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

                            H.R. 3068, TARP FOR MAIN
                               STREET ACT OF 2009

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

                                    HEARING

                                   BEFORE THE

                        COMMITTEE ON FINANCIAL SERVICES

                         U.S. HOUSE OF REPRESENTATIVES

                         ONE HUNDRED ELEVENTH CONGRESS

                                 FIRST SESSION

                                   __________

                                  JULY 9, 2009

                                   __________

           Printed for the use of the Committee on Financial Services

                               Serial No. 111-54

                     HOUSE COMMITTEE ON FINANCIAL SERVICES

                      U.S. GOVERNMENT PRINTING OFFICE
    53-235                    WASHINGTON : 2009
    -----------------------------------------------------------------------
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                     BARNEY FRANK, Massachusetts, Chairman

    PAUL E. KANJORSKI, Pennsylvania      SPENCER BACHUS, Alabama
    MAXINE WATERS, California            MICHAEL N. CASTLE, Delaware
    CAROLYN B. MALONEY, New York         PETER T. KING, New York
    LUIS V. GUTIERREZ, Illinois          EDWARD R. ROYCE, California
    NYDIA M. VELAZQUEZ, New York         FRANK D. LUCAS, Oklahoma
    MELVIN L. WATT, North Carolina       RON PAUL, Texas
    GARY L. ACKERMAN, New York           DONALD A. MANZULLO, Illinois
    BRAD SHERMAN, California             WALTER B. JONES, Jr., North
    GREGORY W. MEEKS, New York               Carolina
    DENNIS MOORE, Kansas                 JUDY BIGGERT, Illinois
    MICHAEL E. CAPUANO, Massachusetts    GARY G. MILLER, California
    RUBEN HINOJOSA, Texas                SHELLEY MOORE CAPITO, West
    WM. LACY CLAY, Missouri                  Virginia
    CAROLYN McCARTHY, New York           JEB HENSARLING, Texas
    JOE BACA, California                 SCOTT GARRETT, New Jersey
    STEPHEN F. LYNCH, Massachusetts      J. GRESHAM BARRETT, South Carolina
    BRAD MILLER, North Carolina          JIM GERLACH, Pennsylvania
    DAVID SCOTT, Georgia                 RANDY NEUGEBAUER, Texas
    AL GREEN, Texas                      TOM PRICE, Georgia
    EMANUEL CLEAVER, Missouri            PATRICK T. McHENRY, North Carolina
    MELISSA L. BEAN, Illinois            JOHN CAMPBELL, California
    GWEN MOORE, Wisconsin                ADAM PUTNAM, Florida
    PAUL W. HODES, New Hampshire         MICHELE BACHMANN, Minnesota
    KEITH ELLISON, Minnesota             KENNY MARCHANT, Texas
    RON KLEIN, Florida                   THADDEUS G. McCOTTER, Michigan
    CHARLES A. WILSON, Ohio              KEVIN McCARTHY, California
    ED PERLMUTTER, Colorado              BILL POSEY, Florida
    JOE DONNELLY, Indiana                LYNN JENKINS, Kansas
    BILL FOSTER, Illinois                CHRISTOPHER LEE, New York
    ANDRE CARSON, Indiana                ERIK PAULSEN, Minnesota
    JACKIE SPEIER, California            LEONARD LANCE, New Jersey
    TRAVIS CHILDERS, Mississippi
    WALT MINNICK, Idaho
    JOHN ADLER, New Jersey
    MARY JO KILROY, Ohio
    STEVE DRIEHAUS, Ohio
    SUZANNE KOSMAS, Florida
    ALAN GRAYSON, Florida
    JIM HIMES, Connecticut
    GARY PETERS, Michigan
    DAN MAFFEI, New York

            Jeanne M. Roslanowick, Staff Director and Chief Counsel

                                C O N T E N T S

                                  ----------
                                                                       Page
    Hearing held on:
        July 9, 2009.................................................     1
    Appendix:
        July 9, 2009.................................................    31

                                   WITNESSES
                             Thursday, July 9, 2009

    Apeseche, Frank, Chief Executive Officer, Berkshire Property
      Advisors and The Berkshire Group, on behalf of The National
      Multi Housing Council and the National Apartment Association...    18
    Apgar, Hon. William C., Senior Advisor to the Secretary for
      Mortgage Finance, U.S. Department of Housing and Urban
      Development....................................................     9
    Calabria, Mark A., Ph.D., Director, Financial Regulation Studies,
      Cato Institute.................................................    13
    Crowley, Sheila, MSW, Ph.D., President, National Low Income
      Housing Coalition..............................................    15
    Engel, Gary T., Director, Financial Management and Assurance,
      U.S. Government Accountability Office..........................    12
    Hudson, Brian A., Sr., Executive Director & CEO, Pennsylvania
      Housing Finance Agency.........................................    19
    Silvers, Damon A., Associate General Counsel, AFL-CIO............    21
    Warren, Chris, Chief of Regional Development, City of Cleveland,
      Office of the Mayor............................................    23

                                    APPENDIX

    Prepared statements:
        Bachmann, Hon. Michele.......................................    32
        Apeseche, Frank..............................................    33
        Apgar, Hon. William C........................................    43
        Calabria, Mark A.............................................    48
        Crowley, Sheila..............................................    51
        Engel, Gary T................................................    61
        Hudson, Brian A., Sr.........................................    74
        Silvers, Damon A.............................................    79
        Warren, Chris................................................    83

                  Additional Material Submitted for the Record

    Crowley, Sheila:
        ``What We Mean By Housing: An Open Letter to Congress and the
          Administration,'' dated April 2009.........................    92
    Engel, Gary:
        Written responses to questions submitted by Chairman Frank
          and Representative Neugebauer..............................   123
    Written statement of The Partnership to Preserve Affordable
      Housing........................................................   126

