[House Hearing, 111 Congress]
[From the U.S. Government Publishing Office]



 
                     TROUBLED ASSET RELIEF PROGRAM

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


                                HEARING

                               before the

                       SUBCOMMITTEE ON OVERSIGHT

                                 of the

                      COMMITTEE ON WAYS AND MEANS

                        HOUSE OF REPRESENTATIVES

                     ONE HUNDRED ELEVENTH CONGRESS

                             FIRST SESSION

                               __________

                             MARCH 19, 2009

                               __________

                            Serial No. 111-8

                               __________

         Printed for the use of the Committee on Ways and Means




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                      COMMITTEE ON WAYS AND MEANS

                     JOHN LEWIS, Georgia, Chairman

XAVIER BECERRA, California           CHARLES W. BOUSTANY, JR., 
RON KIND, Wisconsin                  Louisiana, Ranking Member
BILL PASCRELL, JR., New Jersey       DAVID G. REICHERT, Washington
JOHN B. LARSON, Connecticut          PETER J. ROSKAM, Illinois
ARTUR DAVIS, Alabama                 PAUL RYAN, Wisconsin
DANNY K. DAVIS, Illinois             JOHN LINDER, Georgia
BOB ETHERIDGE, North Carolina
BRIAN HIGGINS, New York

             Janice Mays, Chief Counsel and Staff Director

                   Jon Traub, Minority Staff Director

Pursuant to clause 2(e)(4) of Rule XI of the Rules of the House, public 
hearing records of the Committee on Ways and Means are also published 
in electronic form. The printed hearing record remains the official 
version. Because electronic submissions are used to prepare both 
printed and electronic versions of the hearing record, the process of 
converting between various electronic formats may introduce 
unintentional errors or omissions. Such occurrences are inherent in the 
current publication process and should diminish as the process is 
further refined.


                            C O N T E N T S

                               __________

                                                                   Page

Advisory of March 12, 2009, announcing the hearing...............     2

                               WITNESSES

Hon. Neil Barofsky, Special Inspector General, Office of the 
  Special Inspector General, Troubled Asset Relief Program.......     9
Gene Dodaro, Acting Comptroller General of the United States, 
  U.S. Government Accountability Office..........................    20

                       SUBMISSIONS FOR THE RECORD

Elizabeth Warren, Statement......................................    68


                     TROUBLED ASSET RELIEF PROGRAM

                              ----------                              


                        THURSDAY, MARCH 19, 2009

             U.S. House of Representatives,
                       Committee on Ways and Means,
                                 Subcommittee on Oversight,
                                                    Washington, DC.

    The Subcommittee met, pursuant to notice, at 10:10 a.m. in 
1100 Longworth House Office Building, Hon. John Lewis (Chairman 
of the Subcommittee) presiding.
    [The advisory announcing the hearing follows:]

ADVISORY

FROM THE 
COMMITTEE
 ON WAYS 
AND 
MEANS

                       SUBCOMMITTEE ON OVERSIGHT

                                                CONTACT: (202) 225-5522
FOR IMMEDIATE RELEASE
March 12, 2009
OV-2

    Lewis Announces a Hearing on the Troubled Asset Relief Program: 
      Oversight of Federal Borrowing and the Use of Federal Monies

    House Ways and Means Oversight Subcommittee Chairman John Lewis (D-
GA) today announced that the Subcommittee on Oversight will hold a 
hearing on the Troubled Asset Relief Program (TARP) and oversight of 
Federal borrowing and the use of Federal monies. The hearing will take 
place on Thursday, March 19, 2009, at 10:00 a.m. in the main Committee 
hearing room, 1100 Longworth House Office Building.
      
    In view of the limited time available to hear witnesses, oral 
testimony at this hearing will be from invited witnesses only. The 
Special Inspector General for TARP, the Honorable Neil Barofsky, and 
the Acting Comptroller General of the United States, Mr. Gene Dodaro, 
have been invited to testify. Any individual or organization not 
scheduled for an oral appearance may submit a written statement for 
consideration by the Subcommittee and for inclusion in the printed 
record of the hearing.
      

BACKGROUND:

      
    Public Law 110-343, the ``Emergency Economic Stabilization Act of 
2008'' (the Act), was enacted to provide authorities and facilities 
that the Secretary of Treasury (Secretary) can use to restore liquidity 
and stability to the financial system of the United States. The Act 
authorizes the Secretary to establish TARP to purchase, and to make and 
fund commitments to purchase, troubled assets from any financial 
institution. The Act provides that the Secretary shall establish a 
program to guarantee certain troubled assets. The Act authorizes the 
Secretary to purchase and hold up to $700 billion in troubled assets at 
a time. Further, the Act increased the statutory limit on the public 
debt to $11.3 trillion (which is now $12.1 trillion).
      
    The Act included numerous provisions with respect to TARP 
oversight. The Act established the Office of the Special Inspector 
General for the TARP (SIGTARP) to conduct, supervise, and coordinate 
audits and investigations of the purchase, management, and sale of 
assets under the program. The Act created the Congressional Oversight 
Panel. The Act mandated that the Comptroller General of the United 
States conduct ongoing oversight of the activities and performance of 
TARP. Further, the Secretary is required under the Act to provide 
reports to the appropriate committees of the Congress, including the 
Committee on Ways and Means, detailing monthly activities and each $50 
billion in commitments to purchase troubled assets.
      
    The first oversight reports to the Congress by SIGTARP and the 
Comptroller General both noted that Treasury has utilized TARP funds 
differently than had been envisioned at inception of the Act. TARP's 
primary focus was expected to be the purchase of troubled assets, such 
as mortgages and mortgage-backed securities. However, within two weeks 
of enactment, then-Secretary Henry M. Paulson changed the strategy and 
decided to make capital investments of approximately $290 billion 
directly in financial institutions and other eligible recipients. This 
changed strategy resulted in an extraordinary use of public monies.
      
    In announcing the hearing, Chairman Lewis said, ``In the face of 
this economic crisis, we must restore public confidence in the use of 
Federal funds. As a starting point, taxpayers need to be certain that 
TARP funds are being spent for their intended purposes. The questions 
are simple. How much has been spent, and what have the recipients done 
with the money? We need answers.''
      

FOCUS OF THE HEARING:

      
    The focus of the hearing is to review TARP, its operations, and 
oversight. Specifically, the Subcommittee will focus on the role of 
Federal borrowing, the impact on the national debt, and the protection 
of public monies. The Subcommittee also will consider the role of 
Federal tax compliance under this program.
      

DETAILS FOR SUBMISSION OF WRITTEN COMMENTS:

      
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225-1721.


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    Note: All Committee advisories and news releases are available on 
the World Wide Web at http://waysandmeans.house.gov.

                                 
    Chairman LEWIS. Good morning. The hearing is now called to 
order. This is a hearing of the Subcommittee on Oversight of 
the Committee on Ways and Means.
    Before we begin, I would like to express my condolences to 
our Ranking Member, Dr. Boustany, on the passing of his father.
    I would like to thank Mr. Reichert and his colleagues for 
agreeing to hold this hearing with us this morning.
    I would like for us to take a brief moment to remember Dr. 
Boustany and his father.
    [Pause.]
    Chairman LEWIS. Thank you. To date, the Troubled Asset 
Relief Program has given more than $300 billion to private 
companies, and there are plans to give billions more.
    Taxpayers have no sense that there is any control over this 
money. They have no idea what, if anything, they will get in 
return. This entire program is based on trust, trust in the 
givers and trust in the takers. At this point, there is no 
trust.
    To get money from Treasury, banks and others must sign a 
contract that states they have no material unpaid Federal 
taxes. Treasury did not ask these banks and companies to turn 
over their tax receipts.
    Treasury relied on the signed statements when it agreed to 
invest billions of taxpayer dollars. When you or I go out to 
the bank to take out a mortgage to buy a house, we are asked 
for our tax returns. They are not going to just take our word 
for it, and we are not asking for millions of dollars.
    The Subcommittee looked at the top 23 TARP recipients. We 
found that 13 of them owed more than $220 million in unpaid 
Federal taxes. Two companies owe over $100 million each.
    How can this be? If we looked at all 470 recipients, how 
much would they owe?
    Are they signing contracts knowing that they owe taxes but 
thinking they will not get caught? Did then Secretary Paulson 
turn a blind eye?
    Either way, this is shameful. It is a disgrace. The 
American people are fed up, and they are fired up, and they are 
not going to take it any more. As Members of Congress, we 
should not take it any more either.
    We want to get to the bottom of what is going on here. The 
taxpayers deserve nothing less than the truth. The oversight 
work that our witnesses are doing is so important.
    I look forward to hearing from our witnesses on their 
oversight efforts and more importantly, what Treasury needs to 
do to restore the public trust in TARP.
    Thank you, Members, all of the Members, for being here 
today.
    Without objection, I would like to enter the report from 
the IRS to the Subcommittee into the record.

    [The information referred to follows:]

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    Chairman LEWIS. I am pleased to recognize Congressman 
Reichert for his opening statement.
    Mr. REICHERT. Thank you, Mr. Chairman. Also, thank you so 
much and I appreciate your recognizing, taking a moment of 
silence for the Boustany family in their loss. His father 
passed away this week, as you know. Our thoughts and prayers 
are with him and all of his family members.
    The Troubled Asset Relief Program or TARP was intended to 
open up credit for families and businesses but it was also 
supposed to restore confidence in the market.
    Yet every week brings new questions and new concerns about 
how these tax dollars are spent, from the millions of AIG 
bonuses and spa retreats to the billions that simply went 
missing.
    Worse, TARP continues to change and multiply before our 
very eyes, from buying toxic assets to buying stakes in banks. 
There is no clear plan and no consistent application of the 
program.
    Those involved have no idea if, how, or when TARP will 
change or change again.
    One particularly troubling change is the apparent transfer 
of authority from Treasury to the Federal Reserve, without any 
new Congressional oversight. The complete lack of transparency 
in TARP has produced a credibility crisis that undermines the 
very confidence it was meant to restore.
    Without transparency, investors have little reason to 
participate in a program that changes faster than the Dow.
    Without transparency, we are left with outrageous abuses, 
like bailout bonuses for companies surviving on the backs of 
taxpayers alone.
    To restore confidence, two things must be made very clear. 
One, exactly how TARP money is being spent, and two, what 
specific metric or metrics are used by Treasury that will 
measure the effectiveness of this program.
    Taxpayers have every right to be angry, as the Chairman 
said, that the results of the $700 billion bailout are as blank 
as the check that authorized it.
    We have an obligation to them to find answers, to collect 
facts and data, and to hold accountable the policies and people 
that led to the abuses, like those at AIG.
    We can all agree that TARP money has been misspent. Our 
options are to stay mad at wrongdoers or to identify how the 
wrongdoing occurred and find solutions so that it never happens 
again.
    We must also remember that the lack of transparency and 
accountability in TARP happened in the first place because 
Congress acted out of raw emotion before looking at all the 
facts. We acted too fast. That is one of the many reasons why I 
opposed that bill.
    We must be careful not to let our collective outrage 
prevail over good judgment and common sense. After all, we all 
know the mistakes that can happen when Government panics and 
rushes to act rather than working to get the action right.
    This is not the time to again shoot first and ask questions 
later.
    I hope that we can all work together, Democrats and 
Republicans, to get to the bottom of this, to get to the real 
answers, and to stop the abuses. The American taxpayer deserves 
no less.
    Mr. Chairman, I yield back the balance of my time.
    Chairman LEWIS. Thank you very much for your statement.
    Now, we will hear from our witnesses. I ask that you limit 
your testimony to 5 minutes. Without objection, your entire 
statement will be included in the record.
    It is now my pleasure to introduce the Special Inspector 
General for his testimony. Welcome.

