harry harris to be ambassador to the republic of korea. live coverage starts at 10:00 a.m. eastern on c-span3. tomorrow night, democratic and republican members of congress face off in the 57th annual congressional baseball game for charity. the game will be played at nationals park and live coverage begins at 7:00 p.m. eastern on c-span3. next, a look at how states spend and misspend federal funds intended to help people with their housing loans and debt. this is a joint hearing of the house oversight and government reform subcommittees on intergovernmentalffrs and government operations. >> subcommittee on intergovernmental affairs and the subcommittee on government operations will come to order. without objection, the presiding member'suthorized to declare recess at any time. today's hearing marks the tenth anniversary of the troubled asset relief program, al known as t.a.r.p. since 2009, this committeeas conducted oversight of t.a.r.p. programs and management. t.a.r.p. was created in 2008 in the aftermath of the nation's worst economic recession in modern history. often referred to as the bank bailout program, t.a.r.p. t.a.r.p. was a $400 bill program intended to stabilize u.s. financial system and pserve homeownership. in 2010, the treasury department created the t.a.r.p. program known as the hardest hit fund to mitigate the impact of the housing crisis and to prevent foreclosures. the hardest hit fund allocates up to $9.6 billion in t.a.r.p. funds for locally tailored aid to 19 participating state housing finance agencies through 2020. early in the program's tere, government accountability office and special inspector for t.a.r.p. issued reports on state implement takes challenges and the program's lack of established merits and goals. in 2017, the office of the special investigatoreneral of t.a.r.p. issued report questioning $3 million in administrative expenses charged by state housing finance agencies. such expenses included bonuses, barbecues, gym memberships, severance payments, trips to the zoo, and other perks funded by federal t.a.r.p. dollars through the hardest hit fund. the treasury department determined approximately 70% of these expenses arellable under the terms of this participation agreement with the states. in other words, less than 30% of the $3 million questioned by t.a.r.p. was deemed recoverable bytreasury. it is the duty of federal and state partners to ensure that taxpayer dollars for federally funded state-administered programs are used for their intended purposes. none of the payments identified by t.a.r.p. reports the main murp of the program, to prevent foreclosure and provide assistance to homeowners most affected b it's apparenthat the questions. over appropriate expenditures and program efficiencies remain. according to the20semiannual report to congress, fewer than half of all homeowners who sought assistance were admitted to the program, and nearly 30% of homeowners withdrew their applications. with nearly 2 billion in remaining funds left to be dispersed by the treasury of the states, it is necessary to ensure proper safeguards aren place. i thank the witnesses from the treasury department and the representatives from three states, including my home state of alabama, for being here today. i now recognize the ranking member for five minutes for his opening statement. >> chairman palmer, chairman meadows, thanks so much for calling today's hearing. i want to thank all the witnesses for coming. the hardest hit program was set up to provide targeted aid to families in states that were decimated by the dowurn of the housing markets funded by the feds but administered by state governments. the hardest hit fund is financed mortgage modification, unemployment assistance, transition assistance, mortgage reinstatement, and blight elimination. since 2010 and when it was created, the fund has assisted over 350,000 famils and removed 24,000 blighted properties in 18 states and d.c. so i don't want to understate the contributions it's made. but although it's helped many d losing their homes, diligent work of the special inspector general for t.a.r.p. has provoked a l of bipartisan anxiety about how state agencies are administering the program. i have a number of profound concerns i look forward to addressing today. the first is why my state, maryland, and other states where people were hit very hard during the financial crisis were excluded completely from the hardest hit fund. it's been very tough for me to read reporutts sndalou abuses of the program, waste of money taking place, featherbedding, and bloated budgets while my state was completely excluded from it. i would like somebody to explain that to me. why did the treasury department exclude marynd? in addition, why do we still have no an sfralysis from treas about the success and potential expansion of the program now seven years into it? while states in need like mine received zero dollars under the program, others received many millions ofollarshat ended up going to fund excessive and egregious wasteful expenditures that were uncovered in the audits. so i want to know, along with the chairman, why did all of this money go and why is this money going to lavish catered barbecue parties, visa gift cards, employee bonuse catered lunches with treasury employees, fancy cars, and employee trips to the zoo? now, i know a lot of states did not break the rules in any way. the california hardest hit fund program seems to have the highest rate of homeowner apoval wh over3,00 americans that have been assisted with apparently no wasteful expenditures reported. so i look forward today into our digging into the work of the special inspector general and her team at t.a.r.p. who uncovered the fact that federal dollars meant to help people recovering from the greatest economic catastrophe since the depression were being wasted on things like a car allowance of $11,000 for a mercedes benz for a ceo. a september aud report ou that the nevada affordable housing assistance corporation misspent $8.2 million. in 2017, treasury reported that nevada's hhf did not meet its utilization threshold and will have its allocation reduced by $6.7 million. nevada was the only state participating in the program to have funds cut. the georgia department of community affairs provided hardest hit funds to only 9,000 homeowners and rejected two-thirds of the applicants. so mr. chairman, there's a lot of questions here that i want us to get to the bottom o today. i thank you for calling this hearing. >> i now recognize the chairman of the subcommittee on government operations, mr. meadows, for five minutes for his opening statement. >> thank you, mr. chairman. i'll be very brief. inspector general romero, thank you so much for being here. it was a pleasure to not only visit your workplace with so many dedicated individuals but see your leadership, and i just wanted to go on record to recognize that and thank y for that. mr. farmer, welcome. you know, this isn't raleigh. actually, if we could operate d.c. as well as we do raleigh, we might be in better position, but i want to just say welcome. i also want to acknowledge your thoughtful insight on some of the issues that we may be talking about today in terms of your proactive stance there. i want to acknowledge that and thank you. my goo friend who's actually in the audit bill as a nstituent. i want to thank him for hisse a advocacy from ts particular air. this is all about being accountable for the hard working american taxpayer dollar and those areas that priorities arn best help those that are in need. so as we look at that, it's critically important we dohat. mr. chairman, i want to thank you for your leadership on this particular area. i will yield back. iownize the ranking member of the government operations subcommittee, mr. conley, for five minutes for his opening statement. >> thank you, mr. chairman. thank you to mr. meadows for calling today's hearing to look into mismanagement and wasteful spending in the hardeit program. thanks to our witnesses f being here. the oversight and government reform committee has broad jurisdiction to look into fraud, waste, and abuse throughout the gornment, including when federal dollars goes to state and local governments or other recipients. taxpayer dollars should not be viewed as a slush fund, and i welcome the committee's oversight into much this issue today. to ensure accountability wherever taxpayer dollars are spent, it's also important that this committee look into wastul spending elsewhere in the federal government. i would welcome a deeper look into wasteful spending at the environmental protectio agency, for example. $43,000 o a soundproof booth for administrator scott prut in violati spendingws. $105,000 on administrator pruitt's first-class flights in the first year on the job. $100,000 for a four-day trip to moscow. $120,000 on a four-day trip to italy. $45,000 for epa aides to fly to australia and prepare for yet another trip that had to be canceled because of hurricane harvey. five-figure salary increases for preferred staff, even after the white house office of personnel denied request. this is not to mention administrator pruitt's ethical challenges, including his cozy relationship with lobbyists for the industry's regulated by the epa. this committee should also loo into how the department or w ab $139,000 on new doors for secretary zinke's office, which makes the $31,000 dining set at the department of housing and urban development look like small potatoes. and this is just what we know from publicly reported expenditures. i'm sure if the committee took on a full-fledged and vigorous investigation into the wasteful enng by the trump cabinet, we'd be able to find other examples of the flagrant misuse of taxpayer dollars. ten years ag a financial cris hit the american people the likes of which were unseen since the great depression. housing prices plunged. 