Skip to main content

tv   Today in Washington  CSPAN  July 22, 2009 6:00am-7:00am EDT

6:00 am
describe the process came and thank you mr. chairman, i think that this report reinforces the fact that we have ventured into a brave new world where washington decides what happens on wall street and main street. maybe they will find a way to impose a footprint over the rest of american society, and i thank you very much for this report. i yield back. >> i will yield five minutes to the gentleman from california. california. >> thank you mr. chairman, and thank you insider general, is a pleasure to have before us in you're short time. you've done an extraordinary time and a thank-you on behalf of the american people. let me first ask this question, did any bank to serve in non participate by returning the survey?
6:01 am
>> we had 100% participation. >> very good. should we pass legislation to require the tracking of t.a.r.p. funds since evidently it wasn't required in the actual providing of the money? >> we believe that requiring >> we believe that requiring recipients to tell their use of part of transparency and that is why we think this recommendation is important and as a policy we don't, we tend not to put the policy recommendations as what congress or the treasury should do. we do say what treasury should thibodaux suggests legislation for congress to us as a policy meant but we certainly do feel it is our obligation to present why we think it is such an important factor of transparency. >> the contracts that the treasury device with the banks for the distribution of t.a.r.p. funds prohibits the use of the money for any purpose?
6:02 am
>> different contracts and different programs, there are some restrictions on stock buybacks, and the capital purchase program, on certain restrictions on increasing the level of dividends so there are some restrictions although not many. >> so the fact they would use the money to make investments repay debts or by other banks was all legal under the granting of the t.a.r.p. funds? >> absolutely. >> 23 changes that? >> as i said that as a policy decision that may soon get main. i think in making that decision we should take a look at both sides of the arguments and part of the rule of transparency as pesto inspector general as we think these are best informed every and transparencies so we can see what happened back into the arguments i've heard of both size of any one of the issues including one of the more controversial says acquisitions and i've heard arguments that is good for the banking system and arguments that it would be inappropriate use of t.a.r.p.
6:03 am
funds. >> was sought acquisions -- swiss banks took the t.a.r.p. money and acquisitions? >> we are going to be publishing necessarily in summary data from each of the responses we received and the reason i say redacted is there is confidential business defamation we would be prohibited by law from making public since we're still on the process of that. i'm reluctant to comment on any specific response that we had and will be making that information public hopefully within the next 30 days. >> and in terms of the alarms that go off in your head and because of what you have a been able to ascertain their service, what are those alarms that we should be particularly focus on? >> i don't think there is any alarm because when we did this survey we are taking great care not to make any judgments for all the reasons that i've said it. the most alarming thing to me is treasury continues to refuse to
6:04 am
adopt this recommendation even airlines of the proof we have in this august. the continue to tell us it is a meaningless survey even though no one from treasury has taken us up on offers to come look of the survey responses and on redacted form, we say take a look of them and see if you think these are meaningless responses that can provide transparency so i think the most alarming to me is the steadfast refusal, the will flow refusal it to adopt to provide transparency. >> so you are saying that even though you now have over 360 surveys, that provide information on how the t.a.r.p. funds have been news, known from the treasury department has come over to look to this information? >> their refusal to adopt recommendations purely of our audit report, they have not come over. >> i think that is astonishing. i yield back. >> thank you very much.