 STATEMENT OF NEIL BAROFSKY, SPECIAL INSPECTOR GENERAL, OFFICE 
OF THE SPECIAL INSPECTOR GENERAL, TROUBLED ASSET RELIEF PROGRAM

    Mr. BAROFSKY. Thank you. Mr. Chairman, Ranking Member, 
Members of the Subcommittee, I am honored to appear before you 
today as the Special Inspector General for the Troubled Asset 
Relief Program or as we call it, SIGTARP.
    Originally described as a plan to buy $700 billion in toxic 
assets, the TARP has changed significantly. Treasury has 
announced nine different programs through which TARP will cover 
$2.9 trillion, and this does not include the $750 billion the 
administration has put aside in its budget and noted that it 
may seek later this year.
    To accomplish the TARP's mission to oversee this vast 
amount of money for the American taxpayer, I focused on three 
different areas: transparency, oversight and enforcement.
    Transparency has been an area of focus for my office since 
day one. In late December, I recommended that Treasury put all 
TARP agreements up on its website. In late January, Treasury 
agreed, and earlier this morning, they finally posted the top 
20 TARP agreements on its website.
    I have also used my audit division to advance transparency 
where necessary. For example, after Treasury made clear to me 
that they would not require the banks to report on how they are 
using TARP money, I sent letter requests to each TARP recipient 
asking them to report on how they have used the money that they 
received, how they plan on using unspent money, and how they 
plan to comply with the executive compensation requirements.
    I am pleased to report that as of today, we have had 100 
percent compliance with our survey requests.
    As to coordinated oversight, it has been and will continue 
to be my privilege and pleasure to share oversight 
responsibility with my co-panelist, Gene Dodaro. He and his 
team at GAO and us have been working together for more than 3 
months now to ensure maximum coverage and to reduce any 
unnecessary duplication of effort.
    I have also founded and chair the TARP IG Council, which 
includes as its members GAO, as well as the other Inspector 
Generals or agencies who are also touched by the TARP and 
responsible for its oversight.
    In conducting oversight, one focus of SIGTARP has been to 
attempt to have a positive impact on TARPs before the money 
goes out the door, by making recommendations to limit fraud and 
to increase oversight.
    Because I did not take office until mid-December, I was not 
able to offer advice with respect to early TARP agreements, 
such as the AIG agreement. However, we have been active in 
providing recommendations concerning the programs and the 
contracts ever since.
    We are also focused on enforcement. Of the four primary 
oversight bodies referenced in the Stabilization Act, SIGTARP 
stands alone as the TARP oversight body charged with criminal 
law enforcement authority, as the cop on the beat.
    This is one of our most important functions and we are 
meeting this unprecedented challenge head on.
    We are leveraging our resources with other agencies, 
exploring taskforce and similar regional relationships 
throughout the country.
    For example, last week, we formed a multi-agency law 
enforcement taskforce focused on the $1 trillion TALF Program. 
We believe that this taskforce has already served as a powerful 
deterrent, and when we detect fraud, rest assured we will 
investigate the matter and bring any fraudster to justice.
    Additionally, we have begun our outreach to potential 
whistleblowers and those who may have tips about ongoing fraud 
in TARPs. The SIGTARP hotline is operational to be accessed 
through our website, www.sigtarp.gov, or through our telephone 
hotline, 877-SIG-2009.
    The hotline has already yielded results and we have 
recently opened a criminal investigation based on a 
whistleblower complaint.
    Finally, we have been active in our response to the recent 
bonus payments to AIG. Both in my role as Special Inspector 
General and as an individual taxpayer, I too am frustrated with 
these very substantial bonuses which appear to have been made 
to those responsible for AIG's meltdown.
    First, we are launching an audit that is part of a larger 
review of executive compensation practices, and will include a 
thorough review of the process to which Treasury decided to 
authorize and approve such payments, including who knew what, 
how, when and why, both at the time Treasury entered into its 
agreement with AIG last November, which included specific 
reference to contemplated retention payments, all the way up 
and through the events of this week.
    Second, we are working closely with the New York State 
Attorney General's investigation into these payments.
    Third, we are initiating our own investigation, and 
finally, we are coordinating with the Department of Justice in 
its examination of options that may be available to recover 
taxpayer money.
    Mr. Chairman, Ranking Member, Members of the Subcommittee, 
I thank you and commend you for your efforts to help oversee 
the trillions of dollars that are being expended under TARP, 
and I look forward to answering any questions that you may 
have.
    [The prepared statement of Neil Barofsky follows:]
 Statement of The Honorable Neil Barofsky, Special Inspector General, 
 Office of the Special Inspector General, Troubled Asset Relief Program

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    Chairman LEWIS. Thank you very much, Mr. Inspector General.
    It is now my pleasure to introduce the Acting Comptroller 
for his testimony.
    Welcome.

STATEMENT OF GENE L. DODARO, ACTING COMPTROLLER GENERAL OF THE 
      UNITED STATES, U.S. GOVERNMENT ACCOUNTABILITY OFFICE

    Mr. DODARO. Thank you very much, Mr. Chairman. Good morning 
to you, Ranking Member Reichert, and Members of the 
Subcommittee.
    I am very pleased to be here today to assist in your 
deliberations and oversight over the Troubled Asset Relief 
Program.
    When the program was first created in the Economic 
Stabilization Act back on October 3, GAO was charged with 
providing oversight over Treasury's implementation and 
reporting every 60 days to the Congress, and we are also 
charged with providing an annual financial audit of the 
Troubled Asset Relief Program that is being managed by the 
Office of Financial Stability in the Treasury Department.
    Faithful to the mandates in the legislation, we issued our 
first 60 day report on December 2, and our second 60 day report 
toward the end of January.
    In both of those reports, we made a series of 
recommendations that were very important to increasing the 
accountability and transparency of this very important program.
    Those recommendations fell into three categories. First, 
monitoring and tracking the use of the money and making sure 
Treasury had an oversight process in place to monitor 
compliance with the legislative provisions. These were among 
our top recommendations.
    At that time in December, Treasury did not have plans to 
obtain any information back from the organizations receiving 
money under the Capital Purchase Program.
    Our recommendation was they needed to do so, and as a 
result of that, they initially started collecting monthly 
survey information on the aggregate lending activity of the top 
20 institutions receiving the TARP money.
    In January, we said that is not enough. We believe you 
ought to have data collected on a monthly basis for any 
institution receiving Troubled Asset Relief Programs, and they 
are beginning to now recently move in that direction.
    We are pleased with that but they still need to stand up 
fully their oversight monitoring program to ensure compliance 
with the Act's provisions.
    The second category of our recommendations dealt with a 
communications strategy. This is a program that has been 
plagued with communication problems from day one, in making the 
shift between purchasing the troubled assets to the capital 
injections in the program.
    In December, we recommended that their communication 
strategy be improved, both with the Congress and other 
stakeholders, and in January, we added to that recommendation 
by stating that we believe they need to have a clearly 
articulated vision of the entire TARP, and it needs to be 
coherent and understandable so that people have confidence that 
they understand how the different parts are working together.
    They have made some headway in that area with the 
announcement in the last month of the financial stability plan 
and the homeowner affordability plan, but there is a lot of 
details that need to be worked out yet.
    I think the stress test concept was a good one, but it 
remains to be seen what the results of that will be and what 
actions Treasury will take through their capital acquisition 
program to provide assistance in the future. The plan needs to 
be worked out.
    The last category of recommendations were how the program 
is being managed. They needed to have additional people on 
board, to be hired, to be trained, to make sure they had the 
right complement of people to do the program, to make sure they 
had enough people to oversee the contracts that were being let, 
to make sure there were no conflicts of interest in the 
programs, and they had the proper internal controls in place to 
adequately manage the program.
    We had a series of recommendations in that regard. Those 
recommendations have not yet all been fully implemented.
    We are staying on top of Treasury's efforts to move forward 
in those areas, and we believe it is very important for them to 
fully implement our recommendations to ensure that they 
strengthen accountability and transparency for this program 
going forward.
    Last, Mr. Chairman, in closing, I was asked also to provide 
some information about the amount of lending that has been 
required, broadly speaking.
    From the end of fiscal 2007 to February 2009, the amount of 
payments in terms of debt held by the public has increased $1.4 
trillion.
    One of the big challenges going forward is based upon our 
review of Treasury's records, and this year, they are going to 
have to roll over about $2.5 trillion in debt as well. That 
will be a challenge.
    We have an ongoing monitoring activity looking at 
Treasury's process, and we will be happy to keep the Committee 
apprised of our efforts.
    Thank you very much again for being here and we look 
forward to assisting this Committee in its oversight.
    [The prepared statement of Gene L. Dodaro follows:]
  Statement of Gene Dodaro, Acting Comptroller General of the United 
             States, U.S. Government Accountability Office

