we reduce our oil dependency and we're producing these great electric cars, we will have to have a plan to change the way we generate electricity in america. so that it is cleaner and safer and healthier. we know that i sharing in a clean energy economy has the potential of creating untold jobs in the u.s. but we will have to think about how do we produce electricity more efficiently? in addition to producing, we have to think about making sure we are not wasting energy. i do not know how we're doing on the georgetown campus, mr. president, but every institution and household has to start thinking about how are we reducing the amount of energy we're using and doing it in more

efficient ways. our homes and businesses consume 40% of the energy we use and it costs billions of dollars in energy. manufacturers that require large amounts of energy to make their products, their challenge by rising energy costs and so you cannot separate the issue of all dependents from the issue of how we're producing more energy generally. that is why we propose new programs to help americans upgrade their homes and businesses and plans with new energy-efficient building materials, new lighting, new windows, new heating and cooling systems. investments that will save consumers and business owners tens of billions of dollars a year and free money for money and investment and hiring and putting contractors to work as well. the nice thing about energy efficiency is, we have the

technology. we do not have to create something new. we have to help businesses and homeowners put in place the insulation, the energy-efficient windows, the energy-efficient lighting. it will get their money back. you will save money on your electricity bill that pays for these improvements that you made, but a lot of people may not have the money up front, so we have got to give them some incentives to do that. just like the fuels we use in our cars, we're going to have to find cleaner renewable sources of electricity. today, two fifths of our electricity comes from clean energy sources. but we can do better than that. i think with the right incentives in place, we can clean energy.e of energ that is why in my state of the union address, i called for

nuclear energy standard for america. by 2035, up 8% of electricity needs to come from a wide range of clean energy sources, renewal bulls like wind and solar, efficient natural gas, and, yes, we're going to have to havexamid how we make a clean coal and nuclear power work. in light of the ongoing events in japan, a want to take a minute to talk about nuclear power. right now, america gets one- fifth of our electricity from nuclear energy. it is important to recognize that nuclear energy does not emit carbon dioxide in the atmosphere. those of us who are concerned about climate change, we have to recognize that nuclear power if it is safe can make a significant contribution to the

climate change question. i am determined to ensure that it is safe. in light of what is happening, i have requested a comprehensive safety review by the nuclear regulatory commission to make sure that all of our nuclear energy facilities are safe. we will incorporate those conclusions and lessons from japan in design and the building of the next generation of plants. but we simply cannot take it off the table. my administration is leading global discussions toward a new international framework in which all countries who are operating nuclear plants are making sure they are notbut more broadly, an energy standard can expand the scope of clean energy investments because of what it

does is it just cutting edge companies the certainty that they need to invest. essentially what it does is it says to companies, you know what? he will have the customer if you are producing clean energy. utilities' need to buy a certain amount of clean energy in their overall portfolio, and that means that innovators are willing to make those big capital investments. we have got to start now because -- think about this -- in the 1980's, america was home to more than 80% of the world pottery when capacity, 90% of the world of reseller capacity. we were the leaders in wind and solar. we owned the clean energy economy in the '80s. guess what. today, china has the most wind capacity. germany has the most solar capacity. both invest more in clean energy

than we do, even though we are a larger economy at a substantially larger user of energy. we have fallen behind on what is going to be the key to our future. other countries are now exporting technology we pioneered and they are going after the jobs that come with it because they know that the countries that lead the 21st century claim energy economy will be the countries that lead the 21st century global economy. i want america to be that nation. i want america to when the future. -- win the future. [applause] a clean energy standard will help drive private investment in innovation. i want to make this point -- government funding will still be critical.

the investments might administration has made in renewable energy and technology has helped private sectors grow and hire hundreds of thousands new workers. i had visited gleaming new solar arrays that are among the largest in the world. i have tested electric vehicles of fresh off the assembly line. i did not relate tested. i drove it 5 feet before the secret service told me to stop. [laughter] i have toured factories that used to be shattered where they are now building advanced when the blades that are as long as 747. they are building towers to support them. i have seen the scientist searching for the next big breakthrough in energy. none of this would have happened without government support. i understand we have a tight fiscal situation. it is fair to ask, how do we pay

for government's investment in energy? we will have to make some tough choices. we will have to cut what we do not need and invest in what we do need. unfortunately, some folks want to cut critical investments in clean energy. they want to cut our research and development into new technologies. they are shortchanging the resources necessary even to properly issued new permits for offshore drilling. these cuts would eliminate thousands of private-sector jobs. it would terminate scientists and engineers. it would and fellowships for researchers, suit -- some who may be here at georgetown, a graduate students and other talent that we desperately need to get into this area in the 21st century. that does not make sense. we are already paying a price for our inaction.

every time we fill up, every time we lose a job or business to countries that are investing more than we do in clean energy, when it comes to our air, our water, and the climate change that threatens this planet that you in here it, we are already paying a price. these are costs that are already bearing. and if we do nothing, the price will go up. at moments like these, sacrificing these investments in research and development, in supporting clean energy technologies -- that would weaken our energy economy and make us more dependent on oil. that is not a game to win the future. that is a visit to keep us mired in the past. i will not accept that outcome for the united states of america. we are not going to do that. let me close by speaking directly to the students here. the next generation who are going to be writing the next

great chapter in the american story. the issue of energy independence is one that america has been talking about since before your parents were your age, since before you were born. and you also happen to go to a school that for a long time has suffered from a chronic unwillingness to come together and make tough choices. and so i forgive you for thinking that maybe there is not much we can do to rise to this challenge. maybe some of you are feeling kind of cynical or skeptical about whether we are actually going to solve this problem. but everything i have seen and experienced with your generation convinces me otherwise. i think that precisely because you are coming of age at a time of such rapid and sometimes

unsettling change, born into a world with your walls, educated in an era of cost that information, tempered by war and economic turmoil -- because that is the world in which you are coming of age, i think you believe as deeply as any of our previous generations that america can change it and it can change for the better. we need that. we need you to dream big. we need you to summon that same spirit of unbridled optimism and that old willingness to tackle tough challenges and see those challenges through that led previous generations to rise to greatness -- to save a democracy, to touch the moon, to connect the world with our own science and our own imagination. that is what america is capable

of. that is what you have to push america to do, and it will be you that pushes it. that history of ours, of meeting challenges -- that is where birthright. -- that is your birthright. you understand that there is no problem out there that is not within our power to solve. i do not want to lead this challenge for future presidents. i do not want to leave it for my children. i do not want to leave it for your children. so, yes, selling it will take time and it will take effort. it will require our brightest scientists, are most creative companies. it will acquire all of us, democrats, republicans, and everybody in between to do our part. but with confidence in america and in ourselves and in one

another, i know that is a challenge will solve. thank you very much, everybody. god bless you. god bless the united states of america. [applause] ♪ [captioning performed by national captioning institute] [captions copyright national cable satellite corp. 2011]

>> before the president's speech wednesday, senator majority leader mitch mcconnell outlined a program. this is 10 minutes. >> the president is expected to

outline his provision. as we frequently have seen with this administration what it says and what it does are often two very different things. some of te administration when it comes to energy. then i'd like toropose some things republicans would do differently. it should go without saying that americans are ready for action on this issue. with avege gas prices approaching $4 a gallon in most parts of the country, growing uncertainty and unrest in the middle east and a jobs crisis here at home, americans want the president to outline a serious plan today that will make us less dependent, not more, on foreign sources of oil, and which stimulates job creation here. unfortunately, what they have gotten instead are more of the same, halfhearted proposals

democrats have trotted out every other time americanset squeezed at the pump. instead of facing the problem of higher energy prices head on, democrats are once again paying p service to those concern with fake solutions that only aim to distract people from what they are really up to. so it's my hope the president changes that tune today. but i'm n holding my breath because we have seen how ts plays out many times before. tell a democrat in washington that gas prices are too high and as if on cue, they will throw together a speech or a press conference to suggest that we open an underground oil reserve that was created to deal with calamities, not market pressures. they will take you on a tour of some alternative car plant that promises to have one of its its $100,000 prototypes to market 25 years down the road, or they will quietly release some report to the media about how energy companies really

aren't working hard enough to extract oil. while schizophreniccally claiming american reserves are minuscule and that more production isn't the problem. this last item is a perennial favorite of our friends on the other side. the idea here is to somehow blame energy companies for not producing enough energy on their own. what democrats don't mention, however, is that drilling -- that a drilling lease is nothing more than an agreement with the government that a company has a right to explore for oil and gas in a certain area, not a guarantee that they will find it. and they never see fito mention that most of the area that could be leased is off limits, thanks to the red tape factory democrats operate here in washington. an honestly, we're really supposed to lieve that the same administration that declared a blanket moratorium on all offshore drilling off the gulf coast, which chased away

rigs and jobs to other countries and which established new regulations that make getting a new drilling permit virtually impossible now believes that energy companies aren't drilling enough? this doesn't even pass the laugh test, but it does suggest that democrats don't even believe their own arguments about decreased production not affecting price. and it's my hope that the president acknowleds as much today. that when you shut down drilling, higher prices and fewer jobs are sure to follow. the truth is we could use a lot more honesty on this whole issue from democrats. despite what some on the other side might say, republicans are just as eager as democrats to develop alternative sources of energy. but everybody knows it will take years, if not decades, to get to the point where there will be economically viable and widely used.