                            H.R. 3068, TARP FOR MAIN
                               STREET ACT OF 2009

                                  ----------

                             Thursday, July 9, 2009

                 U.S. House of Representatives,
                       Committee on Financial Services,
                                                       Washington, D.C.
        The committee met, pursuant to notice, at 10:02 a.m., in
    room 2128, Rayburn House Office Building, Hon. Barney Frank
    [chairman of the committee] presiding.
        Members present: Representatives Frank, Kanjorski, Waters,
    Maloney, Gutierrez, Velazquez, Watt, Ackerman, Sherman, Meeks,
    Moore of Kansas, Capuano, Hinojosa, Clay, McCarthy of New York,
    Baca, Lynch, Miller of North Carolina, Scott, Green, Cleaver,
    Bean, Moore of Wisconsin, Hodes, Ellison, Klein, Wilson,
    Perlmutter, Donnelly, Foster, Carson, Speier, Childers,
    Minnick, Adler, Kilroy, Driehaus, Kosmas, Grayson, Himes,
    Peters, Maffei; Bachus, Castle, Royce, Biggert, Hensarling,
    Garrett, Barrett, Neugebauer, Bachmann, Marchant, McCarthy of
    California, Posey, Jenkins, Paulsen, and Lance.
        The Chairman. We are about to start the hearing.
        People over on the left, there is a three-way conversation
    going on. Please take it outside. If you are not here for the
    hearing, please leave. Let's have people be seated. There are
    plenty of seats.
        I am hurrying because we have, unfortunately, a lot of
    votes coming up, so I want to get this started. We will have
    the members' opening statements. We may get through the
    Administration. And I apologize, but we may have to do our
    opening statements, take off for about an hour, and come back.
    I apologize, but that is the nature of our business.
        So I will begin with my opening statement.
        This is a hearing on H.R. 3068. We are receiving in
    repayments from the TARP--there were actually three revenue
    streams.
        Let's have people leave. If you are leaving, leave. Close
    the doors.
        The bulk of it, of course, is principal repayment. And, I
    have to say, for those who have counted the whole $700 billion
    advanced under the TARP, or authorized under the TARP, as lost,
    the facts obviously are clearly to the contrary. Of $200
    billion advanced to banks since this program began, $68 billion
    has already been repaid in less than a year in principal.
        There are warrants that are still unredeemed that will be a
    revenue source. And there is a source of interest and dividends
    and some warrants which by now amount to about $6.5 billion.
    This is a bill that would expend that $6.5 billion to deal with
    the ongoing foreclosure and mortgage problems we still have and
    to fund an item that has been frequently supported by the House
    in the past couple of years, the National Affordable Housing
    Trust Fund.
        The National Affordable Housing Trust Fund is very
    important because I believe there was a preference for
    homeownership over rental housing, and for lower-income people,
    that was a contributing factor to the crisis we are in. We did
    too much in pushing people into homeownership when they were in
    lower-income brackets and we did not do nearly enough in terms
    of rental housing.
        Beyond that, the great bulk of the money goes to dealing
    with the ongoing foreclosure crisis. We have a program that was
    supported by the Congress in two separate bills, signed last
    year by President Bush and this year by President Obama as part
    of overall bills, which provide money--pardon me, but this
    microphone does not appear to be on. And I apologize. I will
    try to keep that in mind.
        The program is one where money is provided to communities
    to buy up property that is foreclosed. Property that is
    foreclosed, residential property, goes from being a tax payer
    to a tax eater. It is a serious problem for municipalities,
    and, as we know, foreclosures are not randomly geographically
    distributed. They become serious problems for particular
    neighborhoods.
        This is a very successful program, broadly supported by
    local officials, to give them funds with which they can buy up
    the foreclosed property, take a blight off their rolls, not
    have to send out their police and their fire, already overtaxed
    by the need for layoffs, unfortunately, by budget crises, and
    put them to more productive use.
        It also begins a new program. We clearly face a new wave of
    foreclosures, not because there were problems with the initial
    mortgage, but because people who took out mortgages,
    conventional mortgages overwhelmingly, have lost their jobs.
        In 1994, this House passed a bill that was authored by our
    former chairman, Mr. Gonzalez, who peers at us from over my
    right shoulder, to provide loans, not grants, but loans to
    mortgage holders who would face the loss of homes because they
    have lost their jobs. That never passed the Senate. And there
    is, of course, a lot of that going around.
        But it now seems to me an appropriate thing to do because a
    new wave of foreclosures will be tragic not just for the
    individuals who will lose their homes because they lost their
    jobs through no fault of their own at a time of great
    unemployment, but it will add to the downward pressure on
    housing and housing assets that contribute to this crisis.
        And it is not the role of this committee or this Congress
    or anybody else to try to artificially prop up housing prices.
    But to the extent that we can prevent another artificial drop
    that comes because people who had good mortgages and were in
    good standing now have lost their jobs in unprecedented numbers
    for recent times, we should step in.
        So that is what this bill does. It is an effort to prevent
    bad situations from getting worse in ways that will add to the
    economic crisis that we now face.
        And I recognize the gentleman from Alabama for 4 minutes.
        Mr. Bachus. Thank you, Mr. Chairman.
        Mr. Chairman, I oppose this legislation for several
    reasons.
        I will start with the Constitution. Article I, section 9,
    of the Constitution requires that all drawdowns of the general
    fund of the Treasury must go through the appropriations
    process. However, this bill circumvents the appropriations
    process by sending funds directly from the general fund of the
    Treasury to the Housing Trust Fund. And that is $6.2 billion.
        According to the minority staff on the Senate Committee on
    Budget, the Federal Government has pledged more than $9.7
    trillion to address our economic credit crisis, including
    billions for foreclosure mitigation initiatives. For instance,
    the Treasury has committed $75 billion for loan modification
    and foreclosure prevention. Instead of using the TARP dividends
    to offset these obligations, Chairman Frank's bill spends them.
        It also increases the Federal debt. Any new Federal
    commitment would come on top of our existing $10.9 trillion
    national debt and an estimated 2009 budget deficit of $1.8
    trillion, despite the fact that dividend provisions in TARP
    were intended to make taxpayers whole from any bailout
    committed. This bill obviously flies in the face of that
    commitment.
        Today, soaring deficits are the biggest threat to financial
    stability, economic recovery, and job growth. Vice President
    Biden acknowledged that the Administration had misread the
    economy. But the solution of the Administration is more deficit
    spending, including potentially another multi-billion-dollar
    government stimulus, a new $1.5 trillion government-run health
    care plan, and now the chairman's new legislation to divert
    $6.2 billion from TARP to finance an Affordable Housing Trust
    Fund.
        Most disturbingly, this legislation transfers $1.5 billion
    to the Neighborhood Stabilization Program, which could be
    accessed by ACORN, a community group notorious for its efforts
    to commit voter fraud. Ironically, this approach also
    undermines the flexibility that Treasury Secretary Geithner
    indicated is necessary for the Treasury to carry out TARP's
    authorized legislation.
        In a June 30th letter, this last week, Secretary Geithner
    said, ``We believe it is critical that the Treasury maintain
    full flexibility to strengthen our financial system, promote
    the flow of credit, and permit a rapid response to unforeseen
    economic threats.'' Yet, here we consider legislation that
    undermines that flexibility.
        Mr. Chairman, one of the best things we can do to stabilize
    the credit markets and promote long-term economic growth is to
    restore fiscal discipline and stop the reckless government
    spending. Just this week, Morgan Stanley's chief economist
    characterized our trillion-dollar-a-year deficits as
    ``America's fiscal train wreck'' and offered this dire warning:
    ``Soaring debt will force up real interest rates, reducing
    credit and productivity and boosting debt service. Not only
    will these factors steadily lower our standard of living, but
    they imperil our economic and financial stability.''
        This bill adds $6.2 billion to that deficit. As
    institutions begin to pay back their TARP assistance, we need
    to end the bailouts and return that money to the taxpayers,
    thereby reducing the deficit.
        Republican members of the committee, including the
    gentleman from Texas, Mr. Hensarling, and the gentleman from
    California, Mr. McCarthy, have introduced legislation to do
    that. I urge the members of this committee to support that
    legislation, not this legislation--$6.2 billion added to the
    deficit.
        I am very interested in hearing the witnesses' perspectives
    on this legislation. Thank you, Mr. Chairman. And I yield back
    the balance of my time.
        The Chairman. The gentlewoman from California is recognized
    for 3 minutes.
        Ms. Waters. Thank you very much, Chairman Frank, for
    arranging this hearing on the TARP for Main Street Act of 2009,
    which we, along with Representatives Cardoza and Velazquez,
    introduced at the end of June. I believe this legislation
    represents an important step towards ensuring our economic
    stability.
        Let me just say, Mr. Frank, that I have been very, very
    concerned that the foreclosure problem is larger than we
    thought it was, and that RealtyTrac data indicates that
    foreclosure filings were reported on more than 320,000
    properties in May. They also report that, at the end of May,
    there were over 460,000 properties that have completed the
    foreclosure process and are now real estate owned. So, no
    matter how you measure it, the foreclosure problem far exceeds
    current resources.
        I am very pleased about your leadership on this legislation
    for the three areas that will now be supported. Additional
    money for Neighborhood Stabilization--as you know, this is a
    program that I worked very hard to establish and get funding
    for, to assist communities in mitigating the negative impacts
    of foreclosed and abandoned housing.
        And I am very pleased that cities around the country are
    taking advantage of this program. They are so pleased that they
    are able to clean up their neighborhoods and to rehabilitate
    these homes and put them back on the market. It is a real way
    by which to help not only our cities but families get back into
    housing.
        And of course the Housing Trust Fund that you, Mr.
    Chairman, have been in the leadership of, because we do need to
    expand housing opportunities. People are homeless,
    increasingly, because of this economic crisis. And we have
    people standing in line for assistance and for opportunities.
    The Housing Trust Fund will help to expand our ability to
    create new housing.
        And, of course, the most innovative portion of this, the
    Emergency Homeowner Relief Fund. And this is very important
    because, despite everything that we have done, there are people
    who are losing their jobs, and they need some help. And, with
    this fund, we will be able to help them stay in their homes and
    pay those mortgages with a creative arrangement that will allow
    them to pay back once they get re-employed.
        So I thank you, Mr. Chairman, and I yield back the balance
    of my time.
        The Chairman. The gentleman from California, Mr. Royce, is
    not here, so we will go to the gentlewoman from Illinois, Mrs.
    Biggert.
        Mrs. Biggert. Thank you, Mr. Chairman.
        The Chairman. A minute-and-a-half, because we have one
    more--
        Mrs. Biggert. You know, I think we should rename the bill
    under discussion today, call it, ``Another Bailout Paid for by
    Main Street.''
        Who is Main Street? If you could drive down any Main Street
    in my district, you will see the storefronts of family-owned
    small businesses such as a hardware store, a bakery, and a shoe
    repair shop, and the block behind Main Street are family homes.
