[Senate Hearing 110-868]
[From the U.S. Government Publishing Office]


                                                        S. Hrg. 110-868
 
   CLARK COUNTY, NV: GROUND ZERO OF THE HOUSING AND FINANCIAL CRISES 

=======================================================================

                             FIELD HEARING

                               before the

                     CONGRESSIONAL OVERSIGHT PANEL

                       ONE HUNDRED TENTH CONGRESS

                             SECOND SESSION

                               ----------                              

          HEARING HELD IN LAS VEGAS, NEVADA, DECEMBER 16, 2008

                               ----------                              

                       Printed for the use of the
                     Congressional Oversight Panel



                       Available on the Internet:
   http://www.gpoaccess.gov/congress/house/administration/index.html















   CLARK COUNTY, NV: GROUND ZERO OF THE HOUSING AND FINANCIAL CRISES













                                                        S. Hrg. 110-868

   CLARK COUNTY, NV: GROUND ZERO OF THE HOUSING AND FINANCIAL CRISES

=======================================================================

                             FIELD HEARING

                               before the

                     CONGRESSIONAL OVERSIGHT PANEL

                       ONE HUNDRED TENTH CONGRESS

                             SECOND SESSION

                               __________

          HEARING HELD IN LAS VEGAS, NEVADA, DECEMBER 16, 2008

                               __________

                       Printed for the use of the
                     Congressional Oversight Panel



                       Available on the Internet:
   http://www.gpoaccess.gov/congress/house/administration/index.html

                               ----------
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Washington, DC 20402-0001 










                     CONGRESSIONAL OVERSIGHT PANEL
                             Panel Members
                        Elizabeth Warren, Chair
                          Rep. Jeb Hensarling
                           Richard H. Neiman
                             Damon Silvers
















                            C O N T E N T S

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                                                                   Page
Opening Statement of Elizabeth Warren, Chair, Congressional 
  Oversight Panel................................................     1
Opening Statement of Damon Silvers, Member, Congressional 
  Oversight Panel................................................     8
Opening Statement of Richard Neiman, Member, Congressional 
  Oversight Panel................................................    17
Statement of Congresswoman Shelley Berkley.......................    18
Statement of Congresswoman-Elect Dina Titus......................    21
Statement of George Burns, Commissioner, Nevada Financial 
  Institutions Division..........................................    24
Statement of Bill Uffelman, President & CEO, Nevada Bankers 
  Association....................................................    40
Statement of Dr. Keith Schwer, Director, Center for Business and 
  Economic Research, UNLV........................................    49
Statement of Gail Burks, President & CEO, Nevada Fair Housing 
  Center.........................................................    63
Statement of Danny Thompson, Executive Secretary-Treasurer, 
  Nevada State AFL-CIO...........................................    71
Statement of Julie Murray, CEO, Three Square Food Bank...........    72
Statement of Senator Harry Reid, U.S. Senate Majority Leader.....    81
Statement of Alfred Estrada, Resident of Clark County, NV........    83


                           CLARK COUNTY, NV:
            GROUND ZERO OF THE HOUSING AND FINANCIAL CRISES

                              ----------                              


                       TUESDAY, DECEMBER 16, 2008

                                     U.S. Congress,
                             Congressional Oversight Panel,
                                                      Las Vegas, NV
    The Panel met, pursuant to notice, at 10 a.m. at the Thomas 
and Mack Moot Court, Boyd School of Law, University of Nevada-
Las Vegas, 4505 S. Maryland Parkway, Las Vegas, Nevada, 
Elizabeth Warren presiding.
    Attendance: Elizabeth Warren [presiding], Damon Silvers, 
Richard Neiman.

  OPENING STATEMENT OF ELIZABETH WARREN, CHAIR, CONGRESSIONAL 
                        OVERSIGHT PANEL

    The Chair. The hearing of the Congressional Oversight Panel 
will now come to order. This is the first field hearing of the 
Congressional Oversight Panel of the Emergency Economic 
Stabilization Act of 2008. I want to begin by thanking our 
hosts, The Boyd School of Law of the University of Nevada Las 
Vegas where I count many of my close friends. I want 
particularly to thank President David Ashley and Dean John 
White. I think both of them are with us. Would you mind 
standing so we can say thank you.
    Universities and law schools in particular have a unique 
role to play in civic life. And I think this is a very 
important example of that. And so I am grateful, the entire 
panel is grateful, for the willingness of those at UNLV to come 
in on very short notice and work very hard so that we can put 
this hearing together. I also want to add that we received 
generous assistance from the offices of Senator Harry Reid and 
Congresswoman Shelley Berkley. We're delighted that Senator 
Reid and Congresswoman Berkley, as well as Congresswoman-elect 
Diana Titus will be joining us. Sorry. I'm sorry. I'm sorry. 
Congresswomen-elect Dina Titus will be joining us during the 
course of today's hearing.
    Actually, I'm particularly embarrassed, because I want to 
be able to say publicly how tickled I am to have the 
opportunity to meet Congresswoman Titus because she is 
responsible for doing something that I didn't think anyone 
could do. And that was to manage to get through when she was 
still a state legislator, a ban on universal defaults in 
consumer contracts. And so my particular kudos in that case. 
It's a remarkable achievement, given how much the odds were 
stacked against it. So I'm particularly looking forward to this 
opportunity.
    Chairwoman Warren. In September 2008, the Secretary of the 
Treasury, Henry Paulson, issued a strong warning to Congress 
that without massive government intervention, the U.S. 
financial system faced the possibility of imminent collapse. In 
response, on October 3, 2008, Congress passed the Emergency 
Economic Stabilization Act of 2008 authorizing the Treasury 
Department to commit up to 250 billion dollars in taxpayer 
money, to be followed by another one billion dollars and 
another 350 billion, if warranted.
    The statute also created this oversight panel at a 
considerably smaller cost. The Act's purposes are, to quote, 
``restore liquidity and stability to the financial system of 
the United States in a manner that, A, protects home values, 
college funds, retirement accounts, and life savings; B, 
preserves home ownership and promotes jobs and economic growth; 
C, promotes overall returns to taxpayers of the United States; 
and D, provides public accountability''.
    Congress created the Office of Financial Stability within 
Treasury to implement the Troubled Assets Relief Program, 
cleverly known as TARP. At the same time, Congress also created 
the Congressional Oversight Panel with the far better acronym, 
COP, to review the current state of financial markets and the 
regulatory system. COP is empowered to hold hearings, to review 
official data, and to write reports on actions taken by 
treasury and financial institutions and their effect on the 
economy.
    Through regular reports, COP must oversee Treasury's 
actions, assess the impact of spending to stabilize the 
economy, evaluate market transparency, ensure effective 
foreclosure mitigation efforts, and guarantee the Treasury's 
actions are in the best interest of the American people.
    In addition, Congress has instructed COP to produce a 
special report on regulatory reform that will analyze, quote, 
``The current state of the regulatory system and its 
effectiveness at overseeing the participants in the financial 
system and protecting consumers''.
    We are here today to investigate, to analyze, and to review 
the expenditure of taxpayer funds. But most importantly, we are 
here to ask the questions that we believe all Americans have a 
right to ask. Who got the money? What have they done with it? 
How has it helped the country? And how has it helped every day 
Americans?
    As part of that ongoing effort, we reach out to you. We can 
read the statistics and we can analyze the data, but we want 
more. We come to Nevada to learn from you about the current 
economic crisis and the impact, if any, of the nearly 350 
billion dollars that has been committed to the financial 
institutions and AIG insurance company so far.
    One quick word about this panel. We have been in existence 
as a group for less than three weeks. And instead of spending 
time to set up our offices, hire an extensive staff, and 
develop a timeline and a strategic plan, we jumped directly 
into the task at hand. We have met with representatives of the 
Treasury Department, the Federal Reserve Bank, and the GAO. We 
have read documents and requested information. And we now have 
two things: We have our first report and we have a website. The 
two are together.
    The first report is posted on our website. It's COP, 
cop.senate.gov. That's cop.senate.gov. And you can go there and 
download the report, cut and paste it. Do what you want to do, 
if you would like to read it.
    But most importantly, what we also hope to do with that 
website is not just have us talk to you. We hope that you will 
use it as an opportunity to talk to us. And that is, we're 
setting up within the website, it's still in its beginning 
phases, but an opportunity for you to tell us what's happening 
to you in this economy, how it is that you're experiencing the 
current economic crisis, and to talk with us about the 
questions we are asking of the Treasury Department.
    Further to that, we have invited witnesses today and their 
testimony will be posted on the website so that people all 
around the country can read it. But we recognize this is an 
opportunity for a public hearing.
    And so we will have out in the lobby, starting, I believe 
now, a video camera. We have someone out there who will give 
you the same five minutes the witnesses get here to tell your 
story. To tell whatever story you want to tell about this 
economy, about the Congressional Oversight Panel, and about the 
actions of the Treasury so far. We hope to be able to use some 
of those. We will look at them when we're not here. We 
recognize the constraints of time. And we also hope to be able 
to use them to feature some of them on our website so that 
others have the opportunity to hear from people in Nevada about 
what is going on in Nevada. So we hope you will take advantage 
of that, as many of you as possibly can.
    We arranged this first meeting in great haste, imposing on 
our skeletal staff and, more often, on the kindness of our 
friends to put together this event in less than a week. We are 
especially grateful to everyone who contributed to this effort. 
But I mention the tight deadlines and our quick response to 
emphasize a different point. We take this task very seriously. 
Our country is in peril. Taxpayer dollars are flowing into 
banks, but there is little evidence what effect these hundreds 
of billions of dollars are having on the very obvious troubles 
facing us. Mortgage foreclosures, constricted small business 
lending, and rising unemployment.
    We are here to learn from you and to take what we learn 
back to Washington. We appreciate your coming here in person. 
And for those of you who join us online, for telling us your 
stories. And I hope you will join us again on our website.
    [The prepared statement of Ms. Warren follows:]

    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
    
    The Chair. With that, I will be quiet and listen to you.
    And next, we will have our opening statement from Damon 
Silvers, one of our panelists. Damon.

   OPENING STATEMENT OF DAMON SILVERS, MEMBER, CONGRESSIONAL 
                        OVERSIGHT PANEL

    Mr. Silvers. Good morning. I am very pleased to be here in 
Nevada for this first hearing of the Congressional Oversight 
Panel. I want to express my appreciation to Senator Harry Reid 
and Speaker Nancy Pelosi for the opportunity to serve on the 
panel and to the congressional leadership and their staff, and 
the good people here at UNLV, and to Congresswoman Berkley and 
Congresswoman-elect Titus for all their help under the extreme 
time pressures that we asked people to act under as Elizabeth 
indicated.
    I also want to express my appreciation to our chair, 
Professor Elizabeth Warren, for her leadership in getting our 
panel off to such a fast start. Professor Warren has worked 
tirelessly over the past three weeks, giving voice to the 
concerns of the American people.
    It is also an honor to serve on the panel with my two 
distinguished fellow panelists; Congressman Jeb Hensarling, who 
was unable to be here with us today, and New York State Banking 
Superintendent, Richard Neiman.
    In the three week since the panel's first meeting, we have 
had the chance to meet with many dedicated public servants at 
every level. In the Treasury Department, the Government 
Accountability Office, the GAO, and other government agencies 
who are working as hard as they can to try and stabilize our 
economy. Whatever the panel's concerns are and may become 
regarding policy, strategy or execution, they should not be 
read in any way as to diminish the great respect and gratitude 
that we owe for those folks, for the public service that they 
are rendering in their efforts to serve our country in this 
economic crisis.
    Since early October, the Treasury Department has provided 
banks, private companies, with 165 billion dollars in public 
money, taxpayer money, in exchange for preferred stock. Plus, 
an additional 60 billion dollars to two companies; Citigroup 
and AIG. And they have made commitments to allocate more than 
100 billion dollars more to banks and to buy asset backed 
securities. In total, these very large numbers amount to more 
than $1000 for every single American.
    Each of us has to be concerned about the specifics of these 
actions taken under the Emergency Economic Stabilization Act of 
2008. Actions which every person I know who is not actually 
involved in the policy making process refers to as the 
financial bailout.
    When Congress created this panel, Congress asked that it 
report every 30 days on our oversight work. Last week, we 
issued our first report. The report was, in its essence, a set 
of ten simple questions, together with some explanations as to 
why we felt it was necessary to ask each question. These basic 
questions cannot be answered through a dialogue among 
Washington insiders. They must be the subject of a national 
conversation. A conversation that starts off with what is 
actually happening in our communities. Communities like yours. 
Can business people borrow money to run their firms? Are 
foreclosures getting better or worse? Are employers hiring or 
laying off workers? Are local financial institutions being 
fairly treated by our federal government?
    The opportunity to get answers to these questions is why 
I'm so pleased to be here in Nevada today. Because we need to 
know how the Wall Street bailout looks from here. Has it 
helped? Is there less fear here in Nevada than there was in 
September and October? Is the bailout being fairly managed? Is 
the Treasury Department's plan thoughtful in relation to what 
has gone on in the economy here? Do Nevadans, whose tax dollars 
have been used to fund the bailout, feel that you have enough 
information about how your money is being used? Do you feel 
that there has been accountability for the financial sector?
    Now, some involved in managing the bailout have said that 
the measure of success is not in what has happened but in what 
has not happened, that we have averted, we have prevented a 
complete halt to all financial activity. When Hank Paulson 
asked Congress to act in September, and then when he chose 
together with British Prime Minister Gordon Brown to put money 
directly into the banks in October, he certainly had good 
reason to believe that we faced the risk of systemic breakdown. 
But it is difficult to assess this kind of argument. Because 
while it is true that our economy is in grave trouble, now, 
today, it could always be worse. And it can be hard to know 
whether by our actions are actually making it better.
    So our panel needs to look deeply in the coming weeks into 
the extent to which we have stabilized our financial markets 
and whether we could have done a better job. But when we do so, 
we must remember that the financial markets do not exist to 
serve themselves. Markets exist to move resources to productive 
activities so that all of us are better off. If the financial 
markets are not achieving that end, if the innovative 
entrepreneur, the builder, the business person, large and 
small, cannot obtain financing for viable businesses, then we 
have not achieved our purposes in seeking to stabilize the 
financial markets.
    If a downward spiral in housing prices driven by 
foreclosures, falling incomes, and rising joblessness keeps our 
major financial institutions on the brink of collapse, we have 
not repaired the real economy and we have not really even 
stabilized our financial markets.
    As we make these inquiries we need to remember that our 
economic problems are not ultimately about finance. This 
recession and its associated financial upheavals are driven by 
structural problems in our economy. And in particular, a long 
futile effort to maintain high consumer spending while in 
reality wages stagnate and our productive capacity shrinks. 
Some of us in the East don't understand about Nevada, that for 
decades there have been good jobs here. The hotels here in Las 
Vegas employ tens of thousands of workers who earn a living 
wage, have health insurance and a pension, doing jobs that in 
other parts of the country often pay only poverty wages.
    Labor and management in Las Vegas built a service sector 
middle class in the '80s and '90s, which is now under pressure 
from a national economic model that is not working. The truth 
is, if America is in economic trouble, if the American middle 
class is under pressure, the middle class in Las Vegas will 
feel the pain. In a very real way our economic fate as 
Americans is woven together.
    But our national strategy in recent years seems to have 
been to look to the financial sector to borrowing, to leverage, 
to generate wealth. That strategy has failed. And the vain 
pursuit of it has made our economic situation far worse than it 
might have been.
    Now, we run the risk as a nation of making the mistake of 
thinking that if we only cut our incomes we can get through 
this crisis, that the best employers are those that pay the 
least. The best bankers are those that lend the least. The 
truth is that these deflationary strategies will only make 
things worse, much worse.
    So the questions we as a nation should ask about the 225 
billion dollars that has been handed out are: Are we really 
stabilizing the financial system and improving our economy? And 
second, are we laying the foundation for a financial system 
that can really work to move capital toward productive uses and 
appropriately manage risk?
    In the pursuit of answers to these questions, I hope our 
panel will visit every corner of our country. In the weeks and 
months to come, we need to hear what the public, business 
people and consumers, workers and home owners have to say about 
how the public's money is being used to stabilize our economy.
    Thank you.
    [The prepared statement of Mr. Silvers follows:]

    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
    
    The Chair. Thank you, Mr. Silvers.
    Mr. Neiman.