8.8 million jobs were lost. a liquidity crisis hit the financial sector and the unemployment rate hit 10%. the meltdown left hundreds of thousands of homeowners under water in their mortgages, owing more than their houses were worth. in 2008, u.s. foreclosure filings spiked more than 81%, and over 860,000 families lost their homes inorecsuresha year alone. in response to this crisis, congress enacted the emergency econic stabilization act, whh among other things created the t.a.r.p., troubled as set relief program. t.a.r.p. is widely considered a bank bailout authorizing the secretary of the treasury either to purchase or insure up to $700 billion in troubled owned by financial firms. t.a.r.p. also sought to homeown foreclosure by stabilizing housing markets and. the hardest hit fund made funding available to the state housing financegencie that had experienced the greatest declines in home prices. the program has helped homeowners stay in their houses and knock down blighted properties, raising property values of the surrounding homes. it's grown into a $9.6 billion program funded by the federal government but administered by the states and has assisted more than 300,000 homeowners in 18 states and the district of columbia. i support the cooperative federalism embedded in this program with the states and the federal government working together to solve common problems, but today's hearing will highlight instances where that cooperation has gone awry. some states severely mismanage their programs and/or misspend federal funds. in september of 2016, the special inspector general for t.a. found that the nevada housing division allowed abuse and waste of $8.2 million. this included a car allowance of $500 a month for the ceo to drive a mercedes-benz totaling $11,000, nearly the same amount of money was spent on employee bonuses, gifts, outings, and other perks. over 5800 spent on holiday parties and gifts. 43,000 in bonuses, almost all of which were paid to a o who was later terminated. at the same time, the state agency had all but stopped homeowners from getting assistance through the hardest hit fund, admitting only 117 nevada homeowners i 2015, a year-on-year drop of 96%. the special inspector general for t.a.r.p. also found that state agencies charge more than 100,000 for barbecues, picnics, celebrations, and other outings thatncluded food and beverage, instead of putting $14,124 toward assisting homeowners, the north carolina housing finance agency charg that amount for employee food and beverages. overall, it was fndhe agency charged more than $100,000 in unnecessary expenses. at the same time, that same agency denied 18.8% of homeowners who applied for housing assistance. state agencies even charged employee parking fees at the hardest hit fund as was the case in michigan, which spent over ght years after pass page of t.a.r.p., the special inspector general for t.a.r.p. continues to conduct audits of the hardest hit fund expenditures to ensure money is spent properly. in august 2017, it was found the states had misspent 3 million in t.a.r.p. funds. we must remember, that's $3 million which could have been used to provide mortgage assistance to underwater homeowne to rehabilitate neighborhoods. the only thing more disappn ste agenci using money meant to help homeowners onecessary expenditures is the treasury department's reluctance to recover those misspent taxpayer dollars. after receiving the audit, treasury decided to claw back only 29% of the improperly spent funds. so long as t.a.r.p. programs exist, it's important that we keep a watchful eye on those expenditures to ensure that taxpayer dollars are spent judiciously and for the purpose of which congress intended. i'm glad we're having this hearing. i'm glad we're looking at the proper use and expend chiture o funds, but i believe the same standard must be applied t trump cabinet and this committee should have hearings on those issues. >> thank you. i'm pleased to introduce our witnesses. deputy assistant secretary for small biness community development and affordable housing policy. in the office of the assistant secretary for financial institutions at the u.s. department of treasury. does all that fit on one business card? the honorable christy goldsmith romero. ms. campbell, chief executive officer of the nevada affordable housing corporation. ss kathy james of the alabama housing finance authority. and mr. scott farmer. welcome to you all. pursuant to committee rules, all witnesses will be sworn in fore they testify. so please stand and raise your right hand. do you solemnly swear and affirm the testimony you're about to gives the truth, the whole truth, and nothing but the truth so help you god? the record will reflect that all witnesses answered in the affirmative. please be seated. in order to allow time for discussion, please limit your testimony to five minutes. your entire written statement will be made part of the record. as a reminder, the clock in front of you shows the remaining time during your opening statement. the light will turn yellow. it's kind of like a yellow light at a traffic stop. that means speed up. you have 30ds left. red when your time is up. please also remember to press the button to turn your microphone on before speaking. we look forward to your testimony. >> chairman meadows, chairman palm ranking member connely and members of the subcommittees, thank you for the opportunity to testify today about treasury's efforts to mitigate the effects of the financial crisis on american homeowners through the hardest hit fund, or hhf. it was established in 2010 a part of the troubled assets relief program, or t.a.r.p., in order to help prevent foreclosure and stabilize housing markets in states hit hardest by the housing crisis. state housing finance agencies, or hfas, in 18 states were selected to participate as these areas experienced unemployment rates at or above the national average and/or home price declines of greater than 20%. hhf was designed to give the participating hfas the maximum flexibility to design and administer their own programs each tailored to local conditions in their respective communities. as a part of this flexibility, the states have been able to adapt their programs in order to address the changing needs in their communities over time. as of december 31st, 2017, states that assisted approximately 350,000 homeowners funded the demolition of nearly 24,000 blighted properties in distressed communities. however, the flexibility afforded to hfas by the hardest hit fund has made treasury's oversight a critical aspect of the program. we maintain a strong commitment to ensure the program achieves its goals and federal taxpayer dollars are used for their intended purpose. treasury requires each hfa to set specific goals for its program and demonstrate steady progress towards meeting these goals. treasury maintains an hfa from goals. treasury has also conductedore than 100 onsite compliance reviews across the participating fhas as well as additional targeted reviews to assess systemic programmatic risks. they evaluate a number of program functions, such as whether homeowners are evaluated in accordance with the guidelines, program disbursements and administrative expenditures are appropriate, the information reported to treasury is accurate, and the hfa's internal controls are functionings intended to minimize the risk of noncompliance. treasury takes corrective action when instances of noncompliance arise. this includes, for example, requiring the hfas to re-evaluate homeowners who were improperly denied to rim duress hhf for expenditures and strengthen internal controls to prevent further noncompliance. in addition to compliance reviews, treasury also shares this committee and sigt.a.r.p.'s commitment to preventing waste, fraud and abuse in all t.a.r.p. programs and we certainly consider the recommendations in that regard. treasury responds to this in writing and our responses me orkard to address the c. ncerns raised by these recommendations in a manner that allows the programs to function as intended and in the context of t.a.r.p.'s winddown. for example, treasury thoroughly reviewed the $2.2 million of cost questions and sigtarp's august 2017 report, involving analyzing thousands of transactions incurred by allf the hfas dating back to 2010. following this, it was determined that some of the questioned cost did not comply with federal government'cost principles. the hfas were required to reimburse hh for the reasons set forth in our april 6th, 2018 letter to gnicantarp, which is available to our website, treasury determined that the remaining costs were allowable under federal cost principles. as is the case with all t.a.r.p. programs, hhf isinding down. although congress authorized additional funding in 2015, the program remains a temporary one. as of the end of april 2018, treasury has disbursed $8.8 billion, or 92% of the $9.6 billion obligated under hhf. although they may issue new approvals through 2020, most of the states have already begun to close down hhf programs or will do so this year as they exhaust their available funds. this includes california and florida, the two largest states in the pgr. treasury's outstanding commitments under t.a.r.p. represent just1% of the $475 billion authorized by congress. as t.a.r.p. winds down, treasury remains committed to robust oversight and monitoring o all of its t.a.r.p. programs, including hhf. i thank you again for the opportunity to testify today and ome your questions. >> thank the gentleman for his testimony. the chair recognizes ms. romero for her testimony. >> chairman palmer and chairman meadows and ranking member raskin, ranking member connolly and members of the committee, i thank you for the support that you've given to sigtarp. sigtarp's a law enforcement agency as well as watchdog auditor. 415 defendants we investigated have been charged with crimes, including 100 bankers. 349 have already been convicted. 