        These Americans pay taxes, and over 90 percent of them are
    paying their mortgages and paying them on time. They can't
    afford another big-government, big-spending bill--so that the
    Federal Government can build more housing? Our families and
    home builders can't sell the housing on the market right now.
    And bailout programs are not making money, and if they do it
    should help put our fiscal house in order.
        Our budget deficit could reach $1.8 trillion this year. Our
    current national debt is $10.9 trillion. And who is loaning us
    this money? China holds 25 percent of U.S. Treasury securities,
    and Japan holds over 20 percent.
        Spend, spend, spend. Who pays for it? During these tough
    economic times, when credit is less available, the family
    budget is tight, and small businesses are making tough
    decisions to keep their employees in a job, they simply can't
    afford more Washington spending. We can't afford to lose more
    jobs, we can't afford to tax to death the American family, and
    we can't afford another bailout bill or a free-for-all housing
    spending bill.
        I yield back.
        The Chairman. The gentleman from Texas. The time will be
    the same, but the membership is different, in terms of numbers.
    So the gentleman from Texas is recognized for 1 minute.
        Mr. Hensarling. Thank you, Mr. Chairman.
        ``TARP for Main Street'' is an ironic title for this
    hearing, since 95 percent of Main Street either rents their
    homes, own them outright, or are current on their mortgages,
    which means that 95 percent of Main Street taxpayers are being
    forced to bail out the other 5 percent, many of whom acted
    irresponsibly.
        TARP was established as emergency legislation to stabilize
    our financial markets. Regardless of what good may have been
    achieved last October, the program has since morphed into a
    $700 billion revolving bailout slush fund.
        And what do we have to show for the current TARP in this
    Administration's failed economic policies? 9.5 percent
    unemployment, the greatest in a quarter of a century; 2.6
    million jobs lost since February alone; and trillions of debt
    for our children to repay, debt the likes of which we haven't
    seen since World War II.
        Section 103 of the TARP legislation lists as the first
    consideration for the Secretary of Treasury, ``protecting the
    interests of taxpayers by maximizing overall returns and
    minimizing the impact on the national debt.'' The taxpayer
    wants his money back. Washington led him to believe that he
    would get his money back. What a cruel hoax it is to take it
    from him now.
        It is not time to recycle TARP; it is time to terminate
    TARP. It is time to quit borrowing money from the Chinese and
    sending the bill to our children and grandchildren.
        I yield back the balance of my time.
        The Chairman. The gentleman from Illinois is recognized for
    3 minutes.
        Mr. Gutierrez. I would like to thank Chairman Frank for
    calling this hearing to discuss the TARP for Main Street Act of
    2009. I think it is vital for both our economy and our
    communities that we find ways to reinvest, repay TARP funds
    into our local neighborhoods.
        I supported, along with the chairman, the TARP money,
    primarily to unfreeze our credit markets and get capital
    flowing on Main Street. But, under no circumstance, do I want
    the money held up in the vaults of Wall Street firms. I am
    pleased this committee is shifting its focus away. We have had
    hearings in my subcommittee where we know that banks aren't
    lending people money that we hoped would become unfrozen
    because of the TARP money. But we also have heard very
    innovative ways that TARP money is being used to stimulate our
    economy.
        To that end, using TARP dividends to finance the
    redevelopment of abandoned and foreclosed homes, as the
    chairman's bill proposes, is an excellent step. However, we
    must also consider expanding the scope of this idea to assist
    our local businesses and nonprofits.
        Mr. Chairman, while I support your legislation, I would
    like to see the committee take a lead in pushing TARP funds
    that are returned to Wall Street banks to be set aside for the
    funding of CDFI loans and SBA loans, to make them directly to
    people out of private lenders' hands. These simple steps would
    allow TARP funds to directly reach those businesses which help
    create jobs and help keep people in their homes.
        Another way to increase it is to do this--I mean, in my
    home State of Illinois, 49 percent of the workforce is employed
    by small businesses. Without a vibrant small-business
    community, this recession will continue to linger. Investing
    TARP funds resources in small businesses and nonprofits is one
    of the fastest routes, I believe, to economic recovery.
        I do not regret my vote. Sometimes it would have been
    probably a little easier to have said ``no'' to the TARP money
    and then watched the consequences to our economy and to our
    financial structures had we not responded. But that would have
    been irresponsible.
        So, Chairman Frank, I want to thank you again for showing
    leadership and ingenuity in these ideas, and I look forward to
    working with you on them.
        The Chairman. I thank the gentleman. And I think many of us
    look back to the days when we thought the TARP was what you
    used to cover the infield when it rained, but we are beyond
    that.
        The gentleman from New Jersey, Mr. Garrett, for 1 minute.
        Mr. Garrett. Thank you, Mr. Chairman.
        You know, there seems to be a competition here by the
    Democrats, and especially in this committee, as to who can come
    up with the most outlandish way to spend taxpayers' dollars and
    to do it, as the ranking member said, maybe outside the
    Constitution and outside the regular appropriation process.
        You know, the current proposal is to take the TARP program
    and to turn it into something of a Madoff-like Ponzi scheme. It
    goes something like this. They assume that because a portion of
    the $700 billion TARP programs turns out a return, they call it
    a profit. This, despite the fact, you know, the CBO says the
    majority of the money, the $700 billion, is still outstanding,
    and the CBO says that the majority will most likely result in a
    loss. They still consider it a profit and say they want to
    spend it on their pet projects.
        Now, the lady from California said that she had misread the
    housing situation. The Vice President said the Administration
    misread the unemployment and the economic situation. I would
    suggest the other side of the aisle has misread the American
    public, who is tired of all the bailouts, tired of all the big
    spending. And the simple solution that they are really looking
    for from this committee and from Congress is to return these
    dollars to the American taxpayers, to the Treasury, pay down
    the debt, and not one more big spending program.
        The Chairman. The gentleman from Texas, Mr. Marchant, is
    next for 1 minute.
        Mr. Marchant. Thank you, Mr. Chairman.
        Mr. Chairman, one of the main reasons why I was concerned
    about the TARP vote back in October was the fact that I did not
    see in the bill any provision for the TARP money to ever be
    paid back to the Treasury. In fact, it was my impression, when
    the vote was passed, that the money would go back into general
    Treasury, and my fear at that time was that it would just be
    spent for general programs.
        I think the disagreement that I have on this particular
    proposal is that it is, in my opinion, the first step towards
    spending the money outside of the appropriations process and
    spending the money on new programs. The people in my district,
    I think, expect this money to be paid back to the Treasury. And
    I think my fears have been realized, in that it looks like our
    plan is to spend the money.
        The Chairman. The gentleman from California, Mr. Royce, is
    again recognized.
        Mr. Royce. Thank you, Mr. Chairman.
        You know, let's start with a basic premise here. The TARP
    is not profitable. We had to go out and borrow that money, plus
    the interest. We have forgotten about the interest that we are
    paying on that borrowed money. There are no TARP profits. We
    have spent $643 billion; we have gotten back $70 billion. That
    is a $573 billion hole.
        There is no new money to spend. The dividends should be
    used to pay down the enormous national debt with interest that
    is accruing. And they should not be recycled, they should not
    be churned. Pay down the debt. It is the only fiscally
    responsible thing to do.
        A couple of other points here. This obviously would violate
    Article I, section 9, of the Constitution, requiring that all
    drawdowns of the general fund going through Treasury must go
    through the appropriations process. That would be circumvented
    here.
        And, lastly, the proposed $1.5 billion transfer of funds to
    Neighborhood Stabilization Programs would be accessible by
    ACORN. And ACORN, frankly, is notorious for its efforts to
    commit voter fraud.
        So you increase the Federal debt, you worsen the problem in
    terms of already having too much supply in terms of housing on
    the market, so you have a continued depreciation in home
    prices. Building new apartments, which this fund would do for
    affordable housing, would further decrease the value of
    existing homes, potentially leading to even more defaults and
    foreclosures.
        The Chairman. The gentleman from California, Mr. McCarthy,
    for 1 minute.
        Mr. McCarthy. Thank you, Mr. Chairman.
        Mr. Chairman, I oppose this legislation. I believe that any
    funds repaid to the government from the TARP program should go
    to pay down our immense debt, which is projected to double in 5
    years and triple in 10 years. In fact, this Administration will
    compile more debt than all the 43 previous Administrations
    combined. That is from the creation of this country, to the
    World Wars, to the Depression, to Hurricane Katrina, to Iraq,
    the building of the highway system, and so on.
        That is why I have introduced legislation to have repaid
    TARP funds go down to pay the debt, to help relieve our
    children and grandchildren of the burden of the crushing debt.
    The government borrowed the money to pay for the TARP program
    when it began, so we need to repay them first, rather than
    establishing a revolving line of credit for Washington
    bureaucrats and politicians.
        And I yield back.
        The Chairman. We have 1 minute remaining. I am going to
    yield to myself.
        First of all, there has been a total misreading of the
    Constitution. There was no Appropriations Committee when the
    Constitution was adopted. Somebody's history is fairly
    deficient. What it says is, no expenditure, except by
    appropriation, made by law. That meant a statute. This has
    already been litigated. Apparently, members here have never
    heard of the Highway Trust Fund, which spends a lot of money
    without going through the Appropriations Committee.
        So the notion that the founders of the Constitution, bright
    as they were, anticipated the existence of the Appropriations
    Committee, and therefore said everything had to go through the
    appropriations process, is historical nonsense. And, of course,
    members here have voted consistently for spending money outside
    the appropriations process--for example, the Highway Trust
    Fund.
        Second, as to ACORN, it is true that under the Bush
    Administration, ACORN consistently received over a million
    dollars a year to no objection from my colleagues. Apparently
    there was no partisanship there. It was okay for the Bush
    Administration to give ACORN a total of $8 billion during its
    presidency. I am not aware of how much they have gotten under
    the NSP. I am not aware they got any. I would think, given the
    mighty obsession from little acorns that grow, if they had
    gotten a nickel we would have heard about it. And if they had
    registered a voter on a vacant property, we probably would have
    heard about that.
        But this ACORN thing, let's be clear, this is not the Bush
    Administration, and the pattern of millions of dollars to
    ACORN, in my experience, has not yet been repeated. And, again,
    I would urge members to look at a little history when they look
    at the Constitution; know, when the Constitution was drafted,
    the founders who wrote the Constitution did not have Dave Obey
    in mind.
        With that--
        Mr. Bachus. Mr. Chairman?
        The Chairman. The gentleman's time has expired. I used an
    equal amount of time.
        Mr. Bachus. Oh, that was your opening.
        The Chairman. That was my last minute.
        We will begin now. We will start our witness statements. I
    hope we can get through them. I apologize, but we will have to
    go vote.
        Let's begin with Mr. Apgar.