6:05 am
i now yield to congressman souls from illinois. >> thank you mr. chairman, likewise have a birthday on your special day. just know this ain't your election to office in 1983 and someone who is 28 years old and congress, that is a lifetime peridots of thank you for your service. >> i feel it to can i confirm your congressman and the country, have a birthday. mr. barofsky, i am specifically interested in the exchange in purpose that has occurred under the new administration with the use of t.a.r.p. funds and how that might change your role or add additional responsibilities or how your responsibility as the special inspector general for t.a.r.p. interfaces with our federal government decision to bail out the auto makers, could you speak to that? >> sure, i think in the near term we are addressing that to
6:06 am
our audit function and announce an audit of corporate governance which, of course, oversees the fact that we do have a controlling interest in general motors now and minority interest in chrysler financial. of my team is going to be heading out to do try next week to start that process. we are going to be sending representatives of our investigative division as well to make the necessary contacts and make sure the bridges out including word about our hotline if anyone in these companies those of many misrepresentations there's a whole bunch of reporting required of the federal funds so we will keep a close eye and dedicate the necessary resources to fulfil our oversight role came and so you feel you are being given the latitude in it in terms of allowing your personnel into gm and chrysler to oversee the use of those t.a.r.p. funds. >> i don't anticipate we're going to have a problem. >> okay, the next question is
6:07 am
your opinion. when this bill and was sold to congress last fall it was sold on the competitive and on the idea that this money in the words of former treasury secretary hank paulson would be if not all paid back most of it and there was a slim likelihood that we might add to make money on the t.a.r.p. money for the taxpayers. deily the majority will be paid back? >> i think if you look at the way the program has evolved i think is extremely unlikely we will get $700 billion back. the mark is modification program is $50 billion, there's no anticipation that any of that will come back. that money is paid directly given to market servicers to help convince them to lower mortgage payments and payments that they make on behalf of homeowners so i think it is very unlikely that t.a.r.p. will turn
6:08 am
a profit significant on other activities to generate a profit to cover the $50 billion. in addition on the other programs as ranking member noted money has been written off from chrysler. still have to see what happens with equity interests in the company's so certainly possible that more may be retained or turned back over time that maybe even we suspect right now but i think the idea of getting a dollar for dollar return would be extremely unlikely. >> and then specifically about your conversation and same as earlier about asking basically treasury to detail or basically to collect information from t.a.r.p. principal -- recipients and also to use other taxpayer funds from the tar recipients, in your view why isn't the treasury gets this response that that would be meaningless and really is not necessary.
6:09 am
what is your view of that? >> if it was meaningless but i don't understand why treasury does this with respect to bank of america and aig and citigroup, are they including with conditions in the context they believe are meaningless? as hertling help bob. my view is that money is fungible and that is a shrewd concept, but just to use a simple example from my own life i again direct deposit of my federal pay check and normally i couldn't tell you whether one week whether i buy some groceries whether from one way corps in different weight, it all goes into my checking account, a couple years ago when i won the john marshall warned for my work on the case there was a small cash components and do that was going to be direct deposit into my account and before i get that check and give as go to the money and pay off a piece of my student loan. so when i got its the money given to my account and went to
6:10 am
pay office alone so much money is fungible but i kentucky with a great deal of certainty what i did without bonus money that came in. what we see is a fine institutions been able to do the exact same thing. t.a.r.p. was an extreme amount of money and investment and for banks to tell what they did without money, there are responsible companies and budgeting for the fact they're increasing the capital and the fact this is all money that can be verified and tested it. so much as treasurys compliance system is based on similar self reporting with financial incentives as reporting compliance and treasury comes back and hopefully one day will test. this is no different. the bank says the use the money to acquire another financial institution which i wouldn't have done otherwise, it's certainly a verifiable fact. if they go by an agency mortgage backed securities and say this is what we did with the money we can look at what their total volume of securities for before the t.a.r.p. money and have the
6:11 am
written tests in the money so we do believe this is a born part of transparency, and forum for the members of congress american people and a for treasury to know what is going on with the taxpayer funds to i think every much for your testimony and i hope you'll continue to press on team and the time is expired and i now yield five minutes to the gentleman from massachusetts, congressman lynch. >> thank you mr. chairman. mr. barofsky, and thank you for your great torque and i appreciate the work being done by elizabeth warren as well. conover q2 obviously allows us on the oversight committee to do a lot of our work. let me ask you, one of the programs of the treasury has said that was the assassin guarantee program -- assets guarantee program where treasury will guarantee held by qualifying financial visitations. they have focused mainly on toxic assets purchased by --
6:12 am
held by bank of america and citigroup, i think those of the two big outfits that focus on. have you been able to get information on the specific assets that treasury has acquired a from citibank and bank of america? >> career in the process of putting together an audit that will address tt question, we received a letter of request to look into that and right now in the process of putting together the odd structure that will address this issue of what is in the cash flow and how it came to be and a thorough audit on the entire process and was going out and the citigroup. for bank of america, they indicated to the ceo indicated that they are withdrawing from the program and the contract was never signed and therefore it is not have to lay going to be imposed so we do have a pending audits that we expect to complete in september that addresses bank of america and participation in the t.a.r.p.