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    Chairman LEWIS. Thank you very much, Mr. Comptroller.
    At this time, I will open the hearing for questions. I ask 
that each Member follow the 5 minute rule. If the witnesses 
will respond with short answers, all Members should have an 
opportunity to ask questions.
    Mr. Inspector General, tell the Members of the Committee, 
are you familiar with the extended contracts that are used to 
give money under this program and the term of those contracts?
    Mr. BAROFSKY. I am generally aware of those contracts and 
terms.
    Chairman LEWIS. Do you care to elaborate on the contents of 
those contracts?
    Mr. BAROFSKY. Sure. The contracts contain various 
provisions, a lot of legal standard representations and 
warranties, and as you mentioned in your opening statement, 
provisions regarding tax compliance.
    Chairman LEWIS. That is what I want to get to, Mr. 
Inspector General. Do the contracts state that the recipients 
are not aware of any material unpaid taxes?
    If the contracts contain this clause, why are there 
recipients with outstanding Federal taxes? What can be done to 
collect unpaid taxes?
    Mr. BAROFSKY. I think, Mr. Chairman, yes, the agreements 
state that in Section 2.20 of the Standard Capital Purchase 
Program. The agreement does have that provision. As you 
correctly noted, they represent and warrant that at the time 
they sign this contract, there are no material outstanding tax 
obligations.
    I think it falls primarily on the Office of Financial 
Stability's Compliance Department to be monitoring their 
compliance with these provisions of this agreement.
    I am aware today, thanks to the Subcommittee, that there 
are several recipients who do appear to have large unpaid tax 
amounts, and I certainly plan on discussing this with OFS 
Compliance to remedy this situation. It is obviously a very 
serious one.
    Chairman LEWIS. Mr. Comptroller, what are the options for 
recovering unpaid taxes?
    Mr. DODARO. IRS has various tools available to it, such as 
liens on property, levies on bank accounts or other assets that 
might be available. They can also levy penalties on the 
organizations, and also charge the individuals that are 
accountable at the bank individually with some of these 
penalties.
    The IRS has ample tools available to it to enforce 
compliance under current law.
    Chairman LEWIS. Are either of you prepared to make 
recommendations to the IRS and Treasury as to what they should 
do? Who can the Government collect from when a company has 
unpaid payroll taxes?
    Mr. DODARO. They can collect from the company itself and 
the officers or the responsible officials in the company. That 
is pretty much standard practice at the IRS.
    We have noted over time that their enforcement efforts, 
particularly for unpaid payroll taxes, are not very timely. It 
will take many weeks for them to move toward a decision and 
then to levy the penalties and then to proceed toward 
collection, and their collection record is not that terrific in 
a number of these areas.
    We do an annual financial audit of the IRS, so we look at 
this every year when we do that. We have made some 
recommendations to them to increase their activities to move 
forward in these areas and to collect more funds.
    I would be happy to provide our recommendations that we 
have made to the IRS for the record, Mr. Chairman.
    I would also be happy to--for GAO to get access to taxpayer 
data requires the consent of this Committee or the Joint 
Committee on Taxation or Senate Finance Committee, and if we 
received that approval from the Committee to get the data, we 
could go behind the information and take a closer look at what 
you are revealing today.
    Chairman LEWIS. How do we recover unpaid taxes from Federal 
contractors?
    Mr. DODARO. There are a number of ways. If the dispersing 
system for the contractors can be run through a system over at 
the Treasury Department and they can screen against whether 
that contractor has any unpaid Federal taxes, and the payment 
stream to the contractors can be offset to recoup the amount of 
money that is available there.
    Also, back on your other question, one other tool IRS has, 
they can also offset refunds that are made to individuals on 
the corporations that might be charged with particular problems 
as well.
    We made recommendations that more dispersing systems in the 
Federal Government be coordinated with this Treasury program to 
provide additional safeguards in that process, so there is more 
ability to collect the money.
    Chairman LEWIS. Thank you very much, the two of you. I 
yield to Mr. Reichert for his questions.
    Mr. REICHERT Thank you, Mr. Chairman. Thank you both for 
being here. I do not envy your jobs at this time. I am happy to 
have you here and the American people certainly are looking 
forward to your answers, and glad that you are watching out for 
their tax dollars.
    I just want to congratulate you both first of all for 
talking about transparency and oversight and enforcement, 
monitoring, tracking, all of those things that you both 
mentioned in your opening statements.
    I kind of want to go over some of the things that you have 
already mentioned, just to highlight them.
    The people are real concerned. They have heard a lot of 
figures tossed around, $700 billion is the authorized amount, 
but the total taxpayer exposure, as you mentioned in your 
opening statements, is quite a bit more.
    Just how much really are the taxpayers on the hook for? 
Either one of you can answer that question.
    Mr. BAROFSKY. I think with the TARP related programs as 
they have been described and announced by the Secretary, when 
you add up all the commitments, when leveraged with money from 
the Federal Reserve, the TARP related programs are 
approximately $2.9 trillion.
    Mr. REICHERT Just so the American people understand, we are 
not talking about $700 billion. We are talking about almost $3 
trillion.
    Mr. DODARO. There are a couple of different aspects, and I 
think what Mr. Barofsky is saying is absolutely accurate in the 
aggregate, but some of the different programs have different 
characteristics.
    The Capital Purchase Program, for example, companies are 
required to pay dividends back. So, far, there has been about 
$2.4 billion, and I think with the recent information I 
received, about $2.8 billion in dividend payments that have 
been paid back on the preferred stock.
    There is some ability to recoup some of this money, but you 
are exactly right, the potential risk long term on some of 
these other programs is very significant.
    Mr. REICHERT. We are spending a lot of taxpayer dollars. We 
are talking about $3 trillion potentially on the hook here for 
the taxpayers.
    How can Treasury establish meaningful metrics to determine 
whether or not TARP is really providing any sort of access to 
credit, improving access to credit? Are you able to answer that 
question?
    Mr. DODARO. Yes. That is one of our first recommendations, 
to collect information from the institutions receiving 
assistance about their lending activities, to be able to 
determine whether or not they are actually increasing their 
lending activities or mortgage mitigation efforts, to help 
homeowners that needed to readjust their mortgages.
    Mr. REICHERT. What did you find out?
    Mr. DODARO. We found out first of all that Treasury had not 
planned to do that, and as a result of our recommendation, they 
started collecting that information, and the top 20 banks that 
reported, the aggregate lending activity for their first report 
through the end of the year had decreased a bit in November and 
had gone back up in the aggregate in December, but not back up 
to the October date.
    This money was distributed through a period of time, so 
they need to continue to collect that data. We are in the 
process of analyzing the most recent information, and we will 
be providing assistance.
    We also have developed in our reports a series of 
indicators to determine in the aggregate whether lending is 
going up, like for example, the inner-bank lending rates.
    Mr. REICHERT The troubling part in this is that we knew we 
were spending a lot of taxpayer dollars and there was no plan 
in the beginning.
    Mr. DODARO. That concerned us, and that is why we made our 
recommendations in our very first report, Congressman.
    Mr. REICHERT. Next topic here, I am an original cosponsor 
of a bill that a number of Members have supported that would 
force Treasury to reveal certain records of its dealings with 
AIG.
    Some of the questions that we want answered, of course, as 
you probably have already heard, did the Treasury Secretary, 
Mr. Geithner, know or should he have known, about these bonuses 
prior to offering AIG an additional $30 billion earlier this 
month. Did he know or should he have known?
    Mr. BAROFSKY. The audit that I announced in my opening 
statement will have the answer to that question, whether or not 
he knew. Not just him, of course, but throughout the Treasury 
Department, who knew what, when, how and why, and we will 
answer that question in our audit.
    Mr. REICHERT. When is that due?
    Mr. BAROFSKY. We are just getting it off the ground right 
now. I cannot give you a precise answer.
    Mr. REICHERT. Neither of you can answer that question 
today?
    Mr. DODARO. No.
    Mr. BAROFSKY. I cannot answer that question.
    Mr. REICHERT. Thank you, Mr. Chairman. My time is up, I 
yield back.
    Chairman LEWIS. Thank you, sir. Now, I will turn to Mr. 
Becerra for questions.
    Mr. BECERRA. Thank you, Mr. Chairman. Thank you for holding 
this hearing, which I suspect is the first of several hearings 
to conduct the oversight responsibility that this Committee has 
over these issues involving the TARP funding.
    I want to thank the two gentlemen that are before us for 
their overall work they have done for the people of this 
country in trying to help us provide the information and 
oversight that is important for us to conduct our business.
    First question, you have mentioned, gentlemen, that you 
have had conversations with obviously the folks at Treasury, 
probably the Fed, and some of the recipients of the TARP money 
directly as well.
    Are you receiving all of the support and cooperation that 
you need to conduct your oversight responsibilities and 
enforcement responsibilities from the Department of Treasury 
and its personnel?
    Mr. BAROFSKY. So, far we have.
    Mr. DODARO. We have been given a great deal of cooperation 
from the Treasury Department. One thing I do want to mention 
since you mentioned the Federal Reserve, GAO is statutorily 
prohibited from reviewing certain activities of the Federal 
Reserve, and discount window operations, open market Committee 
transactions.
    I am becoming very concerned as TARP money is being used to 
leverage Federal Reserve activities that we will have--
currently, that we will have a problem in reviewing that in the 
future.
    I think that the Congress should consider removing those 
restrictions for the GAO to provide additional oversight. I 
wanted to make that point clear this morning. Thank you.
    Mr. BECERRA. Thank you, Mr. Dodaro. I hope, Mr. Chairman, 
we are able to continue conversation with Mr. Dodaro and his 
staff to find out if there is some ways we can help make sure 
that the transparency and accountability that you are charged 
to help us obtain is something we end up securing. Thank you 
for that information.
    On the issue of unpaid income taxes by some of these TARP 
recipients, my understanding is there are more than one TARP 
recipient that has unpaid income taxes totaling over $100 
million to the Federal Treasury; is that correct?
    Mr. BAROFSKY. Based on the information provided to us by 
the Subcommittee, it does indicate that.
    Mr. BECERRA. There are ways for Treasury to collect this 
money from those TARP recipients, specifically the contracts 
these recipients signed with the Government in order to obtain 
taxpayer funded TARP dollars; is that correct?
    Mr. BAROFSKY. That is correct.
    Mr. DODARO. That is correct.
    Mr. BECERRA. Does the Treasury have the tools in place 
today to be able to secure those uncollected income taxes from 
these TARP recipients?
    Mr. DODARO. IRS has the tools available to do it. This goes 
to the recommendation we had made about Treasury really 
monitoring compliance with this Act, and they really have not 
had their program up and running yet.
    Mr. BECERRA. Are you aware if IRS is taking steps to 
collect those uncollected income taxes from those recipients of 
billions of dollars of TARP/taxpayer money?
    Mr. DODARO. I do not know that today but we can find out.
    Mr. BECERRA. Would you please find out? I suspect we will 
try to find out as well. If you can report back to us if IRS is 
taking steps to collect money that is owed by banks and 
financial institutions that have received billions of dollars 
from the taxpayers.
    It just seems anomalous that given that they signed a 
contract that said they will be up to date on their taxes that 
they owe, to get this taxpayer bail out money, they would pay 
their taxes.
    I hope that you will help us quickly determine what is 
being done to make sure that these companies are up to date the 
way we expect every other working American to be up to date in 
his or her taxes.
    Mr. BAROFSKY. Yes, sir. To be clear, if an executive 
knowingly signed this agreement knowing that a representation 
in that was false, that would also potentially be a crime.
    We are going to look very heavily into this issue as part 
of our responsibility for enforcement to see if any such crime 
was committed.
    Mr. BECERRA. Please let us know if we can be helpful to you 
as you conduct that examination.
    Mr. DODARO. The one thing we will need, Congressman, is 
approval from this Committee to get access to the taxpayer 
information.
    Mr. BECERRA. To the degree that we can help, I am certain, 
Mr. Chairman, we will do everything we can at the Congressional 
level to try to help you have that information at your 
disposal.
    A question regarding Treasury's authority over TARP. Can 
Treasury limit executive compensation based on these TARP 
agreements that were signed by these financial institutions 
that requested taxpayer bail out money?
    Mr. BAROFSKY. Yes, it can do so through regulation.
    Mr. BECERRA. Can it require recipients of TARP money to get 
Treasury approval before paying out bonuses?
    Mr. BAROFSKY. It does have the ability to do so.
    Mr. BECERRA. Can the Treasury limit recipients of taxpayer 
money, TARP money, from using TARP moneys in particular ways?
    Mr. BAROFSKY. It can and has put some restrictions already 
in its agreements.
    Mr. BECERRA. Yes, we can place restrictions on how 
recipients use TARP money?
    Mr. BAROFSKY. Yes.
    Mr. BECERRA. Thank you, Mr. Chairman. Maybe if we have a 
second round of questions, I will have an opportunity to 
continue, but thank you very much. I yield back.
    Chairman LEWIS. Thank you. Mr. Roskam is recognized for 
questions.
    Mr. ROSKAM. Thank you, Mr. Chairman.
    I just want to take a step back and go back to the Fall 
when this whole adventure began, and essentially, I think there 
was not a serious person in Congress that did not realize that 
the credit markets were ceasing up and there was near unanimity 
that Congress needed to act.
    The question is how does Congress act, and there was a drum 