247 sentenced t prison. we've recovered $10 billion from our investigations. that's money going back to the government, to victims, to homeowners. that's a 35 times return on investment on our budget. sigtarp auditors have identified hundreds of millions of llars, in ways question cost savings. so i'm grateful you're examining the hardest hit fund because i've been there for the full eight years of the program. at the beginning of the program, phyllis caldwell, the senior treasury official who created the program, said to sigtarp that what they were trying to do at treasury was develop locally tailored strategies, and she explained this to us as state agencies choose the type of program, the amount of ing, the number of homeowners that they want to help. the white house announced that the program would be under strict transparency and accountability rules and treasury promised to measure performance. and phyllis caldwell told us that meant are we reaching the right number of people, are the states meeting their targets? if not, we'll learn and we'll adjust. by 2012,e found treasury had moved away from that. the senior treasury official who was in charge of implementing the program told sigtarp, this is not our program. this is their programs. after two years, at the height of the recession, only 3% of the money had gone out to only 7% of the homeowners who the program was estimated to help. treasury has never took ownership of this program or brought accountability. we made bread-and-butter ig recommendations for best practices that were often dismissed. some state agencies performed well. and solow-performing state agencies, what we did was we did data analytics. we talked to homeowners, to whistle-blowers, housing counselors and others. we identified obstacles that could be removed. for example, in florida, seniors had trouble with online applications. th's not surprising. or troubleetngdocunt such a tax assessments. in georgia, homeowners had trouble because they had to go to the irs and get a tax transcript within 30 days, which you can't do and which other state agencies don't require. after our reports, some of these obstacles were removed, and the performance improved. we found waste and misused dollars, which you've already talked about. parties, picnics, catered barbecues, gifts, steak and seafood dinners, $500 a month for an executive to drive a mercedes. i found one receipt in illinois, $549 at a pizza restaurant, and it said to celebrate hhf funds officially given from u.s. treasury and to celebrate the name of employee's upcoming wedding. in comparison, arizona and california, which has the most dollars, spent zero dollars on food and parties. critpplied treasury's contrt 2010, treasury's top lawyer said that under appropriations law, an expense must be necessary to what congress authorized in t.a.r.p. and if the homeowner could get this assistance without it, it wasn't necessary. well, the federal cost principles that have been talked about today start with necessary, next reasonable, next allicable to the program. and the top official at treasury warned if you open this farther, it wil authorize an almost unlimidumber and variety of expenditures, rendering the t.a.r.p. law meaningless, and that's what we found, days at the zoo and gym memberships and lawyers' fees to settle discrimination claims, visa gift cards, custom shirts, building a customer center where most of the customers are not hardest hit fund, moving into an apartment building, severance package. basically, it's less dollars for homeowners to reduce the cost. we found there are no federal competition requirements to save money and prevent fraud. we found that blight demolition rose 90% in michigan, 65% in ohio, 70% in indiana. army corps of engineers found asbestos mismanaged. so, what are the top threats today in the program? waste, anticompetitive conduct. in the blight program, corruption, fraud, antitrust, asbestos exposure. these are the types of areas we are investigating and auditing, so we have a vested interest in prevention. greater accountabilities and controls are needed. there are billions of dollars at stake. more than 10000 people applied for this program this year. demolitisreust starting this year or haven't even started in some cities, so it's not too late. thank you. >> the chair now recognizes ms. campbell for her testimony for five minutes. >> thank you, mr. chairman. chairman palmer, chairman meadows, and members of the committee, thank you for the opportunity to participate in today's hearing and appear before you regarding implementation and oversight of the hardest fund. for the record, my name is verise campbell, and since june of 2016, i've been the chief executive officer for the nevada affordable assistance corporation, also known as naac. i was selected by the state to restructure nahac after they experienced a series of operatnal issues and a decr in oduction. no state was hit harder than nevada during the great recession and subsequent housing crisis, and the nevada hardest hit fund has been instrumental in helping people save their homes and get back on their feet. these are actual quotes from some of our homeowners. "this program saved my life. it saved my children's life. i feel like the weight of the world has been lifted off of my shoulders." "we were under so much pressure, we didn't know what to do. we thought we were going to lose our home, until we spoke to the hardest hit." providing benefits to nevada homeowas not been without challenges. nahac acknowledges that there have been issues with its performance, specifically, the most critical report was a sigtarp report that actually indicated that there was fraud, waste, and abuse in nevada, in the amount of $8.2 million. however, subsequent treasury audits for the same period found a significantly reduced amount of unallowable expenses. ,000 t treasury..2 million.nahae nevertheless, it was without a doubt changes had to be made if nahac was going to effectively serve nevada homeowners. major changes were, in fact, made to nahac's organizationa struure -- systems and programs. in fact, our newest program is a down payment assistance program entitled hope brings you home, which was launched on may 1st, 2018. $36 million was allocated to assist 1,800 homers in the program. to date, the down payment assistance program has over 200 reservations with over $3.8 million committed in its short time. the nevada affordable housing assistance corporation has helped over 5,000, almost 6,000 nevada households to date, a that number continues to grow. programs have been instituted to solve nevada's hsi crisis with the assistance of treasury, nevada's business and industry, and the nevada housing division. nahac initially -- but there were issues with the operatis of nahac initially, but nahac has improved its organizational structure and its operations, resulting in better oversight, transparency, and controls. and increased capacity to help more nevada families. new management is committed to efficiently and effectively utilize the remaining allocation of government funds to help more citizens of one of the hardest hit states stay in their homes and stabilize nevada's housing markets. thank you. >> chair now recogzes ms. james for her testimony. ve minutes. >> good morning. chairman palmer, chairman meadows, and members of the subcommittees, thank you for the invitation to discuss with you alabama's hardest hit program. my name is cathy jas, business development manager for alabama housing finance authority. i also serve as the manager of the hardest hit funds program in alabama, which we call the hardest hit alabama program. alabama's introduction to the hardest hit fund began with the cation in 2010. hardes hit funds had already undergone two rounds of funding when fha was invited to participate in round three. we quickly began creating our program and program guidelines. we began by reviewing term sheet templates that were furnished to us by the department of treasury, which had been adopted by other states in rounds one do. during the development of our press, cse attention was paid to the respective allocations of program funds and administrative expenses. in total, alabama's allocation is $162 milli and 16.75% is allocated to administrative expenses. during the seven years of hardest hit assistance, the department of treasury has approved 12 term sheet changes for the state of alabama. our current portfolio of programs includes a mortgage payment assistance program, a loan modification program, a short sell program, and a blight elimination pilot program. more than 6,500 homeowners have been approved and received more than $63.8 million in program dollars. we have an average of 9,828 per household for assistance. 85% of the households who received assistance in our mortgage payment assistance program had an annual income of $50,000 or less. 45% of the homeowners who received assistance were 90-plus days delinquent on their first mortgage at the time of application. and hardest hit funds have been disbursed in all 67 counties in the state of alabama. hfa undertakes the administration of the hardest hit funds program with great seriousness to ensure regulatory and program compliance. alabama's hardest hit program is reviewed on a monthly basis by over internal audit team and an annual basis by an independent audit firm. and since the program's inception, alabama has completed five compliance reviews with the department ofasurre the 2017 sigtarp report asserted that $705 charged by fha to the hardest hit fund was unreasonable, and therefore, unallowable. all noted expenses were related to hardest hit activities, such as inhouse lunches for working conferences, in one instance hit a servicer participating in the hardest hit program and promotional items for hit homeowners who volunteered for television and radio ads. alabama defended the charges. even so, per the march 2018 compliance review, hf ankrim burressed treasury $397, the balance of expenses were found to be reasonable. since notification of alabama's allocation of hardest hit funds, we have worked to ensure that the program is programmatically sound and fun were not spent unnecessarily. hfa's commitment to the proper use of hardest hit funds is unchanged. we will continue to provide hardest hit assistance to homeowners across the state of alabama in compliance with the agreed-upon terms in the term sheets and in compliance with federal guidelines. thank you. >> chair now recognizes mr. farmer for his questions, for fi m>> chaman meadows, chai palmer and honorable members of the committee, my name is scott farmer, and i'm executive director of the north carolina housing finance agency. since january of 2017, it's been my honor to serve as executi director, and i'm proud to be with you representing our board of directors and more than 160 dedicated staff. thank you for the opportunity to share information about one of our most effective programs, the nc4 closure prention fund, and its accomplishments on behalf of citizens in dger of losing their homes in the face of a significant economic downturn. the nc foreclosure prevention fund helps responsible north carolina homeowners struggling with mortgage payments while they search for work or retrain for a new career. eligible homeowners include those facing foreclosure due to a no-fault job loss, reduction of income, or temporary financial hardship, such as illness, death of a spouse, or a natural disaster. the fund also provides housing counseling and assistance to veterans transitioning to civilian life, veterans who have gio mve sh in service to our nation should never fe the prospect of losing their home. this initiative has already saved more than 400 veteran families from losing their homes. the fund was launched in 2010 in the wake of the great recession when our state was identified by treasury as hardest hit due to high unemployment and a high number of foreclosure filings. since then, the fund has helped more than 26,000 homeowners keep their homes during difficult times. approximately $706lion was allocated to our agency under the hardest hit fund. develop this ogram, we tofintly our en capacity. this included hiring more staff, leasing additional office space, budi a complex application portal and website, and training hundreds of partners atewide. we were notified by treasury that we were to receive hardest hit funds in april of 2010. the initial program was approved by treasury in august of 2010, and we built, marketed, and implemented the program by october in only six months. standing up a program of this scale and complexitt time frame required long hours for staff, many of whom already had existing full-time workloads within our agency. the work is specialized, involved, and stressful when assist homersho are undelypset a potentially losingheir homes. among the thousands of hard-working families assisted by the fund is a small business owner in allegany county who has owned a thriving business since that changed when the recession hit. and by 20011, they were about t lose their home. they held on to their home and they emerged stronger in business and recently celebrated his 20th anniversary. the fund helped a lee county veteran who struggled for employment after discharge from the army. he was kept in his home while using the g.i. bill to get assistance to get a local job and is hired by a local government. a lawyer was able to keep her home wit assistance from the fund while seeking new employment. she still lives in her home and works for a health care non-profit that works on getting care to underserved communities. the fund has had a worthy impac on statement and local economies, preserving an operty values, sustaining wealth not only for the homeowners we assisted, but their neighbors as well. on average, lenders and investors can expect to lose almost half of their investment in a foreclosed mortgage. foreclosures prevented by our work have saved an estimated $1.5 billion in our state. thisorklso offset the cost associated with broader social impacts of foreclosure, such as familial stress, neighborhood destabilization, crime and degraded health outcomes. noted, we have helped more than 26,000 north carolinians in the nearly eight years since the program was launched, using a significant portion of the were current winding down s. the program and expect to have committed all of our program funds by the second quarter of 2019. we are proud of wha has been accomplished for north carolina and its citizens through the nc foreclosure prevention fund, and we will continue to ensure that eligible homeowners have the opportunity to benefit from this program. thank you for the opportunity to share o story day, and i will be happy to answer any questions. >> thankhe witnesses for their testimony. the chair now recognizes the geleman fm tennessee, mr. duncan, for five minutes for his questions. >> , thank you very much mr. chairman, and thank you for calling this very important hearing. ms. romero, you listed a very impressive record for your office, but you also said that nevada, for instance, had committed $8.2 million -- or lost $8.2 million in waste, fraud, or abuse. and then ms. campbell just turned right beside you and said, it was only $136,000. what is the discrepancy there? or whatbo her statement about that none of it really was? waste, fraud, and abuse. or very little. >> so, it wasn't -- we didn't label it as fraud. we labeled it as waste and abuse. i want to make that distinction clear, because it was our auditors. but it doesn't make sense. imean, to be honest. what nahac paid back was what treasury requested, which also didn't make sense. so, for example, the ceo that was driving the mercedes-benz was forced to design, he got a $20,000 severance package, and that's been paid. that's not necessary for homeowner to get assistance in the hardest hit fund. so, what i found was that treasury officials were applying the wrong standards. they were not applying the necessary standard isot only what's baked into their contracts but is the first requirement of the federal cost principles, nor is it reasonable. that's just one example, but there are many, many examples, like moving into a luxury building to improve employee morale, then deciding it's more cost than youause you doubled the rent,reaking the lease, $20,000 in legal fees to break the lease and move and pay rent. none of that was paid back. and this was all at a time when they really weren't helping homeowners getting this money out to homeowners. >> all right. thank you very much. the report says that as of december 2017, 347,000 people had been helped by this hhf program. can somebody tell me how this works exactly? have some of these -- how many homes is that? in other words, most homes are in the name of the husband and wife both, or maybe more than one person. so, how many homes are we talking about? does anybody know? of the 347,000? >> we count households, so those numbers represent the household. >> one. >> one. >> so those are 347,000 homes, then -- >> households. >> all right. and how long can somebody stay on this program? ms. romero mentioned it's eight years old. how long -- have there been people who have been on this program from day one and they're still on the program? ask anybody tell me? >> this is cathy with alabama housing financial authority. i think that each state is a little bit different. but for the state of alabama, for the mortgage payment assistance program, our homeowners have up to 12 months not to exceed $30,000. >> and is at pretty typical of -- you say each state is differen ms. campbell? >> mr. committee member, our homeowners, it depends on the program. we have an unemployment program where a homeowner can stay on the program up to 18 months. r programs combined no more of than $100,000 per household. >>ight. is that typical, ms. romer >> again, it vies two years, three years, one year. it just depends on the state. >> all right. and now, mr. kranbuhl, it says there'$2 billion unspent. is that correct? in one of these reports? >> it's actually around $800 million. the $2 billion was the new authorization in round five from the 2015 vote for -- starting in 2016, could be spent through 2021. so, there's about $800,000 left or about 8% of the hardest hit funds remain available. >> is there a goal or a plan to, since unemployment is so low now and the economy is so strong, is there a plan to end this program or phase it out? >> yes, sir. this program, the applications are available for those who have dollars, that $2 billion was allocated across the 19 states. so, of the remaining funds, that applications may be accepted through december 31st of 2020, and dollars can be put out through december 31st, 2020, if there are any remaining dollars. certn states have already wound those down, so there are no longer dollars available. >> so, how many of the 19 states have wound down the >> california and florida are already wound down or are in the final stages of winding down. many others are initiating that winddown now. >> thank you very much. thank you, mr. chairman. >> thank you. the chair recognizes the gentleman from maryland for five nus. >> with your rmsi, i'll d t mr. ol >> so >> thank you. i have a hearing in mark-up in foreign affairs, so i appreciate his consideration and gracefulness. i'm concerned about the apparent mismanagement of the hardest h fund proam by some of our partner states. according to the special, inspector general's report, states spent over $600,000 on cars for executives,re parkinor staff and monthly parking bus passes. states also spent $50,000 o adit housing counselors, $14,000 for employee meals and $8,000 on gym memberships. in 2017, the sigtarp found $3 million in wasteful spending. mr. kranbuhl, where in the world did the states get the idea that this was permissible spending? >> mr. rain member, i appreciate your question. i can't speak for why the states make decisions they make, but they areequired to follow federal cost principles in all of their administrative expenses, and that is the standard that they're required to follow. well, mean, okay, but some of them decided based on those standards that it was permissible to spend up to $8,000 in ger using federal funds tha were intended for housing relief. how uld that happen? was there any oversight by the department of treasury with respect to the use of these funds? 10 in-person reviews and -- a >> i'm soy? >> treasury department has conducted more than 100 in-person reviews with the states to review their administrative expenses. we work with them up front to make sure that there are standards to follow, that their cost principles and compliance platforms are very clear, and we review those with them on the phone frequently, if there are any instances -- >> let me ask it differently. i me get all that. we'll stipulate all that. bu the ft is, somebody spent money on gym memberships. does that meet with your apoval? did that meet with your standards? >> there are a rge of expenses that are eligible and ineligible pl. r federal cost princi >> isbe ineligible or eligible? >> sir, if you'd like to go through each line item, i'd be happy to meet with you and your staff - >> no, sir, i have a simple question i a public hearing. is a gym membership payment a permissible use of these funds, from your point of view? >> well, sir, i can't -- all i can tell you is that the federal cost principles are followed, and under certain circumstances -- >> oh, for god's sake. mrro, iit permissible or not? since apparently, mr. kranbuhl doesn't want to answer a reasonable question put to him that's pretty simple. >> no. no. >> thank you so much, ms. romero. at clarityive english, useful thing when trying to get to the bottom of problems. can you elaborate, since mr. kranbuhl wants to read us, you knowrestrictions from a manual somewhere? >> treasury sent me a letter in april saying that they did think lowed in the federal cost principles. number one of the federal cost principles, got to be necessary to what congress authorized. >> so, unless the only way i can reach an agreement with a homeowner is at the gym, it wouldn't be a permissible expense? >> no, and i think that raises a real danger of what could be allowed. >> right. well, in listening to mr. kranbuhl's convoluted answer, right here, right now i've got more concerns than i had going into this hearing because, apparently, we're not cle clear, and the wonder states are, you know, approving expenditures tt clearly to any common-sense wit wldot be allowable because of this kind of fuzzy guidance. the treasury department, ms. romero, since mr. kranbuhl's not going to be cooperative in answering, i'll