  OPENING STATEMENT OF RICHARD NEIMAN, MEMBER, CONGRESSIONAL 
                        OVERSIGHT PANEL

    Mr. Neiman. Good morning. And thank you all for appearing 
here today. Especially those who are here to testify, those who 
are here to learn. And particularly, those who are here because 
they care. I also want to especially thank the media here. And 
there are a number of television and print. Because that way, 
all citizens and members of the public across the state will 
have an opportunity to participate in today's event.
    I also think it's especially appropriate that we are 
starting our first meeting here in Nevada, the epicenter of the 
foreclosure crisis. I don't have to tell anyone in this room 
that Nevada ranks first in the nation for foreclosure filings, 
up more than 100 percent since last year. The turmoil in the 
financial markets has literally hit home here.
    Now, we all come from diverse backgrounds as members of 
this panel. We've been asked to serve as citizens by Congress 
on this unique experience. I come from the state of New York. 
We are not nearly as severely impacted as a state as you are. 
However, pockets of New York are being disproportionately 
impacted. Whole areas of communities like Brooklyn and Queens, 
which account for over 30 percent of all foreclosures, are 
being devastated by a series of foreclosures impacting 
concentrated areas in those communities. Over 20 percent of 
foreclosures are on Long Island are being significantly 
impacted where there is an extreme shortage of affordable 
housing.
    So I can relate to the challenges you are facing here in 
Nevada. It may seem overwhelming when entire communities risk 
being destabilized. Unfreezing credit markets is vital. But 
lasting stability also must address the needs of families 
losing their most valuable asset, their home.
    So a lot of these efforts--foreclosures, are a local issue. 
They impact states, they impact communities, and they impact 
families. And much must be done at the state level. In New 
York, Governor Paterson and I chair an inter-agency task force 
for over a year and a half that we refer to as HALT, Halt 
Abusive Lending Transactions. We are addressing foreclosures 
and the impact of the housing crisis across a continuum of 
progressive approaches to stem the crisis. From direct outreach 
to borrowers, connecting borrowers and lenders to sit down and 
modify mortgages, to new legislation at the state level, to 
significant grants to home counseling agencies and legal aid 
groups, and increased enforcement against unscrupulous mortgage 
originators and other participants in the mortgage crisis.
    However, only so much can be done at the state level. And 
that's why there is such an important need for action at the 
federal level. And that was the impetuous for the Emergency 
Economic Stabilization Act which gave rise to this important 
panel. The panel includes a diverse group, as you can see, 
among us, as members, with diverse backgrounds from a union, an 
academic, and consumer interests. As well as myself from an 
industry at a regulatory agency. But even more importantly, we 
are out to hear from you as stake-holders among an even more 
diverse a group of citizens. From industry, from consumer 
advocates, from state and local officials, and from academia.
    So we're here to hear from you. This is your day. And I'm 
going to turn it back over to Elizabeth so we can get started. 
And I look forward to an extremely productive morning. And 
thank you for giving me the opportunity to give those remarks.
    The Chair. Thank you, Mr. Neiman. We would like to start 
with statements from Congresswoman Berkley and Congresswoman-
elect Titus. If you can join us. Come to the table.
    Congresswoman Berkley, thank you very much for being with 
us. The chair recognizes you.

           STATEMENT OF CONGRESSWOMAN SHELLEY BERKLEY

    Congresswoman Berkley. Thank you very much. I want to 
particularly thank you, Chairwoman Warren. And thank all of the 
panel for traveling to Las Vegas to see firsthand how the 
nation's economic crisis is affecting our community.
    Mr. Silvers, I'm going to help you understand the State of 
Nevada.
    Mr. Silvers. I tried.
    Congresswoman Berkley. You tried. Here in Las Vegas, we 
have become accustomed to leading the nation in many different 
categories. And that's usually a very good thing. Population 
growth, economic strength, number of satisfied visitors that 
come to our community. Las Vegas has been a boom town. Just to 
give you some idea of what it has been like growing up in Las 
Vegas over the last several years, many, many decades now.
    Unfortunately, the problems caused across the nation by the 
current economic downturn have been magnified in Nevada. We 
have had the highest foreclosure rate in the country. For most 
of the last two years, our unemployment rate was at 7.6 
percent. In October, I suspect it's substantially more than 
that. And Danny Thompson head of the AFL-CIO will speak to the 
fact that thousands and thousands of his members are out of 
work and idle.
    Our unemployment rate, unfortunately, continues to climb. 
And the number of people flying into Las Vegas to enjoy our 
wholesome family entertainment has decreased for the last 12 
straight months. The airlines have cut 20 percent of their 
flights to the Las Vegas valley, which has had devastating 
consequences for us. Our community is suffering. My 
constituents are suffering. And there's not much good news on 
the horizon.
    When Secretary Paulson came to Congress requesting 
unprecedented power and funding to rescue the financial 
industry and restore the flow of credit, I was extremely 
skeptical that this strategy would work or that enough 
conditions were attached to ensure accountability and 
transparency. I initially voted against the bailout. And I'll 
tell you why.
    There were three reasons. One was, I didn't think there was 
enough control over executive compensation. There was some 
language in there, wasn't strong enough. And if you read in the 
Las Vegas paper yesterday, you would have seen that there's a 
report saying that executive compensation continues as usual 
because of a loophole that was included at the last minute in 
the bailout bill.
    The second one was, with all due respect, please know how 
grateful I am that you are here, I thought the congressional 
oversight committee was a window dressing, to say the very 
least. I mean, this is an after the fact thing. The money is 
gone and there was no oversight. Secretary Paulson gave the 
money where he wanted to give it. There was nobody, certainly 
nobody in Congress that had the authority. We gave the 
authority away, and the money is gone. The authority never 
existed and--there's no accountability.
    The third was the judicial review section, which I thought 
was, in all due respect, a joke. The only way that Mr. Paulson 
can be held accountable for his actions through judicial review 
is not if he violated the intent of Congress, which I believe 
he has, not if he's violated the statute, but if he violated 
the constitution. So as an attorney, I was thinking, how does 
one violate the constitution? It seems to me, unless Mr. 
Paulson is accused of committing treason or owned slaves or 
keeps women from voting in this country, there is precious 
little we can do when it comes to judicial review of his 
decisions.
    I reluctantly supported the final legislation only after 
being assured that the need was great and the oversight would 
be vigorous. This is what was said to Congress. And I am 
quoting almost verbatim. The purpose of this was to buy up 
toxic paper, unclog the pipes of the financial industry, and 
get money and credit into the pipeline, get the credit and the 
money flowing again.
    In the two months since I cast that vote, Secretary Paulson 
has used almost 350 billion dollars to prop up Wall Street 
banks and investment companies, but little has been done to 
help the people of Las Vegas and other communities across the 
country who have already lost their homes or who will fall 
victim to foreclosure soon.
    As an added insult, the government accounting office 
reported recently that the Treasury Department has no way of 
knowing whether the billions already allocated are being used 
merely to pad the financial industries' bottom line rather than 
increase lending and limit foreclosures--and limiting 
foreclosures was Congress' intent.
    The bottom line is there is no discernible impact from TARP 
money. TARP was supposed to set the floor. It has not set the 
floor, and that has not created the necessary stability to give 
the banks the confidence to lend money.
    Now, I keep hearing from people that this is a crisis in 
confidence. Well, perhaps that is true.
    However, it is very difficult to tell someone that has lost 
their job and their home in the same week that this is a crisis 
in confidence. It is a little more substantial than that.
    And believe me, I understand what it's like to want that 
American dream of home ownership. When my family moved to Las 
Vegas, everything we had was in a U-Haul hooked up to the 
bumper. Now, when we finally bought our first home in Vegas, it 
gave us a feeling of stability and power. We had roots in this 
community. We were--we were somebody. We were homeowners. We 
belonged here. We made Las Vegas our home. I understand how my 
constituents feel about that. It gives you a piece of the rock. 
And I cannot even begin to imagine the devastation it would 
have caused my family if we would have lost our very small but 
our very first home to foreclosure.
    It's more than that. It's more than people that have lost 
their homes. And let me give you three very quick vignettes. I 
met with my car dealers yesterday. They have got millions of 
dollars of inventory sitting on their lots. They have willing 
buyers coming into their lots, and they can't get them 
financing because the pipes are still clogged. So people that 
are creditworthy still can't get the credit that they need in 
order to do the second biggest purchase of their lives for most 
people, and that's a car. That's killing the car dealers. 
Killing them.
    My step-daughter--I'm very proud to say--has just become a 
doctor and started practicing here in Las Vegas in September. 
She has signed a multiyear contract. She has an income coming 
in, and a rather substantial one. She could not get a loan for 
a house. Because why? Because there's no liquidity. The banks 
are not lending money, even to creditworthy people.
    And finally, another quick example, one of the most 
successful business people in the Las Vegas area, if not the 
United States of America, has the second largest timeshare 
company on the planet, Golden Credit, is having all of his 
loans called in for absolutely no reason. Nothing has changed 
other than that lack of confidence and the banks wanting to 
guarantee their money. And it's creating havoc, I can assure 
you.
    I appreciate the efforts of this Congressional Oversight 
Panel to highlight exactly what the economic crisis has meant 
to families of southern Nevada, whether the TARP is actually 
helping. I also am delighted that you're going to take a tour 
of Las Vegas. You'll be in my congressional district. You're 
going to see the devastation of home after home after home in 
foreclosure. What it's doing to neighborhoods, and what it is 
doing to property values. The witnesses you will hear from 
today bring a variety of important perspectives to this 
hearing. But each are going to deliver the same message. Our 
community is hurting. We could use some help.
    Now, let me say this. And I have a couple of other things I 
want to say. I remain optimistic. Our nation has survived far 
worse than this and we've come out stronger. And while it is 
not under your jurisdiction, I believe that infrastructure 
stimulus package that we're going to pass in January is going 
to make a tremendous difference. Because we have a crumbling 
infrastructure in this country. And if we are going to remain a 
super power with a future, we're going to need to shore up 
that.
    Number two, energy legislation. We need to get away from 
foreign oil and start tapping into renewable energy sources. 
It's an economic imperative, an environmental imperative, and I 
believe a national security imperative too. And it's good for 
the future of this nation.
    Also, the way we do health care in this country is 
backwards. We spend billions of dollars in end of life care 
rather than pouring those billions into early detection and 
prevention of disease, research, and development. This crisis 
may be the catalyst for making those necessary changes for the 
21st century. But before we do any of that, we have to solve 
our financial crisis.
    Let me give you four things that I have found would help a 
lot. My homeowners still have no one to renegotiate their loans 
with. And at the end of this month, a lot of--millions of loans 
across the country are going to be reset higher up, people are 
going to be losing their homes. There is nobody to talk to. 
There is no telephone number. There is nobody on the other end 
of the line that can say, alright. You can afford to stay in 
the house for $1100 a month, your current mortgage payment. 
You're reset to go up to $1600 a month. Let's renegotiate this 
loan.
    Who are these people going to talk to? There is nobody yet. 
And we need to provide that for them. I'm sure the blanks would 
rather have somebody paying a mortgage, even at a lower amount 
than nobody in the house. It's certainly good for the 
municipalities and the states as well.
    I believe there is no consistency between the Treasury and 
congressional intent and the FDIC in what they are doing. The 
regulators are overcompensating. And that's why creditworthy 
people like my stepdaughter can't get a loan. They're putting--
really putting the thumb down on the banks. We're giving them 
the TARP money. And there are so many rules and regulations to 
overcompensate for what they did or didn't do that created this 
crisis, that they're not freeing up the liquidity that we need.
    Number three, short selling. I mean, it's killing us. And 
suspend mark-to-market. And there hasn't been a businessman 
that I've spoken to that hasn't begged for those things and the 
banks as well. Because if it's at the current--if it's valued 
at 500,000 but it's only worth 300,000, then the banks have to 
write off the 500,000. They're using the TARP money for that 
instead of putting it in the pipeline so that my consumers can 
get that credit.
    I thank you very much for your kind attention. I know I 
went a little long. I've got much to say, and I need to take 
care of my constituents because they depend on me.
    The Chair. Thank you. Thank you very much, Congresswoman. I 
applaud your enthusiasm and thank you for hosting us here. We 
really do appreciate the help you gave us so that we could be 
here----
    Congresswoman Berkley. Well, you're here at my alma mater, 
and I'm very happy to have you here.
    The Chair. Thank you.
    Congresswoman-elect Titus, it's a pleasure to welcome you. 
Please, give us your statement.