6:13 am
program so will touch on that there but won't do similar study of the assets given the change of status of the program. >> end of this was instituted in november 2008 and i am wondering what actually was purchased. my question really focuses on a potential exposure, providing a guarantee behind a credit the false log or some complex derivatives. our exposure may be greater and then went your monetary assessment has been even at $3 trillion, i'm worried about our exposure their. let me share and i certainly anticipate your report in september, that will be great. it let me ask you about german position here. we originally set of the special inspector general for t.a.r.p. in connection with the $700 billion that was allocated
6:14 am
in. i did not vote for that, but it went through anyway. a lot of us did not appear to out now originally he riss up to oversee and to save parent the taxpayer money. however, recently and a san the treasury has challenged your authority as an independent oversight body. reportedly treasury has requested an opinion from the justice department's office of legal counsel. questioning whether here office, in fact, false under treasury's authority. so and can you comment on the treasury's challenge to your independence which you talked about earlier as being so important is integral to your operation there. >> we do think it is potentially an issue that could impair our independence. treasury has sought legal advice from llc and we submit our own
6:15 am
submission detail in our position with think it's crystal clear what congress has intends to be an independent agency operating within the treasury department and we are going to wait and see but we think there is a danger that treasury could try to assert to depending on the llc opinion is, the authority to shut down investigations are on its free basing to initiate. we think that would be contrary to the intent of congress and is something we will let congress know if we get an adverse opinion. i'm pretty confident that a thing this attitude is so clear and intent of congress is so clear. i'm hopeful that llc will see of the right way and i think the only way that makes sense based on how the statute is written and when the state has been that both of the time of enactment and since then and hopefully this issue goes away. i thought this was an unnecessary thing for treasury to do continue to think so. >> if this challenge is
6:16 am
diverting the energies of your staff to defend itself then perhaps we in this committee and there are some vehicles that are going through congress right now this is simply amends one of those to clarify that our intent to be independent and conduct oversight and the operations of treasury in connection with this time program. i also for and that's the jury's decision to challenge to this came in a delay in response to some of your questions regarding the bonus payouts and aig. is that trent? >> that was a timing. i wouldn't go so far to causal relationship because i don't know for sure. it did come up the issue on the eve of an interview that we're going to have with member of treasury general counsel office
6:17 am
and executive compensation is to end a 97 certainly was of that time. >> i just want to say that i think it would be a terrible miscarriage of of what congress intent was two have any hamstrung by being put under treasury. riss sali sherrifffice to oversee and to protect taxpayer money. and we do not expect you to be answering to treasury, we expected to be investigating in conducting oversight. >> i yield back the iraqi can't, you don't have any. [laughter] >> thank you reared testimony today. you have made the news with $20.7 trillion announcement in your report. i would like to ask you to
6:18 am
unpack that further, that clearly obviously is a full list of potential of taxpayer liability exposure to taxpayer liability. many of us have been operating in the working assumption that that total taxpayer liability was about 12 trillion between the fed and the fdic as well as the treasury department and the other number i thought was significant to said was about 4 trillion in actual expenditures so two questions. let's try to bring this down and categories that are manageable. and tell the american people with that taxpayer liability is located to whom is gifted basically and then under the $4 billion actual expenditures to him that is going and what form. loans and guarantees, by whom to
6:19 am
whom? >> you're question and to encapsulates why we have made this entire section of our report because it is obviously some very complicated issues here and in section three of this report read to that break down. the we talk about each of the 3 trillion currently outstanding, the 4.7 trillion and that has been suspended or guaranteeing the in total including money paid back in cancelled programs. from the initiation of the crisis through june 30th and 90 prius 7 trillion number which is a maximum number every one of the program subscribe to the highest amount coming every guarantee was done and the purpose of this wasn't to make the news and make a splash but we took the fed to programs and that was important to show with the 50 programs or in addition that address the government's support of the financial system
6:20 am
and generate is such controversy is just adding up the number who of what the total highest watermark is ready to the 50 programs and that is what is reflective it so it isn't the taxpayer is on the hook, we don't say that and does its assets but that is the maximum and take all the programs initiated since the inception. >> again let's step back and tries to attain that a little more concisely. this is to endeavor to pages in particular section referring to particular charts that again categorizes this in broad terms of that we can all have a working framework that is usable so we can understand the total liabilities that exists and actually where it is going. >> on page 138i was say any taxpayer or anyone interested
6:21 am
that the report is that our web sites www.sigtarp.gov or anyone can download this and see all the facts but if you look a page 130 that has a table with his in time of the incremental financial system support. what we have done it is there is some existing programs i have increasingly haven't been to been to the financial crisis. what we have here is a list the different sources of with guarantees or support are coming from a list with the current balances, the maximum balance from inception of what the total potential of the support is and is still potential support. as of these entries and this the fdic, treasury, t.a.r.p. and others, you supported subsequently in the report by the other charts so for example if you want to see when the federal reserve portion is two go to the next page and table