the president's target is decades from now, but americans should be able to expect action now. and all they get from democrats is a pretty picture of some far-off future we've been hearing about for decades and not a word about the things democrats are doing to make it harder to find and use energy we already have right here. initial news reports about the president's speech today mentioned that the administration is determined to derive 80% of u.s. energy from clean energy sources in the year 2035. and i'm sure we could genere a great deal of bipartisan support for much of what the president will call for, assuming it doesn't involve federal mandates. but what does any of this have to do with the crisis at hand, the crisis right now? the guy who's tryin to make ends meet wants to know what you're going to do for him today, not 24 years from now.

but of course, the administration doesn't have anytng to say to that guy because the administration's energyolicy isn't really aed at him. if it were, then the administration would be locking down domestic energy sources. it wouldn't be looking to pass new regulations through the e.p.a. that will impose a national energy tax on every business large and small. it wouldn't be telling our allies in brazil that while it's great that they found oil off their coast, those who want to search for oil off our coast and on our mainland can. in other words, it's great that the brazilians are drilling offshore, but not so good that we are and i wouldn't be telling job creators in the energy industry to look elsewhere. in his remarks today, the president is also expected to call for decreasing imports of foreign oil. yet, just last week he told brazilians that he hopes america becomes a major customer of

brazilian oil. well, which is it? which is it, mr. president? clearly on this issue the president is telling people what he thinks they want to hear. over the past twoear the administration has taken wha can be described as a war on american energy. 's canceled dozens of drilling leases, declared a moratorium on drilling off the gulf coast, increased permit fees, prolonged public comment period. in short, it's done just about everything it can to keep our energy sector fm growing. as a result, thousands of u.s. workers have lost their jobs as companies have been forced to look elsewhere for a better business climate. consider this: just three of the areas we could tap in alaska are thought to hold enough oil to replace our crude imports from the persian gulf or nrly -- for nearly 65 yrs.

so the problem isn't that we need to look elsewhere for our energy. the problem is that democrats don't want us to use the energy we have. it's enough to make you wonder whether anybody in the white house has driven by a gas station lately. no, the crisis we face is immedie and it requires immediate action. and that's why republicans have come up with two concrete proposals that will have a positive practical effect, two things we can do to give american relief, job creators a reason to hire and make all of us less dependent on foreign sources of oil. first, let's increase american energy production b cutting the red tape and opening up areas that the administration has either temporarily blocked, stalled, o closed off to production. and let's block any new regulations that will drive up production costs for energy,

including the administration's prosed new e.p.a. regulations on carbon emissions. the first proposal is guaranteed -- guaranteed -- to create jobs by unlocking our energy resources. the second has been described as one of the best proposals for growth and job creation to make it on to the sene docket in years. and let's be clear, the alternatives being offered by the other side are nothing more than a face-saving exercise aimed at allowing senators who aren't serious about this issue to mislead their constituents into believing that they are. but the american people have put up with distractions and face-saving exercises long enough. they put up with near double-digit unemploymentong enough. they've heard enough about the costly big government proposals democrats envision for the future. and frankly, madam president, they've had it. it's te to address the

problems right in front of us. it's time for the president to put forth a serious plan. when it comes to energy, these problems are obvious. so are the answers. it's time for lawmakers to come together and do what we know is >> up next, the head of the u.s. regulatory commission talks about nuclear plant safety. later, "washington journal". defense strare robert gates and joint chiefs chairman mike mullen come to capitol hill tomorrow to testify about military operations in libya in a pair of congressional hearings. you can watch both of them live begining with the house foreign services committee beginning at

9:00 a.m. eastern time. then at 2:15 p.m., a hearing on the senate armed services committee. both hearings will be on c-span 3 and on our website c-span.org. >> nearly 1,500 middle and high school students submitted documentaries on the theme washington, d.c. through my lens. watch the wing videos every morning -- winning videos every morning. during the program, meet the students who created them. >> follow c-span on twitter. it is the fastest way to get programming and schedule updates as well as links to events we covered. you can also tweet questions directly to our "washington journal" guests. join the viewers who follow our tweet.

get started at twitter.com/c-span. there are chairman of the u.s. nuclear regulatory commission returned from japan and reported on the nuclear crisis there before a senate panel today. they questioned him about how nuclear sweast stored in the u.s. california democrat dianne feinstein chairs this two-hour hearing.

as we speak, workers at the nuclear site continue their work to contain the situation with the reactors and spent fuel pools. they have been caught -- they have been called national heroes and so they should be. it will be months before we know what happened and why. so it is too early to call this a hearing about lessons learned

from the disaster in japan. but we do know enough to start asking some critical questions about nuclear energy policy in our own country. last week, i visited california's two nuclear power plants with representatives from the united states geological survey and the nuclear regulatory commission. the diablo canyon is near the city of san luis o business pow. it is the largest employer in the county. 424,000 people live within 50 miles. it employees 1,200 people. further south, nearly 7.4 million live within 50 miles of that nuclear generating station near san clemente. i came away from those visitses with some good news. i feel much better about the safety precautions that are in place at these nuclear plants.

i was very impressed with the dedication, the confidence and the professionalism of the large staff that run these facilities and the regulatory agents who guard against risk. but we need to reconfirm these facilities are designed to endure the threat that we can foresee and prepare to respond to scenarios we never imagined. that's why redundant systems, backup systems and plans are so important. most significantly, i truly believe we must begin to rethink how we managed spent fuel. however, these pools often

become defacto long-term storage. with fuel assemblies reracked, thus increasing the heat load of the pools. in california, for instance, fuel removed from reactorses in 1984 is still cooling in wet spent fuel pools. this process may have regulatory approval but i have a hard time understanding why the nuclear regulatory commission has not mandated a more rapid transfer of spent fuel to dry casks. reports out of japan indicate there were no problems with the dry casks at daichi. to me, that suggests we should at least consider a policy that would encourage quicker movement of spent fuel to dry cask storage. if that is true. we must also consider what broader regulatory reforms may

be necessary begining with a review over the united states power plant safety. i'm very pleased that the nuclear regulatory commission will undertake both short-term and long-term reviews of nuclear plant safety and mr. chairman, i thank you very much for that. this kind of self-reassessment is really appropriate. today i hope we'll get a more complete picture of what the n.r.c. intends to do with these reviews and how quickly they are likely to act on any new safety regulations. in addition to n.r.c.'s self-assessment, i think werked take a look at some independent -- we should take a look at some independent analysis of our nuclear power plant safety with specific attention to threat assessment and the design parameters of our plan. japan has now suffered two earthquakes in the past four years that were larger than the japanese thought possible.