          STATEMENT OF CONGRESSWOMAN-ELECT DINA TITUS

    Congresswoman-Elect Titus. Well, thank you very much, Madam 
Chair. That's always a hard act to follow, I can tell you. 
Madam Chair, members of the committee, for the record, I'm Dana 
Titus. I'm the newly-elected member of Congress from Nevada's 
third congressional district and a former minority leader of 
the state Senate since '92. And I very much appreciate, 
Professor Warren, your comments about some of my work in the 
legislature.
    I'm pleased to join my colleagues in welcoming you to Las 
Vegas. And I'm encouraged by your presence here to gather 
information on our very serious housing and mortgage 
foreclosure problem. As you know, as you've said, and as you 
will hear repeatedly, Las Vegas has the worst foreclosure rate 
in the country. And the third congressional district is the 
worst of the worst. The third district includes the suburbs and 
the surrounding communities where the greatest growth has 
occurred in the recent decade. In the numerous developments 
that ring this valley that have just sprouted up like mushrooms 
over the past ten years, speculation has run rampant. And we 
see the result of that in the high foreclosure rate.
    Companies and individuals scooped up lots of houses with 
mortgages that were too good to be true, anticipating that they 
could sell the houses off at a profit before they had to pay 
the piper. Unfortunately, it didn't work that way. There were 
other individuals who, as Congresswoman Berkley mentioned, who 
were just trying to realize the American dream at a time when 
the economic prospects looked really good. Never did they dream 
that within a few months or a year or so they would be without 
a job. Nor did many people understand the complex financial 
instruments, and terms, and ARMS, et cetera that were part of 
the lease--or the mortgage that they signed. Who can read and 
understand that--those terms in the fine print when many of 
those haven't even been recognized or defined in the financial 
world and certainly have not even been regulated?
    As a result, it's been estimated that maybe as many as 1 in 
40 houses in this district is in some form of foreclosure. Now, 
you take that problem and you couple it with the highest 
unemployment rate that Nevada has had in 25 years. In addition 
to that, we have a national economy that has hurt our gaming 
industry, because there is no disposable income for people to 
use for taking a holiday.
    In addition to that, the revenues at the state and local 
level are down because property tax is down, sales tax is down, 
real estate transfer tax is down. And the result is those 
governments have had to cut services that would help the people 
who are now in trouble. So you overlay that with this 
foreclosure disaster and southern Nevada is on the brink of an 
economic crisis.
    We used to pride ourselves on being recession proof, but 
that is no longer the case. People used to feel like if they 
had two nickels to rub together, they would go to Las Vegas, 
gamble it, and perhaps change their fortune. Not so much 
anymore. Now, we are in trouble and we need your help.
    I understand. I wasn't there. But I have tried to study 
that the Emergency Economic Stabilization Act that was passed 
by Congress with the best of intentions to encourage the banks 
to free up credit, to invest money back into the economy, and 
to allow the Treasury to buy those troubled assets. As yet, 
however, we have seen very little help on our main street level 
here in District Three.
    And now the message has changed. As I understand it, 
Secretary Paulson now says he is not going to buy up mortgage 
related securities. One day it's one thing, the next day it's 
the next. I believe that until the Treasury Department uses 
it's authority to more aggressively and directly address the 
housing problem, hard working families in CD3 will continue to 
face the problem of foreclosure. We need for banks to use the 
money that they have to refinance mortgages, to restructure 
loans in meaningful ways that don't foster re-foreclosures 
within a short time, because we have seen that happening. To 
get involved before delinquencies in payments occur, so you get 
on the front end of things and not the back end, and to pursue 
rent to buy options as certain possibilities. And we need to 
focus first on those owner occupied homes. Those are the people 
who are there who need our help.
    And as you have said, Madam Chair, and as the recent GAO 
report pointed out, we need more transparency. The taxpayer 
needs to know who is getting the money, how much are they 
getting, where is it going, what are the state and local 
governments really doing with their neighborhood stabilization 
funds, and why is it taking so long?
    In short, we cannot allow financial institutions to ignore 
the intent of the law to aid in the reduction of foreclosures, 
because I believe that addressing the housing situation and 
creating jobs are the keys to turning our economy around. That 
is certainly true in Nevada.
    While individual lenders, investors, builders, and 
borrowers must accept the responsibility for their actions, we 
also have to remember that this crisis not only affects that 
family that loses its home but it also affects the 
neighborhood. From lower property values to forgone revenue, 
the entire community suffers. We have seen that throughout 
District Three. A house is vacant, the lawn dies very quickly 
here without water, then the graffiti comes, the vandals come, 
the windows are broken, the swimming pool turns into a feeding 
ground for West Nile Virus and mosquitoes. You see the whole 
neighborhood goes downhill instantly. And we just cannot allow 
that to happen.
    So thank you very much for being here and for giving me an 
opportunity to tell you how critical this problem is and how 
much we need your help to diversify Nevada's economy, keep 
people in their houses, get people back to work, and turn this 
country around. Thank you so much.
    The Chair. Thank you, Congresswoman. Thank you both for 
joining us.
    And now I ask that the first panel could be seated. Thank 
you.
    Today's hearing will consist of two panels of witnesses. 
The first panel will address the causes of the current 
foreclosure crisis in Clark County and their relationship to 
the broader financial crisis gripping the country. The second 
panel will focus on the impact of the crisis on the local 
economy and how it has affected working families in Clark 
County.
    We're joined on the first panel by George Burns, a 
Commissioner of the Financial Institutions Division of the 
Nevada Department of Business and Industry. William Uffelman, 
President and CEO of the Nevada Bankers Association, and Dr. 
Keith Schwer, Director of the Center for Business and Economic 
Research here at UNLV.
    Thank you all for being here today. I ask you to please 
limit your oral remarks to five minutes. Your full written 
statements will appear in the official record of the hearing.
    Mr. Burns, could you start, please.
    Mr. Burns. Thank you. Good morning, Chair Warren and 
members of the panel. My name is George Burns. I am the 
Commissioner of the Nevada--am I on?
    Mr. Neiman. I think the speaker over to your right. You 
have one right in front of you. Okay.
    Mr. Burns. Is that better? How is that? Sorry. I'll start 
again.
    The Chair. Thank you.

   STATEMENT OF GEORGE BURNS, COMMISSIONER, NEVADA FINANCIAL 
                     INSTITUTIONS DIVISION

    Mr. Burns. Good morning, Chair Warren and members of the 
panel. My name is George Burns. And I am the Commissioner of 
the Nevada Financial Institutions Division. I am honored to 
have the opportunity to testify on the banking and economic 
environment in the State of Nevada and the Treasury's Troubled 
Asset Relief Program.
    This panel provides an important mechanism for oversight 
and accountability of this program in the future of our 
regulatory structure. I am very pleased that my colleague, 
Richard Neiman, has a critical role in this process. As state 
regulators, we play an important role in ensuring local 
economic development while protecting consumers. As we evaluate 
the effectiveness of the various government programs and 
contemplate our future regulatory structure, it is important 
for Congress and the Administration to hear and learn from the 
experience of state officials.
    Today, I will share my perspective on the effect of the 
mortgage and financial crises on state chartered banks and bank 
customers in Nevada, the strategy behind the Nevada banks and 
the Treasury Department's use of TARP funds through its Capital 
Purchase Program, and my recommendations on the use of future 
TARP funds to help the banking industry in the State of Nevada.
    I would also like to share my thoughts on the broader 
issues surrounding the TARP and regulatory restructuring. 
Nevada, as the rest of the nation does, finds itself in one of 
the most challenging financial situations since perhaps the 
1930s. Two studies, one done by the National Conference of 
State Legislators, and another completed by The Rockefeller 
Institute, state that Nevada has suffered significantly more 
than the rest of the nation in the current economic crisis. In 
short, our economy has gone from the fastest growing in the 
nation to amongst the worst.
    Nevada, like the rest of the nation, is experiencing both a 
foreclosure problem and a credit availability crisis. In 
Nevada, the financial crisis is strongly related to the 
unavailability of capital. The lack of investment funds for 
projects has literally killed economic growth, while just a few 
years ago this state led the nation in the creation of small 
businesses.
    Not only are many financial institutions not extending new 
credit, but they're also reducing or eliminating existing lines 
of credit for many customers, which only exasperates the 
problem. Making capital available for institutions to loan to 
credit worthy customers is an essential step in the right 
direction of turning this financial crisis around.
    Our nation's banks are operating in a challenging economic 
environment, the severity of which is probably greatest in 
Nevada. A downturn in economic conditions often results in a 
weakening of the banking sector and an increase in bank 
failures. Nevada has seen the voluntary liquidation of two 
banks, the closure of two other banks, and the merger of two 
nationwide financial institutions into others.
    The declining real estate market of almost 30 percent in 
values, rising foreclosures to a level of the highest in the 
nation, slower economic growth, and an unstable energy crisis 
have both exposed and contributed to weaknesses in the 
portfolios of numerous Nevada banks. The industry now has to 
manage these risk exposures over an ever weakening economy.
    Our job as regulators is to ensure that risks are 
identified in a timely manner and proactively managed to 
minimize destabilization of individual institutions, as well as 
the financial institution's industry as a whole. Nevada, 
particularly southern Nevada, has two major economic engines; 
gaming and real estate development. The overall economy has 
dampened gaming, and the mortgage crisis has stagnated real 
estate development with huge inventories of foreclosed 
properties. State chartered banks in Nevada are being affected 
by these circumstances indirectly but significantly. Most 
Nevada community banks do not originate much, if any, 
residential real estate mortgage loans. If they do, they are 
not held in portfolio in any significant amounts. However, the 
mortgage crisis has begun to spill over into the commercial 
real estate market, which Nevada community banks specialize in 
with small to medium size businesses.
    As residential real estate values have declined, so have 
commercial real estate values, specifically, in the acquisition 
and development categories. If there are no residential 
rooftops going up, supporting commercial development of grocery 
stores, retail strip malls, et cetera do not go up either. This 
has led to increasing nonperformance in substantial segments of 
Nevada community bank loan portfolios. The need for----
    The Chair. Mr. Burns, if I can just ask you to wrap up, so 
that we can be sure we hear all three people. I'm sorry how 
fast five minutes goes.
    Mr. Burns. That's quite all right.
    The Chair. And we will, of course, have your entire 
statement in the record.
    Mr. Burns. Thank you.
    With the announcement of the Capital Purchase Plan, 27 of 
the banks--state bank charters indicated their interest in 
applying. Nine of these have submitted applications. Two 
applications have been forwarded to federal regulators in 
Washington D.C. headquarters. And two applications have been 
forwarded and approved by the Treasury. To date, only three 
Nevada institutions have received any of the TARP funds. And 
that is from funds that were supplied to their multi-state, 
multi-bank holding companies. All the rest of those that have 
been submitted so far are primarily from privately or closely 
held institutions, which the Treasury Department has only just 
begun to entertain the approval process.
    It seems that the larger institutions have avoided poor 
examination ratings that would have vexed them from 
consideration because of timing. However, the smaller community 
banks have continued to deteriorate putting them at a 
competitive and regulatory disadvantage to publicly traded 
institutions because they maybe no longer meet the federal 
regulatory definitions of a healthy institution.
    The Chair. Thank you very much.
    Mr. Burns.
    Mr. Burns. Thank you.
    The Chair. I appreciate it.
    Mr. Burns. Thank you.
    [The prepared statement of Mr. Burns follows:]

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    The Chair. Thank you. Mr. Uffelman.

  STATEMENT OF BILL UFFELMAN, PRESIDENT & CEO, NEVADA BANKERS 
                          ASSOCIATION

    Mr. Uffelman. Good morning. My name is Bill Uffelman. I'm 
president and CEO of the Nevada Bankers Association. Madam 
Chair, members of the panel, I appreciate the opportunity to 
testify on behalf of Nevada's bankers on the Troubled Asset 
Relief Program. I have been asked to focus on the health of the 
local banking system of the current financial climate, 
including bank lending to small businesses and whether TARP has 
had a measurable effect on the community banking industry in 
Nevada.
    Nationally, the TARP program has served to calm the 
financial markets and does have promise to promote renewed 
economic growth. However, it's also a source of great 
frustration and uncertainty to many banks. George has commented 
on how few Nevada banks actually have seen the money.
    Much of the frustration and uncertainty is because of the 
significant and numerous changes to the program and 
misperceptions that have resulted on the part of press and the 
public. Overall, as you know, regulated banks were not the 
cause of the problem and have generally performed well. Not 
only did the regulated banks not cause the problem, they can be 
the primary solution to the problem, as both regulation and 
markets move towards the bank world. Investment banks, in 
effect, are no more. They're all becoming bank holding 
companies with substantially reduce leverage opportunities and 
with much stricter regulation.
    In general, banks across Nevada did not make toxic sub-
prime loans. They are strongly capitalized and ready to lend. 
But they cannot do so if misguided policies increase their 
regulatory costs and provide disincentives to lend. Banks 
already face significantly higher costs from deposit insurance 
premiums. They are almost double now what they were in the 
past. And banks are already receiving contradictory government 
signals about lending, being told to use capital to make new 
loans. And in some cases, being told by bank examiners not to 
because the risk is too great.
    As you all probably recall, banks loan from deposits. You 
don't lend out your capital. The capital is there to support 
the lending, but it in fact is not to be--or shouldn't be the 
source of the loans. There's a broad consensus that the crisis 
grew out of a housing bubble fed by mortgage loans that never 
should have been made, which were securitized and sold to 
investors who did not properly analyze or understand the risk. 
Excess leverage on Wall Street and other financial centers 
greatly exacerbated the crisis. The impact on the economy of 
the dysfunctional housing market is very evident in Las Vegas 
and in northern Nevada. The dramatic reduction to new home 
construction has hit the construction development lending, 
bringing it to a virtual halt. Banks in both areas have also 
been hit by the decline in the commercial real estate 
development, which typically lags behind residential 
construction.
    These impacts are further exacerbated in Las Vegas by the 
decline in retailing, tourism, and gaming. In northern Nevada 
declines in manufacturing are also contributing to the decline 
of their economy. Despite it all, banks in Nevada stand ready 
to lend to qualified borrowers. However, it's more difficult 
for potential borrowers to qualify because of tightened credit 
requirements. At the same time, because of the economic 
slowdown, potential borrowers are not stepping forward to ask 
for loans. They have hunkered down to wait and see what the 
future holds.
    A banker at a large bank commented to me that in the old 
days they might have funded seven deals out of ten that were 
presented. Now, they're only funding three or four. Some of the 
other deals were referred to smaller community banks where they 
might obtain funding or many wither on the vine. To many 
bankers, the implementation of TARP has been frustrating. 
Today, nationally, only about 50 banks have received capital 
infusions in Nevada. Less than a handful, as George has pointed 
out, two community banks have qualified for the Capital 
Purchase Program and received funds.
    This is due to Treasury's phased implementation program. 
The program was open to the publically traded banks in mid-
October, to small privately held banks in mid-November. 
Guidelines from mutual banks, Sub S banks, and others that have 
no way to issue preferred stock have not been issued. My 
current chairwoman, she actually received the application forms 
on Thursday. She has to decide whether to convert her bank from 
a Sub S to a C, so they can even proceed with the process.
    As Treasury moves forward, it should assure that TARP will 
allow all healthy banks, regardless of their corporate 
structure or charter type to participate in the CPP. Treasury 
should also ensure that sufficient money remains to fully fund 
the CPP for community banks accepted into the program. It would 
be most unfair and result in competitive inequality for the 
community bank program not to be fully funded.
    The Chair. Mr. Uffelman----
    Mr. Uffelman. Because the TARP funds have not really 
reached most of Nevada's community banks, I cannot say that it 
has a measurable effect on community banking.
    The Chair [continuing]. One minute.
    Mr. Uffelman. To the extent that most community banks have 
not yet had the opportunity to participate, they are at a 
disadvantage in competing with banks that have received TARP 
funds. Nevada banks continue to lend, and the TARP can help to 
further stimulate expanded banking services by healthy banks. 
As the economy starts to grow again, the growth will be stunted 
if adequate credit is not available.
    As experience has shown in previous economic slowdowns, it 
is the banks that end up providing most of the needed credit to 
support a recovery. Banks are anxious to meet the credit needs 
of businesses and consumers, and we know that such capital is 
vital to the economic recovery in communities large and small 
across Nevada and the country. Thank you.
    The Chair. Thank you----
    Mr. Uffelman. I have also provided the panel with an 
article that was in the Review Journal yesterday. It's an 
associated press article: ``Small Banks Waiting for Rescue 
Funds.'' It seemed very on point. I could have read you the 
article rather than constructing something myself.
    The Chair. Thank you very much, Mr. Uffelman.
    [The prepared statement of Mr. Uffelman follows:]

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    The Chair. Dr. Schwer.