    STATEMENT OF THE HONORABLE WILLIAM C. APGAR, SENIOR ADVISOR TO
    THE SECRETARY FOR MORTGAGE FINANCE, U.S. DEPARTMENT OF HOUSING
                         AND URBAN DEVELOPMENT

        Mr. Apgar. Chairman Frank, Ranking Member Bachus, and
    members of the committee, thank you for the opportunity to talk
    today on H.R. 3068, the TARP for Main Street program.
        My name is William Apgar, and I serve as a Senior Advisor
    for Mortgage Finance for HUD Secretary Shaun Donovan. In this
    capacity, I have worked closely on the development and
    implementation of the Obama Administration's Homeowner
    Affordability and Stability Plan, as well as other initiatives.
        Working together, Congress and the Administration have
    undertaken a number of initiatives designed to prevent
    foreclosures and mitigate the impact of foreclosures and
    abandoned properties on local neighborhoods and the broader
    economy. Yet the magnitude and evolving nature of the
    foreclosure crisis has necessitated the development and use of
    innovative tools.
        Congress has provided additional legislative authority on a
    number of occasions, most notably to improve the initial HOPE
    for Homeowners Program, provide FHA with additional tools to
    mitigate foreclosures, and increase the flexibility under the
    Neighborhood Stabilization Program. HUD is pleased that the
    Financial Services Committee is once again examining a range of
    options for responding to the housing crisis.
        We believe the goals of H.R. 3068 are commendable, as the
    proposed legislation attempts to help borrowers and communities
    in need of assistance. HUD stands ready to work with you and
    others in Congress to build upon these objectives, as we seek
    to refine the Administration's overall response to the current
    foreclosure crisis.
        I want to talk about each of the four main elements of the
    bill in turn.
        First, the Neighborhood Stabilization Program. We applaud
    Chairman Frank and other sponsors for recognizing the magnitude
    of the foreclosure problem and the need to continue to mitigate
    foreclosure.
        Last week, Secretary Donovan witnessed firsthand the
    devastation that concentrated foreclosures can wreak on
    formerly stable, middle-class communities when he toured hard-
    hit areas in Nevada, California, and Alabama. Secretary Donovan
    has challenged HUD to do all we can to work with Congress and
    the Administration to ensure that the nearly $6 billion
    appropriated to date for the NSP program is deployed quickly
    and used wisely and well.
        Emergency mortgage relief is the second important
    component. HUD would like to commend the committee for placing
    a spotlight on the negative impacts that rising unemployment
    can have on the ongoing foreclosure crisis. The centerpiece of
    the Obama Administration's Making Home Affordable Program
    offers significant relief to at-risk borrowers by reducing
    mortgage-related payments to 31 percent of monthly income.
        Unfortunately, many individuals who have lost their jobs or
    experienced a significant drop in income generally do not have
    the income sufficient to qualify for the program. Once again,
    HUD looks forward to working with the committee to better
    understand the approach on these issues taken in this bill and
    to forge a series of programmatic options that can help
    unemployed workers get the mortgage assistance they need.
        The third component is for troubled multi-family
    properties. Over the last year, while the spotlight has been on
    single-family home mortgage foreclosures, there is mounting
    evidence of a pending multi-family crisis, as well. As in the
    single-family market, investors and individuals, enabled by
    loosening underwriting standards, purchased multi-family
    properties at sales prices that were not supportable by
    existing income from the property. As the real estate market
    has cooled off, these owners are finding that they are
    underwater, with outstanding mortgages greater than the value
    of the properties that they own, and unable to pay both
    maintenance and debt services.
        Numerous analyst reports indicate that these loans are
    increasingly falling behind in their debt service payments.
    More troubling, however, is that once these loans reach
    maturity, borrowers will be unable to repay the mortgages and
    will not be able to qualify for refinancing.
        Equally problematic is that many of the loans are held on
    individual bank balance sheets, including many smaller regional
    and community banks, and, hence, the turmoil in this sector
    threatens to undermine the safety and soundness of many of the
    smaller community and regional banks.
        In short, we are now seeing the early signs of a looming
    multi-family foreclosure crisis, a crisis that could have
    significant negative impacts on the economy, as well as on
    families living in these multi-family properties and who will
    likely experience worsening housing conditions.
        Recognizing this impending crisis, HUD has already taken
    action. For example, Secretary Donovan has led the
    Administration review of potential means to expand access to
    bond financing to assist State and local housing finance
    agencies continuing to pursue the important financing role to
    expand both affordable homeownership and rental housing
    opportunities.
        HUD has also created an internal task force to develop
    better understanding of the emerging crisis, reached out to
    Treasury and the Federal Housing Finance Agency to explore new
    approaches to confront this situation, and is now completing a
    top-to-bottom review of HUD's own multi-family initiatives.
        Building on these efforts, HUD looks forward to working
    with the committee to explore various options for stabilizing
    the multi-family housing sector.
        Finally, the capitalization of the Housing Trust Fund.
    Foreclosure is adding to the already overwhelming need for
    affordable rental housing. Many individuals who lose their
    homes to foreclosure lack housing alternatives and often become
    at risk for homelessness. An estimated 12 million renters and
    homeowner households now pay more than 50 percent of their
    annual incomes for housing. Families with this high a rent
    burden not only tend to reside in marginal dwelling units, but
    also may have difficulty affording necessities such as food,
    clothing, transportation, and medical care.
        HUD's effort to increase the supply of affordable housing
    received a big boost last year with the authorization of the
    Housing Trust Fund in the Housing and Economic Recovery Act of
    2008. The Housing Trust Fund represents a bipartisan enactment
    of perhaps the most significant new Federal housing production
    program since the creation of the Home Investment Partnership
    Program in 1990.
        Originally authorized with a dedicated funding stream from
    assessments of Fannie Mae and Freddie Mac, the financing
    difficulties these entities have encountered have eliminated
    this revenue stream. In response, the Administration included a
    billion dollars to fund the initial capitalization of the trust
    fund in this year's Fiscal Year 2010 HUD budget request, now
    being considered by the Senate and House Appropriations
    Committees.
        Given the uncertainty over the level of funding and the
    severity of the affordable housing crisis, HUD welcomes further
    discussion with Congress to identify the best method to secure
    funding needed to make the trust fund a reality.
        Once again, and in conclusion, I would like to thank you
    for the opportunity to participate in today's hearing and
    commend the committee for proposing enhanced efforts to address
    the growing foreclosure crisis. I want to reiterate HUD's
    willingness to work with the committee to achieve the
    objectives highlighted in this bill as we seek to improve the
    Nation's overall response to the housing crisis and address the
    continued need to expand access to decent and affordable
    housing for all Americans.
        Thank you for your consideration.
        [The prepared statement of Mr. Apgar can be found on page
    43 of the appendix.]
        The Chairman. Thank you, Mr. Apgar.
        Mr. Engel, my apologies, but we are going to break now. I
    don't want your statement to be rushed. It is the nature of our
    business. We will be back probably in about an hour.
        I will apologize because I have an important meeting
    involving part of my district that I have to be at in the
    Senate. I will be back shortly after that. One of my colleagues
    will be presiding. We will get to Mr. Engel's testimony and
    into the questioning.
        The other witnesses, this is an important issue, we have
    all day, so we hope to see you. Get some lunch and do whatever
    else, and we will see you later.
        We are in recess.
        [recess]
        The Chairman. Let me get your attention with another
    apology.
        A very important subcommittee hearing is scheduled at 1:30.
    We have a very jammed calendar. I am, therefore, going to have
    to postpone the second panel until a further time. I apologize,
    but--well, let me think about this. We may--no, I think what we
    will do--I take it back. Let me consult with the minority.
        With concurrence, we won't do that. But when we reconvene,
    we will have the second panel testify and we will deal with it
    as one panel. We are going to have to break at about 1:30. So,
    as soon as Mr. Engel is through, we will get the other
    witnesses to testify, and then we will question them all as one
    panel.
        If Mr. Apgar and Mr. Engel have to leave, they can do that,
    but then we will be through by 1:30. So we will reconvene, and
    we will ask all the witnesses on the second panel to join the
    first set of witnesses, and they will all testify together.
        [recess]
        The Chairman. We have your statements for the record. We
    will ask questions.
        Mr. Engel, you have been very gracious, and let's begin
    with you.

    STATEMENT OF GARY T. ENGEL, DIRECTOR, FINANCIAL MANAGEMENT AND
            ASSURANCE, U.S. GOVERNMENT ACCOUNTABILITY OFFICE

        Mr. Engel. Thank you. I am pleased to be here today to
    discuss the status of participants' dividend payments and
    repurchases of preferred stock and warrants in connection with
    the Troubled Asset Relief Program, commonly referred to as
    TARP.
        According to Treasury's records, since the inception of
    TARP and through June 30, 2009, Treasury had received
    approximately $6.7 billion in dividend payments on preferred
    stock acquired through various programs such as the Capital
    Purchase Program and the Targeted Investment Program.
        Treasury's agreements under these programs entitled it to
    receive dividend payments on varying terms and at varying
    rates. For example, publicly held institutions participating in
    the Capital Purchase Program pay quarterly dividends at a rate
    of 5 percent per year for the first 5 years. After the first 5
    years, the preferred shares pay quarterly dividends at a rate
    of 9 percent per year.
        Importantly, the dividend payments to Treasury are
    contingent on each institution declaring dividends. Dividend
    payments received, other than for the Asset Guarantee Program,
    are deposited into the general fund of the U.S. Treasury. The
    dividend payments received for the Asset Guarantee Program,
    which totaled about $108 million, are deposited into the
    Troubled Asset Insurance Financing Fund to fulfill obligations
    of certain guarantees. Dividend payments to Treasury from
    participants other than for the Asset Guarantee Program are not
    to be used to reduce the outstanding balance under the almost
    $700 billion TARP limit.
        According to Treasury records, from March 21, 2009, through
    June 30, 2009, 17 Capital Purchase Program participants had not
    declared or paid dividends of approximately $6.6 million.
    Treasury officials told us that, of these 17 institutions, 13
    informed Treasury that State or Federal banking regulations or
    policies restricted them from declaring dividends, one
    indicated concerns about its profitability, and three did not
    provide a reason for not declaring dividends.
        Under the standard terms of the program, after 6
    nonpayments of dividends by a participating institution,
    Treasury and other holders of preferred stock equivalent to
    Treasury's can exercise their right to appoint two members to
    the board of directors for that institution.
        As permitted by the Act as amended, participants may at any
    time repurchase or buy back their preferred stock and warrants
    issued to Treasury under the Capital Purchase Program. This is
    subject to consultation with the participant's primary Federal
    banking regulator. According to Treasury records, as of June
    30, 2009, 32 institutions had repurchased their preferred stock
    from Treasury, for a total of about $70.1 billion, including 10
    of the largest bank holding companies that are participating in
    the program. Funds received from the repurchase of preferred
    stock are deposited into the general fund of the U.S. Treasury
    and reduce the outstanding balance under the TARP limit.
        After all the preferred stock is repurchased, the financial
    institution may repurchase all or part of its warrants held by
    Treasury. According to Treasury records, as of June 30th, 11 of
    the 32 financial institutions that had repurchased their
    preferred stock had also repurchased their warrants, and three
    others had repurchased their warrant preferred stock at an
    aggregate cost of about $20.3 million.
        As of June 30, 2009, none of the 10 largest bank holding
    companies that had repurchased their preferred stock had
    repurchased their warrants. Like the dividend payments, any
    amounts received from the repurchase of warrants are deposited
    in the general fund of the U.S. Treasury and are not to be used
    to reduce the outstanding balance under the TARP limit.
        Certain financial institutions that had repurchased their
    preferred stock had informed Treasury that they did not plan to
    repurchase their warrants. For these institutions, Treasury may
    attempt to sell the warrants in the financial markets.
    According to Treasury officials, Treasury had not yet, as of
    June 30, 2009, liquidated any Capital Purchase Program warrants
    in the financial markets.
        Treasury has received billions of dollars from TARP
    participants from dividend payments and repurchases of
    participants' preferred stock and warrants. Treasury has also
    continued to disburse funds. As of June 30, 2009, Treasury had
    disbursed almost $339 billion of TARP funds. In addition, as of
    that date, Treasury's projected use of TARP funds totaled about
    $643 billion, without taking into account any repayments.
        Mr. Chairman, this concludes my oral statement. I would be
    pleased to respond to any questions.
        [The prepared statement of Mr. Engel can be found on page
    61 of the appendix.]
        The Chairman. Thank you, Mr. Engel.
        Let me say to all the panelists that any material you have
    will be submitted in full.
        Mr. Calabria has to leave and go talk to the Judiciary
    Committee. And they are always in need of instruction, so we
    will go to you now so you can do that.