beat that started, and it became more and more intense over the 
course of several days to the point that it almost had a panic 
feel to it around here.
    As a result, there was a proposal that was put forth by the 
administration at the time, and the communication was 
essentially sign this, vote for this, do not ask too many 
questions, and if you are asking questions, you are either 
naive, uninformed or you are an obstructionist. That was the 
subtext.
    The Monday that the first TARP vote failed, I personally 
heard an open outcry on the Floor of the House of 
Representatives where a Member shouted out the market has 
dropped 600 points, as if that was the driving factor in 
Congress making its determination.
    You know how the adventure went on. On Friday, it comes 
back and it is passed into law.
    It seems to me ironic that here we are, this Congress, we 
gave away tremendous authority in the TARP legislation, did not 
do the due diligence in my view at the time, and now, we are in 
a position where yes, this is changing and it is very, very 
difficult.
    I have analogized this. I think it was the financial 
equivalent of the Gulf of Tonkin resolution, where Congress 
basically gets rolled and gives away tremendous authority.
    It started out badly and it got worse because the 
administration came out of the huddle, so to speak, and they 
were going to do their call, and looked at the line of 
scrimmage in a football analogy and said you know what, we came 
out and we were going to do toxic assets, no, no, new play, 
capital injections.
    It has been one adventure after another. I think getting to 
your testimony, there is a lack of predictability on how this 
is playing out. What is the metric? How are decisions being 
made?
    I think that while you are hearing from wound up Members of 
Congress, who are rightfully wound up about this, our 
opportunity was to cast this well when the bill was originally 
passed, and now reluctantly, we are dealing with a situation--
my predecessor was Henry Hyde, and Henry Hyde had a great 
expression.
    He said there is one thing worse than gridlock, the worse 
thing than gridlock is the greased shoot of Government. That is 
exactly what we are dealing with right now.
    Mr. Barofsky, you mentioned something that I found 
interesting, and that is the recommendations that you are 
making as it relates to this whole program, are those 
recommendations--are you memorializing those?
    In other words, are those recommendations in writing that 
we can get the benefit of in future oversight hearings and 
future conversations, or they just sort of not memorialized and 
just sort of conversational recommendations?
    Could you speak to that?
    Mr. BAROFSKY. We memorialized our recommendations. They are 
included in--the first round of recommendations were gathered 
and included in our first report to Congress on February 6. 
Since then, we have made a series of recommendations. We do 
those in writing. We will be including those in our next 
report, which I believe will be delivered to Congress on April 
20.
    Mr. ROSKAM. You mentioned the on line aspect of the 
disclosure of the TARP agreements. Would those online 
disclosures, as they are currently exercised by Treasury, have 
revealed the AIG problem?
    Mr. BAROFSKY. It would have revealed that in any AIG 
agreement with Treasury, retention payments were explicitly 
contemplated. It did not list the contracts. It did not list 
the amounts.
    In the executive compensation provisions, there is an 
explicit reference to retention payments and calculating the 
total amount of payment a senior executive could receive.
    That issue was in fact in those agreements.
    Mr. ROSKAM. Is it fair to say that if they had been online, 
that issue would have been red flagged and certainly drawn 
attention in advance of the problem?
    Mr. BAROFSKY. Potentially. I am not sure of the exact date 
that the AIG agreement did go up on the Internet. Our 
recommendation was sort of adopted in waves after it was made 
in late December. It is now being fully complied with. I am not 
sure of the exact date the AIG agreement went up.
    Mr. ROSKAM. I understand. Thank you. I yield back.
    Chairman LEWIS. Thank you. Now, I will turn to Mr. Kind for 
his questions.
    Mr. KIND. Thank you, Mr. Chairman. Thank you for holding 
this very, very important and timely hearing. I want to thank 
our witnesses for your testimony and your access to us as we 
have ongoing questions about the oversight and implementation 
of TARP.
    Let me just quickly ask you both whether or not you feel 
that your respective agencies have the resources, the tools, 
the personnel that you need to effectively conduct oversight 
with the implementation of TARP.
    Mr. Barofsky?
    Mr. BAROFSKY. We are building. We do not have the necessary 
resources yet. Pending right now in the House is H.R. 1341, 
which would give us some expanded hiring authority, which will 
help us.
    Right now, we are about 30 strong. We are building to about 
120 to 125. We have had some serious challenges. We have had 
the same challenges that TARP has, as Mr. Dodaro has indicated 
in his report.
    I am hopeful with the passage of this vitally important 
bill for us that we will be on the road to getting the 
necessary resources.
    Mr. KIND. Thank you. Mr. Dodaro?
    Mr. DODARO. I believe we have the necessary expertise in 
GAO since we are a preexisting organization. We have 
collectively pooled the resources and we are augmenting those 
resources with some hires.
    I have two concerns. My biggest concern is what I mentioned 
before about our limitations at the Federal Reserve. I think 
unless that is dealt with, we are not going to be able to 
provide the type of oversight that the Congress would expect, 
and I believe deserves, during these extraordinary times. That 
needs to be dealt with.
    There is also a potential safeguard that could be put in 
place to give us access to the books and records of any 
recipient of TARP money. We currently do not have that.
    There has been a bill introduced in the Senate, which I can 
provide to this Committee, by Senators Baucus and Grassley, to 
do that.
    Right now, it is not a problem, but given the 
unpredictability of how this process is going to unfold, I 
think it would be a good safeguard.
    Mr. KIND. I appreciate your concern about the Fed 
oversight. We have had conversation previously about that. It 
gets a little tricky, and I think we are going to have to 
engage you in further exploration of what type of statutory 
authority you need.
    Obviously, the Fed has always been set up as an independent 
entity, so it is not subjected to the political whims of 
Congress or any other outside influence.
    If there is a way we can massage that authority that you 
need, I think we need to. It is an unprecedented intervention 
by the Fed with the capitalization that has taken place there. 
I think more oversight is certainly necessary.
    Mr. DODARO. Congressman, I am very respectful of the need 
for the Fed's independence. I believe whatever legislation is 
passed could be carefully crafted and even temporary in nature. 
I am not trying to seek any permanent authority here.
    Mr. KIND. Let me ask you both about the coordinated 
oversight functions. Just from my quick calculations here, we 
have the IG Office and the GAO obviously involved in oversight. 
We have the Financial Stability Oversight Board that was 
created with the passage of TARP. We have Treasury involvement, 
Fed involvement with oversight. Our involvement in oversight. 
Might as well throw in the national media's involvement in 
oversight.
    Do you feel there is sufficient coordination so that we do 
not have overlap and redundancy and duplication occurring with 
oversight?
    Mr. BAROFSKY. I do. I think that is one of our most 
important roles, making sure that is the case. TARP is such a 
vast terrain and it is growing and changing every day.
    If Gene and I and our organizations were not to work 
closely, as well with the Congressional oversight panel, I have 
my own council of the various Inspector Generals that includes 
representatives from GAO, if we were not coordinating, one, we 
would not have a shot at covering this whole terrain.
    Second, we would be wasting our time by duplication of 
resources. We have worked really hard----
    Mr. KIND. Let me ask you both this, the first line of 
defense is responsible behavior of the banks that are receiving 
these funds right now. Unfortunately, the track record has not 
been very good so far, especially with the AIG story this week 
and the anger it has engendered.
    Do the banks themselves have internal control systems being 
established in the appropriate use of the TARP funds from what 
you have been able to see?
    Mr. BAROFSKY. One of our recommendations that we made to 
Treasury was that Treasury require in its agreement the 
establishment of internal controls, at least with respect to 
those conditions that are imposed upon them.
    They have adopted that with respect to some of their 
agreements such as Citigroup and Bank of America, as well as 
the auto industries, and we hope they continue to impose those 
internal controls. We think they are vital.
    Mr. DODARO. I think a real important point here for the 
Congress, too, is as these next set of programs are authorized, 
there is a real opportunity here to build in some better 
controls up front than were originally built into the program.
    I would encourage the Congress to have oversight hearings 
with the Treasury Department to really focus on what their 
plans are.
    Mr. KIND. I see my time is expiring, but I would like to 
follow up with you two gentlemen in regard to what type of 
additional oversight we need to provide through statute, what 
type of questions we need as a body to be asking Treasury in 
regard to their oversight function as well.
    There is still a lot of work to be done. I thank you two 
and your agencies for the job that you are performing on behalf 
of the American taxpayer. Thank you.
    Mr. DODARO. Thank you.
    Mr. BAROFSKY. Thank you.
    Chairman LEWIS. Thank you very much. Now, I will turn to 
Mr. Linder for his questions.
    Mr. LINDER. Thank you, Mr. Chairman.
    Mr. Barofsky, of the companies that are owing taxes to the 
Government who signed those contracts, are any of those 
companies delinquent today?
    Mr. BAROFSKY. I do not know the names of the companies. The 
information that was provided to me today has the companies 
identified by number or letter. I cannot answer your question.
    Mr. LINDER. You cannot also answer whether those companies 
signed contracts before or after January?
    Mr. BAROFSKY. Because I do not know the identity, I am 
sorry, Congressman, but I hope to work with the Subcommittee 
and find out and be able to answer that question.
    Mr. LINDER. Mr. Dodaro, are the limitations on the Fed 
statutory?
    Mr. DODARO. Yes, they are, Congressman. It is in the Bank 
Auditing Act. It is one of the few instances where GAO is 
statutorily prohibited.
    Mr. LINDER. Do either of your organizations have any 
anticipatory examination powers? Could you have gone into the 
TARP when it was just being anticipated and looked at it and 
made recommendations?
    Mr. BAROFSKY. I am sorry. We did not exist when the TARP 
was being formed. I was sworn in on December 15. I would not 
have been able to do that.
    Mr. LINDER. Could you do it with respect to TALF?
    Mr. BAROFSKY. With TALF, what we have been attempting to do 
is make a series of recommendations and continue to make 
recommendations on the formation of that program.
    We are very concerned about the fraud vulnerabilities in 
the TALF. We made recommendations in our February report. We 
continue to engage in a dialog with the Federal Reserve as well 
as Treasury. We are trying to do our best to make the necessary 
recommendations to protect taxpayer money.
    We have also formed a TALF taskforce to try to send a 
powerful deterrent message to those who would abuse the 
program, and I think that deterrent effect is beginning to have 
some traction.
    Mr. LINDER. Does that mean people are going to refuse to 
participate in it?
    Mr. BAROFSKY. I hope that anyone who is planning on 
stealing from the program refuses to participate. I hope we 
deter them.
    Mr. LINDER. Do you know more details about TALF than we do?
    Mr. BAROFSKY. I know a lot of details about TALF.
    Mr. LINDER. Can you share them with us? I have no idea what 
they are finally going to do.
    Mr. BAROFSKY. It is an extremely complicated program and it 
changes. That has been one of our great concerns.
    Just last week, a lot of the conditions that gave us some 
greater comfort about the fraud prevention in the program were 
changed. It continues to change.
    In our report, we detail some information on the TALF as it 
existed at that time. The Federal Reserve does have 
information, questions and answers on its website.
    It is complicated. We are going to in our next report give 
a comprehensive description of the program, like we did in our 
last report, and in easy to understand terms.
    Mr. LINDER. Do you have any idea what their timeframe is?
    Mr. BAROFSKY. The first disbursements on TALF are supposed 
to occur next week.
    Mr. LINDER. Do you know how much they are looking at?
    Mr. BAROFSKY. I do not think the numbers have been 
disclosed. The total TALF program as it currently exists is a 
potential $200 billion worth of lending. I am not sure what 
they expect. I do not think they know until the applications 
come in what the amounts will be.
    Mr. LINDER. What do you know about the Fed's insinuation in 
commercial paper markets?
    Mr. BAROFSKY. That is not really part of the TARP related 
program, so I really would not feel qualified.
    Mr. LINDER. Do you know, Mr. Dodaro?
    Mr. DODARO. No.
    Mr. LINDER. Could you look into that?
    Mr. DODARO. That is one of the areas we would not be able 
to look into because of this limitation, Congressman.
    Mr. LINDER. In the last couple of days, you may have 
noticed a lot of interest in the bonuses that AIG paid out. 
That language was put into the bill, stimulation package, was 
it not? When did you first know the language was there?
    Mr. BAROFSKY. I first saw the language--I think the bill 
passed on a Friday and I think I saw it later that day.
    Mr. LINDER. The language was in the bill then?
    Mr. BAROFSKY. When I saw the bill, it was after it had been 
passed and it had language that exempted----
    Mr. LINDER. Prior to February 11?
    Mr. BAROFSKY. Yes.
    Mr. LINDER. Which is about a month ago.
    Mr. BAROFSKY. Yes.
    Mr. LINDER. Did you raise that issue then? Did you raise 
any issues about the bonuses, retention bonuses going to AIG?
    Mr. BAROFSKY. I became aware of these particular set of 
bonuses after they had already been paid. That is when Treasury 
notified me of them.
    Mr. LINDER. Thank you both. Mr. Chairman, I yield back.
    Chairman LEWIS. Thank you very much. Mr. Pascrell is 
recognized for questions.
    Mr. PASCRELL. Mr. Chairman, let me start with my 
conclusion. The Treasury does not want financial institutions 
to fail. None of us do. Those institutions will fail if the 
Treasury puts everything on the table, so let us not put 
everything on the table.
    There are some things the public and the Congress need not 
know. If they know, the public will further lose confidence. 