 STATEMENT OF DR. KEITH SCHWER, DIRECTOR, CENTER FOR BUSINESS 
                  AND ECONOMIC RESEARCH, UNLV

    Dr. Schwer. Thank you. Madam Chair, members of the panel, 
thank you for the opportunity to testify this morning. I will 
be focusing on the economic conditions surrounding the State of 
Nevada, but will be making most references with respect to Las 
Vegas. But conditions in Las Vegas are pretty much matched by 
what is going on in our sister city to the north in Reno. Las 
Vegas represents 71 percent of the population of the State of 
Nevada, a population of slightly less than two million people 
here locally.
    There was a myth that was mentioned earlier about the 
southern Nevada economy, that it was decoupled from the 
national economy. That myth has destroyed very clearly. But the 
myth was based upon 25 years of growth and expansion with the 
population growth rate in excess of 5 percent per year. And 
that compares with the national rate of 1 percent per year. 
Last year, we lost a population of near 10,000 people. And that 
turns into roughly 4,000 additional vacant homes added to the 
excess supply that we currently have.
    Looking at the composition of the economy, it is an economy 
that very much looks like the Michigan economy, in the sense 
that it is concentrated in one industry. The location quotient, 
the measure that economists use to evaluate economic 
concentration, shows that hotels and accommodations were 17 
times the national average. And with autos in Michigan, it is 
somewhere around 12 or 13 percent.
    Over this rapid period of expansion of the last 25 years, 
housing prices in southern Nevada until 2003 remained at or 
near the national level with very little price variation. So 
our economy was growing and providing housing, but it was not 
in a bubble situation. In 2003, we saw the change. In 2003, we 
saw that housing prices began to jump. And within a period of 
one year, housing prices had rose more than 50 percent.
    The cause of that is many components that were associated 
with speculative behavior. I will note only one. That was on 
television, you could follow the get rich real estate seminars. 
Take out your mortgage equity, withdraw it, and invest in Las 
Vegas, and get rich.
    We have also had others that followed on, seeing an 
economic opportunity, that were inexperienced and that added to 
the economic difficulty associated with price increases. 
Housing price increases peaked in 2006, and have been going 
down ever since. I've included the most recent information in 
graphic form, the Case-Shiller Price Index for Las Vegas.
    Housing prices are now returning to the levels that they 
were prior to the peak, but nobody is buying other than 
investors. Overall, the economy slowed. I would note that we 
did not enter a recession here in southern Nevada until 
October. The economy peaked in October of 2007. So we went for 
over a year with minimal impacts even though real estate and 
residential construction were heavily hit. What happened there 
is, we had workers moving out of residential construction to 
construction jobs on the strip. If it had not been for the 
credit crisis of 2007 and the associated difficulties 
thereafter, we may, we may have got through that economic 
downturn without the severity that we now see.
    The Las Vegas economy is now one in which unemployment 
rates are rising. As noted, our unemployment rate has remained 
above the national rate by 1 percent and continuing to 
increase. We have every reason to believe that the economy, its 
unemployment rate will peak next year and could well be at the 
10 percent level.
    We also included a very important point of the risk during 
this period. And that is, that 50 percent of homeowners in the 
State Nevada have negative mortgage equity. And that is a great 
risk going forward if the economy does not pick up. The housing 
problems are focused in three key areas: price, for which we 
have made some progress locall; foreclosures, which continue to 
be a problem, an increasing problem; and jobs. And we're seeing 
around those last two, that our economy is suffering 
significantly.
    So in conclusion, what we've seen is that credit has dried 
up, we had a housing bubble, we've seen flight to safety. And 
we anticipate that there will be further problems here, serious 
problems. And that we face significant risk going ahead, and 
that risk will depend very much on how the national economy 
performs over the next year.
    Thank you for your time and your attention.
    [The prepared statement of Dr. Schwer follows:]

    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
    
    The Chair. Thank you, Dr. Schwer. If you all would remain 
for just a minute, we have a few questions. And I'm going to 
start with Mr. Neiman.
    Mr. Neiman. Thank you. As you all referenced, the Treasury 
has two programs that it implemented under the TARP. One is 
directed toward systemically significant failing institutions. 
The other toward healthy institutions. And that's where the 
bulk of money has gone to, the Capital Purchase Program. With 
respect to the Capital Purchase Program, I'm interested in your 
views on the effectiveness of a strategy that invests 
taxpayers' money into only healthy banks, the term viable 
without any additional assistance, and investment in banks 
without any restrictions on--or requirements that that money be 
down streamed.
    I think Mr. Burns referenced the fact that there is no 
requirement that money invested at the holding company level be 
down streamed to individual banks, as well as no restrictions 
or requirements regarding the use of the funds. And this is 
really one of the critical questions that we are dealing with. 
I would like the perspective of both--in fact, of any of the 
members of the panel that would like to comment.
    Mr. Burns. If the Capital Purchase Program continues to be 
orchestrated the way that it has been so far in its short 
existence, I believe that it's going to lead to further 
concentration of banking in Nevada, where over 80 percent of 
the market is already controlled by three national banks. This 
is because, as the smaller banks have taken longer and longer 
to be able to apply for and possibly receive these Capital 
Purchase Program funds, their exam ratings are deteriorating 
and they're now being tagged as non-healthy banks. Whereas, if 
this program had moved faster or sooner or further 
consideration could be given to them regardless of what their 
most recent ratings are and so forth, their sustainability 
there over the long run.
    Mr. Neiman. So the use of the capital into larger banks, 
the likely use of those funds will be for acquisitions of other 
banks further consolidating the markets?
    Mr. Burns. Exactly. One of the few banks in this state that 
has received the funds from their holding company received over 
140 million dollars. They just recently announced that they're 
using 77 million of that in order to write off their bad 
security investments. That is not contributing to lending, nor 
the stabilization of the system.
    Mr. Neiman. Mr. Uffelman.
    Mr. Uffelman. Last week, when I was invited to appear 
before this panel, I went out to a number--well, I went to my 
board and several of my other members, among them a small 
community bank. I want to quote something that he wrote back to 
me. ``The FDIC just left here yesterday--and George, I forget 
what bank you're at--we've been impacted with the real estate 
and economic issues much the same as everyone else. They're 
just plain overreacting in favor of protecting the FDIC to the 
detriment of the consumers they're chartered to protect. They 
talk out of both sides of their mouths and are unquestionably 
on a mission to take some banks down regardless of their real 
viability. I will undoubtedly come under some form--some sort 
of regulatory action, just not sure which one for now. The TARP 
program really needs to have its name changed. And I can think 
a number of good names since they have yet to touch a toxic 
asset by way of loan purchase or stock purchase.''
    I will skip a couple other comments here. ``All the while, 
community banks like ours are left hanging in the wind, and due 
to our deteriorated condition caused by the economic downturn, 
excluded for eligibility for the CPP. It's just ridiculous. And 
I hope that the idea that community banks didn't cause the 
problem and are affected by it are being--are not--excuse me--
are not--are affected by it are being dismissed as bad 
investments. That the FDIC has taken all this effectively 
discourages banks from taking any risk due to the fear of being 
downgraded and subjected to harsh treatment as they continue to 
protect the bank insurance fund. Since everyone knows that the 
government will step in to bolster the fund, I think they're 
tossing out the baby with the bathwater. Now, that you've heard 
it, I'm buried at this point working on an action plan to 
refocus this bank in a fashion where we're stingy lenders or 
not lenders at all and will only grow our loan portfolios at a 
rate commencement with our core deposit of growth. That won't 
go a long way towards encouraging the banking industry to begin 
lending again.''
    The Chair. Thank you. Mr. Silvers.
    Mr. Silvers. Well, first, I want to thank all three panel 
members. I thought that the testimony was extremely valuable 
and candid. As someone who just got off the plane from the East 
Coast this morning, it was worth my while just to hear the 
three of you outlining conditions. I'm really grateful.
    I want to ask several questions I believe follow up on 
Richard's inquiry, which I think, as he indicated, is essential 
to an aspect of at least our--of our world.
    Let me pose a series of questions to you and you can maybe 
pick which one you want to answer. We have met with the 
Treasury Department, and we have been present and reviewed much 
of what they have said about what they are doing. And they 
repeat, and we have queried them about this, and we've queried 
the Federal Reserve about this, that their sole decision 
criteria in the Capital Purchase Program is whether a bank is 
healthy, absent of the capital infusion. That that's all that 
they look at. All right.
    I'm curious if any of you have a response or an evaluation 
of the accuracy of that assertion.
    Mr. Neiman. And the appropriateness, is that what the test 
should be as to the use of those capital objections?
    Mr. Silvers. And with that addition, my second question to 
you really comes off of some of the comments in Mr. Uffelman's 
written testimony, where you discuss the quandary, the problem 
faced by banks contemplating requesting TARP money. The 
perception how--how potential depositors will perceive it, how 
capital--how stockholders will perceive it, a sort of set of 
game theory problems. Will a bank be perceived as being weaker 
for asking for money or stronger?
    And this of course interacts with the criteria. The sole 
decision criteria is, are you healthier or not? It's kind of a 
question you may not want to ask for fear of the answer. My 
question is kind of one step up, which is: Does that set of 
quandaries that you've laid out, which seemed like a sort of no 
win set of propositions for banks thinking about this, does 
that suggest that maybe we ought to reconceptualize the way 
this whole capitalization program works, and perhaps for 
example give money to everyone? So that it's not--you don't 
ask, you just get it. Unless, of course, you really can't--you 
really are nonviable. In which case, you should be closed or 
sold off.
    Third question--and this is very brief--the Congresswoman 
and the Congresswoman-elect talked a great deal about the 
problem of mortgage restructurings. And each of you in your 
testimony eluded to very high foreclosure rates. I'm curious as 
to what steps are being taken here to address mortgage 
restructurings by the financial institutions community, and 
what steps would be helpful for the Treasury to take under the 
TARP in that regard.
    The Chair. So a combination of questions there. Perhaps, 
we'll start at the other end this time, if that's all right. 
Dr. Schwer.
    Dr. Schwer. Well, I'd like to come back perhaps to the 
first one and offer some explanation of perhaps what the Fed is 
doing. And since the question and the devaluation of banks is 
always that of solvency versus liquidity. And the deep abiding 
concern and the financial regulators is the question of 
solvency and the question of bank runs. I would suggest that it 
is in the DNA of bank regulators not to use the word solvency. 
They are very much concerned about liquidity. So I think that 
perhaps reflects some of the comments that they may have made. 
With respect to structuring mortgage programs, I think it's 
particularly important to note the magnitude of the problem 
that we face. I realize that there are questions about how to 
do that. But waiting a long period of time to figure it out in 
some way may well result in the problem having grown to great 
magnitude. There is a question of getting it done and getting 
it done now.
    Mr. Silvers. If you don't mind my stopping you right there. 
Do you think it's important, in thinking about this, how much 
attention should we pay to the question of whether to some, 
quote, ``undeserving'' people may receive aid if we act?
    Dr. Schwer. Well, I realize the there is always the 
question in equity of who gets what. That is the current debate 
about the distinction between the money that is being used for 
Wall Street and the money that is being used for Main Street. 
There is the question of bailing out the banking industry 
versus the automobile industry. So that equity issue is always 
in front. Standing and having a long debate on who wins and who 
loses is contrary to getting the nation's economy back in 
order. So we need to be moving forward, from my perspective.
    The Chair. Thank you. Mr. Uffelman, would you like to 
respond to the questions?
    Mr. Uffelman. If I can keep them all straight.
    The Chair. I hope you took good notes, sir.
    Mr. Uffelman. I did want to comment. You know, Fannie and 
Freddie, before their failure and their preferred and other--
their stock and the impact, it did have an impact on at least 
one Nevada community bank that I'm aware of. So, you know, 
immediately, the day before, you're being encouraged, put your 
money in Fannie and Freddie, you can't lose, by the regulators. 
You do, and guess what, it's basically no longer of value. So 
your capitalization is down. Mark-to-market, in the midst of 
all the Treasury process over that weekend, the same time we 
had people in the banking industry working on the mark-to-
market issue, again, a kind of a double-whammy.
    I'll comment on the mortgage restructuring. As I said 
before, the banks that I represent, in effect, they got 
excluded from the mortgage game. I mean, the larger banks, you 
know, that had a mortgage division, that because they were in 
the mortgage business, they now are frequently servicers for a 
number of investors for the mortgage-backed securities. So they 
have a bigger portfolio to manage. But, in fact, and if you go 
out here, as we commented before, the community bank in Las 
Vegas, the community bank in northern Nevada, a minimal number 
of mortgage loans, and regularly packaged up and sold upstream.
    But the whole servicing industry--yesterday afternoon, I 
was on an extended phone call with people all over the country 
in the servicing industry, talking about servicing related 
issues. For whatever reason, I have become their spokesperson. 
The servicing companies that--you know, you used to have that 
collection side that made all the calls, those people are now 
becoming workout specialists. And they have added bodies.
    But again, how many thousand properties are we talking 
about? The other experience that time and time again we're 
reminded, as many as half--excuse me--as many of half the loans 
that are in default in this valley, the people will not return 
a phone call, they won't respond to the letter. They have in 
effect thrown their hands up and walked away.
    Foreclosure in Nevada is typically nonjudicial. Typically, 
you have missed payments for three months and a letter is sent 
called a notice of default and intent to sell. That's a 90-day 
letter. Sometime in that 90 days, we sure hope you would call 
home and ask about, can we make an arrangement? At the end of 
that 90 days, I then have a 21 day notice of sale. You still 
have an opportunity to work it out.
    After the sale at the courthouse steps, whoever the 
purchaser is, they basically have a three day delay before 
there is an eviction. So in that process, if you missed 
payments for 90 days, you have the notice of default for 90 
days, 21, you start adding it up, we're talking about seven or 
eight months before there is that final moment that the locks 
get changed on the door and the new owner, whoever they are, 
takes over. Maybe the institution got it back, maybe they 
didn't.
    But the net outcome of all of that is, somewhere between 40 
and 50 percent of the people who are involved in that, they 
haven't talked to their lender at any time. It is very 
discouraging. The homeowners association are upset with the 
lenders. The lender doesn't own the home until the end. And it 
is very difficult to deal with. So yes, we are working at it 
and there are more people available to do the workouts. But it 
is a very tough situation.
    The Chair. Mr. Burns would you just have a short answer. 
We're going to be running a little bit late, but we would like 
to hear from you on these questions.
    Mr. Burns. To generally answer all of the three questions 
that you asked, it is indeed the case that for the first time 
in history we are seeing banks fail, not due to a lack of 
capital but due to a lack of liquidity of that capital. And 
that's why the Capital Purchase Program is so important as far 
as providing capital to institutions, so that they can loosen 
up the funds aimed at liquidity.
    It seems to become a matter of too big to fail versus too 
small to matter. The larger banks whose actual viability is 
probably even more in doubt than small community banks are 
being infused. The smaller community banks are not.
    Mr. Neiman. Can I just ask--do we have time or----
    The Chair. We--actually--it would be rude to our next 
panel.
    Mr. Neiman. Okay.
    The Chair. So I am going to play the discipline of the 
chair here.
    I want to thank our first panel very much for coming. As I 
said, your remarks will be posted in full. We appreciate the 
time that you have taken. And the first panel is excused. Thank 
you.
    I would now like to invite our second panel of witnesses to 
come down.
    I'm pleased to welcome our second panel of witnesses. We're 
joined by Gail Burks, who is president and CEO of Nevada Fair 
Housing, Inc.; Julie Murray, who is CEO of Three Square, a 
local community food bank; Danny Thompson, who is Executive 
Secretary and Treasurer of the Nevada AFL-CIO; and by Alfred 
Estrada, who is a Clark County resident who will share his 
personal story of the effects of the foreclosure crisis.
    Thank you all for being here today. As I asked of our first 
panel, please limit your oral remarks to five minutes. Your 
full written statements will be part of the official record.
    Ms. Burks, could we begin with you?