       STATEMENT OF MARK A. CALABRIA, PH.D., DIRECTOR, FINANCIAL
                   REGULATION STUDIES, CATO INSTITUTE

        Mr. Calabria. Thank you, Mr. Chairman. I appreciate that.
    And I will be testifying there on mortgage modifications, which
    I know is a topic that this committee is interested in as well.
    I want to thank you and thank all of the members of the
    committee for the invitation to appear today.
        The first part of my testimony is that, despite the
    repayment of TARP funds from a number of banks and the receipt
    of over $6.2 billion in dividends from TARP institutions, the
    TARP overall has not been profitable. CBO's most recent
    estimate is that the overall subsidy of the cost of the TARP
    will be $356 billion. This is $356 billion lost to the taxpayer
    that will not be recovered.
        In addition to the $356 billion in losses from the TARP, we
    are also likely to see between $200 billion and $300 billion
    absolute losses from the bailouts of Fannie Mae and Freddie
    Mac. We may also see losses in the tens of billions from the
    Federal Reserve's mortgage-backed securities purchase program.
    So we are ultimately likely to see taxpayer losses from the
    bailouts approach $700 billion.
        While any dividends received will only make a small dent in
    these losses, diverting these dividends for purposes other than
    offsetting TARP losses will leave a deeper hole for the
    taxpayer. If, however, Congress chooses to use TARP dividends
    or any other funds to support the housing market, I believe
    Congress should focus on stimulating the demand side of the
    housing market rather than the supply side.
        The fundamental problem facing our Nation's housing market
    is an oversupply of housing rather than a lack of housing. The
    Nation's oversupply of housing is documented in the Census
    Bureau's housing vacancy survey. The Census reports a national
    rental vacancy rate for the first quarter of 2009 at 10.1
    percent. This is only slightly below the record rate of 10.4
    percent and is almost 40 percent higher than the average rental
    vacancy rate for the last 50 years of 7.2 percent.
        The record vacancy rates are not an issue of specific
    geographic areas, but are found almost everywhere throughout
    the country. The highest vacancy rates and also the areas
    seeing the largest increases in rental vacancy rates are in our
    Nation's central cities. All the increases over the last year
    can be attributed largely to the increase in central-city
    vacancies. Vacancies in suburban and rural areas, while near
    historic highs, have moderated over the last year and remain
    below those of the central cities.
        I raise this fact because of the way it relates to our
    tendency of Federal housing production programs to concentrate
    new production and rehabilitation in central cities, and I
    think that is something that needs to be very much considered
    with any production program going forward.
        Even in parts of the country with traditionally tight
    rental markets, such as California, while they remain tighter
    than the Nation overall, have seen significant increases in
    rental vacancy rates over the last year. Interestingly, those
    States with the lowest vacancy rates--Vermont and Wyoming--are
    concentrated in rural areas, those very areas where our
    production programs have been least effective, in my opinion.
        Our production programs also tend to build almost
    exclusively multi-family properties, as would be the case of a
    production-focused trust fund. However, over two-thirds of
    vacant rental units are current in multi-family properties.
    This fact isn't simply the result of older units based in older
    urban areas. For instance, the rental vacancy rate for units
    constructed in the 2000's is almost twice that of units
    constructed in the 1990's.
        Despite an almost 1 million increase in rental households
    associated with the meltdown of our mortgage markets, the
    overall number of vacant rental units has actually increased by
    over 400,000. Currently, there are over 4.1 million vacant
    rental units in this country. The glut in our housing markets
    is not simply one of single-family units intended for
    homeownership, but also one of recently constructed multi-
    family units.
        I recognize that was a considerable amount of data, so, to
    summarize, my main point was that, if we are going to subsidize
    additional housing, it should really be focused on stimulating
    demand.
        The most obvious method of doing so would be additional
    rental vouchers. I am concerned that additional production
    actually runs the risk of adding to supply, which would put
    downward pressure on house, particularly condo, prices, which
    could actually have the reverse effect of increasing mortgage
    defaults. Additional production could also increase multi-
    family mortgage defaults.
        In addition to directing any additional housing assistance
    only at tenant-based subsidies, I would also encourage Congress
    to re-examine the feasibility of redirecting current unit-based
    subsidies which are not already committed to specific housing
    units toward increased vouchers. Such a move would help
    increase the demand for rental housing while also providing
    much-needed assistance to the recently unemployed, many who are
    renters and probably would prefer to stay in the unit they are
    in.
        A final concern I would have with H.R. 3068 is the
    precedent it sets for redirecting TARP funds and its potential
    to erode the checks and balances that come with the
    appropriations process. Once the line has been crossed to
    redirect TARP dividends to non-TARP uses, I am concerned that
    it will only be a matter of time before TARP repayments start
    to be redirected. So, while H.R. 3068 represents just over $6
    billion, it could easily become the first step in a process
    that results in hundreds of billions being diverted. I think
    such would leave the taxpayer with a much bigger hole to fill.
    So I would strongly urge any additional housing subsidies,
    trust fund or otherwise, to be subject to either appropriations
    or PAYGO.
        Once again, I thank you for this opportunity and appreciate
    your attention.
        [The prepared statement of Dr. Calabria can be found on
    page 48 of the appendix.]
        The Chairman. We will now go to Sheila Crowley, who is the
    president of the National Low Income Housing Coalition.

      SHEILA CROWLEY, MSW, PH.D., PRESIDENT, NATIONAL LOW INCOME
                           HOUSING COALITION

        Ms. Crowley. Thank you, Chairman Frank, and members of the
    committee. I am glad to have the opportunity to testify today
    on H.R. 3068, the TARP for Main Street Act of 2009, and
    specifically on section 2 that designates a billion dollars
    from dividends paid by financial institutions that receive TARP
    funds to the National Housing Trust Fund.
        It was almost 2 years ago that this committee held a
    hearing on H.R. 2895, the National Affordable Housing and Trust
    Fund Act of 2007, that was introduced by Chairman Frank with
    eight Democratic and eight Republican cosponsors. The bill
    passed the House in October of that year by a vote of 264-148.
    With similar bipartisan success in the Senate, President Bush
    signed the Housing and Economic Recovery Act on July 30, 2008,
    that included the National Housing Trust Fund. This victory was
    not possible without the championship of you, Mr. Chairman, and
    we thank you.
        The original proposal for the National Housing Trust Fund
    was developed in the 1990's, under the leadership of the
    founder of the National Low Income Housing Coalition, the late
    Cushing Dolbeare. And I would like to acknowledge the presence
    here today of Louis Dolbeare, who was married to Cushing and
    who remains a very strong supporter of the Coalition and of the
    trust fund.
        The National Housing Trust Fund is intended to produce,
    preserve, and rehabilitate rental homes that are affordable for
    extremely low- and very-low-income households. HUD will
    distribute funds to States based on the need for rental homes
    affordable for this income group. States will make grants to
    qualifying public nonprofit and for-profit entities that
    produce and operate the rental homes. All the funds must
    benefit households with incomes at or below 50 percent of the
    area median, and 75 percent of the funds must benefit
    households who are extremely low income, or at 30 percent of
    the area median income.
        The goal that we have set is to build or preserve 1.5
    million rental homes over the next 10 years, and HUD is now
    completing the interim regulations for the trust fund for
    implementation this fall. But before the trust fund can be
    implemented, it must be capitalized.
        A key feature of the National Housing Trust Fund is its
    reliance on dedicated sources of revenue, not discretionary
    appropriations. Contributions from Fannie and Freddie were
    designated as the first funding source for the trust fund, but
    they have obviously been suspended in light of the financial
    difficulties of the companies. We are confident that someday
    they will be restored, but it is important to know that Fannie
    and Freddie were never intended to be the sole sources of
    revenue, and the legislation actually allows Congress to direct
    any appropriations, transfers, or credits that it may choose to
    into the National Housing Trust Fund.
        So, use of TARP dividends for the National Housing Trust
    Fund is a welcome proposal, from our perspective. And, as you
    just heard, Treasury has received approximately $6.2 billion in
    TARP dividend payments as of mid-June. And we certainly
    recommend that the committee claim all current and future
    dividends that the TARP program yields for ``Main Street''
    purposes, including the National Housing Trust Fund.
        The longstanding shortage of rental homes that are
    affordable to the lowest-income households in the United States
    is well-documented. The recession has only made the problem
    worse. But some people assert, like my colleague Mark Calabria,
    that because we have an excess supply of housing now, housing
    production is not necessary and, he says, unwise. This analysis
    does not account for the mismatch between housing supply and
    housing need, which is causing both high housing vacancy rates
    and growing housing cost burdens.
        A new analysis of the American Housing Survey shows that
    the number of rental units in the United States actually
    increased by 3.5 percent between 2005 and 2007. The number of
    units affordable to households with incomes over 50 percent of
    the area median income grew by 16 percent. For households with
    incomes over 100 percent of the area median income, the number
    of units grew by 34 percent. However, for units affordable to
    households with incomes at 50 percent of the area median income
    or less--that is the folks who would be served by the National
    Housing Trust Fund--the number of units actually fell by 7
    percent, for a loss of 1.5 million homes. That was between 2005
    and 2007.
        The ultimate consequence of this particular part of the
    failure of our housing market is that some people will have no
    home at all. The New York Times reports this week about the
    surge in homelessness now that school is out. Earlier this
    year, when the unemployment rate was expected to reach just 9
    percent, we were able to predict that 800,000 new people would
    become homeless. And we now know, of course, that the
    unemployment rate is going to go higher.
        So, in the absence of new resources to expand the supply of
    homes that people who are elderly, disabled, employed in the
    low-wage workforce, or out of work altogether can afford, we
    will see a growth in homelessness that rivals or exceeds the
    recession in the early 1990's. We made the mistake then of
    thinking that it was a temporary shelter problem that we could
    solve by building shelters, not permanent housing. We should
    not make that mistake again.
        In closing, more than 1,000 organizations across the
    country have signed an open letter to Congress and the
    Administration urging greater balance in our approach to the
    mortgage crisis by also attending to the housing shortage for
    the lowest-income people. I ask, Mr. Chairman, that this letter
    be entered for the record, and that we will make copies
    available to all the members.
        TARP for Main Street will help achieve this balance that we
    are seeking, and I urge the committee to move forward with
    this. Thank you for the opportunity to testify.
        [The prepared statement of Dr. Crowley can be found on page
    51 of the appendix.]
        The Chairman. Thank you. And, as I said, everything will be
    made a part of the record.
        And next--if I mispronounce the name, I apologize--Mr.
    Frank Apeseche, who is chief executive officer of the Berkshire
    Property Advisors Group, here for the National Multi Housing
    Council.
        Mr. Apeseche, please go ahead.

