to get a bill off the house floor, if what ever they negotiate has less than $60 billion in cuts, are the house republicans going to hope for some democratic votes? >> the most logical scenario would be yes. some part of the republican conference would support this. but because the leaders and freshmen are wedded to the spending cuts, the republican leadership may not be willing to split the caucus on this issue. >> it do you see a case where the republicans are willing to help them get this off the floor? >> there are only about two dozen house democrats who are considered fiscal conservatives it would be possible the allies on something like this. they're really just depends on what the policy writers are on the bill and what the level of spending cuts as.

if it is off the charts, i don think many democrats will be willing to come their way. on the other hand, more democrats than not voted with them to do the temporary extension to keep the government open, seeing no alternative. >> the vote was 335-91. he had over 100 democrats who voted for this extension. >> there are some democrats willing to vote for spending cuts, but it is not clear whether john boehner is willing to split the caucus and allow the sweet spot number to come before. >> thank you for being here. we appreciate it. >> democratic congressman, henry

waxman, talks about his opposition to an in-house build up with strip the authority from the epa to strip greenhouse gases. he will also talk about our dependence on oil and improving competitiveness through technology. live coverage on monday at 10:00 eastern on c-span. >> monday on c-span, live coverage of a presidential forum in iowa. we will hear from possible republican candidates, former house speaker newt gingrich, former senator rick santorum, a former governors and the former ceo of godfather's pizza. iowa is scheduled to hold the first in the nation presidential caucuses in early 2012. this is organized by the iowa face and freedom coalition. an hour long coverage starts at 8:00 on c-span.

>> the house returns for legislative business on tuesday at 4:00 eastern with the first the of the week at 6:30. the house will take up to measures to end federal mortgage assistance. on wednesday, the house and senate will meet at 11:00 in the house chamber for a joint meeting to hear from the prime minister of australia. live coverage of the house when members return on c-span. >> the congressional trouble as a relief program oversight panel held its final public hearing this week, looking at the overall impact of the tarp program. they're due to issue their final report before dissolving in early april. now remarks from the chairman. this is 45 minutes.

>> we appreciate your willingness to join the troubled assets relief program. there is no 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 risen 20% in the last year, had instead 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. yet, 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. should 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 know 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 foreclosures. 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 lingering belief that america's biggest banks are too big to fail and the rules apply 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 consists 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 from the fdic, fha, and federal reserve. 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 coughlin. welcome to our distinguished witnesses. although the congressional budget office has recently estimated the cost of t.a.r.p. is down only 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 difficult 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 combined 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 street should 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 freddie mac's in the purchase of $1.25 trillion of gse- guaranteed mortgage-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 they would have received without the guarantees and used the proceeds to pay their obligations outstanding

and under t.a.r.p.. there by arguably shifting a greater portion of the t.a.r.p. from the recipients themselves, 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 panel staff over the past two years, it is all but clear that the success or failure of the t.a.r.p. remains 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 is 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 beyond 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 automotive 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 hundreds of often-ill managed financial and other institutions, and their shareholders and officers, received taxpayer funded bailout as well as other subsidies from the treasury, federal reserve, fdic, on remarkably 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 losses 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 the discussion. >> thank you, mr. chairman. good morning. this is the last hearing of the congressional oversight panel. i would like to express my gratitude to senate majority harry reid, minority leader 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 particular, 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 it 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 states "the economic recovery is continuing, though at a rate that has been insufficient to bring about a significant improvement in labor