 STATEMENT OF GAIL BURKS, PRESIDENT & CEO, NEVADA FAIR HOUSING 
                             CENTER

    Ms. Burks. Thank you, Madam Chair, members of the 
committee, for the opportunity to make comments today. I have 
been asked to focus on the role of lenders in the foreclosure 
crisis and the prevalence of foreclosure victims and the impact 
on those victims.
    Audience Speaker. We can't hear.
    Ms. Burks. Is that better?
    I've been asked to focus on the role of lenders in the 
foreclosure crisis and the impact on victims. Nevada Fair 
Housing Center is a nonprofit. We have served the valley since 
1995. And much of our work involves housing and consumer 
issues. Over the last two years, we've seen a huge increase in 
our case load for foreclosure prevention. Currently on average, 
we are servicing about 600 calls and internet inquiries per day 
for foreclosure assistance.
    In terms of the lender role, in the Nevada community, 
advocates warn the local government officials as well as public 
officials about the increase in predatory lending in 2001. As 
we begin to see what we refer to as predatory lending, we saw 
an increase in fees, a decrease in retail originations, an 
increase in loan purchases, and a decrease in the use of such 
things as down payment assistance, FHA loans, and fee for 
service type work that literally represented services provided.
    As this increased, we saw a transition from predatory 
lending to sub-prime lending. With that, we mean consumers who 
could have received better loans receiving what we consider to 
be toxic loans or sub-prime loans. So how in effect did that 
work? In looking at actual data and case files in some of the 
communities that have been hit the hardest by the foreclosure, 
over 97 percent of the consumers that received adjusted rate, 
sub-prime loans, interest only loans or Alt-A loans had credit 
scores of 640 or greater and could have received a traditional 
conventional loan or even qualified for an FHA loan.
    As the increase in the sub-prime market expanded and the 
decrease of consumers receiving legitimate loans, we also saw 
an increase in foreclosure. Now, many of the national reports 
and studies that have been broadcast in the news have done what 
we call blaming the victim or literally putting the economic 
crisis on the backs of low income consumers stating that they 
caused the mortgage market to fail. This is not true. Many of 
the consumers that we see on a day-to-day basis are consumers 
who could have received better loans. The clients that we see 
are broken down into those who have a delinquency; meaning 30 
days or less, those who have received a notice of default; 
meaning, 90 days or more, and those who have actually received 
a sale date.
    Given the opportunity, many of these loans could be 
modified because the consumers could afford the homes. Now, 
earlier it was stated that 50 percent of those in foreclosure 
don't talk to their lender. What was not stated is that many of 
the consumers have attempted to contact their servicer to 
receive help, but because of all of the different programs that 
are available, the loans are not getting modified without some 
sort of intervention and assistance on behalf of the consumers.
    The Chair. Ms. Burks, one minute.
    Ms. Burks. The other thing that we are seeing in terms of 
the foreclosure crisis is not enough sufficient initiatives to 
actually address consumer issues. All real estate is local. 
With the inability to modify loans or to obtain direct 
assistance or funding to modify those loans or to purchase 
those loans, these loans are actually going into foreclosure. 
That's also leading to another type of scam. Consumers are 
being inundated with requests to pay for foreclosure prevention 
services. In some instances, consumers have paid upwards of 
$4,000 to scammers to modify loans, only to find that the 
foreclosure has not been stopped.
    The top funds have not increased lending. Indeed, many 
lenders have changed their mortgages conventional products. So 
today, you have to have on average a 680 to a 720 credit score 
and 75 percent of that loan will be financed, where as the 
other 25 percent must come from money from your pocket. In 
order to make TARP effective, we have to give consumers some 
relief, we have to make modifications mandatory versus 
voluntarily, and we have to ensure consumers that there is 
legitimate assistance to help with the foreclosure crisis.
    The Chair. Thank you, Ms. Burks.
    [The prepared statement of Ms. Burks follows:]

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    The Chair. Mr. Thompson.

  STATEMENT OF DANNY THOMPSON, EXECUTIVE SECRETARY-TREASURER, 
                      NEVADA STATE AFL-CIO

    Mr. Thompson. Thank you. Thank you, Madam Chairwoman and 
members of the committee. It's a pleasure to be here today. You 
know, I think the previous speakers have pretty well laid out 
what happened here, and that we had this massive housing bubble 
and a move by everyone to make money quick.
    Let me tell you, during that period of time, I was going to 
buy a rental property, to show you how bad this was. I had 
found one that was right, that I could afford and make enough 
money in the rent. When I went to make the offer on the home, 
the person selling the home told me, ``Well, no, that's not 
enough, you have to offer more because this week the prices 
went up.'' The prices went up so quickly and there was such a 
move by people to get in on this get rich scheme, if you will, 
that the lenders made loans that normally they wouldn't make.
    I have friends who--who got ARM loans that they didn't 
fully understand. Interest-only ARM loans on a $700,000 home 
that had been told by the lender that, ``Well, don't worry if 
rates go up beyond,'' because there is no way they could afford 
that home, ``if the rates go up, you will simply refinance.'' 
And then we come to where we are today and you couldn't 
refinance if you had to.
    Today, they're over 30,000 foreclosures in Clark County. 
One of the problems, quite honestly, is that 50 percent of the 
people that hold mortgages owe more on the mortgage than the 
home is worth. Now, that's a direct result of the bubble 
popping. But it's also--a lot of those people are her clients, 
where they now have those ARMs and those interest-only ARMs 
come due. And as they get readjusted, they find themselves in a 
situation where that is impossible. And so many of them simply 
walk--walk away. We have a $450,000 house that the house right 
across the street is worth $200,000. That's what's happening. 
They--some of them literally walk away. And some of them go and 
turn the keys in.
    Whether the stimulus has helped individuals, I don't know 
of any help that has filtered down to homeowners. I do know, 
though, that the lack of regulation or the lack of enforcement 
of existing regulations on some of these mortgage companies is 
something that certainly needs some scrutiny. Because, you 
know, like I say, I know people that have loans that ended up 
with an adjustable rate mortgage that they didn't fully 
understand that that's what it was. Whose fault is that? I 
don't know. But I can tell you that the result of that has put 
Nevada, as a state, in a place where we have never been before.
    Right now, on the Las Vegas Strip, we have the largest 
privately funded construction job in the world. There are 
approximately 10,000 workers on that job. And Nevada's economy 
is dependent, so dependent on a single source, in that almost 
50 percent of all the money in the state budget comes from a 
single source. And so I can tell you what the fix is not. The 
fix is not to take away wages. The fix is not to take away 
pensions. The fix is not to take away health care of workers. 
Because that's a rush to the bottom.
    And I have heard so many work people say, ``Well, we need 
to''--in fact, this legislative session, I'm in the fight of my 
life to protect public employees' pensions. That's not the fix. 
The fix, I think is creating jobs and good paying jobs and jobs 
that pay prevailing wages in the community that they are 
created will get us out of this mess. Thank you.
    The Chair. Thank you, Mr. Thompson.
    We are going to take a break for just a minute in the 
middle of this panel. I apologize to Mr. Estrada and Ms. 
Murray. But Senator Reid has come to join us, and we would like 
to just make a space for him and invite him in so that he can 
also read a statement. That would be good. The rest of you can 
just stay there. Stay there, Ms. Murray. I think Mr. Thompson 
is going to give up his seat. Please, Ms. Burks, stay. That's 
fine. I think we have the Senator?
    Oh, it's--sorry. We do not have the Senator. We will have 
the Senator soon. I was misinformed.
    Ms. Murray, would you like to start your testimony? Yes. 
Sorry, Mr. Thompson. I'm glad for you to have a little exercise 
in the middle of this. I appreciate it.
    Ms. Murray.

     STATEMENT OF JULIE MURRAY, CEO, THREE SQUARE FOOD BANK

    Ms. Murray. Good morning, Chairwoman Warren and members of 
the Congressional Oversight Panel. My name is Julie Murray, and 
I serve as the CEO of the Three Square Food Bank in Las Vegas, 
Nevada. And I'm honored to have been invited to provide 
testimony today. My testimony follows that of housing and 
finance experts who have done an outstanding job discussing the 
economic conditions of our community and our state. My role in 
today's proceedings is to focus on what these numbers mean in 
terms of human lives and how the residents of our city and 
state are being affected and are suffering due to the downward 
trends in our economy.
    As you know, I run the Three Square Food Bank which started 
over a year ago at the inspiration of Eric Hilton, youngest son 
of Conrad Hilton, and numerous other think-outside-the-box 
leaders in this community who declared that it is was not 
acceptable for people in our community to go hungry. As the 
newest member of Feeding America, we're proud to distribute 
food in southern Nevada to over 211 nonprofit agency partners, 
including faith-based groups and churches. We also provide 
weekend food banks, food bank bags to 120 schools with our 
Backpack for Kids program.
    Maslow's hierarchy of needs states that when looking at how 
a human being's needs are met on a pyramid, the basic needs of 
food and shelter are at the base of the pyramid, serving as the 
foundation. Once a person has these basic needs of food and 
shelter met, they are better equipped to excel in school, to 
maintain a job, and lead a productive life. When part of that 
foundation, the core, food and shelter, is absent or has 
crumbled, it makes it very difficult for a person to survive or 
exist.
    If I would have testified a year ago or even six months 
ago, I would have said that thousands of families in my home 
state are living paycheck to paycheck and are just one crisis 
away from disaster. However, I'm sad that as I testify before 
you today, those thousands of families have had that one crisis 
occur. Due to the recession, they're now living their biggest 
fear, living without a paycheck. Our city, county and state 
budgets are receiving double digits cuts at a time when people 
are in most need of services. At the Three Square Food Bank, we 
see the people affected by these statistics and these numbers 
every day.
    Let me give you three brief examples in the five minutes of 
my testimony. Number one, children. Children facing hunger. In 
this Clark County School District here in southern Nevada 
nearly half of our children, 132,000 qualify for a free or a 
reduced lunch meal, which means that a family of four makes 
less than $20,000 a year. Picture that. Five out of ten 
children crossing the crosswalk on their way to school who are 
struggling with hunger. When half of our children are 
suffering, we are living in a crisis mode.
    The Chair. One minute.
    Ms. Murray. Thank you. Secondly, families in need. For 
every child in need, there are members of families struggling 
to make ends meet. Recently, while filling my gas at a gas 
station in Summerlin, Nevada, a car driven by a middle aged man 
with two sweet little girls in the back seat pulled in next to 
me. The man approached me with an ashamed look on his face and 
said that he had never been out of work but recently was laid 
off, lost his home, and could not afford gas or food for his 
family. My heart broke as the two little girls watched their 
dejected father beg for money. I gave him some cash and told 
him how to find a local food bank agency partner where he could 
receive free groceries.
    As Nevada's unemployment rate grows, such stories will only 
become more common all across the country. So in conclusion, I 
want to share with you what I testified before the 
Congressional Appropriations Committee last week, along with 
Governors from Wisconsin, Vermont, and New Jersey, and an 
expert on higher education. Congressman David Obey wanted the 
Congressional Appropriations Committee to hear testimony about 
how lives are being impacted. And I was delighted to be able to 
represent our state and share that with him. My input for that 
committee and my input for this committee is the same. When we 
are looking at ways to effect change and when you are looking 
at the effectiveness of TARP, let me say that we have not seen 
any decreases in the demand for food or services from my food 
bank and from our 211 nonprofit agencies, partners, schools, 
and churches. In fact, as we wind down our year, each week 
brings huge increases in demand for food and longer lines of 
people who need food at our agency and nonprofit agency 
partners.
    My recommendation is that we all work together. And in the 
final conclusion is, I want to share with you that, as Damon 
Silvers said in his opening remarks, we're all woven in this 
together. And Richard Neiman said, only so much can be done at 
the state level. And all of you are right. We have to work 
together. My food bank service providers, cities, counties, 
states, and the federal government must communicate and be 
effective.
    It is sad--a sad day when a child writes to Santa that all 
he or she wants for Christmas is food. This recession is 
frightening, it's impacting us all, people are suffering. And I 
thank you for coming to our state to hear about how things are 
going. Thank you.
    The Chair. Thank you, Ms. Murray.
    [The prepared statement of Ms. Murray follows:]

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    The Chair. Now, Mr. Estrada, if you could wait for just a 
minute, we're going to hear, I believe, from Senator Reid, 
who's going to join us.
    Senator Reid, on behalf of Mr. Neiman, and Mr. Silvers, and 
myself, the Congressional Oversight Panel, we want to welcome 
you here today and offer a special word of thanks because, 
without your insistence, this panel would not exist and 
certainly not would be in Nevada today. So we welcome your 
thoughts.

