, like in citizens loans, or in the case of washington mutual. the regulator had the instruments to intervene. do you know where they intervene? where the credit default swaps price was $3,305, ending a 33% spread over the break.

if you do go washington mutual and shareholders, you will find there is a suit because shareholders are complaining that regulators intervened too early cardboard -- early credit you are a turkey, thanksgiving always comes too early if you are a shareholder of a bank that is out of money -- always comes too early. if you are a shareholder of a bank that is out of money, intervention always comes too early. we need to ask for them to intervene early on, and give them a choice to either recapitalize, or you are liquidated. in a sense, what the gentleman from the treasury was saying with the stress test was exactly that -- and out and out choice -- either you recap -- either you recapitalize, or we take you over. all the problems of raising capital descanted -- disappear. >> thank you. mr. mcwatters? >> that is a tough act to

follow. when i read your testimony last evening, a little bit after midnight, i was running through the pages, and i thought there were four minds thinking pretty much the same way. i happen to agree with most everything i was reading, which was delightful. it raises the question -- if we go back to september, 2008, if president bush, secretary paulson had called you and said we were in a really bad jam, which should we do, what would you have said? mr. stiglitz? >> well, i think it is clear that there had to be some government action, and it is also clear that we have all said the real mistake was letting things get to that position. it is also the case that given what we know now, the fed knew that there was a lot of turmoil in the financial markets well

before everybody knew -- the financial inquiry commission pointed this out. after bear stearns, the argument that lehman brothers did not have authority, it was nonsense, because if they really believe that, they should have asked for authority. they needed to do something. the problem i had, and i try to emphasize in my remarks, is the way they gave money to the banks was wrong. interesting, when t.a.r.p. was passed, they said they were going to buy the troubled assets. everybody pointed out that that was a flawed approach, and to their credit, paulson change the strategy after several weeks. he would have then an even worse disaster had he not change that strategy. the way the money was put in come without conditions, without thinking about the structure of

where you want to go, and without thinking about the mortgage market most importantly, which was the underlying source of the problem, it seems to me that they went in without any vision or understanding of how to get relending started, they had had plenty of time to think about that. it is not the intervention. it is how the intervention was done. >> mr. meltzer? >> i am in a good position to answer your question, mr. mcwatters, because i appeared on a program when the program was first announced, and i said i am against it. he has not explained how is leadwort. he does not have a coherent plan we need a coherent plan. -- coherent plan. we need a coherent plan. i have been on television many times. i received an overwhelming response from the public.

nobody that i knew, it was 149-1 on my side. i got a call from treasury. they said not in so many words, but the message was clear, "ok, wise guy, what would you do?" i told them what i would do. i said, the banks in, raise capital in the market. if you need $20 billion, raised $10 billion in the marketplace, and we will give you $10 billion in subsidized rates. if they cannot do that, they are done. the treasury to benchley did something like that, close to that, but at the time they did in which he eventually did something like that, close to that, -- eventually did something like that, close to that, but at the time they did not want to hear.

capital is what protect the public and incentivizes the management and the stockholders. >> thank you. mr. johnson? >> if you give me the choice between global come get -- calamity and unsavory bailouts, i will suggest unsavory bailouts along the lines that mr. meltzer was suggesting. i think all of the suggestions we are making with regard to how to learn the lesson and reduce the chance of a global come and -- calamitous and they're going forward, i agree that capital is the concept. we need a lot more capital. he needs to be pure, real capital, not hybrid capital, not contingent capital. he needs to be real, equity capital. if this is not costing from a social point of view. if the bankers do not want this. all the arguments they put forward against this is pure lobbying. it is a complete public

relations exercise. we need a lot more capital, and we need to persuade anyone that wants to do a banking business, that they need to be just as well capitalized >> the question is not hypothetical. what i did not speak directly to treasury, i did speak with the chairman of the committee who spoke with paulson and i had a very clear proposal that articulate into the pieces i referenced in my testimony. one, and the second, where i would say, simple. you basically acquire a bank -- require that banks with the long term debt that can absorb the losses and if you think this requirement is coercive, you give the option to buy back their shares