That is my conclusion.
    I understand that this administration is trying to dig 
itself out of the deep hole that it found itself in. I 
understand that very clearly in early October of 2008, Congress 
passed and President Bush signed the Emergency Economic 
Stabilization Act of 2008, creating the Troubled Asset Relief 
Program.
    At that time, the TARP's primary focus was expected to be 
the purchase of troubled assets, such as mortgages and mortgage 
backed securities.
    However, we know what happened two weeks after the 
enactment, someone changed their minds, not the Congress.
    The past Administration and specifically former Secretary 
Paulson implemented TARP in ways that have been radically 
different than what was widely envisioned when Congress passed 
the Emergency Economic Stabilization Act.
    I consider this a fraud perpetuated by the last 
Administration when it promised one course of action and 
delivered another, but I am deeply disappointed that the 
Treasury Secretary right now, Mr. Geithner, has not taken a 
more aggressive approach to remedy the mismanagement of these 
TARP funds by the last Administration.
    I am stunned by the current Treasury, and I am offended by 
their obstinacy and the fact that they are not here today when 
they were requested to be here three times.
    Three different Treasury offices, the Office of Financial 
Stability, the Office of Tax Policy, the Office of Public Debt 
and Borrowing, were contacted about testifying at the hearing, 
all three refused.
    The Treasury, regardless of the administration, must be 
accountable for their actions or their mismanagement, and the 
mismanagement of the TARP funds specifically.
    Mr. Dodaro, it has been nearly six months since AIG 
received its first Government bail out. By the way, the interim 
final rule still includes limits on executive compensation. 
That is still there, as I understand it.
    Mr. DODARO. Until they revise it to make it consistent with 
the new legislation.
    Mr. PASCRELL. Thank you. They have given a total of $170 
billion, one thousand times the cost of these executive 
bonuses, yet no progress has been made in consolidating AIG and 
no progress has been made in selling off its assets.
    My question is this--I wish the Treasury was present 
because they are the folks I should be asking the question to, 
so you will have to substitute for them, as you have been 
doing, but you have done a fantastic job, both of you.
    Specifically, what the plan is for consolidating AIG, and 
can any of you here today give some insight into the matter? 
Then I have a follow up question.
    Mr. Dodaro?
    Mr. DODARO. If I might, Congressman Pascrell, I have the 
person that is doing this work for us here, Ms. Orice Williams, 
and she could give you----
    Mr. PASCRELL. With your permission, Mr. Chairman.
    Chairman LEWIS. Yes. Thank you for being here.
    Ms. WILLIAMS. No problem. In terms of AIG, the Fed 
initially provided assistance to AIG. Treasury through TARP 
provided assistance through the systemically significant 
failing institution program. That money was paid directly to 
the Fed to pay down the original credit revolving facility.
    The Fed has been responsible for the day to day oversight 
of AIG and its plan to unwind the institution.
    I testified yesterday that in terms of where they are in 
the process, it is still very much ongoing, they have been 
unable to sell major assets out of the organization, so they 
have not had great success in unwinding the organization to 
this point.
    They have been able to terminate their securities lending 
facility that had created a lot of problems for AIG, and they 
also have been able to move off a significant amount of their 
most complicated CDS portfolio.
    Mr. PASCRELL. If I may, Mr. Chairman, in the last 6 months, 
with our infusion of a lot of capital, if there has been no 
progress in addressing the larger problems at AIG, do you still 
believe AIG should receive more TARP money in the future?
    Ms. WILLIAMS. This goes to kind of the Fed's goal in 
assisting AIG, and that had to do with preventing systemic risk 
to the system, from either a credit downgrade of AIG or a rapid 
bankruptcy of the organization.
    The two areas that were creating the largest problems for 
AIG were addressed, and that is the securities lending program 
and dealing with their CDS portfolio, and these were moved into 
two vehicles created by the Fed, Maiden Lane II and Maiden Lane 
III, to purchase the securities that AIG had invested in.
    Mr. PASCRELL. Thank you very much. Thank you. I yield back.
    Chairman LEWIS. Thank you. Mr. Davis of Kentucky is 
recognized for his questions.
    Mr. DAVIS OF KENTUCKY. Thank you, Mr. Chairman.
    I would like to go off on something that Mr. Pascrell had 
mentioned, really a follow up to the joint discussion that we 
had in the library earlier in the week.
    One point that I think is important to clarify on the way 
the record came out, it was not just Members of the past 
Administration who were party to framing this problem.
    I sat in the hearings in the Financial Services Committee 
and actually watched the Majority Chairman, the Democratic 
Chairman of the House Financial Services Committee and then the 
Chairman of the Senate Banking Committee agree and in fact 
ignore the warnings of many Members on both sides of the aisle 
who were attempting to prescribe the use of these funds, 
because the very thing that has happened is really no surprise.
    I find it a little disingenuous that the Secretary in fact 
is reacting to this based on the fact that he was Governor of 
the New York Fed that was intimately involved in setting up the 
contractual relationships of how this went.
    I want to come back to a bigger picture, I think, this was 
the thrust of my question before. Not so much a party issue, 
and I truly believe at the root of problems like this, it is 
not a Democrat or Republican issue, but we have a flawed 
process issue in how the agencies are functioning.
    First of all, we have this unprecedented transfer of 
unaccountable power to the executive to place taxpayer money 
into the private sector.
    I may over simplify this and where we go with it, but I 
guess the concern I have is we have had this change take place, 
is there a bigger Constitutional question here?
    Do you believe that we need to have the ability to dive in 
and see what was done with those assets specifically?
    Where I would go into a parallel before I follow along with 
a couple of subparts to the question, if I owned 80 percent of 
a corporation, I know for a fact that I could see every aspect 
of the books of that corporation if I so desired by simply 
calling an emergency board meeting and determining I would be 
given that access.
    Why cannot we not do that here and see this? I suspect 
there will be more culpability in the details when we get down 
there, if you were to have access, and especially the Chairman 
and Ranking Member.
    Mr. BAROFSKY. Certainly, the Fed and Treasury do have that 
degree of access.
    Mr. DAVIS OF KENTUCKY. They are obviously not sharing this 
information.
    Mr. DODARO. Right. The only thing we have been given from 
the Federal Reserve is information that is available to the 
public. Unless the law is changed removing our restrictions, we 
are not going to be able to do what you are suggesting. I do 
think it needs to be done.
    Mr. DAVIS OF KENTUCKY. Following on that, do you believe 
the way that the original law was structured out of the 
Congress was flawed?
    Mr. DODARO. I guess my view would be given the original 
explanation of what it was to be used for, I am just speaking 
from GAO's standpoint, in terms of what our authority would 
have been, I think we would have been fine if they would have 
purchased the toxic assets.
    Since they shifted the plans, first, to the capital 
purchase program, that created a little bit of a dilemma for 
us, but when they started using TARP money to leverage Federal 
Reserve activities, that created a bigger problem.
    As the program has evolved, we have not been able to adapt, 
because of these restrictions, the type of accountability and 
transparency that the Congress expects of us.
    Mr. DAVIS OF KENTUCKY. I think this goes back to the 
cautions that many of us were raising in the run up to the 
legislation last year, the way the title was originally put 
into the housing bail out bill that would have been oriented in 
that direction was a simple blank statement that the Secretary 
was basically being given unlimited authority.
    The only real question last Fall was raising the debt 
ceiling rather than actually the mechanisms of how it would be 
done.
    Seeing that Secretary Geithner seems to be carrying on the 
same responsibilities that Paulson had asked for in the 
previous Administration, I would really question the competence 
of how this is being carried out.
    You agree that we have to have some type of an audit 
mechanism to see that and hopefully we will work from this 
Committee to bring that forward.
    Just as an aside, the President made a comment this past 
week that Secretary Geithner was making all the right moves. Do 
you agree with that statement, just from a forensics audit 
standpoint? You do not have the information that is available. 
We have numbers instead of names for people.
    This would be an outrage in the private sector as the 
owners of a business and certainly we as taxpayers own it now.
    How do you feel about that?
    Mr. DODARO. Basically, I would say it relates to the 
recommendations that GAO has made about how to improve the 
program, that they are making progress but they are not there 
yet.
    From the standpoint of fully implementing our 
recommendations, I would say they need to take additional steps 
in order to do that.
    Mr. BAROFSKY. I would say the exact same with our 
recommendations.
    Mr. DAVIS OF KENTUCKY. Thank you. We will try to work 
closely with you and follow on from the discussion earlier in 
the week and with the Chairman of the Committee to address that 
blank spot.
    Thank you very much. I yield back.
    Chairman LEWIS. Thank you very much. Mr. Etheridge is now 
recognized.
    Mr. ETHERIDGE. Thank you, Mr. Chairman. Let me thank you 
for holding this hearing.
    We have a lot of hearings going on the Hill right now. All 
of them are important in this area because the American people 
are concerned, and it did not just start with the bonuses paid 
for AIG, as all of us know.
    This started last year when they had serious concerns about 
the economy and then the funds moving in that area. I think it 
has sort of culminated and erupted with what has happened over 
the last several days.
    I think all of us are concerned, so let me ask you a couple 
of questions. I appreciate your service. I appreciate the job 
you are doing, both of you, and GAO has a rich history.
    As we look at these and as we deal with the focal points of 
where we are, I think we have to acknowledge that, too many 
people talk around it, people are just furious, and certainly 
in my district in North Carolina where people are about to lose 
their homes, we have farmers who are in jeopardy of losing 
their farms, and then they see their tax money rolling to Wall 
Street. I think that is what is bubbling over the top.
    The very people that got us in this problem are the very 
folks that they feel we are rewarding. As we move to fix the 
problem, my question is as we deal with that, in your 
testimony, you mention the following ``Plans to launch an audit 
examining Federal monitoring and enforcement of executive 
compensation restrictions imposed as a condition of Federal 
financial assistance.''
    Can you tell me and those of us in this panel about this 
audit, what it will entail, and what can be done in the future 
to prevent these kinds of excesses?
    I think that is what the American people want to do. The 
American people want things fixed, but they want them to be 
done right, and they are just tired of gaps being put in place 
that people slip through.
    Mr. BAROFSKY. I think there are several aspects of this 
audit. First and foremost, it is to make sure or to report on 
what the status of Treasury's responsibility is in its 
compliance, to set up the right procedures, to ensure that the 
recipients of TARP funds are complying with the executive 
compensation requirements.
    This is something that GAO has identified, I think, in its 
very first report. We are picking up on that to have a 
comprehensive audit of what is going on.
    Second, it is looking very specifically at the AIG process, 
the process for this particular example of executive 
compensation, how it came to be that these payments were made, 
when Treasury knew about it, who at Treasury knew about it, 
what legal analysis was done, to provide that type of 
transparency.
    Ultimately, that type of transparency in reporting on what 
the efforts have been and making recommendations on how to fix 
it are how, I think, we are best able to address these 
problems.
    Mr. ETHERIDGE. You covered this a little bit earlier, and I 
think it is important enough to be touched on again. We keep 
talking about transparency. We talk about time lines.
    If you would, repeat again when do we expect to have the 
transparency up so the American people can see it on line. 
Number two, when the audit will be completed, and I assume that 
will be on line.
    Mr. BAROFSKY. Yes.
    Mr. ETHERIDGE. These are the kinds of things that people 
hear. They expect to see it. All of a sudden, they see more 
hearings, nothing is happening, and they are absolutely 
frustrated and confused.
    Can you cover that one more time?
    Mr. BAROFSKY. Sure. On our overall audit on use of funds, 
we have just received our last response yesterday, late 
yesterday. We are now in the process of gathering that 
information. I think that within the next 30 days, we are going 
to release some preliminary information.
    We are shooting for----
    Mr. ETHERIDGE. You are saying by April 15?
    Mr. BAROFSKY. Yes, summary of responses, some anecdotal 
descriptions of the responses. We are looking for late Spring 
to have the first wave of the report.
    Mr. ETHERIDGE. When is late Spring?
    Mr. BAROFSKY. May/June is the timeframe.
    One of the problems we have, Congressman, is we are 
starting up. We have actually hired a contractor to help us 
with this.
    Mr. ETHERIDGE. You cannot fault me for trying to tie you 
down to a date.
    Mr. BAROFSKY. Right. We want to get it out as soon as 
possible, and that is why we actually hired a contractor and 
are not doing it entirely in-house, to speed this up, which 
will be an intermediate report.
    Ultimately, if H.R. 1341 does pass, that requires us by 
September 1 to get a comprehensive report on how TARP funds 
have been spent, so we will certainly have a final, final, 
final by that date, but we plan to release the information and 
provide transparency in stages, making sure that we have a 
complete yellow book standard audit report when we provide our 
final product to the Congress and the American people.
    Mr. ETHERIDGE. I think that will be great and important. 
Thank you. Thank you, Mr. Chairman. I yield back.
    Chairman LEWIS. I just want to announce to the Members, we 
are going to have a series of votes coming up, and we are going 
to try to rush to get everyone in.
    Mr. Higgins is now recognized for questions.
    Mr. HIGGINS. Thank you, Mr. Chairman.