and each devastated a nuclear power plant that was not designed to endure quake of that size. the lesson is that we need to think carefully about whether our country has properly estimated the threats to our nuclear facilities and design the facilities to endure them. an independent review of the design bases for all the united states plants i believe should be a priority. the r & d program currently funds to existing plants, and waste issues. the question becomes do we have the right focus to promote increased safety? the spent fuel at daichi posed a significant problem contributing to at least one of the hydrogen explosions. so what can our r & d programs

do to address issues of remaining spent fuel energy and hydrogen? funding constraints are already requiring programs to rerank r & d priorities. perhaps the events at daichi will also contribute to that rethink. it is clear that we lack a comprehensive national policy to address the nuclear fuel cycle, including management of nuclear waste. creating more waste without a plan increasing our risks and exposes taxpayers to more payments for you tillities. this hearing is not focused on nuclear waste but i think it is hard to look at the other aspect of nuclear power and not recognize our lack of appropriate permanent retrievable storage. so we will be exploring these

issues today. our first panel we will hear from greg jaczko. the chairman to have regulatory commission. i've had the pleasure of meeting with him and look forward to his testimony and from keith lyons. our second panel will include dr. ernie monise from m.i.t. who has a long hith in this area and is currently serve tong blue ribbon commission developing a long-term plan for nuclear waste. we will also hear from william levis at pseg power. they operate the same reactor model as those at the daich everyone i site. our third witness on the panel is dave lockbalm. he has a long history inside and outside the nuclear power

industry. so we look forward to their testimony. let me now turn to my distinguished ranking member with whom it is a great pleasure to work. we have actually worked together on the prior session on the interior committee and i think this is one of our very first hearings on this committee so i want you to know i very much look forward to working with you in the same we we did on the interior. >> thank you. thank you for that and thank you for your -- for hosting this hearing in a timely way. the witnesses whom we ought to be hearing from. people who know what they are talking about in charge of the safety usefulness of our nuclear program. those of us who support nuclear power as a part of the mix of electricity generation in the united states, and for the world

ought to be among the first to ask questions about what can we learn from what happened in japan, about the safety of our own reactors that we have in united states. those are on the drawing board at the nuclear regulatory commission and of course we have a large number of nuclear reactors in our nuclear navy which has been operating since the 1950's. so the questions i'll be looking forward to hearing are many of the same ones that senator feinstein spoke of. what kind of safety enhancements have been made at our nuclear plants since they began operation. i mean our current plants. how will the next generation of reactors have improved safety capables of reactors that are in service not just in the united states but around the world today.

what about new technologies? one of the most important things that the federal government can do about clean energy is research. we have the capacity for that. i was in great britain, madam chairman for three days last week and they remind me we're the ones with the national labs and great research universities and if any country is going to have advanced research in clean energy, it ought to be united states, we can do that for ourselves and for the world and nuclear power is one area where we can have that. better wives recycling used nuclear fuel -- way s of recycling used nuclear fuel. another one, can we build 125 megawatt reactors or smaller reactors as part of our future. those there be questions that i will be looking for. i thank the chairman for

reminding us of the scope to have japan tragedy. it is important to put the entire event in perspective. one is the size of the quake and the size over the tsunami and the size of the tragedy. there are hundreds of thousand s of people for example still homeless in japan. just as california by its proximity to be on the pacific ocean, tennessee has an unusual relationship with the people of japan because over the years we have become the state with the most japanese manufacturing. we have many japanese friends in manufacture in our state. we felt this tragedy more than we might otherwise have. another way to put it this perspective is to be aware of the record of safety in the united states nuclear industry. i want to confirm this with our witnesses but my understanding is the only -- deaths we have ever had happened in 1961 a

research reactor and that kind of reactor isn't currently used any more in our country. the 104 civilian reactors we have in the united states, my understanding is, have never produced a fatality. the navy ships that have reactors have never resulted in a fatality. while we have heard a lot about three-mile island, the worst nuclear accident we have had in our country, i suppose in the last 30 years, anyway, no one was hurt at three-mile island. which many people don't believe when i say that but i want to confirm that with our witnesses as well. no one was hurt at three-mile island.

>> i think it is important to keep in perspective what our alternatives are. every form of energy we have carries with it some risk. listening to those talk in great britain this past week, they are going through the same sort of analysis but here are their alternatives. that% of their electricity comes from natural gas. half of it comes from russia. i'm not sure they want to go up to 80% of their natural grass russia. they are closing their coal plants because of their climate change rules.

their only option is really to build more nuclear power plants, which is what great britain is planning to do. as we look around the world, we see that nuclear power provides 15% of the world's electricity. 30% of japan's electricity. there are 65 reactors currently under construction worldwide from russia, china, brazil and korea. 25% of our energy in the united states comes from nuclear power. 70% of our clean electricity, that is no sulfur, nitrogen, mercury or carbon comes from nuclear power. so it is hard for know imagine how we have a future in the united states without subsubstantiate rble expansion of nuclear power. some coal plantses are going to close and some nuclear power plants are going to close because they are old. that makes this hearing on what we can learn about safety even more important. i thank the chairman for holding the hearing and i look forward

to the testimony of the witnesses. >> thank you very much, senator for those excellent comments. senator lautenberg, welcome. would you like to make a brief statement? >> yeah, i would like to make a longer one but i will make this brief. just to say, madal chairman, this is not only obviously timely but we are pleased to have him here. i had a chance to meet with him yesterday and i think we -- the review we had was very productive and i will also attest to mr. jaczko's depurblet he came in from jab and i was half asleep coming from japan. we welcome you here again to both witnesses and look forward to hearing from them and i thank you for hiring them. >> thank you.

thank you both for being here today. you have both been intimately involved with the crisis and senator lautenberg said i understand you just returned from japan so we would be most interested in your observations and an update on that situation but i also want you to be looking forward to and talk a little bit about the issues the united states should consider in learning from this events. your formal statements, gentlemen, will be made part of the record so please summarize in your oral statement. mr. chairman, we will begin with you. >> thank you, chairman feinstein, ranking member alexandria and senator launtberg. i appreciates the opportunity to address the response of the nuclear regulatory commission to these tragic eventses that you have discussed in japan. as you mentioned, i traveled to japan over the past weekend and just returned yesterday.

i went to be able to directly convey message of support to our japanese counterparts and i had an opportunity to meet with senior japanese government and officials and i consulted with the team of experts who are in japan as parts of our effort to assist the japanese response to dealing with the nuclear reactors and i would notes that that is one small part of a broader u.s. effort to provide assistance to the japanese regard to all of the challenges they are facing as a result of this hurricane and tsunami . as many of you have mentioned, i too would like to reiterate my condolences and industry to all -- and sympathy to all of those affected by the earthquake and tsunami in japan. we are mindful of the long and difficult road they will face in recovering. since friday, march 11, when the

earthquake and tsunami struck, they have been operating on a 24-hour basis to monotar events at the power plants in japan. we do continue to remain focused on our domestic responsibilities and ultimately ensuring the safety and security of the u.s. nuclear reactors. in spite of the situation, the long hours and intensity of efforts, responding with dedication, determination and professionalism 3789 i'm very proud of the work they have done. on march 11, an earthquake hit japan rulling in the shut downdown of more than 10 reactors in japan. it affected power to six units

at the fukushima site. by the following monday we had dispatched a total of 11 n.r.c. staff to japan. as our discussion and understanding of the vents continue to unfold, at a certain point, we gained a limited amount of information that led us to believe that there was a possibility of a further degradeation of the conditions of the reactor. based on the information that we had, we looked at that situation relative to what we had and determined if a similar thing were to happen in the united states we would be recommending a larger evacuation out to. 50 miles and i would stress that was based on limited information a conservative and prudent decision that we made. pe provided a recommendation to the u.s. government and the ambassador in japan issued a notice to american citizens in japan to be advised to evacuate or relocate to 50 miles beyond

the plant. here domesticically, we continue to support efforts to monitor at nuclear power plants and through the environmental protection agent system we continue to monitor radiation levels that would be seen in the united states and i want to stress and repeat that we do not believe there is any likelihood of levels of radiation in the united states that could cause any kind of public health and safety concerns. now i want to focus a little bit with the remainder of my opening remarks on the reasons we believe we have strong regular tear program here in the united states. since the beginning of our regulatory program, we emphasized the philosophy of defense and -- which recognizes the highest standards of design

and oversight preparation. it does not rely on any single way of protection. they take into account site specific factors and include a detailed evacuation for natural events such as earthquakes, floods and tsunamis. additionally, there are diverse and redundant safety systems required to be maintained in operable condition and to ensure the plant is always in a high condition of readiness. we are, however, a learning organization and we continue to take advantage of the best available information that we have to refine and improve our system. one of the most significant changes that we made after three-mile island in 1979 was an expansion of our resident inspector program which now has

at least two full-time inspectors at each site where we have the ability to have unfettered access to the site at any time. we have also developed retirements for asset management to ensure that in the event all of the things we think are possible to happen, if the event -- something drblely were to happen, we have these severe accident management guidelines in place to ensure that we can deal promptly and in a methodical way with the unique safety challenges that may be presented. two hours and 20

minutes.