6:22 am
3.5 we list of the programs described in the same information, the current balance and the total support related to the crisis. when you add up these to these charts that is where the 23 prints $7 trillion comes from. >> added the 16 trillion is between the federal reserve treasury and the fdic an operating assumption that have been working off of basically the balance of this year because there was no easily available was well and so this was a significant increase demand that is one of the reasons we've done this and come under some criticism for having done this but every time we will look as if a different newspaper there would be a different paper and it was important to put the time contexts to collect and major numbers and try to do here. >> what level does it go into in terms of actual recipients of
6:23 am
the various funds between fdic and treasury as well as fellow reserve? >> because ultimately mrs. t.a.r.p. a contest and given the number went have done is they wanted to paragraph summary. the further information everything is in here is based on publicly available information and stuff we got off the web site to congressional testimony. getting into the recipient's is a large current many cases what is public a available and beyond our jurisdiction or authority because these are non t.a.r.p. related. >> the gentleman's time has expired and now yield five minutes to the gentleman from massachusetts. >> thank you mr. chairman en thank you mr. barofsky for the work for being here today. i have two lines of questioning -- one results of the term asset
6:24 am
backed securities. this is an idea where it ended a triple a rating from two other trading firms and not more than triple a rating from the third firm but we continue to have the rating agencies painted by the issues whose products their rating. you may mention in your report and essentially been by the issues that their rating as a result and then regency has a high rating to business of the issuer. that is one of the problems that got us where we are and the crises. is to boggle of mines and continue down the path and relying on those as part of the program so you would agree obviously we should be concerned about this but more over which you suggest we should do it as a different methodology for the program and others? >> this is something we have been pushing for severance initial report to congress and
6:25 am
it we have some suggestions in the reports. one of our concerns is a race of the bottom. moody's came out, one of the three rating agencies said basically they're losing business because they have been more restrictive than the other two and as a result we haven't investigated that. we think the federal reserve and treasury news to investigate that further. aires is the ultimate issue of a potential base of the bottom and expanded in the talf atmar is by securities and more rating agencies pick up the number required to get approval and exacerbates the issue of a more rating agencies. i think that when they need to do is two their credit has started to do but to stop relying on rating agencies to do the work, the diligence and the underlying that stands behind these assets back securities.
6:26 am
federal reserve is hired to collateral monitor for commercial or is buy securities to come up with his own evaluation as to what the things might be worth an is important to keep pushing in that direction. away from reliance in this process to make sure reared dealing with taxpayer money the the level of protection is higher than what as you correctly state goddess into this in the first place. >> obviously we are not good two have summit than the other paid and doing this problem. >> i don't think it is not really our policy to advise congress on specific legislation to make the same the legislation to do it would be helpful generally. >> i think it also it is worth noting in the regulatory reform that congress is considering taking a good hard look at whether reforms are for the rating agencies and whether the reforms to the and squarely address the conference of interests that have such
6:27 am
disastrous consequences in the financial crisis. kim and the other line has to do with the derivative contracts that aig held with counterparties and financial situation that occurred created a situation with the counter but is created by relating they demanded payment or an additional collateral, aig that lack of liquidity made it that difficult to come up with and there was a contest between aig and other party is did with that there was money own and how much should be an garrison that was going on on that. before the committee we asked why was he paid 100 percent of the claim. and he said he didn't believe it should have that, in fact, they were saying a consensus among us that and some surprise and he and on tenant that, in fact, in the branch particular that had done a are you looking at that
6:28 am
of all and able to tell us what happens that contested claims for over 100%? >> we have a pending audit and that specific issue the credit party agents in the payment of $0.100 to the dollar. i expect that on this will be finalized by september. >> i just have a quick follow-up. are you familiar with the xprl and are you in a position to help invent this kind of transparency database access to available two agencies that currently are not reporting in a chance brand vashon? >> we are familiar with xprl products. add to my office received a presentation on its ear and it does appear to be a useful type of product to track these types of funds. >> thank you. i yield back mr. chairman. >> i yield to the gentleman from
6:29 am
indiana. >> thank you very much and i want to thank congressman i suffer the letter he gave to me. you know, we have mr. parsons -- paulson and bernanke before of the committee a couple of weeks ago in the they have an epidemic of memory loss of a number of issues and mr. paulson was working closely with mr. diner and the secretary of treasury on a number of issues as well as mr. bernanke end of this whole pattern it really kind of bothers me about how they have. two keep the congress of the u.s. because i can't remember who did what on the maryland steel and the bank of america and how secretary geithner has worked with paulson and i don't see how anybody can get anything out of this letter that we received other than putting the hammer to you.