  STATEMENT OF SENATOR HARRY REID, U.S. SENATE MAJORITY LEADER

    Senator Reid. Madam Chair, I appreciate very much all of 
you being here in Las Vegas. But more importantly, thank you 
very much for taking this assignment. This is an 
extracurricular activity that you all didn't have time to do, 
but you're all uniquely situated to help the American people 
work their way through the issues that they have, which are 
significant.
    The Chair. Senator, could you move the mic just a little 
bit closer, now that you've finished those kind words.
    Senator Reid. It's good over the years--it's good over the 
years, I haven't developed a complex because people always tell 
me I don't talk loud enough.
    The Chair. Thank you, sir.
    Senator Reid. Maybe I do have a complex. I don't know. For 
those who are listening, I had the unique opportunity to 
appoint the chair, Elizabeth Warren. And I appreciate your 
taking this. I worked with Speaker Pelosi, you know, Mr. 
Silvers, to get you on this board. And it really is a very, 
very important job that each of you have. I can't think of a 
more appropriate place in the country than Las Vegas to hold 
this hearing. No place can demonstrate more the struggles that 
communities across the country are facing as we work our way 
through one of the most difficult economic recessions in our 
entire nation's history. I'm confident this hearing will 
provide the oversight board important information and insight 
into the economic crisis to help guide its work in Washington.
    Before the election, we passed the Economic Stabilization 
Act, which created the Troubled Asset Relief Program or as we 
all refer to it TARP. In acting, Congress believed that working 
with the administration and the Federal Reserve, that there 
could be an ad hoc approach to rescuing important financial 
institutions that at the time wasn't working at all. And we 
felt confident a legislative solution was needed.
    We all believed, and Congress certainly was part of that 
belief, that the financial system had to be stabilized before a 
broader economic recovery could follow. The Bush Administration 
initially believed that they would do this by using TARP to 
purchase from banks troubled assets which consisted mainly of 
mortgage backed securities or mortgages.
    Now, I'd never heard of an illiquid asset, but that's what 
Paulson kept referring to--these illiquid assets, these bad 
loans. These illiquid assets had been rapidly declining in 
value due to the housing crisis and were causing many 
institutions to suffer enormous losses. Soon after the law was 
passed, Secretary Paulson concluded that this approach was too 
complicated and would take too much time and frankly too much 
money. So treasury shifted gears, began buying preferred stock 
in the nation's largest banks as a way to inject capital into 
these firms and hopefully into the country's financial 
problems. This capital could be used to help absorb expected 
losses on real estate related to securities or mortgages, and 
also could be used to provide funds for lending which we know 
is critical to economic growth.
    So far, we know that at least 350 billion dollars have been 
allocated under TARP. Yet, as the economy continues to 
deteriorate, foreclosures increase and credit continues to 
contract. Many Nevadans wonder whether TARP is being used 
appropriately. All America shares this. I do. I see two 
problems with how TARP has been implemented so far. First, most 
of the big banks that received capital funding through TARP, 
some 225 billion dollars, were healthy and should be using the 
new capital for lending. And they're not. Instead, these firms 
appear to be contracting their lending activity just when 
business and consumers across the country need access to credit 
the most.
    This lending contraction exacerbates our country's economic 
troubles. And if there is anything that I want to make as a 
point today, it is that these banks have to loosen their grasp 
on stopping people from borrowing anything. Businesses that 
have been ongoing for years and years with good credit ratings 
can't borrow enough to keep their businesses going. People 
can't buy cars.
    I met with a bank president here in Las Vegas yesterday, 
president of one of the one hundred largest banks in America. 
He said it's unbelievable what is happening as far as his bank. 
People can't get--their credit ratings can be very high, but 
they can't get approval to borrow money for a car loan. Now, as 
you know, I have spoken to car dealers and of the few cars they 
have, if they have somebody who wants to buy a car, they can't 
get it financed. So 225 billion dollars given to the big banks 
has not helped the problem at all. And it shouldn't be that 
way.
    I took the liberty yesterday to call three large financial 
institutions. What's going on? And they all had the same 
answer, ``We're working on it.'' Well, I would suggest they get 
a new work crew because it's just not helping at all. 
Underwriting standards became too shoddy before the housing 
bubble. We all know that. But I believe the pendulum now has 
swung too far in the other direction. I hear from too many 
constituents, parents, small business owners or business 
leaders that need capital but can't get it because it's either 
unavailable or far too expensive. The banks that received TARP 
have a unique responsibility due to the fact that American 
taxpayers now have an ownership stake in these banks. All of us 
here who pay taxes are shareholders of those banks. We can't 
force them. But for the good of the country, the banks should 
be putting their TARP funds to use and lending where possible.
    I don't know if this is true. You could find out, that some 
of these big banks are loaning money to countries in the Middle 
East. I'm not--countries, I'm sorry--to business propositions 
in the Middle East, but nothing here in America. And I hope you 
would follow up on that.
    Second, despite Congress' clear intent that TARP be used to 
stem foreclosures, so far no TARP funds have been used for that 
purpose. Meanwhile, the number of foreclosures increases by 
day, by day. Especially here in Nevada. Some of the witnesses 
here, like Gail Burks, can explain first hand, if she hasn't 
already, the scope of Nevada's foreclosure problem and the 
tremendous strain it brings to working families and entire 
neighborhoods. If we don't confront the problem here more 
aggressively, experts predict we would see another up to 2 
million foreclosures in the next two years.
    Oscar Goodman and I went to the number one place in the 
city of Las Vegas for foreclosures. The average home in the 
area was eight years old. It was a very nice neighborhood. 
People have the idea these foreclosures are taking place in 
slums. They're not. The number one foreclosure district in Las 
Vegas--neighborhood, I should say--in Las Vegas is a very nice 
neighborhood. But part of it was exacerbated by the virtue of 
the fact that here in Nevada, we had a lot of homes that were 
bought for speculative purposes and not to live in. And that 
made things worse.
    My colleagues and I in Congress know that strong oversight 
of the Treasury Secretary is critical, given the large funds at 
stake. The oversight board is just one of several tools 
included in the legislation to hold the Treasury Secretary 
accountable to the taxpayers for fulfilling the objectives of 
TARP. While I had some role in the makeup of this board, 
everyone should be reminded, this board is independent from 
Congress. This board will be a reliable resource to Congress 
and the public, and this administration and the Obama 
Administration as we learn from you how the Treasury program is 
performing and whether its helping to put our country's 
financial system and economy back on track.
    And I would say to you, Mr. Neiman, I'm going to go out in 
just a minute and speak to my number one pal on the telephone. 
Schumer and I talk--Senator Schumer of New York and I talk 
several times a day, and he said only nice things about you a 
few minutes ago.
    Mr. Neiman. Thank you very much.
    Senator Reid. Thank you very much.
    The Chair. Thank you, Senator, we appreciate you coming.
    Senator Reid. Could I be excused?
    The Chair. You may be excused, Senator.
    Senator Reid. Glad to--glad to escape this difficult cross 
examination.
    The Chair. Thank you, sir.
    Mr. Thompson would you like to rejoin us? Mr. Estrada.
    Mr. Estrada. Yes, ma'am?
    The Chair. It was a wait. We appreciate your patience--
    Mr. Estrada. No problem.
    The Chair [continuing]. And now it's time for your 
statement. Please, sir.