    I just want to stay on this issue of executive compensation 
and the problem with AIG. Unfortunately, this Troubled Asset 
Relief Program will always be synonymous with the mess that has 
been created with respect to AIG.
    AIG should not be paying out bonuses. They should be paying 
restitution. They should be fined.
    This is a gross breach of their responsibility. AIG was 
essentially running an unregulated hedge fund within the 
context of an AAA insurance company. AIG was selling a product 
that did not exist, issuing phony insurance policies against 
the default of bundled subprime mortgages, insurance that did 
not have any capital behind it. It was like a hedge fund 
without the hedge.
    When you get into this whole issue of bonuses, call them 
performance bonuses or retention bonuses, the bottom line is a 
bonus is a form of compensation for rewarding good work.
    I do not think anybody agrees that AIG was doing good work. 
In fact, I think they were corrupt in what it is they were 
doing, which is undermine the confidence of the American people 
relative to the financial markets and the overall economy.
    Let us call them retention bonuses as AIG has called them. 
The problem is they paid this out to 54 people who are no 
longer with AIG.
    When this whole thing started, people were suggesting that 
these financial institutions were too big to fail because they 
were highly integrated, they were associated with banks and 
governments, and those institutions, those secondary 
institutions would fail if we allowed these big companies to 
fail.
    They are failing. We were rolled, as somebody else said, by 
approving the Troubled Asset Relief Program, which is no longer 
a troubled asset relief program, and we continue to call it a 
troubled asset relief program.
    The Chairman earlier talked about trust and the fact that 
no trust exists, and once you lose trust, it is very difficult 
to get it back.
    The Congressional response and the administrative response 
to a massive financial problem has morphed into another massive 
financial problem.
    I am concerned that whatever audits are done are not going 
to give us the kind of conclusions that are necessary to fix 
this thing in time.
    You are both talking about staffing up, starting up, 
getting your personnel numbers and expertise in order, in order 
to properly monitor these programs, and the program continues 
with the dispersement of funds, and it seems as though there is 
very, very little oversight.
    I am not suggesting that anybody is doing this 
deliberately. I cannot see how it could be much worse than what 
it is today.
    The American people are very, very angry. Members of 
Congress are very, very angry for good reason. I think the 
frustration is fueled by a lack of clear, concise answers to a 
problem that is contributing to the continual contraction of 
this economy.
    Just your thoughts on that.
    Mr. BAROFSKY. Let me give you an example of how much worse 
it could be. The original TALF program, which is now projected 
to be $1 trillion of Government money, the original fraud 
protections when we were briefed on the program was they were 
going to rely on two things.
    They were going to rely on AAA rating by credit agencies 
and the due diligence of investors. That, of course, was the 
exact same protections that got us into the entire mortgage 
meltdown, mortgage backed securities meltdown.
    We came out strong. We came out with strong 
recommendations, and the fraud prevention in that program is 
better. They have not adopted all of our recommendations. It is 
not perfect, but third party attestations and launching of our 
taskforce is going to reduce the amount of fraud.
    It is not going to reduce it to zero, but that is an 
example of where we provided oversight, we provided 
recommendations, so that it may not be as bad as it may have 
been.
    Mr. HIGGINS. Credit rating agencies were bought off. Credit 
rating agencies were not doing objective analysis of the 
creditworthiness of these instruments. They were extracting 
huge fees for giving phony high credit rating agencies which 
bamboozled the American people and investors and clients.
    Mr. BAROFSKY. That is why we came out with a strong 
recommendation that would not be sufficient.
    Mr. DODARO. I would just make three quick points. One, if 
it was not for our recommendations, you would not have any 
information available on how the lending practices have changed 
for the institutions receiving the money.
    Number two, we are staffed up but we are hampered by access 
to certain information, which I pointed out.
    Number three, we have issued a report and designated it as 
a high risk area and the need to modernize the financial 
regulatory system to close some of these gaps.
    Basically, the regulators struggled and were unable to 
mitigate the systemic risk of some of these large financial 
conglomerates. Unless Congress revamps that whole financial 
regulatory system going forward, that is really as important in 
my opinion as fixing some of these intermediate activities.
    Mr. HIGGINS. Thank you, Mr. Chairman. I yield back.
    Chairman LEWIS. Thank you very much. Mr. Comptroller, if 
you are going to be able to do your job as an official of GAO, 
you need the capacity, you need the ability to get all of the 
information.
    I think this Committee should get serious and careful 
consideration to making a recommendation to the Full Committee 
that we change the law. It does not make sense.
    Mr. DODARO. It makes sense and in a carefully crafted 
manner, I would be happy to have our counsel work with your 
counsel to see if we can develop some legislation that respects 
the independence and some of the issues of the Federal Reserve, 
but gives us the authority we need to provide Congress with 
proper oversight.
    Chairman LEWIS. We should do just that.
    Mr. BAROFSKY. For what it is worth, as GAO being such an 
important oversight partner for us, giving them this type of 
access would only enhance the overall oversight of this 
program.
    Chairman LEWIS. Thank you. We are prepared and ready to 
work with you. On that note, we will recognize Mr. Davis of 
Alabama for his questions.
    Mr. DAVIS OF ALABAMA. Thank you, Mr. Chairman.
    Let me react, if I can, Mr. Dodaro and Mr. Barofsky, to 
several things that struck me about your testimony in this 
hearing today.
    I remember an exchange between you and one of the 
Republican Members about the various privacy provisions, I 
suppose, that prevent us from identifying these 13 companies 
that owe massive amounts of money to the Federal Government, in 
terms of their taxes, but signed the contracts saying they had 
no tax liability.
    I was thinking about the fact that in my hometown of 
Montgomery, Alabama, if you write a large number of bad checks, 
they stick your picture on a big billboard and they put it on 
the most well traveled interstate in town, and whatever privacy 
you thought you had kind of goes out the window.
    I am wondering how many people listening to this hearing or 
sitting here wondering why there seems to be one set of rules 
for them and their families and there seems to be another set 
of rules for these enormously large companies that employ all 
these so-called geniuses who were so smart that they figured 
out how to ruin a company in a way that almost ruined an 
economy.
    As I was listening to the testimony, for example, I heard 
you talk about the requirement that they had to make a signed 
statement that they did not owe any tax liability, and I 
thought about Sarbanes-Oxley, which requires chief financial 
officers to sign a statement attesting that when they sign a 
financial statement, that signature is an attestation that all 
the contents are accurate, and people get prosecuted and go to 
jail if they knowingly sign a false Sarbanes-Oxley statement.
    I was a prosecutor for a little while at the Federal level, 
and I prosecuted people who got loans from the SBA and 
represented to the Federal Government that they did not owe any 
outstanding taxes, and it turned out they did, and they went to 
jail.
    There are prosecutors all over the country who are going to 
have to bring cases like that.
    I am wondering what those prosecutors will say to juries 
when they are sitting here wondering why are we being asked to 
find this person criminally liable when I am turning on my t.v. 
in the middle of the day and hearing about large companies 
getting taxpayer dollars making false representations and we 
cannot even name them, much less make them pay the money back, 
much less prosecute them.
    Finally, I am thinking about people in my state who have 
invested in an affordable college plan get a letter from the 
State Treasurer a few weeks ago that tells them the plan is 
about to run out of money, their hard earned investments may go 
for naught, may have to tell their kids to lay off a semester 
to go to college, and then they pick up the newspaper and hear 
this week about again these geniuses who worked for AIG who 
were so smart that they figured out how to wreck an economy and 
not just a company, but yet it is so important to retain them 
and keep them doing what they are doing, and we have to pay 
them millions and millions of dollars.
    I just wonder, we are eroding confidence in the way our 
legal system works. We are eroding confidence in the way 
taxpayer dollars are managed and spent and the cost of that, it 
is going to make it harder than ever for us to do the things 
that must be done to get this economy moving forward.
    This is a massive breach of accountability and public 
trust. It goes way across party lines. It is damaging and 
imperiling everything we think about in public trust and about 
Government.
    Now, I would like a brief response from you all.
    Mr. BAROFSKY. To be very clear, I have not invoked or set 
forth any type of privacy claims with respect to this 
information. I just received this list today indicated by 
number.
    I look forward to finding out who those financial 
institutions are.
    Mr. DAVIS OF ALABAMA. So, they will get their day on the 
billboard, hopefully.
    Mr. BAROFSKY. Absolutely. With regard to Sarbanes-Oxley, I 
was a Federal prosecutor for 8 years before I took this job. 
One of the things I have done is bring in Sarbanes-Oxley's 
certifications into the TARP. It is part of my standard 
recommendation for every condition that is imposed, that a 
senior executive officer has to certify under 1001 with 
criminal penalty that their company is in compliance with each 
of the TARP conditions.
    On my survey that I sent out to each of the financial 
institutions requiring them to report on how they used the 
funds, it included 1001 Sarbanes-Oxley type----
    Mr. DAVIS OF ALABAMA. Do you agree that some of these 
people need to be prosecuted for lying to the Federal 
Government about their tax liability?
    Mr. BAROFSKY. One of my core responsibilities is to 
investigate anyone who lies, makes a material lie to the TARP 
to get money, and that would include this. If it is a material 
lie, absolutely, they need to be prosecuted.
    Chairman LEWIS. Thank you very much. Now, I recognize Mr. 
Larson for his questions.
    Mr. LARSON. Thank you very much, Mr. Chairman. I thank our 
witnesses as well. especially for your testimony today but also 
your ongoing work.
    I am interested in that in the testimony you were talking 
about that you go back to September in terms of taking a look 
at how this whole thing came to be with respect to TARP.
    Are either of you familiar with the Becora Commission?
    Mr. DODARO. No.
    Mr. BAROFSKY. No, sir.
    Mr. LARSON. Becora in 1929 was called upon by the Banking 
Committee to come forward and take a look at how this whole 
thing came to be. It seems to me we have had three major 
economic bubbles and then bursts. I realize that is not your 
specific oversight responsibility.
    I am interested in both of you who are getting to take a 
look at this about the need for us to do a systemic long term 
look, not unlike Becora did, who probably was a then modern day 
inspector general.
    With respect to inspector generals, you have independent 
oversight; correct? You are not the employee of the Treasury 
Department, you have independent responsibility?
    Mr. BAROFSKY. I am within the Treasury Department but I 
have complete independence.
    Mr. LARSON. Do you think that inspector generals should 
have independent responsibility? Should they be appointed by 
the President, approved by the Senate, and have complete 
independent oversight?
    Mr. BAROFSKY. It is the only thing I know, since I am new 
to the inspector general community, and I certainly fell in all 
of those categories.
    Mr. LARSON. Should the CFTC and the SEC have independent 
oversight?
    Mr. BAROFSKY. It certainly seems to work on the TARP.
    Mr. LARSON. I would conclude from that you would say they 
should. It surprises me to know that they do not.
    It surprises me to know that where there is independent 
inspector generals, there are 435 investigations and audits, 
and where there are not independent, meaning they are not 
nominated by the President and ratified by the Senate, there 
are 11 independent audits and investigations that go on.
    Does it seem to you, Mr. Dodaro, that we should have a long 
term look back, in fact, something like the Becora Commission, 
to take a look systematically at what is happening, not just 
since September, but what has happened in a lot of legislation 
over a long period of time has transpired, not just the last 8 
years or the last 16 years, but perhaps the last 20 or 28 
years.
    I think there is a real need for that. I would be 
interested in your response, either of you.
    Mr. DODARO. I not only agree with you, I initiated such an 
effort at the GAO. We issued a report in January where we 
traced the evolution of the financial regulatory structure over 
the last 150 years.
    We talked about the last major market developments in the 
last 20/25 years that have out paced the ability of the 
regulatory system to manage it, and we outlined a list of 
characteristics, nine characteristics, that we think Congress 
can use in crafting and evaluating legislative proposals to 
modernize the system.
    The system we have now is outdated. It is fragmented and 
ill suited to meet our needs going forward. We have designated 
it a high risk area.
    I do not admit we have done all the research 
comprehensively, and it could be added to, but I felt very 
strongly about that, and that is why I initiated it.
    Mr. LARSON. Of those nine characteristics, what would be 
the top three things that the Congress should be doing 
immediately that would assist in this area?
    Mr. DODARO. Number one is there is no systemic regulators, 
no one regulator charged with monitoring systemic risk across 
the system. That is a big problem. It needs to be fixed. There 
are a lot of gaps in institutions that are not covered or 
products that are not covered. They need to closed.
    The taxpayers need to be protected. The system has to be 
revamped in a way that not only gives additional protections to 
investors and the public, but also gives some of the regulators 
more independence as well.
    Those are the key things. I would be happy to provide a 
report to you.
    Mr. LARSON. I would be glad to receive that and sit down 
with your staff and work with you on that.
    You mentioned, I think, to a question with regard to Ron 
