that same on it? >> it is not my determination. it is a question of interpreting what the law requires and provides for. both as to the small business lending fund law as well as t.a.r.p. both the special inspector general's office and the inspector general's office are very excellent operations that have conducted a thorough audits and i would be happy to work with both of them as we have. that is an issue that will have to be resolved. thank you for observation. i did not understand why there would have been any reluctance. as we look at the larger question, not just where we have been because there is a collage of analysis and information on both sides, much of it credible about the successes of t.a.r.p.

there is an issue where we're going. part of the problem is the unintended consequences with the bigger banks getting bigger. a lot of the oversight going toward the institutions that were not the target of this initial effort. what i am concerned about is the perception that now we have rating agencies that are factoring in the likelihood that somebody is going to step in to cover these banks in shoring up their position. i am dramatically concerned about the consequences as ben bernanke said. it creates a limited market and limits market discipline in this context. how do we check the ability to be assured we are not going to see this again and one of the factors i see you have been looking at has been the idea of

the living will. what is going to happen in practice with that living will? are we and forcing this, are we requiring that an effort be made to compel these organizations to explain how they will get out of it? >> absolutely. it is a good question. i was rather surprised by the comment that somehow treasury was opposed to this. it is a requirement of dodd- frank. of limitation of living wills is left to the fdic and the federal reserve. they have until january 2012 to work on it. it was part of the proposal that treasury made and we have backed the concept the entire time. you are right, that is a critical tool on how -- and how thoroughly it that is enforced and how thorough those plans are will make a critical difference. in terms of the rating agencies,

they're watching this closely. they should. again, have made it clear that what they're doing is monitoring it. they are seeing -- >> they are making calculations and the calculation is we're reading the banks and giving them a preferential position with respect to the market based on their confidence that someone else will step in. >> that is correct and they are doing that worldwide. they have said we're closely monitoring the situation to see how these resolution regimes are implemented and to see if there is the political will to ensure the there are no bailouts in the future. >> what would that take? what should be requiring for them to people to pass the scrutiny of that living well analysis? >> where at this early stage of the implementation. the law was passed eight months

ago and to say it is not going to work, it is like saying we passed the securities act in 1933, because they cannot fix our markets within six months, they did not work. we set up the sec and took actions and we have the most vibrant and robust capital markets. it is like saying we passed the civil rights act and it did not end discrimination. there is time needed to implement. we're busy working on it. it involves many agencies, not just treasure. i will come the suggestions if he has suggestions on how to implement it. i have not heard any specifics. >> thank you. i turned to the gentleman from maryland. >> thank you. let me ask you this. you have heard the testimony

earlier. >> i did. >> you talked earlier, you said there would be some retooling. basically if i were to sum up what mr. borowski said, it is late but at least you are aiming in the right direction. he did not seem to have confidence based on the past that your department is going to do very much of anything. even under the threat of demise of the program. i am wondering what is your reaction to that? >> thank you for the question. my reaction is to be puzzled.

i felt like there was strong criticism but i did not hear specifics. sigtarp made recommendations to us. we have implemented 14. the ones we did not would have made it harder for people to get assistance. it would have required us to thumbprint anyone and would have required more documentation about income, comparing their income to when they got their mortgage. other things like that. the last recommendation was in april of last year. lately, he said the program is a failure but we have not seen in thesanything specific. we are expanding our compliance reporting and we will withhold incentives. on that, what we did from the outset was we had a very strong

compliance program to get servicers to fix the problem. there was not -- we only pay money when they enter into the permanent modification. there were not entering which is why we focused on remedial actions. >> there is a lot of frustration on both sides of the aisle. the question is, what can we do pass the conversation to affect more people? is there something we need to do differently? i for one and many of my colleagues voted against the bill yesterday to and the program. most of us said to ourselves and each other treasury has to do better. this is real. i am wondering, what is going to happen? we cannot keep going down this