[captioning performed by national captioning institute] [captions copyright national cable satellite corp. 2011] >> thank you for the opportunity to appear before you today. it is a pleasure and an honored to appear before the subcommittee o my final day as special inspector general. it is hard to believe that two and a half years ago there was assisting a star, certainly no such thing as a tarp subcommittee. after an opouring than doubling of government funds to a financial industry that was

teetering on the brink of collapse, accompanied by historic riverside, emergency economic stabilization act, which greeted tart, also created sig tarp. i am proud to say that, since our inception in 2008, we have made progress in fulfilling the goals set before us by congress. we should 9 quarterly report, 13 audits, secured civil or criminal charges against more than 50 individuals, 18 different defendants have been convicted of tarp-related fraud, and our investigations have helped assist in the recovery of or the prevention to loss in a some of $70 million. as importantly -- of $17 million. as importantly, we brought in to retool a program desperately in need of it. tarp made promises to both wall street and to ministry.

i'm fortunate, its track record has been mixed. it fulfil this -- unfortunately, its track record has been mixed. it fulfilled its promise to wall street, but it has failed to live up to its promises to main street. when treasury give out billions the -- billions of dollars to banks, it did so without policy in place to accomplish that goal, without any strings to require lending or provide incentives for it. not surprisingly, credit continued to contract throughout the financial crisis and well into the recovery. second, the promise to preserve home ownership, such an important part of the legislative are in the treasury struck with congress in order to get top past lies in tatters.

the original promise to modify up to $700 billion inortgages that treasury was to purchase under tarp was cast aside within weeks. it was replaced months later with the promise by this administration to modify 4 million mortgages for struggling homeowners. that promise has, too, been cast aside. the cold start reality of a fail program that was poorly designed, poorly managed, poorly executed, and will come nowhere close to coming to the original promise. after secretary paulson and then secretary geithner told the world that they would stand by and not let our largest banks fail, and demonstrated that they were ready, willing to enable to use the term funds to accomplish that, we were left with the fincial system -- the tarp funds to accomplish the, we were left with the financial system that was more dangerous than

the ones that created the crisis. it is a promise that looks like it, too, will go unmet. notwithstanding the passage of frank, there's still the perception that the government will bail out large banks. should the hit the rocks again, e united states government will come to their rescue. it still remains theoretically possible that it will address of too-big-to-fail. treasury and the regulators wod get into broad powers and authorities to take on the largest banks. these are the same regulators whose incompetence and lack of foresight was prescribed by the financial -- described by the financial regulatory

committee as the reason for the crisis. without dramatic and quick action, i am afraid that this promise, too, will be broken with potentially devastating consequences. i think you for the opportunity to be here today. i so want to thank you and the chairman of the full committee for your strong support over the years. we would not have been able to accomplish in nearly any of our goals or our accomplishments if it were not for the strong continues and, above all, bipartisan support from congress. if we received only support from one side or the other, it would not have had nearly the impact that your uniform support has been for our office. i think you. i also want to thank the

incredible men and women who worked at tarp for their saifices, their commitment, and they demonstrate all the good that is in federal workers. it has been my privilege and honor to work with them for the last two years plus. a look forward to answering any questions you may have. -- i look forward to entering y questions you may have. >> thank you. you have mentioned in your report, in your editorial today in "the new york times" that the objectives of tarp had been shifted dramatically in two and a half years since the creation of the program. it is now evolving, but it seems like, if they fail to meet metrics set for themselves, they change the metrics. can you elaborate on this? >> it happened far too often with this program that, when a goal was not met, rather than do what you would expect in a good

government program, which is that you have a goal and doucette policy to achieve that goal, measure performance against that goal, and if you are not performing, you change the program, make the necsary changes to accomplish that goal. far too often, in tar, and it has been to set a goal, treat no policy to achieve that goal, basically ignored, try not to be transparent about the progress toward that goal. when you do not meet that goal, changeable and then declare mission accomplished and move on. -- changed that the goal and then declare mission accomplished and move on. it happened with a lot of the main street goals which have been written out. recently, a treasury official talked about these incredibly important mean streak goals that were part of the bargain, for white tarp got past, and dismissed them as window dressing. they were intended to be more than that. those are some of the broken

promises i discussed in the op ed and in our reports. >> to go further on this, there has been a discussion in recent days that part has been a success for the taxpayers. in dollars and cents terms, it has not been a huge negative. what is the legacy of tarp and this unprecedented intervention in the market? >> there is a number of areas where tarp fell short of course, there are the goals that were not met. ere is a cost to not meeting your main street bulls. one of them is in the impact of government credibility. the bottom line is that the people do not trust their government could part of the reason is tha -- government. part of the reason is because they do not meet their goals.

gradus legacies is the failure to deal with -- greatest legacy is the failure to deal with too-big-to-fail. it exacerbated the problem of tobig-to-fail. it was no longer as explicit as it could be. the whole rson why tarp contribute to avoiding the economic collapse was because of the promise that we would not let these institutions fail. that has had the unintended consequences of the problem of getting bigger and bigger, more concentrated. you mentioned the statistical data that backs up what we all know, that they're able to borrow money more cheaply, able to access the credit markets, access capital markets, and they are more systemic the significant than they were before, if for no other reason that there are fewer of them and they are bigger than ever. >> dodd-frank prevented that

from happening? >> it was not a magic wanted it did not actually change the status quo. it gave one possible path of the deregulators could choose to use to potentially accomplish that goal, but the bill itself is just that, a bill. unfortunately, based on the market's perception, they are very much and convinced that it will be used in the effective way that it would need to be used in order to really address too-big-to-fail. >> even in the design of the bill, does it leave wide openings for bailouts to continue? >> technically, under the letter of the law -- and there is some dispute about what the meaning of all this is -- in certain language, bailout will not happen. but that sort of ignores reality. the reality is that, when we talk about too-big-to-fail, far too often we lose sight of the fact of what those words mean. it means really what they say.

whether there is a law in the books or not, if we had a repeat of the financial crisis, it will not matter what the law in the books is because its failure is not an option. you cannot let those banks fail if that happens. it does not matr what your political or personal ideology is. the country will go down. there will be a systemic crash. there will be devastating consequences. the point is that, much like the tarp, whoever happens to be president at the time and controlling congress at that time, for the best of the country, has to go in and rescue the banks. it is not a moral question. that is what too-big-to-fail means. certain transportation's of the bill gives certain degree of discretion as to which -- certain portions of the build a certain degree of discretion as to dollars and something you can

point that does not mean an orderly bankruptcy and can continue in the form of a bailout, whether funded by the industry or elsewhere, if you have a to-be-to-filled eyes, we will be right back where we weren 2008 -- too big -- too- big-to-fail crisis, we will be back where we staewere in 2008. unless and until they use those the 40's, we are worse than the status quo. -- the use those -- use those authorities, we are worse than the status quo. the market is looking at dodd- frank and they are rejecting it. it increases capital

requirements. the volcker rule, although a lot of exceptions have been made to defeated, these are all hopeful in certain areas of potential risk. but the big ticket question we're talking about it, does it solve too-big-to-fail? the answer is not yet. in terms of what the direction has been, i am not entirely optimistic that it will. >> thank you. we recognize mr. quigley. >> tha you, mr. chairman. it is not that i disagree with you on the point. but i want to understand better. you advocating your testimony toda and in your editorial, discussing the recommendation to supply our strength, -- to simplify or make smaller.

the risk-taking will shift elsewhere in the system were is harder to regulate. think hedge funds. what is your response to that? >> that sounds like an embracing a too-big-to-fail. >> i do not think he is correct. >> this is similar to a different argument. our largest banks are not of the size and scope that they are. they will not able to compete with larger european banks. if we break that down, what it really means is that, ok, so other countries guarantee their banks and those banks hen't advantage. unless we guarantee our banks, our banks will not able to compete with those other banks. that is essentially what it

comes down to. so the question becomes are you willing to believe that the government should subsidize and guarantee financial institutions or do you believe that we should be true to our capitals ideals and let these banks compete without an economic subsidy, a very significant subsidy that they receive? sure, there are a number of doomsday scenarios that one could posit, that if we actually use the tools of dodd-frank and we were true to the idea of ending too-big-to-fill, it may result in banks that are not as profitable as they are today. >> but there are instances in whh unfair trade practices, for example, by other countries do put our capitalistic ideals at risk. you do not see that as a possibility in the banking industry? >> i think is a possibility, but there are other ways to deal with those policy concerns rather than embracing the idea that we should be effectively

granting our largest banks a subsy. and essentially putting them on the books. there's very little difference when you compare where we were in the lead up to the financial crisisith fannie mae and freddie marked -- and freddie mac than where we are right now. is an explicit guarantee. it creates distortionsn the market. in many ways, we could end up i that same exact situation. sure, the banks can reach short- term profits because they can compete with other banks that have subdies. but i will take the other side. if we remove these subsidies, if we remove the implicit guarantee overtime, we will have a healthier and better banking system. this is what chairman ben bernanke said recently. this is what larry summers said recently. >> how do you protect our banks in the meantime from unfair practices or unfair competition as it might exist? >> there is constant interaction.