6:30 am
>> off. you say here that on april april 15th mr. knight@@@@@@@ @ >> the attached a copy of the april 7 memorandum. they were asking whether or not you should fall under the jurisdiction or control under the treasury? if it's pretty clear to everyone on the committee that you should be there, because that is what you're job is. and there was something between you and the department of justice. they ask you to reject a portion of the email exchanged from olc, but that was to you, right? >> i think all the information -- ansari, the response from olc to us, which then generated additional response from treasury, or ast dew tour deck that. >> i wonder why? did they give your reason? >> the reason from olc is the
6:31 am
information was indicative of their current thinking on an uncompleted matter, therefore, it was privileged information and until they came to a final resolution, they did not what ution. >> i was chairman of this committee for six years and worked on a number of occasions as a matter of fans and they didn't give any information whatsoever thou have to be redacted. and the reason they did this was because until they made a final determination they didn't want any information out there so when they sent to this information and tell you it has to be redacted and it seems to me that that is, once again, working with the treasury department to keep the hammer on you and hold things in advance so that you'll walk the walk. you have any comment on that? >> i really can't on cordially,.
6:32 am
>> and think this is such a blatant attempt to intimidate you and i'm so happy you contacted ranking member is senator grassley because what it has done is eliminate this issue so that these people who are trying to slow you down and out of this information dinow the public domain will be threatened by this. the only thing i will admonish you is to walk you're back because i am to send you are subject to the president and news services pleasures so i think there should be some reason and they could come up with down the road that would get replaced but in the meantime i want to congratulate you for having the intestinal fortitude and give you other terminology and public to stand up for what to believe in. i think it is great and i'm glad to send this letter, i thank you reymont and i can assure you and the committee that i will not spend a single moment or eight
6:33 am
about my job security for my future two continue to do the job it hired to do which is bring the complete transparency as possible and investigate. >> i have not met to be before but i like a man. [laughter] >> i've had a tough couple days so i appreciate that. >> one follow-up question, much has been some of this 23.7 trillion plus or minus a trillion here or there but because constitutionally we must authorize and appropriate moneys wouldn't be fair to say that we need to have the transparency so we can anticipate in each fiscal year the likely outlays of additional money where risk is a beginning to become recognized by accident that be something that our committee has to be able to access and allow the producers if those funds available presumably because additional losses may still
6:34 am
occur in the number of markets including the housing markets? >> i have to confess i don't have intimate knowledge of their argentine authorities and go by that of reserve in authorizing this maximum amounts of what congress role is for authorizing them so i'm not really sure. >> assuming we believe that currently, in our opinion, on beginning that information assuming that we believe we should appropriate monies in the years in which the loss occurs? >> looking back we have done a bus to bring that information to your attention to the best we can based on publicly available information. >> thank you mr. chairman. >> i like you to do it. in the me just say that you also send -- i don't thank you have a problem because the president has said he is far transparency.
6:35 am
every conversation i've never had he talked about the importance of transparency so to me you should be in good shape. >> thank you and having a birthday. >> thank you, happy birthday also. efrain this is making me even older. [laughter] >> mr. barofsky, thank you for being. an accord to your insight on questions that are asked frequently and as there is a first congressional district. i did not agree with the original press of t.a.r.p. and then still troubled by some results that as a. one of the most important reasons for the legislation was to provide liquidity for businesses and home owners as the ultimate benefit of shoring up the banks and investment houses.