road to where we're going. there are people suffering and with all that money out there, it gives the opposition more ammunition to not only destroy the program, but also not replace it with anything. that goes against everything that we're trying to accomplish. i want to know what direction is. >> you are right. those people who want to end the program have not offered any alternatives. we continue to look at ways we can improve it. it is a difficult issue. we have a lot of people who spent time on this and if there was a silver bullet, it is not easy. the program is continuing to help tens of thousands. it is affecting people indirectly through the standards that were setting -- we are

setting. >> do we need to raise the standards? >> absolutely. we need national servicing standards and there's a lot of activity going on in that regard through the discussions on the foreclosure problems and otherwise and we will see that coming. we are committed to that. we have met with members of congress about specific things that need to be in those national servicing standards. >> one of the things he said, there are the tools in dodd- frank but he said he does not believe that the administration has the will to carry it out. i want you to comment on that but on this other issue. if we take funds away from the

budget, how would that affect the market perception? % but taking awayrcent tha funds would not be a good thing. we need to make sure we vigorously enforce this. as to the comment, i do not know what specifics he is referring to. the implementation process is an open one. there are a number of rulemaking proceedings going on. if he has comments on those, he can make them. if he thinks certain things are not happening fast enough, he should point that out. >> thank you. >> thank you. the gentle lady from new york. >> thank you. thank you for being here this morning and a willingness to testify. i am looking at your opening statement.

i wondered if we could flush out a couple items that are in your comments. in reference to dodd-frank, you listed three points for us. the first one is dodd-frank gives the government the authority to shut down and broke apart large non-bank financial firms. to what extent, what is the scope of that? should we concern the government has the kind of power they can shut down a private entity? >> it is a good question. there is a process that has to go one. a determination that has to be made by treasury and the vote of the fdic and the federal reserve and consultation with the president. there are criteria that have to be met to do that in terms of when you can use that authority. those criteria include there is not another way to do with the

situation. the firm does pose a threat to our financial stability and there are others. there is rulemaking going on to further explicate that. it is important for there to be clarity as to those rules. >> thank you. the second point for identifying and responding to risk. that would tie back to the first point. there are -- are there benchmarks you are going to look for that will identify someone is in trouble and the government needs to take this aggressive action? >> there are standards that need to be implemented and fleshed out more. the key thing is that prior to the passage of dodd-frank, we regulated entities based on the type of entity and we did not have a comprehensive way of looking at risk to the system.

that is what we have now. that is why this law is so important and why implementation is important. we can take proactive measures to impose provincial standards, whether it's the capital, leveraged, liquidity, which can limit for risky activities and there is a process where you exercise -- you can impose restraints on firms. it gives us a lot of tools but they need to be implemented. >> going along with that gives you the tools. what is the concern of the government? many feel dodd-frank is an overreach. we want to prevent what happened but we want to maintain free market. at what point does the government step back and say we're not going to get involved?

>> there is a balance and congress struck the right balance plan dodd-frank -- in dodd-frank and give us the tools. that is why in has to be implemented thoughtfully overtime. that may change of time as our financial changes. >> one more question regarding your testimony. you talked about dodd-frank, you say "much work needs to be done." can you expand. there are 250 rulemaking that needs to be done and studies the need to happen. it involves efforts of many agencies, not just treasury or fdic but the federal reserve and the sec and others. that is the work i am referring to.

a number of those things, -- have been done or in process. there is a lot more work to be done. >> thank you. i have one last question. the government is a player and referee. do you say a conflict in all of this? >> i do not think we want the government to be a player in the sense of having interest in firms. that is why we're unwinding the program quickly and get out of the business of owning stakes in private companies. we have been successful in doing that quickly. the government needs to stick to a to roll of regulating risk and monitoring risk and taking action when firms pose risks to the system but clearly, we have to have a system where there is no firm that is too big to fail. and firms fail as a result of the actions they take.