    STATEMENT OF FRANK APESECHE, CHIEF EXECUTIVE OFFICER, BERKSHIRE
      PROPERTY ADVISORS AND THE BERKSHIRE GROUP, ON BEHALF OF THE
       NATIONAL MULTI HOUSING COUNCIL AND THE NATIONAL APARTMENT
                              ASSOCIATION

        Mr. Apeseche. Thank you, Chairman Frank, and distinguished
    members of the committee.
        I am chief executive officer of Berkshire Property
    Advisors, based in Boston. We are a fully integrated multi-
    family investor owner and operator. We currently operate more
    than 26,000 units throughout the United States and have an
    employee base of 800 personnel servicing our assets.
        I am testifying on behalf of the National Multi Housing
    Council and the National Apartment Association. Both represent
    the Nation's leading firms participating in the multi-family
    housing rental industry.
        First, I would like to say that we fully support the
    Federal efforts to help preserve the Nation's supply of
    affordable housing and to provide liquidity to the apartment
    sector. And we thank you for taking such important steps in the
    right direction.
        As the committee begins its debate on provisions of H.R.
    3068, I would like to take the opportunity to offer some key
    recommendations in order to keep the legislation focused where
    we believe it is most needed. We have five significant
    recommendations for section 5 of the legislation.
        First, we encourage any program to support the following
    three items. The first item we recommend is that this program
    should not compete with or crowd out private-sector investors
    but, instead, direct investment capital to areas currently not
    appropriately served by private investors, and to support and
    preserve the properties developed using low-income housing tax
    credits or other public subsidies which have limited cash flow
    and have exhausted operating and repair reserves, especially if
    they have material deferred maintenance or are in poor
    condition.
        Second, we would like to see an appropriate definition of
    mortgage loan default and at-risk properties. We believe it is
    critical to appropriately define what constitutes a mortgage
    default that would trigger any government assistance, because
    government action prior to a well-defined economic default
    would not only interfere with contractual obligations between
    the borrower and mortgage lender but would also create future
    uncertainty and concern about the sanctimony of the legal
    transaction process.
        We recommend here only multi-family properties that are in
    economic default be eligible for government assistance.
    Economic default should be defined as mortgage payments
    delinquency of 90 days beyond applicable notice and cure
    periods. And government intervention in any economic default
    situation should be limited to actions to support and stabilize
    the property by providing capital for necessary repairs or to
    fund maintenance reserves. In addition, it should, in all
    circumstances, be undertaken in consultation with the lender
    and property owner.
        It is also important to define at-risk properties, too,
    since the term ``at-risk'' can be broadly interpreted or even
    misconstrued. We believe that it is prudent for at-risk to
    specifically be linked to material deferred maintenance and
    physical distress as evidenced by significant structural
    problems, system integrity failures, and health and safety
    issues.
        Third, the multi-family housing industry does not, under
    any circumstances, support the transfer or taking of a property
    without the consent of both the property owner and lender.
    Privately contracted property assignments, assumptions, and
    transfers are significantly negotiated arm-length provisions of
    any mortgage contract and have economic value. If such
    provisions are countermanded through government intervention,
    this action could have profound, unpredicted negative impact on
    both multi-family capital and investment market stability. It
    can also have profound negative impact on investors' reliance
    that future property ownership rights will be respected.
        Fourth, we support assistance to Federal Government-
    financed, sponsored, or assisted multi-family properties.
    However, we support a more tailored assistance to properties
    financed without government ownership or sponsorship.
        Here, we recommend that the government assistance should be
    kept to borrowers and lenders who participated in reasonable
    underwritings and financing. We do not believe that borrowers
    and lenders who took undue risks upfront should be rewarded by
    government assistance at this time. We specifically recommend
    that assistance eligibility here be limited to those properties
    with originating loan-to-value ratios at or below 80 percent,
    debt service coverage at or above 1.2 times, and current
    deferred maintenance at or below $2,000 per unit.
        Lastly, we enthusiastically support active government
    response to mortgage refinance needs. Here, we urge the
    committee to use its resources to add liquidity to the
    refinance markets. We support the use of government funds to
    provide insurance to lenders who will extend current loans for
    periods of 12 to 36 months, allowing the cash flows of
    properties to recover as the economy does.
        Thank you very much for your time. I appreciate the
    opportunity to represent the multi-family industry before the
    committee and look forward to any questions.
        [The prepared statement of Mr. Apeseche can be found on
    page 33 of the appendix.]
        The Chairman. Thank you, Mr. Apeseche.
        Next, we have Mr. Brian Hudson, who is the executive
    director of the Pennsylvania Housing Finance Agency.
        And I should tell you that, some months ago, Representative
    Fattah talked proudly about the program, and more recently,
    Representative Schwartz mentioned it. And we were guided, to
    some extent, by the successful work you have been doing in
    Pennsylvania.
        Please go ahead.

     STATEMENT OF BRIAN A. HUDSON, SR., EXECUTIVE DIRECTOR & CEO,
                  PENNSYLVANIA HOUSING FINANCE AGENCY

        Mr. Hudson. Thank you, Mr. Chairman, and members of the
    committee, for the opportunity to talk to you today on behalf
    of the Pennsylvania Housing Finance Agency on H.R. 3068, the
    TARP for Main Street Act of 2009.
        I also wanted to recognize members of the Pennsylvania
    delegation who are members of your committee, Congressman Paul
    Kanjorski and Congressman Tim Gerlach.
        Mr. Chairman, thank you for your early and persistent
    efforts to revive with Federal help the struggling municipal
    bond market. Your legislative initiatives, including the
    previous Troubled Asset Relief Program bill, and your appeals
    to the Administration over the last several months have
    succeeded in focusing critical attention on the needs of the
    municipal bond market and particularly the tax-exempt housing
    bond market.
        Because of your encouragement, the Administration is now on
    the verge of announcing a plan to support State and local
    housing finance agencies' affordable housing lending by
    purchasing HFA housing bonds and providing liquidity to support
    HFA variable rate debt. With this assistance, HFAs will finally
    be able to put our housing bond resources to work to produce
    hundreds of thousands of affordable housing, sustainable homes,
    and jobs, as well as tax revenues, in support of our Nation's
    economic recovery.
        We understand that the Administration's HFA initiatives as
    currently conceived do not rely on TARP resources. However,
    since the HFA plan has not been finalized, we urge you to leave
    open the possibility of committing TARP resources to it, should
    that become necessary to the plan's successful implementation.
        Mr. Chairman, we would also like to thank you for your
    leadership in creating the Housing Trust Fund and for
    dedicating through this legislation TARP funds to its initial
    capitalization. My agency and my fellow State agencies are
    eager to help address with these new resources housing needs as
    we struggle to meet existing resources, particularly those of
    extremely low-income families.
        Finally, we are pleased that your new TARP legislation
    reauthorized and allocates funding to the Emergency Mortgage
    Relief Program. As you consider the optimal design of this
    program, we urge you to look at PHFA's Homeowners' Emergency
    Mortgage Assistance Program, HEMAP, as a model. We also
    encourage you to consider making HFAs eligible for direct
    funding under this program so that a program such as HEMAP may
    benefit and be replicated around the country,
        Senator Casey was successful in getting an amendment
    accepted in the Senate during deliberations on Neighborhood
    Stabilization Program funding as reauthorized in the American
    Recovery and Rehabilitation Act of 2009. Mr. Casey's amendment
    would have allowed the use of NSP funds for foreclosure
    prevention activities, such as HEMAP, in the Commonwealth.
    Opening up the NSP for these type of activities may be another
    option to stem the tide of foreclosures as a result of
    temporary economic conditions.
        Pennsylvania's Act 91 of 1983 authorized PHFA to develop
    HEMAP to help certain homeowners in danger of losing their
    homes to foreclosure. Pennsylvania created this program to
    address the large number of foreclosures, particularly in the
    southwestern part of the State as a result of the downturn in
    the steel industry early economic recession in the 1980's.
        HEMAP has been very successful. It has saved almost 43,000
    homes from foreclosure by providing $442 million in loans to
    at-risk homeowners. Over 20,000 loans have been repaid in full,
    and HEMAP has received over $246 million in principal and
    interest repayment from homeowners. They are structured as
    loans, not grants. These repayments are recycled into HEMAP
    loans assisting additional Pennsylvanians.
        State appropriation has totaled $225 million. The average
    HEMAP loan to a distressed homeowner is $10,500, much less than
    the $35,000 it costs to complete most foreclosure actions.
    Additionally, it is estimated that average foreclosure costs do
    not consider the impact of foreclosures on families,
    neighborhoods, and communities. HEMAP prevents mortgage
    foreclosures only from defaults caused by circumstances beyond
    a homeowner's control. It provides loans to bring delinquent
    mortgage payments current, and may also provide continuing help
    with mortgage payments. Total assistance under the current
    environment cannot exceed 36 months.
        Unlike programs that have been created by other States and
    other structures to address unsound or predatory lending, HEMAP
    is focused on helping homeowners who are facing a short-term
    financial setback. The number one reason for a HEMAP
    applicant's delinquency under the HEMAP is loss of a job. The
    second reason is illness. In all instances, there has been a
    reasonable likelihood that a homeowner will be able to resume
    making his mortgage payment without State help, since HEMAP
    assistance is temporary.
        In the current economic environment of unemployment at 9.5
    percent and the State over 7, HEMAP would be a great
    complement-like program with other Federal initiatives. With
    over 25 years of experience, PHFA has refined the operation of
    this primarily unemployment driven program. Lenders in the
    Commonwealth are some of its most ardent supporters because of
    the seamless nature of this operation. These results have led
    Harvard University to directly recognize HEMAP as a top
    innovation in American government.
        A number of States have developed HEMAP-like programs.
    Delaware has DMAP; North Carolina has a pilot; Tennessee is
    exploring it also. With creative legislation and creative
    language and ending current TARP legislation to allow States
    the flexibility to operate a model like HEMAP, we think that
    would help many homeowners across the Nation.
        I have provided more explicit details on our programs, and
    I would be more than happy to answer any questions that the
    committee would have. And, again, thank you for the invitation.
    I look forward to working with you.
        [The prepared statement of Mr. Hudson can be found on page
    74 of the appendix.]
        The Chairman. Thank you.
        Next, we have Mr. Damon Silvers, who is associate general
    counsel of the AFL-CIO and, relevant today, a member of the
    oversight board of the Troubled Asset Relief Program.
        Mr. Silvers?