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 the focus 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 the 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 needed 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 big 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 way, the 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 firms to pay the 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. in turn, 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 report, 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. after being 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 also 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 together for 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 the 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 other t.a.r.p. related areas. our goal was to obtain information on a systematic basis, communicated as clearly as possible. with this, people can assess what is happening today and others in the future can, with the benefit of time, truly assess what happened back in the first 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

opportunity to 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 have 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 acting assistant secretary for financial stability, but i began my 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 was initially expected to be approximately $341 billion. according to the latest estimates, the overall cost of t.a.r.p. will be between 25 and $50 billion, and most of that will represent the money 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 hearing. 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. where this 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 assistance we 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 to our financial system and economy. now two years later, the company has been restructured, and taxpayers are in a position to potentially recover every dollar invested. and 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 jobs 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 finally, i want to

respond to the struggling american homeowners. by reducing mortgage rates and 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 foundation 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 would like to focus 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 nobody 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, to me, that is the principal lesson we learned, the way we are trying to address the moral hazard issue, which many of you have rightly noted. >> specifically, what with dodd- frank would reduce moral hazard? >> the fact we have resolution of order with respect to non- banking institutions, 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 to 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 to look 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 things treasury would like to have had, that would have helped them resolve -- eliminate or minimize moral hazard? >> i guess i would say that we 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 questions 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 have estimated.

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 use the 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 actually do this, take them down, as opposed to simply another bailout? >> i would certainly hope so. i believe now on these tools are very 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 financial 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 be 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 terms of 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 encourage 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 >> on monday, alabama republican governor of -- governor announced deep cuts to

balance the budget. he also said it is time for the state's addition to the federal stimulus to end. there was a joint session of the alabama legislature. this is 40 minutes. >> the first joint section -- joint session of the 2011 alabama legislature will now come to order. we are gathered to hear the state of the state address by his excellency, the governor of alabama, robert bentley. [applause]

i present to the governor. [applause] >> good to see you.

lieutenant governor, speaker, president pro tem, distinguished guests, my fellow public servants and my fellow alabama a great privilege that i join you hear in this chamber to mark another milestone in our

state's history. i am humbled tonight to be addressing this joint session as your governor. as i deliver my first stage of the state address, i do so with humility as a public servant, one who has been called to a great task. i thank you for sharing this moment with me tonight. as public servants, we are called to put others ahead of ourselves. i do not think you will find anyone with a bigger hearts and desire to serve others ban your first lady and my sweet wife, diane. [applause] i would also like to thank

members of my cabinet who are here with me tonight. thank you for serving and joining me in meeting the challenges that lie ahead. chief justice, distinguished members of the alabama supreme court, thank you for what you do and the service you give to our state. today we face great challenges in alabama. our state, like so many others in our country, finds itself at a pivotal point in time. we are at a time in our state's history where we must make difficult choices. what we choose to do or not to do today will have far reaching effects on the future of alabama and our citizens. but they are choices we must make. as your governor, called to serve our citizens, i am ready to make those choices. i told you many months ago when

i decided to run for governor that my highest priority for alabama is creating jobs. that has not changed. stimulating our economy and job creation for the people of alabama is and will remain the focal point of my administration. here in alabama, we have inherited a budget this year that, at best, is on realistic. our education trust fund and our state general budget is based -- are based on a realistic budget projections. five months into the 2011 fiscal year, what we fear is true. we do not have enough money to sustain either budget. taxpayers deserve better. one time money for federal stimulus dollars -- dollars propped up our budgets. with stimulus money depleted, we are left with a loss of millions

of dollars in both budgets. we now face a $165 million shortfall in the education budget and a $110 million budget in the general fund budget. -- $110 million shortfall in the general fund budget. alabama must live within its means. we must do a better job of prioritizing our resources to get the most of our state expenditures. here -- year after year, it has a budgeta theme to adopt that must be prorated. that must change. my goal is to never submit a budget to you that must be prorated. [applause]

that is why the budget i present will be balanced, they will be responsible, and they will be conservative. it will be a challenge. first, we must balance our current education and general fund budget. then we must look to the 2012 budgets and prioritize what taxpayers can and cannot afford to keep funding. we will be called on to do without. but while there are sacrifices that must be made, i can tell you that we will come out on the other side of this difficult time stronger than ever. alabama will not look to the federal government for one time funds to prop up an already under realistic budget. we will not look to washington ever again to bill us out. tonight -- bail us out.

tonight, we take our future back. [applause] together, i have been working with the lieutenant governor, with the speaker of the house, and with the president pro tem to meet the challenges we face in crafting a state budget that lives within our means. i want to thank our budget shares -- budget chairs for working with us to craft responsible budget. ladies and gentlemen, i can tell you that we have had an unprecedented collaboration on this budget. together, we will get this done.

