price and see if we can share some of the benefit of that with the motorists. that is something that liver never did in all its time in government. it ought to be reminded of the fact that it announced for crisis in fuel to the lester, three of which were due to come in after the election. -- last year, three of which were due to come in after the election. >> the 90 million pounds of cuts to the budget of leads city council means that gramley baths in my constituency will have its hours cuts so that school children will not be able to swim there anymore. how does that fit with the government's ambition for school sports and for the olympic legacy for leeds? >> we do want to see a proper legacy come out of the olympics. that is why we are funding the olympics properly and why we have made clear that the extra money will be made available for school sport. if we look at education funding, we can see that funding per pupil is not being reduced.

that is the right decision. it is one that the hon. lady should be behind. when colonel gaddafi is finally removed, is the prime minister confident that an interim government can be found to prevent the country from falling into anarchy? >> i would advise my hon. friend to ignore the voices opposite. there are just furious that he has liberated a long-held labor seat. he makes a very good point. [laughter] one of the things that we are doing, currently and in the coming days, is making contact with the opposition in been gauzy to make sure that we have good contacts with them so that we can help to bring a peaceful transition in libya. >> order. >> each week, the house of

commons is in session, we air prime minister's questions live on c-span 2, wednesday at 7:00 a.m. eastern and again on sunday night on c-span. at c-span.org you can find past prime ministers questions. >> next, a congressional oversight hearing examines the impact of the troubled asset relief program known as tarp. then alabama gov. robert bentley delivers his state of the state message appeared at 11:00 p.m., "washington post"on' writer. >> thtarp has been a success.

remarks came at the congressional tarp oversight panel public hearing which looked at the overall impact of the tarp program. this portion of that hearing is about 45 minutes. >> there is no question that our economy faces real challenges. let's take a moment at the start of today's hearing to imagine that those challenges could be far worse. they were far worse. let's imagine that the s&p 500, which has risen by nearly 20% last year, had instead fallen by 30% in the last month. let's imagine that our economy, which has added over a million jobs in the last year, had

instead lost that many jobs in just two months. let's imagine that america's oldest and most highly regarded financial institutions were beginning to topple literally like dominoes. i think it is fair to describe this scenario as a dire. that is precisely the scenario that faced economy in late 2008, around the time that congress passed tarp into law. today, the panic of 2008 is a slowly fading memory. tarp played a role in turning the page on that grithe grim chapter. i believe that any hearing on the part should begin by recognizing its greatest success, in a moment of financial panic, it helped to pull our market back from the abyss. despite this accomplishment, the

tarp remains deeply despised by the american public. most of the anger is understandable. it did much more for wall street than it did for everyday americans. it is only fair to note that some of the bun popularity is due to misunderstandings about its track record. -- about the unpopularity is due to misunderstandings about its tractor -- about its track record. only 33% believe that most of the money will be recovered. many of the greatest skeptics recall the frightening price tag first assisted with the program, $700 billion, the amount that the treasury requested and congress approved to bail out the financial system. what they do not know is that the congressional office estimates it will lose $25 billion.

but maybe clear. $25 billion is a vast sum of money. yet it is far less than anyone expected the tarp to cross when it was initiated. the news is not all good. it has fallen far short to help homeowners stay in their homes. the panel estimates that it will prevent fewer than 8000. it is no wonder that many americans view the program as one executed for wall street ceo's rather than main street homeowners. the program has a far greater and more noxious cost, moral hazard. it is the lingering belief that america's biggest banks are too big to fail and that the rules apply to everyone else in america and not to them. this belief continues to distort our financial markets, advantaging the largest banks on wall street while disadvantaging

every other bank in the country. the cost to moral hazard is not easily quantifiable, but israel and reprehensible. today's hearing will consist of three panels of distinguished witnesses. we are joined by timothy who manages all our programs for the department of treasury. i particularly hope you will share with us your lessons learned from more than two years of work on the tarp. if you created it today, what would you have done differently? 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 fdic and the federal reserve. i hope these witnesses will help us placed tarp in its proper context.