ask you. the treasury department only sought to recuperate 20% of the money that was misspent or wasted. is that acceptable from your point of view? and why only 29%? >> no, it's not acceptable. you know, we worked hard to loo at this. we didn't put -- we didn't substitute our own judgment. we applied the federal cost principles. you know, there's a long history of applying the federal cost principles. this apply to every grant. is ista work. so no, it's not acceptable. and i also want to say, when he says his program'sn winddown or that there's not $2 billion, there is $2 billion remning to be spent. the numrsha he's tal out is what's gone out of treasury's door, but it's not been spent.so, when he says californ closing down. californiaas $334 million to be spent. >> very helpful. thank you. and thanks for the claritive answers. i yield back. >> thank you, mr. connolly. i will take a few minutes to follow up with some questions and then yield some time to mr. raskin. what actions, if any, did your agency, mr. farmer, take to address the concerns raised in the special inspector general for t.a.r.'s report? >> yes, thank you, sir. immediately following the release of the report, our agency made the decision to repay a portion of those costs related to meals primarily because, you know, there was a number of charges in there that we could have spent an inordinate amount of time debating back and forth whether or not it was allowed or not allowed, so we decided to repay the meals immediately. in addition to that, we hired a third-party audit firm to bring -- we brought them into our office, had them look at the expenses, look at the categories and how we were categorizing expenses to give us advice to help us address any questions related to those expenses highlighted in the report. in addition to that, we also revised our travel and expense policies based on that guidance. in addition to that, we also provided all of the same records to treasury. they did a similar review. while we did not agree with everything that was included in the initial report, in the categorization of some of the categories, we respect the role and responsibilities of sigtarp in reviewing it. and so, we tried to get back to the place where we knew that the expenses that we had better guidance moving forward so we would not make expenses or charge things that may not be allowed under the federal principles. you know, treasury did their additional review, ande have since repaid all of the dollars that have been requested of us to repay. >> when did your agency decide to return those funds to the treasury? >> excuse me? >> why did your agency make the decision to return those funds to treasury? >> for the initial amount, we actually had made the decision prior to the release of the report for some of the expenses. we had reviewed it and recognized some of those were questionable and we were better off to repay than to again debate each and every fee. the other fees we repaid in march following the exit interview with treasury. we paid an additional $5,100 at that point in time. >> have you received any guidance or training to your agency received from the treasury on the use of administration funds? have you had any kind of correspondence or any kind of guidance from the treasury? >> we have received guidance over time from treasury at differints. they were in our office, i think five times over a seven-ar period, with onsite reviews. the administrative expenses were not an issue at any of those reviews. they have since provided se additional guidance regarding the federal principles, and again, those have been what we reviewed and instituted across the board for this program. >> so, their primary communication means is just visiting on site? is there any other ways they communicate with you? >> no, it's regularly with staff, with the staff that are administering the program, regularly communicate through e-mails, through phone calls, conference calls. as issues come up, they would bring that to the attention. there's regular calls with the hardest hit fund states as well, where information is communicated out to t group. >> thankouery much. ms. james, summary of questions and topics there. would you like just to take maybe 30 seconds and kind of -- going back to the same questions, giv us a summary of what i asked of mr. farmer? >> so, yes, sir. that there was $705 in misuse of funds, and we, of course, did not agree with that, but we did, after the treasury report, reimburse $397. the funds were used concerning hardest hit activity -- lunches, promotional items for some homeowners. so, we did not consider the funds to be a misuse or unnecessary. >> what were some of the hit fund implementation chlenges, mr. farmer? mike, please. >> sorry. some of the difficulties were the -- it was a relatively new program. we had a small-scale program at the state, but receiving the dollar amounts, it required us to basically start from scratch. as i mentioned in my remarks, we had to hire staff. most of those were contractors, temporary contractors. we knew this was a time-limited program, so we tried to go out and hire at our peak, i think we had 50 contractors that were working on the program. we continue to maintain that same staff. it was statewide program, and you know, we've got a really large state with 100 different counties. we had to work with partners across the state. we held events as we were rolling out the program. we had to educate all the partners on what the program was going to be, and then figure out a delivery vehicle to get that out to the homeowners. it required -- you know, we built, in house, we built a database system for the portal as we refer to it for intake of the applications that not only our partners but also homeowners had the access so that, you know, whether they we computer savvy, they had that ability, if they needed to go to a council loge agency, we made sure they knew there was a counseling agency available. so it was really just the size and scale of the program initially and knowing that there was a great need, and it was not area that our agenc had a lot of expertise in. we're used to providing the affordable housing as opposed to saving the affordable using, but it was a challenge that we took on. it was something the state needed at the time, and so we were glad to step into that role, and it certainly has been a learning experienceor us. >> thank you, mr. farmer the chair now recognizes the gentleman from maryland, mr. raskin. >> mr. chair, thank you very kindly. ms. romero, we've got some information indicating that your office, the office of the special inspector general, found information that led to criminal charges against 415 people, and 349 criminal convictions with 247 people sentenced to prison. so that's not just taking the office out for lunch. but what kinds of activities were taking place there? and is this just in the hardest hit fund, or is that in t.a.r.p. overall? >> thank you for that question. t.a.r.p. overall, so, 100 of those are bankers. a good number of them are their bankers' onsps. we're talking about bank fraud. there's about 88 people who have gone to prison for scamming homeowners in t.a.r.p. housing programs. so there's a number of things related to the crimes that we're looking at. >> the kin oe, fraud and abuse that you identified in the hardest hit program afflict the other programs under t.a.r.p. as well? >> well, i think in terms of the a.p. housing programs, we have found people who have tried to scam homeowners. the other ones are sort of program related, like bank fraud, related to t.a.r.p. banks. >> okay. so, mr. kranbuhl, let me come back to you. you know, there is some suggestion that treasury, if not washing its hands of what goes on at the state level, is somewhat indifferent or lackadaisical about it. is that right? y basically just trust the state authorities to implement this in an efficient way with integrity? >> thank you for your question. mr. ranking member. we work with the states andave conducted more than 100 in-person reviews. i can't speak for what sigtarp's methodologies that they use are. however, our reviews are incredibly detailed. we look at each expenditure to make surere complying with -- >> have you followed through on all of the recommendations made by the special inspector general that came out as part of her report? >> there are two reports outstanding and we're still reviewing, but other than those two, we've replied to each line-item recommendation that the special inspector general has provided in writing, and that is available to the public. >> when you say you've replied to them -- >> we have written a response letter with each line item -- >> right. but course, what we're interested in is terminating the unde practices that are wasting public resources that should be going to people who are in need, right? >> we certainly are appreciative of that and are very focused on making sure no waste, fraud, or abuse occurs. we follow federal cost principles along with every other federal program. it's standard. >> yeah. i mean, i guess, you know, you detected some frustration in mr. connolly's response to you, but i detect a certain passivity about following the principles and we stand by the law and so on. sense is to bring all the people in from the 50 states to have a meeting and say here are the principles and here's what's going to get you sent to jail, and we're very serious about enforcing this, because it's the public's money and it's people who need it. and i'm just curious about what kind of high-octane intensity you're bringing to the task of enforcing integrity within the system. >> sure. we have several -- i've had several annual meetings to share best practices, and certainly review compliance procedures. any time there's an instance called into question, we work with the states to augment those and to strengthen their internal controls. with respect to ranking member connolly's question, the federal cost principles allow for health care platforms for employees, and health and wellness programs, and gym memberships do fall under that. >> okay. ms. romero, do you feel confident that treasury has responded positively to your recommendations and is implementing them in order to crack down on the waste, fraud, and abusend get the money to the people who need it? >> well, let me say, i do appreciate that there's been some movement, but no. this is an absolute misread of the federal cost principles, which start with one, necessary, as to what congress intended, two, reasonable, three, allocable to the program. when it comes down toabili accountability, if you want to stop