Kind, do you have the appropriate moneys. You said you were in 
the process of still building up and gearing up, but it seems 
to me that especially given these times, and as was pointed out 
by Mr. Davis, the special need to restore confidence in the 
American public, if you could tell us to the extent that you 
need more money or additional tools, et cetera, or elaborate on 
that, we would be interested to know as well.
    Mr. BAROFSKY. Absolutely. The Stabilization Act carved out 
$50 million for my office. We will come back to Congress when 
we see that we need additional funds. Right now, that is more 
than covering our expenses, but we certainly will let you know.
    Mr. LARSON. I thank Chairman Lewis. I would love to pursue 
talking with you about inspector generals and the kind of 
authority and independent nature of the authority they should 
have given your vast experience.
    Mr. DODARO. We have also studied that issue across the 
Federal Government. I would be happy to provide some of our 
reports and talk to you about that as well.
    Mr. LARSON. Thank you very much.
    Chairman LEWIS. Thank you. Mr. Meek is recognized for his 
questions.
    Mr. MEEK. Thank you so very much, Mr. Chairman. I am glad 
the Inspector General and the Comptroller are here.
    Inspector General, I know that it was several weeks after 
we passed TARP when you were appointed; am I correct?
    Mr. BAROFSKY. A couple of months, actually.
    Mr. MEEK. I remember because it was right before a Senate 
hearing asking about TARP that you were appointed almost a day 
before the hearing.
    I want to make sure that the members are fully aware of 
that and the American people are aware of that because Mr. 
Chairman and Ranking Member, we were in a very precarious 
situation when it came down to passing this TARP legislation.
    It is almost like putting the dollars out there and not 
having the overseer or the police officer out there to enforce 
our original intent to be able to bring the price of money 
down.
    I just want to point the Committee to what happened on 
January 22, 2008. The Federal Reserve cut rates by 3.5 percent, 
the largest cut in 25 years. On March 7, the Federal Reserve 
makes $200 billion in funds available to banks and other 
institutions.
    This is without Congressional intervention.
    Then we turn around and find that Freddie and Fannie have 
problems or go into problems and enter into an agreement with 
the Federal Government on September 7.
    I skipped over a lot, Mr. Chairman. We kept moving down, 
kept moving down. As I look at this chart here, and this is a 
CBO report showing the price of money and how it was spiking, 
and how small businesses were closing because they could not 
meet payroll.
    I am saying all that to say that I think in a time such as 
this, we do know that we could not afford for our financial 
institutions to fall, at that time, because it would have been 
a bigger problem than what we are facing now.
    Now we know we had to act under pressure. We do know that 
there are some issues that are unaddressed that should be 
addressed immediately.
    Just a couple of days ago, the President shared with the 
American people--this is on March 18, yesterday--time is flying 
here--he is saying he is asking for the same authority that 
FDIC has over banks to be able to consolidate some sort of 
oversight of TARP.
    This is something that he said yesterday. I think it is 
important, he identifies AIG as an insurance company but has a 
hedge fund over it. I think it is important that we look at how 
the administration can move.
    You mentioned earlier, I believe, and if I am misquoting 
you, Inspector General, let me know, you mentioned a bill, 
1341?
    Mr. BAROFSKY. I believe that is H.R. 1341.
    Mr. MEEK. That is to give you additional authority or staff 
or oversight to be able to follow up on many of these leads 
that you are getting over the hotline and that your staff is 
uncovering?
    Mr. BAROFSKY. There are a number of different provisions. 
The ones I was referring to would give me some greater hiring 
flexibility. There are also portions of the bill that clarify 
my overall authority as well.
    Mr. MEEK. Can this be achieved through an Executive Order 
or some sort of flexibility that the President and Treasury has 
now? I know you are kind of the overseer.
    Can that be accomplished through administrative actions 
since the administration has a great deal of flexibility that 
the Congress has given it to carry out this program?
    Mr. BAROFSKY. I think some of the hiring flexibility, they 
could. Some of it, they could not. I think the expansion of 
authority, although I think it is more of a clarification of 
our authority, is something that Congress would need to do 
since we are ultimately a creation of Congress.
    Mr. MEEK. For what the administration can do, I would love 
to talk to the appropriate staff person--we are going to have 
to run out here for votes very shortly--of being able to follow 
up.
    I want to write a letter to the Administration. I am hoping 
we can do it as a Committee, saying these are the things that 
you need right now, yesterday, so we can be able to follow up 
on it.
    I think the American people know that we had to respond, 
which we did, under President Bush, and now under President 
Barack Obama.
    I think it is important that we do not allow the same 
situation to continue because no one is paying attention day by 
day of the details.
    I think when we look at this whole AIG situation, the 
details--I do not think $30 billion would have gone out the 
door. I do not think Mr. Geithner would have been able to sit 
where you are sitting right now just a week ago if we had any 
idea of what was going on as it relates to this bonus 
situation.
    We know we are a country of laws and also contracts, and we 
realize that. When you have the American people around here, 
their hours are being reduced, they are losing their jobs, and 
businesses are closing, meanwhile, back in New York or where 
have you, you have individuals that are pulling down $1 million 
and we are saying we need them.
    We are all outraged. Where do we stop the bleeding? I think 
we have to stop it by doing things that we can do through the 
executive power and also this Committee pushing legislation as 
though it was imperative, which it is, to get it done ASAP.
    I commend you both. I am glad you all are doing what you 
are doing. You are shedding light on this. You are looking at 
the details, as we try to govern.
    Mr. Chairman, all of us are public servants. We all signed 
up to serve the people of the United States of America. I do 
not think anyone set out to be able to waste taxpayer dollars, 
but we must make sure that the Comptroller and the Inspector 
General have time to catch up on what we did in a very fast way 
to make sure that we shore up the financial institutions so 
that small businesses do not have to close and we will not see 
the job loss that we would have seen if we did not respond to 
the crisis.
    Thank you, Mr. Chairman. I look forward to working with the 
Subcommittee.
    Chairman LEWIS. Mr. Pomeroy is recognized for questions.
    Mr. POMEROY. Mr. Chairman, I know we have to vote so I will 
be very quick. Actually, you can submit answers in writing to 
me later.
    I am concerned that the closer you look at the AIG 
situation, the uglier it gets, especially the prospect that 
there has been very little effort made by people in the 
Financial Products Division to get the best deals possible as 
they unwind the many commitments of that division.
    Obviously, under the circumstances, I believe it would only 
be a responsible business proposition to demand a haircut in 
settling of the many obligations that were entered into by the 
company.
    Indeed, today's Washington Post reported that instead there 
has been subtle pressure from the government to settle 
liberally because the receiving firms probably need the money.
    This is not good stewardship of taxpayer dollars.
    Is this a matter you are looking at?
    Mr. DODARO. Basically, since the Federal Reserve is 
managing this area, this is one reason I cite that we have 
statutory prohibitions in looking at this issue.
    Mr. POMEROY. It is important information for us to 
consider, Mr. Chairman. I thank you and I yield back my time.
    Chairman LEWIS. Thank you. Let me take the opportunity on 
behalf of the Ranking Member and all of the members to thank 
you two for being here, thank you for your testimony.
    I am sure we will be calling on you again as we move down 
this road, and it is a very long road.
    Thank you so much. You have been very helpful.
    Mr. DODARO. Thank you very much, Mr. Chairman.
    Mr. BAROFSKY. Thank you, Mr. Chairman.
    Chairman LEWIS. The hearing is adjourned. Thank you.
    [Whereupon, at 11:46 a.m., the hearing was adjourned.]
    [Submission for the Record follows:]
      Statement of Elizabeth Warren, Congressional Oversight Panel
    Thank you, Chairman Lewis, Ranking Member Boustany and members of 
the Oversight Subcommittee, for allowing the Congressional Oversight 
Panel to submit written testimony for your hearing on the Troubled 
Asset Relief Program: Oversight of Federal Borrowing and the Use of 
Federal Monies.
    I regret that I am unable to testify in person, however, the 
Oversight Panel is holding a hearing at the same time. Certainly, we 
share a desire to bring accountability and transparency to the TARP 
program, and I am pleased to assist your efforts in any way that I can.
    The Oversight Panel was created as part of the TARP in last year's 
Emergency Economic Stabilization Act. The job of the Panel is to 
``review the current state of the financial markets and the financial 
regulatory system'' and report to Congress every 30 days. The Panel has 
submitted reports to Congress on December 10, January 9, February 6, 
and March 6, and it is preparing its fifth TARP oversight report for 
submission in early April. The Panel also submitted a special report on 
regulatory reform to Congress, as required by the legislation, at the 
end of January.
    The Oversight Panel is one of three organizations to which the TARP 
legislation gives oversight responsibilities. In my capacity as Panel 
chair, I have been pleased to work alongside my colleagues Gene Dodaro, 
the Acting Comptroller General of the United States, and Neil Barofsky, 
the Special Inspector General for the Troubled Assets Relief Program. 
Together we are charged with ensuring that the tax dollars of the 
American people are used prudently and effectively to ameliorate and 
ultimately reverse the deepening financial crisis in which our 
country--and much of the world--now finds itself.
    The Special Inspector General for the TARP has a broad 
responsibility, and matching authority, to audit and investigate any 
part of the Program. GAO is given an even more detailed set of 
instructions for ``ongoing oversight of the activities and performance 
of the TARP,'' as well as responsibility for an annual audit of the 
TARP's financial statements. Between the Oversight Panel's obligation 
to report to Congress every 30 days, the GAO's obligation to report 
every 60 days, and the obligation of the Special Inspector General to 
report every 90 days, Congress will receive an average of two TARP 
oversight reports every month.
    The three oversight organizations are working to complement, not 
duplicate, one another. We hold regular meetings with the office of the 
Special Inspector General and with GAO senior staff responsible for 
TARP oversight. We share information and discuss possible lines of 
inquiry. We have also discussed sharing, where possible, preliminary 
work product. If GAO or the SIGTARP identify questions for the 
Oversight Panel, they will pass them to us and give us access to data 
that we can synthesize to inform our work; similarly, when our analysis 
or information indicates a significant instance of non-compliance with 
the terms or spirit of the TARP legislation, we will inform GAO, the 
SIGTARP, or both. We all want to make the whole of our work greater 
than the sum of its parts.
    The Oversight Panel is the smallest of the three organizations. We 
see our contribution as fact-based analysis designed to raise issues 
about the operation and direction of the TARP and about the broader 
effort to restore stability to the financial system. In the Emergency 
Economic Stabilization Act, Congress specifically asked that the 
Oversight Panel conduct oversight on: the use of Treasury authority 
under the TARP; the Program's effect on the financial markets, 
financial institutions, and market transparency; the effectiveness of 
foreclosure mitigation efforts; and the TARP's effectiveness in 
minimizing long-term costs and maximizing long-term benefits for the 
nation's taxpayers. Our ultimate question is whether the TARP is 
operating to benefit the American family and the American economy. If 
we believe the answer is no, we will ask ``why not,'' and try to 
suggest alternatives.
    Several facets of our work are related to your question of the use 
of federal monies. The Panel's February 6 report asked whether the 
public was receiving a ``fair deal'' when Treasury used TARP funds to 
make capital infusions into financial institutions last year. We worked 
with recognized independent experts to develop multiple valuation 
models to determine whether the securities Treasury received had a fair 
market value equal to the dollar amount of the infusions. With minimal 
variation, the models all demonstrated that Treasury made its infusions 
at a substantial discount. Treasury received securities that were worth 
substantially less than the amounts it had paid in return, given the 
financial institutions involved. In all, the Panel's report found that 
Treasury had overpaid by an estimated $78 billion. For each $100 
Treasury invested in these financial institutions, it received on 
average stock and warrants worth only about $66. We believe this is an 
important issue.
    Our report does not draw a conclusion about whether such discounts 
may--or may not--have been appropriate as a matter of policy. The Panel 
continues to examine the matter, and Congress may decide to keep it in 
mind as well. Thus far, Treasury has not given the public an 
explanation, so that the appropriateness of the overpayment remains, at 
best, unresolved.
    The most important lesson we draw from our analysis is that without 
a clearer explanation from Treasury about its overall plan for each 
capital infusion, and without more transparency and accountability for 
how that plan was carried out, it is not possible to exercise 
meaningful oversight over Treasury's actions. Congress has given 
Treasury substantial discretion, as befits this fast-moving crisis. But 
that discretion carries with it an equivalent obligation to explain, in 
real time, why the discretion is exercised as it is. Congress and the 
American people need to understand Treasury's conception of the 
problems in the financial system and its comprehensive strategy to 
address those problems. Our collective financial security is on the 
line, and we all have a stake in the outcome.
    The Oversight Panel has also focused on mortgage foreclosure 
mitigation, with particular regard to impediments to mitigation 
efforts. The March report offers a checklist of items to evaluate the 
likely effectiveness of any proposal to halt the cascade of mortgage 
foreclosures.