>> thank you. i yield back. >> the chair recognizes the gentle lady from new york. >> thank you and welcome to the committee. during the financial crisis, some firms became so risky and interconnected that their failure was a threat to the broader economy. i know congress tried to address that in treasury -- and treasury dodd-frank.-- in can you describe what happened [unintelligible] number of experts looking at the riskiness of activities. the fsoc will make

determinations about which firms opposed those risks based on their interconnectedness, their leverage, the nature of their activities. the work is ongoing. those determinations have not been made yet. there will be made by fsoc, which is comprised of all these agencies. >> thank you. one of the factors that led to the crisis is the evolution of the shutter banking system. trading and sales of derivatives had grown to be a trillion dollar business but it became evident that people, the treasury, even the companies did not understand the scope, location of the risk of the size -- location of the risk and this size.

it became billions oand it was o control or understanding. can you comment on what advances you have made on the derivative market and bring it into the light of day to ensure it can exist without posing a threat to financial stability? " certainly. dodd-frank does provide provisions for greater transparency and regulation of the derivatives market. we did not have those previously. there is a lot of work going on in that regard. >> can you specify? >> i am not directly involved. that involves treasury. the sec and ftc. i will be happy to arrange that. >> the growth illustrates that

federal regulators had failed to keep up with market innovation and development. regulation could not keep up with innovation and dynamic action taking place in the markets. can you ensure that dodd-frank and the regulations will keep pace with the innovations in the financial markets? >> it is a good question. what it does is give us the tools to do that. we have to implement them. previously, we did not have a system where we could look at risk across our entire system. we regulated banks and had regulation of other entities. we have an entire shuttle banking system developed and we had all this risk being taken on by firms that were not subject to regulation. aig is a classic example. there was no federal regulation

of daiichi and it engaged in derivatives that were destructive. we have wound that down and there is the reason they will repay the government every dollar we gave them. >> we heard testimony earlier and one of the points he raised is the act did not reach far enough to address international firms that operate globally. -- are financial institutions at a disadvantage because we have regulation? many of these other areas do not. they do not have the capital requirements. they do not have the rest restraints, the oversight that

american firms will be having. >> thank you for that. the international coordination piece of this is very critical. we are dealing in a global world. we have these large institutions who are not national. they operate worldwide. that is why the coordination is important. it is going on and the federal reserve is involved and treasury. i would be happy to get you more details on what is taking place in that regard. congress could not legislate something that mandates what our foreign counterparts do. it requires us to engage in coordination and cooperation with them. >> the basel talks, where do they stand? >> that will result in higher capital requirements that will be phased in over time that are badly needed.

many of our institutions are better capitalized today than their foreign counterparts. we need to phase in those tougher standards. >> my time has expired. thank you for your service. >> thank you. >> thank you. let me turn to the gentleman from in illinois. >> thank you and thank you for your testimony today. let me ask you a brief question related to the insurance industry. i have heard from people who expressed concerns with how dodd-frank affects the insurance industry. insurers are heavily regulated, including an industry funded state guaranty system that helps secure policyholders in the event of an insurance company

failure. most insurers are not engaged in significant unregulated interconnected off-balance sheet, highly leveraged activities. so designations such as systemically important would appear to be on warranted in this industry. overlapping and conflicting roles between state and federal regulators adds a layer of regulation that would disadvantage these insurers and their customers. as you know in the event of another large financial company failure, companies with assets over $50 billion could be on the hook to pay for the resolution of these failed firms even though they exhibited no bad behavior of their own. insurance companies who will continue to be resolved in the existing state system are never resolved by the orderly

liquidation process and yet have to pay to resolve banks and other bad actors in the financial industry. these costs will inevitably be borne by the consumer. if insurance companies are regulated at the state level, and if it is clear they do not participate in systemically risky behavior, why do they have to bail out other failing financial service companies that do participate in this risky behavior? >> your question raises a number of important issues. let me try my best. where i would start is we have come out of a time when we did have a very large insurance company that was regulated at the state level but which posed huge risks to our system.