what's going on, start with repayment, because there's no better way to deter misuse of funds than repayment. and then let's put some controls in here. but loong -- just because the federal cost principle have a line in there about health and welfare does not mean gym meerships are health and welfare things are necessary in what congress intended, and tha is being lost. >> yeah. i mean, i would just like to say, the expenditures that are reported here are kind of eye-popping, and i think, you know, any government agency would be amazed to think that they can spend money on, you know, lavish christmas parties, taking people on trips, even just purchasing lunch for the office on a daily or weekly basis, that kind of thing that we saw. i mean, it just doesn't make any sense. well, the program arose because there was a terrible crisis that threw millions of people out of work and millions of people lost their homes, and is on that. the big banks got essentially this huge subsidy, but we still have a lot of people around the country who are hurting and are in crisis. so you know, i guess the last point i'd want to ask back to you, mr. kranbuhl, are you convinced that youot the controls in place right now to make sure that the money that's still within the pipeline is going to be spent in the right way? and do you have the controls within treasury to make sure that you guys are on top of it? >> i appreciate your question. we are very dedicated to working th this committee and making sure that in each state, each program to make sure that they are following the proper federal cost principles that waste, fraud, and abuse are minimized, if not eliminated outright, that the intended use of dollars that congress has set forth will be followed and the real driver o this whole platform is to help homeowners in need, and we are committed to doing that, sir. >> thank you, mr. chairman. i yield back. >> i thank the gentleman. i now recognize myself for a few questions. mr. kranbuhl, you testified that you've expended $8.8 billion of the $9.6 billion, is that correct? >> that is correct, sir. >> so you only have $800 million left in the fund? >> that's a large number, but yes, sir, $800 million. >> yeah, that is a large number. but it also indicates that the program is virtually shut down? >> it is winddown. we have less than 1% of all dollars from t.a.r.p., $475 billion program, left to deploy, yes, sir. >> ms. romero, is that number consistent with what the ig has found? >> well, that's what is left the u.s. treasury, but the money's not been spent. so if you think about it this way, when we investigate fraud or when we audit waste, those are only of spent money. the money's protected. there's $2 billion that's left unspent in the program. >> so, there's still $2 billion out, but there's $800 million left in treasury? i just want to get that straight. >> yeah. for my purposes, whatever's sitting in treasury is nice and safe and secure. whatever's out there and is going to be out there in the future, which is $2 billion, that's what i've got to watch out for. >> what responsibility, mr. kranbuhl, do you think the department of treasury has for ensuring that over these last few years that this money was spent to achieve the states purposes to help families who were homeowners keep their homes? >> well, there are several measures taken to make sure that the dollars are spent -- >> now, i'm asking you - >> not on the cost principle -- >> this is not a filibuster time. >> i agree. >> i want to know, what responsibility does the department of treasury have when you're overseeing a program like this to make sure that, in this case, administrative costs, don't get out of hand? i mean, you do have an oversight responsibility. >> certainly. from a cost -- from an administrative cost perspective, we work with them to, each state, to look at their internal controls, but more importantly, we're wng sure that dollars are being deployed. if they're having a challenge, we're working with each state hfa to make sure that their platforms are accessible to those who need it. >> well, where was treasury when you had people driving mercedes or renting office space in the taj mahal? imean, i really appreciate the work of the inspector general, but generally, if the inspector general's coming to call the report, it's not always a good report, and that's unfortunate, but it's indicative that there's a problem with oversight. the treasury has a responsibility here. and i don't like the idea of us having to have hearings like this and then coming back and trying to fix a problem that should never have occurred to art with. so, i just want to know, does the treasury take seriously its oversight responsibility to make sure that the people at the state level who are handling federal dollars, taxpayer dollars, are not abusing those dollars? >> ainly. actually are identifying many of the items that sigtarp has identified ourselves, through our work, and then we refer it to sigtarp for their review, but we're very focused on that, mr. chairman. >> well, tell me what action's been taken. has anybody been fired? has anybody been referred for investigation for, you kn, criminal issues? >> there are many cases where we have required the states to replace their management teams to make sure that, in the case of nevada, for instance. we worked with their hfa to ensure that proper accountability was occurring and that they -- >> he was forced to resign and paid $20,000 in severance. for crying out loud, is there anything he could have done that would have gotten him fired? >> sir, as we reviewed each situation, we offered our recommendations, and -- >> let me ask this question of the folks who administer the programs from the state level. did treasury provide any guidance or training to you or your agency on the use of administrative funds? yo attend any kind of training online, in person, facetime? i mean, did you get any training? >> i know -- this is varise in nevada. because of the way i was brought on, i was in constant contact with treasury. prior to me coming on, read correspondence where treasury and sigtarp both, as well as the housing division, had expressed some n.coer neva nevada's situation -- >> you didn't get training? you did not attend a training session? i mean -- >> no, actually, i came in the door with training because i was walking hand in hand with treasury, because i ce in after the problem was discovered. >> all right. how about you, ms. james? >> i wouldn't say that we received training. we did receive guidance via the agreemt that we signed. but in terms of facetime, it was always discussed at oursummits, but training per se i cannot say that. >> how about you, mr. farmer? >> i would agree with ms. james. that was same -- >> ms. romero, is that a problem, if you're being -- if you're charged with handling hundreds of millions of dollars, is that adequate training? >> no. >> let me ask you this. ms. james, you guys had $35 million for demolition. and you repurposed $34 million of that. you million of it and only demolished three houses since 2014. i hope you didn't spend $1 million on it, because i think for $1 million, i could have gone in with a sledgehammer and a wheearrow,nd in a four-year period, mr.raskin and i could have done that and gladly done it for $1 million. >> no doubt. >> that drives me crazy. prior to this job, i ran a think tank and also worked in the private sector. and a couple engineering companies. and i had my staff do a little research for the birmingham area, and the average cost to completely demolish a house, it ranged from $5,000 for a smaller home to $15,000. at $15,000, that's 67 houses that should have been demolished for $1 million. now, if you want to look at the median, $10,000, that's 100 houses. you demolished three houses. let's say that's $45,000. let's say they were the toughest ones to take down and haul off. what happenedo that other $955,000? >> the state of alabama does have allocated $1 million to the blight elimination program. we've actually only disbursed $38,000 for tho three properties that were demolished. >> so, you've got $962,000 in balance? >> correct. that is correct. >> all right. on that, i'mot going to get into what the local responsibilities are for those houses, but i would pointut that if these are homes that were previously owned, and the efault on, and there are tax liens on them, which is typically the case -- i know in birmingham, there are at least 16,000 abandoned buildings, 25,000 or so in jefferson county with tax lean lie leans on them. is there any responsibility for the municipalities or opportunities for them to take ownership of these homes and dispose of them? >> we have worked very closely with the city of birmingham as well as their land bank in terms of trying to get them up and running on our pilot program for the blight elimination product that we were offering. we reached out for the pilot program to two cities that we knew were in great need of assistance. we reached out to the city of mobile as well as to the city of birmingham. the city of birmingham did submit an application, although the application was never completed. we have not heard from them. our last conversation with the city of birmingham was january 29th. we had conversation with their new -- part of their new executive committee. they do have a n m the city of birmingham. and mr. roberts did reach out to us. and we had conversation with him in january, but we have not had a response from his office. >> one of the problems, potential problems, that i see in some of these programs, particularly the demolition, is that the state agencies ensure that there is an open bid process for that type of work so that you don't have a single-source contractor, no bid-rigging, no brother-in-law contract sort of thing. ms. campbell, i'll start with you and we'll just go in order. are those -- do you have those insurances in place? would you be actively involved in monitoring the disbursement of any money to make sure that there was a fair and open bidding process? >> thank you, mr. chair. actually, the sigtarp released an interim report where they identified a weakness with our policy and predures. when iamon it was like restarting the organization all over again, and although we got multiple bids, we did not follow specific rfp process, and that was one of the takeaways that we took back after sigtarp recognized that, is that we're taking a look at all of the policies and procedures and seeing how we can tighten them up. >> ms. james, considering only three houses have been demolished in three years, i don't think that's an issue yet. but