finally, we will be joined by four of this country's leading economists who will bring decades of experience and exceptional credentials. i look forward to hearing their expert views on the crisis and its enduring impact. all of our witnesses testimony will provide material support for the 30th and final oversight hearings. the report, which will be issued to congress and the public later this month. i would like to hear from my colleagues. >> thank you, senator kaufman. although the congressional budget office recently estimated that the necessity cost to tarp was only down to $25 billion, such metrics should not serve as a sole the termination of the success or failure of the program. we should remain mindful that the overall contribution to the rescue the u.s. economy was relatively modest when

considered along with the multi-hundred billion dollar bailout of fannie mae and freddie mac. if it is particularly difficult to labor the tar or any other government-sponsored program aimed at financial stability and unqualified success when the unemployment rate hovers around 9%, the combined unemployment and other unemployment rate = 60% and millions of american families are struggling to escape foreclosure. it is of cold comfort to these families that be too big to fail financial institutions aided by the tar and other generous below-market rate government- sponsored programs are recording near-record earnings. to this day, the tarp carries a

substantial stigma with a the residents of main street and it should come as little surprise. we noted in our oversight report that to the repayment of the tarp recipients is a misleading measure of the effectiveness of the program and should not serve as the standard by which the tarp is judged. the unlimited bailout of fannie mae and freddie mac buy treasury and the purchase of 1.1 and $25 trillion -- $1.125 trillion. in effect, the bailout of fannie mae and freddie mac prevented

tarp recipients to monetize what they would have received and use the proceeds to pay that which was outstanding. costs such as this should be thoughtfully considered when evaluated need tarp. -- when evaluating the tarp. it is also clear that the success or failure of the tarp remains an open question. neither a favorable adjustment to the cbo subsidy rate nor the repayment of the top funds by some recipients tells the entire story. it is critical to note that all of the tarp play a meaningful role in the u.s. economy. its enduring legacy may have

been to codify the implicit guarantee of the too-big-to- fail. the tar, in essence, reinforced the bubble bailout cycle as the government's preferred business cycle. along these lines, "the government's actions in rescuing a ig continues to have a poisonous effect on the marketplace by providing a complete rescue that called for no shared sacrifice among aig's creditors. the federal reserve and treasury fundamentally changed the relationship between the government and the country's most sophisticated financial players. the aig 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 assure repayment to the creditors doing business with them. so long as this remains the worst effects of aig's rescue on the marketplace will bring your." -- will linger." in general 2011, on the report, the panel noted "treasuries now on course to recover the majority of the automotive investments within the next few years. but the impact of the actions will not reverberate for much longer. treasurys rescue suggested that any sufficiently large american corp., even if not a bank, may be considered too-big-to-fail, creating a risk that moral hazard will affect the economy far beyond the financial system. the government help of the sword the cost of gm's and chrysler's failure and put financial

institutions risk. it is important to consider the reasons underlined in this distinct popularity and stigma associated with the tar. it helped rescue the united states economy from collapse and it should not have served as the basis for the public outrage and scorn expressed today. hundreds of often profited and ill-managed institutions and their shareholders and officers received taxpayer funded bailout as well as other subsidies from the treasury, the federal reserve, and the fdic on remarkably favorable terms. many officers of these

institutions retained lucrative employment. the shareholders and must recipients were not wiped out. the public intuitively recognize that such policies were an anathema in a market economy where entrepreneurs and passing investors alike retain their business investment prospect -- profits without question but are expected to bear the full losses with transparency and accountability and without subsidy. main street quickly realize that the tarp was heavily tilted toward thin favor of wall stree. banks that refused to lend and the general sense that the residents were left on their own. thank you and i look forward to our discussion. >> good morning.

this is the last hearing of the congressional oversight panel. i would like to begin by expressing my gratitude to harry reid and nancy pelosi for giving me this opportunity to serve my country. also like to express my profound gratitude to our chair and his predecessor, elizabeth warren, for their participation in this panel and my sincere gratitude to our staff for all they have done over the past two and half years to make our panel a success. finally, i would like 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. i am honored to have been a part of that. today, we hear from acting assistant secretary timothy math andmatthen.