          Will the plan result in modifications that create 
        affordable monthly payments?
          Does the plan deal with negative equity?
          Does the plan address junior mortgages?
          Does the plan overcome obstacles in existing pooling 
        and servicing agreements that may prevent modifications?
          Does the plan counteract mortgage servicer incentives 
        not to engage in modifications?
          Does the plan provide adequate outreach to 
        homeowners?
          Can the plan be scaled up quickly to deal with 
        millions of mortgages?
          Will the plan have widespread participation by 
        lenders and servicers?

    President Obama's announcement of the Administration's Homeowner 
Affordability and Stability Plan last month addressed many of these 
issues. The Plan focuses on payment affordability through an expanded 
refinancing program involving Fannie Mae and Freddie Mac and a 
modification program targeting a wide range of borrowers at risk. The 
Plan also includes financial incentives to encourage both lenders and 
borrowers to strive for sustainable outcomes. It also encourages 
servicers to modify mortgages for at risk homeowners before they are 
delinquent. There are additional incentives available to extinguish 
junior mortgages. The Administration estimates that the Plan's expanded 
refinancing opportunities could assist four to five million responsible 
homeowners, some of whom otherwise would likely have ended up in 
foreclosure.
    While these projections are encouraging, the Panel noted areas of 
concern that are not addressed in the plan. In particular, the Plan 
does not include a safe harbor for servicers operating under pooling 
and servicing agreements to address the potential litigation risk that 
may be an impediment to voluntary modifications. It is also important 
that the Plan more fully address the contributory role of second 
mortgages in the foreclosure process, both as it affects affordability 
and as it increases the amount of negative equity. And while the 
modification aspects of the Plan will be mandatory for banks receiving 
TARP funds going forward, it is unclear how the federal regulators will 
enforce these new standards industry-wide to reach the needed level of 
participation.
    The Plan also supports permitting bankruptcy judges to restructure 
underwater mortgages in certain situations. Such statutory changes 
would expand the impact of the Plan. Without the bankruptcy piece, 
however, the Plan does not deal with mortgages that substantially 
exceed the value of the home. Such a failure could sharply limit the 
relief it provides in parts of the country that have experienced the 
greatest price declines.
    It is also critical for the federal government to collect and 
analyze loan performance and loss mitigation data. Without adequate 
data, measuring the success or failure of mitigation efforts is, at 
best, a hit-or-miss proposition. Data are the clearest way to 
demonstrate whether TARP funds used for foreclosure mitigation efforts 
are achieving their intended purpose.
    The TARP legislation is now more than five months old, and Treasury 
has spent or committed more than $350 billion under its terms. Both the 
Oversight Panel and GAO have called on Treasury to articulate a clear 
strategy for its use of TARP funds; the absence of such a vision 
hampers effective oversight. In fact, the absence of a clearly 
articulated strategy was one of the very first points raised by the 
Oversight Panel. In our first report the Panel outlined a series of ten 
basic questions, starting with the question, ``What is Treasury's 
strategy?'' Unfortunately, Congress and the American public still do 
not have a clear answer to that question. The ongoing uncertainty has 
hindered recovery efforts.
    I have sent two letters to Treasury Secretary Geithner asking for 
clarification on this point, among others. I am disappointed to report 
that the Oversight Panel has not received a substantive response. 
Although the initiatives announced over recent weeks describe a 
commitment to transparency and accountability, the general frameworks 
do not provide an adequate foundation to oversee Treasury's activities 
or to measure the success of the TARP or the Stability Plan. As part of 
its April report, the Oversight Panel will further analyze the evolving 
strategy of Treasury, including the lessons that can be learned from 
previous financial crises, both foreign and domestic.
    What have we learned thus far? Even in a crisis such as we are 
experiencing, transparency, accountability and a strategy with clearly 
delineated goals are necessary to maintain public confidence and the 
confidence of the capital markets. Sophisticated metrics to measure the 
success and failure of program initiatives are also essential. Assuring 
that the TARP reflects these elements underlies all of our oversight 
efforts.
    Thank you again for the opportunity to explain the work of the 
Congressional Oversight Panel.

                                  
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