>> i do not think that you have to like to-be-to-fail or embrace it to be concerned about that potential risk, right? >> right. but there are whole of this is dedicated to dealing with foreign offices and foreign regulators through the g-20. that is the right place to do with them and not throwing your hands up and say that we will subsidize our largest banks and take money out of one pockets and bridget one pocket and put it into the pockets of the shareholders. that is what is happening. $34 billion was one of the dollar subsidies that we give to our largest banks as an implicit guarantee. i say take the money and put it elsewhere. i think we will be better off. >> i appreciate that. i guess the second point is that what is implied here that encourages banks to engage in risky behavior, can you detail the risky behavior you see today? >> sure. the idea of risky behavior is

that banks -- anybody who has a bank, especially when they are large, interconnected in simi buses, they will make decisions on how to invest their money, how they manage their portfolio, and the question is on the level of risk they will attach to each of those decisions. the problem with too-big-to-fail is that it impacts of that decision-making process. senator kaufman, when he was the chair of the congressional oversight panel, described it as being the rional decision of an executive when you take out the -- and what to big to fail does is take the bottom of that because is the rational assumption that, if the risk does not work out, you will not have negative consequences of that risk. that is what happens with too- big-to-fail to and you actually

rationalize risky behavior because it is in the dusty -- best interest of the bank and the shareholders and executives. >> thank you. >> mr. man for five minutes. >> thank you, mr. chairman. orofsky formr. brodsk looking at this issue in such a scope, a tremendous challenge to our country when it happened, but the health the capacity to then look back at what happened and as the kinds of difficult questions that allow us to consider the implications of all that happened so quickly wit such remarkable significance at thheight of the challenge to our financial system. i appreciate your service to our country and thank you for

your contribution. i knowhat you wld say as well that that is something that has been a great part -- a great part has been the work that you have done. i want to compliment the people that work with you. you study this. you spent time really looking at the g picture and had the chance to sitack, maybe more than many of the people here in congress have. and you made a comment. unless there is dramatic and quick action, we will head down a path. that is a very disconcerting observation. what do you mean by dramatic and quick action? what you think we need to be doing here in congress to protect against the kind of concern that you have identified in your testimony? >> first of all, thank you for your kind comments. it is certainly true -- i am the

one that is to set the table and take the credit for our successes and plan for our failures, but it does not happen without the people that are banned senior staff. we have all benefited. what i was referring to is that i think we have to stay here within the realm of the possible. i could go back and said that there are certain things that could have been done with dodd- frank that could have made this a better protecting against too- big-to-fail. but in the realm of where we are today, there is a path that has a better chance than most of succeeding and that is the one that is being advocated by sheila bair, the outgoing chair of the fdic.

it is not a very dramatic departure. it is just fulfilling the mandate of dodd-frank. what she has said is that part of the proposal is the living will where the banks are required to come up with a plan for how they will be resolved in the event of a financial crisis. and she cannot was say it -- with something, saying it over and over again, which does not seem to be very controversial. in order for us to carry out the mandate of dodd-frank, in order for us to really address today to -- address to-big-to-fail, they need to be resolved in a meaningful way and we need to use the powers of dodd-frank to simplify and shrink those institutions. what is remarkable about this is the deafening silence with which it has been met by the other regulator the other members of the financial stability oversht panel,

including secretary treasury timothy geithner. ultimately, they are too complex. they are too large. i think that chairman greenspan, famously at the beginning of this crisis, said that too-big- to-fail means too big. it is not just too big. it is a good place to start. it really does appear that what is happening with the chairwoman suggestion is a regulatory game of running up the clock. they say nothing. they do nothing. and the bottom line is that she will not able to institute those changes before she steps down during the course of the summer. those plans will not be coming in a manner of six months. it could be a year before anything happens so what would be an example of dramatic change? how about a strong endorsement from the secretary of the treasury, from the chairman of the federal reserve and others that chairman sheila bair's

suggestion will be adopted? perhaps this coul help to away at the market's perption that resolution authority is somewhat of a joke. if you look at the language that moody's used at rejecting the idea that dodd-frank would work or somehow and too-big-to-fail, that this resolution of party is going to work, it is striking language. it is not just a passive projection. it is a complete rejection. >> moody's has included in their analysis the idea that the government is actually going to bail out the banks. this is part of the problem we're looking at. >> absolutely. there -- that this is going to happen. it is a it -- they reject that this is going to happen. it is a minor first step. but instead of issuing what is basically empty statements that this will and too-big-to-fail as we know it and we will never have to bailout anybody else again and there are provisions

in law that i have heard that says the wl never be a bailout, let's start with unarticulated plan similar to the one advocated by chairwoman sheila bair that says, ok, this is how we will do this. we will simplify and shrink these institutions so we can have a credible response to the markets that we will not bail them out. right now, the empty rhetoric, the market is not buying it. you can actually measure whether or not your statements are effective or not. all you have to do is look at what the credit rating agencies say, look at how much cheaper the benefit is, h much cheaper it is for the banks to raise capital. there things you can actually look to. while it is unfortunate that credit rating agencies have so much power and influence, that is the sad reality of where we are today. i tnk there has to be -- it has to start with an increase in

rhetoric and then it has to be backed up by demonstrated action to fulfil those rhetorical promises. ght now, we do not have any of that. what we have is a lot of discussion about endss roll- making that will accomplish some goal, a real sense of incrementalism. we will do a little bit here and a little bit there. i personally believe that chairman sheila bair's approach is a better one. >> the gentleman's time h expired. >> thank you, mr. chairman. >> thank you so much. i could not help but think about the fact that, come june 25 in my district, 40 miles from her people will march into a room, to a conference of the preventing foreclosure. they will march in with tears, literally, about 1000 of them.

and they will face some very difficult situations. they will finally get a chance to sit down with some lenders and tried to come to some resolve with regard to modifications. many of them will be lied to. many of them have been lied to. they have been playing games with them. a lot of these servicers, as if they were fools. when i read your editorial this morning, i was very impressed. we just voted yesterday to end the have program. i know how you feel about it. many of us feel the same way. but when you and the program and there is nothing to substitute,

nothing, i a wondering if that is a good idea. i am just curious. >> as special inspector general, it has always been my position and continues to be my position that tarp made a promise. congressman, i don't to presume anything about you or your decision to make your vote, but, for a lot of progress as that i have spoken to,embers of congress, the reason why they voted for tarp, one of the really things that convinced them to vote for what is essentially a bank bailout was this promise to preserve home ownership. >> you are right. that is one of the reasons why i voted for it appeared >> this is part and parcel of tarp in my view as the need to save the financial system. i do not rank them. i put them side by side. it was just as important to do

with home ownership and deal with the foreclosure crisis as was to deal with the banks. i believe that then it is on par. i look at the disappointments, the broken promise of the hamp program. i do agree with you that we cannot just abandon that goal of tarp. and also can defend, for those who voted for termination of -- i also cannot defend, for those who voted for termination of hamp, because thehad the portunity to make a difference. why has treasury not lived up to a different promise itade, the one it made in november 2009 to impose financial penalties on those servicers for not performing? why are we to use it to the program without a single financial penalty for

performance? >> i need to get to one other thing. the reason why i started out the way i did, we can have all these discussions we want, but when i go back to my district and i know members on both sides of the aisle, when they go back to their districts, but some of them may not see these folks. but there are a lot of americans suffering. if we basically cut the money for carrying out dodd-frank, do you have an opinion on that? because that is what is happening. >> i come from a law forcement background. i spent eight years at the u.s. attorney's office. during budget freezes and hiring freezes, i think you for your generous support during this crisis for our resources.

but those budget cuts and freezes have a direct impact on the ability of those offices to put people in jail, to lock people up, to hold people accountable. >> but does it also have an impact -- you said that you know how the market is viewing dodd- frank. he talked about the possibility that dodd-frank operates and they look at it and say, you know what? we are not so worried about it because you said to-be-toail. but could it be that they see an effort to take the money from out o these agencies so they can properly enrce and carry out dodd-frank? >> it may be part of that perception issue. the bottom line is that the regulatory agencies that are charged with natalie implementing dodd-frank, but also law enforcement goals and enforcement goals -- i am thinking specifically of the sec