tonight, i share with you all that regardless of what you may have heard or read, we are on the same page. [applause] we are working every day, relying not on washington, but on our own ability as a state to accomplish the task set before us. in the historic elections of 2010, the message from the people of this country was loud and clear. they expect us to govern right. they expect us to have and that the government that is fiscally irresponsible and creates jobs. as republicans, we have a tremendous opportunity. we would not be here without the hard work of the speaker and the republican party. i want to thank them for all

they did. the election is over. now we represent all of alabama. [applause] together we will work hard to address the critical challenges before us. now we must get to work. the 2011 education trust fund budget is based on revenue estimates that were robbed and artificially inflated with one time federal stimulus dollars. yesterday, i had no choice but to declare a 3% pro ration in the education trust fund. there was no all other alternatives to make up the $100 million that was not there.

this is the last time that will happen. beginning with the 2012 budget, it is my goal that no budget in my industry shall ever have to be prorated. [applause] in order to make that happen, there are sacrifices that must be made. we will ask our teachers to contribute more to their individual retirement and to health care insurance programs. [applause] i am recommending the repeal of the d.r.o.p. program -- [applause] which has overtly taxed our retirement system. the taxpayers cannot afford to

sustain the continued high cost of teacher retirement and health care. we are only asking our teachers to do what virtually everyone else has been forced to do in these tough economic times. you need to know that within my budget, there will be no reduction in state-funded teacher gets. -- teacher units. [applause] nothing is more important to me than protecting our classroom teachers. though there will be sacrifices that must be made, i will not sacrifice one single teacher's job. [applause] classroom sizes will not increase. [applause]

there will be no cuts to the school year or two contract days or teachers or support -- for teachers or support personnel. [applause] we must redirect our priorities within the education trust fund. i, along with our leaders in the higher education systems and the k-12, have taken a long look at the budget and have determined what should be the priorities for this day. the budget i present will preserve, protect, and bolster areas that should remain a priority for all of alabama. we will devote $5 million in education budgets or classroom teaching supplies. [applause]

we expect our teachers to lead our children to succeed and excel in the classroom. by finding classroom supplies, we are giving our teachers -- funding classroom supplies, we are giving our teachers the tools they need to meet those expectations. we will protect the map and science initiative. we will protect the access distance learning program. we will explain and -- expand our programs that prepare students for college. [applause] we will strengthen our work force training programs and our two year college systems. we will give flexibility to local school boards to prioritize and make decisions that affect the schools in their

districts. we will remove restrictive language from legislation that it takes decisions made by the school boards -- that dictates decisions made by the school boards and give them flexibility so that they can put the money to the highest and best use. [applause] we have made strategic investments in cancer research act the university -- at the university of alabama. we have increased state funding for higher education and given our presidents more flexibility in their budgets. we have provided increases in state funding for disabled and special needs children and adults. in the education budget i am presenting, we have done all

these things while still balancing the budget, which will not have to be prorated and will not have to lay out -- we will not have to lay off one single teacher. [applause] and now we must take steps to make sure we never find our state in such dire straits again. we must no longer based our education budget on a predictable revenue projections. greg, thank you for your leadership in writing legislation that will provide a funding base for the education trust fund. [applause] if we are going to solve the problems facing alabama, we must budget differently and we

must budget responsibly. send this bill to me and i will sign it. one year ago, as a state representative, i voted against our state's general fund budget because it exceeded general revenue. do you know what? i was right. we have exhausted our rainy day fund. yet today, out -- yesterday i announced my intention to prorate the budget by 10% for the remainder of the fiscal year. now we face the task of looking to our 2012 budget, where there are tough decisions to be made. there will be sacrifices. there will be losses. it is what we must do to maintain and sustain a budget that taxpayers can afford, one