   STATEMENT OF ALFRED ESTRADA, RESIDENT OF CLARK COUNTY, NV

    Mr. Estrada. Good morning. My name is Alfred Estrada, and I 
was referred to you by my realtor who is Leslie Moore. Let me 
tell you a little story about what happened to me. Okay?
    The Chair. Yes sir.
    Mr. Estrada. What happened was that my house, I fell behind 
on my payments. Okay? The house doubled in price, like this 
gentleman was saying, the houses doubled in price. So the 
amount of money that I owed on my house was not what it is 
worth anymore. So I had found another buyer to purchase the 
house from me. Right? And this is when I met up with my 
realtors. And I had asked them, I says, you know, I want to 
sell the house to a family friend of mine so that I can stay in 
the house.
    I have two little daughters, and I live in a house where I 
would never need to live in any other home in my life. Okay. 
This is my dream house, because I can open my garage door and 
see my daughters playing right directly across the street 
because that's where their school is at. Okay. And what had 
happened was, was that my mortgage company, they did everything 
that they were supposed to do. My wife, she worked on it for 
two, three weeks. Always on the phone. We had sent a bid in for 
the house for a fair rate of $75,000 for the house.
    All the houses had lost all their equity in the homes. 
Okay. And this was with Wells Fargo Bank. And what they had 
told us was that they wanted $89,000--$98,000 for the house. 
Okay. So I called--I called back my buyer and I told him, I 
said, ``Listen, this is what they want and then we can get the 
house back.'' Because the one part--the one part that I never 
wanted to do was to leave the house. Okay. Well, we did 
everything that they asked for. We gave them a new bid, the 
money that they wanted. They told us that if you give us this 
amount, the house is yours. So after we had did everything we 
were supposed to do, for two weeks, we couldn't get in touch 
with anybody. And then about another week or two down the road, 
and we find out that our house was sold at auction.
    I had a realtor come to my house and tell me that I had to 
move out of my house because--because they had no record pretty 
much of none of the things that was being done as far as the 
new bid for the home with our first mortgage company. So at the 
end, they tell me that I have 14 days to get my children out of 
the house and take them out of the house that--it's their home 
really. And so the gentleman tells me that he's going to pay me 
$500--up to--well, first $1,500, he was going to pay me for 
something called cash for keys.
    Which meant--because my wife, she was--she was working for 
a lady that was into foreclosed homes and she was cleaning the 
homes. And so she--we had--I had been with her, and I had seen 
some of the homes that people that are so distraught they're 
losing their homes or they're just upset, and they're tearing 
these houses apart, which is bringing the value down even more.
    And I told the gentleman, I said, ``Look, that's not our 
intention.'' I says, ``My intention is this, is that on the day 
that you told tell me that you are going to put the house back 
up for sale, I want to be the first person that you call so 
that I can have what should have been done in the beginning get 
finished so that I can move back into my home.'' The thing that 
really amazed me was that the $98,000 that the bank said that 
they wanted for the house, well, they sold the house for 
$85,000 in a auction. So they actually lost money.
    So now, Wells Fargo has the house. And now we've had to 
leave the home. We--I live in an apartment right around the 
corner from my house because I have five and six year old 
daughters.
    My six year old came home the other day with a full sheet 
of paper with all of her friends' names on it.
    And she told--she told me that these were the people that 
were going to miss her because we were going to have to be 
moving. And I told my daughter, I says, ``I don't care if I 
have to live in a van. You're still going to be able to go to 
this school.''
    I'm trusting in God that we're going to be able to be back 
into this home again. But this is what had happened to us. We 
had the money to buy the house.
    It wasn't supposed to go into foreclosure. And four or five 
days later, they sold it at auction for a reduced price.
    The Chair. Mr. Estrada, do you have any idea why this 
happened?
    Mr. Estrada. I have no idea. We did everything we were 
supposed to do. My realtors put in the bid for the home. They 
were dealing with the mortgage company, this and that. They 
sent back saying that they didn't want the first bid, that they 
wanted this amount of money, and they would sell the house to 
us. So that's what we did. We give them everything that they 
wanted. And in the end, they threw me--threw us--me and my 
family out of our house.
    Mr. Neiman. This is often an unfortunately common story, 
where banks are not moving these short sales along. And I 
assume when you had that offer to purchase that home at that 
price, they were going to allow you to remain in that house 
either through a rental or a loan, personal loan to you?
    Mr. Estrada. Right. We were going to rent the house from 
the buyer.
    Mr. Neiman. Right. This is something, an area that has to 
be addressed in order to get banks to move that along. Because, 
as you see, you're not benefiting and the bank is not 
benefiting.
    Mr. Estrada. No.
    Mr. Neiman. So it's a lose/lose. And that really is--and I 
very much appreciate you bringing this one to our attention, 
because it highlights a number of the problems in facing and 
dealing with an institution and the impact that it has on 
families. So I thank you very much for sharing that with us 
today.
    Mr. Estrada. Yes, sir.
    The Chair. Thank you, Mr. Estrada.
    Mr. Estrada. You're welcome. Thank you.
    Chair Warren. Mr. Silvers.
    Mr. Silvers. I have two questions. First, I want to pose a 
question about foreclosures. And I think Mr. Estrada's 
testimony suggests that foreclosure is kind of the first idea 
rather than the last. And we in Washington have heard on a 
number of occasions from the Treasury Department, in the 
context of the Treasury Department implementing TARP, the 
bailout, that what they are doing--that they are doing an 
enormous amount to prevent foreclosures on a voluntary basis.
    They have a program that they talk about called Hope Now. 
And they say that is the appropriate way to deal with 
foreclosures, is by voluntarily encouraging the banks that are 
receiving the hundreds and billions of dollars to work things 
out in just the--maybe not quite just the way they worked them 
out with the Mr. Estrada, but that kind of idea.
    I'm interested in the panelists' observations about the 
effectiveness of this voluntary approach and what might be done 
alternatively if that's not good enough with what remains of 
the TARP money?
    Second question is for Mr. Thompson. There was a mention of 
the----
    The Chair. You have multiple chances to ask questions.
    Mr. Silvers. Oh, I do? Okay.
    The Chair. So if you want to just ask one? I promise----
    Mr. Silvers. Then I'll come back. Thank you.
    The Chair. Good.
    Ms. Burks. Thank you. The Hope Now program is a program 
that uses a national toll free number for consumers that need 
assistance to call in. The difficulty is, it is impossible to 
truly diagnose a particular loan situation without looking at 
the case file, taking information from the client, and looking 
at the neighborhood at large. If you just tell the consumer to 
call the lender and request a modification, it doesn't work. 
You have to assist the consumer in calling the lender and show 
that lender how it's in the best interest of their investors 
and the consumer, how they can maximize net tangible benefit by 
keeping the client in that home. It's a lot of work. And on the 
average, if you do it correctly, you will spend about 200 hours 
per case.
    It's a direct service. There is no way around it. It's like 
trying to diagnose your medical problem without running a test 
or without doing any blood work. It cannot be done. So all of 
what we have done and all of the voluntary initiatives, call a 
toll free number, get it refinanced through FHA secured, they 
don't address the fundamental problem. Look at, can the 
consumer afford the mortgage? Is it in your best interest to 
take a short sale? And make sure the paperwork goes through and 
is recorded so that there is no foreclosure. And then the last 
thing is different lenders, different servicers have different 
departments and they don't talk to each other. It happens all 
the time that you're negotiating a deal and the foreclosure 
goes through. So then you have to start at the top, work down, 
and rescind that foreclosure.
    Mr. Silvers. Thank you. Ms. Burks, we, as you probably 
know, in New York we are working with a number of other state 
banking departments and attorneys general in meeting with 
servicers on a regular basis. The data that we have collected 
continues to worsen and shows that eight out of ten seriously 
delinquent borrowers are in no stage of foreclosure mitigation.
    What are you seeing in terms of the largest obstacles? What 
are the greatest obstacles that you believe are deterring the 
servicers from modifying these? Is it the volume? Is it the 
staffing? Is it the fiduciary duty they assert that's owed to--
to investors? What is it, in your opinion, that we need to 
hurdle--that hurdle that we have to address?
    Ms. Burks. It's a little bit of all three. The major thing 
is the people on the servicing end that answer the phone and 
talk to the consumer. And sometimes the same people that talk 
to the advocates have no authority to make a decision. If that 
servicer does not have full delegated authority, they cannot 
give you an answer on that modification. They have to go back 
to the investor, get permission, and then come back. And so you 
have to be able to sort of negotiate at a higher level, to go 
to the top to say, ``This is what we need to do.'' Present an 
offer and literally do counter offers back and forth. That's 
the main problem, that the people on the line don't have the 
ability to----
    Mr. Neiman. Do you think that one of the other criticisms 
is that this ad hoc basis of negotiation will never address the 
millions of foreclosures? Is there a systemic stream line 
modification program out there that you support as an 
alternative to move these modifications forward?
    Ms. Burks. Well, it's not out there yet. But we would make 
it mandatory. There has to be some mandatory modification in 
order to stabilize the market. It's not going to happen 
otherwise.
    Mr. Silvers. Okay. As I understand it, and I hope maybe 
other panelists will respond to this. As I understand it, 
there's been a dialogue about--about foreclosure moratorium 
here in this state. It's my understanding that the Governor has 
asked major services to voluntarily take on a moratorium. Am I 
correct in that?
    Ms. Burks. That request has been made. It is unclear as to 
which servicers have agreed to do that and will do that. And so 
we advise consumers, please don't take a chance on voluntarily 
moratorium.
    Mr. Silvers. But now to come back for a moment to the issue 
of what the treasury has said. As we have been providing 
financial institutions with hundreds of billions of dollars, we 
have been simultaneously saying that for homeowners, for 
homeowners such as Mr. Estrada, the solution is a negotiation, 
perhaps 200 hours, in which the ultimate power as to what to do 
rests with the bank. They can chose to act arbitrarily or they 
can chose not to, but it doesn't appear to be the government's 
business. Right. As far as I know.
    Mr. Estrada, have you received any money from the Treasury 
Department to assist you?
    Mr. Estrada. No. Not yet.
    Mr. Silvers. Now, there seems to be--it feels like there 
was some kind of difference in approach here fundamentally. The 
Treasury Department says to us, ``Well we are concerned that 
people who are undeserving might receive money.'' Now, perhaps 
we can request an application form for bank assistance and see 
if the question, ``Are you deserving?'', is on the form some 
place.
    Mr. Neiman. I think something that would be useful would be 
some regulation that would be mandatory for these lenders to be 
more proactive with these people, and often times people who 
don't--who can't tell you what their loan is, they can't--they 
don't know that they're in an ARM, they don't know that it's 
going to be readjusted. But the potential, certainly in Clark 
County where half of the people owe more than the house is 
worth, the potential there is disastrous. So if I were in the 
mortgage business, I would be more proactive in reaching out to 
those people knowing that at any given moment they could walk 
away for a better deal somewhere else. I don't it's 
unreasonable for the government or the Treasury Department to 
require them by regulation to be more proactive, in that they 
are getting the bailout money and seek out these people who--
and it's easily identified, they know what their loans are and 
they know what the value is in the community, seek them out and 
see if you can't make arrangements with them to keep them in 
the house.
    Mr. Silvers. There has been a deal between Citigroup and 
the Treasury Department and the FDIC, that in exchange for--
Citigroup received, I think, it's 25 billion dollars in the 
first set of monies for healthy banks. Then later on, when 
there was some issues at Citigroup, they received another 20 
billion. In the context of that second infusion of cash, there 
was an agreement that Citigroup would implement the FDIC 
program for mortgage modifications. The FDIC program is not 
principal write down program. It's a program that defers 
payments in certain respects, reschedules things, to make the 
loan more attractive.
    Is it your view, Mr. Thompson or Ms. Burks that that 
perhaps ought to be across the board for people who receive 
this money? For banks who receive money from the Treasury 
Department?
    Mr. Thompson. I believe that. I believe that.
    Ms. Burks. Yes.
    Mr. Silvers. That's the sort of thing you're talking about?
    Ms. Murray and Mr. Estrada, you have an opportunity to 
respond.
    Ms. Murray. Yes. Thank you. As we talked about, 50 percent 
of the people who receive a foreclosure letter are not 
responding. I just want to remind all of us that often times 
those same 50 percent of people are people who have lost their 
jobs, who don't have food, and are just trying to survive. So 
as we look at the ripple effect that comes from what you're 
here to investigate and how it flows through the system of you 
lose your home, you lose your job, vice versa, often times, and 
you have no food, it's so important for us to get the core 
fixed so that people can stay in their homes, have jobs, have a 
healthy economy and be able to have food. These are just the 
basic needs in life. So I wanted to again to just talk about 
the human element in all of this. So thank you, Mr. Silvers.
    Mr. Neiman. In New York, the numbers are even in worse. 
Over 90 percent of people who lose their homes through the 
foreclosure process, and we have a judicial process in New 
York, 90 percent of those individuals lose their homes through 
a default. Meaning, they never show up. And that's why, they 
give up hope, they don't understand the process, they don't 
know how to obtain an attorney. Or they just think that it's--
there's no hope.
    So I think your point is so well taken, and why the focus 
has to be on--on not for profits who provide housing, 
counselors on legal aid to provide assistance on these complex 
issues involving negotiations, because individuals cannot be 
expected to understand the complexities. You even heard the 
Senator talk about the complexities of these illiquid 
securities and these contracts. These mortgage contracts are 
even more complex. So I agree with you. And I really appreciate 
you putting a public face to these complex issues.
    The Chair. I would like to ask in a different direction, as 
long as we're talking about mortgage modifications here. As I 
know you're well aware of at this point, it's possible for a 
family to declare bankruptcy and deal, in effect, with 
virtually every debt except the home mortgage. So credit card 
debts can be written off. Car loans can be written down. 
Indeed, mortgages can be written down on real estate if they're 
on vacation homes, if they're on rental property, if they're on 
business property. But for someone who lives in a home and is 
trying to save that home, there is currently no bankruptcy 
protection. One of the alternatives that Congress is currently 
considering would be to amend that portion of the bankruptcy 
laws so that bankruptcy is never a happy alternative, but it 
puts rights in the hands of the family. So that it would not be 
possible to ignore the phone calls, it would not be possible 
not to have someone on the phone to negotiate. So that these 
mortgages could be re-written, at least down to 100 percent of 
loan to value ratio and put people into 30 year fixed mortgages 
that would permit them to save their homes.
    I wonder if you could speak to the impact of that on not 
only how it would or would not be useful for families who are 
in trouble as a direct option for some families to go through 
bankruptcy, but perhaps more importantly how it might change 
the structure of the negotiations if the consumer had the 
option available to the family to declare bankruptcy if nothing 
could be worked out consensually. Could anyone speak to that? 
Perhaps, Ms. Burks would be appropriate?
    Ms. Burks. Thank you. When the bankruptcy rules were 
changed, it became more difficult for consumers to file 
bankruptcy. And attempts have been made to get mandatory cram 
down and to look at using bankruptcy to save the foreclosure. 
That would be very helpful if we could get that passed. 
Currently, when they file bankruptcy, if they don't litigate 
the underlying sub-prime mortgage issue, they cannot then go 
back again and address it. So once the main bankruptcy plan is 
put in place, guess what, the lender's running out, filing a 
motion to lift a stay to take the home anyway. So, yes, we need 
the bankruptcy rules amended in order to help consumers address 
these issues.
    Mr. Silvers. I want to shift for a moment from mortgages to 
jobs or the way to jobs. I want to get at the heart of what I 
think are the reasons why Congress passed the Emergency 
Economic Stabilization Act, TARP, bailout, why this was passed 
and what this was trying to be--what Congress was trying to 
achieve and what I believe the people at the Treasury 
Department are in good faith trying to achieve.
    References have been made to large commercial construction 
projects in southern Nevada and particularly, on the strip and 
to projects being canceled. There is an argument that it takes 
a while for money to flow down through the financial system to 
home mortgages, to cars, and so forth. Large commercial 
construction financing which drives jobs, good jobs--to your 
point, Mr. Thompson--large commercial construction financing 
moves very fast, if people want to lend it.
    I was hoping to ask the prior panel this, but we have a 
structured time frame here. But, Mr. Thompson, I wondered if 
you might be able to enlighten us as to whether or not large 
commercial construction financing is flowing in southern Nevada 
or not? And if not, why not?
    Mr. Thompson. I can tell you that right now, we have the 
largest privately funded job in the world. When that job is 
over, and there are about 10,000 people on that one job, I 
don't know where those people are going to go to work. As a 
direct result of this financial crisis, builders and developers 
aren't able to get financing. We have Echelon, which is a 
massive project, coming out of the ground, and it's closed 
because it's not able to finance the project.
    Mr. Silvers. Can you describe Echelon? Where----
    Mr. Thompson. It's a resort development on the Las Vegas 
Strip. It's partially built and stopped in the middle of 
construction. It was in the early phases of construction. So 
there were only about 1,000 workers on that job. But they 
literally stopped the job because--because of the inability to 
get the financing. So if you multiply that out, times every job 
that I can think of, that's either been canceled or been put on 
hold or postponed, we are heading for some very tough times in 
Nevada, specifically, because we are so reliant on one source 
of income in the state, that when they have hard times, we all 
have hard times. So if you add the fact that now, you know, 
builders can't build and developers can't develop, to just the 
general downturn in the economy, we are in real trouble here.
    And potentially, this time next year, and I think you heard 
Dr. Schwer talk about unemployment numbers, this time next year 
are going to be severe unless something changes. And unless 
something can be done to loosen up those lines of credit to 
businesses, we are going to have double digit unemployment and 
an economy that's going to be very difficult.
    Mr. Silvers. Can I just get more specific with you for a 
moment?
    Mr. Thompson. Okay.
    Mr. Silvers. It became clear that the Treasury Department 
was going to infuse banks with substantial equity capital in 
mid October. Now, of course, the mechanisms by which the money 
gets there are a little slower than that. But it became clear 
in mid October. By mid November, some of largest banks had 