when you do sta expending that money, i highly encourage that. mr. farmer, do you have an oversight program in place to make sure that contracts are fairly -- >> we are not actually operating a blight ogram. that's not one of the ones we run in our state. >> will you? >> no, we do not have an intention to run a blight program at this point. >> ms. romero, you've been looking at the administrative costs. have you also had not just the blightog but other areas where contracts have been let, and do you have any insight into whether or not these are getting adequate oversight? >> so, in my opening statement, i identify one of the top threats as anticompetitive conduct, and we're conducting active investigations. and i will say this, our investigations are criminal investigations run at sigtarp are confidential, so i will not discuss those, but i will say it is a rea issue, a real issue in this program. >> i want to go back to you, mr. kranbuhl. and i'm being a little generous to myself in the time, but i think this is very serious. i think we all take this seriously. the thing that disturbs me more than anything else, and this is particularly true in alabama, ms. james, that there were w were eelibl for o lost their this program, but only 24% of alabamans were able to get help from this fund. that's the third lowest in the country. and it looks like new homeowners were given preference over existing homeowners. and from my perspective, the whole point of the program was to help people who owned their homes to be able to stay in their homes. >> we don't make a distinction in alabama new versus existing homeowners. our program is open to applicants who have suffered a hardship prior to their application of the program. we do have a significantly high withdrawal rate of applications, but -- >> but that's because the process is so impossibly complex d cumbersome. i mean, it's of the same things that ms. romero's already testified about in georgia and other places. what's the national average? wasn't it like 80 something percent of the first new homeowners got approved? >> yes, talking about the down payment assistance program. that's like 88%. 88% compared to like national average in the 40s for homeowners. >> well, we're in winddown stage of this program, but from my perspective, particularly in alabama, it was a failure. when two-thirds of the people who needed help couldn't get help, for whatever reason, that's a failure. mr. kranbuhl, i want to go back to you. do you have -- how does treasury go about monitoring these programs? i want to get back to the oversight. >> well, i want to make it clear that every identified case of waste, fraud, or abuse, we've reclaimed every dollar that was. >> but you only reclaimed $400,000-? >> sir, i can't speak to the standards others have reviewed. however, at treasury and our program at hfa,have revied every one and if there was a case where it did not meet cost principles, we can't just decide although things might sound improper, we have to have a standard, and that's the federal cost principles that we follow, sir. and every time those have been violated, the dollars have been fully refunded. >> it took sinkgtarp bringing ts before you to identify this. my guess is you didn't get this until sigtarp provided it to you. >> i can't speak for each case. there were i suspect cases that were provided to sigtarp. however, we undertake a sample based program that is risk adjusted in terms of how we pursue our reviews. so we do a sample study. i will tell you that less than 0.01 of 1% of all administrative dollars have been deemed improper for the federal cost standards. >> how would you respond to t assertion, ms. romero? >> so, there's like more than $800 million spent. i haven't audited all of it. nothing's been provided to us from treasury. but again, it's like not seeing the forest through the trees. i keep hearing federal cost principles. and it starts with necessary. and why necessary? because under appropriations law, you've got to get back to what congress intended with t.a.r.p. so, yes, there might be some sten rts a being allowed, but that doesn't -- you've still got to look at the program. is it necessary for the program? so, if in nevada, they're really not letting people into the program move into a luxury building, it's not the same. i mean, so that seems to be lost. the context of something seems to be lost, getting back to what congress intended. and i want to say this. when we apply the federal cost principles, this is not like an ig shop going out on an island. there is years and years and years of gao other ig reports. this is just bread-and-butter work for an ig shop. this is not going, doing something that's somehow remarkably different than everyone else. this is just really, really basic, get back to what congress intended for spending. >> well, i'm about to gavel myself. but i just want to say this. one of the reasons this really, really bothers me is that we sent out $140 billion in improper payments last year, and it will be more than that this year. and when you -- -- this is obviously not in that realm, but it all adds up, and every dollar that is improperly expended, every dollar that's wasted, every dollar that's misused is a dollar that we've had to borrow and that adds to our interest burden. so, i guess my concluding remark on this is that you have got to do better, and we're going to insist that you do better and that the state agencies receiving federal money do better. with that, i recognize mr. grothman, the gentleman from wisconsin, for five minutes for his questions. >> right. you guys have about $2 billion left in the t.a.r.p. overall in your programs. is that right? is that what we have here? >> those are the unspent funds. >> correct.funds. >> correct. what year was this program originally established? 2010? >> 2010, yes, sir. >> okay. >> what do you plan on having happen with that $2 billion? >> to be clear, the $2 billion is the amount that was appropriated is an extension o the program. congress extended the program through additional $2 billion in 2015 with dollars made available in 2016. they go out to the states to be spent at the state l deciding how they should help homeowners. >> given that we heard this on th news this morning or whatever. the housing market is boo right now nationwide in general. housing costs are up everywhere. do you think it would be appropriate to takehese funds back now and kind of what the chairman said, vice chairman said. give them back to the treasury. is it necessary that we help any else in this program? >> mr. vice chairman, we at treasury are administrating a progra put forth by the congress deemed necessary. and if the states are unable to use the dollars at end of 2021 be returned to treasury. >> what would happen to the money now? >> my understanding they have to be a change. >> right. we would change the we would change the law and said we're not sending anymore money to the states. what would happen? >> mr. vice chairman, states are utilizing dollars they are needed. if they cannot use them, they'll return them. >> we're broke. getting back to what the chairman said. we're broke out of our mind. i know if you send money to states, they will always have a way to spend it, ultimately. but, i mean, the question i have is given that the housing market in this country right now is booming like never before, i'm told, do you feel it is necessary to send anymore of these dollars to the states. what would happen if we didn't. what happened if we gave them back to the treasury or whatever? >> mr. vice chairman, i think that question might be best for the states. we're solely allowed to administer the program. >> you can't make any observations on the program you're administering? >> to your point, sir, the states found plenty of uses for the dollars. >> just out of curiosity here. there's a general lack of urgency in the whole building about spending federal dollars. does anybody on the panel know what percent of the federal budget we're borrowing this year? just out of curiosity. anybody guess? how much of the budget do you think we're borrowing this year. we'll call on you. >> mr. vice chair, i do n care to guess. thank you. >> nobody is going to. 22%. thf high, isn't it? 22%. i mean, you know. okay, we'll give you some questions. which state housing finance authorities perform better than others? well, mr. vice chairman, i would say the states have utilized the dollars most quickly have been performing the best. states like california and florida. however, their performance is really probably best gauged over time and history will decide that, sir, after the program is completed. >> define success in these programs. >> we've helped more than 350,000 homeowners in demolition and creating 24,000 from properties. >> i got a question. neither one of you has got a housing finance authority. how would you describe the goals of the hardest hit fund in your state? >> i think for north carolina it was try to help as many folks as weou during the economic crisis and recognizing that there wa a real challenge with the high foreclosure rates that were not anything we've seen before and trying to help as many families as we could. help them out. in our case there was a number of programs. the primary one was theorage payment. we would make their payment while they were out of work or haduced w and while they were being retrained for their jobs. so it was basically getting them back on a good footing. bringing the mortgage payment current and getting them back to where they can remain in their homes. >> i'll ask you because you're from north carolina. what bad -- do you have any money out there, you're still operating, obviously. what would happen if we took back the money that hasn't been spent right now to the federal government? our poor, broke, destitute federal government? >> if you took back the money, we would have to shut down the program sooner than anticipated. right now we aicipate closing out the second quarter of next year. so we would have to close it out and whatever point that the state recovered the dollars. it wouldmount to fewer households that would benefit from the foreclosure prevention. >> how are housing prices in north carolina now? >> they're doing really well. we're a growing state now. so, obviously, the economy has turned around. >> if housing prices were booming like they were in north carolina in 2010, would they ever i a million years thought of this program? >> sir, i don't believe they would. >> right. right. right. we'll say the same thing, miss james, from alabama. if i gave you the same questions, what would you