6:36 am
we are a single large banks and investment houses experiencing, arizona profits but no relaxation of credit, no significant increase in liquidity. why hasn't liquidity been restored just of small presses is an individual consumers as a result of stabilizing these and do you find that too much of the monies and profits are invested in treasury then firmed on a? >> i think the lack of transparency and the familiar to adopt our recommendations regarding recurring the recipients to report on the use of funds makes in san that almost impossible. until we know with some degree of precision exactly how the financial institutions are using the money is hard to answer the question of why there are not using to increase lending because we don't know what they are doing. and our survey are audit report
6:37 am
which was their responses to your survey we've got answers that lead to some conclusions but the survey, of course, was from a certain point in time. basically march of this year. the base the responded 75 percent said they have not allocated or spend all other t.a.r.p. funds. since the time of the survey another 200 institutions received in t.a.r.p. it money including insurance companies which i don't think anyone and specs will be using the money is part of their banking subsidiaries that entitled to receive t.a.r.p. funds so is the will to answer of why then not increasing lending if we don't know what they are doing with the money and the only way we can get that on a more timely regular basis is a treasury and dogs are recommendation and commits itself in deed as well as in word. >> one transparency. >> in your crystal ball do you suspect there are perhaps paying out lucrative bonuses were paying off debt?
6:38 am
what do you think is happening? >> based on what we saw from my snapshot back in march there are simply using it to pay off debts. in different types of debt is some pain down lines of credit with the federal reserve tarpaulins and was smaller institution reported to us that in substance planning on using the t.a.r.p. funding for one purpose and to increase lending, but revenue of the time the other t.a.r.p. funds the got a lot of credit that had with another financial institution called in and ended up using all of the t.a.r.p. funds to make good on the money they borrow from another planet to institution and a have had trouble paying back but for the t.a.r.p. funds so we get questions from the dates of our survey as to have been. >> on another subject how do you see the private program of a aig, the systemically significant failing institution program is having worked to the
6:39 am
advantages of the taxpayers? aig is a the only company to receive funds under this program. we own 80% that have sales of the most bible assets which are on the insurance side of the companies, why do we do this? >> that is a cousin and think is better address the treasury then to myself. is hard to calculate, to go into that way back machine and none said they what would have happened if we have not been allowed to the treasury and with the implications would have been serving from some post prospective and those responsible for the bailout and aig were of the consequences would have been disastrous but is trying to really know to know exactly what would happen and will continue to do is to try to
6:40 am
take transparency to that decision making progress to what is happening over there and blow continue to do so? >> you think by the recipients of this low dollar deal? moi. >> crisping and assets? they have to disclose some of the sale of assets and it included art in our report to camp and thank you so much for your answer is. >> thank you very much, mr. chairman, and let me echo my colleagues in this era have a birthday as well mr. barofsky, the carrier testimony. i share the opinion of many of the members of the committee that he should impacts the independent and that's there are challenges with treasury we should certainly be addressing those because the value independence and value the information you provided to de.
6:41 am
i like many of my colleagues am astonished by the potential exposure you have identified, but i guess i take a different view. i go to how this may have been prevented and am astonished that so few people were willing to look to the inaction and the failure of regulation to work properly to prevent the almost collapse of our financial markets. no light at the time was of serving in congress last fall when the market's collapse but has set the time i would have reluctantly supported the t.a.r.p. if only to stabilize the financial institutions and subsequently bowed against because it didn't include the conditions on transparency that some of my colleagues have talked about today. but i go back and i go back to
6:42 am
the failure of congress, the failure of previous administrations to mortgage bank securities, to regulate ceos and regulate cl0, and while at the same time the banking industry was suggesting the regulated industry in and the country and there wasn't any need for us to move toward a minute of the same post that are complaining about the exposure also working against with regulatory firm and financial services so i am struck by most accounts that have been made by some of my colleagues, but specifically what i would like to pursue a line of questioning regarding some of the toxic assets and evaluation. there was an article of that i think was very interesting and they talked about collateralized debt obligation and the fact this was related to the moors
6:43 am