-- when you take away funding, it may be that they will reallocate resources to dodd- frank. but as an agency, there will be able to accomplish less as far as enforcement is concerned and in implementing dodd-frank. i am not here to wade into the politics of a budget battle but it is simple. i have seen it over and over again. when spending freezes hit, it has a direct impact on enforcement. that is a reality. >> "the wall street journal" article noted that the department's seem to be drafting bills to take apart this reform piece by piece. what do you think about the funding or dismantling dodd- frank and what it has on the perception of the markets? >> i am not sure the impact is,

in part because of the political realities of a decisive governnt i have not traced anything or seen anything or heard anything that directly links that. of course, if the agencies are cuts deeply to the bone that they are unable to implement for visions of regulatory reform, that will have an impact. but i think the far greater impact, frankly, is the lack of political and regulatory will in staking out how they will use that authority since they have all the resources to really take on the issue of too-big-to-fail. unless we see that shift, i think that will have a far greater impact on market perceptions. >> i think the ranking member. >> thank you for being here this morning. i have one general question and

i would like to just ask a couple of questions about some of the comments you have made already. would you agree that tarp picked winners, perhaps letting weaker entities survive. -- survive? if so, do you think that may have been a millocation of funds? >> when you look at tarp as a whole, the lack of transparency in the program has led to the very fair criticism that, at times, tarp may have picked winners and losers. generally speaking, when we talk about the different truck programs -- there are 13 different tarp subprograms. we often think of a tarp as a monolith. wehink of it as a capital purchase program, which, by very domitian, picks winners and losers -- by very definition, picks winners and losers.

but there was, in fact, a process in place that depended mostly on the banks'regulatory ratings. on certain occasions, we did audit work on this. certainly, there were winners and loser picked. tarp did not have a perfect record. there have been a member banks that were supposedly healthy and viable that failed. there were others that were deemed healthy and viable and, a month later, needed to get a tremendous amount of additional support like bank of america and citigroup. i am understand that concern. on the flip side, it probably would have been inappropriate for tarp toive money to all institutions that came to the window. part of the importance of giving out text-- giving a tax payer money is to make sure that they were viable.

based on our work and our reporting, it was incredibly difficult. there was a real sense of panic. they made some mistakes for sure, but i do not think they were intentional in anyway. they tried to get it right. they just did not sometimes. >> i want to go back to a comment for when you were responding to our chairman. you mentioned that unless treasury and the regulators use their authorities -- you mentioned that some of the '30's they already have -- that we -- some of those authorities they already have -- we will experience the same or worse. can you explain the authorities you are referring to and if they exist prior to dodd-frank. >> caps all leverage, capital floors are examples of things that have been around for a

while. i think that what dodd-frank does is that it really forces an entry point for using those types of mechanisms anticipatory. this gives us an entry to evaluate the largest banks that were deemed systemically significant and evaluate whether or not it really could survive or whether the system could survive their failure. that is the key to any resolution plan, which is to take what ever it is, as chairman sheila bair sugge, and putting it through a reality check. if it does not meet the reality check using those tools, either spin off certain businesses, shrink the company, simplified organizational structure -- if you look at the lehman bankruptcy and the 3200 something different entities

that were hopelessly complex and makes resolution difficult, i think that is a good start. of course, we have to remember that one of the limitations of waiting too long -- in other words, we do not use the authorities when we get the resolution plan prescriptive lead before the next financial crisis -- even our best intentions may not really work. in an era of a financial crisis, that is when all these institutions are suffering similar threats at the same time. it will be very difficult to execute some of these resolution plans. how do sell-off a large business job as part of a resolution if there is no one to buy it because the other entities are going through the same stresses of the financial system collapse? i think that is what secretary geithner meant when he said to mus did dodd-frank help? we need to do exceptional things

again because, even with the best intentions, the reality of that the shock to the system will require -- as long as the banks are too big, it will require, again, extraordinary intervention. >> thank you very much. >> mr. welch. five minutes. >> thank you very much, mr. chairman. if inderstand it, you say that dodd-frank has not succeeded in making the market believe that it has addressed this issue of too-big-to-fail. >> the implementation of it has not succeeded in convincing the market. >> is a because of the regulatory provisions - is it because of the regulatory provisions? >> yes, some of that put the responsibility on the

regulators to edelman the necessary changes and send the right messages to market. >> so we would have been better off with congress testifying what were the guidelines and what were the parameters within which these large financial institutions could operate? would that have been a better approach? >> it would have been a more effective approach if ideas like the amendments in the senate to dog frank -- to dodd- frank would put such as caps on the larger institutions. if that had passed, it would have sent a clear message to the market. >> that is simple. >> you would have relied lot less on the regulators if that were included. >> when we get into the regulators, of course, having a budget challenge in this country and in this congress, if we are

cutting the budget for, for instance, the sec by $25 million, how does that affect -- what kind of signal does that send and how does that affect the ability to actually supervised the regulations that would apply? >> according to the sec, it would have a very direct result. it would inhibit their ability, according to chairman shapiro, of being able to implement the requirements that they need to do under dodd-frank. >> in your independent capacity, that offer makes sense to you? >> there is no question. when you are a regulatory agency, a law-enforcement agency, and you have fewer resources, you have to make cuts across the board. everything suppers. that will suffer. enforcement will suffer. >> the same thing with the consumer financial protection board. dodd-frank calls for an independent watchdog.

that would be independent. it would not be advocating for the interest of the large financial institutions. it would be advocating for the interest of nsumers. the sierra provision, the continuing resolution provision, which cut that down by 40%, from $143 billion to $80 billion japan which have the same response to the budgetar cut -- $80 billion. would you have the same response to the budgetary cuts? >> having been fortunate enough to workith elizabeth warren as she was the chair of the congressional oversight panel, i would certainly take her at her word that this would impact the ability to go forward. press one of the points of this hearing is that there are some legit -- >> one of the points of this hearing is that there are some legitimate questions if tarp was working.

it is not clear what the consensus would be on this committee and if we want to be tougher on the too-big-to-fail policy or not. that is not part of it. but let's assume that we did have a view that was shared across the aisle, on both sides, where we did want to protect the taxpayer from a future bailout. what would do it -- what would be your recommendation for congress to do for protection against another bailout? >> step one is working within the tarbell that has already passed. that is to exert as much pressure as you can on the congressional oversight panel, on secretary geithner to fulfill the promise and to not take an approach and lookt at the recommendations of chairwoman sheila bear.

getting rid of that subsidy, getting rid of the economic advantage that the bigger banks have over their smaller counterparts, whether it is the implicit guarantee, the increased credit rating, that has to be a goal. this is the remarkable thing about too-big-to-fail. perception matters. perception is as important as anything else. it is unfortunate that the credit rating ageies still have some much influence over things. but that is reality. we have to take those perceptions head on. many to figure out how to use the tools we already have to do with that perception and not just, i am sorry, ignore the advocacy of chairman sheila bair and others who have strong ideas about trying to get this to a place where these banks no longer enjoy that subsidy. >> i would be happy to -- i think we agree that we want to

and 2-big-to-fail. but i know that has been your advocacy in your time in congress as well as mine. the bill of goods that some of us saw coming out of dodd-frank is that it would prevent too- big-to-fail. >> i appreciate that. as the chairman knows, i voted in significant part because of the testimony of mr borofsky. in so much as we can find a way to work together, i agree with your statement. >> i thank the chairman for his advocacy. we do not always agree, but you have a great way of reaching out and try to find consensus. with that, i yield five minutes issa.nator eis