that is irresponsible, realistic, and balanced. in the general fund, we are asking state employees to do what we have asked of our teachers, increase their individual contributions to their retirement and health insurance programs. today, the state of alabama spends $1 billion on pension costs. that number has been increasing in an unsustainable matter. we will increase -- unsustainable manner. the increases will result in savings of over $100 million for the state government. we will control states spinsters on public employee health benefits. state insurance boards will now be given the opportunity to make

changes and come up with new ideas for health cost savings. these are sacrifices, but they must be made. now we can rein in spending and responsibly to operate state budgets. this will prevent additional cuts in programs and services and employees in the future. it may help these programs survive for generations to come. under the 15% per ration of the general fund, there are agencies that simply must be protected. agencies that provide critical services will be protected through supplemental appropriations and prioritization of the budget. we will protect our medicaid

agency. [applause] medicaid provides health care to 1 million children, elderly, and disabled people. it must be protected. we must maintain necessary funding for the department of corrections. we also must be cost-efficient in criminal justice spending. 20 years ago, the cost of corrections in alabama was $133 million. today, we spent more than four times that much. we must do better. a broad coalition of our top judicial and legislative leaders and members of my staff have been meeting to determine how we can do better. it is time to deliver our citizens a better public safety returned on investment of our

corrections dollars. i urge the legislature to act this year. [applause] in the general fund, we will protect our military. in the budget i present, there will be protection for our alabama national guard. [applause] we will preserve and protect the ability to maintain and achieve an ethical states government by fully funding the ethics committee. [applause] the new laws passed in the december special session will forever change how state government operates. the ethics commission now has

more power and must be given the resources it needs to enforce the new laws. i would like to take this moment and this opportunity to recognize the members of the ethics commission and commend them for their work that they are doing. i would ask jim and the members of the commission to please stand. [applause] the people of alabama want their elected leaders to meet the strictest at the close standards. we intend to offer the resources to make sure that happens. that is why we will protect the office of the state auditor to make sure we wisely use the assets we own. there are hard decisions that must be made if we are to

balance the general fund budget. while we are protecting these five areas i just mentioned, other areas will see deep cuts. aside from those protections, every agency in the state's general fund will be cut anywhere from 15% to 45%. some will no longer receive general fund appropriations and will be delaminated. we have eliminated a total of 217 line items from the general fund including earmarks and 32 entities such as commissions and boards. [applause] many are worthwhile. many are not. in this day and time, taxpayers

cannot afford to continue to support non-essential programs. in the 2012 budget, we must prioritize our resources and the limited functions that are not part of the core mission of state government. historical sites, tourist attractions, hall of fame are wonderful for tourism and travel and i want you to all visit them. they are not as important as providing health care to the low income and the elderly or keeping state troopers on our roads. [applause] these are the hard choices i have had to make as your governor. we cannot continue to spend

millions of dollars we do not have. the taxpayers deserve better. it is time for our addiction to federal stimulus dollars to end and for this state to take up a responsible budget. i will send a budget that lives within our means, that is realistic, and most of all, responsible. the numbers you will see are real. they are conservative. we will balance our budget. we will not outspend what we are given. families across alabama work hard to make ends meet. they must keep their checkbook balance. the time has come for us to do the same thing. [applause]

dark clouds have been looming overhead for some time. as i am thought of saying, if you get above those clouds, even if it is raining, you can always see the sunshine. i believe our state is on the verge of a dramatic change. i believe jobs are coming to alabama, jobs that support families, support economic growth, and turn things around for our state. i have been to every corner of this state looking for ways to create jobs and stimulate economic growth. only a few days after the november general election, i was contacted by a company in hodgenville -- in huntsville

that is considering coming to that city. i new alabama needed the facility. i signed a letter confirming my commitment to creating jobs and helping them find the resources they need to choose alabama. two weeks ago, we were in the city where north american lighting is created. the company is the leading manufacturer of automobile lighting. they are making a $35 million investment in alabama that will create 250 new jobs. we were in troy where cgi announced its expansion to provide jobs. that is just the beginning. in the days to come, we will be