bank securities which allows predatory lending to happen. but trying to pull all of these assets the parts and value them in any real way is a herculean task because there are so that is in terms of collateral and capital that is behind them. so how do you from your prospective and looking at the use toxic assets, how do you believe we can best value them? >> and things that i to read in "the wall street journal" article and the pulling apart of the cdl square and i think it was a great illustration of the problem of the complex securities and his talents that congress has been creating the type of regulatory reform that will ensure oversight so that these types of products don't drink the damaged that they did. i think the valuation issue is a challenge a one and think it is
6:44 am
one aphorists and since has got to be done in by the treasury itself to the extent that they have these assets on their books whether through asset guaranty of citigroup, whether in its own collection of assets. it's a complicated structure and then it's a great degree of expertise and a great degree of skepticism and also have to see what happens with the other programs with these complex start coming across and being in the actual purchase programs or other t.a.r.p. programs that will come to the front two. >> i realize your function is evaluating the way in which t.a.r.p. moneys are being spent but as you look at it and look at the causes of this financial collapse, can you offer advice as to moving foreign? the type of regulation and the thai province we should be
6:45 am
looking to regulate as we move toward? >> i think that is outside my lane, i would be uncomfortable offering an opinion on that because when it gets to the core issues of regulatory reform it is fair or us to identify some areas of the credit rating agencies because we are seeing that that when you get into the nuts and bolts of regulatory reform and would be uncomfortable offering that. >> is a fair to say much of their exposure you identified is due to a@@@@@ >> short of an audit process, i would feel uncomfortable offering that opinion. >> thank you. >> i yield to the ranking member from california. >> thank you, mr. chairman. we thank mr. neil barofsky. we will eliminate that.
6:46 am
the fact is you have been very generous with your time. you have given us a lot of food for thought. riefly, chris all by thinking that chairman and secondly by asking the chairman with the consider bringing the treasury secretary here to a next close a loop on a lot of a series of transparency that i think treasury deserves an opportunity to tell us from their perspective why they have not yet implemented it these. .. we look forward to having you back a tear, but i want to thank
6:47 am
you for doing everything you can do to bring the level of transparency. for myself and for the chairman, we want to promise that we will be your partners in bridging the bureaucratic nightmare that always exists between a president like president obama, who has promised us transparency, and the congress to begs for transparency, the ideas that produce it, and the bureaucracy bedstands away. you have our support on a bipartisan basis. you will continue to have our support, because we agree with you that transparency is the only form of disinfectant that will prevent government waste. mr. chairman, thank you again for this series of very good oversight hearings. and i thank arm as and laphone to seeing you in about 90 days. >> recognize the gentleman from ohio -- the gentlewoman from ohio.
6:48 am
>> thanks you, mr. chairman. we appreciate your insurance, mr. barofsky. i recognize this is the largest transfer of wealth in american history we have ever seen. from those whose equity has been moved to wall street institutions that now have become even more concentrated as a result of what has occurred with the meltdown in the financial sector. with the meltdown in the financial sector. and i just want to again shared information. it's interesting to me some of the companies like black rock involved in the resolution are headed by individuals heavily involved formerly went ahead of other companies and inventing the sub prime instrument itself and we don't know where they did all of their handiwork necessarily but i find it very interesting that then now the federal government rewards them in very long transparent process
6:49 am
these and i've said to myself could they be handling paper of the invented in traffic ten years ago or 15 years ago. the derivative instrument itself i understand was heavily influenced by a gentleman that is now the chairman of the pnc in that hour, know how you live received a notice our certificate of deposit its bid with national city bank is going to be transferred to pnc. i don't want pnc owning our assets. that isn't my choice and yet i see this having an impact. ohio now is only left with three money-center banks. national city is disappearing and i see this power gravitating to the very people who caused this problem and the first place. one of my questions has to do with freddie mac's and i could continue on fannie mae and fha because what's happened is all the bad paper is being dumped on
6:50 am
the tax payer as you've noted in your report in different ways putting it here and here in the federal government so it's not easily traceable but if one looks at freddie mac which is central in terms of being a dumpster else well as an enabler during the 1990's let me ask you why when i looked in your report i couldn't find the word freddie mac we have freddie mac and fannie mae been hidden behind the walls of all is at the federal reserve? to you have any role at all in on winding role of kody and all of this going back into the 90's? >> we don't have jurisdiction over freddie mac in any aspect other than the fact treasury has hired them as a financial agent to help to compliance with the mortgage modification program but otherwise because other than that since freddie mac is not