while i am grateful to all of our witnesses for joining us today, i want to note that we have come in many ways, benefited from the advice and assistance of secretary massive and prof. johnson and it is fitting that they are here with us today. i think it is appropriate for me to be clear what my final conclusions are about the top program. number one, i believe top, through the initial investments in the large banks and in security markets primarily was a substantial contributor to halting a financial park. it is irresponsible to say that our nation would have been better off if we had taken no action. number two, i believe and there is overwhelming evidence to support my position that, at the time of these initial investments, the public did not receive anything like full value

for our money. however, over time, the management of these assets and the execution of further transactions by the team managing tarp became systematically fair to the taxpayer and they deserve a great deal of credit for that. no. 3, the paulson treasury department was not truthful with the public when it said that the program funds would only help the institutions. the geithner treasury department has compounded this lack of candor by refusing to admit that citigroup and bank of america were on the verge of collapse when they received additional tarp friends in november 2008 and january 2009 respectively. no. 4, the failure to replace bank management, to do a rigorous evaluation of the state of bank assets, and to restructure bank balances accordingly, it has left weaker

banks and a damage of trust between the american public and our nation's elected leaders. no. 5, although more than half a million families have been helped by turks foreclosure prevention programs, it has been subordinated to the needs of the banks. the truth is that the continued mass home foreclosures is due to systemic risk and pressure. in 2008, this panel held its first hearing in court county, nevada. we did so to make the point that the american people would judge tarp not only will the bankers, but on the health of our communities. in december 2008, unemployment in southern nevada was 9.1%. today, it is 14.9%. in december 2008, 6.5% of all home mortgages in nevada were doing great. take, 7.6% are.

the most recent statement states that "the economic recovery is continuing although at a rate that is 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 housing wealth, and tight credit. that is exactly the scenario that the majority of this panel warned in our 2009 report and would be the likely consequence of failing to restructure the major banks. although this panel is going out of business, the task of managing tarp's remaining programs of regulating the banks, of the nursing systemic risk goes on. the mass foreclosures, tragically, continue. but it is never too late to act, to make change. thank you. >> i would like to start by

thanking the witnesses for appearing before the panel today. i realize that you have other responsibilities. i appreciate you taking time to help us with our oversight responsibilities. it seems appropriate to comment on the overall impact of tarp and the financial rescue in general. i was recently asked whether my assessment would be different if tarp had ended up costing $356 billion instead of the current estimate of $25 billion. it is one of the more creative questions i have gotten. i answer that any completed assessment of the success of tarp needed to take into account a number of factors, such as the role it played in preventing the financial collapse, the risk taxpayers were exposed to, the long run impact it will have on the market, and its effect on the likelihood of future financial crisis.

while the actual cost of tarp is an important component, it is only one factor affecting one devaluation of the success or failure of tarp. so my answer to the reporter is, yes, i still could view it as a success even if the program had cost taxpayers $356 billion. the government's actions were circumscribed by the expectations of the market in the event of the financial crisis. it would bailout firms whose bankruptcy threatened to increase systemic risk. these expectations, of course, were based on past government bailout of large financial firms. in fact, as argued previously, these expectations affected the severity of the financial crisis since the market responded 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 the amount of money needed to stem the financial crisis. also, once they detained two-

big-to-fill status, there were given the incentive to -- two- big-to-fail status, they were given incentive to continue. the success or failure of top, in particular in the overall financial rescue, will hinge -- so far, it does not appear that we have taken the necessary steps to end to big to fail -- too-big-to-fail. the market has a clear understanding of which firms will receive support in the next financial crisis and which will not. then the government needs to start charging market-based fees to these firms or insurance provided to them through a substantially higher reserve requirements, which has been

advocated by prof. meltzer and others, by requiring firms to have alternative reserves against systemically risky holdings, as has been proposed, by challenging terms in the bailout and turns along the lines offered by the president of the federal reserve of minneapolis, or to have 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 basic market discipline to wall street and ensure that large financial firms face the same competitive pressures faced by firms operating on main street. in turn, this will ensure that future financial crises will be less severe and that the fixes to these crises will not involve putting trillions of taxpayer dollars at risk. since this is our last year, there are some people i would like to note and thank for their work.