     STATEMENT OF DAMON A. SILVERS, ASSOCIATE GENERAL COUNSEL, AFL-
                                  CIO

        Mr. Silvers. Thank you, Chairman Frank. It is a pleasure to
    be here with you this afternoon.
        As you mentioned, in addition to serving at the AFL-CIO, I
    am Deputy Chair of the Congressional Oversight Panel. I have
    the honor of serving with Congressman Hensarling of this
    committee in that capacity. My testimony today, however,
    reflects my views and those of the AFL-CIO.
        The Chairman. And not Mr. Hensarling.
        Mr. Silvers. I believe he speaks for himself. Nor is it the
    view of the panel, its staff, or its Chair.
        Let me begin by saying that there is an urgent need to help
    American families address the financial crisis. We can no
    longer continue the pretense that simply putting money in at
    the top of this financial system is going to achieve very much
    unless we stabilize the other end of the system, the household
    balance sheets.
        For that reason, the AFL-CIO strongly supports H.R. 3068,
    the TARP for Main Street Act of 2009. And we want to
    congratulate you, Mr. Chairman, for your leadership in moving
    this bill forward at this time.
        In March, the Obama Administration announced its intention
    to devote significant TARP resources to assisting families
    facing foreclosure. In our March report, the Congressional
    Oversight Panel was supportive of this effort but noted that it
    had limitations, particularly around situations where
    homeowners' mortgages were deeply underwater and where
    unemployed families were facing foreclosure.
        It is now very clear today that what began as a foreclosure
    crisis driven by falling real estate values and exploitative
    mortgage products is now being very significantly compounded by
    accelerating rates of unemployment.
        As was mentioned by the prior witness, the official
    national rate of unemployment is now 9.5 percent, with higher
    rates in many States. Estimates of real rates of effective
    underemployment are now well into the teens in many States. And
    even more troubling projections by the International Monetary
    Fund and the OECD for the U.S. economy are for rates going
    significantly higher than current levels and remaining over 10
    percent through next year. Most recently, the OECD's June
    economic outlook shows that the United States has added 6
    million unemployed people since December of 2000 and projects
    unemployment at the end of 2010 to be 10.1 percent.
        Yesterday, the mortgage insurer PMI Group cited rising
    unemployment as the leading cause of a projected continued rise
    in home foreclosures. The result, according to PMI, is a likely
    continuing fall in housing prices in the majority of U.S.
    cities driven by unemployment-related foreclosures through the
    first quarter of 2011.
        Rapidly rising unemployment and its consequences for the
    quality of bank assets, particularly home mortgages,
    substantially threaten what progress has been made in
    stabilizing our financial system. In these circumstances, the
    AFL-CIO believes there is an urgent need to pursue all paths
    necessary to halt both the rising tide of unemployment and
    consequent home foreclosures, including a second, more job-
    targeted stimulus, the restoration of the ability of homeowners
    in bankruptcy to get relief from mortgage debt, and a more
    vigorous effort to restructure bank balance sheets to avoid the
    zombification of our major financial institutions.
        H.R. 3068, though, is an immediate step that could help
    this rapidly deteriorating situation, using resources already
    allocated to the TARP program. While the AFL-CIO believes the
    scale of funding for the bill could be larger, there are
    competing and serious concerns that Treasury should continue to
    have enough headroom in the TARP to act should an acute crisis
    develop in the near term.
        Substantively, in addition to providing $2 billion in
    funding for emergency relief to the unemployed, H.R. 3068 would
    provide $1 billion in funding to assist State and local
    government in redeveloping abandoned and foreclosed homes, $1
    billion for the Housing Trust Fund, and $2 billion in the
    multi-family sector. These provisions are targeted toward clear
    needs with broad economic impact, particularly the aid to
    unemployed and the moneys targeted toward rehabilitating
    foreclosed and abandoned properties.
        H.R. 3068 will not end our economic crisis or halt the
    broader foreclosure epidemic, but it will help the unemployed
    stay in their homes and deliver help to those communities most
    affected by the foreclosure crisis. The AFL-CIO urges this
    committee to move the bill forward.
        I thank you for the opportunity to appear this morning and
    look forward to working with the committee to address this
    crisis.
        [The prepared statement of Mr. Silvers can be found on page
    79 of the appendix.]
        The Chairman. And our final witness is Mr. Chris Warren,
    who is chief of regional development for the city of Cleveland.
        Mr. Warren?