>> thank you. if we can get to some bipartisan discussion where we agree to a number and say, if we need to add sec, or some of the websites and so on that are also being cut and back them up because they save us money, then i think then we can find those offsets. i think that the chairmen agreed that hamp was an awful lot of money that was not meant to ruin people's credit rating. i am concerned about where we make the cuts. i would hope that, in the very near future, we talk about the need to make austerity moves and then begin to say where can we find multiple votes for something by putting things back. you mentioned the sec. i am concerned that many of the summit activities that we have on a bipartisan basis been

investigating -- i think we need to have the access that, quite frankly, dodd-frank, with bipartisan support from this committee, almost got with transparency. we still have to get back to getting that transparency into what was dodd-frank. if i could throw a slide up, i just want to go through a couple of these. it illustrates probably the most important point you are making today. it is the 2-3 step credit rating crease. go to the next slide. real examples -- wells fargo, if their cost of mey is 4.81 vs -- if goldman sacks, often vilified here, but if their cost of money is just under 5% while national city is over 6%, that

is not the three-quarters of a point you're talking about. barclays bank is that 4.39% vs. the tnt -- bb &t. huntington national bank has 6.54%. let me ask it to you in a different way, as a former businessman. if i am among the most creditworthy companies, the fortune 500, down to small companies that simply have healthy balance sheets, is there any reason in the world that they will not migrate to the largest banks when the largest banks can make a profit of nearly a point cheaper than their competition? in the pure cost of money, will this not move the more creditworthy to the big banks

while leaving little banks with higher rates and being forced to take what is ever left behind? >> absolutely. let's say your deposit money at one of these banks. you go beyond the fdic's limits. do you not want to have an implicit government guarantee of too-big-to-fail behind your posits? from an ethical and point of view, you may not want to suppt these institutions because of this implicit government guarantee. but, as a businessman, how can you not take advantage of the fact that you're getting what is essentially free deposit insurance based on the implicit guarantee that t government will bail them out? what does that do? it makes them bigger? it makes them even more systemically important. it is a downward spiral. and for the smaller banks, it gives them incentive as well bid we need to get bigger. we need to get on the gravy train. we need to raise money more

cheaply beuse of the implicit guarantee. it is a complete perversion of the system. >> that brings up a point that i nt to ma sure the committ focuses on. if we do not change where we are today, the five banks that represent 50% will be seven banks that represent 80%. through mergers, the banks will get these rates by being big enough to be not too-big-to- fail. that would be my approach to get my business away from the big 5. >> it is a real danger. there are some provisions in dodd-frank that prohibits concentration of 5% of all deposits. one of the things we talk about lehman and was it not a good example of the government not stepping in? but so much of the incentive of allowing women to fill was a lesson that we need to get bigger than women because we need to make sure that we're big enough so that is a bigger than

lehman because we need to make re that we are be enough -- we need to get bigger than lehman because we need to make sure that we are big enough. >> thank you. >> is a pleasure to have you here. when i was a kid growing up, i remember commercials -- in the avis commercial -- "we try harder because we're no. 2." all of a sudden, number one seems to be a guaranteed by the federal government. whoever is no. 2, good luck because you can try as hard as you want. with community banks if we see what happens when you have seven banks taking 80% of the market, it seems to me that there is only an incentive for community banks to merge with or be acquired by the too-big-to-il

banks. is that the president we're setting up with a the tarp package? cedent we aree presiden setting up with the tarp package? >> certainly, consolidati and consolidationlars could be a bar product -- continued csolidation to be a byproduct of where we are. >> theommunity banks to be serving most of our businesses in terms of loans. it could give them what i think would be an opportunity for the too-big-to-fail banks to dictate more policy and restrictions. >> less competition as never before the consumer. the notion of having more political power almost seems and have a look at this point, but it could have them.

>> systemically, as a result of the tarp package, has been anything to change the way we do business to avoid ever having to have another tarp package passed by this congress? >> in many ways, the way it has been executed and the way it has a legacy of increased moral hazard, it has made a lot even more likely. unless we deal with this too- big-to-fail problem, the increased size, the increase interconnectedness, the fewer number of large institutions, all contribu an elitist to where the too-big-to-fail this will be even bigger and their failure even less conceivable as possible. >> is it possible that the precedent set their that such tarp packages would be considered for non-financial institutions, insurance companies? we saw that withig.

this does not set a precedent that goes beyond assisting financial institutions and any entity that may be deemed too- big-to-fail regardless of what their commercial purposes. >> the tarp was not limited to banks. you have to aig, the automobile industry -- at is part of tarp's legacy, the extending of moral hazard. >> in any of your class is, would you -- classes, would you consider changing your business plan to include a path to where you can now be required or be guaranteed by the federal government because of the precedent that has been said in the last couple of years? >> unless we make that so

painful and really address it through our regulation, again, right now, it is a pretty good place to be to be too-big-to- fail. >> i yield back. thank you. >> i ask unanimous consent to have two additional minutes. will also give the gentleman from vermont, mr. welch, two minutes. >> allred. >> thank you. i have spoken with you about this fall business lending fund. this legislative creation that does not have oversight from your office, can you talk about the small business lending fund and the impact it has especially on these tarp banks, these

small car for banks that are still within the program? >> commerce enabled treasuryo refinance, if you will, really move banks off of the tarp leisure. -- top leisure -- tarp ledger. we made a series of recommendations to treasury, which is to reject it, to help protect the american taxpayer as those banks move from the tarp ledger. there's less oversight. there are less protections come up capital protections for the taxpayer. we have made a couple of recommendations and they have been rejected. it is not entirely within our jurisdiction on this issue. we have jurisdiction over the sale of troubled assets.

hear, the sale of preferred shares of stock which are being sold from government entity and purchased by another government entity is very much within the confines of our gestation period for that, we have requested an audit. -- confines of our jurisdiction. for that, whave requested an audit. we were told that we needed to hold off because treasury general counsel has to decide whether or not we have the right to conduct an audit of the exit of banks from tarp. i have not written a letter. i have not written -- may big deal about this because, frankly, i can add even conceive that there will come out and suggest that the very clear intent of congress that we have jurisdiction of tarp banks will not be there because the money has not been funded in to this program yet. we do not have a sense of

immediacy yet. but if there is some those are legal construct that they adopt and suggested that we cannot do th, i certainly hope that my successor will immediately bring that to this committee's attention. this is a very importantrea because of the potential for the taxpayer to get a raw deal as a top banks exit tarp and go into fdlf. >> thank you. i yield 2 minutes. >> on february 25, i requested that your office conduct an audit on homeowner complaints. can you tell me what is going on with that and when we can expect to have some results? >> i just got an e-mail that has the preliminary numbers. we're going through more than 2500 hits on our hot line. what has been helpful is it has helped us organize their hot

line hits. since we have gotten your tter, our staff has been going through our hot line, literally and tree-by-entry and pulling them together. i got -- entry-by-entry and pulling the together. i expect we will have it to you before too long. i cannot give you an exact date. you you're walking out, cannot dump a commitment to the people behind you that you cannot fulfil. >> ok. let me ask you this. one of the things that concerns me is that we will -- as you move on, the question becomes -- i would say what would your response be to what they're

going to say in some way or another? it sounds like you made some reasonable recommendations and mr masaad said he would be retooling. have you seen evidence of that? why wouldn't the administration accept your recommendations -- some of your recommendations? i am curious and there is -- i am curious. >> there has been no retooling. yesterday which was on the date of the vote, there was an announcement. it was an op-ed in politico. they're going to two years late, almost 18 months after the promise to impose financial

penalties on nonrforming servicers, there will be a plan. i read the op ed and it was brought to my attention. it sounded like a gimmick. they will give servicers grades and withhold payments based on that great. ok. it is some movement in that direction. although again, words, i do not put a lot of faith in words given what we had 18 months ago. it is action that matters. i did what you would -- i would normally do. i reached out to treasury. give us the back of for this. let's evaluate. i am asked the question today, i can give an opinion about whether this will be effective, with the construct is and the response, first and got no response. we got a response, we can tell you because we do not have any other policy or plan other than what was outlined in the opposite. this is ready, fire, aim, all

over again. this is one incident of tential retooling. meeting our recommendation. almost everyone's recommendation to start holding the servicers accountable financially. i am hopeful that this is better late than never as opposed to too little too late. a ultimately, where it's at this point are just words. after the broken promises, we need to see some action on this front if we're gng to get servicers to be held accountable for their terrible and abysmal performance that treasury acknowledges. >> thank you. >> we appreciate your testimony. your candor, your ability to react to a variety of questions. too often in congress, we see the person on the other side of the panel as more sport. it is interesting to have

someone who was on the other side of the panel who is of a sporting mood. you are willing to react and answer the question posed to you. to often, in this place and around washington, is not about answering the question, it is about what you want to answer. there have been frank and forthcoming, very open in answing the question supposed to you even when they're not convenient. we appreciate your service to your government and to your country. thank you for a time and testimony. most of all, thank you for your hard work. >good luck to you and your

the committee will come to order. thank you for being here today. it is a policy that all witnesses be sworn in. please stand and raise your right hand. emnly swear or affirm the testimony you're about to get will be the truth, the whole truth, and nothing but the truth? >> i do. >> but the record reflect the witness answered in the affirmative. with that, we will recognize you for five minutes and you're written testimony will be entered into the record. we will have some questions from the panel. >> thank you. distinguished members, thank you for the opportunity to testify. you have invited me here to address whether the perception