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 that this work will become one of the definitive sources of information about the financial crisis. this is largely because the hard work, patience, and dedication of our staff. i would also like to thank my family panel member mark waters for becoming familiar with the issues facing the panel. he was always available when i needed someone to bounce ideas off of to help me formulate my ideas about tarp. i would like to thank senator, and for his leadership. his guidance was -- fosenator kaufman for his leadership. his guidance was essential. finally, i would like to offer a special thank you to the longest-serving panel members. richard has been part of 30 reports issued by the panel called damon has participated in

27. as someone who is exhausted after having participated in a mere 10, i can honestly say that i do not know how they have done it, reading over and offering comments of three drafts of each of these reports. based on my observations, richard and damon have performed these tasks while facing the important responsibility had to support the interest of the american taxpayers. as a taxpayer, i would like to say thank you. i would also like to conclude and thank the witnesses once again for joining us and helping us with our discussion today. >> thank you. >> when the financial crisis hit in fall 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 top program. there was no shortage of ideological objections from the left and the right when tarp was

passed and there are no fewer today. but the american public's concern 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, were 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. our efforts toward that goal over two years as the nation gained a new democratic president and then gained a new republican house of representatives remained the same. our five different perspectives and background could have led to more disagreement than

agreement. ultimately, it could have been 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 of the last two years is a renewed optimism that people can still work together for the public good during increasingly partisan times. even in the beginning, when ideology was at a -- those who all had something important but something different to contribute, found ways to come together. elizabeth warren deserves great credit for her leadership in the early days of this panel. we have not been perfect, however, and our oversight was always finite. if someone asked me what is the single most important public service we were able to provide, i believe the answer could really only be one.

i believe we help empower the american public to fulfill their critical role as the true watchdog of government. that is why we consistently call for more public data and more transparency. we demanded more information on target expenditures, mortgage modifications, non-hemp mortgage modifications, faith in lending, and other targeted 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 come with the benefit of time, a truly assess what happened back in the first global financial crisis of the 21st century. our monthly report and hearings come to a close this month. but the end of tarp oversight does not. i would humbly encourage your skillful fellow oversight bod

ies and the many reporters and loggers who often got the facts right to continue to find ways to empower the public with clear information that provides opportunity to understand and have an impact. the fact is that free markets -- that free markets work. but the other fact is that they do not work as well as we would always like a.. -- as we would always like. . 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

endings. >> on monday alabama governor robert bentley announced deep cuts to education and other programs to balance state's $19 billion budgets. he also said it's time for the state's quote addiction to the federal stimulus dollars toned.

the government made these remarks in the first state of the state address before joint session of the alabama legislature from the old statehouse chamber in montgomery. 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, prident pro tem, distinguisd guests, my fellow public servants and my fellow alabama a great privilege that i join you hear in this chamber toark 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 re 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 ady 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,e 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 a165 million

shortfall in the education buet 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 responsie, 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 ti 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. night -- 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 cfting 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 workingvery 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 theritical challenges before us. now we must get to work. the 2011 education trust fund budget ibased on revenue estimates that were robbed and artificially inflated with one time federal stimulus dollar 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 ograms. [applause] i am recommendi 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 tis. 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 lg look at the budget and have determined what should be the priorities for this day. the budget i presentill preserve, protect, and bolster areas that should remain a priority for all of alabama. we will devote $5 miion 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 expin and -- expand our prrams 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 cisions that affect the schools in their districts.

we will remove restrictive language from legislation that it takes decisions made by t 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 me 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 thesehings 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 projectis. greg, thank you for your leadership in writing legislion that wl 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 ts 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. tre 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, the 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 correctis. 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 t 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 budge we must

prioritize our resoues and the limited functions that areot part of the core mission of state government. storical sites, tourist attractions, hall ofame 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 sd a budget that lives within our means, that is realistic, and most of all, responble. 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 mee 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 thatupport families, support economic growth, and turn things around for our state. i have been to every corner of this ste 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 --n huntsville that is considering coming to

that city. i n 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 ovide 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 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 th will be giv 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 bl, 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 ll take a long, hard look at states government. it will provide a blueprint for how governments should operate 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 me decisions. the good and hard working people of the great state o 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 milary. [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. --nd for this country. i k 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.