able to announce even more new and expanding businesses bringing new jobs to alabama. as a former business owner, i understand the important role small businesses play in our economy. that is why i am created an office of small business development. small businesses are the engine of economic growth. they are the background and the backbone of a robust and vibrant economy. we will continue to aggressively pursue businesses that bring new jobs to our state. that means providing work force training and resources to support those companies. for the first time, our economic development in job creation strategies will include a plan for how we engage our universities and institutions of higher learning. once we accomplish this, i

believe we will forever change the economic landscape of alabama. i will not stop until we bring more jobs to this state. [applause] to build on these successes, i am offering legislation designed to create jobs. we will create jobs and put people back to work. this is this will be given a one time tax credit for each new job they create. this is an enhanced version of our reemployment act of 2010. it is the centerpiece of our legislative agenda and it will create new jobs. i will work with you to provide health care for all our fellow citizens that is affordable and accessible.

it does not have to be forced upon us by the federal government. [applause] by now, if you have ever spent five minutes with me, you know my concern with the current health-care law in this country. there is no doubt that the federal takeover of our health- care system will kill jobs in the united states and further cripple our economy. [applause] i know that many of you will offer a constitutional and images that will allow alabama

citizen to opt out of the federally -- -- and then -- amendments that will allow citizens in alabama to opt out of the federally mandated health care system. [applause] for a free people, there can be no other way. states can be great laboratories for change. to that end, send me legislation that will offer tax incentives to employers that will provide health care incentives to employees. i will sign your bill. as a legislature, i supported legislation to curb illegal immigration in alabama.

as governor, i will continue to do so. there is the alabama taxpayer and citizens protection act. sydney that bill, and i will sign it. -- send me that bill, and i will sign it. days into our new administration, i created the alabama commission for improving state government. this commission will take a long, hard look at states government. it will provide a blueprint for how governments should operate in the 21st century. when the commission makes its recommendation, we will implement those changes wherever possible. i would like to thank the president' pro tem for defining the core functions of

state government. i would like to thank the chair of the commission. my fellow alabamans, the hard truth is this. for too long, we have avoided the inevitable, living within the flimsy out lines up and on a realistic budget. it has caught up with us. we have avoided making decisions for too long, tough decisions. taxpayers deserve better. the taxpayers of this country, and especially this state, sent a clear message in november. they expect us to make decisions. the good and hard working people of the great state of alabama deserve better than for their state government to adopt another irresponsible budget promising much in the beginning, but always falling short in the end.

taxpayers expect more and deserve for us to make these hard choices that lie ahead. it will require sacrifice. one of the things i have done, a commitment i have made as your governor, is to visit every family of a fallen soldier that guys in the military. in the military. [applause] i do not go to the funeral. but i meet with them privately. in the last month and half, i have had the difficult mission to go and visit with two families where they have lost their sons. i was in the military.

i saw people died. i saw the problem many soldiers have. as i stood there with the last one i visited, i stood there by the caskets. i stood at attention because i wanted to honor that soldier. as i stood there and look at that young 22 year old boy, he was just a boy, lying there in that casket in his full dress uniform, his old blue uniform with his hands crossed with white gloves on, i realised what true sacrifice is. these young fallen soldiers and their families give so much so you and i can enjoy our freedoms. we talked tonight about sacrifice. let me tell you, that is the ultimate sacrifice. [applause]

these soldiers are the true public servants. they are the real heroes. to them and their families, as your governor, i am telling you, i will be there if one of your sons or one of your daughter's is lost fighting for my freedom -- daughters is lost fighting for my freedom and for alabama

in this country. -- and for this country. i ask that you join with me as leaders of our state in reclaiming alabama's future. join with me in responding to what we as public servants have been called to do. join me by doing what we must do to budget responsibly. join with me in my commitment to stimulate our economy and to create jobs for our fellow citizens. today is the day. now is the time for us to act. the people of alabama expect it. the people of alabama deserves it. [applause]

let us all continue to pray that god will bless us and bless our great state, this great state of alabama. thank you very much. [applause]

>> the purpose for which this joint session is gathered is completed. the joint session is adjourned.