    STATEMENT OF CHRIS WARREN, CHIEF OF REGIONAL DEVELOPMENT, CITY
                   OF CLEVELAND, OFFICE OF THE MAYOR

        Mr. Warren. Thank you, Mr. Chairman, and members of the
    committee.
        It is not hyperbole to say that the subprime mortgage
    crisis has hit Cleveland with the force of a natural disaster.
    Call it ``Hurricane Greed'': 24,000 residential foreclosures
    since 2005, 70 percent attributable to subprime loans; an
    overwhelming concentration of those foreclosures in inner-city
    neighborhoods; over 10,000 vacant, distressed residential
    structures; $35 million spent by our City since 2006 to
    eliminate life-threatening nuisances. This is demolition, this
    is weed cutting, this is pulling out tires, this is dealing
    with abandoned properties.
        Mr. Chairman, the predatory practices of unregulated
    mortgage brokers and originators was made possible by complex
    investment schemes hatched by giant companies. The most active
    participants in this subprime fiasco that has hit Cleveland are
    among the highest recipients of TARP. And I have provided a
    chart of that in my written testimony. Six institutions alone
    have accounted for 40 percent of the foreclosure-related
    sheriff sale filings in Cleveland since 2005. All, except
    Deutsche Bank, have received TARP investments. Their total TARP
    take--$96 billion.
        Mr. Chairman, Cleveland's response to the unnatural
    disaster in our City is predicated on three principles.
        Collaboration: To devise an act on a common strategy, we
    have brought together under one umbrella our city, our county,
    suburbs, court system, our housing authority, community
    organizations, counseling agencies, foundations, and a newly
    formed countywide land bank. A $74 million application for
    Neighborhood Stabilization II funds, in fact, will be submitted
    to HUD next week by a consortium comprised of these entities.
        Principle two: gaining control of abandoned property.
    Earlier this year, our Ohio general assembly enacted
    legislation establishing the Cuyahoga County Land Bank. The
    land bank has the statutory powers and recurring revenues
    needed to acquire, responsibly maintain, and position for
    redevelopment thousands of mortgage- and tax-foreclosed
    properties.
        Principle three: intensely targeted resources. Last year,
    we launched what we called the Opportunity Homes Program in six
    Cleveland neighborhoods. Over 3 years, through this program, we
    will acquire, rehabilitate, and sell 450 homes; demolish 300
    condemned structures; convert 600 vacant lots into useful
    public assets; and provide foreclosure counseling to 450 at-
    risk homeowners. Funds made possible through a $25 million NSP
    I grant to Cleveland and hopefully a successful NSP II
    application will allow expansion of this approach to 14 more
    neighborhoods, including five in inner-ring suburbs.
        Mr. Chairman, without question, passage of the TARP for
    Main Street Act will advance our efforts that I just described.
    On behalf of Mayor Jackson, I thank you for your leadership.
        I have included in my written testimony recommendations for
    technical improvements to the Neighborhood Stabilization Act.
    But, in closing, I want to also bring to your attention two
    troubling recent phenomenons in our City.
        First, financial institutions are unloading unsalvageable
    REO properties in bulk sales to out-of-town, faceless
    investors. This sounds familiar. The City is put in the
    position often of proceeding with demolitions of these
    properties with little chance of recovering our costs. TARP
    recipients need to be held to strict standards with respect to
    disposition of uninhabitable condemned properties.
        And we are seeing walkaway foreclosures. This practice
    involves the decision by creditors to forgo sheriff sales
    because, we suspect, they determine the cost of abating--
        The Chairman. Your time is up, Mr. Warren.
        Mr. Warren. --the nuisances in our communities are in
    excess of liquidation values. This needs to be dealt with by
    this legislation.
        [The prepared statement of Mr. Warren can be found on page
    83 of the appendix.]
        The Chairman. Thank you.
        I am going to try to--we have a hearing coming up. I am not
    going to ask questions.
        I just want to be sure, Mr. Apeseche, nothing in this
    legislation tries to take property over the objection of the
    owner. There is nothing like that on the table. You were
    concerned about it. There is nothing there that would do it.
        Mr. Apeseche. The current wording of the legislation, you
    are absolutely correct.
        The Chairman. Well, okay. It is not going to get any--don't
    worry about it.
        I will go to Mr. Green.
        Mr. Green. Thank you, Mr. Chairman. And I will be as brief
    as you have been. I will just make a couple of points.
        It has been my observation that all persons on this
    committee are persons of good will, but we do have different
    points of view. And, in my brief tenure on the committee, I
    have noticed that some of the things that we would like to do
    to be of assistance--the Affordable Housing Trust Fund, for
    example--in good times, this was a bad time to do it; and in
    bad times, it is not a good time to do it. It appears that
    there will never be a time that is a good time for an
    Affordable Housing Trust Fund.
        And this is not to demean any of my colleagues. It is just
    that we have different points of view about the role of
    government, especially when people are at risk by way of
    unnatural disasters. I will borrow that term, if I may.
        I would also want to observe that I am a bootstrap guy. I
    think folk ought to pull themselves up by their bootstraps. But
    I find it very hard for many people to do this when they don't
    have bootstraps. I think that what we are trying to do is
    afford people bootstraps so that they can help themselves.
        The language is pretty explicit. We are talking about
    people who have lost their jobs due to no fault of their own,
    due to economic circumstances, and they are being foreclosed
    on. What do we do? Do we continue to allow the foreclosure rate
    to escalate? Do we continue to have people placed out of their
    homes on the streets? Or do we, as responsible agents and
    trustees of the government, take affirmative, positive action
    to assist people? That is my position.
        I don't, in any way, find fault with my friends who have a
    different position. I just find that those of us who believe
    that this is the right thing to do have to have the courage to
    do the right thing. This is a moment of courage in this
    country, and those of us who are in leadership and in positions
    of responsibility, we have to have the courage to act now.
        We may not have the chance to act in such a responsible way
    again in our lifetimes, and I think that we have to take
    advantage, not of a bad circumstance, but advantage of an
    opportunity to be our brothers' and our sisters' keepers and to
    afford people who really are trying the opportunity to succeed.
        Finally, I would say that, Mr. Chairman, this is a great
    piece of legislation. I will be supporting the legislation. I
    think that it is timely, it is targeted, and it impacts the
    people who need it the most.
        I yield back the balance of my time.
        The Chairman. The gentleman from Texas, Mr. Neugebauer.
        Mr. Neugebauer. Thank you, Mr. Chairman. And I will try to
    be brief, as well.
        Mr. Engel, is it your understanding that the two different
    TARP tranches were intended to be a program to inject and/or
    lend capital or loan money to entities with the intention of
    getting that money back?
        Mr. Engel. The TARP program was intended to put capital out
    into the financial markets. I am not sure there was an
    understanding that we would get every dollar back.
        Mr. Neugebauer. But, obviously, the scoring was such that
    you wouldn't get all the money back. Is that correct?
        Mr. Engel. One of the programs, the Making Home Affordable
    Program, the way that is structured currently is a direct
    disbursement program. They haven't disbursed any money yet, but
    once they do, that is a direct disbursement out. So, there will
    be no money coming back for that particular program at all.
        Mr. Neugebauer. But if I could just get an answer. Was it,
    by and large, the intent of the original legislation to get
    most of that money back for the taxpayers?
        Mr. Engel. I am not sure I can respond to that.
        Mr. Neugebauer. Well, obviously you haven't yet.
        Mr. Engel. I would have to get back to you for the record
    on that.
        Mr. Neugebauer. So, on $700 billion, do you know what the
    interest at prevailing rates would be on that on an annual
    basis?
        Mr. Engel. You mean the borrowing rate by Treasury?
        Mr. Neugebauer. Yes.
        Mr. Engel. I am not sure what the current borrowing rate
    is. It is not real high.
        Mr. Neugebauer. For a 30-year right now, I think it is
    around 4 percent. Is that correct?
        Mr. Engel. We haven't borrowed the whole $700 billion.
        Mr. Neugebauer. But, at some point in time, we will. That
    is $28 billion a year, if I am not mistaken. So it would be
    premature to call the dividends that we have received up to
    this point a profit, would you say?
        Mr. Engel. We haven't looked at it from a profit-loss
    standpoint. The dividends are intended to go into the general
    fund and then to be used to basically bring down the debt.
        Mr. Neugebauer. To bring down the debt. And so, but if you
    haven't even paid the interest yet, it is a little difficult to
    bring down the debt, right?
        Mr. Engel. Yes.
        Mr. Neugebauer. And so, what is the current estimate of
    the--if the full $700 billion is disbursed, what is the
    expected potential return to the taxpayers?
        Mr. Engel. That hasn't been determined yet. The Office of
    Financial Stability, which is responsible for accounting for
    the activities, will be developing their models and things to
    be able to do that as part of their financial statements. But
    right now there is no estimate of what that would be.
        Mr. Neugebauer. And based on your understanding of the
    original legislation that was passed, is it allowable to use
    any of the dividends for the purposes under this bill?
        Mr. Engel. Under the bill, the money for the dividends are
    to go into the general fund to be used to pay down the debt.
        Mr. Neugebauer. But if this legislation were not to pass,
    could you fund money for these purposes?
        Mr. Engel. Without the legislation, no. That money is to be
    used to go into the general fund to pay down the debt.
        Mr. Neugebauer. So you don't have--are you familiar with
    the money that we put into the auto industry?
        Mr. Engel. Somewhat, yes.
        Mr. Neugebauer. And how much of that money have the
    American taxpayers put in so far for that?
        Mr. Engel. You mean, what has come back?
        Mr. Neugebauer. Well, none of it has come back. But, I
    mean, how much money have we put in?
        Mr. Engel. It has been announced as an $80 billion program,
    but disbursed so far is about $54 billion.
        Mr. Neugebauer. And do we think we are going to get all
    that back?
        Mr. Engel. It is hard to determine at this point how much
    of that would be recouped. For example, in the Chrysler
    situation, we have equity shares, and it would probably be
    dependent upon what we would get back in selling those equity
    shares. There is a possibility we would not recoup all that we
    have put in.
        Mr. Neugebauer. Both on the Chrysler and the GM?
        Mr. Engel. The GM is just now going through the
    restructuring process. But if it had a similar type situation,
    it would be dependent upon what we are able to get by selling
    those shares of equity that we received.
        Mr. Neugebauer. But you would not characterize the $6.5
    billion as a profit to the American taxpayers at this point?
        Mr. Engel. Not at this point.
        Mr. Neugebauer. Thank you.
        I yield back.
        The Chairman. The gentleman from Missouri, Mr. Cleaver.
        We are going to try and do two more, and then we do have to
    relinquish this for the 1:30 hearing on the Fed. So Mr. Cleaver
    and Mr. Hensarling, and we will have to cut it to that. I
    apologize.
        Mr. Cleaver. Very briefly, do any of you believe that H.R.
    3068 represents a poor or improper use of TARP funds? And, if
    so, why?
        That does it. I have no other questions, Mr. Chairman.
        The Chairman. All right. The record should show that no one
    responded. The record is not very good at charades.
        The gentleman from Texas, Mr. Hensarling.
        Mr. Hensarling. Thank you, Mr. Chairman.
        And let me welcome my fellow member of the Congressional
    Oversight Panel and thank him for his service to his country on
    that panel.
        I would like to also acknowledge the comments of my
    colleague from Texas, who--my respect for him is only equaled
    by my disagreement with him on a number of public policy
    matters, although I certainly respect his views.
        I have heard a number of panelists today speak of the
    housing crisis, which we all acknowledge. I am somewhat
    disappointed, though. I don't believe, perhaps with one
    exception, did I hear any mention of the debt crisis.
        I think, I trust, the panel is aware that recently Congress
    passed a budget that will triple the national debt in the next
    10 years, create more national debt in the next 10 years than
    in the previous 220 years. The Federal deficit has increased
    tenfold in just the last 2 years. We are presently borrowing 46
    cents on the dollar, principally from the Chinese. We are
    sending the bill to our children and grandchildren, who either:
    one, cannot vote; or, two, have yet to be born.
        A number of economists believe that one of the great drags
    on our economic recovery today is this debt overhang. And so I
    am troubled by the underlying legislation that finally,
    finally, the taxpayer sees a little money coming back that
    potentially could be used for either taxpayer relief or to pay
    off the deficit, and, instead, it is going right out the door.
        So my question is, number one, does anybody on the panel
    acknowledge the debt crisis? And, if so, do you see any link to
    the housing crisis to it?
        I would be happy to hear any comments from anybody on the
    panel. Mr. Hudson?
        Mr. Hudson. Yes, that is one of the reasons why I advocated
    for HEMAP as a loan program. It has been a model that existed
    since 1983, funded by the Commonwealth legislature. The State
    has set aside $225 million; it has gotten repaid $246 million,
    in terms of repaying. They are actually appropriations. It is
    set up as a loan. It is meant to be repaid. The fund has lent
    $442 million under that fund, and not to be a grant, but
    actually a loan to be repaid.
        Mr. Hensarling. Now, Mr. Hudson, as I understand your
    testimony, apparently the Pennsylvania Homeowners' Emergency
    Mortgage Assistance Program, you loan to people who ``have a
    reasonable likelihood that the homeowner will be able to resume
    making the mortgage payment without State help,'' is what you
    said in your testimony. Correct?
        Mr. Hudson. Resume their payment within 36 months in the
    current environment without continuing assistance, correct.
        Mr. Hensarling. Then do you believe that government should
    only provide assistance, then, to those who have a demonstrated
    ability to repay their mortgages without further government
    assistance? Is that the conclusion I should draw from your
    testimony?
        Mr. Hudson. Well, it is designed as temporary assistance,
    given that we now have a high unemployment rate at 9.5 percent
    in the Nation, and for our Commonwealth it is over 7 percent.
    Yes, it is temporary assistance, that they should show the
    prospect of getting back on their feet, get the jobs, and be
    paired with the other programs that are designed to create
    those jobs.
        Mr. Hensarling. As I look at a number of the programs of
    this Congress and the Administration, I don't see that they are
    working particularly well. For example, congressionally
    authorized programs for foreclosure mitigation and for housing:
    The Neighborhood Stabilization Program costs $5.8 billion,
    although no money has been spent on eligible activities.
    Stimulus homelessness prevention programs, $1.5 billion.
    National foreclosure mitigation counseling, HOPE for
    Homeowners, up to $300 billion authorized. Supposedly we were
    going to see 400,000 homeowners being helped. As of June 15th,
    945 applications, one loan has closed. Administration programs,
    making homes affordable, $75 billion, $50 billion from TARP.
    FHA Secure, 4,000 loans financed.
        What I see is either a bunch of programs that don't seem to
    work or a bunch of programs that still have money in the
    pipeline. Now, the latest data I see is that foreclosure rates
    are still increasing.
        So why do we want to put money into a failed agenda? Why
    have you concluded that somehow these programs, if we simply
    give them more money, are going to work?
        Anybody who cares to take that one?
        The Chairman. We don't have much time.
        Mr. Hensarling. Well, there may not be an answer to that
    one, Mr. Chairman.
        I will tell you what, Mr. Chairman. I see the red light has
    come on. I will yield back the balance of my time.
        The Chairman. I thank the witnesses.
        We have to give this over to a hearing that is very
    important on the Federal Reserve. We will be continuing this.
    And I will ask the GAO--I have some differences with the
    estimate of borrowing costs that my colleague Mr. Neugebauer
    gave, so we are going to be asking the GAO to give us the
    figures on the borrowing costs for the TARP.
        Obviously, the whole $700 billion hasn't been borrowed
    because it hasn't been disbursed. It is not all on the 30-year
    bonds, etc. But rather than debate that, I would ask them for
    what the figures are. I believe they are far less than was
    indicated. Mr. Neugebauer thinks they are that, perhaps. We are
    going to ask that we get those figures.
        The hearing is adjourned.
        [Whereupon, at 1:36 p.m., the hearing was adjourned.]

                                A P P E N D I X

                                  July 9, 2009

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