some institutions are too big to fail persists despite the passage of dodd-frank. the quarterly report suggested legacy may be's the too big to fail institutions. moral hazard is a real and significant concern. to suggest this is the main legacy confuses a response to a crisis with the need to fix the flaws in a regulatory system. t.a.r.p. was necessary and it did what is supposed to do. its legacy is that a combined with other government actions helped save our economy from a catastrophic collapse and may have helped prevent the second great depression. the lesson we learned from having to take these actions was to better protect ourselves against future crises and to do

with the moral hazard issue, our system needed to be fixed. today while more work remains, we have taken action to do just that. we have taken steps to address the moral hazard associated with the fact that t.a.r.p. and other interventions were necessary to address the problem. 19 months after it was enacted, congress passed the dodd frank act. dodd-frank contains three main elements. first, it gives the government of 42 shot down and break apart firms whose failure might threaten the system. it does so in a way that protects the economy while ensuring large financial firms bear the cost. it provides as with the tools to insure no firm will be insulated from the consequences of its

actions are protected from the year. it makes clear that taxpayers must be asked to bear the cost of a financial firms failure. dodd-frank creates a framework for identifying and responding to rest in the financial system that creates the financial stability oversight council and the office of financial research. it is charged with responding to emerging threats and promoting market discipline. ofr addresses the critical need for more standardized and useful data. dodd-frank requires regulators to impose substantially stronger provincial standards, risk-based capital standards will be stronger. complex firms will have to hold more. dodd-frank requires that certain large firms undergo regular stress tests and requires living wills.

it restrict risky activities by banks such as proprietary trading as well as the excessive growth by acquisition of the largest firms. it sets a clear path for. we have made progress to implement its provisions but there is more work to do. the financial markets are watching this progress which underscores the importance of the implementation. let me turn briefly back to t.a.r.p. a strong area is unwinding the assistance that had to be provided. since the last appeared, t.a.r.p. has continued to make good progress. we have reduced the dependence. we expect to receive $7.40 billion in repayments and taxpayers will have

recovered two ordered $51 billion compared to the two ordered $45 billion invested. that will be the gain to the taxpayer. with the repayments over 70% of the amount has been recovered. the ultimate costs will be far less than anyone expected. the cbo estimated the costs to 8 $19 billion. it is one part of the actions taken to respond which included support for fannie mae, freddie mac, the federal reserve actions and guarantees money market funds and bank debt. it is important to look at the cost of these measures. the latest estimates of these interventions shows they are -- it should be a small profit when we look at those actions. this estimate does not include the stimulus measures and does not include the cost to our economy. jobs were lost and businesses

fail. household wealth declined and tax revenues fell. that would have been worse without the emergency response. thank you for the opportunity to testify. i welcome your questions and let me say i am happy to respond to any of the matters that were raised whether it is pertaining to dodd-frank or other issues. >> thank you. i recognize myself for five minutes. there are a number of questions dodd-frank raises. i read your editorial against my legislation ending the program. we do not have to litigate that. we won the vote so i am fine with that. we had a bipartisan vote as well. i hope that sends a strong message to the overseers of the

program. the status quo is simply not acceptable. destroying credit scores, taking their savings, it is not a responsible program in order to help half a million people. the people who are brought into the program and given verbal modifications of their mortgages and are kicked out of the program at the end of the day. the recent report was 700,002 ordered 40. we appreciate you releasing those numbers but it is not acceptable. we do not have to really get that. i want to raise a question i think is interesting. use of the taxpayers will not be on the hook for future bailouts.

can you explain how you justify that under dodd-frank? >> dodd-frank provides taxpayers will not fund any bailout. it gives the authority -- >> how does it do that? >> it gives authority to fdic to liquidate and non-bank financial firm that is threatening the system and to oppose those costs on creditors and shareholders, including the ability to clawback those costs and to the extent those costs cannot be imposed on creditors and shareholders. there is an assessment after the fact on large financial institutions. >> you disagree with the assertion that dodd-frank and robust, the comment that in the event of the next crisis we have to do extraordinary things beyond the scope of the dodd- frank legislation.

>> as i testified before, the secretary's statement referred to the fact that it is difficult to predict the shape, the nature of a crisis. you may have to take extraordinary actions but he was referring to using the tools of dodd-frank. >> interesting. ok. another question i have. is treasury in terms of looking at financial stability, are you looking at the interconnectedness of our financial markets across regulatory regimes? for and regulations and how they are moving forward. is there going to be, speaking to market participants. they see an opportunity for regulatory arbitrage and to make money based on the fact that other european countries are behind in terms of changing

their financial regulations. is this a concern? >> absolutely. it is a good question. thank you for raising it. one of the important things is to work with foreign regulators to -- >> are you doing that? >> yes. there is work going on to do that. the dodd-frank law provides for that. >> i know it does. how was that going? is that progressing? how is it progressing? what are you doing? >> there's a lot of work going on by each agency. as you know. >> i know there is a lot of work going on by each agency. you are stating some obvious things. it is part of the treasury tact and i have seen you before. i call my own time so you need to answer the question. >> i will be happy to provide you with details about that. i do not have them at my fingertips.

it is not my responsibility to coordinate with our international friends on those regulatory regimes. it is my responsibility to implement t.a.r.p. i would be happy to get you a detailed response. >> it does not entail looking at international regulatory regimes is when i am trying to understand. i will move on. it is fine. the financial stability oversight council. which is a creation of dodd- frank entails regular sitting on a council together. each regular has their own staff. is it your view in terms of preparing for this, how this council will operate? how their meetings will occur, where they will occur. is this being driven by the treasury department? >> fsoc is chaired by the

secretary of the treasury and it has a number of members. 10 voting members as well as non-members. it meets periodically and it is promulgating rules. it is a lot of activity. it requires the coronation across all agencies as you know. >> i do not believe i said that financial stability does not entail looking at international regimes. i think i said the contrary. i would be happy to have you details on what is going on. >> she said it was not york responsibility. >> that is correct. my responsibility is t.a.r.p. i will recognize mr. quigley for five minutes. >> thank you. good morning.

questions this morning were brought up earlier about the community banks, the relative disadvantage. are you in a position to talk about the comparative disadvantage many of those banks, many in my state are at and what can be done? >> that is an important question. we have to have a thriving community bank sector in this country. we have taken a number of actions to do that. we funded the obama -- the it obama administration did not provide funds to large banks. we provided funds to 400 small banks and 60 were funded out of the program. treasury push for the implementation of the small business lending fund to provide assistance. the differential you referred to is important. dodd-frank provides us with tools to address that. it allows us to impose tougher

standards on the largest banks. capital standards, leveraged standards, liquidity standards. there is a lot of work to do to implement that but it does give us some tools to adjust the problem. -- addressed that problem. problem.ess that >> could you detail some of those? >> some of our banks do not have access to capital markets. that is why we have been able to see a lot of the larger banks have repaid t.a.r.p. funds and some banks have not. we are continuing to work with them. is capital under a tart.a.r.p. not required to be repaid. the fact that we funded a lot of those banks has help them weather the storm. >> perception in my state is that as simplistic as it sounds,

you have bailed out the big banks and shut down the small ones. if you are in my position, how do you respond? >> a good question. i think what we say is in fact under t.a.r.p., we provided capital to any small bank that was viable. we ended up providing that overall, 650 banks. we're continuing to work with them. the issues you raise as to whether big banks have an advantage. dodd-frank is meant to provide us with tools to level the playing field. it needs to be fully implemented. >> a lagered discussion at some point. let me shift gears. march 21, a report that goldman sachs and others are skirting the volcker rule by saying it

does apply to long-term principal investments. what has reaction to that then? >> i am not familiar with the particulars of implementing the volcker rule. i would be happy to get your response. >> thank you. i yield back. >> this is not the time -- you had identified one of the things you would do is to try to be responsive to any comments that were made by the gentleman who testified before you. he raised an issue which was a question i think your general counsel was looking at, the right to conduct an audit of the exit of banks from t.a.r.p.

is there any reason that should be a question? what is your position as to the authority of the inspector general to audit that process? >> thank you. it is a good question. the issue goes to whether sigtarp or the inspector general has jurisdiction or what their jurisdiction is. i respect both are in total to those opinions and i defer to the judgment of the general counsel as to the proper jurisdiction between them and that is what is going on. >> you have a willingness to engage in this activity. if it is determined the inspector general from treasury is the entity by you, are reassured that the inspector reassured that the inspector general from