it was not regulated beyond that. that was b.i.t.. we did not have the tools to do with it. its failure could have brought down our entire system. that has animated the provisions of dodd-frank that address the insurance industry. i recognize your point. we have to make sure these provisions are implemented in a way that is fair to those companies that do not pose those risks and do not engage in those activities. that is a process that we have to focus on as we go for. fsoc is focused on those issues. we need to do this in a way that imposes standards and restrictions on those funds that pose a significant risk to the system while leveling the playing field for the others. >> you acknowledged with regard

to aig, it was not their insurance business that got them in trouble or brought them down. it is a complicated question. there were things going on with their insurance business that did pose some risks. you are correct that aig was involved in a number of activities that went outside the traditional insurance area. and outside of the traditional insurance activities which did not get them in trouble. >> it is a complicated question. they had derivatives that posed a lot of risks but they were engaged in some activities with the capital through their insurance business that pose the illiquidity challenge and that was one of the reasons they had liquidity problems and had to --

the fed had to step in. >> is there a part of you that thinks it is a bit of a stretch to lump the insurance industry into dodd-frank as well? >> the regulation of large firms that pose a risk to the system is designed to recognize we can achieve our goal. doing that by type of entity or a business line today, we have to have the ability to look across the entire financial industry and determine where are the risks coming from and take appropriate action. at the same time, we have to make sure that those regulations do not impose unfair burdens on the other companies that are not -- engaged in those activities. >> i would second that and reiterate the fact that the

insurance industry did not engage in systemically risky behavior. thank you. >> in your testimony, you say outright that dodd-frank was necessary because of the moral hazard when government provided emergency assistance to private firms. you believe that dodd-frank answered the too big to fail question. >> yes. dodd-frank gives us the tools to address the too big to fail problem. >> too big to fail is no longer permissible? >> as i said when you are out of -- when you were out of the room, we have to implement the law. the law is not a magic wand.

it is like saying when we passed the civil rights act, that did not eliminate discrimination. we have a lot of work to do. >> it is a heck of an analogy. in today's financial times, alan greenspan said, the financial system on which dodd-frank is thing imposed as far more complex than the lawmakers and even most regulators apparently contemplate. we will almost certainly end up with a number of regulatory inconsistencies whose consequences cannot readily be anticipated. do you agree? >> no. but i would say is the question is what are we saying would be the alternative? i do not think anyone who would

say we would be better off without the tools that we have provided for through dodd-frank to regulate risk to impose higher provincial standards to be able to prevent any firm from threading our entire system. the question is, we have to implement those wisely. >> are we doing that? >> i think we are. >> to continue with the peace in -- the piece. we are preventing undesirable repercussions that might happen to a market when its conditions are altered. no one has such killed. do you agree or disagree? >> i think we have to try. i do not think any of us want to be in a situation that we were

in in fall 2008 where because we had a regulatory system that had been outgrown, we had a financial industry where there was a huge amount of risk being taken on without transparency, without adequate redcoat -- regulation and that is what contributed to the crisis we have. because of that, we learned a lesson that we need to overhaul our system. that is the judgment congress has made and the task is to implement the judgment. >> a number of folks have testified during the last financial crisis in 2008, the laws that we had then we could have prevented the crisis. do you agree? >> that is news to me. i would be happy to discuss that. >> basically it is your view that dodd-frank ended too big to

fail. >> dodd-frank gives us the tools to address the problem. >> ok. moving back to hamp. we are on our second round. you made an interesting face when i was saying we had 740,000 homeowners who have been harmed by this program. do you disagree? >> i do and i appreciate -- >> the focus of fallen out of this program that enter, this is 1.4 million. trial modifications. do you understand when they are entered, they are told verbally that oftentimes they would make

a lower monthly payment going for. are you aware of that? >> i am. >> when you are paying less than what is contractually obligated, that harms your credit. are you aware of that? yes or no? >> if i can answer how the trial modification works. it is important to have all the facts on the table. the trial modification. baht -- provides a 3 month period. we have to determine if someone qualifies for permanent modification. what we did at the outset was we allowed people, servicers to except people into trial modifications on the basis of what we call stated income. you can raise your hand and say

this is how much i make, i qualified. it was a terrible crisis because we have people -- >> i read your editorial. i know you are trying to go through all this. i understand how this works. operationally. i want to make sure you understand how this works. when you are given that verbal modification, this temporary modification, does that hurt your credit? >your not answering the question. either it does or does not. -- you are not answering the question. >> can i answer the question in this regard, if you will allow me. you refer to all these people being hurt.

