[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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