say? >> we definitelyjoy the use of the hardest hit funds in the statef alabama we helped several homeowners maintain home ownership. if the funds were withdrawn, there's some people that would go into foreclosure. there has been a turn around in our state, but removing the funds would causee families to go into foreclosure. >> how are housing prices in alabama? >> doing well. >> if housing prices were booming in alabama like they were in 2010. do you think congress would have began aprogram? >> i would have to a wh north carolina. i don't. >> more than enough time. i thank the chairman for givin me an extra 20 seconds. >> my pleasure. i thank the gentlemans for his questions. >> mr. chairman, thank you very much. i wanted to come back to something i started off with that i bugging me, which is why is maryland not part of this program? what about the states that have been left out? the hardest hit refer to the states or does it refer to the people who were the victims of the downturn? >> the decision is not what states were eligible to participate in the hardest hit fund made criteria developed by a prior administration. if you would like, my team would be happy to sit down with you and run through the criteria and talk about the other programs the treasury has >>well, are you actively reconsidering those criteria? i mean, it seems like there's a lot of money that is being e it's not necessary there, but we've got parts of maryland that were devastated and demolished by the crisis. is that something under active consideration with you? >> we don't have authority to an t criteria at this point, sir. the changes to which states are eligible -- >> why not? >> the criteria was set forth. the program is closed. >> as a matter of administrative discretion, right. it was not built into t.a.r.p. itself. >> sir, i can't answer that specifically. i would be happy to work with my team. >> do you know if the supreme court case called shelby county versus holder? >> i do not. >> the supreme court said it basically cut the heart out of the voting rights act because different states were being differently. and here is a program that has been set up by the department of treasury where some states get the benefit of it and other states are completely excluded from it. and, you know, if t's billions of dollars that are sitting around that still haven't been programmed, i would like you to reconsider why these other states, including my own, were roped off from it. >> my understanding that legislation required that the funds had to be committed by october 2010 for the eligibility. again, that s a prior administration. we can go through that with tha with your office and my staff. >> i would love it if treasury would present a leg memo whether you have the authority to include the lar parts of america that were excluded from the program. so i would appreciate that. let me ask you one other question. i want to go to nevada for a second. whose job is it to coordinate and oversee t hardest hit fund within treasury? >> haveur office of financial stability, which administrators the t.a.r.p. programs, including the hardest hit fund. as far as the ovsight goes, they report to me as deputy assistant secretary for small business community development and affordable housing policy and i report to the assistant secrinanal instion. >> the name of the office is? >> financial institutions. >> okay. so is there a director of the office ofinancial -- >> assistant secretary. >> assistant secretary. who is that? >> christopher kim bell. >> is he the person in charge of it on a day-to-day basis. >> sir, theroam is administered by the office of financial stability and their chief financial office is day-to-day working with the overseeing the team. >> but what i'm trying to get the sen of is this somebody's job at treasurhere they' focussed on this massive program? with billions of dollars to distribute or just part of somebody's portfolio of 150 different thing we have a team that is specifically focussed on this programs well as other -- this is the hardest hit fund program specifically and also a team of overseeing the overall t.a.r.p. programs. we have roughly 30 folks who oversee the platform. >> okay. so the buck stops where? if something goes wrong in the program, who within treasury says we need to make big changes in nevada or we need, you know, we need to revolutionize what is going on inlaba because the money is not getting to the people. whose job is that? >> that specific job would fall to our hardest hit fund team and program director for that. >> okay. so let me come to nevada, miss campbell. i understand you're part of the new regime. you're not part of the people under. there was a lot of waste and fraud abuse. but toha do you attribute the problem that plagued the program before you got there? >> thank you for the opportunity to answer that question. i think there were multiple issues that i identified right off. the first thing was that there was really no systems in place. the program was massive. the second thing was staffing. there were people that had a great Ésu. however, they came from the banking industry. and i think that's where some of the misunderstooding of how to interpret certain guidelines came in. they were coming from private sector. and then, also, i think. >> can you e lap rate that? you mean they we accustomed. you're talking about the gym memberships and the free wheel spending and so on. >> yes. for example, i'll take lunches and i think for one of ours there was a staff member who was pregnant and they bout a baby gift. well, that might be appropriate if you're in private practice but it's not appropriate under government. >> in government everybody kicks in their $10 or whatever, right. that's how w it. >> right. >> you're saying they were writing checks. >> right. i think there was just a complete misunderstanding. also, as demonstrated here today, there is certainly, i guess, a difference of interpretation between t.a.r.p. and treasury. would be most helpful to the states if we had some uniformity there. so, i mean, even coming on it was difficult. we hired a cpa firm, as well. >> i yield back. thank you very much. >> thank you. >> i would like to hear from you. what you think we need to i thi greater accountability and greater controls. i went up and i met with secretary mnuchin and he said you have to recover this money. i said if we don't cover it it's up for you. and i met with treasury general counsel. they need to reread the federal use principles and look at the first page which says necessary. it goes beyond we talk about cost principles all you want. it comes down to appropriations law. federal government you cannot spend money unless congress authorized it. that's what it comes down. that's why necessary prevision can't be left out. they need to read this memo. they need to take a look at this. what i've not seen in treasury's papers is that determination about what is necessary. it's not necessary. and so if you go back and look, secreta secreta secretary said they can't use it for legal aid. we know a lot of people get the program in legal aid or general housing counsel. you can't charge it. if you can't charge that kind of reasonably related because it's not necessary under appropriations law, how can you take the same housing counsellors to the zoo?understa there's a provision in the cost principles that say this. you have to read page one. you got to read page one. federalt principles cannot override appropriations law that's what it comes down to. so what i think everyone should do here, all the state agencies and everyone in treasury involved. let's get back to what did congress intend in the t.a.r.p. law and what is this program for. it's not the standard. do you have to spend the money? and what i suggest they do is talk to each other. and say california you're not spending anything on this. arizona you're not spending anything on this. other state agencies not spending anything. and they talk to each other and say are you using this money for bonuses? i think that's where accountaty comes in. all it is about is getting back to what congress authorized. if they do that, if they talk to each other and they work something out, i think it'll be back on trk. it shouldn't ble u to each state. >> my concluding remarks on is that, first of all, you have to take seriously what congress intends. that's true of every federal agency. and if treasury doesn't take it seriously, then the state agencies may or may not take it seriously. when they oversee the money, there has to be a clear understanding about the parameters with which that mone can be spen >> some of of the money thathe have pointed out are spent on things that anyone with any common sense would have known that if it wast jusinitely in the gray area. and i think treasury has a responsibility to monitor that. what i would like you to do is whether youeto treasury, i would like you to submit some changes tohe guidelines. i think on our end, as members of congress, we've got to be mo sure that our instructions are c when we're hemorrhaging funds like we are, we can't afford to waste another dollar. i don't know what we can do to go back and fix what has been done. but i guarantee we to pay attention to what happens going forward. and i think the treasury needs to inform everybody of that. i thin they would be happy to let you kw wn those are getting outside the lines. i thank our witnesses before appearing before us today. the hearing record will remain open for two weeks. the subcoittee stands adjourned. > >>>. >>> coming up jerome powell will be holding a news conference at the end of the two-day meeting. several media outlets are speculating he'll announce an interest rate increase. live coverage begins at 2:30 p.m. here on c-span3. >>> thursday the senate foreign relations committee holds a confirmation hearing on three state department nominations. including harryharris to be ambassador to the repuic of korea. live coverage at 10:00 a.m. eastern c-sp tomorrow night, democratic and republican members of congress face off in the 57th annual congressional baseball game for charity. the game will be played at nationals park and live coverage begins at 7:00 p.m. eastern time on c-span3. >>> several house members joined us this morning on "washington journal" to talk about the u.s./north korea summit. we'll show you these leading up to today's fed news conference. e from congress throughout the program. joining us now is ted yoho, who sits on the subcommittee for asia and the pacific, and is in the chair of that committee.
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