publish on what happens to those people. those statistics are based on servicer surveys. it is in our monthly report. it shows what happens. the majority of them ended up by an alternative modifications or alternative payment plans for our current. very few went to foreclosure. do you believe hamp has harmed any borrower? i am sure there are people who were harmed. >> how many? >> i do not know the answer. >> i thought you published statistics about what happened. >> will publish a lot of statistics. i am trying my best to address your concern. i think it is important to remember that when you implement a program like this on a massive

scale during a crisis, we were buying time. most of them ended up in better situations. based on the servicer surveys, the majority of them -- >> how many went to foreclosure? have the report. >> completion is 58,000. their loan was not increased. they owed the same amount. >> when they are not given a permanent modification, they are owed -- they owe

there are penalties and fees associated as long as additional interest. that temporary modification has left them worse off than if they had not been. >> the vast majority of them end up being in better situations. i still think it was the right policy judgment to make. >> even if it is leaving them worse off? >> it is not that it is actively harming them, they have a mortgage.

they would still owe what was previously do. the program did not make them worse off. >> i have numerous examples i can read from yeah. the program has harmed a large number of individuals and the treasury department, the special inspector general's report has been out there for quite awhile. you have had plenty of authority to go in and fix it and you have not. how many are and pending foreclosures? parks foreclosures starts, those lot except for trial

modifications is 163,000. many of those could have been foreclosures star for they even went into the trial. >> if you would like to add anything else, and i will give the opportunity. >> we faced the worst housing crisis in a generation. we were trying to roll out a program that would help a lot of people. many people were already delinquent for months. we were trying to create some breathing room. >> first of all, can i have your

opinion in the record. >> without objection. >> they are very grateful as are the families that are able to stay in their home because of the family. i would say it is easy to throw stones than criticize, it is hard to come up with a program that addressed this crisis which a large part of it was the housing crisis. for every person who stayed in their home, not only did it help that person, it helped their community.

they can bring down the value of housing for their neighbors. it helped to their community, their city, the overall financial stability of their country. housing is roughly 25% of our economy. stabilize this, we will not stabilize out of this great recession. i am very concerned that the republican majority has eliminated four critical housing programs which help people to stay in their homes. i would say that this is very dishonest to criticize the program for not helping people that have no help to begin with and they did not get in the program because they did not meet the criteria that the program had that taxpayers'

dollars would not be spent unless people had a job, and credit record, and were believed to be able to meet that commitment going forward. i would like to congratulate the treasury department's and the obama administration for not just criticizing and saying that we have a problem but getting out there and doing something. when fdr had a problem, he did not look at it, he started working on it. come in with some ideas on how to make the program better. to come in and criticize the program when you have no ideas of your own, when you have not done anything to help the people and i would say the overall economy. i want to congratulate you on the work that you've done and i support the program and i hope that president obama has a lot of veto into in his den and if the republican bill gets to his

desk, it is my hope that he will veto it. i respectfully ask a majority if they will have a hearing if we can bring in directors from across the country, people on the front line working with our government to help people stay in their homes. the city that i represent, the officials that do this every day, the not-for-profit sector are committed and that banks that have voluntarily stepped up to the bank for help has said this program has worked. to criticize because people did not get into the program because the criteria was so high, i agree with the proposal from treasury to keep that criteria away the upper tax taxpayer money. i would like to move on to the park work out.