6:51 am
involved in t.a.r.p. specifically we don't of jurisdiction. >> i don't know if you're aware of this or if the public is aware but freddie mac had over $500 million of fines placed on it already for fraudulent activity and the fact is that they had during the heyday of their nefarious activity blown up profits over 30% on their books. the underestimated risk and they've begun to pay a heavy price for that. i am a very interested in your opinion as an auditor do you find it rather interesting that we can to get at the paper even though the american people are of the recipient of all the mistakes? our mortgages are not being worked out of the local level. jpmorgan chase is in my district court in its fifth affiliate, plymouth, and yet they can dump
6:52 am
their paper and theoretically a lot of it moves through freddie and fannie coming in to get behind these walls of the fed we can't get at bat and sallai singing to myself as a look of a capable individual like yourself and your staff you are not going to get at the truth because they decided the truth in such a way that you can never tell us the whole. how do you concern to that concern? how do we get the whole truth? >> i think it should be no surprise at this point that i agree wholeheartedly more transparency is better than less, that the more information that is out there for policymakers and the american people, the better. because it isn't related to a t.a.r.p. program is outside of our work scope and jurisdiction. >> dorcy and is unrelated yet the fed has hired black rock to help resolve means well, and let
6:53 am
me quote from "the washington post" bird mac manipulation caused it to understate profit by 30.5% in 2000, and 42.9% in 2002 and to overstate profits by 23.9% in 2001. these manipulations include transactions that shifted windfall -- expectations. my point is i don't see how we can know the whole truth and this troubles me mr. chairman because even the report today, the sigtarp report today there's some agencies it's like a divvied up into a thousand pieces like they did a terrific if so that we can never know the truth. how do we get our arms around the whole? can you think about that? >> the question is best addressed to the inspector general for the federal reserve as well as inspector general
6:54 am
for, excuse me, if h. faf who oversees the conservatorship of frannie and freddie. they would help you find the answers. >> from the federal government's standpoint are you disallowed from working together? >> no, no, no, we do coordinate together. both those inspector general's are part of my t.a.r.p. ing council because they didn't pack the t.a.r.p. and i am part of the council and we do talk and to coordinate with one another where the interests intersect. here this is sort of apart from the t.a.r.p. programs i don't have an ability to go in and look at that information. >> the gentleman's time is expired but she makes a great case as to why the inspector general should have an independent and i agree when there's 23 weeks $7 trillion at stake i think it's important that we make certain that there
6:55 am
are independent. let me thank you, mr. barofsky for your testimony and i appreciate the interest of the members who attended today's hearing. earnings at the largest bank and the bank holding companies such as jpmorgan, goldman sachs are up, get lending remains down. it is unacceptable profits go up while landing goes down. the taxpayers have invested very large amounts of money in these banks. but what have we gotten in return? at remains unclear. the taxpayers deserve to know how their tax dollars are being spent. the treasury department needs to publish full and detailed information on the use of t.a.r.p. funds and published the portfolio on a monthly basis. they have that information and they should make it public. moreover, treasury also requires
6:56 am
the largest banks to file monthly reports showing the dollar value of the new lending. that should be made public also. if treasury does not put this information up on its website this committee will come and treasury does not turn over this information voluntarily, secretary geithner will be brought before the committee to explain why not. what we have heard today convinces me that one of the best things congress did when they create t.a.r.p. was to also create the inspector general to oversee t.a.r.p. spending. i can now understand why the treasury department would like to rein in sigtarp, but we are all going to let that happen. you heard from the amendments on the committee today in terms of their commitment. again i thank our witness, mr. barofsky. finally, please let the record
6:57 am
demonstrate my submission of a binder with documents related to this hearing. without objection i enter this winder into the kennedy records and without objection, the committee stands adjourned. thank you, mr. barofsky, for your time and information you have shared with us. the committee is adjourned. >> thank you, mr. chairman. [inaudible conversations] [captioning performed by national captioning institute] [captions copyright national cable satellite corp. 2008]
6:58 am
>> today the house appropriations committee works on the annual defense spending bill. the white house proposes spending 534 billion for next year's defense budget. live coverage of the committee lockups session starts at 9:00 eastern on c-span 3 and online at c-span.org. >> join the conversation on civil rights and race relations
6:59 am
with onjuan williams on c-span to on august 2. . in a look at the state of the u.s. economy with mark zandi, proposed health care legislation with dr. ray gibbons of the mayo clinic aon

124 Views

info Stream Only

Uploaded by TV Archive on