received that money. Those are the sorts of banks that I would 
assume would be potential funders for a project of the size of 
the Echelon project.
    Have you seen any indication or are you aware of any 
indication among developers that construction unions deal with, 
that there has been any increase in the availability of credit 
starting in mid October, or starting in mid November?
    Mr. Thompson. Not to my knowledge. And I would tell you 
that, you know, the City Center is actually saved by partially 
being funded from money from Dubai. But I don't see that 
happening. And as this thing continues to tighten around and 
people spend less money and, you know, you can't get financing 
on a car, so the cars aren't selling. It just at some point 
spins out of control.
    Mr. Neiman. We're hearing that across the country. In New 
York, which has traditionally been a very strong commercial 
development location, we are hearing that there is no money to 
any loan type, to real estate, that over 400 billion dollars of 
commercial real estate loans are coming due and are going to 
need to be refinanced over the next number of years, and there 
are no banks there to talk about refinancing. So I appreciate 
you highlighting it from what it means for Nevada but 
recognizing that this is going to be an issue that we are going 
to look at and address across the country. Because these are 
some of the largest banks that are accepting these funds as 
capital. And as of now, we want to understand why, what are 
their lending standards with regard to a large commercial 
construction development project?
    The Chair. Mr. Neiman, I think Ms. Murray would also like 
to comment.
    Ms. Murray. Yes, thank you. Thank you, Chairwoman Warren. 
Going back to Mr. Silvers' comment, you recently mentioned 
unemployment and you shifted the transition to that.
    Let me share with you, in Nevada, we are currently at 7.6 
percent unemployment rate. And you heard Dr. Schwer say we are 
on track for what could be 10 percent unemployment rate. And as 
you know, nationwide, traditionally, we've been a percentage 
point or more below the national average for decades.
    So currently, if we have five out of every ten children in 
school who need and qualify for a free lunch or if they don't 
get food in a day, and we go from 7.6 percent unemployment rate 
to 10 percent unemployment rate, the numbers are going to 
skyrocket of kids who won't eat and won't have access to food. 
And so we're bracing for something of crisis proportion next 
year when the unemployment rate could go as high as double 
digits.
    So again, I come back to the importance of what you all are 
doing and what you're doing in listening to share with Congress 
the severity of the situation. And I thank you for that.
    Mr. Thompson. There is a point that I would like to make 
that I--unrelated to the banking crisis--that I think when you 
talk about stimulating the economy, and certainly in this 
state, one of the things that the federal government could do 
is to relax the need for matching funds for some--for instance, 
highway construction is a match. If the government could put a 
moratorium on matching funds for public works projects for two 
years so that the state doesn't have to come up with that 
money, and yet they get the funds to build those projects, I 
think it would go a long way in creating jobs. Just this last 
year, we gave money back because we didn't have the matching 
funds to match for the particular program.
    And I think that's something the government can do 
immediately to help the economy.
    The Chair. Mr. Thompson, can I just ask, because this is 
one of the proposals on the table, not specifically for TARP, 
but in general. The idea of putting money directly back into 
the states overall with the theory behind it, that the states 
are well prepared to put this money to use, to put people into 
jobs, to rebuild infrastructure, and so on. Can you comment on 
this? Do you think this is a wise move, a foolish move? I'd be 
interested in your thoughts on this.
    Mr. Thompson. I can tell you, I served in the Nevada 
legislature for ten years. Actually, I served with Shelley 
Berkley and Dina Titus. But I can tell you, absolutely, 
critically needed, the state is ready--for instance, I'm a 
commissioner in a high speed train commission, to build a train 
from here--a train from here to Anaheim, California. So much 
work has already been done on that job. If we just had some 
money, they could start construction soon. And in regards to 
matching funds, we have mapped out needs to widen I-15, to 
increase the freeways. That work's already been done, but we 
don't have the money. And so by relaxing those matches and 
letting the states keep the money, you would create jobs 
overnight.
    The Chair. That's pretty helpful.
    Mr. Silvers.
    Mr. Silvers. Mr. Thompson, your comments, I think, go to my 
opening statement which is the real underlying problem here, 
which we need to be conscious of as we craft TARP, as TARP 
moves forward, is that we're not moving resources to productive 
uses. Right? Enormous housing levels, speculative--speculative 
boom here but all around the country. Meanwhile, critical 
needs, the congressman talked about energy and infrastructure, 
critical needs are unmet. Now part of it--part of addressing 
that is the issue of moving public money. But part of the issue 
is why are our private funds, why are our capital markets not 
funding productive processes and instead funding destructive 
speculation? That is all over this. And the question of what 
should the Treasury Department be and the Congress be doing in 
relationship to TARP, to see to it that TARP moves in the right 
direction rather than in the wrong direction. By rather than 
repeating this cycle of destructive and ultimately misleading 
financial booms, I think is right at the center of things.
    I would like to turn again, though, I think, you know, we, 
as a panel later this week are going to be meeting with the 
FDIC and we hope to be even meeting with Treasury again. We 
will have an opportunity to convey what we hear today to the 
people who are the decision makers, people who will decide what 
to do with the TARP funds that remain, who will decide what 
sort of oversight should be over institutions that have 
received money, that will decide what the rules will be for 
some of these programs that have been announced that involve 
buying credit card paper or buying other sorts of paper. There 
is more money involved here than I think any of us can properly 
grasp. But this is an opportunity--and as our chair said there 
are cameras outside for all of you who are here to be heard--
but this is an opportunity particularly for the four of you to 
be heard, for us to be able to carry the direct message back. 
And I particularly would like Ms. Murray and Mr. Estrada, you 
know, this is your chance. Imagine, Hank Paulson is sitting 
right here at this desk, what would you say?
    Ms. Murray. If Hank Paulson were sitting at the desk, I 
would say that never in the history of our country has the 
challenges been so great. But then never has there been a 
greater opportunity for us to show how strong we are as a 
country. We're the United States of America. We have to, and we 
will be able to get this under control. But it starts with the 
strength of the financial communities and unemployment. 
Because, as a food bank, I can do all that we can do to keep up 
with food. But if people don't have jobs, and if there is not 
strength in the financial markets, we're only being reactive. 
And that it's so important to be proactive and to work with 
members of Congress, to work with the states and the cities and 
the counties to ensure that everyone is doing the best it is 
that they can be doing.
    Mr. Estrada. Well, I would like to just say that to me, 
without putting God first around us, this world, the way that 
it is right now--unfortunately, I just got laid off from a job 
that dealt with transportation for tourism. And they couldn't 
justify moving 32 people in the morning, having 13 drivers, and 
having a bus that carries that many people in one shot. So I 
was laid off. And the one thing I thank God about is that I 
have a commercial license so that I sort of have some leeway. 
But the one thing that I will not do especially in this town, 
and I've lived in Las Vegas for 30 years, is take a job that 
has to do anything with tourism anymore. Because tourism here 
in Las Vegas is so bad. I have a friend that was working at the 
airport--and three years ago, I worked an economy lot shuttle 
from the airport parking to the zero level, and we filled up 
three different parking lots. This year, they didn't even fill 
up the first parking lot.
    And all I'm saying is that we need help. And some of these 
people that we're trying to talk to, like our mortgage 
companies and stuff like that, they're not talking to us. 
They're waiting until the end, just like what happened with me 
as far as losing my house, when to me, that never should have 
ever happened. It should have never happened. They had what 
they wanted, we agreed to give them the amount, and still a few 
days later, they tell us, you know, it's not your home anymore.
    Ms. Murray. Chairwoman Warren, we have an opening in our 
food bank for a driver. I would like to talk to Mr. Estrada 
after the hearing.
    The Chair. Good things can come from hearings.
    Mr. Estrada. Yes, they do.
    The Chair. Good.
    Remarks----
    Mr. Neiman. I have a question. We have heard a lot about 
the servicers and the lenders being overwhelmed. And I know 
that not for profits, particularly the housing counselors, are 
overwhelmed as well. And that's why in New York, we've had a 
specific effort of getting grants. In fact, we've given in the 
banking department, over 2 million dollars in monies that we've 
collected from fines, in fact, against predatory lenders to go 
to housing counselors and legal aid. The state's given 25 
million to housing counselors and legal aid, because they're 
mandating now, prior to a foreclosure, that individuals have a 
right to counselors. And if it goes into a foreclosure 
proceeding, they have a right to legal counsel.
    Ms. Burks, what is the level of volume and support that 
your institutions have in terms of providing resources? Can you 
handle the work? Is there a funding resource or is there an 
expertise or staffing need for the organizations in this state?
    Ms. Burks. Yes. The nonprofits have been working around the 
clock and with the local government to do outreach. We could 
work 24/7 and we couldn't handle the load. There have been some 
counseling funds that have come down through national. There is 
no state money to do the work. Staffing is inadequate, and it's 
going to get worse in 2009.
    So while you may have expertise, there may be people you 
could hire, there are no funds to hire more staff. That is not 
going to happen. So we have to do the best we can with what we 
have. And we have to change the way we modify loans in this 
country and in this state.
    The Chair. Thank you. With that----
    Audience Speaker. Madam Chairwoman, a point of inquiry, if 
I might?
    Ms. Warren. I'm sorry? Yes.
    Audience Speaker. Well, it's such a special panel and this 
is such a special gathering. So nonofficial, so nonspecific. I 
would beg your indulgence to open to the public to be able to 
comment to folks. It is a special moment. And you have that 
discretion. And I think this moment calls for that. And if you 
give us a certain amount of time. Even three minutes. And I 
mean this with respect.
    Now, there are some things that need to be addressed which 
are not being addressed here.
    The Chair. I understand your question. I'm going to deal 
with the panel first here.
    I want to thank the panel for coming. I appreciate the time 
that you have put in on this. I know this is difficult to come 
and tell these stories.
    I know you work hard to prepare, and I know you work hard 
every day on what you're accomplishing. So I appreciate it on 
behalf of the panel.
    And the second panel is now excused. Thank you very much.
    We still have in our schedule, I believe, we have about 
eight minutes left.
    We are scheduled to leave at 12:30, and we will leave at 
12:30. We must leave at 12:30. I'm sorry we don't have more 
time. I want to remind everyone, we brought, for exactly this 
reason, a videographer who is out in the hallway so that each 
of you who wants to talk can talk to the videographer. That 
gives us a record to take back with us, rather than simply our 
repeating.
    But we are glad to spend our remaining time, perhaps the 
fairest way to allocate that time, is if we each just took one 
minute for a person who wants to do that. And perhaps I should 
start with you, sir.
    Audience Speaker. First, I would state my position to 
somebody else more important who might not understand who I am. 
I'll take that.
    The Chair. Yes, sir.
    Audience Speaker. So having conveyed that, here is what 
concerns me. It concerns me that we're talking all around an 
issue and we're not being specific. I want to see the plan. I 
want to see just like I'm sitting at the kitchen table what 
we're going to do. I want to feel the pain. And there is lots 
of pain, ladies and gentlemen.
    And you are not going to resolve this unless you go to the 
heart of it. It is about energy. If you do not move towards 
energy and move now, everything else will be fraud.
    When I hear people talking about financial enterprises, I 
am disgusted. It is those people who got us into this that give 
these bodies credibility.
    It is foolish on top of foolish.
    And it is not about----
    The Chair. Sir, that's one minute.
    Thank you very much. I want others to have a chance to talk 
too.
    Audience Speaker. It is not about jobs. It is about a 
vision for the country that brings us back to being American. 
And I am not here to----
    Chairwoman Warren. Thank you, sir. That is more than a 
minute. Thank you. Yes, sir.
    Yes. In the back in the gray sweater. Will you please 
identify yourself, please, sir.
    Audience Speaker. Yes. My name is Raymond G. Herrera. I'm 
going to make this as quick as I possibly can. I lost my 
position in May of 2008. We have done everything we possibly 
could with our own savings to help support the people that are 
renting the homes that we have rented, including our own which 
we reside in, which is in Las Vegas. We have since tapped our 
resources because of the fact that the other individuals who 
rent those homes have themselves have become victims to this 
economy. We couldn't do anything towards moving towards trying 
to address our own loan situation because the banks instructed 
us that we had to be in default before they would even talk to 
us. Now, that they're communicating with us, they treat us like 
we're the culprit. In fact, that we can't pay the loan anymore. 
And then you hear these outside sources that say, you know 
what, these people are trying to take advantage of the system 
by trying to get some kind of loan modifications.
    There were two things that were brought up here that could 
really assist those of us. One is to mandate forbearance until 
an issue is resolved, even if it does mean the loss of a home. 
And the second one is do the adjustment on the bankruptcy, so 
that we can at least address our situation.
    I mean, everybody is talking about the three big auto 
dealers going bankrupt to try to resolve their own issues. Yet 
we ourselves, in our own homes and residences, we don't have 
that option. So those are two things that could be addressed 
and we don't have to worry about where all the other money is 
going at this point in time.
    The Chair. Thank you, sir.
    Yes, ma'am.
    Audience Speaker. My name is Aussie Brooks.
    And I have written a proposal on real estate and 
foreclosure and defaults. I know I can upload it, but I do have 
an extra copy here that I would like to give to you. And it 
seems like everything is trickling down, not getting to us. I 
want it to start trickling up. What do we have to do, wait for 
the new regime or administration to come in or not? But my 
concern--my great concern is that nothing has been done now. 
And we do need some help right now. And when I say we, I mean 
the people who make the banks. Our monies are in the banks. And 
anyway, can I give this to you, please?Foreclosures, are these 
lenders receiving mortgage insurance? Is that a motivation for them to 
let it go into foreclosure? Also, you know the TARP money that is going 
out, you know, the banks are getting--receiving this money, can this 
money go through the consumer? To allow them to buy down the loans, and 
it still goes to the lender anyway. That's something I wanted to state.
    The Chair. Thank you, sir.
    Yes, sir.
    Audience Speaker. Strictly, three things.
    Economics. Economics. Economics. Now----
    Chairwoman Warren. Got them all.
    Audience Speaker. Now, Obama wants to reissue economics in 
the middle class of America with dams and bridges, and 
buildings, and federal funds.
    The bailout is waste, because if you bail them out now, 
you're going to have to bail them out in the future. But if we 
go back to our founding fathers, the people that came over here 
from the old country, and they built equity--the word equity 
has been lost in the rental of survival and low income is $750 
a month. How in this God's earth can a wage earner that is 
making $7.50 to $10.00 an hour afford to live in the economic 
structure the way it is?
    Simply, the unions and all the other factions pushed our 
economic structure lop sided. I've been told that the Ford 
motor company worker gets $50 to $70 an hour for goods and 
services for his work. The basic America is getting back to the 
low income people that can afford to live and build some 
equity. The only option is the mobile home industry that can 
rebuild mobile homes for low income housing and buy equity into 
the future. That's where it has to go. Back to the grassroots 
of earning the right to become in life, liberty and the pursuit 
of happiness. That's what's wrong, and that's what has to be 
corrected. And if you don't, stop wasting your time.
    The Chair. Thank you, sir. Yes, ma'am. And then we'll do 
one more, and we'll be done. The gentleman in the back.
    The Witness. My name is Linda Abrams.
    I'm a counselor with NID Housing. I want to speak on the 
issue about the loan modification. It is not enough that is 
being done to help the people that I am working with. The 
borrowers, they're being offered modifications that the 
payments are just as high. And in some cases, more than what 
they were already paying. Which is not helping them. Then they 
ask for $20,000, $30,000 up front. Well, if they can't make 
their mortgage payment, how are they going to come up with 
$20,000 or $30,000? Then they're forced into bankruptcy. And 
when they're forced into bankruptcy, and you go back to the 
servicer or the lender to try and get a loan modification so 
they can take it to the judge, which is what they tell you that 
you need to do, they don't talk to each other, because you go 
from one department to another. And this department tells you 
you need to talk to the bankruptcy department. The bankruptcy 
department tells you you need to go speak to the attorney. The 
attorney sends you right back, and then it comes that, well, 
you know what, we can't do anything for that loan because the 
loan is bundled. So we don't even have--we don't even know who 
the lender is. So I'm stuck with borrowers that we can't do 
anything--we don't have a modification that we can take to the 
a judge and ask that judge if he could do something to bring 
that payment back down. So what do we do with those borrowers? 
There's just not enough. And it's very, very sad. Our hands are 
just tied.
    The Chair. Yes, ma'am. Thank you.
    Audience Speaker. Ron. Resident here in Clark County. 
Coming back to the courts, everything that has been said here, 
mandatory loan modification, make them step up. If you are 
handed a million dollars, make sure they are handing you a 
million dollars that they have in existing mortgages that they 
have done modifications down to loan value.
    The Chair. I want to close now by thanking all of you. I 
want to thank you for coming out. I want to thank you for 
talking with us. I want to thank for your patience for sitting 
here for two and a half hours as we work through this. Please 
let me say again if you have not already done so, we're glad to 
hear and we're glad to make notes but please do talk to the 
videographer. I really want to make a record of this. I also 
want to say if you get the opportunity click on the website. 
Remember it's cop dot senate dot gov. Click on, add your 
comments, as we begin to post comments feel free to add 
additional comments. I don't think this is going to be over 
within the next few weeks. Finally I want to say that the three 
of us, the panelists, one reason I need to stay on schedule is 
that we were here today to engage in a formal hearing to have 
an opportunity to hear from the public. But we are not through 
trying to learn at least a little bit about Nevada in our short 
time here. We are leaving to drive around a little and talk to 
some more people on a more informal basis. So we hope to see 
more of Clark County while we're here and learn more. Again 
thank you all for coming. This hearing is adjourned.
    Hearing adjourned at 12:32 p.m.
    [The written statement of Oscar B. Goodman, Mayor, City of 
Las Vegas, follows:]

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