-- tarp work out. bloomberg testified that the investments have actually provided taxpayers with "higher returns than yields paid on treasury bonds. and enough money to fund the sec for the next two decades." "the government has earned 25.2 billion on its investment in banks and insurance companies and an 8.2% return over two years. that beat out high yield savings accounts, money-market funds, certificates of deposit. >> you are correct that we have

had some good returns on the program but i am not sure about those numbers. >> can you describe generally the ways in which treasury is seeking to maximize taxpayers investments and insurer that our country and taxpayers are made whole? >> certainly, congresswoman. the purpose of tarp is to stabilize the system and not make money. it is terrific that this will not cost very much and we are maximizing returns on the various programs. we will earn about 20 billion on the bank investments. we will have some loss.

in terms of those who were in trial, they are actually about half of what i said. the foreclosure the -- 20,000. >> i will give the ranking member six minutes since i went well over my time out of fairness. >> i want to associate myself with every syllable that miss maloney to said. part of the frustration is that we want even more people to be helped. the reason for the criteria was the dilemma that people did not

want a program that the stands would be so low that there would be a lot of people failing. >> i think it is a few things. we did had prudent eligibility criteria. we don't provide modifications four vacant homes, says we don't provide those who provide assistance for those in need to move onto another situation and we make sure that the modification it makes sense. the pool of people is about 1.4 million.

we have reached a lot of those. this is a very difficult problem. we did take funds and reallocate them to the states so that the states can come up, particularly those that are hardest hit. >> early on, much has been made with regard to the whole issue that it was protected by the president's that more people would be helped then was. is there something that happened along the way that cause you to

look at this thing to say, maybe we cannot accomplish those numbers? >> we recognize that the eligibility pool is not as big as it thought it might be. people had no historical basis to say that this is how you should do it. the bid is model was set up to collect payments on performing loans. we have tried to take a lot of actions to improve that. we need national servicing standards. there is a lot of work going on.

it is hard to reach people sometimes. people do not necessarily want to talk on the phone. it was hard to reach people. >> going back to the trauma of vacation so that we have a clear picture. this is a very important point, that a lot the people who did not end up with modifications, they were able to resolve their problems. >> going back to the drum of -- going back to the drama of modifications of that we have a clear victor. >> those that were done, the industry largely adopted the affordability standards.

as a result of the other protections we put in place, the effect has been very indirect in terms of improving many people. there has been about 2 million modifications done outside since we launch this program. our standards helped to cause that. we put in a number of protections that now the industry is following in terms of prohibitions on tool stracke -- dual track where someone could be foreclosed upon. servicesre the serviceto to require them for other types -- require the services to evaluate them for other types of assistance before they can

foreclosed upon them. >> i assume you have access to information or maybe you are a part of these negotiations with the attorney general. are you a part of that? >> i am aware of what is going on. >> might this be affected by anything that comes out of that? >> this certainly will be. what is going on and that -- again, i appreciate the question, but clearly this is another example of the fact that this industry is broken. it did not have the standards that we needed and it did not have the ability to cope with this crisis. we saw this a through what they

were doing with foreclosures. what is emerging from this is clearly a push to get national service in standards. yes, those will have an effect across the whole industry. that is what we need. >> thank you very much. >> i appreciate the ranking members' questions, especially the last question which is of interest. this is a push for national service in standards. mr. chairman -- >> mr. chairman, what is evidenced what has been found to foreclosures is that we do need national servicing standards. as to what exactly would be in a settlement would be determined by the various parties. >> thank you for your testimony and being here today. at this time i asked unanimous consent to submit for the

record three written testimonies of what would have been a panel today, a testimony by --, and anthony sanders. without objection, so ordered. today's hearing was certainly interesting. we have dramatically different views of the facts and the lay of the land but this is stimulating and interesting for us to inform congress is thinking on how the implementation is progressing. the impact of the program and the bailouts and whether or not they continue to be the rule of the day.

a couple of interesting points in terms of -- testimony, he refers to this as a broken promise. the main goals of tarp were not followed through with. finally, he also testified that what he said was "resolution authority is a joke." and that goes to the heart of what many of us here in terms of congress, we believe is one of the lasting impacts of dog frank. -- dodd- frank.

mr. massad did a good job of defending the administration's position. thank you. this meeting is adjourned. >> thank you. [captioning performed by national captioning institute] [captions copyright national cable satellite corp. 2011]

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>> coming up on c-span, today's "washington journal." and then live coverage of the house. they are scheduled to work on an faa bill. robert gates and mike mullen will talk about the military mission in libya. live coverage of the house armed services committee begins at 9:00 eastern time. then at 2:15, the senate armed services comee